State Registration and Jurisdiction

A federal district court in Illinois recently held that a corporation that has registered with the state but employs a handful of workers who work from home in Illinois has no “regular and established place of business” and cannot be subject to suit. Judge Ruben Castillo held in an order dated November 6, 2017 in BillingNetwork Patent, Inc. v. Modernizing Medicine, Inc. (E.D. Ill. 2017) that simply complying with a state statute by registering to do business in that state—at least in Illinois—does not automatically subject a defendant to suit in that particular state.

This decision follows the United States Supreme Court’s recent decisions enforcing venue requirements for patent cases. The analysis in BillingNetwork is one example of an intellectual property dispute complicated by the state registration of one of the parties.

State registration should be evaluated in any states where business may be done. Registering and maintaining compliance in a particular state could subject a business to jurisdiction, but it depends on the state. One thing is for sure: failing to comply with state statutes concerning registered or resident agents is a sure way to end up in court or pay hefty fines. Consider carefully whether your client needs to register in a state and if it’s necessary, review pertinent decisions from federal courts in that state about whether registering automatically confers jurisdiction, especially considering the intended business activity.

In BillingNetwork, the court granted a motion to dismiss brought by Modernizing Medicine. Plaintiff company offered cloud-based practice and billing services and sued the defendant, Modernizing Medicine, for patent infringement. The court held that the proper venue in a patent case depends on two factors, including where the defendant “has a regular and established place of business.” This means there must be a “physical place” in the district, the place must be a “regular and established place of business,” and it must be the “place of the defendant.”

Here, the plaintiff argued the defendant has a regular and established place of business because it is registered in Illinois to do business, has an agent in Chicago, and has remote employees in the Eastern District of Illinois. The court concluded that whether a business is registered and in compliance with the state has no bearing on whether the defendant maintains a physical place of business in the District. The court ultimately granted Modernizing Medicine’s motion to dismiss.

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