Car Dealership Not Found to Be a Place of Business for Car Distributor

Franchise agreements do not make independent dealerships agents of car manufacturers

A plaintiff in a patent infringement case is required to establish venue. The venue statute states “[a]ny civil action for patent infringement may be brought in the judicial district where . . . the defendant has committed acts of infringement and has a regular and established place of business.”

Because car dealerships are regular and established places of business, a venue question arose to address whether the dealerships can be considered agents of car distributors (in this case, VW and Hyundai), allowing the car distributors to be sued for patent infringement wherever a car dealership is found. The Federal Circuit held that they were not shown to be agents and remanded the case to back to district court to reconsider whether to grant a motion to dismiss or transfer the cases against the car distributors.

To address the agency issue, the Federal Circuit questioned whether the car distributors exercised sufficient control over the sales process and warranty services performed by the car dealerships. It found that the “various constraints placed on the dealerships that are arguably related to sales (minimum inventory, sales staff, displaying the parent company’s logo, providing sales reports, etc.)” do not “evidence any control over the sales process itself” and made similar findings regarding warranty services. The Federal Circuit supported its result as being “in accord with a near uniform body of case law finding that similar contractual provisions or allegations of control fail to show that independent dealerships are agents of vehicle manufacturers or distributors.”