United States District Court, D. Delaware
MEMORANDUM OPINION & ORDER
WILLIAM C. BRYSON UNITED STATES CIRCUIT JUDGE
British Telecommunications plc (“British
Telecom”) filed its first amended complaint in this
action on June 8, 2018, against IAC/InteractiveCorp
(“IAC”), Match Group, Inc. (“MGI”),
Match Group, LLC, and Vimeo, Inc. The first amended complaint
alleged that the named defendants infringed six patents
through the provision of four online services: Match.com,
Tinder, OkCupid, and Vimeo. See Dkt. No. 17, at
24-53. The six patents include U.S. Patent Nos. 6, 240, 450;
6, 397, 040; 6, 578, 079; 7, 243, 105; 7, 974, 200; and 9,
177, 297. Id. at 24-25.
defendants' corporate structure is relevant to this
motion. IAC is a Delaware corporation with its headquarters
in New York City. Id. at 8. MGI, also a Delaware
corporation, is an IAC subsidiary; according to the
complaint, IAC “owns over 81% of [MGI's] stock
value, and controls over 97% of [MGI's] voting
rights.” Id. at 11. Vimeo, Inc., is also a
subsidiary of IAC. Id. at 18. Additionally, Match
Group, LLC, and Humor Rainbow, Inc., are subsidiaries of MGI.
Id. at 15, 16. Vimeo, Inc., operates Vimeo. Match
Group, LLC, operates Match.com and Tinder. And Humor Rainbow,
Inc., operates OkCupid. Id. at 16, 18.
IAC and MGI have filed a motion under Fed.R.Civ.P. 12(b)(6)
to dismiss British Telecom's first amended complaint for
failure to plead state a claim on which relief can be
granted. Dkt. No. 20. IAC and MGI argue that British Telecom
has failed to plead facts plausibly demonstrating that IAC or
MGI owns or operates any of the alleged infringing services
or that either company is liable for any acts of alleged
infringement by any of the other defendants. Dkt. No. 21, at
1. According to IAC and MGI, “[n]either IAC nor MGI
operates the accused services[;] [n]evertheless, [British
Telecom's first amended complaint] seeks to hold the two
companies liable for the alleged infringement by their
subsidiary companies that do operate the accused
services.” Id. at 2. British Telecom
disagrees, stating that, aside from vicarious liability, the
first amended complaint shows that IAC and MGI “own and
operate each of the underlying accused services, websites,
and applications.” Dkt. No. 27, at 2, 5-15.
motion to dismiss asserts that IAC and MGI are not liable for
infringement on either of two theories: (1) vicarious
liability based on an alter ago theory, and (2) vicarious
liability based on an agency theory. In response, British
Telecom does not allege liability on an alter ego theory, but
relies only on an agency theory. Dkt. No. 27, at 11 n.2. The
Court will therefore focus on whether British Telecom's
first amended complaint is sufficient to meet the pleading
requirements for British Telecom's agency theory of
liability. Because the Court finds that the pleadings are
sufficient to survive a motion to dismiss under an agency
theory of vicarious liability, it is not necessary to address
whether the first amended complaint shows that IAC or MGI
actually owns or operates the accused services.
presented with a motion to dismiss for failure to state a
claim, the court applies a two-part analysis: (1) “the
factual and legal elements of a claim should be separated,
” and (2) accepting all of the complaint's
well-pleaded facts as true, the court “must then
determine whether the facts alleged in the complaint are
sufficient to show that the plaintiff has a ‘plausible
claim for relief.'” Fowler v. UPMC
Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (quoting
Ashcraft v. Iqbal, 556 U.S. 662, 679 (2009)).
“Determining whether a complaint states a plausible
claim for relief will . . . be a context-specific task that
requires the reviewing court to draw on its judicial
experience and common sense.” Iqbal, 556 U.S.
at 679. That standard guides the Court's analysis of the
sufficiency of British Telecom's claims of vicarious
parent company is not liable for the actions of its
subsidiary solely because of the parent-subsidiary
relationship.” StrikeForce Techs., Inc. v.
PhoneFactor, Inc., No. CV 13-490, 2013 WL 6002850, at *3
(D. Del. Nov. 13, 2013). However, liability may be
permissible under either of two distinct theories: (1) the
alter ego theory, or (2) the agency theory. See Id.
Although British Telecom does not rely on the alter ego
theory, the differences between the two theories inform the
the alter ego theory, the court must determine whether a
parent and its subsidiary are truly separate. See Phoenix
Canada Oil Co. Ltd. v. Texaco, Inc., 842 F.2d 1466, 1476
(3d Cir. 1988). Factors to consider include: “adequacy
of capitalization, overlapping directorates and officers,
separate record keeping, payment of taxes and filing of
consolidated returns, maintenance of separate bank accounts,
level of parental financing and control over the subsidiary,
and subsidiary authority over day-to-day operations.”
Id.; see Upjohn Co. v. Syntro Corp., No.
CIV. A. 89-107, 1990 WL 79232, at *4 (D. Del. Mar. 9, 1990);
Mobil Oil Corp. v. Linear Films, Inc., 718 F.Supp.
260, 266 (D. Del. 1989); Akzona Inc. v. E.I. Du Pont De
Nemours & Co., 607 F.Supp. 227, 237 (D. Del. 1984).
Significantly, “[t]he activities bearing on the issue
of corporate independence need not have any particular
relationship to the cause of action being asserted.”
Phoenix Canada, 842 F.2d at 1477.
agency theory differs in scope and application. Under the
agency theory, “total domination or general alter ego
criteria need not be proven.” Id. Rather,
“a parent corporation is held liable for the actions of
its subsidiary if the parent directed or authorized those
actions.” T-Jat Sys. 2006 Ltd. v. Expedia, Inc.
(DE), No. CV 16-581, 2017 WL 896988, at *6 (D. Del. Mar.
7, 2017); StrikeForce, 2013 WL 6002850, at * 5;
C.R. Bard, Inc. v. Guidant Corp., 997 F.Supp. 556,
560 (D. Del. 1998). Stated another way, when a subsidiary
acts as the agent of the parent corporation, the parent
corporation may be liable for actions conducted by the agent.
See Phoenix Canada, 842 F.2d at 1477. However,
agency liability is limited in application. Finding liability
under the agency test requires the parent-subsidiary
relationship to be directly related to the cause of action.
See id.; T-Jat Sys., 2017 WL 896988, at *6;
StrikeForce, 2013 WL 6002850, at *5.
the facts alleged in the complaint are sufficient to show
that British Telecom has a plausible claim for relief against
IAC and MGI under an agency theory of vicarious liability.
With regard to MGI, the first amended complaint alleges that
MGI: (1) “represents to the public and shareholders
that Match, Tinder and OkCupid are its proprietary brands,
operated by [MGI]”; (2) “provides the technology
and network systems that perform the steps for the Match.com,
Tinder, and OkCupid products/services that infringe [British
Telecom's] patents”; (3) “share[s] [user]
information with other Match Group companies to . . . improve
[users'] chances at building significant connections with
others”; (4) “directly hires and fires officers
of its subsidiaries, including Humor Rainbow, Inc. and . . .
Match Group, LLC”; (5) “shares officers and
directors and shuffles officers throughout its
subsidiaries”; and (6) relies on a system in which the
“persons responsible for overseeing [MGI and] Humor
Rainbow, Inc. . . . also report directly to [MGI's] CEO,
rather than reporting to their own companies' boards of
directors.” Dkt. No. 17, at 11-17. Those factual
allegations, accepted as true, amount to more than bald,
conclusory assertions that should be disregarded. See
BlackBerry Ltd. v. Nokia Corp., No. 17-CV-155, 2018 WL
1401330, at *1 (D. Del. Mar. 20, 2018) (“Though
detailed factual allegations are not required, a complaint
must do more than simply provide labels and conclusions or a
formulaic recitation of the elements of a cause of
action.” (internal citations and quotations omitted)).
Instead, they present a plausible factual scenario of close
coordination and a joint strategy for the use and deployment
of technology and user information that are at the heart of
the '040 patent (Match.com's Mixer feature,
OkCupid's Quickmatch and Locals features, and
Tinder's basic features), the '105 patent
(Match.com's Daily Matches feature and OkCupid's quiz
question feature), and the '297 patent (Tinder's
Smart Photos). See Dkt. No. 21, at 2-3.
relationship to MGI's subsidiaries is somewhat less
clear. The first amended complaint notes, at the outset, that
in IAC's Annual Reports, “[a]ll references to
‘IAC,' the ‘Company,' ‘we,'
‘our' or ‘us' . . . are to IAC.”
Dkt. No. 17, at 9. It then cites to language from numerous
Annual Reports in which IAC allegedly discusses its
relationship (using the pronoun “we”) to the
alleged infringing products and services. This language
includes: (1) “[t]hrough Match Group, we operate a
dating business . . . [and] provide these [dating] services
through websites and applications that we own and
operate”; (2) “we also offer access to our
services via various mobile devices through our Match,
OkCupid, [and] Tinder . . . applications”; (3)
“[w]e also continually work to expand and enhance the
efficiency and scalability of our technology and network
systems.” Dkt. No. 21, at 9-12. The first amended
complaint also alleges that IAC “promulgated the
infringing products/services of the '040 Patent . . . and
the '105 Patent . . . across and incorporated them into
each of the dating business products/services.”
Id. at 13. While the connection between the
grandparent company and its sub-subsidiaries is more
attenuated than the connection between MGI and its
subsidiaries, the requisite “evidence of agency
required at the pleading stage is minimal. . . . Although
this corporate closeness may not be sufficient to succeed on
agency theory at later stages in litigation, it is sufficient
to survive a motion to dismiss, if the parties are properly
and individually identified.” T-Jat Sys., 2017
WL 896988, at *5-6 (D. Del. Mar. 7, 2017); see Jurimex
Kommerz Transit G.M.B.H. v. Case Corp., 65 Fed.Appx.
803, 808 (3d Cir. 2003) (“Jurimex must allege facts
sufficient to allow such a relationship to be proven at
trial, but it is not required to have extensive proof at the
complaint stage.”); Intellectual Ventures I LLC v.
Toshiba Corp., 66 F.Supp.3d 495, 499 (D. Del. 2014)
(regarding allegations of an agency relationship between a
corporate parent and its subsidiaries, “[t]he court
must take plaintiffs' factual allegations as true,
especially where, as here, the information resides with
defendants who, in turn, have provided only a general denial
of infringement rather than facts about the organization and
relationships between the various defendant entities”).
also the parent company of Vimeo, Inc., and the first amended
complaint alleges a plausible agency relationship between IAC
and Vimeo. It cites language from IAC's Annual Reports
including: (1) “[w]e offer basic video hosting and
sharing services . . . and the ability to sell videos”;
(2) “[t]hrough Vimeo, we offer video creators . . .
tools to share, manage distribute and monetize content
online, and provide viewers with a clutter-free environment
to watch content”; (3) “[w]e market Vimeo's
services . . . through our owned and operated website and
mobile applications”; and (4) “[w]e also
continually work to expand and enhance the efficiency and
scalability of our technology and network systems”
(language also used to describe IAC's relationship with
MGI's subsidiaries). Dkt. No. 17, at 10-12. The amended
complaint also alleges that “Vimeo, Inc.'s revenue
is consolidated and reported as part of the operations of
IAC.” Id. at 18. Based on those allegations,
the Court finds that British Telecom has plausibly alleged
that Vimeo, Inc., is directed and controlled by IAC,
particularly with respect to the Vimeo products and services
that assertedly infringe the '450 patent (Vimeo's
Advanced Stats features), the '079 patent (Vimeo's
basic video “purchased” or “rented”
features), and the '200 patent (Vimeo and Vimeo Live
products/services). See Dkt. No. 21, at 3. Citing
Akzona Inc. v. E.I. Du Pont De Nemours & Co.,
607 F.Supp. 227 (D. Del. 1984), IAC and MGI argue that
British Telecom's factual allegations are not sufficient
to overcome a motion to dismiss under Fed.R.Civ.P. 12(b)(6).
In Akzo ...