The U.S. Court of Appeals for the Federal Circuit held that to find a “required and established place of business” for venue in a civil action for patent infringement, the court must identify “a physical place, of business, of the defendant.” Cray filed a motion to transfer the underlying litigation, arguing that it did not meet the venue requirements of §1400(b) as it did not “reside” in the Eastern District of Texas in light of the Supreme Court’s decision in TC Heartland, and that it did not have a regular and established place of business in the District. Relying heavily on the Federal Circuit’s decision in In re Cordis Corp., 769 F.2d 733 (Fed. Cir. 1985), the district court found that Cray did have a regular and established place of business in the District and denied Cray’s motion. As part of the ruling, Judge Gilstrap identified four factors to consider in the patent venue inquiry: physical presence; Defendants’ representation to others; benefits received from presence in the district; and targeted interactions within the district.

On Cray’s petition for mandamus, the Federal Circuit found the lower court misunderstood the scope and effect of the Cordis decision, and held that the language of the statute should be the focus in considering venue. As such, the Federal Circuit set forth three requirements, all of which must be satisfied for proper venue: “(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.” The ruling vacated the district court’s denial of motion to transfer and criticized the four-factor test announced by Judge Gilstrap.

The Federal Circuit’s test will likely improve the ability of defendants to transfer venue out of the Eastern District of Texas and subsequently obtain a stay of district court litigation pending inter partes review. According to Docket Navigator, there have been 243 motions to stay pending IPR, CBM, or PGR proceedings filed in U.S. district courts in 2017. Of those, 143 were granted (a grant rate of 58.8%). 59 motions were filed in the Eastern District of Texas, 26 were filed in Delaware, and 22 were filed in the Northern District of California. While only 50.8% of those motions were granted in EDTX, Delaware granted 53.8% and CAND granted 81.8%. Other districts with favorable rates of granting a stay include New Jersey (69% granted since 2015) and the Northern District of Illinois (66% granted since 2015).

In re: Cray Inc., Case No. 17-129, D.I. 50 (Fed. Cir. Sept. 21, 2017) (Panel: Lourie, Reyna, and Stoll)