For venue to be proper based on a “regular and established placed of business” analysis, a regular, physical presence of an employee or other agent of the business must be present in the “place of business” and must be conducting the defendant’s business.

The Federal Circuit recently granted a petition for a writ of mandamus to Google LLC (“Google”) finding that venue was improper for a case filed by Super Interconnected Technologies LLC (“SIT”) against Google in the Eastern District of Texas. See In re Google LLC, No. 2019-126, 2020 U.S. App. LEXIS 4588 (Fed. Cir. Feb. 13, 2020) (Before Dyk, Wallach, and Taranto, Circuit Judges) (Order for the Court, Dyk, Circuit Judge) (Concurring opinion, Wallach, Circuit Judge).

SIT brought suit against Google in the Eastern District of Texas arguing that venue was proper under the patent venue statute (28 U.S.C. § 1400(b)). SIT filed its suit after the Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514, 1517 (2017), which held that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute,” and after the Federal Circuit’s decision in In re Cray, Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017), which held that a “regular and established place of business” under the patent venue statute must be: (1) ‘a physical place in the district’; (2) ‘regular and established’; and (3) ‘the place of the defendant.’” SIT alleged venue was proper under the patent venue statute because Google allegedly committed acts of infringement in the Eastern District of Texas and has a regular and established place of business there.

SIT’s allegation of venue was based on Google’s use of several Google Global Cache (“GGC”) servers which were located in the Eastern District of Texas at the time of SIT first brought suit. The GGC servers were installed, maintained, and hosted by third party Internet Service Providers (“ISPs”). The ISPs would route Google’s traffic through the GGC servers within the District prior to sending the traffic to Google’s central data storage servers located outside of the District.

The petition for writ of mandamus arrived at the Federal Circuit after Google’s motion to dismiss was denied by the United States District Court for the Eastern District of Texas. The District Court concluded that the GGC servers qualified as Google’s “regular and established business” under Cray’s venue test. Google subsequently petitioned the Federal Circuit for a writ of mandamus asking that the Federal Circuit direct the District Court to dismiss the case for lack of venue under the patent venue statute.

The Federal Circuit acknowledged that it had previously denied a writ of mandamus filed by Google for a case having similar facts stating at the time that “it would be appropriate to allow the issue to percolate in the district courts so as to more clearly define the importance, scope, and nature of the issue for us to review.” See In re Google LLC, No. 2018-152, 2018 U.S. App. LEXIS 31000, at 6 (Fed. Cir. Oct. 29, 2018). The Court believed the time was now appropriate to address this issue through a writ of mandamus noting that several similar cases had now been heard in various district courts with conflicting results. The Court identified two issues that should be addressed: (1) whether a server rack, a shelf, or analogous space can be a “place of business,” and (2) whether a “regular and established place of business” requires the regular presence of an employee or agent of the defendant conducting business.

Google first argued that the GGC servers did not constitute a place of business because the “place of business” requirement should require a real property or leasehold interest and Google had neither a real property nor a leasehold interest in the GGC servers. The Court quickly dismissed this argument concluding that Cray itself recognized that a “place of business” is not restricted to real property that the defendant must own or lease. The Court viewed Google’s use of the GGC servers to constitute a “place of business” in the same way that a merchant at a flea market would be considered to have a place of business at a table even though the merchant had neither a real property nor a leasehold interest.

Google next argued that a “regular and established place of business” under the second prong of Cray requires a place where an employee or agent of the defendant is conducting the defendant’s business. The Federal Circuit found this argument persuasive because it was supported by 28 U.S.C. § 1694, which was the second sentence of the original patent venue statute, and the related legislative history. §1694 assumes that the defendant will have a “regular and established place of business” within the meaning of the venue statute only if the defendant also has an “agent… engaged in conducting such business.” The Court 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.”

Finding that a defendant must have regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged “place of business,” the Court concluded that the Eastern District of Texas was not a proper venue for this case because Google does not have an employee or agent regularly conducting its business within the District. The Court limited this holding by stating that it does not hold that a “regular and established place of business” will always require the regular presence of a human agent. That is, the Court did not address whether a machine could be an agent of a business. Nor did the Court decide what might be inferred from Congress’ amendment to the venue statute in the America Invents Act concerning automated teller machines. See AIA § 18(c).

In a concurring opinion, Circuit Judge Wallach agreed with the conclusion but encouraged district courts to further consider Google’s business model. Circuit Judge Wallach expressed frustration that Google’s business model was not clear and that it’s possible the end user could be considered an agent of Google “by entering searches and selecting results… providing data which Google monetizes as the core aspect of its business model.”

EDITORIAL NOTE: If you are looking for discussion of a different In re Googlecase regarding venue where the Federal Circuit en banc denied deciding whether servers create a regular and established place of business please see this recent article, also by the same authors dealing with a case between Google and SEVEN Networks.

Photography Courtesy of Deposit Photos

ID: 195563908

Copyright: alexeynovikov

Upload Date: May 12, 2018

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