Georgetown Law
Technology Review

For decades, patent holders could effectively file a lawsuit in any district where a defendant made sales, thanks to a broad interpretation of the phrase “resides” in 28 U.S.C. § 1400(b). With this reading, the patent world saw the rise of forum shopping, a practice which allows plaintiffs to bring suit in a court they believe more favorable to them, and as such, there was an influx of cases to historically plaintiff-friendly dockets such as the Eastern District of Texas. This concern led in part to the Supreme Court’s consideration of the TC Heartland case during its last term.1TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514 (2017).

In TC Heartland, the Supreme Court definitively struck down this broad reading of the venue statute and clarified that its previous case, Fourco Glass Co. v. Transmirra Prod. Corp.,2Fourco Glass Co. v. Transmirra Prod. Corp., 353 U.S. 222 (1957) is still good law in that “resides” should only refer to a company’s place of incorporation. With this change, patent plaintiffs were left to determine the meaning of the rather untouched second clause of section 1400(b), which allows for a venue “where the defendant has committed acts of infringement and has a regular and established place of business.”3Id.

Enter Rodney Gilstrap, a judge in the Eastern District of Texas who historically has had the largest patent docket of any district judge in the country. In a written opinion denying a motion to transfer out of his district, Gilstrap laid out a four-factor test which he believed properly encompassed the meaning of a “regular and established” place of business.4See Raytheon Co. v. Cray, Inc., No. 2:15–CV–01554–JRG, 2017 WL 2813896, at *11 (E.D. Tex. June 29, 2017). His interpretation would allow for a broad reading of “regular and established” and would have found venue proper when a company had only a minimal connection to the district.

The Federal Circuit struck down this interpretation on appeal.5See In re Cray Inc., 871 F.3d 1355, 1362 (Fed. Cir. 2017). The court’s new interpretation requires: 1) 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.6See id. at 1360. In the case at issue, the presence of one employee who teleworked from his home was not enough to establish venue.7See id. at 1366.

While the Supreme Court and Federal Circuit decisions seem to offer more clarity for domestic defendants, there is little guidance for international defendants in establishing venue. The Supreme Court specifically noted that their holding was limited to “domestic” defendants.8TC Heartland, 137 S.Ct. at 1517. With this limitation, along with recent changes to the regular venue statute and the long-standing idea that foreign business entities can be sued for patent infringement in any district, the issue is ripe for review by the highest court.

Additionally, neither court seemed to heavily focus on the remaining prong of the clause, which relates to “where the defendant has committed acts of infringement.”928 U.S.C. § 1400(b). This standard hasn’t raised significant issue to date, but courts may see more arguments made to this point, possibly if a situation arises where the defendant has a regular and established place of business but no facts pointing to infringing activity in the district.

Following TC Heartland, many defendants in ongoing litigation argued the case was an intervening change in law that allowed for a court to revisit the defense’s venue objection later down the line, with some courts even ordering additional briefing.10See, e.g., Symbology Innovations, LLC v. Lego Sys., Inc., No. 2:17–cv–86, 2017 WL 4324841, at *3 (E.D. Va. Sept. 28, 2017). Courts are often granting these motions, with the exception of those cases where the court found the venue defense waived given that the cases were simply too far along that a transfer would have prejudiced the opposition.11See, e.g., Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys., LLC, No. 2:15-CV-00037-RWS-RSP, 2017 WL 2651618, at *20 (E.D. Tex. June 20, 2017).

Plaintiffs looking to argue venue now should use the following factors to help show that venue is proper under the Federal Circuit’s standard: the defendant owns, leases, or pays for a physical location in the district; the employee in the location is hired for their location specifically or the employment is otherwise conditioned on their continued residence in the location; the location is marketed to the public; the employer would look to establish a new place of business if the employee moved out; and the remote office in the district is similar to the main office of the business.12See David Tellekson et al., Federal Circuit Provides Much Needed Patent Guidance Post TC Heartland, FENWICK (Sept. 22, 2017), https://www.fenwick.com/publications/Pages/Federal-Circuit-Provides-Much-Needed-Patent-Venue-Guidance-Post-TC-Heartland.aspx.

However, the case law is still being developed and only the creativity of defense lawyers will bring to light the true meaning of “regular and established place of business.”