In re Cray Inc.

• Citation: 871 F.3d 1355
• Decision Date: 21 September 2017
• Docket Number: 2017-129.
• Parties: IN RE: CRAY INC., Petitioner
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

871 F.3d 1355

IN RE: CRAY INC., Petitioner

2017-129.

United States Court of Appeals, Federal Circuit.

September 21, 2017

Melanie Lyne Mayer, Attorney, David Keith Tellekson, Fenwick & West LLP, Seattle, WA, Bryan Alexander Kohm, Fenwick & West, LLP, San Francisco, CA, for Petitioner.

Before Lourie, Reyna, and Stoll, Circuit Judges.

ORDER

Lourie, Circuit Judge.

Cray Inc. ("Cray") petitions for a writ of mandamus vacating the order of the United States District Court for the Eastern District of Texas denying its motion to transfer the case to the United States District Court for the Western District of Wisconsin. See Raytheon Co. v. Cray, Inc. , No. 2:15-cv-01554-JRG, 258 F.Supp.3d 781, 2017 WL 2813896 (E.D. Tex. June 29, 2017) (" Transfer Order "). Raytheon Company ("Raytheon") opposes the petition. The district court misinterpreted the scope and effect of our precedent in determining that Cray maintained "a regular and established place of business" in the Eastern District of Texas within the meaning of 28 U.S.C. § 1400(b). Accordingly, the court's decision refusing transfer pursuant to 28 U.S.C. § 1406(a) was an abuse of discretion. We therefore grant Cray's petition for a writ of mandamus and direct transfer of the case.

BACKGROUND

This petition arises from a patent infringement action filed by Raytheon against Cray in the Eastern District of Texas. Cray sells advanced supercomputers that Raytheon accuses of infringement. Cray is a Washington corporation with its principal place of business located there. It also maintains facilities in Bloomington, Minnesota; Chippewa Falls, Wisconsin; Pleasanton and San Jose, California; and Austin and Houston, Texas.

Although Cray does not rent or own an office or any property in the Eastern District of Texas, it allowed Mr. Douglas Harless and Mr. Troy Testa to work remotely from their respective homes in that district. Transfer Order, 258 F.Supp.3d at 783–787 & n.1, 2017 WL 2813896, at *1–2 & n.1. Mr. Testa worked for Cray as a senior territory manager while residing in the district from 2010 to 2011 before the underlying suit was filed. Id. at 784 n.1, 2017 WL 2813896 at *1 n.1

Mr. Harless worked as a "sales executive" for approximately seven years with associated sales of Cray systems in excess of $345 million. Id. at 783, 2017 WL 2813896 at *1. Mr. Harless's responsibilities also included "new sales and new account development in [the] Central U.S." and "management of key accounts within the Financial, Biomedical and Petroleum Industries." Id. (alteration in original) (quotation marks omitted). Cray's "Americas Sales Territories" map, an internal document, identified Mr. Harless as a "Named Account Manager" and his location at his Eastern District of Texas personal home. Id. Mr. Harless received reimbursement for his cell phone usage for business purposes, internet fees, and mileage or "other costs" for business travel. Id. Cray provided Mr. Harless with "administrative support" from its Minnesota office. Id. He provided "price quotations" to customers, listing himself as the "account executive" and the person who prepared the quotation. Id. at 790, 2017 WL 2813896 at *6. The communications also identified his home telephone number as his "office" telephone number with an Eastern District of Texas area code. Id.

Mr. Harless, however, did not maintain Cray products at his home, nor did he maintain product literature at his home because it was available online. Id. at 793, 2017 WL 2813896 at *9. It is undisputed that Cray never paid Mr. Harless for the use of his home to operate its business, or publicly advertised or otherwise indicated that his home residence was a Cray place of business.

Cray moved to transfer this suit under 28 U.S.C. § 1406(a), which provides that "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." Cray argued that it does not "reside" in the Eastern District of Texas in light of the Supreme Court's decision in TC Heartland LLC v. Kraft Foods Group Brands LLC , ––– U.S. ––––, 137 S.Ct. 1514, 197 L.Ed.2d 816 (2017). The district court agreed that Cray does not reside in the district. Transfer Order, 258 F.Supp.3d at 788, 2017 WL 2813896, at *4.

Cray further argued that venue was improper in the Eastern District of Texas because Cray had neither committed acts of infringement, nor maintained a regular and established place of business within that district. The district court, however, rejected that argument. The court found that Mr. Harless's activities were factually similar to the activities performed by the representatives in In re Cordis Corp. , 769 F.2d 733 (Fed. Cir. 1985), in which this court rejected a mandamus request to reverse an order denying transfer for improper venue. See Transfer Order, 258 F.Supp.3d at 792–796, 2017 WL 2813896, at *8–10. The court did not rely on Mr. Testa's activities in determining that venue was proper.

Although the district court found that Cordis resolved this case, the district court then went on "[f]or the benefit of" other litigants and counsel to set out four factors for inquiries into what constitutes a regular and established places of business "in the modern era," including physical presence, defendant's representations, benefits received, and targeted interactions with the district. Id. at 795–799, 2017 WL 2813896 at *11–14. The court, however, "decline[d] to expressly apply the factors ... in this particular case; although, [it noted that it was] satisfied that had it done so, the result would remain the same." Id. at 799 n.13, 2017 WL 2813896 at *14 n.13.

Cray petitions for a writ of mandamus directing reversal of the district court's denial of its motion to transfer venue and directing the district court to transfer this case to the Western District of Wisconsin pursuant to 28 U.S.C. § 1406(a).

DISCUSSION

I. The Mandamus Standard

We may issue a writ under the All Writs Act, 28 U.S.C. § 1651(a), as " ‘necessary or appropriate in aid of’ our jurisdiction." Miss. Chem. Corp. v. Swift Agric. Chems. Corp. , 717 F.2d 1374, 1379 (Fed. Cir. 1983) (quoting 28 U.S.C. § 1651(a) ). Mandamus is reserved for exceptional circumstances. Bankers Life & Cas. Co. v. Holland , 346 U.S. 379, 382–83, 74 S.Ct. 145, 98 L.Ed. 106 (1953). A writ of mandamus "is appropriately issued, however, when there is ‘usurpation of judicial power’ or a clear abuse of discretion." Schlagenhauf v. Holder , 379 U.S. 104, 110, 85 S.Ct. 234, 13 L.Ed.2d 152 (1964) (quoting Bankers Life , 346 U.S. at 383, 74 S.Ct. 145 ).

A writ of mandamus may issue where: (1) the petitioner has "no other adequate means to attain the relief he desires"; (2) the petitioner shows "his right to mandamus is ‘clear and indisputable’ "; and (3) the issuing court is "satisfied that the writ is appropriate under the circumstances." In re TC Heartland LLC , 821 F.3d 1338, 1341 (Fed. Cir. 2016) (quoting Cheney v. U.S. Dist. Court for the Dist. of Columbia , 542 U.S. 367, 380–81, 124 S.Ct. 2576, 159 L.Ed.2d 459 (2004) ), rev'd and remanded sub nom., on other grounds, TC Heartland LLC v. Kraft Foods Grp. Brands LLC , ––– U.S. ––––, 137 S.Ct. 1514, 197 L.Ed.2d 816 (2017). Similarly, mandamus may be appropriate, as it is here, to decide issues "important to ‘proper judicial administration.’ " In re BP Lubricants USA Inc. , 637 F.3d 1307, 1313 (Fed. Cir. 2011) (quoting La Buy v. Howes Leather Co. , 352 U.S. 249, 259–60, 77 S.Ct. 309, 1 L.Ed.2d 290 (1957) ). Additionally, the Supreme Court has approved the use of mandamus to decide a "basic [and] undecided" legal question when the trial court abused its discretion by applying incorrect law. Schlagenhauf , 379 U.S. at 110, 85 S.Ct. 234.

That is the circumstance here: the district court misunderstood the scope and effect of our decision in Cordis , and its misplaced reliance on that precedent led the court to deny the motion to transfer, which we find to have been an abuse of discretion.

As Cray points out, for nearly the last 30 years, venue in patent infringement cases has largely turned on whether a defendant "resides" in the district in question. Following the Supreme Court's recent decision in TC Heartland , litigants and courts are raising with increased frequency the question of where a defendant has a "regular and established place of business." See, e.g. , Transfer Order, 258 F.Supp.3d at 794, 2017 WL 2813896, at *10 ("Since the Supreme Court's decision in TC Heartland , this Court has received a number of motions to dismiss or transfer based on improper venue."); Regenlab USA LLC v. Estar Techs. Ltd. , No. 16-CV-08771 (ALC), 2017 WL 3601304, at *2 (S.D.N.Y. Aug. 17, 2017) ("In light of TC Heartland , the parties agree that venue is improper ... under the first prong of § 1400(b).... Therefore, the question presented today is whether discovery is necessary to determine that [either defendant] ‘has a regular and established place of business' here.").

We have addressed that phrase only once in the context of a previous mandamus petition—in Cordis . See 769 F.2d at 736–37. Cordis found that "a rational and substantial argument may be made in support of the court's order denying Cordis' motion to dismiss for lack of proper venue." Id. at 737. It thus held in those circumstances that "we decline to issue the writ." Id. The court did state that the "appropriate inquiry" is not "whether [Cordis] has a fixed physical presence in the sense of a formal office or store." Id. But, notably, the court did not, in its opinion, evaluate venue in light of the statutory language of § 1400(b). The court simply determined that, under the facts presented, a writ was not justified.

We recognize that the world has changed since 1985 when the Cordis decision issued. In this new era, not all corporations operate under a brick-and-mortar model. Business...