Establishing Patent Infringement Venue Today and in the “New Normal”
In 2017, The United States Supreme Court decided that a 1957 opinion is still valid and still limits venue choices for patent infringement actions under 28 U.S.C. § 1400. See TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. ___ (2017) (citing Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957)). SCOTUS held that “[a]s applied to domestic corporations, ‘reside[nce]’ in § 1400(b) refers only to the State of incorporation,” where the accused infringer has a “regular and established place of business” in the venue. While framed as merely confirmation of precedent from the 1950s, this decision created a dramatic change in the patent litigation landscape.
Since TC Heartland came down, lower courts have applied the new paradigm in differing ways. It was not until In re Cray, 2017-129 (Fed. Cir. Sept. 21, 2017), that the Federal Circuit weighed in on what constitutes a “regular and established place of business.” The patent venue statute, 28 U.S.C. § 1400(b), provides that venue is proper in a patent infringement lawsuit only where the defendant (1) resides or (2) has “committed acts of infringement and has a regular and established place of business.” TC Heartland clarified that a defendant “resides” only in the state in which it is incorporated. It did not address the second prong, however, which is an alternative way of establishing venue. More frequently patent owners are looking to the second prong to determine the locus of an appropriate venue now that the first prong of the statute has been interpreted narrowly.
In In re Cray, the Federal Circuit determined that a “regular” and “established” place of business requires a fixed, physical presence belonging to the defendant in the district. That Cray’s employee lived in the district and worked out of his home was not enough. Cray did not pay rent or lease the employee’s home, did not direct its employee to store merchandise or other goods related to the company at the home, nor require the employee to live in the district. Put simply, the Federal Circuit found that the employee’s presence in the district was not a “regular and established place of business” of the defendant, but rather a location of the employee.
Beyond the specific facts at issue in In re Cray, the Federal Circuit provided helpful guidance that the second prong of § 1400(b) requires (1) a fixed, physical presence, akin to a building or part of a building from which business is conducted, (2) that the physical presence be regular in that it operates in a steady, uniform, orderly, and methodical manner, and is not sporadic or transient, and (3) that the location must be a place of the defendant, and not merely the place of an employee, in that the defendant must establish or ratify the location.
The Federal Circuit’s guidance in In re Clay is sure to be tested in the coming years as businesses transition to new way of life in the post COVID era in which employees are much more routinely working remotely, and in some instances, in differing states than an employer’s established place of business. Will the new normal make In re Clay irrelevant as employees may now be required to work from home? Or, what happens if a business goes entirely virtual? How the new normal impacts venue in a patent infringement lawsuit is yet to be seen, but it certainly something to keep an eye on.