United States: Patent Infringers Can Be Sued In A Venue Where They Do Not Own Own Or Lease Property If They Hold Themselves Out To The Public As Having Property Or Facilities In That Venue

Abstract

A state's sovereign immunity does not allow its agencies to avoid the requirements of the patent venue statute. Like other patent owners, state agencies may only sue infringers in venues permitted by the patent venue statute. Patent infringers can be sued in a venue where they do not own or lease property if they hold themselves out to the public as having property or facilities in that venue.

Background

The Board of Regents for the University of Texas System and TissueGen sued Medtronic and Tyrx in the Western District of Texas for infringing drug delivery patents.  Tyrx was a wholly-owned subsidiary and an agent of Medtronic; Medtronic was a Minnesota corporation with a principal place of business in Minneapolis; and Tyrx was Delaware corporation with a principal place of business in Monmouth Junction, New Jersey.

Medtronic and Tyrx moved to dismiss the litigation, arguing that under that patent venue statue, they could not be sued in that district. The Board disagreed, arguing that (1) its sovereign immunity as a state agency, rather than the patent venue statute, allowed it to choose where to litigate its property rights, and by choosing to sue in the Western District of Texas, the Board invoked its sovereign immunity and (2) venue was proper because Medtronic had a regular and established place of business in San Antonio, Texas.

Medtronic Decision

Sovereign Immunity
The Court rejected the Board's assertion of sovereign immunity, explaining that sovereign immunity has traditionally been invoked as a shield to litigation against a State and could not be used as sword to allow a state organization to sue another entity in a court where venue was not proper under the patent venue statute.

Venue
Under the patent venue statue, a patent owner may sue an alleged infringer (1) where the alleged infringer "resides," namely where the infringer is incorporated, or (2) where the alleged infringer "committed acts of infringement" and has "a regular and established place of business."

Because neither Metronic nor Tyrx were incorporated in Texas, the Board and TissueGen had to show that Metronic and Tyrx had a regular and established place of business and committed acts of infringement in the Western District of Texas to sue there.

The Board and TissueGen claimed that Medtronic's facility in San Antonio, Texas was a regular and established place of business in that district because Medtronic had opened the facility in 2009 and advertised at the time that it was the home for Medtronic's new Diabetes Therapy Management and Education Center. Medtronic disagreed, arguing it did not have a "regular and established place of business" in the Western District of Texas because it neither owned nor leased any locations in the Western District of Texas. Rather, Medtronic's subsidiary, MidiMed, held the lease to the San Antonio facility.

In analyzing the facts, the court applied the Federal Circuit test in In re Cray and concluded that Medtronic had a "regular and established place of business" in the district and could be sued in that district. Regardless of who had the lease arrangements, the San Antonio facility was a physical place in the Western District of Texas and was a regular and established place of business for Medtronic in that district because Medtronic had (1) its logo on the exterior of the facility, (2) announced its move to San Antonio in 2009, (3) twenty-one employees in the facility, (4) an 8-year presence in the facility, and (5) listed the San Antonio facility as a place of business on its website and in directories. So regardless of the lease arrangements between Medtronic and MidiMed, Medtronic had ratified the San Antonio facility as its place of business and could be sued for patent infringement in that venue.

On the other hand, the Court found the Western District of Texas was an improper venue for Tyrx because (1) it does not own or lease any property in the district and (2) it does not have any employees working or residing in the district.

Strategy and Conclusion

A state's sovereign immunity does not allow its agencies to avoid the requirements of the patent venue statute. Like other patent owners, state agencies may only sue infringers in venues permitted under the patent venue statute, namely (1) where the alleged infringer is incorporated or (2) where the alleged infringer "committed acts of infringement" and has "a regular and established place of business." A regular and established place of business may exist if the alleged infringers hold themselves out to the public as having a place of business in that district, regardless of whether they actually own or lease property there.

Further Information
The Board of Regents et al. v. Medtronic PLC et al. decision can be found here.

*Alissa Green is a summer associate at Finnegan.

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