In the first published decision applying the Supreme Court’s T.C. Heartland holding regarding patent venue, the Federal Circuit reversed Eastern District of Texas Judge Rodney Gilstrap’s In Re Cray decision denying a motion to transfer venue filed by defendant Cray Inc. and remanded with instructions for the district court to grant Cray’s motion. In doing so, the Federal Circuit rejected Judge Gilstrap’s reliance on In Re Cordis to find that venue was proper and rejected the district court’s four-factor test that focused on the defendant’s physical presence, representations made, benefits received and targeted interactions in the judicial district. 

Background: On September 25, 2015, plaintiff Raytheon sued Seattle-based Cray for patent infringement in the Eastern District of Texas. On May 22, 2017, the U.S. Supreme Court, in T.C. Heartland LLC v. Kraft Food Group Brands LLC, 137 S. Ct. 1514 (2017), clarified that 28 U.S.C. § 1400(b) is the exclusive source of venue for patent infringement lawsuits, and that under § 1400(b), venue is only proper in a particular district if the defendant resides in that district or if “the defendant has committed acts of infringement and has a regular and established place of business” in that district.

On June 1, 2017, Cray moved to transfer venue, arguing that its employees’ personal presence in the district did not amount to a regular and established place of business on behalf of Cray.

Judge Gilstrap denied Cray’s motion to transfer venue, finding that venue was proper in the Eastern District because two of Cray’s employees lived in the district and worked remotely from their homes in the district. Cray then appealed to the Federal Circuit seeking a writ of mandamus to overturn Judge Gilstrap’s decision.

In reversing Judge Gilstrap’s decision, the Federal Circuit explained that the only question before the district court was “whether Cray had a ‘regular and established place of business’ in the Eastern District of Texas,” as required by § 1400(b). 

In that regard, the court explained that § 1400(b) has three requirements for proper venue to be established for a patent case:

(1) a physical place, i.e., a physical, geographical location in the district from which the business of the defendant is carried out, such as a building or part of a building set apart; 

(2) the place of business must be “regular” and “established,” i.e., not transient or sporadic; and 

(3) the “regular” and “established” place of business must be that of the defendant, “not solely a place of the defendant's employee.”

Applying the above considerations, the Federal Circuit found that the facts of the case could not “support a finding that [the Cray employee’s] home was a regular and established place of business of Cray.” Accordingly, the Federal Circuit held that the third requirement was not met, and that the district court erred in failing to base its venue analysis on an identified “physical place, of business, of the defendant,” and not its employees.

Implications: This decision by the Federal Circuit bodes well for defendants (accused infringers) seeking to defend patent cases on their home turf or otherwise seeking a more favorable forum with higher accused infringer success rates. For patentee plaintiffs, this decision underscores the need for careful consideration regarding venue when filing a patent infringement suit outside of the district in which the defendant is headquartered.