Federal Circuit Finds Presence Of Google’s Cache Servers In The Eastern District Of Texas Does Not Justify Venue
On February 13, 2020, the Court of Appeals for the Federal Circuit (CAFC) granted a writ of mandamus, ordering the Eastern District of Texas (“EDTX”) to dismiss or transfer the patent infringement suit filed there against Google LLC (“Google”). In re Google LLC, No. 2019-126, __ F.3d __ (Fed. Cir. Feb, 13, 2020). Applying In re Cray, CAFC found that the EDTX lacked venue under the 28 U.S.C. § 1400(b).
Super Interconnect Technologies LLC filed suit against Google in the EDTX, alleging that venue was proper based on the presence of several Google cache servers in the EDTX. These servers save content frequently accessed by nearby users, reducing bandwidth costs for Google and improving user experience by reducing load times. Google contracts with local internet service providers (“ISPs”) for access to their networks and to lease rack space in their datacenters for these servers. The ISPs also provide installation and maintenance services for the servers. As a result, no Google employees have physically accessed the servers located in the EDTX.
28 U.S.C. § 1400(b) states: “Any civil action for patent infringement may be brought in the judicial district where defendant resides, or where defendant has committed acts of infringement and has a regular and established place of business.” Under Cray, a regular and established place of business requires (1) “a physical place in the district” that is (2) “a regular and established place of business” and that (3) “must be the place of defendant.”
The CAFC rejected Google’s argument that “place of business” requires ownership of, or at least a leasehold interest in, real property, holding that the statute would be satisfied by any physical place that defendant could possess or control, using the example of a table at a flea market. As a result, Google’s leased rack space is a “place of business” under 28 U.S.C. § 1400(b).
However, the CAFC agreed with Google that it had no “regular and established place of business” in the EDTX.
First, the CAFC found that this factor requires “the regular, physical presence of an employee or other agent of defendant conducting defendant’s business at the alleged ‘place of business.’” The CAFC found that the venue and service statutes for patent cases have always been expressly linked, and so the two must be read together. Since the service statute plainly assumes that a defendant will have a regular and established place of business only if defendant has an agent engaged in conducting such business there, then the same assumptions must also govern the venue statute.
Second, the CAFC found that the local ISPs were not Google’s agents because (1) Google has no right of interim control over the way the ISPs provide it network access; (2) the ISPs’ installation services are one-time events for each server and do not constitute the conduct of a “regular and established” business; and (3) the ISPs’ maintenance services, though conducted at Google’s direction, are “meaningfully different from—as ancillary to” the actual producing, storing, and furnishing to customers of what Google offers as a business.
In so finding, the CAFC reiterated the United States Supreme Court’s caution against a broad reading of the venue statute and the need to minimize expenditure of resources on threshold, non-merits issues such as venue. Based on these principles, the CAFC concluded that “[t]he venue statute should be read to exclude agents’ activities, such as maintenance, that are merely connected to, but do not themselves constitute, defendant’s conduct of business in the sense of production, storage, transport, and exchange of goods or services.”
Judge Wallach concurred in the decision, but noted that it remains for the district courts to determine whether Google’s end users can be considered its agents in furtherance of its business, noting that, because a core aspect of Google’s business model is monetizes end user data, then Google may be doing business “at the computer of each of its users/customers.”