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One Salesman Not Enough for Patent Infringement Venue Shoppers

Thanks to the Court of Appeals for the Federal Circuit and a recent SCOTUS decision, a patent infringement case filed by Raytheon against Cray Inc. in the Eastern District of Texas is being sent to the federal district court in Cray's home state of Washington.

The Federal Circuit Court of Appeals followed the U.S. Supreme Court precedent established in TC Heartland v. Kraft to explain that the one salesman Cray had within the Eastern District of Texas did not satisfy the venue requirements established by TC Heartland. This ruling reversed the lower district court's ruling dismissing the challenge to venue, while contemporaneously transferring the venue.

What's This Case About?

The lawsuit filed by Raytheon alleges that Cray's advanced supercomputer infringes on a Raytheon patent. However, the merits of the infringement claim, which still have not been put at issue, are actually much less important than the holding in this appeal. This decision is about federal patent civil litigation procedure.

The TC Heartland case essentially killed forum shopping for patent trolls, and the appellate decision in this case helps to explain the extent of the new rules.

Getting Semantic

While explaining the new rule, the court painstakingly broke down the relevant statutory language. In the court's own words:

The statutory language we need to interpret is "where the defendant . . . has a regular and established place of business." 28 U.S.C. § 1400(b). The noun in this phrase is "place," and "regular" and "established" are adjectives modifying the noun "place." The following words, "of business," indicate the nature and purpose of the "place," and the preceding words, "the defendant," indicate that it must be that of the defendant. Thus, § 1400(b) requires that "a defendant has" a "place of business" that is "regular" and "established." All of these requirements must be present.

A business may be "regular," for example, if it operates in a "steady[,] uniform[,] orderly[, and] methodical" manner. In other words, sporadic activity cannot create venue.

In short, the appellate court explained that there are three main factors that must be met:

  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.

Unfortunately for Raytheon, none of these three factors were met as Cray only had a single, solitary salesman in the district. Cray owned no buildings or property, the employee's home (where he worked) was not a Cray location, and there was no evidence that it was a "regular" or "established" place of business.

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