Cray Appeals Texas District Court’s Broad Patent Venue Ruling

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By Peter Leung

Cray Inc. is asking a federal appeals court to throw out a ruling that the supercomputer maker has to defend a patent lawsuit in East Texas, in a petition filed July 17. The U.S. Court of Appeals for the Federal Circuit July 18 ordered the patent holder in the case, Raytheon Co., to respond to Cray’s petition ( In re: Cray Inc. , Fed. Cir., No. 17-00129, petition filed 7/17/17 ).Judge Rodney Gilstrap, of the U.S. District Court for the Eastern District of Texas, denied Cray’s motion to transfer the lawsuit to another court. Gilstrap said that East Texas is the proper venue because Cray has a “regular and established place of business” in the district—even though that place of business is one work-at-home salesperson.

If the Federal Circuit takes up the case, it will be its first chance to address the venue issue since the Supreme Court’s May 22 ruling in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, which was expected to make it more difficult for patent plaintiffs to sue in a favored court, such as the Eastern District of Texas. Critics of abusive patent lawsuits argue that choosing a favorable venue gives patent owners extra leverage in getting defendants to settle quickly without going to trial.

House Judiciary Chairman Robert W. Goodlatte (R-Va.) accused Gilstrap of defying the Supreme Court in order “to keep as many patent cases as possible in his district.” Goodlatte sponsored the Innovation Act during the 2015-16 congressional session, including provisions to limit where plaintiffs could file patent lawsuits. Congress may again attempt to change the patent venue rules, especially if Gilstrap’s ruling stands.

Regular and Established

The Federal Circuit has the option to deny Cray’s petition for a writ of mandamus, an order from a superior court to a lower court or body, without a full briefing, so asking Raytheon to weigh in may suggest that it is considering the issue. But even if the court takes the case, Cray has a high burden, because it must prove the trial court clearly abused its discretion.

Cray’s petition asks the Federal Circuit to address two issues: whether a company can have a “regular and established place of business” in a district where it doesn’t have a physical presence, and whether a work-at-home employee suffices as that place of business.

Cray argues that the court should take up the case because after TC Heartland, there are hundreds of cases dealing with the venue issue, and the law is “particularly unsettled because of conflicting regional circuit case law and district court decisions.” It also says that most case law on the issue is several decades old, adding to the uncertainty of applying the law in the internet age.

If the court doesn’t take up the issue, then it likely won’t weigh in for several years, risking that hundreds of venue decisions will be based on an incorrect understanding of the law, Cray said.

Fenwick & West LLP is representing Cray. Steptoe & Johnson LLP is representing Raytheon.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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