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Home Isn’t Where the Servers Are: Federal Circuit Holds that the Presence of Google Servers Does Not Establish Venue

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In Re: Google LLC, Appeal No. 2019-126 (Fed. Cir. Feb. 13, 2020)

The Federal Circuit has ordered the U.S. District Court for the Eastern District of Texas to dismiss or transfer Super Interconnect Techs. LLC v. Google LLC, No. 2:18-CV-00463-JRG for lack of venue, because Google LLC, which contracted with internet service providers (ISPs) within the district to host its servers, had no employee or agent regularly conducting its business there.

Google provides video and advertising services to residents of the Eastern District of Texas through the internet. During the relevant time, Google had several servers in the district[1] which functioned as local caches for Google’s data. The servers were not hosted within Google-owned data centers; rather, Google contracted with two ISPs within the district to host its servers within the ISP’s data center. Thus, when a user requested content from Google, the ISP attempted to route the user’s request to a server within its own in-district network before routing the request to Google’s central data storage servers outside the district.

The contracts between Google and the ISPs required the ISPs to provide “installation services” and “[r]emote assistance services,” which “involve[d] basic maintenance activities” performed on the servers by the ISP’s onsite technician at Google’s request. No Google employee performed installation of, performed maintenance on, or physically accessed any of the servers.

In 2019, Super Interconnect Technologies LLC sued Google for patent infringement in the Eastern District of Texas. Google moved to dismiss the case for improper venue under 28 U.S.C. § 1406(a) and Federal Rule of Civil Procedure 12(b)(3). The district court denied Google’s motion, finding that the servers qualified as Google’s “regular and established place of business” under the test articulated in In re Cray, Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017).[2]

Google then petitioned the Federal Circuit for a writ of mandamus to dismiss the case for lack of venue. Google’s arguments were based on the first and second Cray factors. First, Google argued that it had no physical place in the district, because a “place” must have the characteristics of a real property or leasehold interest. Second, it argued that it had no regular and established place of business because a “place of business” requires a place where an employee or agent of the defendant is conducting the defendant’s business.

The Federal Circuit panel of Judges Dyk, Wallach, and Taranto granted Google’s writ. The panel rejected Google’s argument under the first Cray factor “that a court’s inquiry into whether the defendant has a physical ‘place of business’ should focus on whether the defendant has real property ownership or a leasehold interest in real property.” According to the court, “a ‘place’ need not have such attributes.”

However, the court agreed with Google’s argument under the second Cray factor, concluding 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.’” The court then determined that (1) there was no Google employee conducting business in the Eastern District of Texas and (2) the ISPs were not acting as Google’s agent, because maintenance activities, standing alone, could not be considered the conduct of Google’s business. The panel explained, “[m]aintaining equipment is meaningfully different from—as only ancillary to—the actual producing, storing, and furnishing to customers of what the business offers.”

The panel further indicated that a defendant’s agent is not necessarily required to be a human, and there may be a situation where a machine could be an agent.

In a separate concurrence, Judge Wallach (who joined the panel opinion) raised questions about Google’s business model and stated that district courts should “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.” The concurrence explained that, under the panel’s analysis, Google may indeed be doing business at the computer of each of its users/customers if, e.g., “by entering searches and selecting results a Google consumer is continuously providing data which Google monetizes as the core aspect of its business model.”

Implications for Patent Law Litigation

Venue is an important consideration in patent law litigation.  The Federal Circuit’s holding that the Eastern District of Texas was not a proper venue for the litigation based on Google’s lack of employee conduct and/or conduct of a Google agent within the district may impact the availability of a district to a patent owner suing for infringement.  Thus, it is necessary for patent owners (and those being sued for infringement) to carefully consider the law and relevant facts relating to venue in deciding where to file a lawsuit.

[1] Google has subsequently withdrawn its servers from the district.

[2] Under Cray, to establish that the defendant has a regular and established place of business: “(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.”