The United States Court of Appeals for the Federal Circuit has struck down a much-criticized venue test created by Judge Rodney Gilstrap of the United States Federal District Court for the Eastern District of Texas. See In re: Cray Inc.
In a unanimous panel decision authored by Judge Alan Lourie (joined by Judges Reyna and Stoll), the Federal Circuit found that Judge Gilstrap misinterpreted the scope and effect of Federal Circuit precedent in determining that Cray maintained “a regular and established place of business” in the Eastern District of Texas within the meaning of 28 U.S.C. § 1400(b). Accordingly, Judge Gilstrap’s denial of Cray’s transfer motion was an abuse of discretion. The Federal Circuit panel ordered the case transferred, but did not decide to which court the case should be transferred. While Cray would prefer transfer to the Western District of Wisconsin, Raytheon would prefer transfer to the Western District of Texas. The Federal Circuit left the decision of which district to transfer the case to for remand.
While not going into great detail with respect to Judge Gilstrap’s four-factor test for venue, the Federal Circuit did rule that it “is not sufficiently tethered” to the “statutory language.”
Federal Circuit Decision
The Federal Circuit began its substantive discussion with the meaning and history of the venue statute, and cautioned district courts to keep this history in mind and not to improperly “conflate showings that may be sufficient for other purposes, e.g., personal jurisdiction or the general venue statute, with the necessary showing to establish proper venue in patent cases.” This is necessary because “regular and established place of business” requires more than minimum contacts for establishing personal jurisdiction.
After briefly parsing the statutory language of §1400(b) critical to the decision, the Federal Circuit concluded that Judge Gilstrap’s four-factor test was not compliant with the statutory language. Judge Lourie simply concluded: “The district court’s four-factor test is not sufficiently tethered to this statutory language and thus it fails to inform each of the necessary requirements of the statute.”
The Federal Circuit would go on to explain that, in determining whether a defendant has a regular and established place of business within a district in order to make venue proper, requires analysis of the unique facts of the case, and for that there is “no precise rule.”
“The fact that Cray allowed its employees to work from the Eastern District of Texas is insufficient,” wrote Judge Lourie, as he shifted to the specifics of the case before the Court. Lourie would go on to point out that Cray did not own, lease, rent or pay for any portion of the employees’ homes. Furthermore, Cray played no role in selecting the location, storing inventory, conducting demonstrations, maintaining the locations, or in decisions relating to terminating the location of the residences.
Judge Lourie distinguished these facts in this case from Cordis based on the fact that in Cordis “it was clear that the place of business was established by Cordis.” Furthermore, in Cordis, the appellant there received secretarial support services from a third-party provider that was located within the district, another distinguishing factor.
Tags: Federal Circuit, patent, patents, venue
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