Last week, the District of Minnesota granted Defendant Gilead Science's motion to transfer for improper venue in Regents of the University of Minnesota v. Gilead Sciences, Inc., 16-cv-2915 (D. Minn. Oct. 20, 2017). In so doing, the court co nsidered the Federal Circuit's test, recently set forth in In re Cray, Inc., No. 2017-129 (Fed. Cir. Sept. 21, 2017) for determining what constitutes a “regular and established place of business” under 28 U.S.C. § 1400(b). The court found that venue was improper because Gilead's twelve Minnesota-based employees only worked at customer facilities and not at a place of business of Gilead.

Under the Federal Circuit’s Cray test, a “regular and established place of business” must be (1) a physical place in the district; (2) a regular and established place of business; and (3) a place of the defendant. In arguing that venue was proper, the plaintiffs noted that twelve Gilead employees lived and worked in Minnesota, used company vehicles and home office equipment, and stored sample products in their homes. The court, however, rejected these arguments.

Applying the first element of the Cray test, the court found that Gilead did not have a physical place in the district. In contrast to In re Cordis Corp., 769 F.2d 733 (Fed. Cir. 1985), where venue was found to be proper based on the presence of employees who occasionally used their home offices as distribution centers, Gilead’s Minnesota-based employees only stored low quantities of sample products at their homes. Moreover, unlike the defendant in Cordis, Gilead did not provide any Minnesota-based administrative support.

As to the second element of the Cray test, the court noted that Gilead’s Minnesota-based employees had discretion to move from the district. Moreover, the employees worked primarily at the facilities of their customers – not at their individual homes. As such, the employees’ homes were not sufficiently settled or fixed to amount to a “regular and established” place of business.

As to the last element of the Cray test, the court determined that Gilead did not ratify or establish a place of business in the district. Looking first at the question of ownership and control, the court found that Gilead did not rent or own any physical place in Minnesota. The court further found that Gilead’s provision of temporary office equipment to its employees did not convert its employees’ home offices into places over which Gilead had ownership and control. The court additionally found that Gilead’s employees were not required to live in Minnesota to service its Minnesota-based customers. Finally, the court noted that Gilead did not make any outward representations of having offices or locations in Minnesota. Even though employees listed Minnesota-based cell phone numbers on their business cards, this fact alone was not enough to support a finding that Gilead had a place in the district. 

In sum, the court found that Gilead failed to satisfy all the elements of the Cray test and therefore Gilead did not have a regular and established place of business in Minnesota. Accordingly, a transfer for improper venue was warranted.

Gilead demonstrates that even employing a substantial workforce in a judicial district may not be enough to establish venue if the defendant does not otherwise own or control a physical place of business in the district.