Disney Stores Don’t Tie Patent Lawsuit to Texas

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By Peter Leung

The Walt Disney Co. has convinced a Texas federal court to let it fight a patent infringement lawsuit in its own backyard.

The U.S. District Court for the Western District of Texas Oct. 25 transferred Interactive ToyBox LLC’s lawsuit to California. Western Texas wasn’t the right venue, because Disney didn’t have a “regular and established place of business” there, the court said.The U.S. District Court for the Central District of California will hear the case instead.

The decision shows that retail stores and warehousing operations may not be enough to establish venue in infringement cases, narrowing where large corporate defendants with widespread operations can be sued.

The court applied the U.S. Supreme Court’s 2017 ruling in TC Heartland v. Kraft Foods, which made it more difficult for patent owners to sue in their preferred venues. Under the ruling, one way to establish venue is to show that the defendant has a regular and established place of business there.

ToyBox alleges that Disney Co.’s Disney Infinity video games infringe U.S. Patent No. 6,471,565, which relate to interactive toys. ToyBox says Disney Co. is selling the games in several outlets, including its retail stores. Several Disney stores in the Western District of Texas are operated by a Disney Co. subsidiary, Disney Store USA LLC.

ToyBox failed to convince the court to treat the two distinct corporate entities as one. Disney Co.’s annual report says it “owns and operates” stores in North America, and that it is fosters safe working environments in “our Disney-owned stores.”

Those statements aren’t enough, because ToyBox has to show the Disney companies ignored the corporate formalities and created an alter-ego relationship between them, the court said.

District Court Judge Robert Pittman issued the opinion.

Etheridge Law Group represented ToyBox. Erise IP PA and Scott, Douglass & McConnico LLP represented Disney Co.

The case is Interactive Toybox, LLC v. The Walt Disney Co., 2018 BL 392669, W.D. Tex., 1:17-CV-1137-RP, 10/24/18

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