Venue: “Regular and Established Place of Business” is a Questions of Law

Westech v. 3M (Fed. Cir. 2019)

Westech sued 3M for patent infringement in W.D.Washington. On motion from 3M, the district court then dismissed the case for improper venue under 28 U.S.C. 1400(b).  Under the statute, infringement cases can only be brought in a judicial district where the defendant either (1) resides (i.e., is incorporated) or (2) infringed the patent and has a regular and established place of business.  Here, the focus is on 3M’s sales activities with vendors, distributors, and sales professionals — and whether those activities constitute a “regular and established place of business.”  Two key precedential cases: In Cray, the Federal Circuit held that a “place of business” must be a “physical place in the district.”  In ZTE, the Federal Circuit held that it is the plaintiff’s burden of establishing proper venue (burden of persuasion).

Westech’s amended complaint states:

3M has one or more regular and established places of business in this judicial district. Furthermore, on information and belief, Defendants maintain contractual relationships with distributors of the infringing products who are located in this judicial district, Defendants have sales representatives located in this judicial district, Defendants represent that they sell products in this judicial district, and Defendants earn substantial sales revenue from sales of the infringing products in this judicial district.

Sufficient for venue? The district court saw these allegations as insufficient and the Federal Circuit has affirmed on appeal.  On point – The asserted facts do not lead to a conclusion that 3M has a physical place of business in the district, and the allegation that 3M has “regular and established places of business” is a legal conclusion not given any weight in the analysis. The court explains:

Simply stating that 3M has a regular and established place of business within the judicial district, without more, amounts to a mere legal conclusion that the court is not bound to accept as true. . . .

A presumption that facts pleaded in the complaint are true does not supplant a plaintiff’s burden to plead specific facts showing that the defendant has a regular and established place of business physically located in the judicial district.

Question of Law: The statements by the court here is a bit oblique, but it may be the first precedent expressly stating that whether the defendant “has a regular and established place of business” in the district is a question of law and not a question of fact.  In Cray, the court indicated that the analysis will be based upon underlying facts: “In deciding whether a defendant has a regular and established place of business in a district . . . each case depends on its own facts.”

18 thoughts on “Venue: “Regular and Established Place of Business” is a Questions of Law

  1. 4

    I have to wonder how the courts would treat the topic if tax codes had to follow the same “must have physical presence” to establish a State’s dominion over a business…

    1. 4.1

      A follow-on musing…

      If “business is abstract**,” why require a physical presence as a predicate to the notion that business is being routinely conducted?

      Conduct of business is the “deal,” and in this day and age, the “deal” is done at the physical location of the customer.

      Routinely so.

      If a business avails itself of the known mechanism that places the deal at any location of the customer, has not that business affirmatively decided “to do business” at ALL locations that any customer may then choose to engage the business’s choice of mechanism?

      After all, nothing is forcing a business to choose other than the traditional brick and mortar, actual physical location for conducting its business…

      … and I am just a little surprised that Malcolm does not thunderously jump to my side in this ‘fight’ against the seeming advantage to “money-grubbing businesses.”

      ** whatever that means…

      1. 4.1.1

        “Conduct of business is the “deal,” and in this day and age, the “deal” is done at the physical location of the customer.”

        What if they technically make the sale in say, india (between some servers), on a transaction between a company based in CA for a customer in washington DC?

        1. 4.1.1.1

          What if they technically make the sale in say, [___] (between some servers),…

          Absolutely misses the point, 6.

          In this day and age, the actual “route” of the transactional details is just not pertinent to the deal, which is AT the physical location of the customer agreeing to the deal. Your “technically make” is AT the physical location of the customer. All else is merely transit of the made deal. And such transit may not technically even be knowable.

          As to the rest of your question, had you been paying attention, the actual deal’s “physical location” is Washington DC.

          ALL of this should have been more clear, had the law evolved properly under mail order catalogues, and the ability of a business to reach outside of ANY of its own existing brick and mortar facilities in order to conduct business.

          Let me state this again: NO ONE forces a business to conduct business at any location that the business chooses to conduct business. For a business to open itself — by choice — to remote sales to anyone, anywhere, IS a choice to establish regular business anywhere.

          NO business must choose to operate anywhere where it does not want to. It is only through some rather bizarre (and absence of) logic that a business choice is inoculated against the natural ramification of that business choice.

          1. 4.1.1.1.1

            “Let me state this again: NO ONE forces a business to conduct business at any location that the business chooses to conduct business. ”

            Actually Bezos and some other execs at huge companies are doing this as we speak. With an economic gun to the head that is just as real, tho not tangible, as any real gun. Though I take your point, it is close to delusional to not appreciate the realities of modern business.

            1. 4.1.1.1.1.1

              There is no such “economic gun.”

              One chooses entirely of one’s own free will to engage in any business.

              Once you are in a business, there is a difference of choosing to be competitive. I think that your “Bezos and some other execs” comment conflates and confuses these things.

              One always has a choice to engage in business.
              One does not choose what is the most competitive way to STAY in business.

              1. 4.1.1.1.1.1.1

                “One chooses entirely of one’s own free will to engage in any business.”

                I used to think that as well anon. But actually, since the move from small communities and farms to cities (and truthfully even before that) “the working class” and even to an extent “the business class” are basically forced into business and working, and doing things that further those ends. You basically no longer have the family farm to go get bread on. It is our privilege as a privileged class to not be scurrying around for our daily bread etc. and our relative overall societal wealth that blinds us to this reality. And to be clear, it is this same thing that commies are all the time btching about. It is a real thing. It actually exists. Not saying commieism is an answer, because it ain’t, but it does exist. The leftist critique of the capitalist system forcing people into working/business is, at base, fundamentally correct, esp in the modern world.

                1. I am not saying that one need not work at all.

                  Any particular work, though IS entirely voluntarily (and yes, slavery is illegal).

                2. As to “commieism,” one of the PRIME failings is the abdication of personal responsibility.

              2. 4.1.1.1.1.1.2

                “I think that your “Bezos and some other execs” comment conflates and confuses these things.”

                Whether you’re launching the business anew or continuing an old established business you’re still forced into doing x y z to stay in business (and also to thrive in business) in any given business environment. In the modern times Bezos and friends are putting those pressures on both and on all. And I’m not saying it shouldn’t be that way, but you can’t just ignore that.

                1. I am not ig n0ring anything.

                  I perfectly well distinguish the choice to be competitive (which may — or may not — include the optional business choices of brick and mortar, mail order, or “on line.”

                  What I push for is that the responsibility for the choice of the business be made to adhere in kind to the benefits of any such choice.

                  You want to be able reach — and do business — AT any single person’s residence, well then, you have made a business choice to BE at any single person’s residence. You want the benefit, then you should be prepared to take the responsibility.

  2. 3

    Just based on the quotes above, it looks to me like “mere legal conclusion” is referring only to the assertions in the plaintiff’s pleading for Iqbal purposes, not to the issue of who ultimately decides the question.

  3. 2

    I don’t think this case says much of anything with respect to the fact/law dichotomy on issues of venue. The only statement you seem to be pointing to is a one-liner about the district court’s venue determination being reviewed de novo, and a favorable citation to a Tenth Circuit decision.

    There’s nothing new there. It’s been well-established across the circuits for decades that whether venue is proper is a question of law for the court, just like the question of whether the court has personal jurisdiction. There is no reason a determination of venue under 1400(b) isn’t also a question of law. The same is true for just about every other procedural ruling a district court makes.

    And there is nothing here inconsistent with Cray. It’s well-established that even though venue is a question of law, it may turn on disputed factual issues. In that situation, the district court makes factual findings and those findings are reviewed deferentially (for clear error) on appeal, similar to how the Federal Circuit reviews district court factual findings in claim construction after Teva.

    This particular case didn’t involve any disputed facts; it was based entirely on insufficiency of the pleadings, so venue was a question of law reviewed de novo.

    1. 2.1

      I have found difficulty predicting when the Federal Circuit will identify something as a question-of-law vs a question-of-fact. Notice here thought that we are not simply talking about the question of venue, but also the sub-issue of whether the party has a “regular and established place of business” in the district. The court could have just as easily indicated that question to be a factual determination.

      1. 2.1.1

        Yeah, it’s unclear why some things in patent law are classified as questions of law and others as questions of fact. For example, why is compliance with the enablement requirement a question of law, while compliance with written description requirement a question of fact? Anticipation a question of fact, but obviousness is a question of law.

        But I don’t think that criticism of the CAFC really applies when you’re talking about PROCEDURAL rulings made by federal district courts, such as venue or any sub-issue under 1400(b). Procedural rulings are often classified as “questions of law” simply to make clear that they are decided by the district court–they do not go to a jury even if there are factual disputes. For example, a jury will never be asked to decide whether there is personal jurisdiction or proper venue over a defendant, whether a plaintiff has standing to sue, whether the plaintiff adequately pleaded its claims in its complaint, etc. The jury thus doesn’t get to decide whether a party has a “regular and established place of business” in the district. It’s a question of law, albeit one that can be based on underlying facts.

        1. 2.1.1.1

          “For example, why is compliance with the enablement requirement a question of law, while compliance with written description requirement a question of fact? ”

          I had to look into that myself and it always seems hard to beginners. In fact it is not difficult at all. The reason is because of the way those two “requirements” came to be imposed through history, and what, specifically was at issue when they were being considered, and then how the congress chose to implement those questions in the statute. It is a very complicated process, but in general it’s just “history, legislation, and interpretatin’ in the courts”.

    2. 2.2

      Yes, that is right.

      Whether a defendant has a “regular and established place of business” in the district is a legal conclusion, based on the underlying facts. The facts can be presumed (if we are talking about allegations in a complaint) or proven by evidence. The factual findings are subject to clear error review, while the conclusion should be reviewed do novo. (Same law applies to personal jurisdiction, which is a legal conclusion based on facts.)

      BTW, just because someone pleads the facts, does not mean that they have to be accepted in the case as a whole. The defendant can dispute them with evidence, and ask that the issue be dealt with on a summary judgment motion or even an evidentiary hearing (although that is rare).

  4. 1

    Looks like Westech skips on a minor technicality of arguing badly only due to its arguments being made prior to ZTE being published (and barely at that, as Cray alone appears to provide sanctionable action).

Leave a Reply

Your email address will not be published. Required fields are marked *

You can click here to Subscribe without commenting

Add a picture