Prepared by Cislo & Thomas LLP Attorney Mark D. Nielsen, Ph.D.
This week, we have one significant and important takeaway that pertains to venue in patent cases, particularly, venue in patent cases in which a plaintiff may rely on the location of a defendant’s servers to allege proper venue. The case is In re Google (Fed. Cir. Feb. 13, 2020).
In In re Google, the Federal Circuit, on a writ of mandamus, held that venue is not proper in the Eastern District of Texas as to Google simply because Google has servers in the District. Some key facts are that Google leased space from local ISPs to house the Google servers, and had no employees in the District.
Basically, patent venue under the now exclusive patent venue statute (28 U.S.C. Section 1400(b)) is proper when: (1) the defendant resides, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. This new Federal Circuit decision focused on the second basis for proper venue – acts of infringement plus regular and established place of business, and more specifically, on the regular and established place of business element.
In In re Cray, the Federal Circuit clarified that there are three general requirements to show that a defendant has a regular and established place of business in a venue, including: (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. Cray at 1360.
Here, Google focused its argument in support of its petition for writ of mandamus on the first and second factors. Regarding the first factor, the Federal Circuit did not hold that a physical place must be one owned or leased by the defendant. It merely needed to be a physical space that a defendant possesses or controls.
Regarding the second factor, the Federal Circuit agreed with Google that a regular and established place of business typically requires an employee or agent conducting business on behalf of the defendant in the venue. In fact, the Federal Circuit concluded that, “a regular and established place of business requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged “place of business.” Based on that legal proposition, the Federal Circuit concluded that Google had no employees in the Eastern District of Texas.
The Court then asked whether the ISPs from whom Google leased rack space were acting as Google’s “agent” in the District. The Court then looked at agency law and determined that installation and maintenance of Google’s servers were not, in and of themselves, “the conduct of Google’s business.” Thus, the ISPs were not agents of Google. Ultimately, the Federal Circuit determined that “the Eastern District of Texas was not a proper venue because Google lacked a “regular and established place of business” within the district since it has no employee or agent regularly conducting its business at its alleged “place of business” within the district.”
The Federal Circuit concluded by leaving open the question of whether a machine could be an agent of a company.
The takeaway here is that the presence of servers alone in the district is unlikely to constitute a regular and established place of business unless: (1) the owner of the servers owns the property on which the servers are located; (2) the landlords of the property where the servers are located do more than routine technical service on the servers, but are somehow otherwise involved in the business of the company that owns the servers; or, (3) there are employees or agents of the company that owns the servers in the district. There may be other possibilities, but these are the ones that seem most likely to create a distinction from the Federal Circuit’s holding in In re Google.