Custom Servers Pin Netflix in the Eastern District of Texas | Mintz – Perspectives on Intellectual Property

Patent holders looking for a suitable venue for doing business against suspected infringers may be able to report the activity of an infringer’s agents, based on a new ruling from the Eastern District of Texas. In recommending the dismissal of a motion to dismiss Netflix, trial judge Payne explained that the nature and extent of Netflix’s relationship with Internet service providers (“ISPs”) in the district give rise to a suitable place as a regular and established place of business for Netflix. CA, Inc. v Netflix, Inc., n ° 2: 21-cv-00080, Dkt. No. 110, ED Tex. (September 27, 2021). There, Mr. J. Payne found that Netflix’s use of content delivery networks using “Open Connect devices” (“OCA”) at local ISPs in the district resulted in a regular and established place of business based on the considerable control Netflix has maintained over OCAs and its collaborative relationship with ISPs.

In patent infringement cases, the place is appropriate “where the defendant resides, or where the defendant has committed infringement and has a regular and established place of business”. 28 USC § 1400 (b). In determining whether a defendant has a regular and established place of business, courts apply the Pencil factors: “(1) there must be a physical location in the neighborhood; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant. In re Cray Inc., 871 F.3d 1355, 1360 (Cir. Fed. 2017). The crux of the dispute between the parties CA, Inc. v Netflix, Inc. was whether the OCAs were a “defendant’s” location and whether “regular and established” business was conducted in the district.

Mr. J. Payne agreed with the complainants that although Netflix transferred the ownership and title of OCAs to ISPs and only entered into a software licensing agreement with ISPs over OCAs, Netflix maintained significant control over the OCAs. the OCAs so that the OCAs remained “of the defendant.” (Dkt. No. 110 to 12). In particular, the court identified the following elements of Netflix: control of modifications, upgrades and repairs OCAs; continuously monitoring OCAs; ability to remotely erase software loaded on OCAs; and frequently referring to OCAs on ISP sites as “OCA Netflix” in its marketing materials. to determine that Netflix retained sufficient possession and control over the OCAs to be a place of business for the defendant (Dkt. 110-12).

MJ Payne also found Netflix to meet regular and established requirements. commercial element. Differentiate from other situations where ISPs were deemed insufficient due to a more passive relationship between a defendant and an ISP (see In google), here MJ Payne has determined that significant ongoing and ongoing actions have been taken by ISPs on behalf of Netflix. The court concluded that a collaboration agreement therefore existed between the ISPs and Netflix, which qualified the ISPs as “partners”, establishing “that the ISPs act as agents of the defendant”. (Dkt. No. 110 to 19).

This decision reinforces the factual nature of the “regular and established business establishment” analysis. Courts will consider the extent of control over a service provider such as an ISP to determine whether an action can be brought against a party in that location. According to MJ Payne, transferring ownership of the equipment to service providers alone is not enough to avoid litigation in the district courts where the equipment is located. As patent owners increasingly find ways to keep suspected infringers in favorable jurisdictions, expect this approach to be used more widely.

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