Introduction
Texas courts, especially those in the Eastern and Western Districts, continue to attract patent lawsuits. Fast-paced dockets and plaintiff-friendly juries often lead to challenging litigation environments for franchisors. Plaintiffs frequently argue that branded stores, even if owned by franchisees, subject franchisors to venue in Texas.
The Texas courts can make defending against patent suits costly. When speedy trials are set, defendants lose access to more affordable review options, like inter partes review. As a result, franchisors face a tough choice: fight an expensive lawsuit or pay for a license. For franchisors, avoiding lawsuits in Texas—and transferring cases elsewhere—is critical.
A recent decision in S3G Technology LLC v. Domino’s Pizza LLC, No. 24-cv-00395-OLG, (W.D. Tex. September 3, 2025), provides practical guidance on how franchisors – who own no store locations in these jurisdictions – can avoid suits there.
Patent Venue Basics
Venue in patent cases is governed exclusively by 28 U.S.C. § 1400(b):
A defendant may be sued:
- In its state of incorporation; or
- Where it has committed acts of infringement and has a “regular and established place of business.”
The Federal Circuit’s In re Cray decision identifies three specific factors for determining whether a defendant has a “regular and established place of business” in the district for purposes of venue:
- maintaining a physical place within the district,
- operating that place regularly and on an established basis, and
- the place belonging to the defendant.
In re Cray, Inc., 871 F.3d 1355 (Fed. Cir. 2017). If even one element is not met, venue cannot be established. In re: Volkswagen Grp. of Am., Inc., 28 F.4th 1203, 1208 (Fed. Cir. 2022).
To prove a franchisor defendant – with only franchises and no locations of its own in the district – meets the second Cray factor, a plaintiff must prove three things: (1) the franchisees are agents of the franchisor; (2) that the franchisees conduct franchisor’s business; and (3) franchisor has ratified the franchise store locations as its own places of business. Volkswagen, 28 F.4th at 1208 (Fed. Cir. 2022).
For franchisors, the determination of whether franchisees are agents of the franchisor —is the most contested issue.
S3G v. Domino’s
S3G Technology, LLC (“S3G”) sued Domino’s in the Western District of Texas for patent infringement asserting Domino’s mobile ordering application infringed three S3G patents. S3G asserted that a Domino’s franchisee in Waco, Texas supported venue in the case. Domino’s moved to dismiss or transfer the case to Michigan –arguing it had no corporate-owned locations in the District – and all the locations were owned by third-party franchisees whose sole connection to Domino’s was a franchise agreement. S3G argued that the Texas franchisees were agents of Domino’s, conducted Domino’s business and Domino’s had ratified the stores as its own.
Plaintiff argued Domino’s exerted “comprehensive control” that extended to virtually every aspect of store operations:
- Mandatory operating procedures.
- Signage, store appearance and construction and required equipment.
- Required menu, product ingredients and ingredient sourcing.
- Required advertising contributions.
- Integrated apps and online ordering.
- Prominent trademark use.
The Western District of Texas disagreed, finding these measures were consistent with brand protection, not day-to-day control. The Court found the following important in making this determination:
- The franchise agreements expressly disclaim agency, stating franchisees are independent contractors
- The franchise agreements provide high-level details and guidelines that the franchisees must follow to operate a pizza business,” not “the type of interim control required to establish venue.
- Domino’s employees visit each franchisee only 2 times per year for a total of three hours to inspect and ensure brand standards are followed.
The Court also found that plaintiff did not prove that these franchisee locations were locations of Domino’s or that Domino’s had ratified them as its own citing that:
- Domino’s does not own or lease stores in Texas.
- The franchise agreement required the franchisee to visibly identify itself as the owner of the location in the lobby, on delivery vehicles and in local advertising.
The Court transferred the case to the Eastern District of Michigan, where Domino’s headquarters is located.
Practical Steps for Franchisors to Avoid Venue in Texas
- Draft Strong Independent Contractor Language
- Explicitly disclaim agency in franchise agreements.
- State that franchisees cannot bind the franchisor.
- Require all franchisees to inform employees upon hiring that they are employees of the franchisee, and not the franchisor.
- Limit Interim Control
- Avoid dictating pricing (other than for national promotions), staffing, or daily operations.
- Restrict directives to brand standards and quality assurance.
- Require Franchisee Identification
- In-store signage and marketing should clearly state: “Owned and operated by [Franchisee Name].”
- Separate Digital Presence
- Apps and websites should disclose that transactions are with independent franchisees.
- Avoid language suggesting a unified corporate operation.
- Minimize Physical and Financial Ties
- Do not own or lease franchise premises. Many franchisors leave the option to assume a lease to preserve the location when a franchisor/franchisee relationship is terminated. Avoid this by creating a separate company or contracting with one to assume the leases in these situations.
- Avoid storing inventory or equipment in the district.
- If possible, do not hire employees that live in these District and certainly do not condition employment on living there. If it is necessary, these employees should not regularly store any equipment or literature at their homes.
- Visits to store by franchisor employees should limited and for the sole purpose of protecting compliance with brand and quality standards.
- Audit for Cray Compliance and Ratification Risks
- Document independence: no control over property, employees, or finances.
- Ensure no actions or communications could be construed as ratifying franchise locations as corporate offices.
Conclusion
Venue battles in Texas hinge on two questions: who controls the store, and has the franchisor ratified the location? Franchisors must make clear that franchisees run their own businesses and their stores are not corporate locations. Careful structuring of agreements and operations can help franchisors avoid unnecessary patent litigation in Texas.
About Thomas Cunningham
Thomas W. Cunningham is a veteran intellectual property litigator at Brooks Kushman, focusing on patent, trademark, copyright, and trade secret disputes. He combines a strong scientific background in biology and molecular biology with more than two decades of courtroom experience, representing both plaintiffs and defendants across a broad range of technologies including automotive, biotech, software, and consumer products. In addition to litigation, he advises clients on IP portfolio management, licensing, and competitive design-around strategies.
About Brooks Kushman P.C.
Founded in 1983, Brooks Kushman P.C. has built a national reputation as a premier intellectual property and technology law firm. We accomplish this with the understanding that the most effective IP solutions come from putting great minds together – our clients and our own. With offices across the country, we forge strong relationships with corporations, small to medium-sized businesses, and leading universities across the country.
Brooks Kushman counts a number of Fortune 100 Corporations across a variety of industries among its clients. Our attorneys have a deep understanding and broad range of experience in a variety of industries and technologies, including consumer electronics, manufacturing, medical device, computer technology, aerospace, chemicals, biotechnology, and retail. We are also recognized by leading legal publications and rankings, including, Best Lawyers, Law360, Intellectual Asset Management, Managing Intellectual Property, and World Trademark Review. For more information, please visit www.BrooksKushman.com.
