Welcome to VW of Waco

by Dennis Crouch

In re Volkswagen Group of America; In re Hyundai Motor America (Fed. Cir. 2022)

On appeal here, the Federal Circuit delved into franchise law — holding that independently owned and operated VW/Hyundai car dealerships located in the W.D. Texas do not count as a “place of business” of the car distributors.   As such, venue is improper under 28 U.S.C. 1400(b).

In ordinary civil actions, venue is proper in any district that would have personal jurisdiction over the defendant. 28 U.S.C. 1391.  Thus, for most federal cases, venue is not a major hurdle. But, in the 1800s, Congress created a special statute that substantially limits proper venue in patent cases (well before the expansion seen in Section 1391.  In Fourco (1957), and again in TC Heartland (2017), the Supreme Court gave weight to the patent-focused statute.  Today, there are two ways to show proper venue over a US corporate defendant:

  1. The defendant is incorporated in the state; or
  2. The defendant committed acts of infringement in the district and also has a “regular and established place of business” in the district.

TC Heartland, interpreting Section 1400(b).

In 2020, StratosAudio sued VW Group of America (VW) for patent infringement in Judge Albright’s court located in Waco, Texas.  VW is incorporated NJ and does not have its own “place of business” in the district.  However, there are VW dealerships in Waco and Austin.  The question is whether those can count as a “place of business” for the defendant.

The laws of most states, including Texas, prohibit auto manufacturers and distributors from operating a dealership within the state. Still, Judge Albright found sufficient control by the distributor as well as ratification by the distributors.

On mandamus, the court further defined its requirements to determine whether a dealership can count as the place of business for a manufacturer or  distributor:

  1. Is the dealership the VW’s agent?
  2. Does the dealership conduct VW’s business?; and
  3. Has VW ratified the dealership as its place of business?

Slip Op.  These requirements stem from the court’s 2020 Google decision requiring physical presence of an “agent of the defendant conducting the defendant’s business at the alleged place of business.” In re Google LLC, 949 F.3d 1338 (Fed. Cir. 2020).  In addition, the ratification requirement appears in Cray: “Thus, the defendant must establish or ratify the place of business. It is not enough that the employee does so on his or her own.” In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017).   These three elements are independent requirements that must each be met before a place-of-business maintained by a separate legal entity will “count” as the place-of-business of the defendant.

Not Agents: Here in particular, the court found that the dealerships located in W.D.Texas are not agents of VW Group of America.  And, therefore, the dealerships are not a place-of-business of VW Group.  The court’s approach was to follow the Restatement (Third) of Agency in focusing on the right of control/direction by the principal; and consent to the agency relationship by both the principal and agent.  In the end, the court found that the dealerships had “full control over their day-to-day operations, such as sales.”  Thus, the court found no agency relationship there.  The court admitted some control over things such as:

  1. who can be employed, what roles are required, and other employment requirements;
  2. minimum inventory;
  3. requirement of performing warranty work (warranty is promised by VW, not the dealer);
  4. use specified tools when performing warranty and maintenance work;
  5. use distributor-approved computer hardware and software;
  6. compliance with distributors’ standards regarding dealership appearance and use of signs and brand logos;
  7. maintaining working capital;
  8. attending mandatory training and or certificates.

However, the court found that there was a lack of “interim control” once those parameters are set.

No agent, no place of business, no venue.

86 thoughts on “Welcome to VW of Waco

  1. 12

    Important to keep the big picture in view here. This order does not mean that Stratos will not get its day in court. It merely means that Stratos will have to sue VWNA in DNJ, and Hyundai in SDCal.

    Justice will still be done. It will merely be done elsewhere than WDTex.

  2. 11

    Needless to say, the patents are rub bish.

    Typical “do it on a computer” that would fail both my proposed eligibility test and the existing, actual eligibility jurisprudence.

    These patents add nothing to any art; not even the advertising “arts”

  3. 10

    I’m not defending the specific agency law decision here that this Texas car agency is not a “regular and established business” of these two car company defendants. But as for the various unreasonableness or unfairness arguments below, how do the below-noted patents of this lawsuit have anything to do with either these cars themselves or this dealer? If they were, the dealer could have been a named defendant, with no venue dispute.

    1. 10.1

      Paul is right to some degree as the Google case law seems to say that you have to have control of the employees on a day-to-day basis.

    2. 10.2

      If they were, the dealer could have been

      Such “could have been’s” are NOT at point.

      It’s a nice dust cloud kicked up though.

  4. 9

    (b)Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. makes a business choice that avails it of benefits of business in the state.

    All fixed. Because the words of CONGRESS should mean what we want them to mean, not what they say, amirite?

      1. 9.1.1

        They don’t control them? They finance the cars. They write all the contracts. They make all the signs and have contracts where the signs are placed and which signs may be displayed. They have rules of how the sellers of the cars behave. They have rules about the size of the dealership the services provided.

        Sounds like a franchise to me.


          “They have rules of how the sellers of the cars behave.”

          The decision is pretty explicit about Stratos having failed to show that the manufacturers have control over the sales process. It appears that if Stratos had shown what you assert here, the outcome could have easily gone the other way.


            >Stratos has not cited any evidence that Volkswagen or Hyundai >maintain influence over the sales process once they have sold a car >to a dealership. Once the cars leave Petitioners’ possession, >Petitioners “retain[] no authority over the manner in—or price for—>which the [car] will be [sold].”

            This is almost certainly not true. I bought a Volkswagen and there was financing and a suggested price. I can’t even remember all the other constraints on the salesman but I remember there were a lot placed on them by Volkswagen.


              Plus there are contracts for maintenance. Plus there factory orders for specific cars.

              I don’t know how you say that there is no control when the entire structure of the relationship is controlled by Volkswagen. Volkswagen will do all sorts of things if a dealership’s inventory is too large or small.

              And so forth. This is some kind of very narrow reading where they are saying for a single car a dealership could do what they wanted with this single car (but as long as 1,000 other contractual behaviors are followed) including things like offering maintenance.

              Oh well. I don’t have time to express this well but anyone that knows about dealerships knows the CAFC opinion is shxt.


                “I don’t know how you say that there is no control when the entire structure of the relationship is controlled by Volkswagen.”

                One can say all sorts of thing when one ignores other people’s actual arguments.

                1. I know there are examples of dealerships being admonished or warned if they don’t see the cars in accordance with their contractual obligations.

                  And there is a flow of cars so VW just basically says stop doing this or your franchise to sell will be revoked.

                2. hit the filter again…

                  Your comment is awaiting moderation.

                  March 11, 2022 at 8:40 am


                  Please define “formal control” as you see it.

                  (please note that ‘formal control’ is NOT synonymous with ‘total control’)


                “This is some kind of very narrow reading where they are saying for a single car a dealership could do what they wanted with this single car (but as long as 1,000 other contractual behaviors are followed) including things like offering maintenance.”

                I think they’re more saying that given the set of constraints that the franchisor has set here, as long as the franchisee isn’t subject the franchisor’s control within those constraints, the franchisee is not an agent of the franchisor.

                In other words, VW cannot come in and order the dealership mechanic with regards to the scheduling of when the mechanic applies VW approved techniques with VW approved tools in order to fulfill VW’s warranty obligations.

                That seems like a silly/undesirable outcome to me, but I’ve yet to see someone here articulate why it is an incorrect interpretation of the law.

                1. Except, VW does exactly that.

                  The contract includes levels of service for people that bought VW cars. So it is saying when the service is performed and what service is performed.

                  And requires levels of customer satisfaction with the dealership. And so forth.

                  Saying what they did is wrong is always almost impossible given that it is a balancing test and nothing the court ever does is wrong until the Scotus says so, an en banc opinion says so, or the Congress says so.

                  Here they have decided to use a very narrow view of control.

                2. The law of unintended irony from Ben:

                  One can say all sorts of thing when one ignores…

                  … but I’ve yet to see

    1. 9.2

      has a regular and established place of business. makes a business choice that avails it of benefits of business in the state.

      All fixed. Because the words of CONGRESS should mean what we want them to mean, not what they say, amirite?

      Too many around here suffer from the (willful?) inability to keep straight the distinction between personal jurisdiction and venue.

      1. 9.2.1

        The WWW needs a standard sarcasm tag.

        Meanwhile, what’s the very point and essence of a franchise?

        To legally separate the entity who deals with the end-user from the upstream provider entity of a good or service.

        To negate that basic fact to bend an unwanted statutory provision is the kind of legal activism that people constantly complain about. Fix the statute instead of torturing the concept of a franchise into the one thing it cannot be.


          Honestly, if the CAFC had decided that a franchise is enough to constitute a “regular and established place of business” in a district, that would have been an equally defensible reading of the text. This is a boundary case, and cases at the boundary will always look a little unsatisfactory.


            I hear you about “boundary case” but it was reversed as PATENTLY ERRONEOUS on mandamus. So, either the decision was plainly wrong, or it was a boundary case, but deemed wrong on mandamus to reign in Albright. If he was more reasonable then people would give him the benefit in boundary cases. But, he is the opposite of reasonable and therefore his prestige and persuasive value is in the toilet.


              [E]ither the decision was plainly wrong, or it was a boundary case, but deemed wrong on mandamus to [rein] in Albright.

              I do not think that “plainly wrong” and “boundary case” are at odds. The CAFC concluded (slip op. at 18) that “the district court’s venue conclusions were a clear abuse of discretion for erroneously interpreting governing law and reaching a patently erroneous result.” But the point of law that the district court got wrong was a matter of first appellate impression (slip op. at 5, “[h]ere, given the disagreement among district courts on the recurring issue of whether independent car dealerships are sufficient to establish venue over car distributors,… we determine that these cases involve exceptional circumstances warranting immediate review”).

              Judge Albright can hardly be faulted for getting this one wrong, because many other district courts were also confused on this particular point of law (viz, whether a dealership counts as a “regular and established place of business” for the auto manufacturer, see cases cited at slip op. 5). Once the CAFC corrected this single point of law, however, (slip op. at 18) “[b]ecause [the CAFC had] reverse[d] the only basis for the district court’s decisions to keep these cases in the Western District of Texas,” it followed that they had to “remand for the district court to now address whether to dismiss or transfer these two cases.”

              Whether a dealership counts as a “regular and established place of business” is a boundary case. It is possible to give the statute a coherent reading in which a dealership is a “regular and established place of business” for the relevant auto manufacturer, but is also possible to give the statute a coherent reading in which a dealership is not. Once one draws the boundary in such a way that the dealership is not, however, then Judge Albright’s refusal to transfer or dismiss becomes an abuse of discretion because it is predicated on an error of law. Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1147 (Fed. Cir. 2011) (“A district court abuses its discretion when it acts based upon an error of law…”).

              I do not read this mandamus order as a caution to Judge Albright (although many of the previous mandamuses give that impression). This really was an unusual one-off, where Judge Albright just happened to be the one who provided the occasion for the court to give guidance on a point that confuses multiple district courts.


                Incidentally, the fact that multiple district courts had been confused about this point for several years now (basically since TC Heartland totally upended everyone’s understanding of patent venue law) should give pause to the folks who appear to treat the CAFC’s conclusion here as absurd.

                Among serious jurists who have had meaningful occasion to think hard on this point, it is actually a close case. It is only those who are coming at it for the first time in the last two days who treat it as a comically simple point on which the CAFC was laughably wrong.

                1. should give pause to the folks who appear to treat the CAFC’s conclusion here as absurd.

                  It should give pause to Greg’s ego, and his apparent thickness in understanding what the Big Picture is about.


          The WWW needs a standard sarcasm tag.

          That is: “/s” for mild sar casm, “/S” for strong sar casm, and ” ” for are you out of your mind sar casm.


            Yes, follow the money.

            A manufacturer builds a car. A dealer buys the car. Title in the car is created, and then passed to the dealer. Money flows from the dealer to the manufacturer. The manufacturer buys a new robot.

            A customer buys a car. Title passes from the dealership to the customer. Money passes from the customer to the dealership. The dealer makes a boat payment.

            The money has been followed. Now what?


              In your hurry to ask, “now what?”, you forgot to follow the connection of the money from the individual through the complete channel to the parent corporation.

              Way to botch something that just is not that difficult.


                The money does not flow from the individual to the parent corporation. I just showed that.

                First the dealer buys the car, and pays for it. The dealer might sit on that car for a long time. The customer buys the car, and that money does not flow to the manufacturer.

                Way to botch your own dum b point.

                1. Is that dispositive? That is really not meaningful because there is a constant flow of cars and the terms with which those cars are sold is controlled by VW. For example, the dealership has to offer certain maintenance packages and provide a certain level of service for repairs.

                  Plus, I think VK provides financing. The fact that the dealership puts the money out front is really not meaningful other than adding a bit of financing cost to the dealership. But acting as if the cars are bought by the dealership and that’s it then can do as they please is not true.

                  Do they have to have the exact signs VW says when selling the cars? Yes. And there are many other requirements.

                2. But the money DOES flow as I point out.

                  You are stuck in a simplistic “purely linear” mode of thinking.

                  Product flows in one direction — money flows in the opposite.


              You are overlooking the fact that all situations must be analyzed from the point of view of the patentee’s goals. Therefore, the patentee gets to pick and choose anywhere and anyplace on the sales chain to sue anyone because separate corporate identity is really more of a suggestion when it comes to patent law. For example, the patentees (and only patentees) can sue WV of Waco in NJ because that is where VW Group of America (VW) is located.

    2. 9.3

      Hit a filter

      Your comment is awaiting moderation.

      March 10, 2022 at 11:03 am

      should mean what we want them to mean, not what they say


      The issue is what they DO say has been twisted because it is plainly evident that “established place of business” has been badly twisted to suit Efficient Infringement, as opposed to what the words say.

      This is NOT a case of “want them to mean.”

  5. 8

    The unavoidable but too often ignored problem for many commentators on this subject is simply that the patent venue statute itself, 28 U.S.C. 1400(b), is very clearly written in favor of patent suit defendants with no encouragement of judicial favoring of patent owner desires.
    It would be interesting [if now irrelevant without further legislation] to look back to 1948 see on what basis this statute was enacted? Was it based on the fact that the defendants have the patent trial burden of proof [with clear and convincing evidence] for all but one of the most frequent issues in patent litigation?

  6. 7

    This doesn’t seem right to me because VW licenses and controls the dealership. The dealership is not just coincidentally selling VWs but is very similar to a franchise like MacDonald’s in that there are all sorts of conditions for selling and capital support even to the level of what signs are displayed.

    1. 7.1

      Frankly, the more I look at this the more ridiculous this is. I don’t know how a corporation could be doing business more than a dealership other than owning the dealership themselves outright or manufacturing the cars.

      This is typical CAFC crim judicial activism shxt. Probably inspired by one of Lemley’s BS “scholarship” articles that isn’t peer reviewed and has no consequences for unethical behavior.

  7. 6

    I mean if they’re just selling that brand, but aren’t under the same corp, then I guess that’s how it is.

    1. 6.1


      Let’s consider where exactly that “selling the brand” takes place.

      Oh wait….

      1. 6.1.1


        Let’s consider where exactly that “selling the brand” takes place.

        Oh wait….”

        Yes but they don’t want to sue the selling entity. They want to reach through to the manufacturer entity iirc.


          LOL – try again 6 (and realize that multiple levels of that “selling the brand” exists).

          Follow the money.

          You like to boast about your investing prowess – treat this of kind.


            Yes but the other “levels” (i.e. previous instances) of selling maybe didn’t even happen in that geographic area.


              lol — so you are saying that the local franchise is not making theirpurchases locally….?

              As I stated; try using that boastful investing “brain” of yours.


                And now, Snowflake will prove once and for all how he’s not totally obsessed with us by refusing to do the monkey dance.


                Monkey, Dance.

                1. Ah, Shifty, you disappeared on Feb. 2 — as I noted your cyber sta1 king habits, and now you have returned with 2 of 3 of your posts in the exact same mindless and attempted menacing manner.

                  What exactly is the point of your post here?


                “lol — so you are saying that the local franchise is not making theirpurchases locally….?”

                Um yeah I would doubt that they are making their purchases locally. Just like nearly all car lots, they’re importing from outside their immediate location/county etc. (in this case outside of this specific judge’s jurisdiction that they’re wanting inside of) Derp.

                1. 6, that’s a bit disappointing that you do not understand that the local business IS making their purchase locally.

                  The fact that the other party is not local, and that the product purchased is then imported to the local point is just not determinative of what a local purchase entails.

                  If you doubt this, may I suggest that you contact your tax attorney and have him explain it to you.

                2. “IS making their purchase locally.”

                  Gonna need to see that in evidence big hoss cause I’m pressin “x” to doubt.

                  “may I suggest that you contact your tax attorney and have him explain it to you.”

                  How about instead you just show it in evidenciaries?

                  link to google.com

                3. I chuckle as today Greg himself (at least twice) did the very thing that he would accuse me of.

                  How are those shards of your former glass house there, Greg?

                4. As to 6 – I am not going to hold your hand through your phase of “doubt.”

                  Treat this as one of your investing opportunities.


                How would form of currency be pertinent to the legal issue at the point of discussion?

  8. 5

    So . . . when is a place of business . . . not a place of business?

    Why, when the CAFC ties itself in legal knots to so rule.

    . . . with the fact that the case came out of the Honorable Judge Albright’s court having absolutely nothing to do with it.

    Sure it didn’t.

    1. 5.1

      You can’t create a legal system centered around limiting liability and responsibility and then be shocked when the system limits liability an responsibility.

      1. 5.1.1

        Patent infringement is NOT a system set up for limited liability.

        Like trespass, it is a strict liability offense.

        (just in case you were interested in being informed)


          The corporate structuring that blocks you from naming the manufacturer is “legal system centered around limiting liability and responsibility” tho.


            Nice – but that is not the point of the patent angle, now is it, 6?

            The legal point under consideration is not the liability induced (or avoided) in various legal corporate structuring.

            This has to do with avoiding the risk when the business decision has been made to obtain the benefit (read that as conducting business) IN that locale.

      2. 5.1.2

        I agree with your argument about limited liability law, but to be fair to the critics of the decision here, this is not how limited liability law would usually work. If Mr. X had been injured when the Jetta he bought at VW of Waco burst into flames on the highway, no court in the U.S. would say that Mr. X’s only right of recovery is from VW of Waco, that VWNA is shielded from products liability by virtue of VW of Waco’s intervening presence in the supply chain by which the defective Jetta moved from the Puebla MX factory to Mr. X’s driveway in Hallsburg TX.

        In order to reconcile the incongruity between “VWNA is subject to a product liability suit in Waco TX for the defective Jetta” and “VWNA is not subject to suit in Waco TX for patent infringement,” one has to read this order rather carefully, and bear in mind that the general federal venue statute is not the same as the federal venue statute for patent infringement. Specifically, the order cites (slip op. at 7) Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260, 264 (1961) and Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 566 (1942) for the proposition that “the Supreme Court has repeatedly cautioned against a broad reading of the patent venue statute.”

        Evidently, Judges Dyk, Reyna, & Chen are being extremely cautious about giving §1400(b) the sort of reading that extends one micrometer beyond the edge of what has ever been granted before. I think that is why they read the limited liability relationship here as cutting off venue for patent suit, even though everyone knows that the limited liability arrangement would not defeat venue for many other sorts of suits that might also be brought in a federal district court.


          Yes but in that example its easy to reconcile, as in the example VWNA is imputed to have harmed the buyer (by defective product manufacturing). That’s a far cry from holding them responsible for the sole actions of the seller in deciding to sell there for the sole action of selling. Although I can understand what you mean there.


            Agreed, but that is all just another way of saying that Congress had good reasons to write a different venue statute for patents than for the mine run of torts.

  9. 4

    I believe Dennis has commented on this point, but the Federal Circuit has created a lot of case law that supposedly interprets Fifth Circuit transfer of venue law. I wonder if the Fifth Circuit would have decided things differently. Something seems out of whack.

    1. 4.1

      In this instance, it does not matter whether the CA5 would have decided the matter differently. “Whether venue is appropriate in a patent infringement action is unique to patent law and therefore Federal Circuit law applies.” Slip op. at 6.

      1. 4.1.1

        Thanks, Greg. Just to be clear, I was talking about motions to transfer venue for convenience under 1404(a).

        In in re DISH Network LLC, 2021 WL 4911981 (Fed. Cir. Oct. 21, 2021), for example, the court said:

        “Our review of transfer rulings is governed by the law of the regional circuit, which in this case is the Fifth Circuit. See In re TS Tech USA Corp., 551 F.3d 1315, 1319 (Fed. Cir. 2008). Under Fifth Circuit law, the governing principles are well settled. Section 1404(a) authorizes a court to transfer a civil action “[f]or the convenience of parties and witnesses, in the interest of justice[.]” Fifth Circuit law provides that a motion to transfer should be granted if “the movant demonstrates that the transferee venue is clearly more convenient.” In re Radmax, Ltd., 720 F.3d 285, 288 (5th Cir. 2013) (quoting In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008)).”

        It was the application of Fifth Circuit transfer law and mandamus law that I was commenting on.



          I “got” what your post was about (and have made the same point previously).

          Greg has chosen not to address that point head on.


          Right. I understood what you meant. It is true that all of those §1404(a) mandamus orders were based on application of CA5 law, and it is interesting to wonder if the actual CA5 would have issued all of those same orders if the CA5 had jurisdiction instead of the CAFC. This mandamus appeal, however, was not based on a §1404(a) motion, but rather on a dispute under §1400(b) over whether WDTX was the correct venue at all. The question in this case (unlike those §1404(a) disputes) is entirely a question of patent law. Therefore, this case involved the CAFC applying its own circuit law, not the CA5’s.

          In other words, this mandamus was not really like all of those other mandamus cases. CA5 precedent does not really come into this one, unlike all of those others. I agree, however, that it will be interesting if someday a circumstance analogous to all of these §1404(a) disputes should come to the CA5, to see whether the CA5 applies its own precedents in the same manner that the CAFC has been applying them.

  10. 3

    Curious what the patent in suit was about? [No indication in this mandamus venue decision re car dealers.]

    1. 3.1

      “System and method for advertisement transmission and display”

      U.S. Patent No. 8,166,081; U.S. Patent No. 8,688,028; U.S. Patent No. 8,903,307; U.S. Patent No. 9,584,843; U.S. Patent No. 8,200,203; U.S. Patent No. 9,294,806; and U.S. Patent No. 9,355,405

      link to patents.google.com

      1. 3.1.1

        Because the Texas independent dealership also programs the parent company’s Internet site.


      2. 3.1.2

        The greatest trick the Devil ever pulled was convincing the PTO that his application should be examined by 2100 rather than 3600.


          And that’s a “trick” because….?

          (are you inserting a Desired Ends into your thinking?)

  11. 2

    >Here in particular, the court found that the dealerships located in W.D.Texas are not agents of VW Group of America.

    From an *equitable* point of view, this seems indistinguishable from Ikorongo, that Saint Regis Mohawk Tribe “Tribal Sovereign Immunity” case, and a few dozen similar schemes i.e., one side using carefully constructed, 3rd party paperwork to prevent a particular court from hearing the case.

    1. 2.1

      and yet, the “decisions” only locus of consistency appear to be: “is this for or against the patent holder?”

    1. 1.1

      Correct result. The plaintiff can still sue the distributors in their state of incorporation OR where they have offices. The plaintiff simply cannot select Judge Albright because venue is improper. If you think that is “efficient” then you are really arguing that Judge Albright is biased toward the plaintiff. And, in the end, that is precisely why the plaintiff selected the WDTX even though the Defendant is not incorporated in Texas and has no office there.

      1. 1.1.1

        This is my thinking, as well. Stratos still has an adequate remedy now that their suit against VW will be transferred to DNJ and against Hyundai to some district in CA (the opinion is not quite clear as to which CA district is relevant).

      2. 1.1.2

        . If you think that is “efficient” then you are really arguing that Judge Albright is biased toward the plaintiff.

        No – that is YOUR logical fallacy of a false choice.

        Follow the money – does VW (the parent) make a business choice that avails it of benefits of business in the state?

        (it’s not a difficult question)

Comments are closed.