Result: Infringing acts committed on servers stored in a third-party ISP’s facility may constitute a regular and established place of business, sufficient to satisfy venue.
The Federal Circuit recently elected not to decide en banc “whether servers are a regular and established place of business, such that venue is proper under 35 U.S.C. § 1400(b). In re: Google LLC, No. 2018-152 (Fed. Cir. Feb. 5, 2019) (Before Prost, Chief Judge, Newman, Lourie, Dyk, Moore, O’Malley, Reyna, Wallach, Taranto, Chen, Hughes, and Stoll, Circuit Judges) (Dissent by Reyna, Circuit Judge, joined by Newman and Lourie, Circuit Judges).
SEVEN Networks, LLC’s (SEVEN) patent infringement suit against Google arose in the Eastern District of Texas. SEVEN alleged Google’s servers, stored in a third-party ISP’s facility, where the allegedly infringing activities occurred, were a regular and established place of business, such that venue is proper under 35 U.S.C. § 1400(b).
The district court denied Google’s motion to dismiss for improper venue. As a result, Google petitioned the Federal Circuit for a writ of mandamus directing the district court to dismiss or transfer the case for improper venue. On appeal, the panel majority found mandamus relief inappropriate because “it is not known if the district court’s ruling involves the kind of broad and fundamental legal questions relevant to § 1400(b),” and “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.”
Google petitioned for panel rehearing and for rehearing en banc. The panel denied the petition for panel rehearing, and, after a poll of the full Federal Circuit was taken, the petition for rehearing en banc was also denied. Judge Reyna, joined by Judges Newman and Lourie, authored a dissenting opinion to the majority’s denial of Google’s petition for rehearing en banc.
Dissent Warns Against Kicking the Can Down the Road
The dissent began by noting “[m]andamus review is part of our bedrock supervisory duty as an appellate court to ensure proper judicial administration.” The dissent further noted, “[g]iven the nature of our exclusive subject-matter jurisdiction over federal questions involving patent law, this court in particular has a vital supervisory and instructional duty to further the goals of uniformity and predictability that are ‘the cornerstones of a well-functioning patent system’ and part of the reason for this court’s very existence.”
To demonstrate mandamus relief was appropriate on this issue, the dissent compared this case to In re Cray Inc., where the Federal Circuit granted mandamus relief to ensure § 1400(b) was not given an expansive construction after TC Heartland v. Kraft Foods Group Brands, LLC, 137 S.Ct. 1514 (2017). Moreover, because of inconsistent case law in the district courts on this question, the dissent felt mandamus relief was appropriate. The dissent was also troubled by the fact that the panel’s original denial of mandamus relief had led to many more subsequent suits:
“The bar apparently already views the denial of the petition at the panel stage as a signal that it is safe to file more cases against Google and similar defendants in the same district. At the time of filing of the petition for rehearing, Google had been sued thirteen more times in the same district under the same venue theory since October 29, 2018, the date that we denied the petition for mandamus.  That number now stands at thirty-four. I count that as trending.”
The dissent further explained that the district court’s holding could be read as another expansion of § 1400(b) and “essentially reestablish nationwide venue, in conflict with TC Heartland, by standing for the proposition that owning and controlling computer hardware involved in some aspect of company business (e.g., transmitting data) alone is sufficient.”
Finally, the dissent reasoned that the question would eventually be taken up by the Federal Circuit and that, by denying the question now, judicial and party resources would be wasted:
“By the time we eventually decide these questions, it is possible that dozens of cases will proceed through motion practice, discovery, claim construction, or trial before potentially getting thrown out by a reversal of a ruling on a motion to dismiss for improper venue.”