Andra Group, Lp v. Victoria's Secret Stores, LLC

Case: 20-2009   Document: 41    Page: 1   Filed: 08/03/2021




   United States Court of Appeals
       for the Federal Circuit
                 ______________________

                 ANDRA GROUP, LP,
                  Plaintiff-Appellant

                           v.

 VICTORIA'S SECRET STORES, L.L.C., VICTORIA'S
  SECRET STORES BRAND MANAGEMENT, INC.,
      VICTORIA'S SECRET DIRECT BRAND
     MANAGEMENT, LLC, L BRANDS, INC.,
               Defendants-Appellees
              ______________________

                       2020-2009
                 ______________________

    Appeal from the United States District Court for the
 Eastern District of Texas in No. 4:19-cv-00288-ALM-KPJ,
 Judge Amos L. Mazzant, III.
                  ______________________

                Decided: August 3, 2021
                ______________________

    MAEGHAN WHITEHEAD, Griffith Barbee PLLC, Dallas,
 TX, argued for plaintiff-appellant. Also represented by
 CASEY GRIFFITH.

     RICHARD WILLIAM MILLER, Ballard Spahr LLP, At-
 lanta, GA, argued for defendants-appellees. Also repre-
 sented by LYNN E. RZONCA, Philadelphia, PA.
                 ______________________
Case: 20-2009     Document: 41      Page: 2    Filed: 08/03/2021




 2           ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC



     Before REYNA, MAYER, and HUGHES, Circuit Judges.
 HUGHES, Circuit Judge.
     Andra Group, LP appeals the district court’s grant in
 part of the Defendants’ motion to dismiss for improper
 venue. Because we find that venue is improper in the East-
 ern District of Texas as to the three dismissed defendants
 under 

28 U.S.C. § 1400

(b), we affirm.
                                I
      Defendants are related companies. Andra Grp., LP v.
 Victoria’s Secret Stores, LLC, No. 4:19-cv-288, 

2020 WL 1465894

 at *1 (E.D. Tex. Mar. 26, 2020) (Decision).
 L Brands, Inc. (LBI) is the corporate parent of several re-
 tailers in the apparel and home product field. 

Id.

 This case
 involves the parent LBI and several Victoria’s Secret enti-
 ties: (1) Victoria’s Secret Stores, LLC (Stores) operates the
 physical Victoria’s Secret stores; (2) Victoria’s Secret Direct
 Brand Management, LLC (Direct) manages the victori-
 assecret.com website and the Victoria’s Secret mobile ap-
 plication; and (3) Victoria’s Secret Stores Brand
 Management, Inc. (Brand) creates Victoria’s Secret
 branded intimate apparel and beauty products. 

Id.

 “LBI’s
 subsidiaries each maintain their own corporate, partner-
 ship, or limited liability company status, identity, and
 structure.” 

Id.

 Each Defendant is incorporated in Dela-
 ware. Andra Grp., LP v. Victoria’s Secret Stores, LLC,
 No. 4:19-cv-288, 

2020 WL 2478546

, at *2 (E.D. Tex.
 Feb. 24, 2020) (Report and Recommendation), report and
 recommendation adopted, Decision, 

2020 WL 1465894

.
 LBI, Direct, and Brand (collectively, the Non-Store Defend-
 ants) do not have any employees, stores, or any other phys-
 ical presence in the Eastern District of Texas (the District).
 

Id. at *3

. Stores operates at least one retail location in the
 District. 

Id. at *5

.
     In April 2019, Andra sued Defendants for infringement
 of 

U.S. Patent No. 8,078,498

 (the ’498 patent), which claims
Case: 20-2009      Document: 41     Page: 3   Filed: 08/03/2021




 ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC         3



 inventions directed to displaying articles on a webpage, in-
 cluding applying distinctive characteristics to thumbnails
 and displaying those thumbnails in a “master display
 field.” ’498 patent 11:27–42. [J.A. 56] Andra’s infringe-
 ment claims are directed to the victoriassecret.com web-
 site, related sites, and smartphone applications that
 contain similar functionality as the website. Appellant’s
 Br. 3–4.
     Defendants moved to dismiss the infringement suit for
 improper venue under 

28 U.S.C. § 1406

(a), or in the alter-
 native, to transfer the lawsuit to the Southern District of
 Ohio. Andra filed an amended complaint, and the Defend-
 ants renewed their motion. Report and Recommendation,
 

2020 WL 2478546

, at *1. Defendants argued that venue
 was improper because Stores did not commit acts of in-
 fringement in the District and the Non-Store Defendants
 did not have regular and established places of business in
 the District.
     The magistrate judge recommended that the Non-Store
 Defendants be dismissed for improper venue but that the
 suit continue against Stores, because testimony by one
 Stores employee supported a finding of the alleged infring-
 ing acts in the District. 

Id.

 at *4–5. The magistrate judge
 did not consider transfer, because the parties had only
 briefed the issue of transfer where venue was improper
 against all the Defendants. 

Id. at *5

. The magistrate judge
 discussed a potential division in the case, where venue was
 proper against some Defendants and improper against oth-
 ers, in a telephone conference on February 19, 2020, and
 Andra stated that it would proceed in the District against
 the Defendants who were not dismissed even if some of the
 Defendants were dismissed. 

Id.

     After reviewing objections by both parties to the mag-
 istrate’s report and recommendation, the district court
 adopted the findings and conclusions of the magistrate
 judge as the findings and conclusions of the court. Decision,
Case: 20-2009    Document: 41      Page: 4    Filed: 08/03/2021




 4          ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC



 

2020 WL 1465894

 at *1. The district court dismissed the
 Non-Store Defendants without prejudice for improper
 venue on March 26, 2020. In a departure from its earlier
 statement that it would proceed against any Defendants
 who were not dismissed, Andra voluntarily dismissed the
 last remaining Defendant, Stores, and the district court
 subsequently dismissed all remaining claims without prej-
 udice on May 15, 2020. Andra timely filed notice of appeal
 of the dismissal of the Non-Store Defendants for improper
 venue.
                              II
    “We review de novo the question of proper venue under
 

28 U.S.C. § 1400

(b).” Westech Aerosol Corp. v. 3M Co.,
 

927 F.3d 1378

, 1381–82 (Fed. Cir. 2019). “[T]he plaintiff
 has the burden of establishing proper venue under
 

28 U.S.C. § 1400

(b).” 

Id.

28 U.S.C. § 1400

(b) provides that “[a]ny civil action
     for patent infringement may be brought in the ju-
     dicial district where the defendant resides, or
     where the defendant has committed acts of in-
     fringement and has a regular and established place
     of business.” A “domestic corporation ‘resides’ only
     in its State of incorporation for purposes of the pa-
     tent venue statute.” TC Heartland LLC v. Kraft
     Foods Grp. Brands LLC, 

137 S. Ct. 1514, 1517

     (2017).
     Because each Defendant is incorporated in Delaware,
 no defendant “resides” in Texas for the purpose of patent
 venue. Thus, to establish venue in this case, Andra must
 show that each Defendant committed acts of infringement
 and maintains a regular and established place of business
 in the Eastern District of Texas.
     To show that a defendant has a regular and established
 place of business, there are three requirements: “(1) there
 must be a physical place in the district; (2) it must be a
Case: 20-2009      Document: 41     Page: 5   Filed: 08/03/2021




 ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC          5



 regular and established place of business; and (3) it must
 be the place of the defendant.” In re Cray Inc., 

871 F.3d 1355, 1360

 (Fed. Cir. 2017).
     As we stated in Cray, “[t]he Supreme Court has . . . in-
 structed that ‘[t]he requirement of venue is specific and un-
 ambiguous; it is not one of those vague principles which, in
 the interests of some overriding policy, is to be given a lib-
 eral construction.’” 

Id. at 1361

 (second alteration in origi-
 nal) (quoting Schnell v. Peter Eckrich & Sons, Inc., 

365 U.S. 260, 264

 (1961)); see also In re Google LLC, 

949 F.3d 1338, 1346

 (Fed. Cir. 2020) (“[T]he Supreme Court has cautioned
 against a broad reading of the venue statute.”).
     The parties do not dispute that Stores operates retail
 locations in the District, and whether venue is proper as to
 Stores is not at issue in this appeal. The question is
 whether these Stores locations can be considered “a regular
 and established place of business” of the Non-Store Defend-
 ants. In re Cray, 

871 F.3d at 1360

. Andra argues that
 Stores locations are “a regular and established place of
 business” of the Non-Store Defendants because Stores em-
 ployees are agents of the Non-Store Defendants, or, alter-
 natively, because the Non-Store Defendants have ratified
 Stores locations as their places of business. We address
 each argument in turn.
                               A
     “[A] ‘regular and established place of business’ re-
 quires the regular, physical presence of an employee or
 other agent of the defendant conducting the defendant’s
 business at the alleged ‘place of business.’” In re Google,
 

949 F.3d at 1345

. Because there is no dispute that the Non-
 Store Defendants lack employees in the District, Andra ar-
 gues that Stores employees are agents of LBI, Direct, and
 Brand. Appellant’s Br. 13–14.
     “Agency is the fiduciary relationship that arises
     when one person (a ‘principal’) manifests assent to
Case: 20-2009     Document: 41     Page: 6    Filed: 08/03/2021




 6          ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC



     another person (an ‘agent’) that the agent shall act
     on the principal’s behalf and subject to the princi-
     pal's control, and the agent manifests assent or oth-
     erwise consents so to act.” Restatement (Third) of
     Agency § 1.01 (Am. L. Inst. 2006). “The essential
     elements of agency are (1) the principal’s ‘right to
     direct or control’ the agent’s actions, (2) ‘the mani-
     festation of consent by [the principal] to [the agent]
     that the [agent] shall act on his behalf,’ and (3) the
     ‘consent by the [agent] to act.’” In re Google, 

949 F.3d at 1345

 (alterations in original) (quoting
     Meyer v. Holley, 

53 U.S. 280, 286

 (2003).
     Andra argues that LBI “controls store location workers
 by dictating store operations, hiring, and conduct.” Appel-
 lant’s Br. 16. Andra points to various public filings by LBI
 that speak in broad terms about real estate holdings and
 investments, contends that LBI controls the hiring and fir-
 ing of employees, and argues that because LBI requires
 Stores associates to sign and follow LBI’s Code of Conduct,
 this indicates control over the employees. Andra argues
 that Direct “controls store location workers by dictating
 their handling of returns of merchandise purchased on the
 [Victoria’s Secret] website.” Id. at 18. Finally, Andra ar-
 gues that Stores employees are agents of Brand because
 Brand “‘closely controls the distribution and sales of its
 products’ exclusively available through store locations and
 the [w]ebsite.” Id. at 19 (quoting J.A. 799–801 ¶¶ 11, 13,
 15–16). Andra also contends that Brand’s control over the
 Victoria’s Secret website “strengthens the agency relation-
 ship with [] Brand.” Id. at 19–20.
    We considered a similar agency question in In re
 Google. There, a plaintiff sued Google for patent infringe-
 ment in the Eastern District of Texas, alleging that venue
 was proper based on the presence of several Google Global
 Cache servers in the District. In re Google, 

949 F.3d at 1340

. Google did not own the datacenters where the servers
 were hosted but contracted with two internet service
Case: 20-2009      Document: 41     Page: 7   Filed: 08/03/2021




 ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC         7



 providers (ISPs) in the district to host the servers. 

Id.

 The
 contracts included several limitations including: restrict-
 ing “the ISPs’ ability to relocate the servers without
 Google’s permission,” limiting unauthorized access to the
 space used by Google’s servers, requiring the ISPs to pro-
 vide “installation services,” forbidding the ISPs from ac-
 cessing, using, or disposing of the servers without Google’s
 permission, and requiring the ISPs to provide “remote as-
 sistance services” involving basic maintenance activities
 performed on the servers by the ISP’s on-site technician, if
 requested by Google. 

Id.

 at 1340–41.
     The relevant inquiry was “whether the ISPs [were] act-
 ing as Google’s agent.” 

Id. at 1345

. We held that although
 the installation of the servers and provision of mainte-
 nance may suggest an agency relationship, the installation
 activity was a “one-time event for each server” that did not
 constitute the conduct of a “regular and established” busi-
 ness, and “SIT ha[d] not established that the ISPs perform-
 ing the specified maintenance functions [were] conducting
 Google’s business within the meaning of the statute.” 

Id. at 1346

.
      Here, as in Google, none of Andra’s arguments are suf-
 ficient to show that Stores employees are agents of the
 Non-Store Defendants. None of the public filings cited by
 Andra demonstrate LBI’s control, because they are docu-
 ments covering all of LBI’s brands. The documents’ use of
 “we” does not convey that “we” means LBI specifically, but
 that “we” could include the individual subsidiary brands,
 like Stores. See J.A. 452, 846. Andra’s contention that LBI
 controls the hiring and firing of store employees is directly
 contradicted by the testimony of the store manager for the
 Plano, Texas store, Lisa Barcelona, who stated during her
 deposition that she, a Stores employee, interviews associ-
 ates and makes offers of employment. J.A. 642–43. She also
 testified that she decides whether to fire employees and
 that she does not need any approval before doing so, and
 that it is she who holds Stores employees at her store
Case: 20-2009    Document: 41      Page: 8    Filed: 08/03/2021




 8          ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC



 accountable for following the Code of Conduct, not LBI.
 Thus, none of the facts alleged by Andra are sufficient to
 prove that Stores employees are agents of LBI, because LBI
 does not have “the right to direct or control” Stores employ-
 ees, an essential element of an agency relationship. In re
 Google, 

949 F.3d at 1345

.
      Additionally, while Stores locations accepting returns
 of Direct merchandise purchased on the website is a service
 that may benefit Direct, Andra has not shown that Direct
 controls this process. This one discrete task is analogous to
 the ISPs’ installation and maintenance of the servers in
 Google, which we found insufficient to establish an agency
 relationship. 

Id. at 1346

. Finally, Brand’s close control of
 its products and the website does not equate to “the right
 to direct or control” employees at the physical Stores loca-
 tions in the District. 

Id. at 1345

.
     For the above reasons, we agree with the district court
 that Andra has not established that any of the Non-Store
 Defendants exercise the degree of control over Stores em-
 ployees required to find an agency relationship.
                              B
     Andra’s second venue theory is that the Non-Store De-
 fendants ratified Stores locations as their own places of
 business such that Non-Store Defendants may be said to
 maintain a regular and established place of business in the
 District.
     A threshold inquiry when determining whether the
 place of business of one company can be imputed to an-
 other, related company is whether they have maintained
 corporate separateness. If corporate separateness has not
 been maintained, the place of business of one corporation
 may be imputed to the other for venue purposes. But where
 related companies have maintained corporate separate-
 ness, the place of business of one corporation is not imputed
 to the other for venue purposes. See Cannon Mfg. Co. v.
Case: 20-2009      Document: 41     Page: 9     Filed: 08/03/2021




 ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC            9



 Cudahy Packing Co., 

267 U.S. 333

, 334–35 (1925); 14D
 Charles Alan Wright & Arthur R. Miller, Federal Practice
 and Procedure § 3823 & nn.25–26 (4th ed.).
     Andra does not argue that the Defendants have not
 maintained corporate separateness. Andra contends that
 each of the Non-Store Defendants has ratified the retail
 stores as its own based on the criteria outlined in In re
 Cray, including “whether the defendant owns or leases the
 place, or exercises other attributes of possession or control
 over the place,” “the storing of materials at a place in the
 district so that they can be distributed or sold from that
 place,” and the “defendant’s representations that it has a
 place of business in the district.” 

871 F.3d at 1363

.
     Andra argues (1) that LBI has ratified store locations
 through its control over store operations and by holding out
 store locations as its own; (2) that Direct has ratified store
 locations by allowing merchandise purchased online to be
 returned in stores and by directing customers to store loca-
 tions using the “Find a Store” feature; and (3) that Brand
 has ratified store locations by distributing and selling its
 merchandise from Store locations and because it is listed
 as the registrant for the Victoria’s Secret website.
     But “the mere fact that a defendant has advertised that
 it has a place of business or has even set up an office is not
 sufficient; the defendant must actually engage in business
 from that location.” In re Cray, 

871 F.3d at 1364

 (emphasis
 added). Andra has not shown that the Non-Store Defend-
 ants actually engage in business at Stores locations. Andra
 asserts that the Non-Store Defendants maintain a “unified
 business model” with Stores, asserting many of the same
 facts it set forth in support of its agency theory, but the fact
 that the entities work together in some aspects, as dis-
 cussed above, is insufficient to show ratification. See In re
 ZTE(USA) Inc., 

890 F.3d 1008, 1015

 (Fed. Cir. 2018) (hold-
 ing that a contractual relationship between two entities
 “does not necessarily make [the first company’s] call center
Case: 20-2009    Document: 41       Page: 10   Filed: 08/03/2021




 10         ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC



 ‘a regular and established place of business’ of [the second
 company] in the [district]”).
     Several additional factors weigh against a finding of
 ratification here. The Non-Store defendants do not own or
 lease Stores locations; Stores leases and performs all oper-
 ations at the retail locations. Decision, 

2020 WL 1465894

 at *5. The Victoria’s Secret website’s “Find a Store” feature
 points consumers to Stores locations, not Non-Store De-
 fendants locations. J.A. 829. The Non-Store Defendants do
 not display their corporate names in the retail locations.
 Decision, 

2020 WL 1465894

 at *5. Non-Store Defendants
 carry out different business functions than Stores. 

Id.

 And
 the companies’ shared use of “Victoria’s Secret” in their
 name does not detract from the separateness of their busi-
 nesses. Giving “reasoned consideration to all relevant fac-
 tors or attributes of the relationship” between Stores and
 Non-Store Defendants, Andra has not met its burden to
 show that Non-Store Defendants have ratified Stores loca-
 tions as their own places of business such that Non-Store
 Defendants may be said to maintain a regular and estab-
 lished place of business in the District.
                              III
      All three Cray factors must be met for venue to be
 proper against a defendant. The second Cray factor, a “‘reg-
 ular and established place of business’ requires the regu-
 lar, physical presence of an employee or other agent of the
 defendant conducting the defendant’s business at the al-
 leged ‘place of business.’” In re Google, 

949 F.3d at 1345

.
 Because Andra has not demonstrated that LBI, Brand, or
 Direct has “the right to direct or control” the actions of
 Store employees, 

id. at 1346

, it has not shown the “regular,
 physical presence of an employee or other agent” of LBI,
 Brand, or Direct in the District. The Defendants have also
 maintained corporate formalities and Andra has not shown
 that Non-Store Defendants ratified Stores locations in the
 District as their own places of business. We therefore
Case: 20-2009   Document: 41       Page: 11    Filed: 08/03/2021




 ANDRA GROUP, LP   v. VICTORIA'S SECRET STORES, LLC        11



 affirm the district court’s decision that venue was not
 proper in the District as to the Non-Store Defendants.
                         AFFIRMED