IP Edge Affiliate Launches New Payment Campaign in the Eastern District of Texas Against Two Out-of-State LLC Subsidiaries

June 15, 2017

Vaultet LLC, an apparent affiliate of monetization firm IP Edge LLC, has launched a litigation campaign, asserting a single patent (7,814,009) in separate cases filed against LLC subsidiaries of Avis Budget Group (Avis Rent A Car System LLC) (6:17-cv-00366) and Disney (Disney Store USA LLC) (6:17-cv-00362). The ‘009 patent generally relates to retail systems permitting anonymous purchases, with infringement allegations against Disney focusing on the use of PayPal, and for Avis on the use of gift cards and American Express cards, each as methods of payment on the companies’ websites. In an apparent nod to the US Supreme Court’s TC Heartland decision, each new complaint pleads proper venue in the Eastern District of Texas with more particularity than usual for IP Edge affiliates.

The NPE names as defendants in each respective case an LLC subsidiary of the parent entity: Avis Rent A Car System LLC for Avis Budget Group and Disney Store USA LLC for The Walt Disney Company. Parents and subsidiaries were all formed in Delaware with headquarters located outside Texas. However, for the purposes of personal jurisdiction and proper venue, Vaultet pleads that Disney Store USA is registered to conduct business in Texas and has 13 physical locations in the state, including one in the Eastern District, also selling products and collecting Texas sales taxes through purchases made on the Disney store website. Similarly, Vaultet pleads that Avis Rent A Car System is registered to conduct business in Texas and has “numerous physical store locations” in the state, including several in the Eastern District, also permitting customers to make vehicle reservations via the www.avis.com website. The plaintiff then pleads, identically in each case, that venue is proper under both prongs of the patent venue statute (28 U.S.C. § 1400(b)): residence (“Defendant, as a non-corporation, resides in this District”) and “regular and established place of business” with acts of infringement (“Additionally, acts of infringement have occurred in this District, and Defendant has a regular and established place of business in the District, which includes, without limitation, physical retail stores of Defendant in the District.”).

Vaultet’s pleading appears to hang proper venue, at least in part, on a footnote from the TC Heartland decision itself. In the first footnote in the opinion, the Supreme Court noted that the underlying complaint alleged that defendant is a corporation, which TC Heartland admitted in its answer. By the time the case bubbled up to the Supreme Court, the parties had noted in briefs that TC Heartland is actually an unincorporated entity (an LLC), not a corporation, organized under Indiana law. The decision leaves “further consideration of the issue of [TC Heartland’s] legal status to the courts below on remand”, which issue the parties are now facing before the district court. TC Heartland (the party) characterizes the “newly minted ‘LLC’ argument” of the plaintiff in that case as “baseless”, contending that residence for a chartered LLC should be determined by the entity’s articles of organization, which in that case identify an Indiana location as TC Heartland’s registered office. (The Delaware district court in the TC Heartland case is not the only court grappling with this issue. For example, a court in the Eastern District of Michigan has recently received briefing from an LLC defendant, organized in Texas, arguing that the TC Heartland applies to it, locating its state of residence both where it is chartered (Texas) and where it has its principal place of business (Texas).)

The ‘009 patent issued in October 2010 with estimated priority date in May 1999. Its sole named inventor is Marvin A. Frenkel, an apparent Michigan resident and graduate of the University of Miami School of Law, once admitted to the Florida bar (in 1950), but no longer eligible to practice in the state. The ‘009 patent comprises a family of one, but while Vaultet pleads ownership of it, currently available USPTO records do not reflect the assignment of rights from Frenkel to the plaintiff.

IP Edge was formed in Texas in July 2015 by Texas attorneys Gautham (Gau) Bodepudi, Sanjay Pant, and Lillian Woung. It was (by far) last year’s most frequent plaintiff, with a history of launching its campaigns (now over 45) in the Eastern District of Texas using LLCs under the management of longtime local residents, many of whom have no ready connection to patent assertion. Vaultet was formed on January 4, 2017 with Jamie Fong as its managing member. Fong is also affiliated with litigating IP Edge entities Mozly Tech LLC and Carnition LLC. 6/16, Eastern District of Texas.