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Patent Venue Requires Employee or Agent at Place of Business: Federal Circuit
Practical Law Legal Update w-024-0500 (Approx. 5 pages)
Patent Venue Requires Employee or Agent at Place of Business: Federal Circuit
by Practical Law Intellectual Property & Technology
| Published on 14 Feb 2020 • USA (National/Federal) |
In In re Google LLC, the US Court of Appeals for the Federal Circuit held that the patent venue statute's "regular and established place of business" provision (28 U.S.C. § 1400(b)) requires the regular and physical presence of an employee or other agent conducting business there.
On February 13, 2020, in In re Google LLC, the US Court of Appeals for the Federal Circuit held, in a mandamus order to the US District Court for the Eastern District of Texas, that under the patent venue statute, 28 U.S.C. § 1400(b), a "regular and established place of business" requires the regular, physical presence of an employee or other agent conducting business at that place ( (Fed. Cir. Feb. 13, 2020)).
Super Interconnect Technologies LLC (SIT) filed suit against Google LLC for patent infringement in the Eastern District of Texas. SIT asserted venue under 28 U.S.C. § 1400(b) based on Google's contracts with two internet service providers (ISPs) in the district to host Google Global Cache (GGC) servers, which the ISPs first attempt to route to when a nearby user seeks Google's content.
Google sought dismissal of the complaint for improper venue under 28 U.S.C. § 1406(a) and Federal Rule of Civil Procedure 12(b)(3), which the district court denied, reasoning that GGC servers constituted Google's regular and established place of business based on:
- The district court's previous decision in SEVEN Networks LLC v. Google, LLC (315 F. Supp. 3d 933 (E.D. Tex. 2018)). In that litigation, the Federal Circuit denied Google's petition for mandamus, finding that Google did not demonstrate that the district court's ruling warranted mandamus review (see Legal Update, Under Patent Venue Statute, Local Google Servers Are a Regular and Established Place of Business: E.D. Tex.).
- The requirements for a "regular and established place of business" laid out in In re Cray, Inc. (871 F.3d 1355, 1360 (Fed. Cir. 2017)).
Google petitioned the Federal Circuit for a writ of mandamus requiring the district court to dismiss the case for lack of venue under Section 1400(b). In its decision, the Federal Circuit found mandamus was now warranted to address the "regular and established place of business" question because, since the SEVEN Networks case:
- Many district courts had adopted inconsistent views on the question.
- Experience indicates the question is not likely to reach the Federal Circuit through the usual appellate process.
- District courts have had time to consider the question and have clarified that the issues to address are:
- if a server rack, shelf, or similar space constitutes a "place of business"; and
- if the regular presence of an employee or agent conducting business at the place is required for a "regular and established place of business."
Turning to these two issues, the Federal Circuit:
- Reiterated that the requirements in Cray for determining if a defendant has a "regular and established place of business" are:
- there must be a physical place in the district;
- it must be a regular and established place of business; and
- it must be the place of the defendant.
- Citing Cray, held that leased shelf or rack space, such as that used by GGC servers, can constitute a "place" under Section 1400(b) because a "place":
- does not require real property ownership or a leasehold in real property; and
- may be any physical space defendant can possess or control.
- Held that a "regular and established place of business" requires an employee or agent to regularly conduct business at that place, reasoning that:
- the patent service and venue statutes must be read together because they were originally linked and the service statute provided that service where defendant has a "regular and established place of business" may be made on the "agent or agents engaged in conducting such business" (54 Cong. Ch. 395, 29 Stat. 695 (1897));
- the legislative history indicates that Congress enacted the venue statute to "give original jurisdiction to the court where a permanent agency transacting the business is located" (29 Cong. Rec. 1900 (1897) (statement of Rep. Lacey));
- the amendment to the venue statute in the Leahy-Smith America Invents Act stating that ATMs are not "regular and established places of business" should not impact this analysis because it does not address an employment or agent requirement (Pub. L. 112-29, § 18(c));
- the US Supreme Court has advised against reading the venue statute broadly (citing Cray, 871 F.3d at 1361; Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 566 (1942); Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260, 264 (1961));
- courts should aim for clear rules governing non-merit issues such as venue (citing Bolivarian Republic of Venezuela v. Helmerich & Payne Int'l Drilling Co., 137 S. Ct. 1312, 1321 (2017); Hertz Corp. v. Friend, 559 U.S. 77, 94-95 (2010); United Sates v. Sisson, 399 U.S. 267, 307 (1970)); and
- the patent venue statute should not consider agent actions, including maintenance, that are connected to, but do not constitute the "defendant's conduct of business in the sense of production, storage, transport, and exchange of goods or services."
Applying its holdings, the Federal Circuit determined that:
- There was no Google employee conducting business in the district.
- The ISPs are not functioning as Google's agent because:
- although they provide GGC servers with network access, Google has no real right of interim control over the provision (citing Restatement (Third) of Agency § 1.01 cmt. f(1));
- although the ISPs install the GGC servers, this is not conducting "regular and established" business since it is a one-time occurrence; and
- although Google may request ISPs to perform maintenance, SIT has not shown that this is conducting Google's business, and maintenance activities alone are not the conduct of Google's business.
Accordingly, the Federal Circuit granted Google's petition and ordered that the district court dismiss or transfer the case.
The Federal Circuit clarified that it did not decide that venue will always require the regular presence of a human agent or whether a machine could be an agent able to accept service under 28 U.S.C. § 1694.
In a concurrence, Judge Wallach argued that there was insufficient information in the record to adequately understand Google's business model and address whether Google's end users become its agents by sharing information produced on its servers, which he argued the district court should determine.