In Re: Cray Inc. ( 2017 )

United States Court of Appeals
for the Federal Circuit
______________________
IN RE: CRAY INC.,
Petitioner
______________________
2017-129
______________________
On Petition for Writ of Mandamus to the United
States District Court for the Eastern District of Texas in
No. 2:15-cv-01554-JRG, Judge J. Rodney Gilstrap.
______________________
ON PETITION
______________________
Before LOURIE, REYNA, and STOLL, Circuit Judges.
LOURIE, Circuit Judge.
ORDER
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 trans-
fer 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, 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 estab-
lished place of business” in the Eastern District of Texas
within the meaning of 28 U.S.C. § 1400(b). Accordingly,
2 IN RE: CRAY INC.
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 Raythe-
on accuses of infringement. Cray is a Washington corpo-
ration 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, 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 *1 n.1
Mr. Harless worked as a “sales executive” for approx-
imately seven years with associated sales of Cray systems
in excess of $345 million. Id. at *1. Mr. Harless’s respon-
sibilities also included “new sales and new account devel-
opment 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 reim-
bursement for his cell phone usage for business purposes,
internet fees, and mileage or “other costs” for business
travel. Id. Cray provided Mr. Harless with “administra-
tive support” from its Minnesota office. Id. He provided
IN RE: CRAY INC. 3
“price quotations” to customers, listing himself as the
“account executive” and the person who prepared the
quotation. Id. 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 *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, 137 S. Ct. 1514 (2017).
The district court agreed that Cray does not reside in the
district. Transfer Order, 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 Trans-
fer Order, 2017 WL 2813896, at *8–10. The court did not
rely on Mr. Testa’s activities in determining that venue
was proper.
4 IN RE: CRAY INC.
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 *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 *14 n.13.
Cray petitions for a writ of mandamus directing re-
versal of the district court’s denial of its motion to trans-
fer 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) (quot-
ing 28 U.S.C. § 1651(a)). Mandamus is reserved for
exceptional circumstances. Bankers Life & Cas. Co. v.
Holland, 346 U.S. 379, 382–83 (1953). A writ of manda-
mus “is appropriately issued, however, when there is
‘usurpation of judicial power’ or a clear abuse of discre-
tion.” Schlagenhauf v. Holder, 379 U.S. 104, 110 (1964)
(quoting Bankers Life, 346 U.S. at 383).
A writ of mandamus may issue where: (1) the peti-
tioner has “no other adequate means to attain the relief
he desires”; (2) the petitioner shows “his right to manda-
mus is ‘clear and indisputable’”; and (3) the issuing court
is “satisfied that the writ is appropriate under the cir-
cumstances.” In re TC Heartland LLC, 821 F.3d 1338,
IN RE: CRAY INC. 5
1341 (Fed. Cir. 2016) (quoting Cheney v. U.S. Dist. Court
for the Dist. of Columbia, 542 U.S. 367, 380–81 (2004)),
rev’d and remanded sub nom., on other grounds, TC
Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.
Ct. 1514 (2017). Similarly, mandamus may be appropri-
ate, 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 LaBuy v.
Howes Leather Co., 352 U.S. 249, 259–60 (1957)). Addi-
tionally, 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.
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 “regu-
lar and established place of business.” See, e.g., Transfer
Order, 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.”).
6 IN RE: CRAY INC.
We have addressed that phrase only once in the con-
text of a previous mandamus petition—in Cordis. See 769
F.2d at 736–37. Cordis found that “a rational and sub-
stantial 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 can be conducted virtually. Employees increas-
ingly telecommute. Products may not as a rule be ware-
housed by retailers, and the just-in-time delivery
paradigm has eliminated the need for storing some inven-
tory. But, notwithstanding these changes, in the wake of
the Supreme Court’s holding in TC Heartland, effectively
reviving Section 1400(b) as the focus of venue in patent
cases, we must focus on the full and unchanged language
of the statute, as Cordis did not consider itself obliged to
do.
Moreover, district courts, including the trial court in
this case, have noted the uncertainty surrounding and the
need for greater uniformity on this issue, see, e.g., Trans-
fer Order, 2017 WL 2813896, at *10 (explaining there is
“uncertainty among the litigants regarding the scope of
the phrase ‘regular and established place of business’”
and “the appropriate scope of such venue discovery”);
Regenlab, 2017 WL 3601304, at *2 (S.D.N.Y. Aug. 17,
2017) (“Substantial confusion exists regarding the cir-
cumstances in which an entity will be found to have a
‘regular and established place of business’ in the dis-
IN RE: CRAY INC. 7
trict.”); Johnston v. IVAC Corp., 681 F. Supp. 959, 962–63
(D. Mass. 1987) (collecting cases with a more “restrictive
reading” of the statute and those with a more “‘liberal’
construction” (citation omitted)); Brunswick Corp. v.
Suzuki Motor Co., 575 F. Supp. 1412, 1424 n.5 (E.D. Wis.
1983) (noting that § 1400(b) “demonstrates . . . a need for
nationwide uniformity” offered by the Federal Circuit),
and this court “has a mandate to achieve uniformity in
patent matters,” Panduit Corp. v. All States Plastic Mfg.
Co., 744 F.2d 1564, 1574 (Fed. Cir. 1984). We conclude
that mandamus here will further “supervisory or instruc-
tional goals” on an “unsettled and important” issue, an
appropriate basis upon which to grant the mandamus
petition. In re Queen’s Univ. at Kingston, 820 F.3d 1287,
1291 (Fed. Cir. 2016) (quoting In re Nintendo Co., Ltd.,
544 F. App’x 934, 936 (Fed. Cir. 2013)); see also BP Lubri-
cants, 637 F.3d at 1313. Although the law was unclear
and the error understandable, the district court abused its
discretion by applying an incorrect legal standard, which
we now clarify in this opinion.
II. The Meaning of the Venue Statute
Section 1400(b) provides that “[a]ny civil action for
patent infringement may be brought in the judicial dis-
trict where the defendant resides, or where the defendant
has committed acts of infringement and has a regular and
established place of business.” On the issue of improper
venue, the only question before the court is whether Cray
has a “regular and established place of business” in the
Eastern District of Texas within the meaning of § 1400(b).
Because Cray is incorporated in the State of Washington,
there is no dispute that the residency requirement of that
statute cannot be met here under the definition provided
in TC Heartland. See 137 S. Ct. at 1521. Nor does Cray
challenge the district court’s finding as to the acts of
infringement within the district for purposes of venue.
8 IN RE: CRAY INC.
In matters unique to patent law, this court applies its
own law. Midwest Indus., Inc. v. Karavan Trailers, Inc.,
175 F.3d 1356, 1359 (Fed. Cir. 1999) (en banc in relevant
part), cert. denied 528 U.S. 1019 (1999). Section 1400(b)
is unique to patent law, and “constitute[s] ‘the exclusive
provision controlling venue in patent infringement pro-
ceedings’ . . . .” TC Heartland, 137 S. Ct. at 1518 (quoting
Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 563
(1942)). Thus, Federal Circuit law, rather than regional
circuit law, governs our analysis of what § 1400(b) re-
quires.
As discussed in greater detail below, our analysis of
the case law and statute reveal three general require-
ments relevant to the inquiry: (1) there must be a physi-
cal 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. If any statutory requirement is not
satisfied, venue is improper under § 1400(b).
In the late 1800s, when § 1400(b)’s predecessor was
being considered, courts had divided over whether a
defendant could be sued for patent infringement outside
the place of the defendant’s incorporation. Some courts
held that it was necessary to sue a defendant in its place
of incorporation, and “the corporations thus have an
opportunity to infringe upon patents and almost escape
any responsibility for it by reason of the difficulty of
finding them in order to sue them, for it is very inconven-
ient to travel across the continent to sue them when they
are infringing in a business established near the plaintiff
or owner of a patent.” 29 Cong. Rec. 2719 (1897) (state-
ment of Sen. Platt). Other courts instead held that an
infringement “suit[] may be brought wherever service can
be had.” 29 Cong. Rec. 1900 (1897) (statement of Rep.
Mitchell).
To resolve the uncertainty, Congress enacted
§ 1400(b)’s predecessor in 1897 to provide “jurisdiction”
IN RE: CRAY INC. 9
for patent infringement suits “in the district of which the
defendant is an inhabitant, or in any district in which the
defendant . . . shall have committed acts of infringement
and have a regular and established place of business.” 29
Stat. 695, Ch. 395. The statute’s “main purpose” was to
“give original jurisdiction to the court where a permanent
agency transacting the business is located.” 29 Cong. Rec.
1900 (1897) (statement of Rep. Lacey). Jurisdiction would
not be conferred by “[i]solated cases of infringement” but
“only where a permanent agency is established.” Id.
The statute of course allows broader venue than
merely the place of a defendant’s incorporation, providing
“patent claimants an advantage” compared to claimants
in other federal-question cases at the time, Brunette
Mach. Works, Ltd. v. Kockum Indus., Inc., 406 U.S. 706,
713 n.13 (1972); but the statute also clearly narrows
jurisdiction relative to the courts that previously allowed
patent suits wherever the defendant could be served, see
id. at 712–13. “Congress adopted the predecessor to
§ 1400(b) as a special venue statute in patent infringe-
ment actions to eliminate the ‘abuses engendered’ by
previous venue provisions allowing such suits to be
brought in any district in which the defendant could be
served.” Schnell v. Peter Eckrich & Sons, Inc., 365 U.S.
260, 262 (1961). The legislation was “intended to define
the exact limits of venue in patent infringement suits.”
Stonite, 315 U.S. at 566. The Supreme Court therefore
has explained that it “was a restrictive measure, limiting
a prior, broader venue.” Id. The Supreme Court has also
instructed that “[t]he requirement of venue is specific and
unambiguous; it is not one of those vague principles
which, in the interests of some overriding policy, is to be
given a liberal construction.” Schnell, 365 U.S. at 264
(quoting Olberding v. Ill. Cent. R. Co., 346 U.S. 338, 340
(1953)) (internal quotation marks omitted).
Courts should be mindful of this history in applying
the statute and be careful not to conflate showings that
10 IN RE: CRAY INC.
may be sufficient for other purposes, e.g., personal juris-
diction or the general venue statute, with the necessary
showing to establish proper venue in patent cases. As the
district court correctly stated, “the regular and estab-
lished place of business standard requires more than the
minimum contacts necessary for establishing personal
jurisdiction or for satisfying the doing business standard
of the general venue provision, 28 U.S.C. § 1391(c).”
Transfer Order, 2017 WL 2813896, at *13 n.11 (internal
quotation marks omitted); see also Brunette, 406 U.S. at
713 n.13 (contrasting the patent venue statute and the
general venue statute and explaining “[s]ince 1948, the
general venue law has authorized suit against a corporate
defendant not only where he maintains a ‘regular and
established place of business,’ as in s 1400(b), but also
where he is ‘doing business.’”).
The statutory language we need to interpret is “where
the defendant . . . has a regular and established place of
business.” 28 U.S.C. § 1400(b). The noun in this phrase
is “place,” and “regular” and “established” are adjectives
modifying the noun “place.” The following words, “of
business,” indicate the nature and purpose of the “place,”
and the preceding words, “the defendant,” indicate that it
must be that of the defendant. Thus, § 1400(b) requires
that “a defendant has” a “place of business” that is “regu-
lar” and “established.” All of these requirements must be
present. The district court’s four-factor test is not suffi-
ciently tethered to this statutory language and thus it
fails to inform each of the necessary requirements of the
statute.
In deciding whether a defendant has a regular and es-
tablished place of business in a district, no precise rule
has been laid down and each case depends on its own
facts. The “requirements” listed above and discussed
below inform whether there exist the necessary elements,
but do not supplant the statutory language. We stress
IN RE: CRAY INC. 11
that the analysis must be closely tied to the language of
the statute.
As noted above, when determining venue, the first
requirement is that there “must be a physical place in the
district.” The district court erred as a matter of law in
holding that “a fixed physical location in the district is not
a prerequisite to proper venue.” Transfer Order, WL
2813896, at *11. This interpretation impermissibly
expands the statute. The statute requires a “place,” i.e.,
“[a] building or a part of a building set apart for any
purpose” or “quarters of any kind” from which business is
conducted. William Dwight Whitney, The Century Dic-
tionary, 732 (Benjamin E. Smith, ed. 1911); see also Place,
Black’s Law Dictionary (1st ed. 1891) (defining place as a
“locality, limited by boundaries”). The statute thus can-
not be read to refer merely to a virtual space or to elec-
tronic communications from one person to another. But
such “places” would seemingly be authorized under the
district court’s test.
While the “place” need not be a “fixed physical pres-
ence in the sense of a formal office or store,” Cordis, 769
F.2d at 737, there must still be a physical, geographical
location in the district from which the business of the
defendant is carried out. In Cordis, for example, a de-
fendant used its employees’ homes to store its “literature,
documents and products” and, in some instances, like
distribution centers, storing inventory that the employees
then directly took to its clients. 769 F.2d at 735. Defend-
ant also engaged a secretarial service physically located in
the district to perform certain tasks. Id.
The second requirement for determining venue is that
the place “must be a regular and established place of
business.” The district court’s test fails to recognize that
the place of business must be “regular.” A business may
be “regular,” for example, if it operates in a “steady[,]
uniform[,] orderly[, and] methodical” manner, Whitney,
12 IN RE: CRAY INC.
supra, at 5050. In other words, sporadic activity cannot
create venue. See Phillips v. Baker, 121 F.2d 752, 756
(9th Cir. 1941) (“A ‘regular place of business’ is, obviously,
a place where such business is carried on ‘regularly’ and
not merely temporarily, or for some special work or par-
ticular transaction.” (quoting Winterbottom v. Casey, 283
F. 518, 521 (E.D. Mich. 1922))). Indeed, “[t]he doing of a
single act pertaining to a particular business will not be
considered engaging in or carrying on the business; yet a
series of such acts would be so considered.” Regular,
Black’s Law Dictionary (1st ed. 1891).
The “established” limitation bolsters this conclusion.
The word contains the root “stable,” indicating that the
place of business is not transient. It directs that the place
in question must be “settle[d] certainly, or fix[ed] perma-
nently.” Establish, Black’s Law Dictionary (1st ed. 1891).
To make “permanent” clearly accords with the “main
purpose” identified in the predecessor statute’s legislative
history. See 29 Cong. Rec. 1900 (1987) (statement of Rep.
Lacey). Indeed, court decisions have stressed the im-
portance of sufficient permanence. See, e.g., Phillips, 121
F.2 at 756 (explaining that where the defendant’s “estab-
lishment [in the district] was just a location for a particu-
lar transaction,” “the necessary element of permanency is
lacking” (internal quotation marks omitted)). As an
example, one court held that a business that semiannual-
ly displayed its products at a trade show in the district
had only a temporary presence. See Knapp-Monarch Co.
v. Casco Prods. Corp., 342 F.2d 622, 625 (7th Cir. 1965).
On the other hand, a five-year continuous presence in the
district demonstrates that the business was established
for purposes of venue. See Remington Rand Bus. Serv. v.
Acme Card Sys. Co., 71 F.2d 628, 629 (4th Cir. 1934).
Accordingly, while a business can certainly move its
location, it must for a meaningful time period be stable,
established. On the other hand, if an employee can move
his or her home out of the district at his or her own insti-
IN RE: CRAY INC. 13
gation, without the approval of the defendant, that would
cut against the employee’s home being considered a place
of business of the defendant.
Finally, the third requirement when determining
venue is that “the regular and established place of busi-
ness” must be “the place of the defendant.” As the statute
indicates, it must be a place of the defendant, not solely a
place of the defendant’s employee. Employees change
jobs. Thus, the defendant must establish or ratify the
place of business. It is not enough that the employee does
so on his or her own.
Relevant considerations include whether the defend-
ant owns or leases the place, or exercises other attributes
of possession or control over the place. One can also
recognize that a small business might operate from a
home; if that is a place of business of the defendant, that
can be a place of business satisfying the requirement of
the statute.
Another consideration might be whether the defend-
ant conditioned employment on an employee’s continued
residence in the district or the storing of materials at a
place in the district so that they can be distributed or sold
from that place. See, e.g., Cordis, 769 F.2d at 375; Am.
Cyanamid Co. v. Nopco Chem. Co., 388 F.2d 818, 820 (4th
Cir. 1968); Grantham v. Challenge-Cook Bros., Inc., 420
F.2d 1182, 1185–86 (7th Cir. 1969); Univ. of Ill. Found. v.
Channel Master Corp., 382 F.2d 514, 516 (7th Cir. 1967);
Shelton v. Schwartz, 131 F.2d 805, 808 (7th Cir. 1942).
Marketing or advertisements also may be relevant, but
only to the extent they indicate that the defendant itself
holds out a place for its business.
The district court is correct that a defendant’s repre-
sentations that it has a place of business in the district
are relevant to the inquiry. Potentially relevant inquiries
include whether the defendant lists the alleged place of
business on a website, or in a telephone or other directory;
14 IN RE: CRAY INC.
or places its name on a sign associated with or on the
building itself. See, e.g., Cordis, 769 F.2d at 375; Gran-
tham, 420 F.2d at 1185–86. But the mere fact that a
defendant has advertised that it has a place of business or
has even set up an office is not sufficient; the defendant
must actually engage in business from that location. In
the final analysis, the court must identify a physical
place, of business, of the defendant.
A further consideration for this requirement might be
the nature and activity of the alleged place of business of
the defendant in the district in comparison with that of
other places of business of the defendant in other venues. *
Such a comparison might reveal that the alleged place of
business is not really a place of business at all.
III. Application of the Venue Statute to This Case
With the above discussion in mind, we turn to the
facts of this case. The parties’ primary dispute concerns
whether Mr. Harless’s home, located in the Eastern
District of Texas, constitutes “a regular and established
place of business” of Cray.
Cray points out that Mr. Harless’s home was not
listed in any business directories or websites, that he did
not maintain product literature or products at his home,
and that he was the only employee within the district. It
argues that the online business materials and generalized
* By this, we do not suggest that district courts
must scrutinize the “nature and activity” of the alleged
place of business to make relative value judgments on the
different types of business activity conducted therein.
Rather, a relative comparison of the nature and activity
may reveal, for example, that a defendant has a business
model whereby many employees’ homes are used by the
business as a place of business of the defendant.
IN RE: CRAY INC. 15
administrative support are not evidence of a place of
business of Cray in the Eastern District of Texas. Cray
argues that its “Americas Sales Territories” map, identify-
ing Mr. Harless’s Eastern District of Texas location, does
not indicate that Cray was doing business from that
location because it merely was an internal presentation
listing his address. Cray argues that it paid for no part of
Mr. Harless’s home or rent, and that it stored nothing
there. Cray contends that Mr. Testa is irrelevant here
because his employment ended well before Raytheon filed
its complaint.
Raytheon responds that Cray made a “conscious deci-
sion” to hire Mr. Harless and Mr. Testa, knowing that
they lived in the Eastern District of Texas. It notes that
Cray paid at least Mr. Harless a salary and offered ad-
ministrative support and reimbursed him for phone,
internet, and business-related travel expenses. Raytheon
also notes that Mr. Harless’s social media profiles identi-
fied his location in the Eastern District of Texas as a Cray
employee and that he corresponded with customers listing
a phone number with an Eastern District of Texas area
code. Raytheon argues that Cray did not need to store
business materials with Mr. Harless or Mr. Testa because
many were available online and that Cray’s large prod-
ucts physically could not be stored there. Raytheon
contends that Mr. Harless’s activities extended beyond
merely making sales and also contends that Cray did
have customers in the Eastern District of Texas, even
though Mr. Harless was not responsible for them.
The third requirement identified above, that the regu-
lar and established place of business must be “the place of
the defendant,” is crucial here. The facts presented
cannot support a finding that Mr. Harless’s home was a
regular and established place of business of Cray. The
same is true as to Mr. Testa, to the extent he is relevant
to this analysis. The fact that Cray allowed its employees
to work from the Eastern District of Texas is insufficient.
16 IN RE: CRAY INC.
There is no indication that Cray owns, leases, or rents any
portion of Mr. Harless’s home in the Eastern District of
Texas. No evidence indicates that Cray played a part in
selecting the place’s location, stored inventory or conduct-
ed demonstrations there, or conditioned Mr. Harless or
Mr. Testa’s employment or support on the maintenance of
an Eastern District of Texas location. No evidence shows
that Cray believed a location within the Eastern District
of Texas to be important to the business performed, or
that it had any intention to maintain some place of busi-
ness in that district in the event Mr. Harless or Mr. Testa
decided to terminate their residences as a place where
they conducted business.
Raytheon argues that a residential home office is “no
less permanent than any conventional store or office,”
noting that often (as is the case here) the employee may
have resided there before the employment began. Re-
spondent’s Br. 22–23 n.6. Raytheon has the wrong per-
spective. For purposes of § 1400(b), it is of no moment
that an employee may permanently reside at a place or
intend to conduct his or her business from that place for
present and future employers. “The statute clearly re-
quires that venue be laid where ‘the defendant has a
regular and established place of business,’ not where the
defendant’s employee owns a home in which he carries on
some of the work that he does for the defendant.” Am.
Cyanamid, 388 F.2d at 820 (citations omitted).
Raytheon also argues that Cray customers were pre-
sent in the district, but makes no suggestions that Mr.
Harless or Mr. Testa served them. Raytheon points to no
evidence that the employees’ location in the Eastern
District of Texas was material to Cray. Instead, it ap-
pears that Mr. Harless and Mr. Testa were “free to live
where [they] chose as far as [the defendant] was con-
cerned.” Grantham, 420 F.2d at 1185.
IN RE: CRAY INC. 17
These facts are in contrast with those in Cordis,
where it was clear that the place of business was estab-
lished by Cordis. Cordis’s business specifically depended
on employees being physically present at places in the
district, and it was undisputable that Cordis affirmatively
acted to make permanent operations within that district
to service its customers there. Cordis publicly advertised
a secretarial service office located within the district as a
place of business of its own and used its employees’ homes
like distribution centers.
Unlike in Cordis, where the appellant received secre-
tarial services from a third-party located within the
district, all expense reimbursements and administrative
support for Cray’s employees were provided from outside
of the district. Further, the reimbursements and support
were not conditioned on any particular employee location.
Raytheon also argues that Cray’s “Americas Sales Terri-
tories” map identifying Mr. Harless as a “Named Account
Manager” and his location at his Eastern District of Texas
personal home as further evidence that Cray had a “regu-
lar and established” place of business in the district. That
map, however, was not advertised publicly and has little
probative value.
Raytheon’s remaining arguments are similarly una-
vailing. Mr. Harless’s social media profiles and phone
number indicate at most that he conducted business from
the Eastern District of Texas, not that Cray established a
place of business there. The availability of Cray’s materi-
als online is not compelling, as the materials were availa-
ble in places where no one would argue that Cray
established a regular place of business. And even if Mr.
Harless performed work for Cray beyond sales, nothing
suggests that Mr. Harless’s work on “new sales and new
account development” or “management of key accounts”
changes the analysis above.
18 IN RE: CRAY INC.
Our decision here comports with a number of appel-
late court decisions concerning employees working from
their homes. In Channel Master Corp., for instance, the
Seventh Circuit addressed whether a defendant that
employed a single salesman who used his home as a base
for his sales activities in promoting his employer’s prod-
ucts demonstrated that the defendant had a regular and
established place of business there. 382 F.2d at 515. Like
Raytheon, the plaintiff in that case argued that the em-
ployee “maintains control of a permanent establishment
in the district for his employer, and systematically con-
ducts a substantial portion of the employer’s business in
the district from this location.” Id.
The Seventh Circuit rejected that argument. Like Mr.
Harless, the salesman in Channel Master was reimbursed
by the defendant for certain business expenses. But, also
like Mr. Harless, he maintained in his home “no stock in
trade, no displays, no samples, and no showroom.” Id. at
516. He also “conducted no demonstrations of the prod-
ucts,” received no business visitors, and had no staff or
even secretarial help located in his home office. Id.
Under these circumstances, the court concluded that the
employee’s home could not “by any stretch of the imagina-
tion” be characterized as a regular and established place
of business of the defendant. Id.; accord Grantham, 420
F.2d at 1185–86.
Likewise, in American Cyanamid, the Fourth Circuit
refused to accept the argument that “it is sufficient under
§ 1400(b) that there exists within the district a physical
location where an employee of the defendant carries on a
part of his work.” 388 F.2d at 820. There, the defendant
maintained no real or personal property, no storage,
distribution or manufacturing facilities, and no bank
account, address, or telephone listing in the district. And
while one of its salaried regional sales managers main-
tained a portion of his home as an office, even having a
part-time secretary assist him, the Fourth Circuit found
IN RE: CRAY INC. 19
that insufficient, noting the fact that there was nothing
outside of the home that indicated business was being
conducted and that the defendant owned no interest in
the house and failed to contribute to its maintenance.
The fact that “the defendant’s employee owns a home in
which he carries on some of the work that he does for the
defendant” was insufficient to establish venue. Id.
Similarly, the facts here do not show that Cray main-
tains a regular and established place of business in the
Eastern District of Texas; they merely show that there
exists within the district a physical location where an
employee of the defendant carries on certain work for his
employer.
We stress that no one fact is controlling. But taken
together, the facts cannot support a finding that Cray
established a place of business in the Eastern District of
Texas. Thus venue cannot exist there under § 1400(b).
Because venue is lacking in the Eastern District of
Texas, Cray seeks transfer to the Western District of
Wisconsin. Raytheon responds that it prefers transfer to
the United States District Court for the Western District
of Texas. Section 1406(a) 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.”
Because the district court determined that venue was
proper, it did not address the parties’ arguments regard-
ing where the case should be transferred. We leave that
determination for the district court on remand.
Accordingly,
IT IS ORDERED THAT:
The petition is granted to the extent that the district
court’s order denying Cray’s Rule 12(b)(3) motion is
20 IN RE: CRAY INC.
vacated, and the district court is directed to grant the
motion and transfer the case pursuant to § 1406(a) to an
appropriate venue to be determined by the district court
on remand.
FOR THE COURT
/s/ Peter R. Marksteiner
Peter R. Marksteiner
Clerk of Court