In Re: Cray Inc.
Case Information
*1 Before L OURIE , R EYNA , and S TOLL , Circuit Judges . L OURIE , Circuit Judge
O R D E R
Cray Inc. (“Cray”) petitions for a writ of mandamus
vacating the order of the United States District Court for
the Eastern District of Texas denying its motion to trans-
fer the case to the United States District Court for the
Western District of Wisconsin.
See Raytheon Co. v. Cray,
Inc.
, No. 2:15-cv-01554-JRG,
B ACKGROUND
This petition arises from a patent infringement action filed by Raytheon against Cray in the Eastern District of Texas. Cray sells advanced supercomputers that Raythe- on accuses of infringement. Cray is a Washington corpo- ration with its principal place of business located there. It also maintains facilities in Bloomington, Minnesota; Chippewa Falls, Wisconsin; Pleasanton and San Jose, California; and Austin and Houston, Texas.
Although Cray does not rent or own an office or any property in the Eastern District of Texas, it allowed Mr. Douglas Harless and Mr. Troy Testa to work remotely from their respective homes in that district. Transfer Order , 2017 WL 2813896, at *1–2 & n.1. Mr. Testa worked for Cray as a senior territory manager while residing in the district from 2010 to 2011 before the underlying suit was filed. Id. at *1 n.1
Mr. Harless worked as a “sales executive” for approx- imately seven years with associated sales of Cray systems in excess of $345 million. Id. at *1. Mr. Harless’s respon- sibilities also included “new sales and new account devel- opment in [the] Central U.S.” and “management of key accounts within the Financial, Biomedical and Petroleum Industries.” Id. (alteration in original) (quotation marks omitted). Cray’s “Americas Sales Territories” map, an internal document, identified Mr. Harless as a “Named Account Manager” and his location at his Eastern District of Texas personal home. Id. Mr. Harless received reim- bursement for his cell phone usage for business purposes, internet fees, and mileage or “other costs” for business travel. Id. Cray provided Mr. Harless with “administra- tive support” from its Minnesota office. Id. He provided “price quotations” to customers, listing himself as the “account executive” and the person who prepared the quotation. Id. at *6. The communications also identified his home telephone number as his “office” telephone number with an Eastern District of Texas area code. Id.
Mr. Harless, however, did not maintain Cray products at his home, nor did he maintain product literature at his home because it was available online. Id. at *9. It is undisputed that Cray never paid Mr. Harless for the use of his home to operate its business, or publicly advertised or otherwise indicated that his home residence was a Cray place of business.
Cray moved to transfer this suit under
Cray further argued that venue was improper in the
Eastern District of Texas because Cray had neither
committed acts of infringement, nor maintained a regular
and established place of business within that district.
The district court, however, rejected that argument. The
court found that Mr. Harless’s activities were factually
similar to the activities performed by the representatives
in
In re Cordis Corp.
, 769 F.2d 733 (Fed. Cir. 1985), in
which this court rejected a mandamus request to reverse
an order denying transfer for improper venue.
See Trans-
fer Order
,
Although the district court found that Cordis resolved this case, the district court then went on “[f]or the benefit of” other litigants and counsel to set out four factors for inquiries into what constitutes a regular and established places of business “in the modern era,” including physical presence, defendant’s representations, benefits received, and targeted interactions with the district. Id. at *11–14. The court, however, “decline[d] to expressly apply the factors . . . in this particular case; although, [it noted that it was] satisfied that had it done so, the result would remain the same.” Id. at *14 n.13.
Cray petitions for a writ of mandamus directing re-
versal of the district court’s denial of its motion to trans-
fer venue and directing the district court to transfer this
case to the Western District of Wisconsin pursuant to
D ISCUSSION I. The Mandamus Standard
We may issue a writ under the All Writs Act,
A writ of mandamus may issue where: (1) the peti-
tioner has “no other adequate means to attain the relief
he desires”; (2) the petitioner shows “his right to manda-
mus is ‘clear and indisputable’”; and (3) the issuing court
is “satisfied that the writ is appropriate under the cir-
cumstances.”
In re TC Heartland LLC
, 821 F.3d 1338,
1341 (Fed. Cir. 2016) (quoting
Cheney v. U.S. Dist. Court
for the Dist. of Columbia
, 542 U.S. 367, 380–81 (2004)),
rev’d and remanded sub nom., on other grounds, TC
Heartland LLC v. Kraft Foods Grp. Brands LLC
, 137 S.
Ct. 1514 (2017). Similarly, mandamus may be appropri-
ate, as it is here, to decide issues “important to ‘proper
judicial administration.’”
In re BP Lubricants USA Inc.
,
637 F.3d 1307, 1313 (Fed. Cir. 2011) (quoting
LaBuy v.
Howes Leather Co.
, 352 U.S. 249, 259–60 (1957)). Addi-
tionally, 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
,
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.
As Cray points out, for nearly the last 30 years, venue
in patent infringement cases has largely turned on
whether a defendant “resides” in the district in question.
Following the Supreme Court’s recent decision in
TC
Heartland
, litigants and courts are raising with increased
frequency the question of where a defendant has a “regu-
lar and established place of business.”
See, e.g.
,
Transfer
Order
, 2017 WL 2813896, at *10 (“Since the Supreme
Court’s decision in
TC Heartland
, this Court has received
a number of motions to dismiss or transfer based on
improper venue.”);
Regenlab USA LLC v. Estar Techs.
Ltd.
, No. 16-CV-08771 (ALC), 2017 WL 3601304, at *2
(S.D.N.Y. Aug. 17, 2017) (“In light of
TC Heartland
, the
parties agree that venue is improper . . . under the first
prong of
6
We have addressed that phrase only once in the con-
text of a previous mandamus petition—in
Cordis. See
F.2d at 736–37.
Cordis
found that “a rational and sub-
stantial argument may be made in support of the court’s
order denying Cordis’ motion to dismiss for lack of proper
venue.”
Id.
at 737. It thus held in those circumstances
that “we decline to issue the writ.”
Id.
The court did
state that the “appropriate inquiry” is not “whether
[Cordis] has a fixed physical presence in the sense of a
formal office or store.”
Id.
But, notably, the court did
not, in its opinion, evaluate venue in light of the statutory
language of
We recognize that the world has changed since 1985
when the
Cordis
decision issued. In this new era, not all
corporations operate under a brick-and-mortar model.
Business can be conducted virtually
.
Employees increas-
ingly telecommute. Products may not as a rule be ware-
housed by retailers, and the just-in-time delivery
paradigm has eliminated the need for storing some inven-
tory. But, notwithstanding these changes, in the wake of
the Supreme Court’s holding in
TC Heartland
, effectively
reviving
Moreover, district courts, including the trial court in
this case, have noted the uncertainty surrounding and the
need for greater uniformity on this issue,
see, e.g.
,
Trans-
fer Order
, 2017 WL 2813896, at *10 (explaining there is
“uncertainty among the litigants regarding the scope of
the phrase ‘regular and established place of business’”
and “the appropriate scope of such venue discovery”);
Regenlab
, 2017 WL 3601304, at *2 (S.D.N.Y. Aug. 17,
2017) (“Substantial confusion exists regarding the cir-
cumstances in which an entity will be found to have a
‘regular and established place of business’ in the dis-
trict.”);
Johnston v. IVAC Corp.
,
II. The Meaning of the Venue Statute
In matters unique to patent law, this court applies its
own law.
Midwest Indus., Inc. v. Karavan Trailers, Inc.
,
As discussed in greater detail below, our analysis of
the case law and statute reveal three general require-
ments relevant to the inquiry: (1) there must be a physi-
cal place in the district; (2) it must be a regular and
established place of business; and (3) it must be the place
of the defendant. If any statutory requirement is not
satisfied, venue is improper under
In the late 1800s, when
To resolve the uncertainty, Congress enacted
Courts should be mindful of this history in applying
the statute and be careful not to conflate showings that
may be sufficient for other purposes,
e.g.
, personal juris-
diction or the general venue statute, with the necessary
showing to establish proper venue in patent cases. As the
district court correctly stated, “the regular and estab-
lished place of business standard requires more than the
minimum contacts necessary for establishing personal
jurisdiction or for satisfying the doing business standard
of the general venue provision,
The statutory language we need to interpret is “where
the defendant . . . has a regular and established place of
business.”
In deciding whether a defendant has a regular and es- tablished place of business in a district, no precise rule has been laid down and each case depends on its own facts. The “requirements” listed above and discussed below inform whether there exist the necessary elements, but do not supplant the statutory language. We stress that the analysis must be closely tied to the language of the statute.
As noted above, when determining venue, the first requirement is that there “must be a physical place in the district.” The district court erred as a matter of law in holding that “a fixed physical location in the district is not a prerequisite to proper venue.” Transfer Order , WL 2813896, at *11. This interpretation impermissibly expands the statute. The statute requires a “place,” i.e. , “[a] building or a part of a building set apart for any purpose” or “quarters of any kind” from which business is conducted. William Dwight Whitney, The Century Dic- tionary, 732 (Benjamin E. Smith, ed. 1911); see also Place , Black’s Law Dictionary (1st ed. 1891) (defining place as a “locality, limited by boundaries”). The statute thus can- not be read to refer merely to a virtual space or to elec- tronic communications from one person to another. But such “places” would seemingly be authorized under the district court’s test.
While the “place” need not be a “fixed physical pres-
ence in the sense of a formal office or store,”
Cordis
, 769
F.2d at 737, there must still be a physical, geographical
location in the district from which the business of the
defendant is carried out. In
Cordis
, for example, a de-
fendant used its employees’ homes to store its “literature,
documents and products” and, in some instances, like
distribution centers, storing inventory that the employees
then directly took to its clients.
The second requirement for determining venue is that the place “must be a regular and established place of business.” The district court’s test fails to recognize that the place of business must be “regular.” A business may be “regular,” for example, if it operates in a “steady[,] uniform[,] orderly[, and] methodical” manner, Whitney, supra , at 5050. In other words, sporadic activity cannot create venue. See Phillips v. Baker , 121 F.2d 752, 756 (9th Cir. 1941) (“A ‘regular place of business’ is, obviously, a place where such business is carried on ‘regularly’ and not merely temporarily, or for some special work or par- ticular transaction.” (quoting Winterbottom v. Casey , 283 F. 518, 521 (E.D. Mich. 1922))). Indeed, “[t]he doing of a single act pertaining to a particular business will not be considered engaging in or carrying on the business; yet a series of such acts would be so considered.” Regular , Black’s Law Dictionary (1st ed. 1891).
The “established” limitation bolsters this conclusion.
The word contains the root “stable,” indicating that the
place of business is not transient. It directs that the place
in question must be “settle[d] certainly, or fix[ed] perma-
nently.”
Establish
, Black’s Law Dictionary (1st ed. 1891).
To make “permanent” clearly accords with the “main
purpose” identified in the predecessor statute’s legislative
history.
See
29 Cong. Rec. 1900 (1987) (statement of Rep.
Lacey). Indeed, court decisions have stressed the im-
portance of sufficient permanence.
See, e.g.
,
Phillips
, 121
F.2 at 756 (explaining that where the defendant’s “estab-
lishment [in the district] was just a location for a particu-
lar transaction,” “the necessary element of permanency is
lacking” (internal quotation marks omitted)). As an
example, one court held that a business that semiannual-
ly displayed its products at a trade show in the district
had only a temporary presence.
See Knapp-Monarch Co.
v. Casco Prods. Corp.
, 342 F.2d 622, 625 (7th Cir. 1965).
On the other hand, a five-year continuous presence in the
district demonstrates that the business was established
for purposes of venue.
See Remington Rand Bus. Serv. v.
Acme Card Sys. Co.
,
Accordingly, while a business can certainly move its location, it must for a meaningful time period be stable, established. On the other hand, if an employee can move his or her home out of the district at his or her own insti- gation, without the approval of the defendant, that would cut against the employee’s home being considered a place of business of the defendant.
Finally, the third requirement when determining venue is that “the regular and established place of busi- ness” must be “the place of the defendant.” As the statute indicates, it must be a place of the defendant , not solely a place of the defendant’s employee. Employees change jobs. Thus, the defendant must establish or ratify the place of business. It is not enough that the employee does so on his or her own.
Relevant considerations include whether the defend- ant owns or leases the place, or exercises other attributes of possession or control over the place. One can also recognize that a small business might operate from a home; if that is a place of business of the defendant, that can be a place of business satisfying the requirement of the statute.
Another consideration might be whether the defend-
ant conditioned employment on an employee’s continued
residence in the district or the storing of materials at a
place in the district so that they can be distributed or sold
from that place.
See, e.g.
,
Cordis
, 769 F.2d at 375;
Am.
Cyanamid Co. v. Nopco Chem. Co.
,
The district court is correct that a defendant’s repre- sentations that it has a place of business in the district are relevant to the inquiry. Potentially relevant inquiries include whether the defendant lists the alleged place of business on a website, or in a telephone or other directory; or places its name on a sign associated with or on the building itself. See, e.g., Cordis , 769 F.2d at 375; Gran- tham , 420 F.2d at 1185–86. But the mere fact that a defendant has advertised that it has a place of business or has even set up an office is not sufficient; the defendant must actually engage in business from that location. In the final analysis, the court must identify a physical place, of business, of the defendant.
A further consideration for this requirement might be the nature and activity of the alleged place of business of the defendant in the district in comparison with that of other places of business of the defendant in other venues. [*] Such a comparison might reveal that the alleged place of business is not really a place of business at all.
III. Application of the Venue Statute to This Case With the above discussion in mind, we turn to the facts of this case. The parties’ primary dispute concerns whether Mr. Harless’s home, located in the Eastern District of Texas, constitutes “a regular and established place of business” of Cray.
Cray points out that Mr. Harless’s home was not listed in any business directories or websites, that he did not maintain product literature or products at his home, and that he was the only employee within the district. It argues that the online business materials and generalized administrative support are not evidence of a place of business of Cray in the Eastern District of Texas. Cray argues that its “Americas Sales Territories” map, identify- ing Mr. Harless’s Eastern District of Texas location, does not indicate that Cray was doing business from that location because it merely was an internal presentation listing his address. Cray argues that it paid for no part of Mr. Harless’s home or rent, and that it stored nothing there. Cray contends that Mr. Testa is irrelevant here because his employment ended well before Raytheon filed its complaint.
Raytheon responds that Cray made a “conscious deci- sion” to hire Mr. Harless and Mr. Testa, knowing that they lived in the Eastern District of Texas. It notes that Cray paid at least Mr. Harless a salary and offered ad- ministrative support and reimbursed him for phone, internet, and business-related travel expenses. Raytheon also notes that Mr. Harless’s social media profiles identi- fied his location in the Eastern District of Texas as a Cray employee and that he corresponded with customers listing a phone number with an Eastern District of Texas area code. Raytheon argues that Cray did not need to store business materials with Mr. Harless or Mr. Testa because many were available online and that Cray’s large prod- ucts physically could not be stored there. Raytheon contends that Mr. Harless’s activities extended beyond merely making sales and also contends that Cray did have customers in the Eastern District of Texas, even though Mr. Harless was not responsible for them.
The third requirement identified above, that the regu- lar and established place of business must be “the place of the defendant,” is crucial here. The facts presented cannot support a finding that Mr. Harless’s home was a regular and established place of business of Cray . The same is true as to Mr. Testa, to the extent he is relevant to this analysis. The fact that Cray allowed its employees to work from the Eastern District of Texas is insufficient. There is no indication that Cray owns, leases, or rents any portion of Mr. Harless’s home in the Eastern District of Texas. No evidence indicates that Cray played a part in selecting the place’s location, stored inventory or conduct- ed demonstrations there, or conditioned Mr. Harless or Mr. Testa’s employment or support on the maintenance of an Eastern District of Texas location. No evidence shows that Cray believed a location within the Eastern District of Texas to be important to the business performed, or that it had any intention to maintain some place of busi- ness in that district in the event Mr. Harless or Mr. Testa decided to terminate their residences as a place where they conducted business.
Raytheon argues that a residential home office is “no
less permanent than any conventional store or office,”
noting that often (as is the case here) the employee may
have resided there before the employment began. Re-
spondent’s Br. 22–23 n.6. Raytheon has the wrong per-
spective. For purposes of
Raytheon also argues that Cray customers were pre-
sent in the district, but makes no suggestions that Mr.
Harless or Mr. Testa served them. Raytheon points to no
evidence that the employees’ location in the Eastern
District of Texas was material to Cray. Instead, it ap-
pears that Mr. Harless and Mr. Testa were “free to live
where [they] chose as far as [the defendant] was con-
cerned.”
Grantham
,
These facts are in contrast with those in Cordis , where it was clear that the place of business was estab- lished by Cordis. Cordis’s business specifically depended on employees being physically present at places in the district, and it was undisputable that Cordis affirmatively acted to make permanent operations within that district to service its customers there. Cordis publicly advertised a secretarial service office located within the district as a place of business of its own and used its employees’ homes like distribution centers.
Unlike in Cordis , where the appellant received secre- tarial services from a third-party located within the district, all expense reimbursements and administrative support for Cray’s employees were provided from outside of the district. Further, the reimbursements and support were not conditioned on any particular employee location. Raytheon also argues that Cray’s “Americas Sales Terri- tories” map identifying Mr. Harless as a “Named Account Manager” and his location at his Eastern District of Texas personal home as further evidence that Cray had a “regu- lar and established” place of business in the district. That map, however, was not advertised publicly and has little probative value.
Raytheon’s remaining arguments are similarly una- vailing. Mr. Harless’s social media profiles and phone number indicate at most that he conducted business from the Eastern District of Texas, not that Cray established a place of business there. The availability of Cray’s materi- als online is not compelling, as the materials were availa- ble in places where no one would argue that Cray established a regular place of business. And even if Mr. Harless performed work for Cray beyond sales, nothing suggests that Mr. Harless’s work on “new sales and new account development” or “management of key accounts” changes the analysis above.
Our decision here comports with a number of appel-
late court decisions concerning employees working from
their homes. In
Channel Master Corp.
, for instance, the
Seventh Circuit addressed whether a defendant that
employed a single salesman who used his home as a base
for his sales activities in promoting his employer’s prod-
ucts demonstrated that the defendant had a regular and
established place of business there.
The Seventh Circuit rejected that argument. Like Mr. Harless, the salesman in Channel Master was reimbursed by the defendant for certain business expenses. But, also like Mr. Harless, he maintained in his home “no stock in trade, no displays, no samples, and no showroom.” Id. at 516. He also “conducted no demonstrations of the prod- ucts,” received no business visitors, and had no staff or even secretarial help located in his home office. Id. Under these circumstances, the court concluded that the employee’s home could not “by any stretch of the imagina- tion” be characterized as a regular and established place of business of the defendant. Id. ; accord Grantham , 420 F.2d at 1185–86.
Likewise, in
American Cyanamid
, the Fourth Circuit
refused to accept the argument that “it is sufficient under
Similarly, the facts here do not show that Cray main- tains a regular and established place of business in the Eastern District of Texas; they merely show that there exists within the district a physical location where an employee of the defendant carries on certain work for his employer.
We stress that no one fact is controlling. But taken
together, the facts cannot support a finding that Cray
established a place of business in the Eastern District of
Texas. Thus venue cannot exist there under
Because venue is lacking in the Eastern District of
Texas, Cray seeks transfer to the Western District of
Wisconsin. Raytheon responds that it prefers transfer to
the United States District Court for the Western District
of Texas.
Because the district court determined that venue was proper, it did not address the parties’ arguments regard- ing where the case should be transferred. We leave that determination for the district court on remand.
Accordingly,
I T I S O RDERED T HAT :
The petition is granted to the extent that the district
court’s order denying Cray’s Rule 12(b)(3) motion is
vacated, and the district court is directed to grant the
motion and transfer the case pursuant to
F OR THE C OURT /s/ Peter R. Marksteiner Peter R. Marksteiner Clerk of Court
Notes
[*] By this, we do not suggest that district courts must scrutinize the “nature and activity” of the alleged place of business to make relative value judgments on the different types of business activity conducted therein. Rather, a relative comparison of the nature and activity may reveal, for example, that a defendant has a business model whereby many employees’ homes are used by the business as a place of business of the defendant.