A recent decision by the Federal Circuit this month will have a big impact on where patent infringement litigation will take place, impacting everyone from small businesses to multinational corporations.
Following the recent Supreme Court decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, limiting venue in patent cases under 28 U.S.C. § 1400(b) to those districts where a defendant is incorporated or where it has a “regular and established place of business,” the Eastern District of Texas came up with a four-factor test for determining the latter: (1) physical presence, (2) defendant’s representations of a presence in the district, (3) benefits received from a district, and (4) whether there were any targeted interactions with the district. Raytheon Co. v. Cray, Inc., No. 2:15-cv-01554-JRG (E.D. Tex. June 29, 2017). Judge Gilstrap found that there was venue and the decision was immediately appealed to the Federal Circuit with a request for a writ of mandamus.
In this month’s decision, In re Cray, Case Number 2017-129 (Fed. Cir. Sept. 21, 2017), the Federal Circuit overturned Judge Gilstrap’s four-part test and took an in-depth look at the language contained within § 1400(b). The panel held that a three-part test was more appropriate finding that: (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.
Regarding the first requirement, the Federal Circuit determined that virtual spaces or electronic communications do not suffice to create a “physical” place because there must still be a physical, geographical location in the district where business is carried out. Further, the physical place must be used continuously and regularly in order to meet the second requirement. In other words, sporadic activity in a district will not create venue. With regard to the third requirement, the Federal Circuit essentially established a factual determination when considered whether a defendant leased or owned the physical place or exercised “other attributes of possession or control over the place,” including marketing and representations made by the defendant. This decision will likely affect the strategic determinations of where to bring a case for patent infringement. For example, the Eastern District of Texas will likely see a drop in the number of filings given its current status as a haven for non-practicing entities who sue corporations with no physical presence in the district.
This decision will likely affect the strategic determinations of where to bring a case for patent infringement. For example, the Eastern District of Texas will likely see a drop in the number of filings given its current status as a haven for non-practicing entities who sue corporations with no physical presence in the district. Plaintiffs will need to put more effort into investigating the defendant to determine where the defendant’s place of business is under the Cray test if the plaintiff is unwilling to bring suit where the defendant is incorporated. It is heavily recommended that a pre-suit investigation include an infringement analysis as well these venue considerations.