Last Week In The Federal Circuit (March 7-11): March Madness Mandamus-Style

If your limited attention is diverted this week because of March Madness, never fear! We’ve got you covered at Federal Circuitry, where we’re always tracking the latest news at the Federal Circuit. Below we provide our usual weekly statistics and a detailed discussion of our case of the week—our highly subjective selection based on whatever case piqued our interest.

Precedential opinions: 6

Non-precedential opinions: 5

Rule 36: 13

Longest pending case from argument: NEXTEEL Co., Ltd. v. United States, No. 21-1334 (127 days)

Shortest (non-Rule 36) pending case from argument: Broadcom Corp. v. ITC, Nos. 20-2008, 21-1260, -1362, -1511 (53 days)

Case of the week: In Re: Volkswagen Group of America, Inc., No. 22-108, -109

Panel: Dyk, Reyna, and Chen (Per Curiam)

You should read this case if: you have a venue dispute in a patent infringement action.

Many recent venue cases have focused on permissive transfers for convenience under 28 U.S.C. § 1404. But this week’s case of the week deals with the stronger medicine of compulsory transfers or dismissal for improper venue under 28 U.S.C. § 1406(a).

The patent venue statute, Section 1400(b), allows a civil action to “be brought in the judicial district where [1] the defendant resides, or where [2] the defendant has committed acts of infringement and has a regular and established place of business.” After StratosAudio sued Volkswagen and Hyuandi (“Volkswagen”) for patent infringement in the Western District of Texas, Volkswagen moved to dismiss or transfer. Volkswagen argued venue was improper because it neither resided in the Western District nor had a regular and established place of business there.

The district court disagreed. It found that Volkswagen had agents—local dealerships—with regular and established places of business that could be imputed to Volkswagen. According to the district court, the dealership franchise agreements gave Volkswagen sufficient control over dealership operations to make the dealerships Volkswagen’s agents. In particular, the district court cited Volkswagen-dictated staffing and reporting requirements, minimum inventory levels, employee training, and equipment requirements placed on the dealerships.

The Federal Circuit granted Volkswagen’s petition for a writ of mandamus and reversed. It explained three requirements for whether a party 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. The first and third factors were not in dispute. The second factor requires the “regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business.”

The Court acknowledged that questions of control often arise in the context of franchise agreements. Yet it distinguished between contractual provisions potentially evidencing interim control and those merely providing constraints on how a service is provided. It explained that setting standards in an agreement for acceptable service quality, without more, does not create an agency relationship.

The Court found there was no evidence that Volkswagen maintains influence over the sales process once it has sold a car to the dealership. There were no “step-by-step instructions” that the dealerships must follow when selling a car. Thus, the dealerships were not Volkswagen's agents. Moreover, while not dispositive the Court noted that the parties had disclaimed an agency relationship in the franchise agreement.

Finally, the Court pointed to a “near uniform” body of law finding that similar contractual provisions or allegations of control fail to show that dealerships are agents of vehicle manufactures. That apparently made this case a slam dunk and worthy of mandamus.