Personalized Media Communications, LLC v. Google LLC

On July 16, 2020 the District Court for the Eastern District of Texas denied Google’s motion to dismiss for improper venue. Notably, the court found that a third-party repair and refurbishment facility (Flower Mound Facility) met the necessary requirements to prove that a defendant has a regular and established place of business.

Personalized Media Communications, LLC (PMC) sued Google, a Delaware corporation, for patent infringement in the Eastern District of Texas. Soon after, Google filed a motion to dismiss for improper venue. Despite not addressing PMC’s initial argument, the court found venue proper under 28 U.S.C. § 1400(b) because the Flower Mound Facility is a regular and established place of business of Google as defined in In re Cray and clarified in In re Google, and PMC has sufficiently alleged that Google has committed acts of infringement in the Eastern District of Texas. See In re Cray, 871 F.3d at 1360; In re Google LLC, 949 F.3d at 1345.

Under the patent venue statute, 28 U.S.C. § 1400(b), “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” Additionally, the United States Court of Appeals for the Federal Circuit’s decision in In re Cray, Inc., held that a “regular and established place of business” under the patent venue statute must be: (1) “a physical place in the district”; (2) “a regular and established place of business”; and (3) “the place of the defendant.” 871 F.3d 1355, 1360 (Fed. Cir. 2017). Furthermore, In In re: Google LLC, the court determined that defendants’ “regular and established course of business” for the purpose of the patent venue statute can be established by the “regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged ‘place of business.” 949 F.3d 1338 (Fed. Cir. 2020).

In accordance with the Cray requirements, the District Court first looked to determine if the Flower Mound Facility was “a physical place in the district”. The court noted the contractual agreements between Communications Test Design, Inc., which owns the Flower Mound Facility, and Google, point to a level of control by Google over a physical place within the Eastern District. Under these agreements, Communications Test Design (CTDI) must “repair, refurbish, and warehouse Google devises at the Flower Mound Facility.” Furthermore, the agreements grant Google “a specific and defined space within the Flower Mound Facility called the ‘Google Secured Area’ where all repair, refurbishment, and warehousing activities are to be conducted.” The court reasons that Google has a dedicated, physical space for its operations within Flower Mound Facility and can dictate the actions within this space. This, the court states, satisfies the first Cray factor.

With the second Cray factor, the court examined whether the Flower Mound Facility is “a regular and established place of business.” Here, the court pointed to the agency relationship between Google and CTDI. As previously discussed, the Federal Circuit recently clarified that to satisfy the second Cray factor, an “…employee or other agent of the defendant conducting the defendant’s business” is required. Additionally, the Federal Circuit confirmed the essential elements of agency are (1) the principal’s right to direct or control the agent’s actions, (2) the manifestation of consent by the principal to the agent that the agent shall act on his behalf, and (3) the consent by the agent to act.” Here, CTDI consents to act of Google’s behalf by agreeing to “provide Google the Services specified” including “tak[ing] receipt of Returned Products” to refurbish and ship on behalf of Google. Likewise, Google authorizes CTDI to act on its behalf by directing its customers to send their devices to “us” —i.e., Google—at the Flower Mound Facility. Furthermore, Google, as the principal, directs or controls the agent’s actions through the previously discussed contractual agreements.

Lastly, the court found the Flower Mound Facility to be “a place of the defendant” in satisfaction of the third Cray factor. Perhaps most dispositive of the third factor is Google directing its customers to send their devices to “us” at the Flower Mound Facility. Indeed, the court notes that customers “believe they are sending their Google devices to Google to be repaired.” Having determined that the three Cray requirements were met, the court dismissed the defendant’s motion to dismiss.

Opportunity Missed

This ruling is perhaps anticlimactic due to the courts reluctance to address whether Google’s servers qualified as agents to establish that Google had a “regular place of business” within the district.

The Federal Circuit left open this possibility when the court stated: “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.’” In re: Google LLC, 949 F.3d 1338 (Fed. Cir. 2020). Additionally prior to the present ruling, Judge Gilstrap of the Eastern District of Texas issued an order that, among other things, required the parties to answer the question: “Under what conditions a ‘machine could be an agent,’ and whether any such agent of Netflix or Google exists within the Eastern District of Texas?” Consequently, the District Court did not address Google’s servers as they relate to venue.