August, 21st, 2018

By Andrew P. Siuta and Andrew E. Kerrick

An important strategic decision at the outset of every patent infringement suit is where to file. Rules of the district, its familiarity with patent disputes, the efficiency of its docket, its proximity to parties and their counsel, and its apparent friendliness to patent holders or infringers can materially affect all phases of the litigation. For many years, patent holders could file suit in essentially any district in which the patent holder was committing acts of infringement. In TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court severely limited where a patentee can sue for infringement.[1] The Court held “resides” in the patent venue statute is where a corporate defendant is located.[2] Now, a patentee can only sue a corporate defendant where it is incorporated or “where the defendant has committed acts of infringement and has a regular and established place of business.”[3] Under a recent Federal Circuit case called In re Cray, for a corporation to have an established place of business, “(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.”[4]

Two recent cases involving computer-related patents have further defined the standard set by Cray. In SEVEN Networks, LLC v. Google LLC, Google was ruled to have an established place of business where its servers where located in eastern Texas.[5] In VoIP-Pal.com, Inc. v. Twitter, Inc., the District Court in Nevada ruled that Twitter did not have an established place of business where one of its software engineers worked from home.[6]

A distinction in these cases is that Google leased a building for its servers under the name Google.  Conversely, Twitter’s employee was living in Nevada under his own name, he chose to work there under his own volition, and the company did not have an office or purport to have an office in Nevada. This dichotomy shows us that having an established place of business likely needs to be in the corporation’s name.  When looking for a proper venue to sue an online company for patent infringement, it would be prudent to search for a district where the company itself has physical ties.

In furtherance of this point, these cases came out the opposite of what one would expect when looking at the dispersion of personnel.  Google had no personnel or official buildings in the district, but the physical presence of the servers was enough to constitute venue.  Twitter literally had an employee in Nevada, but since he reported to a team in San Francisco and Twitter allowed him to move his home out of the district freely on his own accord, without Defendant’s approval, Twitter itself was held not to have a physical presence.  Thus, we can understand that the corporation is treated differently than its employees when conducting a venue analysis.

Additionally, the nature of the relevant business (when considering the defendant’s business presence) and the patents at issue (when considering acts of infringement) play a substantial part in the venue analysis. These two cases illustrate the spectrum of patent venue, but how courts will resolve the issues between these two points is unpredictable. As the case law in this area of law continues to develop, it might become clearer what constitutes venue. However, finding where a web-based corporation is located will only get trickier as internet and cloud-based technology continue to develop. Moreover, this restrictive interpretation of the statute causes undesirable policy issues. Having fewer options for venue leaves smaller companies and start-ups at a significant disadvantage if the only proper venues for their competitors and infringers are across the country. To truly get a uniform standard and produce fairer options for filing suits, it might take legislation by Congress or a Supreme Court decision.  Congress has already amended the non-patent venue rules for clarity, so an amendment to the patent-specific venue rules may follow.

Takeaway: The future of venue in patent infringement cases is still unclear and will hinge on the specific facts of each case. Even though an employee lives somewhere, the company does not necessarily have a sufficient place of business there. Conversely, the company may have a sufficient place of business somewhere else based solely on servers without any employees or official corporate office.

 

WHIPgroup is leading counsel for U.S. and international technology companies. We specialize in patent and trademark law.

© 2018 Whitmyer IP Group, Stamford, Connecticut.

 

[1] 137 S.Ct. 1514, 1521 (2017).

[2] Id. (defining 28 U.S.C. § 1400(b)).

[3] 28 U.S.C. § 1400(b).

[4] In re Cray, 871 F.3d 1355, 1360 (Fed. Cir. 2017).

[5] 2018 WL 3634589, at *21 (E.D. Tex. Jul. 19, 2018).

[6] 2018 WL 3543031 (D. Nev. Jul. 23, 2018).

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