The doctrine of patent venue continues its rapid evolution after the Supreme Court’s recent decision TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017). In TC Heartland, the Supreme Court upended decades of established precedent that allowed for broad assertions of venue in patent cases and found that for purposes of the specific patent infringement venue statute, 28 U.S.C. § 1400(b), a domestic corporation resided only in the state under whose laws it was incorporated. TC Heartland is expected to greatly reduce the volume of patent litigation brought in the Eastern District of Texas, a fast-track venue that has found great favor amongst patent assertion entities.
TC Heartland also awakened the other, relatively dormant, clause of § 1400(b), which provides that an accused infringer can also be sued in a district in which infringement occurred and in which the defendant maintains a “regular and established place of business” (“REPOB”). In a decision some thought calculated to try to maintain the Eastern District of Texas as a patent-friendly venue, U.S. District Judge Rodney Gilstrap created a liberal four-factor test for determining what constitutes a REPOB. Raytheon Co. v. Cray, Inc., No. 2:15-cv-01554-JRG, 2017 WL 2813896 (E.D. Tex. June 29, 2017). In contrast, U.S. District Chief Judge Leonard Stark, in the District of Delaware, a district which in August saw twice the number of patent infringement filings than in May, stressed the need for a “permanent and continuous presence”, particularly physical, to satisfy the REPOB provision of § 1400(b). Boston Scientific Corp. v. Cook Group, Inc., No. 1:15-cv-00980-LPS, 2017 WL 3996110 (D. Del. Sept. 11, 2017).
In re Cray granted a writ of mandamus and the Federal Circuit rejected Judge Gilstrap’s REPOB test. In re Cray, Inc., No. 2017-129 (Fed. Cir. Sept. 21, 2017). Instead, the Federal Circuit found that the presence of an employee who worked from home in the Eastern District of Texas was insufficient standing alone to establish the employer had a regular and established place of business there. The Court recognized the often virtual nature of the modern workplace but rejected a changing world as a basis for changing the interpretation of unchanged statutory terms. The Court reaffirmed the necessity of “place” (“a physical, geographical location in the district from which the business of the defendant is carried out”), “regular” (“‘steady[,] uniform[,] orderly[, and] methodical’”), “established” (“‘settle[d] certainly, or fix[ed] permanently’”), and “of the defendant” (“defendant must establish or ratify the place of business”). In discussing each of these elements and applying them to the facts of the case, the Court emphasized the importance of considering all relevant circumstances. It did not limit the inquiry to any particular factor or test or assign more or less weight to any factor.
The Cray decision is noteworthy for its clarity and methodical application of the plain language of the statute. It injected a rare dose of efficiency to patent litigation and obviated costly uncertainty about the place where patent litigation must occur – an issue that can impact the ultimate cost and outcome of a patent dispute. Cray is unlikely to be the last word, but it adds significantly more predictability to patent venue. For more information on this issue, please contact Steve Holtshouser.