In re Google (Fed. Cir. 2020)
In a mandamus order, the Federal Circuit has ruled that Google cannot be sued in E.D. Texas for patent infringement — holding that the district is an improper venue under TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017).
For most Federal Causes of action, venue is deemed proper if the court hearing the case has personal jurisdiction over the defendants. However, patent infringement cases are different. Patent cases fall under a more specific venue statute that limits actions to districts where either (a) the defendant ‘resides’ (i.e., is incorporated) or (b) the defendant has a regular and established place of business and has committed acts of infringement. 28 U.S.C. 1400(b).
In Super Interconnect Techs. LLC v. Google LLC, No. 2:18-CV-00463-JRG, 2019 U.S. Dist. LEXIS 132005 (E.D. Tex. Aug. 7, 2019), Super Interconnect sued Google for infringing, but Google responded a motion for dismissal for improper venue.
Google is not a Texas company and so does not reside in E.D. Texas. Google is accused of infringing in TX, but Google argues that the company does not have a “regular and established place of business” in the district.
- Yes, Google does have many millions of customers and dollars in revenues from the district.
- Yes, Google does market its goods and services directly to consumers in the district.
- Yes, Google has AI services that provide immediate access to information and activities to millions within the district.
- Yes, Google ha[d] very large servers located within the district particularly designed to serve customers within the district. (Note (1) these servers were operated by local ISPs rather than Google itself; and (2) after the filing of this lawsuit, Google removed its servers from the District in order to avoid being sued in E.D. Tex.).
- No, Google does not have a regular and established place of business in the district.
In its decision, the Federal Circuit repeated its prior holding in Cray that a regular-and-established-place-of-business must be a physical place located within the district. While the servers qualify for the physicality requirement, they are not a “place of business.” According to the court, a “place of business” must have an “employee or agent” conducting business in the location — Google’s AI is not sufficient.
We conclude that a “regular and established place of business” requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged “place of business.”
In making this “employee or agent” requirement, the court looked to the patent-law service-of-process statute 28 U.S.C. 1694 that indicates service may be made upon a defendants “agent or agents conducting such business” at the regular and establish place of business. The court explains:
The service statute plainly assumes that the defendant will have a “regular and established place of business” within the meaning of the venue statute only if the defendant also has an “agent . . . engaged in conducting such business.” Likewise, the provision that “service . . . may be made by service upon the agent” and the “regular and established” character of the business assumes the regular, physical presence of an agent at the place of business. In the absence of a contrary indication, these assumptions must govern the venue statute as well. . . .
Judge Wallach joined the opinion, but also penned a concurrence questioning Google’s business model (hmm, seems that the company is doing pretty well for itself…). Judge Wallach explains:
I join with the majority’s order, but I write separately to raise questions about Google’s business model. During oral argument, Google did not answer, when asked, the question of what its main source of business is in the Eastern District of Texas. Google simply explained that it does not “actively do anything. In other words, there’s no evidence of any employee or agent . . . being present in the district.” Oral Arg. at 51:55–52:15.
When asked again, “what do you do in the Eastern District?,” Google responded what “what Google does in the District will depend on what the subject of that verb is,” and “when you look at the service statute the subject of that verb has to be ‘employees’ or ‘agents’ in the District.” Id. at 52:30–52:53. Finally, Google was asked “when you gather information, from customers, which is part of your business, you agree. How does that get passed back to Google? It goes through the server?” Id. at 58:59–59:10.
Google’s counsel responded stating: “I am not aware.
There’s nothing in the record that I’m aware of on that point, your Honor.” Id. at 59:11–59:14. Given the absence from the record of information sufficient to understand Google’s business model, the question remains for the District Courts to determine whether Google’s end users become agents of Google in furtherance of its business by virtue of voluntarily or involuntarily sharing information generated on Google’s servers. If, for example, by entering searches and selecting results a Google consumer is continuously providing data which Google monetizes as the core aspect of its business model, it may be that under the analysis in which I today join, Google is indeed doing business at the computer of each of its users/customers. Because this is a question I believe should be entertained by District Courts, I concur.