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Children's Network, LLC v. Pixfusion LLC

June 30, 2010

CHILDREN'S NETWORK, LLC D/B/A PBS KIDS SPROUT; COMCAST CHILDREN'S NETWORK HOLDINGS, LLC; AND COMCAST PROGRAMMING HOLDINGS, LLC, PLAINTIFFS,
v.
PIXFUSION LLC, DEFENDANT.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

Defendant PixFusion, LLC ("PixFusion") has moved to transfer this declaratory judgment action to the Eastern District of Texas where patent infringement litigation involving these parties is pending. By Order dated June 17, 2010, defendant's motion was denied. This Opinion provides the factual and legal basis for the June 17 Order.

BACKGROUND

On March 19, 2010, Children's Network, LLC d/b/a/ PBS KIDS Sprout ("Sprout"), and its parent companies, Comcast Children's Network Holdings LLC and Comcast Programming Holdings, LLC (the "Comcast plaintiffs," and collectively with Sprout, the "plaintiffs"), filed this action. Plaintiffs seek a declaratory judgment that U.S. Patent Nos. 5,623,587 and 6,351,265 (collectively, the "patents-in-suit") assigned to PixFusion are invalid and that certain applications on Sprout's website do not infringe those patents. The patents-in-suit relate to a method for producing a personalized electronic image used in creating photo-personalized videos.

Sprout is a Delaware limited liability company with its principal, and only, place of business in Philadelphia, Pennsylvania. Nearly all of Sprout's employees work in its Philadelphia office, where essentially all of its business records are located. The Comcast plaintiffs are holding companies whose operations are managed by Comcast Programming Management, LLC from its single office in Philadelphia. All of the documents in the possession, custody, or control of the Comcast plaintiffs are located in Philadelphia or Delaware. Neither Sprout nor the Comcast plaintiffs have any employees or offices in Texas.

PixFusion is a Delaware limited liability company with its principal place of business in New York, New York. PixFusion's management is located in New York, as are all its documents related to the patents-in-suit. The patents-in-suit were prosecuted by two attorneys who live and work in the Southern District of New York. Both patents list New York, New York as the home of the named inventor, who now resides in Maine, and is not currently employed by PixFusion. PixFusion has previously filed several lawsuits for infringement of the patents-in-suit in the Southern District of New York.

Sprout operates the PBS KIDS Sprout cable channel and companion Sprout website, which was launched in its present form in 2007. Users of the Sprout website can create personalized videos by uploading images of themselves and inserting the images into videos involving characters from programs on the Sprout channel. Three of the software applications accessible through the Sprout website offer this feature (the "photo- personalized applications"). One of the photo-personalized applications was designed and built by Jam Media Limited ("JAM"), a company located in Dublin, Ireland. The other two photo-personalized applications on the Sprout website were designed and built by a third-party located near Philadelphia.

On August 4, 2009, Sprout, PixFusion, and Mercury Capital Partners ("Mercury")*fn1, PixFusion's investor, met for the first time to discuss the possibility of Sprout or the Comcast plaintiffs purchasing or investing in PixFusion. During the meeting, PixFusion showcased the patents-in-suit as assets contributing to its potential value as an investment. At PixFusion's request, on August 19, the parties entered into a nondisclosure agreement so that PixFusion could provide Sprout with its financial information. The parties met again in late August or early September, and then again on September 29. At the September 29 meeting, PixFusion claimed for the first time that Sprout needed to obtain a license from PixFusion for the photo-personalized applications on Sprout's website. On October 29, PixFusion sent a formal proposal to plaintiffs, including a demand that Sprout obtain a license for the patents-in-suit.

On December 18, the parties discussed PixFusion's proposal by telephone. Plaintiffs explained their position that Sprout did not need a license because the Sprout website did not use any of the purported inventions claimed by the patents-in-suit, and because the patents were invalid in light of various prior art references. PixFusion responded that it had successfully enforced its patents before and would not hesitate to do so again. The parties ended the call by agreeing that PixFusion would provide a claim chart demonstrating how PixFusion believed Sprout's website applications infringed the patents-in-suit.

Later that day, PixFusion filed a complaint in the Eastern District of Texas alleging infringement of the patents-in-suit (the "Texas action"). PixFusion did not inform plaintiffs of the lawsuit during the parties' December 18 telephone call. The complaint in the Texas action named Oddcast, Inc.; American Express Company; Asus Computer International; ConAgra Food, Inc.; Mattel, Inc.; Veev Spirits LLC; and WidgetBar Search LLC as defendants. Neither Sprout nor the Comcast plaintiffs were named as defendants.

Over two months later, PixFusion sent a letter to plaintiffs dated February 23, 2010, accompanied by a claim chart for the patents-in-suit. The letter referred to the Texas action and stated that "any further infringing conduct by Comcast may be viewed as willful infringement." The letter concluded by reiterating PixFusion's desire "to negotiate a business resolution to this matter." The letter did not indicate that PixFusion intended to file an infringement action against plaintiffs.

The parties scheduled a telephone call for March 19 to discuss PixFusion's proposal regarding the patents-in-suit. During the call, plaintiffs informed PixFusion that they had filed this declaratory judgment action earlier that day. Three weeks later, on April 9, PixFusion filed an amended complaint in the Texas action adding Sprout and the Comcast plaintiffs as defendants. On May 14, PixFusion filed the instant motion to transfer this action to the Eastern District of Texas. The motion became fully submitted on June 8.

DISCUSSION

A. Legal Background

The relevant law is well established.*fn2 Section 1404 provides: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). District courts have "broad discretion in making determinations of convenience under Section 1404(a) and notions of convenience and fairness are considered on a case-by-case basis." D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 106 (2d Cir. 2006). The movant bears the burden of establishing, by "clear and convincing evidence," that a transfer of venue is warranted. N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 114 (2d Cir. 2010).

If the transferee court would also have jurisdiction over the case, the court must determine whether, considering the "convenience of parties and witnesses" and the "interest of justice," a transfer is appropriate.*fn3 In making that determination, a court considers:

(1) the plaintiff's choice of forum, (2) the convenience of witnesses, (3) the location of relevant documents and relative ease of access to sources of proof, (4) the convenience of parties, (5) the locus of operative facts, (6) the availability of process to compel the ...


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