FILLING THE JURISPRUDENTIAL GAP: "REGULAR AND ESTABLISHED PLACE OF BUSINESS" AFTER IN RE CRAY, INC.

• Author: Serati, David A.

INTRODUCTION

Since the nineteenth century, specific venue rules for patent infringement suits have existed in federal law. (1) The current version of the "Patent Venue Statute" is codified in 28 U.S.C. [section] 1400(b), which provides that "[a]ny civil action for patent infringement may be brought 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." (2) Over time, the reach of this statute has changed in relation to where a corporation "resides" (3) in the specific context of the statute. These changes have come when courts interpret the relationship between the Patent Venue Statute and amendments to the "General Venue Statute." (4) In TC Heartland, LLC v. Kraft Goods Grp. Brands, LLC, (5) the Supreme Court yet again changed our understanding of the relationship between the General Venue Statute and the Patent Venue Statute, upending over thirty years of precedent by holding that the narrower Patent Venue Statute jurisprudence, not the General Venue Statute, determines the meaning of the word "resides." (6) However, the TC Heartland Court provided no guidance on how to apply the second portion of this once-extinct rule of civil procedure. This Note aims to provide some of that missing guidance necessary to determine which precedent remains good law, which case law has been expressly or implicitly overruled, and how the Court of Appeals for the Federal Circuit (Federal Circuit) and federal district courts are likely to rule in novel factual situations moving forward. (7)

The determinative issue in the vast majority of patent venue decisions is whether the defendant has a "regular and established place of business" (8) in the federal judicial district where a plaintiff brings suit. Venue is important to litigants because the local rules of each district court can vary drastically, and these rules influence the length of the proceeding, the jury pool, the cost of litigation, and the likelihood of success. (9)

In In re Cray, Inc., (10) the Federal Circuit articulated a new legal test for applying the Patent Venue Statute to different factual scenarios to answer whether there is a regular and established place of business in a plaintiffs desired judicial district. In Cray, a defendant's sales employee conducted some business activities from his home in the Eastern District of Texas. (11) In holding that there was no regular and established place of business--thereby making venue improper--the Federal Circuit recited three elements necessary to satisfy the regular and established place of business requirement: (1) there must be a "fixed, physical location," (2) the location must be a "regular and established place of business," and (3) the location must be "of the defendant." (12) These requirements overruled the four-factor test Judge Gilstrap articulated in the proceeding below in the Eastern District of Texas. (13) Since the alleged facts did not establish that the defendant had any ownership or possessory interest in the employee's residence, the physical location in the district did not belong to the defendant, and the third requirement was not met. (14)

This Note argues that the Federal Circuit's interpretation of the Patent Venue Statute is consistent with Congress's original purpose for enacting it, which was to narrow the scope of venue when compared to general venue requirements. (15) Where Cray conflicts with prior case law, it conflicts only to the extent that there was already a conflict in the precedent with this original purpose. And in most decisions after Cray, district courts have resolved the conflict on the side of a narrower reading that would find venue improper. (16) In other words, federal district court cases applying Cray's legal test have similarly erred on the side of a narrow reading. (17) Even though there will surely be much more case law on this topic, Cray provides a roadmap for the factual scenarios likely to trigger a venue challenge worth litigating, and thus require a court's analysis.

In this Note, Part I looks at the legislative histories of the Patent Venue Statute, the General Venue Statute, and the judicial understanding of their relationship over time. Part II looks at how the phrase "regular and established place of business" in the Patent Venue Statute has been interpreted in case law from its inception up to the Federal Circuit's decision in Cray, including competing theories among district courts. Part III explores Cray's factual scenario, procedural history, interpretation of case law, reasoning, and the new test to be applied by district courts to determine proper venue. Finally, Part IV expands Cray's rationale to the various factual scenarios and legal doctrines developed to handle these venue questions from Part II, then analyzes the decisions of district courts applying Cray's test.

1. LEGISLATIVE HISTORIES OF THE VENUE STATUTES

   Where a defendant "resides" in patent infringement suits has changed based upon the Patent Venue Statute, the language of the General Venue Statute, and the relationship between the two as determined by the courts. These changes in interpretation explain both what policy reasons led to a Patent Venue Statute and why there has been a large gap in jurisprudence regarding the meaning of [section] 1400(b). Thus, before exploring the development of the interpretations of "regular and established place of business," (18) it is necessary to review the legislative history and jurisprudence that led up to TC Heartland, LLC v. Kraft Goods Grp. Brands, LLC. (19) This involves a look at the developments of the Patent Venue Statute, (20) the General Venue Statute. (21) and the case law interpreting the relationship between the various versions of each. (22) Section A examines the Patent Venue Statute from its original enactment in 1897 (23) and two subsequent amendments. Section B traces the development of the General Venue Statute through its two amendments. Finally, Section C explores the evolving relationship between these statutes as understood by the courts.

   1. Patent Venue Statute

      Initially, the generally applicable provisions of the Judiciary Act of 1789 governed venue in patent infringement suits. (24) Since then, there have been three versions of the Patent Venue Statute: (1) the original enactment in 1897, (2) the codification in 1911, and (3) the codification in 1948.

      1. 1897 Original Enactment

         In a move from judicial (25) to legislative venue rules, Congress enacted the original Patent Venue statute in 1897, which provided,

         [I]n suits brought for the infringement of letters patent the circuit courts of the United States shall have jurisdiction, in law or in equity, in the district of which the defendant is an inhabitant, or in any district in which the defendant, whether a person, partnership, or corporation, shall have committed acts of infringement and have a regular place of business. If such suit is brought in a district of which the defendant is not an inhabitant, but in which such defendant has a regular and established place of business, service of process, summons, or subpoena upon the defendant may be made by service upon the agent or agents engaged in conducting such business in the district in which suit is brought. (26) Congress sought to "narrow venue" (27) options to certain judicial districts and thereby reduce "abuses" (28) resulting from an overly broad venue rule. The first sentence quoted above provides two different requirements that can be met for venue to be proper. (29) The first way to establish proper venue was to be in "the district of [where] the defendant is an inhabitant." (30) This was only one district at most. By contrast, the second way of establishing venue was in "any district in which the defendant ... shall have committed acts of infringement and have a regular and established place of business." (31) This could be more than one district. The former was more restrictive than the General Venue Statute of the time, which merely required that the venue had personal jurisdiction over the defendant. (32)

      2. 1911 Codification

         In 1911, Congress amended its original Patent Venue Statute when they reauthorized and added it to the Judicial Code of 1911. (33) The statute remained largely unchanged. In going from the original 1897 statute to the 1911 version, the term "circuit courts" is replaced by the term "district courts." (34) This was not a substantive change. (35)

      3. 1948 Codification

         At the inception of the United States Code, Congress split up the first section of the statute, enumerating where venue is proper, with the second section, enumerating the procedures for proper service of process. Under the 1948 codification, the first section was changed to its present form. This statute provides that "[a]ny civil action for patent infringement may be brought 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." (36) From the 1911 codification to the 1948 codification, the word "resident" (37) and its conjugates replaced the term "inhabitant" (38) and its conjugates. (39)

         There is a similar word substitution in the second section covering service of process, which provides, "[i]n a patent infringement action commenced in a district where the defendant is not a resident but has a regular and established place of business, service of process, summons or subpoena upon such defendant may be made upon his agent or agents conducting such business." (40) This enumeration shows that an agency relationship can exist to tie a defendant to a plaintiffs desired venue.

   2. General Venue Statute

      1. 1948 Codification

         When the original Patent Venue Statute was enacted in 1897, there was no reason to think the general rules of venue would modify it, nor was there one during the 1911...