United States: Google Gets Out Of Texas In Its First Post-TC Heartland Transfer

Last Updated: January 4 2018
Article by RPX Corporation

A patent infringement suit brought against Google by Personal Audio, LLC has been transferred from the Eastern District of Texas (1:15-cv-00350) to the District of Delaware (1:17-cv-01751) due to improper venue. This appears to be the first time that a court has transferred a case against Google for that reason since the US Supreme Court issued its May 22 opinion in TC Heartland, which held that the narrower patent venue statute (28 USC Section 1400(b)), not the general venue statute (28 USC Section 1391), governs in infringement suits. In addition to the issue of venue propriety itself, the court also ruled on two other, threshold issues related to venue that had not been previously addressed by TC Heartland or subsequent cases: that the burden of proof for venue challenges falls on the plaintiff, under prior precedent for the patent venue statute; and that venue in patent suits should be analyzed based on facts and circumstances existing at the time a suit is filed, in light of the text of the statute.

The court began its analysis, issued in a December 1 order, by quoting the Federal Circuit's holding from In re Cray, which established three general requirements for assessing whether a defendant has a "regular and established place of business" in a district: "(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant". Judge Clark then noted that neither Cray nor TC Heartland had provided guidance on two threshold issues for determining proper venue under Section 1400(b): which party has the burden of proof, and "the date or time at which the defendant must have had a regular and established place of business".

The court addressed the first of those issues by reviewing prior case law, noting that while there had not been a Federal Circuit opinion on the burden of proof for improper venue challenges brought by corporate defendants under 1400(b), circuit court opinions from before the Federal Circuit was formed "are considered persuasive". Judge Clark then highlighted the Seventh Circuit's 1969 holding in Grantham v. Challenge-Cook Brothers, in which the court "put the burden on Plaintiff to establish proper venue" and "emphasized that the patent venue statute 'should not be liberally construed in favor of venue'". The court had "located no compelling authority suggesting that it should ignore the reasoning of Grantham" and deemed it "persuasive", noting that the case had been cited with approval in Cray. Judge Clark then observed that while the Federal Circuit has never explicitly addressed the issue of burden of proof under 1400(b), it appeared to place the burden on the plaintiff in its ruling from In re Cordis, the only case before Crayin which the court had addressed the propriety of venue under the "regular and established place of business" prong. Given the lack of Federal Circuit cases placing that burden on the movant/defendant, Judge Clark concluded that under TC Heartland, "and guided by the earlier decisions on burden of proof in such cases", the burden of proof here fell on Personal Audio.

Next, in its analysis of the time when the propriety of venue should be assessed, the court looked to the text of the patent venue statute itself. Here, Judge Clark noted that the statute uses the present tense in language stating that venue is proper where the defendant "resides" and where it "has a regular and established place of business" (emphasis in original). Judge Clark further observed that "Congress did not tie venue to any jurisdiction in which a cause of action had accrued". Applying what it deemed strict statutory construction, the court then held that "venue under § 1400(b) should be analyzed based on the facts and circumstance [sic] that exist on the date suit is filed". By so ruling, the court rejected Personal Audio's argument that the "accrual standard" applied, holding that the two cases cited by the NPE were inapposite. The first of these, the district court case Raytheon v. Cray, had been overturned by the Federal Circuit's ruling in Cray. Meanwhile, Judge Clark characterized the holding in the second case, Welch Scientific v. Human Engineering Institute—in which the Federal Circuit held that venue is proper when the defendant has a "regular and established cause of action at the time . . . the alleged infringement occurred", and when "the suit was filed a reasonable time thereafter"—as essentially grounded in equity rather than statutory interpretation, declining to revisit the case as to the latter issue.

Having thus resolved those threshold issues, the court turned to the issue of whether venue was proper against Google. The court dispensed with the first prong of Section 1400(b) in one sentence, holding that Google does not reside in the Eastern District of Texas because it is a Delaware corporation. As to the second prong, Judge Clark held that under a plain reading of Section 1400(b), Personal Audio had to show that Google had a "regular and established place of business" as of September 15, 2015, the lawsuit's filing date. To that end, Judge Clark recounted the timeline of Google's use of an office in Frisco, located within the Eastern District. He then held that by the preponderance of the evidence presented, Google had sufficiently shown that the office was its "regular and established place of business" under the patent venue statute "between November 2011 and December 2013". As a result, the court held, Personal Audio had not met its burden to show that Google had a "regular and established place of business" there as of the lawsuit's filing date. The NPE had also failed to show that venue was proper under Welch Scientific due to Google's use of the space between December 2013 and August 2015, during which time the defendant removed its business from that office space and subleased it to an unrelated company, Quest Resource Management, with the court finding that the space was "more likely a regular and established place of business for Quest rather than Google".

The court also rejected Personal Audio's argument that the presence of certain servers in the Eastern District of Texas (Google Edge Nodes or Google Global Cache; collectively, "GGCs") means that Google has a "regular and established place of business" there. For this portion of its analysis, the court cited a passage from Cray establishing that the statute requires "a place, i.e., a building or part of a building set apart for any purpose or quarters of any kind from which business is conducted. The statute thus cannot be read to refer merely to a virtual space or to electronic communications from one person to another" (emphasis added). While positing that servers could loosely be defined as a "place" under the statute, "or perhaps as the 'location' of 'the cloud'", Judge Clark held that [t]hey are not a building or physical quarters of any kind". He further noted that the server rooms themselves, "if any", are not Google property, having previously recounted that Google had shown that local Internet service providers determine the location of GGCs without its input. As a result, Judge Clark concluded that "GGC servers are not 'places' under the meaning of the statute and therefore cannot establish a regular and established place of business" in the Eastern District.

Judge Clark then rejected Personal Audio's assertion that the activities of certain Google employees that had worked in the Eastern District established that Google had a "regular and established place of business" there, holding that these arguments do "not pass muster under the requirements set out by the Federal Circuit in Cray". (That last sentence nominally rejects "Google's argument about individual Google employees", but it is apparent from the court's subsequent analysis that it was Personal Audio's argument that Judge Clark was rejecting, not Google's.) Here, Judge Clark broke down the evidence according to the factors from Cray, noting that "[n]one of the employees took a tax deduction for using part of a home as an office"; that "[t]here is no evidence that these employees' employment was conditioned on their holding product inventory, marketing materials, or any other kind of product literature"; and that "[t]here is similarly no evidence that Google holds out the employees' homes as its place of business, through marketing materials or on the website for example", with the locations of those homes "not even publicly known". As a result, Judge Clark held, Personal Audio had not shown venue to be proper through those employees' work for Google.

Finally, Judge Clark opted to transfer the case rather than dismiss it due to improper venue as Google had requested. While noting that Personal Audio had not actually requested transfer in the alternative, Judge Clark cited the advanced nature of the case and found that the plaintiff will likely "be unfairly prejudiced by having to re-file and relinquish three years of potential damages pursuant to Section 286 of the Patent Act, which limits damages to those incurred during the six years before the date on which suit is filed". Given the absence of briefing as to a proper transferee venue, Judge Clark held that venue would be proper in the District of Delaware, Google's state of incorporation, and transferred the case there in "the interests of justice".

In another order also issued on December 1, Judge Clark denied Personal Audio's motion for sanctions against Google related to its conduct during the venue discovery process. The NPE argued in that motion that sanctions were warranted because Google had allegedly failed to produce certain documents and produced unprepared corporate representatives for Rule 30(b)(6) depositions. As to document production, Judge Clark held that Google had either made sufficient disclosures, that the documents not produced were irrelevant, or that their production would not have influenced the court's ruling on venue. Judge Clark rejected Personal Audio's argument as to the Rule 30(b)(6) depositions, holding that Google had complied with the court's discovery guidelines by preparing its witnesses for the permitted topics subject to discovery.

At issue in the transferred lawsuit are devices that include the Google Play Music application, with the two asserted patents (6,199,076; 7,509,178) generally related to audio player devices. For more information on the litigation between Personal Audio and Google, including Google's September 2017 declaratory judgment action against the NPE, the Patent Trial and Appeal Board's decision to cancel claims from both patents in inter partes reviews filed by Google, and the history of the asserted patents—including a dispute over ownership related to one of the inventors' contentious divorce—see "Google Files DJ Action Against Personal Audio in California as It Seeks Dismissal in Texas" (September 2017).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions