Venue in patent-infringement lawsuits continues to be a heavily contested issue. As I indicated in my June 29, 2017 blog, the Supreme Court made a major change to patent law by narrowing its interpretation of the patent venue statute, 35 U.S.C. § 1400, in TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. ___ (2017).
The United States Court of Appeals for the Federal Circuit continued that trend for certain car companies when it issued an Order in In re Volkswagen Group Of America, Inc., Case No. 2022-108 (Fed. Cir. March 9, 2022). The Order granted a Petition for Writ of Mandamus to a pair of car companies that were seeking to dismiss or to transfer patent cases to more favorable district courts.
The granting of such petitions is extraordinary because appellate courts, generally, do not want to interfere with the decisions of lower courts until a case has been terminated, either by judgment or dismissal.
The car companies were seeking to establish that they did not have regular and established places of business within the Texas districts merely because those companies maintained relationships with independent car dealerships. The Federal Circuit agreed after it reviewed a key three-pronged, disjunctive test.
The Federal Circuit articulated the test as follows:
[t]he dispute thus boils down to three issues: (1) whether the dealerships are the agents of Petitioners; (2) whether the dealerships conduct Petitioners’ business; and (3) whether Petitioners have ratified the dealerships as Petitioners’ places of business
Volkswagen, slip op. at 7 (citation omitted).
The court examined the contractual agreements between the car companies and the car dealerships very closely and determined that the agreements do not give the car companies enough control over the car dealerships to find an agency relationship. As a result, it was not necessary to review the other prongs of the test to hold that venue was not proper in the Texas districts.
It should be noted that the case does not stand for the proposition that car dealerships cannot function as agents of car companies. The Federal Circuit identified cases in which car dealerships did function as agents and described such a proposition as being “unremarkable.” See id., slip op. at 16-18.