Federal Circuit further defines place of business through mandamus decisions
In series of recent mandamus decisions, the Federal Circuit has clarified the requirements to establish proper venue for a patent lawsuit. Most recently, in In Re: Volkswagen Group of Am. Inc., 2022-108, 2022-109, 2022 WL 697526 (Fed. Cir. 2022), the Court held that independent car dealerships were not distributors' agents--thus venue as to the distributors could not be shown based on the operations of car dealers in the district. This decision follows on the heels of other mandamus decisions concerning the question of where a corporation resides or has a regular and established place of business:
Development of patent venue law after TC Heartland
Under the patent venue statute, a civil suit "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."28 U.S.C. §1400(b). For decades, due to a broad interpretation of where a corporation is deemed to reside, patent venue was generally found to be proper wherever a corporate defendant was subject to personal jurisdiction. However, the Supreme Court's 2017 decision in TC Heartland changed the game by holding that a corporation only resides in its state of incorporation. TC Heartland LLC v. Kraft Foods Grp. Brands LLC, ––– U.S. ––––, 137 S. Ct. 1514, 1517, 197 L.Ed.2d 816 (2017). This decision gave new importance to the importance to what it means to have "a regular and established business."
The Federal Circuit applies a three-factor test to determine whether a defendant has "a regular and established place of business" in a particular district. In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017). The Cray test requires the plaintiff[1] to prove:
  • there is a physical place in the district;
  • it is a regular and established place of business of an employee or other agent; and
  • that it be the place of the defendant.
In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017) (evidence of a remote employee who carries out business in the district is insufficient to establish venue where the defendant has not established a place of business); In re Google LLC, 949 F.3d 1338, 1345 (Fed. Cir. 2020) (plaintiff must show employee or agent operates at alleged place of business).
Reliance on agent to establish venue
Where the place of business of an agent is alleged to establish venue, the plaintiff has the burden to establish the existence of the agency relationship. See Pac. Gas & Elec. Co. v. United States, 838 F.3d 1341, 1359 (Fed. Cir. 2016) (PG&E). An agency relationship is a fiduciary relationship that arises when one person (a principal) agrees that another person (an agent) shall act on behalf of the principal and subject to the principal's control, and the agent acts or agrees to do so. In re Google, 949 F.3d at 1345 citing the Restatement (Third) of Agency, §1.01.
In Google, the plaintiff alleged that an ISP operating in the Eastern District of Texas, was Google's place of business, because the ISP operated as Google's agent. In re Google, 949 F.3d 1338, 1340-41. Google had entered into a contract with an ISP in the district that allowed Google to request the ISP to perform a variety of low-level activities, and the ISP to follow detailed instructions from Google. Id. at 1346-47. In particular, the contracts gave Google a great deal of control over the manner in which the ISP performed server installations and maintenance activities. Id. Recognizing that this level of control might suggest an agency relationship, the Federal Circuit nevertheless found that there was not agency to conduct Google's business within the meaning of the patent venue statute. Id.
"The venue statute should be read to exclude agents’ activities, such as maintenance, that are merely connected to, but do not themselves constitute, the defendant's conduct of business in the sense of production, storage, transport, and exchange of goods or services."
Id. at 1348. The Court noted that within the context of the statute, conducting the defendant's business, should be understood to refer to such things as 'the actual producing, storing, and furnishing to customers what the business offers."
Acknowledging that it was taking a narrow view, the Court pointed to Supreme Court precedent favoring a narrow interpretation of venue statutes, and express Congressional intent to limit patent venue. Id. at 1347 citing Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 566, 62 S.Ct. 780, 86 L.Ed. 1026 (1942); Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260, 264, 81 S.Ct. 557, 5 L.Ed.2d 546 (1961).
What this means for litigants
The Federal Circuit has shown a greatly increased willingness to intervene in litigation to address its venue concerns.[2] This repeated intervention of the Federal Circuit increases the importance of developing, and pleading detailed evidence that the defendant operates its business in the district. Patent defendants who do not operate a location in a particular district will be increasingly successful in transferring cases to their home location. Patent plaintiffs must invest more effort to develop their venue case before filing suit, or risk the inevitable delays that come with venue transfers.
[1]The To establish venue in a patent infringement action, the plaintiff bears the burden of proof and must plead specific facts to survive dismissal. See Westech Aerosol Corp. v. 3M Co., 927 F.3d 1378, 1382 (Fed. Cir. 2019). Because §1400(b) only applies to patent cases, the Federal Circuit has found that patent venue is unique to patent law, and thus governed by Federal Circuit precedent. See In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017).
In addition to the numerous mandamus decisions involving venue under §1400(b) discussed above, the Federal Circuit has recently issued an unprecedented and growing body of mandamus decisions involving §1404(A).
  • In re Apple Inc., 979 F.3d 1332, 1337 (Fed. Cir. 2020) (disposing of transfer motions must be given priority); In re Google LLC, 2015–138,2015 WL 5294800 (Fed. Cir. Jul. 16, 2015) (court must timely address transfer motions); In re TracFone Wireless, Inc., 848 F. App'x 899 (Fed. Cir. 2021) (same)
  • In re Samsung Elecs. Co., 2 F.4th 1371, 1375 (Fed. Cir. 2021) (judicial economy did not overcome other convenience factors--
  • affording no weight to the location in which the plaintiff alleged infringement, and discounting the relevance of a court having set a fast-paced trial schedule); In re Uber Techs., Inc., 852 F. App'x 542 (Fed. Cir. 2021) (same); In re Adobe Inc., 823 F. App'x 929 (Fed. Cir. 2020). In re Juniper Networks, Inc., 14 F.4th 1313, 1323 (Fed. Cir. Sep. 14, 2021) ("In sum, this case is a very close cousin of our recent decisions in Samsung and Hulu, and the disposition of this case is largely dictated by the disposition of those cases.)
  • In re Hulu, LLC, No. 2021-142, 2021 WL 3278194, at *3 (Fed. Cir. Aug. 2, 2021) (court cannot categorically reject the importance of witnesses nor require defendant to show that witnesses would be unwilling to travel to the district).
  • In re Google LLC, 855 F. App'x 767, 768 (Fed. Cir. Aug. 4, 2021) (denying mandamus where some potential witnesses were identified in the district);In re Western Digital Technologies, 847 F. App'x 925 (Fed. Cir. May 10, 2021) (same).
  • In re Atlassian Corp. PLC, No. 2021-177, 2021 WL 5292268, at *2 (Fed. Cir. Nov. 15, 2021) (court must afford weight to, and cannot categorically reject the importance of the location of prior-art witnesses).
  • In re Netflix, No. 2022-110, 2022 WL 167470 (Fed. Cir. Jan 19, 2022) (court must afford weight to location of documents and source code, and to the location of identified witnesses, without requiring the defendant show that this evidence would be material at trial).