Most corporations know by now that in May 2017, the Supreme Court drastically changed venue law for patent cases in TC Heartland LLC v. Kraft Foods Group Brands LLC. It is not surprising that since TC Heartland, venue law has been in flux and many patent owners have faced challenges on where proper venue lies. WHIPgroup recently advanced venue law in favor of patent owners by obtaining a ruling that an employee’s home office qualifies as a regular and established place of business.
In a patent infringement case, venue is proper in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. 28 U.S.C. § 1400(b) (emphasis added). Prior to TC Heartland, a patent owner could sue a defendant anywhere the infringing activity took place, which enabled patent owners to forum shop for the court that it believed would result in the best chances of success. In TC Heartland, however, the Supreme Court determined that the term “resides” is limited to a corporation’s state of incorporation. Because most patent cases utilized the former definition of “resides” to find venue, the phrase “regular and established place of business” now has a greatly-expanded role in determining the propriety of venue.
What establishes a “regular and established place of business” is not crystal clear. We are in an era where corporations do not operate under the traditional brick-and-mortar model. Employees telecommute, business is conducted virtually, and companies implement just-in-time inventory methods to eliminate the need for storing inventory or utilize third-party warehousing facilities to ship goods directly to consumers. The Federal Circuit has announced a three-part test to help guide the analysis of whether a defendant has a regular and established place of business: (1) defendant must have a physical place in the district; (2) defendant must have a regular and established place of business; and (3) it must be the place of the defendant.
In RegenLab USA LLC v. Estar Tech. et al., WHIPgroup successfully argued for its client, RegenLab USA, that venue is proper in New York over defendant Eclipse. The Court agreed with WHIPgroup that the home offices of Eclipse’s employees in New York create a regular and established place of business for Eclipse. The Court found that although Eclipse does not require sales people to live in New York, Eclipse tries to hire people living within their assigned sales territory. Further, the Court agreed that the New York employees’ home offices are not merely a sporadic or isolated work environment, but rather a place of business for Eclipse. For example, the employees contact prospective customers, take initial sales orders, and organize trainings from their homes, and the employees keep sales kits containing the infringing products and copies of marketing and sales literature in their homes. The Court also found that such tasks in New York were part of each employee’s job description.
It is important for both patent owners and defendants to know that employee home offices may open the door for patent venue. Although the “physical place” requirement cannot merely be virtual space or electronic communications from one person to another, the place need not be a fixed physical presence in the sense of a formal office or store. For instance, a business may be subject to a judicial district wherein employees store literature, documents, products or inventory, or conduct services directly related to the infringement, in their homes.
WHIPgroup is leading counsel for U.S. and international technology companies. We specialize in patent and trademark law.
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