Fed Circ says Victoria’s Secret online business can’t be sued in Texas
The US Court of Appeals for the Federal Circuit has upheld a Texas court ruling that an online subsidiary of Victoria’s Secret cannot be sued for patent infringement in the state.
The ruling means companies could use corporate structures to avoid defending patent infringement lawsuits in patentee-friendly jurisdictions.
Andra Group filed a suit with the US District Court for the Eastern District of Texas claiming Victoria’s Secret’s mobile division and its website management division infringed its US Patent 8,078,498 for a ‘virtual showroom’.
Victoria’s Secret moved to dismiss the suit for improper venue, claiming that its stores did not commit the acts of infringement in the district and the online subsidiaries “did not have regular and established places of business in the district”.
Following a magistrate judge’s recommendation, the district court decided to dismiss the online subsidiaries without prejudice for improper venue in March 2020.
In a short opinion released on Tuesday, the Federal Circuit upheld the district court’s decision that the venue was not proper for the online subsidiaries.
Cray precedent
The Federal Circuit relied on Supreme Court precedent in Cray, which states that “the requirement of venue is specific and unambiguous”.
Karthik Kumar, partner at Finnegan said: “The Federal Circuit decision reaffirms Supreme Court precedent against a broad reading of the federal venue statute. It also shows that courts will not easily consider employees of a subsidiary to be agents of the parent or other subsidiaries.
“Instead, the patentee must adduce specific facts showing that the subsidiary’s employees are conducting the parent’s or other subsidiaries’ business under their direction or control.”
Circuit judge Todd Hughes noted that Victoria’s Secret did not dispute that it operates stores out of the district, but agreed with the company that those stores were not at issue with this lawsuit.
Andra argued that the physical store’s locations are the “regular place of business” for the online subsidiaries, meaning the venue was proper.
Hughes said: “None of Andra’s arguments are sufficient to show that stores employees are agents of the non-store defendants. None of the public filings cited by Andra demonstrates LBI’s [Victoria’s Secret’s parent company] control, because they are documents covering all of LBI’s brands.”
“Strategic” sheltering
Speaking on the impact the ruling could have on future litigation, Kumar added: “To impute a subsidiary’s place of business to the parent or another subsidiary, the patentee must provide specific facts showing that those companies ratified the location by actually engaging in business from that location.
“As a practical result of the decision, companies can strategically use corporate structure to shelter themselves from having to defend patent infringement lawsuits in known patentee-friendly jurisdictions.”
Did you enjoy reading this story? Sign up to our free daily newsletters and get stories sent like this straight to your inbox
Today’s top stories
Rejected post-Arthrex bids signal uncertainty over USPTO director’s authority
