Subsidiary’s Facility Qualifies as a Regular and Established Place of Business of the Parent for Patent Venue Purposes
A recent decision from the US District Court for the Western District of Texas suggests that district courts are taking a more expansive view of what constitutes a “regular and established place of business” for purposes of establishing venue in patent infringement cases. Board of Regents, The Univ. of Texas Sys. v. Medtronic PLC, Case No. 17-942 (W.D. Tex.)
In November 2017, the Board of Regents of the University of Texas System (the “Board’) sued Medtronic, Inc. for patent infringement in the US District Court for the Western District of Texas (the “Western District”). Medtronic responded to the Complaint by challenging venue as improper.
Proper venue in a patent infringement case is first determined by “the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” 28 USC § 1400(b). In light of the Supreme Court’s TC Heartland decision, which held a corporation “resides” only in its state of incorporation, the parties agreed that Medtronic, which is not incorporated in Texas, did not “reside” in the district. The parties instead focused on the second method for establishing venue: whether Medtronic, Inc. “has a regular and established place of business” in the Western District. Establishing such a presence has three requirements: (1) there must be a physical 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. In re Cray, 871 F.3d 1355, 1360 (Fed. Cir. 2017).
According to Plaintiffs, Medtronic, Inc. satisfies the Cray test because it maintains a regular and established place of business in San Antonio, Texas—a 431,000 square feet manufacturing and research facility. Medtronic, Inc. countered that the facility is not sufficient to establish proper venue because it does not own or lease the facility; rather, a Medtronic, Inc. subsidiary leases and uses the facility, and the presence in the district of a non-party subsidiary cannot be imputed to Medtronic, Inc.
The district court disagreed with Medtronic, Inc. and found venue proper. Regardless of the lease arrangement for the facility, the district court concluded that Medtronic, Inc. had “ratified” the San Antonio facility as its place of business because: (1) Medtronic, Inc. announced its move to San Antonio in 2009, (2) the facility had a large “Medtronic” logo on the façade, and (3) Medtronic, Inc. lists the San Antonio facility on its website and in telephone and web-based directories.
While the Federal Circuit articulated the factors to consider when determining whether a defendant has “a regular and established place of business” in a district, litigants and the district courts continue to wrestle with the question. (See our prior post predicting an increase in litigation over this question, here.) Decisions like that in Board of Regents may signal a trend in which district courts are willing to peek behind formal legal structures and consider whether, under the totality of circumstances, a defendant has ratified a subsidiary’s presence as its own.