As we reported earlier today, this morning the Federal Circuit issued a precedential order in In re Google LLC ordering that the case be dismissed or transferred from the United States District Court for the Eastern District of Texas for lack of venue. We have been tracking the case given the filing of an amicus brief in support of Google. As previously noted in our oral argument recap, Google petitioned the Federal Circuit for a writ of mandamus directing the district court to dismiss the case for lack of venue. The district court had found venue appropriate based on the presence of Google’s servers in the district. A panel of the Federal Circuit disagreed with that basis for venue, and Judge Wallach filed a concurring opinion. Here is a summary of today’s order and some reflections on both the panel’s decision and Judge Wallach’s concurrence.
The Court’s Order
Judge Dyk, writing for the panel, highlighted two key issues addressed in Google’s petition: (1) “whether a server rack, a shelf, or analogous space can be a ‘place of business'” and (2) “whether a ‘regular and established place of business’ requires the regular presence of an employee or agent of the defendant conducting the business.”
Regarding the first issue, the panel disagreed with Google’s argument that the “place of business” inquiry “should focus on whether the defendant has real property ownership or a leasehold interest in real property.” Instead, the court held that Google’s server racks or leased shelf space could “serve as a ‘place’ under the statute.”
Turning to the second issue, the court agreed with Google’s alternative argument that “a ‘place of business’ generally requires an employee or agent of the defendant to be conducting business at that place.” The court interpreted “regular and established place of business” by looking to the service statue, which “originally appeared as the second sentence of a two-sentence statutory section whose first sentence is now the patent venue statute.” Taking the two statutes together, the court found that “[t]he 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.'” In sum, the court held 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.'”
After its interpretation of the patent venue statute, the panel quickly found “no Google employee conducting business in the Eastern District of Texas.” Next, the court set out to determine “whether the [Internet Service Providers servicing Google’s servers] are acting as Google’s agent.” The court analyzed the service contracts between Google and the ISPs to determine whether an agency relationship had been formed. Ultimately, the court held that “[t]he venue statute should be read to exclude agents’ activities, such as maintenance, that are merely connected to, but do not themselves constitute, the defendant’s conduct of business in the sense of production, storage, transport, and exchange of goods or services.”
Judge Wallach’s Concurrence
Judge Wallach wrote a separate concurrence to raise “questions about Google’s business model.” He focused on Google’s ambiguous answers to questions at oral argument about what business Google does in the Eastern District of Texas. Given this lack of information, Wallach concluded that “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.” He went on to explain that “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.”
The Court’s Disposition
The direct impact of the court’s order, of course, is that a particular patent owner’s case will be dismissed or transferred by the district court. Indeed, that is exactly what the Federal Circuit ordered. What remains to be seen, however, is the impact of the court’s disposition on other cases. Notably, in this regard, the panel indicated in its concluding paragraph that, “[t]o be clear, we do not hold today that a ‘regular and established place of business’ will always require the regular presence of a human agent, that is, whether a machine could be an ‘agent.’” Based on the panel’s reading of the original, combined statute, it explained that “[s]uch a theory would require recognition that service could be made on a machine.”
It is hard to understand these statements, however, given the discussion at the oral argument about Google’s machines (servers) and their work for Google in the relevant district. Judge Wallach’s concurrence highlights that Google sidestepped discussing this issue in any detail, but what is notable is that the Federal Circuit did not remand the case for clarification of the issue based on evidence. What the panel may have meant, then, is that Congress has the power to amend the statute to clarify that a machine may constitute a regular and established business for purposes of the patent venue statute and that service may be made on a machine.
Congress, though, has gone in the opposite direction, at least in one respect related to machines. The America Invents Act includes a provision stating that, “[i]n an action for infringement under section 281 of title 35, United States Code, of a covered business method patent, an automated teller machine shall not be deemed to be a regular and established place of business for purposes of section 1400(b) of title 28, United States Code.” Related to this provision, the panel stated that, with respect to the question of whether “a machine could be an agent” and whether “service could be made on a machine,” the panel did not “decide what might be inferred . . . from Congress’ amendment to the venue statute in the AIA concerning automated teller machines.” Either Congress was clarifying prevailing law in the sense that a machine alone is insufficient for venue, or Congress was making an exception to the prevailing law in the sense that a machine alone may be sufficient for venue. The court did not comment on which view is correct. Indeed, it expressly stated that it would not decide what to infer from Congress’s action.
Judge Wallach’s concurrence, on the other hand, squarely states that, “[g]iven 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.” Judge Wallach did not explain why he did not require a remand for the district court to engage in this exact analysis in this case. Moreover, he did not address why he did not require a remand for the district court to engage in an analysis of whether Google’s servers (rather than the end users) act as Google’s agent for purposes of the patent venue and service statutes. Indeed, left unexplained by the panel and the concurrence is why the court did not decide the question seemingly squarely presented in this case: whether machines may qualify as an agent for purposes of the patent venue and service statutes. If they do, presumably the court would have either denied the petition or clarified the law and remanded the case for the district court to take evidence relevant to the newly-articulated standard.
In short, and to repeat the point, the opinions do not explain why the Federal Circuit did not decide the question seemingly squarely presented by this case: whether a machine may qualify as an agent for purposes of the patent venue and service statutes. If the court will not decide this question in this case, it seems unlikely any court will ever answer it.