Venue for Patent Infringement Requires Established Geolocation of Infringers Business

The Court of Appeals for the Federal Circuit, in construing the patent venue statute, 28 U.S.C. sec. 1400(b), ruled that the proper venue to bring suit against an accused infringer is a physical, geographical location in the district from which the business of the defendant is carried out and further that the primary residence of the accused infringer’s district salesman does not expose defendant to an infringement suit base upon the salesman’s residence in the district. In Re Cray Inc., Case No. 2017-129 (Fed. Cir. Sept. 25, 2017) (Available Here).

Cray Inc. (“Cray”) petitions for a writ of mandamus vacating the order of the United States District Court for the Eastern District of Texas denying its motion to transfer the case to the United States District Court for the Western District of Wisconsin. The district court misinterpreted the scope and effect of our precedent in determining that Cray maintained “a regular and established place of business” in the Eastern District of Texas within the meaning of 28 U.S.C. § 1400(b). Accordingly, the court’s decision refusing transfer pursuant to 28 U.S.C. § 1406(a) was an abuse of discretion. We therefore grant Cray’s petition for a writ of mandamus and direct transfer of the case.

Cray was sued for patent infringement by Raytheon in the Eastern District of Texas for patent infringement. The District Court judge denied Cray’s motion to dismiss based upon the patent venue statute, 28 U.S.C. § 1400(b). Section 1400(b) provides that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”

Recently, the U.S. Supreme Court ruled that the patent venue statute governed all patent infringement matters. TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017). The only question before the Federal Circuit was whether Cray has a “regular and established place of business” in the Eastern District of Texas within the meaning of § 1400(b).

Cray does not rent or own an office or any property in the Eastern District of Texas. However, it allowed Mssrs. Harless and Testa to work remotely from their respective homes in that district. Harless did not maintain Cray products at his home, nor did he maintain product literature at his home because it was available online. Cray never paid Harless for the use of his home to operate its business, or publicly advertised or otherwise indicated that his home residence was a Cray place of business.

“We recognize that the world has changed since 1985 when the Cordis decision issued. [In re Cordis, 769 F.2d 733 (Fed. Cir. 1985)]. In this new era, not all corporations operate under a brick-and-mortar model. Business can be conducted virtually. Employees increasingly telecommute. Products may not as a rule be warehoused by retailers, and the just-in-time delivery paradigm has eliminated the need for storing some inventory. But, notwithstanding these changes, in the wake of the Supreme Court’s holding in TC Heartland, effectively reviving Section 1400(b) as the focus of venue in patent cases, we must focus on the full and unchanged language of the statute, as Cordis did not consider itself obliged to do.”

“Our analysis of the case law and statute reveal three general requirements relevant to the inquiry: (1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.” The “place” need not be a “fixed physical presence in the sense of a formal office or store,” Cordis, 769 F.2d at 737, however, there must be a physical, geographical location in the district from which the business of the defendant is carried out. The business may be “regular,” for example, if it operates in a “steady[,] uniform[,] orderly[, and] methodical” manner. The “established” limitation bolsters this conclusion. The word contains the root “stable,” indicating that the place of business is not transient. It directs that the place in question must be “settle[d] certainly, or fix[ed] permanently.”

The Federal Circuit overruled the District Court and ordered that the case be transferred to Wisconsin.

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