Background
In May 2017, the Supreme Court decided TC Heartland LLC v. Kraft Foods Group Brands LLC, holding that the patent venue statute — 28 U.S.C. § 1400(b) — is the exclusive venue provision for patent cases, and that a corporation only “resides” in its state of incorporation. This dramatically changed patent venue by limiting the ability to sue companies in the plaintiff-friendly Eastern District of Texas, which had been the most popular patent litigation forum in the country largely because of its liberal venue rules.
After TC Heartland, courts still needed to interpret the second basis for venue under § 1400(b): a defendant’s “regular and established place of business” in the district. Raytheon had sued Seattle-based Cray in the Eastern District of Texas. Cray moved to transfer venue, arguing it had no regular and established place of business there — it had no offices, stores, or facilities in the district. Raytheon countered that Cray had employees who worked from their homes in the district and that this was sufficient to establish venue. Judge Gilstrap (the chief judge of the Eastern District, who presided over more patent cases than any other judge in the country) applied his own four-factor test and denied transfer, finding that Cray’s remote employees constituted a regular and established place of business. Cray sought mandamus from the Federal Circuit.
The Court’s Holding
The Federal Circuit granted the writ of mandamus and vacated the district court’s venue order. Judge Lourie articulated a clear three-part test for what constitutes a “regular and established place of business” under § 1400(b): (1) there must be a physical place in the district — a fixed geographical location, not merely virtual activity or the mere conduct of business; (2) it must be a regular and established place — temporary or sporadic activity is insufficient; and (3) it must be the place of the defendant — not merely the place of the defendant’s employee, agent, or independent contractor.
The court held that Judge Gilstrap’s four-factor test was not sufficiently tethered to the statutory text and was overbroad. The fact that Cray’s employees happened to live in the Eastern District — working from their homes on Cray’s behalf — did not make those employees’ homes “a regular and established place of business” of Cray, because the homes were not Cray’s places and were not maintained by Cray for the purpose of conducting business. A company cannot be deemed to have a regular and established place of business in every district where it has remote employees.
Key Takeaways
- A defendant has a “regular and established place of business” in a district only if: (1) there is a physical place in the district; (2) that place is regular and established; and (3) the place is the defendant’s own — not merely the personal home or temporary location of an employee or contractor.
- Remote employees and home-based workers do not, by themselves, establish a company’s regular and established place of business in a district — the company must have made the location its own through some affirmative act (e.g., listing it as an office, storing equipment there, requiring the employee to work there for the company’s business purposes).
- Together with TC Heartland, In re Cray drastically curtailed the Eastern District of Texas’s patent docket by eliminating the two most common bases on which defendants had been subject to venue there.
- Post-Cray, venue analysis focuses on whether the defendant maintains physical locations — stores, offices, warehouses, data centers — in the district, making corporate structure and facility locations more important to patent litigation strategy.
Why It Matters
In re Cray was a transformative decision for patent litigation strategy and forum selection. Before TC Heartland and Cray, approximately 40% of all U.S. patent cases were filed in the Eastern District of Texas, a small district that had developed rules and practices highly favorable to patent plaintiffs. TC Heartland eliminated “residency” as a basis for venue in most cases; Cray closed the “regular and established place of business” loophole that the Eastern District had used to maintain jurisdiction over defendants that had remote employees or equipment in the district.
The practical result was a significant geographic reshuffling of patent litigation. Cases moved to districts where defendants actually have substantial physical operations — primarily Delaware (where most corporations are incorporated), the Northern District of California (Silicon Valley), the Western District of Texas (which has since grown substantially), and other districts with major defendant facilities. For plaintiffs, forum shopping became much more constrained. For defendants, understanding the venue landscape and structuring operations to minimize footprint in plaintiff-friendly venues became a genuine strategic consideration. For companies with remote workforces, Cray’s holding that home-based employees do not establish venue significantly reduced their vulnerability to being sued in distant, plaintiff-friendly forums based solely on where their employees happen to live.