In Re ZTE (USA) INC.

Federal Circuit Summary

Before Reyna, Linn, and Hughes.  On Petition for Writ of Mandamus to the Eastern District of Texas.

Summary: Under Federal Circuit law, the plaintiff bears the burden of showing that venue is proper.  Further, an arms-length agreement with a call center in the relevant district is insufficient to show a regular and established place of business for venue.

ZTE USA was sued in the Eastern District of Texas for patent infringement and promptly moved to dismiss or transfer the case for lack of venue.  Considering the motion, the magistrate judge applied Fifth Circuit law and determined that ZTE USA, as the objecting defendant, had the burden to show that venue was improper.  The magistrate further found that  ZTE USA had contracted with a call center in the Eastern District of Texas to handle ZTE USA related calls, which constituted a regular and established place of business.  ZTE USA filed a petition for a writ of mandamus with the Federal Circuit asking the appellate court to reverse the decision. 

At the Federal Circuit, the Court found that patent venue was a substantive issue of patent law and that the magistrate judge had incorrectly applied Fifth Circuit law instead of Federal Circuit law.  The Court then determined that the plaintiff in a patent case has the burden of showing proper venue.  Turning to the question of whether the call center was a regular and established place of business, the court held that an arms-length contract with the call center, without more, is insufficient to show a regular and established place of business.  Instead the lower court should have considered the level of control ZTE USA exerted over the call center.  The Federal Circuit then remanded the case back to the lower court to determine venue in light of the Federal Circuit’s decision.

This case is: In Re ZTE (USA) INC.

Written by: Daniel P. Hughes and Christie Matthaei

Edited by: Paul Stewart