No Getting Around It: TC Heartland

No Getting Around It: TC Heartland

This summer, we blogged about a patent case in the Eastern District of Texas, a popular venue among non-practicing entities. At the time, the judge ruled against the defendant’s request for a change of venue, which he based on a single salesman working out of his home within the district on behalf of the Seattle-based company. A federal appeals court disagreed with the Eastern District judge’s decision, referring to the Supreme Court’s residency requirement in its TC Heartland decision.

Case background: The company Raytheon filed a patent lawsuit in East Texas in 2015 alleging that Cray Inc., a supercomputer manufacturer based in Seattle, had infringed on four Raytheon patents. Cray then filed a motion to dismiss based on the venue, which it felt was inappropriate. But in April, the also well-known hot-spot judge, U.S. District Judge Rodney Gilstrap, denied the request because Cray sold a supercomputer to a company in Austin, outside the Eastern District.

While things were looking up for Cray in May, given the Supreme Court’s venue ruling in TC Heartland, Judge Gilstrap found that the case would stay in district because Cray had one salesperson that worked out of his home in the same district, i.e., evidence of a “regular and established” business.

Cray then filed a petition for a writ of mandamus with the U.S. Court of Appeals for the Federal Circuit to vacate the judge’s original order and force the transfer of the case to another venue. The company was successful.

Ars Technica reported on the appeals court’s reasoning and ruling.

“The statute requires a ‘place,’ which in the view of the appeals court means ‘a building or a part of a building… from which business is conducted.’ Things like ‘virtual space’ or ‘electronic communications’ don’t qualify. The place must be ‘regular,’ meaning it operates in a ‘steady, uniform, orderly, and methodical’ manner.”

In the 20-page ruling, the panel discusses the mandamus standard. It found that it was appropriate to issue the writ.

“Additionally, the Supreme Court has approved the use of mandamus to decide a ‘basic [and] undecided’ legal question when the trial court abused its discretion by applying incorrect law. Schlagenhauf, 379 U.S. at 110.

“That is the circumstance here: the district court misunderstood the scope and effect of our decision in Cordis, and its misplaced reliance on that precedent led the court to deny the motion to transfer, which we find to have been an abuse of discretion.”

Ars reported that during a hearing on Capitol Hill about patent reform, two U.S. Congressmen denounced Judge Gilstrap, with one, Darrell Issa (R-Calif.), referring to Gilstrap’s venue decision regarding the Cray case as “reprehensible.”

Most important, Ars notes that the appeals court’s recent decision “suggests that the venue rule changes of TC Heartland can’t be easily worked around, or ignored.”

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