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Patent Infringers May Be Sued in a Venue Where They Merely Employ Part-Time Field Technicians Who...

Tuesday, September 19, 2017   (0 Comments)
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Patent Infringers May Be Sued in a Venue Where They Merely Employ Part-Time Field Technicians Who Engage with Customers

By John PaulBrian Kacedon, and Paula Miller
Edited by Robert MacKichan and Cecilia Sanabria
(Authors and editors are attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.)

Abstract: A North Carolina court ruled that patent infringers may be sued in a venue where they have a “regular and established place of business,” even if they do not have a physical “place,” such as an office, in that venue. The accused infringer’s contacts with the venue were sufficiently “concrete, regular, and established” because it employed part-time field technicians that actively engage with customers through on-site customer service in the district where the court is located.

Patent owners may only sue infringers in venues where the defendant “resides,” or where the defendant has committed acts of infringement and has “a regular and established place of business.” The Supreme Court in TC Heartland recently held that a domestic corporation “resides” only its State of incorporation, but did not resolve what constitutes a defendant’s “regular and established place of business.” A summary of the TC Heartland decision can be found here.

Courts are now addressing what activities in a state are sufficient to constitute a “regular and established place of business” and subject a patent infringer to being sued in that state. In InVue Security Products Inc. v. Mobile Tech, Inc., a North Carolina court determined that an accused infringer’s employment of six part-time field technicians in the state of North Carolina was enough to show a “regular and established place of business.”

Background

InVue is incorporated in Ohio and based in North Carolina. Mobile Tech is incorporated in Indiana, with its headquarters is in Oregon.

Mobile Tech is registered to do business in North Carolina. Though it does not have an office in North Carolina, Mobile Tech has six part-time field technicians in North Carolina, who are paid hourly. These technicians service existing accounts, but do not solicit orders, enter into contracts, or make sales.

InVue sued Mobile Tech in North Carolina for infringing patents directed to programmable security systems and their components.

Mobile Tech moved to transfer the litigation from North Carolina to Oregon, where its headquarters is, and where it has its primary research and development facilities. The bulk of the design and development of the allegedly infringing products occurred in Oregon, as well as most of the sales and marketing decisions.

The InVue Security Products Decision

The court considered whether Mobile Tech had a “regular and established places of business” in North Carolina such that venue for the patent infringement action was proper in North Carolina. The court considered other decisions on venue where courts found that employing one or two people in a state was not enough to establish a “regular and established place of business” in that state.

In Hand Held Products, Inc. v. Code Corp., a South Carolina court found that having no inventory in South Carolina, only one employee in South Carolina (who was not a salesperson) did not constitute a regular and established place of business in South Carolina. Therefore, patent infringement litigation could not proceed in a South Carolina court against that corporate defendant..

In American Cyanamid Co. v. Nopco Chem. Co., the Fourth Circuit found that employing one sales manager and a part-time secretary who operated out of a home office, did

Distinguishing these prior cases, the court in InVue found Mobile Tech’s contacts with North Carolina to be “more concrete, regular, and established.” Mobile Tech is registered to do business in North Carolina, their part-time field technicians are required to have a home office in North Carolina, and “the technicians’ tasks include on-site customer services related to Mobile Tech’s allegedly infringing products, as well as on-site training and education, emergency call response 24/7, and an inventory of replacement parts and specialized tools.”

Though Mobile Tech had no property, storage, or facilities in the state, the court found that the technicians had regular and established contacts with the district because they actively engage with customers. Accordingly, the court found that Mobile Tech’s connection with North Carolina made that state a proper venue for a patent infringement lawsuit against Mobile Tech.

The court then went on to determine whether to transfer the case to another district by balancing the plaintiff’s choice of venue and the defendant’s inconvenience of litigating in the venue. The court found that the factors favoring transfer substantially outweighed keeping the litigation in North Carolina, because most of the relevant evidence, relevant witness, and allegedly infringing actions were in Oregon.

Strategy and Conclusion

This case demonstrates that a company may still be sued for patent infringement in venues where the business does not have a physical facility. Merely having a “permanent and continuous presence in the district,” such as having employees that actively engage with customers in the district, may provide sufficient connection to the district to allow the company to be sued for patent infringement in that district. However, as this case also shows, when venue is found to be proper, a court has the discretion to transfer a litigation to another court in a venue that is more convenient to the parties.

The InVue Security Products opinion can be found here.

This article is for informational purposes and does not constitute legal advice. The views expressed do not necessarily reflect the views of LES (U.S.A. and Canada) or Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.