On September 21, the US Court of Appeals for the Federal Circuit issued an opinion in In re: Cray Inc. clarifying how district courts should determine whether a patent infringement defendant maintains a “regular and established place of business” for purposes of venue under 28 U.S.C. § 1400(b).
In May, the US Supreme Court issued its landmark TC Heartland decision, which held that, for purposes of the patent venue statute of 28 U.S.C. § 1400(b), a corporation “resides” in its state of incorporation. TC Heartland, however, did not address what qualifies as a “regular and established place of business” under the patent venue statute, and courts have subsequently wrestled with uncertainty over that issue.
In June, Judge Rodney Gilstrap of the US District Court for the Eastern District of Texas denied a motion to transfer in Raytheon Co. v. Cray Inc. on the basis that, among other things, the named defendant maintained a “regular and established place of business” in the forum. In his opinion, Judge Gilstrap set out four factors for inquiries into what constitutes such a place of business “in the modern era,” including physical presence, defendant’s representations, benefits received, and targeted interactions with the district. The defendant petitioned for a writ of mandamus directing reversal of the denial of the motion to transfer, which brought the matter before the Federal Circuit.
Noting the uncertainty surrounding the “regular and established place of business” language in the wake of TC Heartland, the Federal Circuit held that Judge Gilstrap had applied an incorrect legal standard, rendering his refusal to transfer the underlying case an abuse of discretion. Specifically, the Federal Circuit held that the district court’s four-factor test was “not sufficiently tethered” to the statutory language of § 1400(b). The Federal Circuit clarified that there are three general requirements to demonstrate a “regular and established place of business” for purposes of the statutory venue inquiry, as follows:
In Cray, the plaintiff had argued that, although the defendant does not rent or own an office or any property in the district, venue was proper because defendant allowed two employees to work remotely from their respective homes in the district.
However, the Federal Circuit noted that the defendant did not own, lease, or rent any portion of the employee’s homes, did not select the location of the homes, did not store inventory or conduct demonstrations at the homes, did not condition employment on maintenance of an Eastern District of Texas location, and did not believe the locations of employees’ homes to be important to the business performed. As such, the Federal Circuit concluded that the facts did not show that defendant has a “regular and established place of business” in the Eastern District of Texas. Instead, “they merely show that there exists within the district a physical location where an employee of the defendant carries on certain work for his employer.”
The Federal Circuit vacated the district court’s order denying the defendant’s motion to transfer, and remanded the case to determine the appropriate venue for transfer.
Judges Alan Lourie, Jimmie Reyna, and Kara Farnandez Stoll sat on the panel for the Federal Circuit.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact John V. Gorman or Amy M. Dudash, or any of the following lawyers from Morgan Lewis’s IP disputes team:
David W. Marston Jr.