Case 6:12-cv-00405-JDL Document 43 Filed 07/10/14 Page 1 of 7 PageID #: 1645
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`AMERICAN VEHICULAR SCIENCES
`LLC,
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`§
`§
`§
`§ 6:12cv404 MHS-JDL (Lead)
`§
`6:12cv405 MHS-JDL
`§ 6:12cv406 MHS-JDL
`§ 6:12cv408 MHS-JDL
`§ 6:12cv410 MHS-JDL
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`§
`§
`MEMORANDUM OPINION AND ORDER
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` Plaintiff,
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` Defendants.
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`vs.
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`TOYOTA MOTOR CORPORATION,
`et al.,
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`On remand from the mandamus decision of the Court of Appeals for the Federal Circuit
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`(Doc. No. 235), the Court reconsiders the sever-and-and-stay portion of Defendants’ Motion to
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`Change Venue and to Sever and Stay Claims Against Gulf States Toyota (Doc. No. 19). The
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`matter was fully briefed (Doc. Nos. 79, 83 & 88). Additionally before the Court is Defendants
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`Toyota Motor Corporation, Toyota Motor Sales, U.S.A., Inc., Toyota Motor Engineering &
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`Manufacturing North America, Inc., Toyota Motor Manufacturing, Kentucky, Inc., and Toyota
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`Motor Manufacturing, Indiana, Inc. (collectively “Toyota”), as well as Gulf States Toyota, Inc.’s
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`(“Gulf States”) Motion to Stay Pending Decision on Motion to Sever, Stay, and Transfer (Doc.
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`No. 237) (“Toyota’s Motion to Stay”). Plaintiff American Vehicular Sciences LLC (“AVS” or
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`“Plaintiff”) has responded (Doc. No. 243) and Toyota replied (Doc. No. 245). Additionally,
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`AVS filed a Motion for Reconsideration (Doc. No. 249) to which Toyota responded (Doc. No.
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`250). Having considered the Federal Circuit’s Order, the parties’ arguments, and for the reasons
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`set forth below, the Court DENIES AVS’ Motion for Reconsideration, SEVERS and STAYS
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`all claims against Gulf States, and TRANSFERS all actions and claims against Toyota to the
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`Eastern District of Michigan. Toyota’s Motion to Stay is DENIED AS MOOT
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`Case 6:12-cv-00405-JDL Document 43 Filed 07/10/14 Page 2 of 7 PageID #: 1646
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`BACKGROUND
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`On June 25, 2012, AVS simultaneously filed seven separate lawsuits alleging
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`infringement of 24 patents against Toyota and five simultaneous lawsuits against BMW
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`Defendants.1 AVS has since filed sixteen cases against Hyundai, Kia, Honda, Subaru, and
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`Mercedes.2 Each suit alleges infringement of various patents, all of which are a part of a
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`common patent portfolio directed to “electronic sensors for automotive safety and telematics
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`systems.” COMP.
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`On October 4, 2012, Toyota and Gulf States filed a Motion to Change Venue and to
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`Sever and Stay Claims against Gulf States (Doc. No. 19) asserting that the majority of the
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`asserted patents are related to patents that have already been litigated in the Eastern District of
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`Michigan (“EDMI”), the transferee forum. Some of the asserted patents claim priority to those
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`litigated in the Eastern District of Michigan or claim priority to the same patent applications;
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`others are parents to the prior litigated patents. Id. at 5. As a result, some of the claim terms at
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`issue in these matters have already been construed by the court in Michigan. Id. Additionally,
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`the Motion sought to sever all claims brought by AVS against Gulf States, a regional Toyota
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`distributor.
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`The Court denied that Motion on June 12, 2013 (Doc. No. 131). Toyota then moved for
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`reconsideration (Doc. No. 134), which was denied on November 22, 2013 (Doc. No. 179). The
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`Court of Appeals for the Federal Circuit vacated that decision on April 3, 2014, holding that
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`“putting Gulf States aside, Toyota has a clear right to transfer” and further directing this Court to
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`1 The actions against BMW have since been dismissed. See American Vehicular Sciences LLC v. BMW Group,
`a/k/a BMW AG, et al., No. 6:12cv411.
`2 See American Vehicular Sciences LLC v. Hyundai Motor Company, et al., No. 6:12cv774; American Vehicular
`Sciences LLC v. Kia Motors Corporation, et al., No. 6:12cv147; American Vehicular Sciences LLC v. American
`Honda Motor Co., Inc., et al., No. 6:13cv226; American Vehicular Sciences LLC v. Subaru of America, Inc., No.
`6:13cv229; American Vehicular Sciences LLC v. Hyundai Motor Company, et al., No. 6:13cv270; and American
`Vehicular Sciences LLC v. Mercedes-Benz U.S. International, Inc., et al., No. 6:13cv307.
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`2
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`Case 6:12-cv-00405-JDL Document 43 Filed 07/10/14 Page 3 of 7 PageID #: 1647
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`reconsider the motion to sever and stay Gulf States, transferring the remainder of the case if the
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`claims are severed. Doc. No. 235 at 5-6.
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`On April 8, 2014, the Court sua sponte stayed this case for 30 days due to the Federal
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`Circuit’s order (Doc. No. 239) and continued the instituted stay until the conclusion of the
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`mandamus proceedings on April 30, 2014 (Doc. No. 244). In the interim, Toyota filed a Motion
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`to Stay Pending Decision on Motion to Sever, Stay, and Transfer (Doc. No. 237) and AVS filed
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`a Motion for Reconsideration or, in the Alternative, Motion for Supplemental Briefing and to Re-
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`open Discovery in Relation to Toyota’s Opposed Motion to Sever, Stay, and Transfer (Doc. No.
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`249).
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`On June 6, 2014, the Court of Appeals for the Federal Circuit denied AVS’ Petition for
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`Rehearing En Banc (Doc. No. 247). The Court now considers AVS’ Motion for Reconsideration
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`and the Gulf States portion of Toyota’s Motion to Sever, Stay, and Transfer.
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`Sever and Stay of the Claims Against Gulf States
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`ANALYSIS
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`Toyota argues, and the Court agrees, that the claims against Gulf States should be severed
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`I.
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`and stayed because the remaining claims are peripheral to the severed claims, adjudication of the
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`severed claims would dispose of the claims against Gulf States, and the § 1404(a) factors, as
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`instructed by the Federal Circuit, warrant transfer of the severed claims. Doc. No. 19 at 14; See
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`Shifferaw v. Emson USA, No. 2:09-CV-54-TJW-CE, 2010 WL 1064380, at *1 (E.D. Tex. Mar.
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`18, 2010) (citations omitted). The Court does not agree with AVS’ assertion that Gulf States
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`“acts as Toyota in Texas.” Doc. No. 79 at 15. Gulf States is a distributor to various Toyota
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`dealerships, dependent on “literature and other information provided by Toyota” in creating its
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`own marketing materials related to the accused systems and structures. Doc. No. 19-2, Ex. 2,
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`Declaration of Scott R. Cordes (“Cordes Decl.”) ¶¶ 6-7. As discussed below, Gulf States is
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`3
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`Case 6:12-cv-00405-JDL Document 43 Filed 07/10/14 Page 4 of 7 PageID #: 1648
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`charged with infringement solely on the grounds that it distributes Toyota vehicles with no role
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`in the installation, manufacture, research, development or engineering of the accused structures
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`and systems contained within the Toyota vehicles.
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`Rule 21 of the Federal Rules of Civil Procedure allows the court to sever any claim
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`against any party. FED.R.CIV.P. 21. When deciding whether to sever, the district court has
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`“broad discretion.” Shifferaw, 2010 WL 1064380, at *1 (citing Anderson v. Red River Waterway
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`Comm’n, 231 F.3d 211, 214 (5th Cir. 2000)). The party seeking severance under Rule 21 “bears
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`the burden of proving that such action is necessary.” Aspen Tech., Inc. v. Kunt, No. 4:10-cv-
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`1127, 2011 WL 86556, at *3 (S.D. Tex. Jan. 10, 2011) (citations omitted). Severance may be
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`permitted when three factors are met: (1) whether the remaining claims are peripheral to the
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`severed claims; (2) whether adjudication of the severed claims would potentially dispose of the
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`remaining claims; and (3) whether the § 1404(a) factors warrant transfer of the severed claims.
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`Shifferaw, 2010 WL 1064380, at *1 (citations omitted).
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`Turning to the issue of whether the AVS’ claims against Gulf States are peripheral to the
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`claims against the Toyota Defendants, the Court concludes that they are. Gulf States is merely a
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`distributor, and therefore secondarily involved in the present patent litigation claims by AVS.
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`Cordes Decl. ¶ 3. Gulf States is a private, independently owned and operated entity that is the
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`contracted exclusive distributor of Toyota branded vehicles in Arkansas, Louisiana, Mississippi,
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`Oklahoma and Texas. Id. The vehicles Gulf States distributes are purchased from Toyota Motor
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`Sales, USA, Inc. (“TMS”), the U.S. sales and marketing arm of Toyota in all U.S. states other
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`than Hawaii. Cordes Decl. ¶ 3. As a distributor, Gulf States has no part in the manufacture,
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`research, development, or engineering of vehicles, nor the installation of any items that alter the
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`accused structures or systems. Id. ¶¶ 3, 5. AVS has proffered no evidence or attempted to argue
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`that Gulf States has any role in the design or manufacture of the accused products. See generally
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`4
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`Case 6:12-cv-00405-JDL Document 43 Filed 07/10/14 Page 5 of 7 PageID #: 1649
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`Doc. No. 79. ”Where a single manufacturer is the only entity in the U.S. who makes and sells
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`the only accused products to retailers, a patent infringement claim against a retailer is peripheral
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`to the claims against the manufacturer.” Shifferaw, 2010 WL 1064380, at *3; see also Toshiba
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`Corp. v. Hynix Semiconductor, Inc., No. Civ.A 3:04-CV-2391-L, 2005 WL 2415960, at *5 (N.D.
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`Tex. Sept. 30, 2005).
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`Additionally, Gulf States is “fully indemnified” by TMS and has “no financial stake or
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`interest of its own in any of these cases.” Cordes Decl. ¶ 9. A claim against a retailer is much
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`more likely to be considered “peripheral” when a manufacturer has “indemnified and is funding
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`the defense” of the retailer.” Shifferaw, 2010 WL 1064380, at *3. Thus the claims against Gulf
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`States are clearly peripheral to the claims against the remaining Toyota Defendants.
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`Severance is also appropriate because adjudication of the remaining claims against
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`Toyota would likely dispose of AVS’ claims against Gulf States as a severed Defendant. See Id.
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`As in Shifferaw and Toshiba, where the distributor would only be liable if the main defendants as
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`manufacturers of the accused devices were found to have infringed the patents, in this case Gulf
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`States could only be found liable if AVS’ patent infringement claims against Toyota are resolved
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`in AVS’ favor. Id;Toshiba, 2005 WL 2415960, at *6.
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`The only remaining factor is whether AVS’ claims against Toyota should be transferred
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`pursuant to section 1404(a). As discussed in the next section, the Federal Circuit has directed
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`that Toyota has a clear right to transfer. Thus, severance of AVS’ claims against Gulf States is
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`warranted.
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`Further, the Court determines that in the interest of justice, the claims against Gulf States
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`should be severed and stayed pending disposition of the transferred claims against the Toyota
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`Defendants in the Eastern District of Michigan. See Corry v. CFM Majestic 16 F.Supp.2d 660,
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`666 (E.D. Va. 1998); Landis v. North American Co., 299 U.S. 248, 254-5, 57 S.Ct. 163, 81 L.Ed.
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`5
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`Case 6:12-cv-00405-JDL Document 43 Filed 07/10/14 Page 6 of 7 PageID #: 1650
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`153 (1936) (“The power to stay proceedings is incidental to the power inherent in every court to
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`control the disposition of causes on its docket, with economy of time and effort for itself, for
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`counsel, and for the litigants.”).
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`II.
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`Toyota’s Transfer to the Eastern District of Michigan
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`In its opinion, the Court of Appeals for the Federal Circuit stated that “putting Gulf States
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`aside, Toyota has a clear right to transfer…If the district court severs the claims against Gulf
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`States, the remainder of the case must be transferred.” Doc. No. 235 at 6. As discussed supra,
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`the Court has severed the claims against Gulf States and should therefore transfer the remainder
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`of the case. In its Motion for Reconsideration, AVS argues recent developments have
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`undermined the Federal Circuit’s decision. Doc. No. 249. Specifically, AVS argues that the
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`grant of inter partes review (“IPR”) of several patents and Toyota’s announcement that its
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`United States headquarters is moving to Plano, Texas justifies that this Court exercise “its
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`inherent authority to reconsider its transfer order or, in the alternative, that this Court open
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`supplemental briefing and re-open venue-related discovery.” Id. at 15. As Toyota notes in its
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`Opposition, Toyota’s IPR petition was filed well in advance of the Federal Circuit’s ruling, and
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`the Federal Circuit was aware of the IPR proceeding. Doc. No. 250 at 3. Additionally, AVS
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`relied on Toyota’s announcement of the headquarters move to Texas in its briefing to the Federal
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`Circuit. Id. at 4. So the Federal Circuit was aware of both the IPR proceedings and Toyota
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`Headquarters’ move when it granted mandamus and denied AVS’ request for rehearing en banc.
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`Moreover, whether transfer is appropriate is determined at the time of filing. Jones v. Cooper,
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`Civil Action No. 09-0086, 2009 WL 4823837, at *3 (W.D. La. Dec. 14, 2009) (citing. St. Paul
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`Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998)). Therefore, AVS’
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`argument does not undermine the Federal Circuit’s Order for this Court to transfer all claims
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`6
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`Case 6:12-cv-00405-JDL Document 43 Filed 07/10/14 Page 7 of 7 PageID #: 1651
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`against the Toyota Defendants to the Eastern District of Michigan now that it has determined the
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`claims against Gulf States should be severed and stayed.
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`CONCLUSION
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`For the reasons stated herein and pursuant to the Federal Circuit’s decision (Doc. No.
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`235), AVS’ Motion for Reconsideration is DENIED and the 6:12cv404, 6:12cv405, 6:12cv406,
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`6:12cv408 and 6:12cv410 actions as against Toyota Motor Corporation, Toyota Motor Sales,
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`U.S.A., Inc., Toyota Motor Engineering & Manufacturing North America, Inc., Toyota Motor
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`Manufacturing, Kentucky, Inc., and Toyota Motor Manufacturing, Indiana, Inc. are hereby
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`TRANSFERRED as separate actions to the Eastern District of Michigan. Toyota’s Motion to
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`Stay is DENIED AS MOOT. Otherwise all pending motions are deferred to the transferee
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`court. Further, the Court SEVERS AVS’ claims against Gulf States Toyota, Inc. and retains
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`those claims
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`in
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`the aforementioned actions.
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` Finally,
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`the Court STAYS and
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`ADMINISTRATIVELY CLOSES these actions pending the resolution of AVS’ claims against
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`the Toyota Defendants in the Eastern District of Michigan. The clerk of court shall effect the
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`transfer in accordance with the usual procedure.
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`7
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` ___________________________________
` JOHN D. LOVE
` UNITED STATES MAGISTRATE JUDGE
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`So ORDERED and SIGNED this 10th day of July, 2014.