by Dennis Crouch
This decision shows how potential defendants can easily use their corporate structure to shelter a parent company from having to defend against patent infringement lawsuits.
Andra Group v. Victoria’s Secret Stores (Fed. Cir. Aug 3, 2021)
Andra sued Victoria’s Secret for infringing its US Pat. 8,078,498 covering a lingerie virtual showroom. Actually, Andra sued L Brands Inc (LBI), the parent company, as well as Victoria Secret Stores LLC (Stores) which operates the physical retail stores; Victoria’s Secret Direct Brand Management, LLC (Direct), which manages the internet activities (including in-store direct online and returns from the stores); and Victoria’s Secret Stores Brand Management, Inc. (Brand) which creates the apparel products. At the time of the lawsuit*, these companies were all directly linked together in a tight corporate subsidiary structure under LBI. Still, each defendant gets to raise the defense of improper venue.
Under the statute for patent litigation venue, venue is proper in a judicial district if either (1) the defendant is incorporated in the district or (2) the defendant infringes within the district and also has a “regular and established places of business” in the district. 28 U.S.C. 1400(b). Here, none of the defendants are incorporated in E.D. Texas and only the VS Stores has a regular-and-established-place-of-business in the district. As such, the district court dismissed the case against all of the non-stores defendants and, at that point, Andra also voluntarily dismissed its case against VS Stores.
On appeal, the Federal Circuit affirmed — particularly holding that the VS Stores do not serve as places of business for the non-store defendants. The court concluded that Andra had not proven that LBI sufficiently controls VS Stores despite public filings by LBI that dictate various “store operations, hiring, and conduct” and that the stores are acknowledged representatives of Brand and Direct (returns go the roughte website …). The court found that LBI’s public filings were statements about the various brands, but did not necessarily convey control over its wholly owned subsidiaries. The decision goes on, but basically serves as a total apologist for
* On August 3, 2021, LBI spun-off all of the Victoria Secret companies into a separate company VS&Co (VSCO) and LBI has changed its name to Bath & Body Works Inc. (BBWI). Its totally unclear how this change would impact the lawsuit. Also, this is confusing because of VSCO.