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Franchised Automobile Dealerships Count as Regular and Established Places of Business for Purposes of Proper Patent Infringement Venue

In our continuing post-TC Heartland coverage, Judge Rodney Gilstrap of the Eastern District of Texas recently issued an interesting decision regarding the venue analysis for car companies selling into a particular jurisdiction. In Blitzsafe Texas v. BMW, Judge Gilstrap concluded that independently owned and operated BMW dealerships count as a regular and established place of business for purposes of establishing proper venue as to BMW of North America (“BMWNA”). (The court also concluded summarily that venue was proper as to BMWNA’s foreign parent company.) BMWNA argued in the main that the four dealerships located within the district were not their regular and established places of business because the dealerships are franchised. BMWNA also argued that it is not permitted to “own or control” the dealerships within the District pursuant to the Texas Occupations Code.

The court rejected these arguments. In doing so, it pointed to the fact that BMWNA exercised control over the sales, marketing, and service of BMW automobiles within the District. The court also considered that BMWNA employees residing in Texas traveled to the four dealerships in the District to provide on-site technical training to service technicians and to educate sales representatives regarding new features of vehicles. The court also noted that BMWNA pays for and supervises new car warranty services on BMW products at the subject dealerships. Notably, the court emphasized the fact that the Certified Pre-Owned BMWs are “fully backed by BMW of North America, LLC.” On this set of facts, the court concluded that BMWNA conducts regular business through the dealerships within the District for two reasons: first, it conducts its business of the exclusive distribution of new BMW automobiles to the consuming public in the district through the subject authorized dealers; and, second, it conducts its business of providing new purchase warranties, and service pursuant to those warranties, to the consuming public in this district through the same dealerships.

The court also went out of its way to distinguish another case involving BMW from the Southern District of California that reached the opposite conclusion, namely that venue was not proper as to BMWNA on a similar theory that it conducted business through the franchised dealerships within that District. West View Research, LLC v. BMW of North Am., LLC et. al., Case No. 16-CV-2590 JLS (AGS), Dkt. No. 64-1 (S.D. Cal. Feb. 5, 2018). Judge Gilstrap noted that the California court did not assess certain aspects of the distributor-franchisee relationship, and found that

BMWNA, in conducting its business through the dealerships, either in provisioning warranties and subsequent service or through the distribution and sale of automobiles, BMWNA ratifies the dealerships as to that business and the dealerships constitute places ‘of the defendant’ for those select business purposes. … This is not, by contrast, a situation where a generic retailer independently acquires and sells goods to consumers.

It remains to be seen whether Judge Gilstrap’s reasoning will be adopted by other district courts assessing whether similarly situated franchisor-franchisee relationships form a sufficient basis to seat venue in patent infringement suits against the franchisor. We will continue to monitor.

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Andrew H. DeVoogd is a patent litigator and trial attorney whose practice encompasses a wide range of technologies. He represents major technology companies in International Trade Commission investigations, and shares his insights on Mintz's Global IP Matters blog.
Anthony E. Faillaci is a Mintz Associate who assists in legal matters resulting in multimillion-dollar settlements. Tony is a former technical specialist who is experienced in microelectronic design, manufacturing, telecommunications, digital imaging networks, software development, and design.