In Re: Cray Inc.

Docket No. 2017-129

September 21, 2017

Brief summary: Cray was found not to the meet the FC’s venue requirements (e.g., employee’s home office was not a “regular and established place of business”) and the writ of mandamus regarding the DC’s refusal to transfer venue was granted.

Summary: Cray petitioned for a writ of mandamus vacating the order of the DC of the Eastern District of Texas denying its motion to transfer the case to Wisconsin, which Raytheon opposed. Cray is a Washington state corporation and has its principal place of business in WA but maintains facilities in MI, WI, CA, and TX (Austin and Houston) but “does not rent or own an office or any property in the” ED TX, although it allowed employees “to work remotely from their respective homes in that district…before the underlying suit was filed.” “[H]owever,” Cray’s employee (Mr. Harless) “did not maintain Cray products at his home, nor did he maintain product literature at his home because it was available online”, and “Cray never paid Mr. Harless for the use of his home to operate its business, or publicly advertise[] or otherwise indicate[] that his home residence was a Cray place of business.” Cray moved to transfer the suit under 28 USC § 1406(a) (controlled by the meaning of § 1400(b)) in light of the Supreme Court’s TC Heartland decision (US 2017) because “it does not ‘reside’ in” the ED TX and “had neither committed acts of infringement, nor maintained a regular and established place of business” there. The DC agreed that Cray does not reside in that district but denied Cray’s motion because “Mr. Harless’s activities were factually similar to the activities performed in In re Cordis” (FC 1985). The DC also “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 place of business ‘in the modern era,’ including physical presence, defendant’s representations, benefits received, and targeted interactions with the district” but also “decline[d] to expressly apply the factors…in this particular case”, noting that if it had “the result would remain the same.” The FC panel acknowledged that, e.g., “[i]n this new era, not all corporations operate under a brick-and-mortar model” and “[b]usinesses can be conducted virtually” but also explained that it “must focus on the full and unchanged language of the statute” (§ 1400(b)), as Cordis did not consider itself obliged to do.” The FC panel concluded that the “three general requirements relevant to the inquiry” are: “(1) there must be a physical place in the district” (not “merely…a virtual space”); “(2) it must be a regular and established place of business” (“sporadic activity cannot create venue”; e.g., not a home office that can be moved at the will of the employee); and “(3) it must be the place of the defendant” (“not solely a place of the defendant’s employee”), but not necessarily excluding “a business model whereby many employees’ homes are used by the business as a place of business of the defendant”, see asterisk on p. 14). The DC’s “four-factor test” was found not to be “sufficiently tethered to [the] statutory language” of § 1400(b). Cray was found not to the meet the FC’s requirements and venue to be lacking.

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