Federal Circuit Addresses Venue Questions Left Unanswered After TC Heartland

By: Eric G. Soller

While there are many strategic reasons for selecting a venue in which to bring a patent infringement lawsuit, the determination of whether the preferred venue is a proper venue is not as clear as in a non-patent case.  However, on February 13, 2020, the United States Court of Appeals for the Federal Circuit, in In re Google LLC, [1] addressed some of the proper venue questions left unanswered by the Supreme Court’s 2017 opinion in TC Heartland LLC v. Kraft Foods Group Brands LLC. [2]  In the wake of TC Heartland, many practitioners decided to take the “safer” route of filing patent infringement actions in the state where the defendant business is organized rather than risk the time, effort and expense of filing in another jurisdiction where the defendant regularly conducts business.  As could have been expected, in the months following TC Heartland, the Eastern District of Texas saw a reduction in case filings, with a significant increase of filings in the District of Delaware.  While Google did not resolve all of the issues relating to proper venue, the Federal Circuit did leave room for expanding proper venue beyond the defendant’s state of incorporation.

In TC Heartland, the Supreme Court held that the patent venue statute is the sole basis for determining proper venue in patent infringement suits.  The patent venue statute [3] provides that any action for patent infringement may be brought, (1) in the state where a business resides, or (2) where a business has committed acts of infringement and has a regular and established place of business.  The Supreme Court specifically rejected the application of the more relaxed general venue statute [4] to patent infringement cases.  The general venue statute provides that for venue purposes a corporation “resides” in any district within which the corporation has sufficient contacts to be subject to personal jurisdiction.  The Supreme Court in TC Heartland held that “resides” under the patent venue statute is limited to only the state in which a company has been organized.  This stricter interpretation resulted in many new patent infringement actions being filed in the state where the defendant was organized, because of the uncertainty of how the Supreme Court would interpret where a defendant has “a regular and established place of business” under the patent venue statute.

In Google, the Federal Circuit granted a writ of mandamus to address conflicting interpretations of “this fundamental and recurring issue of patent law.”  The Federal Circuit began its analysis by rearticulating its decision in In re Cray, Inc.,[5] which held that a “regular and established place of business” under the patent venue statute must be: (1) “a physical place in the district”; (2) “regular and established”; and (3) “the place of the defendant.”

In Google, Super Interconnect Technologies LLC (“SIT”) sued Google for patent infringement in the Eastern District of Texas, alleging that Google’s business included providing video and advertising services to residents of the Eastern District of Texas through the Internet.  SIT asserted that the presence of several Google Global Cache (“GGC”) servers, which function as local caches for Google’s data, were sufficient evidence of “a regular and established place of business.” The GGC servers are not hosted within datacenters owned by Google.  Instead, Google contracted with internet service providers (ISPs) within the district to host the GGC servers within the ISP’s datacenter. When a user requested Google’s content, the ISP routed the user’s request to a GGC server within its own network (within the district) before routing the request to Google’s central data storage servers (outside the district).

Google argued that the first element of Cray was not satisfied because a “place” must have the characteristics of a real property or leasehold interest. The Federal Circuit rejected this argument holding that a “place” need only be a “physical, geographical location in the district from which the business of the defendant is carried out.”  A “place” does not require real property ownership or a leasehold interest in real property.

Google next argued that a “place of business” requires a place where an employee or agent of the defendant is conducting the defendant’s business.  The Federal Circuit agreed with Google and relying upon the service statute for patent cases, 28 U.S.C. § 1694, held that a “regular and established place of business” requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged “place of business.”

The Google Court next addressed whether Google in fact had an employee or agent with a regular, physical presence at its “place of business” and whether that employee or agent was conducting Google’s business.  While there were no Google employees conducting business in the Eastern District of Texas, there was nonetheless a question as to whether the ISPs were acting as Google’s agent.  Google contracted with two ISPs to host its GGC servers. The contracts stated that, for each ISP, Google would provide the ISP with GGC server equipment, which the ISP would install and host in server racks within its datacenter. The contracts contemplated that the ISP would perform three functions: (1) the ISP provided the GGC servers with network access; (2) the ISP performed installation of the GGC servers; and (3) the contracts provided that “Google may from time to time request that [the ISP] perform certain services” involving “basic maintenance activities” with respect to the GGC servers.  The Court was not persuaded that any of these functions were sufficient to establish an agency relationship or to constitute sufficient evidence of a “regular and established” business.

The Google Court reached its conclusion that venue was not proper “bearing in mind that, as we noted in Cray, the Supreme Court has cautioned against a broad reading of the venue statute,” but also mindful of “the importance of relatively clear rules, where the statutory text allows, so as to minimize expenditure of resources on threshold, non-merits issues, of which venue is one.”  The Court also indicated that any dissatisfaction with its resolution lies with the Congress, who can amend statutes, and not with the Courts, which cannot.  Finally, the Court stated: “To be clear, we do not hold today that a ‘regular and established place of business’ will always require the regular presence of a human agent, that is, whether a machine could be an ‘agent.’”

While Google was a victory for corporations, in that it refused to define a “regular and established place of business” broadly, there remains some opportunity, albeit slight, that would expand venue in patent infringement cases beyond the state in which a company has been organized.

[1] Slip Op. 2019-126 (Fed. Cir. Feb 13, 2020).

[2] 137 S. Ct. 1514 (2017).

[3] 28 U.S.C. § 1400(b).

[4] 28 U.S.C. § 1391.

[5] 871 F.3d 1355 (Fed. Cir. 2017).

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ERIC G. SOLLER is the Chair of the firm’s Commercial Litigation and Intellectual Property Litigation Practice Groups. If you have a question about protecting or defending your trademark, best venue for patent litigation, or any other intellectual property inquiry, please do not hesitate to contact Mr. Soller directly today.

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