Venue in patent infringement cases is governed by 28 U.S.C. § 1400(b), which provides that a plaintiff may bring a patent infringement action either in (1) “the judicial district where the defendant resides”; or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.” In TC Heartland, the Supreme Court made clear that a domestic corporation only “resides” in its state of incorporation. As a result, the focus of the venue analysis has now largely shifted to a question that was largely irrelevant before TC Heartland: what constitutes a “regular and established place of business” under the second prong of § 1400(b)? The answer to this question will play a large role in determining the practical impact of the TC Heartland decision. If courts hold that a “regular and established place of business” should be interpreted expansively – e.g., as including any judicial district in which a company has an authorized sales agent – plaintiffs will still have many of the venue options available before TC Heartland. If, however, courts hold that a regular and established place of business is more akin to a corporation's headquarters – venue options will be limited.
Recently, Judge Rodney Gilstrap in the Eastern District of Texas set forth a test for determining where a company maintains a “regular and established place of business” in “the modern era.” See Raytheon Co. v. Cray, Inc., 2-15-cv-01554 (E.D. Tex. Jun. 29, 2017) (Order, Dkt. 289). Judge Gilstrap noted that courts must consider the “totality of the circumstances” in determining when venue is proper under the second prong of § 1400(b). Judge Gilstrap then outlined four factors that are relevant to the inquiry:
- Defendant’s Physical Presence in the Judicial District. The court noted that a fixed physical location in the district weighs heavily towards establishing a regular and established place of business. The court, however, also noted that a lack of a physical location is not dispositive, citing the Federal Circuit’s holding in In re Cordis Corp., 769 F.2d 733 (Fed. Cir. July 10, 1985). The court noted that the location of the defendant’s property, inventory, infrastructure, and people are all relevant to this factor.
- Defendant’s Representations about Its Presence in the Judicial District. The court also noted that “the extent to which a defendant represents, internally or externally, that is has a presence in the district” can support a finding of venue. For example, advertising that an agent is located in the judicial district is an indication that the defendant maintains a regular and established place of business at that location.
- Benefits the Defendant Received from the Judicial District. The court next noted that venue may be proper under the second prong of § 1400(b) when the defendant receives benefits from the district, including revenues from the sale of infringing products.
- Defendant’s Targeted Interactions with the District. Finally, the court noted that a defendant’s “targeted interactions” with the district support allowing venue, including localized customer support, ongoing contractual relationships, and targeted marketing efforts.
Although the court was careful to set forth these factors relevant to venue in the “modern era,” the court ultimately determined that it was unnecessary to apply the factors in the Raytheon case. Instead, the court held that venue was proper because the defendant, Cray Inc., employed a full-time sales representative who lived in the Eastern District of Texas. The court relied on the Federal Circuit’s decision in Cordis, which held that venue was proper in Minnesota where the defendant employed two sales agents in the state. Judge Gilstrap concluded that “[t]he activities performed by Cray” – i.e., employing a sales representative in East Texas – “are factually similar to the activities performed by the representatives in Cordis and therefore are sufficient to meet the ‘regular and established place of business requirement of § 1400(b)./”
Interestingly, the day after Judge Gilstrap issued his opinion in Raytheon, Magistrate Judge Paul Papak of the District of Oregon issued a discovery order related to venue that appeared to consider many of the same factors that Judge Gilstrap identified as relevant to venue “in the modern era.” See Nike, Inc. v. Skechers U.S.A, Inc., 3-16-cv-007 (D. Or. June 30, 2017) (Order, Dkt. 120). For example, Judge Papak ordered venue-related discovery concerning: (1) sales in the district; (2) names and activities of third-party vendors; (3) names and activities of agents who have lived or worked in the district; (4) professional services retained in the district; and (5) property owned, leased, or managed by the defendant in the district.
The decisions from Judge Gilstrap and Judge Papak are only the first of what will be a deluge of district court opinions interpreting the meaning of “regular and established place of business.” Perhaps not surprisingly, Judge Gilstrap’s totality of the circumstances analysis appears to signal that the Eastern District of Texas will take an expansive approach to determining when venue is appropriate. It remains to be seen whether other district courts, or the Federal Circuit, will agree with that approach.