Eastern District of Virginia Judge Denies Motion to Sever Local Subsidiaries and Transfer Venue of Patent Infringement Suit
On September 23, Judge Raymond Jackson of the Eastern District of Virginia denied a motion by Verizon to sever two of its Virginia-based subsidiaries and transfer venue of a patent infringement action involving its FiOS interactive television services. ActiveVideo Networks, Inc. v. Verizon Comm’s., Inc., et al., Case No. 2:10cv248 (E.D. Va. Sept. 23, 2010) (Jackson, J.), found here.
Verizon argued that its two Virginia subsidiaries, Verizon Virginia, Inc. and Verizon South, were “peripheral” defendants with only an indirect connection to the main claims, and so should be severed and the remaining claims transferred to New Jersey under the decision in Corry v. CFM Majestic, Inc., 16 F.Supp.2d 660 (E.D.Va. 1998).
Verizon claimed that the two Virginia subsidiaries should be severed because neither were responsible for the design, development, research or creation of the allegedly infringing FiOS services and relied on several Eastern District of Virginia cases in which the Court had severed claims against retailers and distributors of allegedly infringing devices.
Judge Jackson rejected this argument, finding that the two Virginia subsidiaries were not merely retailers, but were actually providing and selling the allegedly infringing services. The parent company defendants, by contrast, did not provide or offer for sale any products or services to the public, and so were less involved in the alleged infringing sales and service than the subsidiaries.
The lesson here is that a plaintiff cannot create venue in Virginia merely by suing a company’s Virginia sales subsidiary. If the infringing acts involve provision of services by the subsidiary, however, or if the parent company has little involvement in the allegedly infringing sales, a Virginia subsidiary is enough to overcome a venue objection.
