Problematic or Prophetic?

The decision by Judge Gilstrap in the Eastern District of Texas, in Raytheon Company v. Cray, Inc., has generated much discussion and misleading commentary.

Judge Gilstrap denied Cray’s Motion to Dismiss for lack of personal jurisdiction and improper venue, as follows:

The Federal Circuit resolved competing authorities on the issue of “an established place of business” in In re Cordis Corp. (Fed. Cir. 1985). The Federal Circuit denied Cordis’s petition for a writ of mandamus and ultimately concluded that “the appropriate inquiry is whether the corporate defendant does its business in that district through a permanent and continuous presence there and not . . . whether it has a fixed physical presence  in the sense of a formal office or store.”

The activities performed by Cray are factually similar to the activities performed by the representatives in Cordis and therefore are sufficient to meet the “regular and established place of business” requirement of § 1400(b).

IN DICTA ONLY, Judge Gilstrap wrote:
There is uncertainty among the litigants regarding the scope of the phrase “regular and established place of business.” The Court has also received a number of requests for venue related discovery. Litigants have further expressed uncertainty regarding the appropriate scope of such venue discovery.

For the benefit of such litigants and their counsel, the Court has conducted a thorough analysis of the existing case law regarding regular and established place of business.

This Court now attempts to provide guideposts to point the venue analysis in a single coherent direction.

Factor One: Physical Presence
First, the Court considers the extent to which a defendant has a physical presence in the district, including but not limited to property, inventory, infrastructure, or people. Consistent with the reasoning of these earlier courts, this Court is persuaded that a fixed physical location in the district is not a prerequisite to proper venue. However, such a presence is a persuasive factor for courts to consider.

Factor Two: Defendant’s Representations
Second, the Court looks at the extent to which a defendant represents, internally or externally, that it has a presence in the district. In Chadeloid Chemical:

Judge Hand, in Chadeloid Chemical, found that the defendant had accepted a New York representative’s office as one of its own places of business based on, among other things, the advertising that defendant permitted regarding that location and the fact that the defendant naturally expected customer inquiries to be directed toward its agent there. Such representations weigh in favor of finding that a defendant has a regular and established place of business in a district.

Factor Three: Benefits Received
Third, the Court considers the extent to which a defendant derives benefits from its presence in the district, including but not limited to sales revenue, especially where a defendant has generated significant revenue from such business.

Factor Four: Targeted Interactions with the District
Finally, the Court looks at the extent to which a defendant interacts in a targeted way with existing or potential customers, consumers, users, or entities within a district, including but not limited to through localized customer support, ongoing contractual relationships, or targeted marketing efforts. Although such contractual relationships are not dispositive, they weigh in favor of finding that a defendant has a regular and established place of business in the district.

Conclusion
None of these factors should alone be dispositive, and other realities present in individual cases should likewise be considered. Courts should endeavor to determine whether a domestic business enterprise seeks to materially further its commercial goals within a specific district through ways and means that are ongoing and continuous. Such a conclusion should be driven by a fair consideration of the totality of the circumstances, and not by the siren call of bright line rules or an overt attachment to form.

Technological advances have significantly changed the way businesses operate throughout our nation, and true to Moore’s Law, such exponential progression will continue to expand and evolve. As a result, our courts should employ analytical methods for establishing patent venue which are rooted in the wisdom of the past, but which also embrace the future’s changes.

Problematic or prophetic?