Federal Circuit Flash Digest – In Re: Cray Inc.

In Re Cray Inc., No. 2017-129, 2017 WL 4210535 (Fed. Cir. Sept. 21, 2017)

On September 21, 2017, the United States Court of Appeals for the Federal Circuit clarified requisite conditions for establishing proper venue under 28 U.S.C. § 1400(b). The court’s In Re: Cray Inc. decision examined the elements of § 1400(b) to clarify ambiguity in the statutory terms “regular and established place of business.” The decision confronts incipient questions posed by a potentially increasingly remote workforce.

Earlier in 2017, Raytheon brought a patent infringement action against Cray Inc. in the all-too-familiar United States District Court for the Eastern District of Texas (E.D. Texas). Cray is a Washington corporation with facilities located in Wisconsin and the Western District of Texas (amongst other states), and two remote employees working from their homes in E.D. Texas. In light of the Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017), Cray moved to transfer the lawsuit on grounds of improper venue, asserting that remote employees working from home did not constitute a regular and established place of business in E.D. Texas.

Cray’s motion was denied by the district court, but vacated by the Federal Circuit on appeal. Under § 1400(b), venue for patent infringement actions exists in judicial districts “where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. § 1400(b) (2015). The appellate court considered whether a Cray sales employee working remotely from his home in the Eastern District of Texas fulfilled its construction of the statutory criteria of:

• 1)a physical location at which Cray business was conducted,
• 2)a regular and established place of business evincing some degree of certainty and permanence of location, and
• 3)a place of the defendant corporation – i.e. a place owned, leased, possessed, or controlled in some manner by Cray Inc. – not merely a place of a potentially transient employee of Cray.

The appellate court concluded that the facts did not establish venue in the Eastern District of Texas and remanded to the district court the determination of an appropriate venue (a choice between Raytheon’s preference for the Western District of Texas and Cray’s preference for the Western District of Wisconsin under 28 U.S.C. § 1406(a)). Dennis Crouch of Patently-O points out that while the court’s decision updates the construction of § 1400(b) for an era of remote employees, it remains strikingly consistent with historical interpretations of 19th- and twentieth-century versions of the statute. 

Ashwini Bharatkumar is a 1L student at Harvard Law School.