The Federal Circuit rejected the patent venue test recently established by Judge Rodney Gilstrap of the Eastern District of Texas, the judge who has been reported to preside over about one quarter of all patent infringement cases in America. The three judge panel held that Judge Gilstrap abused his discretion and applied an incorrect legal standard in Raytheon Co. v. Cray Inc. when he refused to transfer the patent suit after applying his own four-factor test and determined defendant Cray maintained “a regular and established place of business” in the district where only one of its employees worked from home. As a result of its findings, the Federal Circuit ordered the case to be transferred.
In its decision, the Federal Circuit also took the opportunity to clarify the Supreme Court’s recent TC Heartland decision and set forth three general requirements to determine where a defendant maintains “a regular and established place of business” including: (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.
Applying its own test, the court found that Cray’s employment of one sales representative who worked from home in the district was insufficient to establish proper venue when Cray did not store, display, distribute, or manufacture materials from this location and had no involvement in selecting or paying for the location in the district. Instead, the Federal Circuit held that “the facts of this case show that there exists within the district a physical location where an employee of the defendant carries on certain work for his employer” and not that “Cray maintains a regular and established place of business.”
Given the Federal Circuit’s rejection of the Gilstrap test and narrowing of the patent venue standards, we expect the number of patent cases filed in the Eastern District of Texas to significantly decrease. Now that patent suits can only be filed where the defendant resides or where it has committed acts of infringement and has a regular and established place of business, other districts will no doubt see an influx of these cases. Here in Boston, the District of Massachusetts is well positioned to take them on for many reasons, not least of all its recent initiative to revise its Local Patent Rules to make patent litigation flow more smoothly.