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International Business Machines Corp. v. Expedia, Inc.

United States District Court, D. Delaware

September 24, 2019

INTERNATIONAL BUSINESS MACHINES CORPORATION, Plaintiff,
v.
EXPEDIA, INC., EXPEDIA, INC., HOMEAWAY.COM, INC., H0TELS.COM L.P., HOTWIRE, INC, ORBITZ WORLDWIDE, INC, ORBITZ, LLC, AND TRAVELSCAPE LLC, Defendants.

          MEMORANDUM ORDER

          HONORABLE LEONARD P. STARK UNITED STATES DISTRICT JUDGE

         WHEREAS, Magistrate Judge Burke issued a Report and Recommendation ("12(b)(6) Report") (D.I. 104) on April 11, 2019, recommending that the Court deny the motion to dismiss (D.I. 31) filed by Defendants Expedia, Inc. ("Expedia Group"), Expedia, Inc. ("Expedia-WA"), Homeaway.com, Inc. ("Homeaway"), Hotels.com L.P. ("Hotels.com"), Hotwire, Inc. ("Hotwire"), Orbitz Worldwide, Inc. ("Orbitz Worldwide"), Orbitz, LLC ("Orbitz"), and Travelscape LLC ("Travelscape") (collectively, "Defendants") as it related to Plaintiff International Business Machines Corporation's ("IBM") claims of direct patent infringement in its Amended Complaint (D.I. 27);

         WHEREAS, on April 25, 2019, Expedia Group filed objections ("12(b)(6) Objections") (D.I. 109), specifically objecting that (1) Judge Burke did not resolve Expedia Group's challenges to IBM's "alter ego and agency theories of liability" and (2) IBM had not stated a plausible claim for direct infringement;

         WHEREAS, on May 9, 2019, IBM filed a response to Expedia Group's 12(b)(6) Objections (D.I. 11) ("12(b)(6) Response");

         WHEREAS, Magistrate Judge Burke issued another Report and Recommendation ("12(b)(3) Report") (D.I. 160) on July 24, 2019, recommending that the Court (1) grant Defendants' motion to dismiss (D.I. 31) IBM's Amended Complaint (D.I. 27) as to Defendants Hotels.com and Travelscape for improper venue to the extent that the actions against these Defendants should be transferred; (2) deny without prejudice Defendants' motion to dismiss IBM's Amended Complaint as to Defendant Expedia-WA; and (3) grant IBM's requests that the actions against Defendants Hotels.com and Travelscape be transferred to the Northern District of Texas and the District of Nevada, respectively; further, Judge Burke ordered venue-related discovery on whether the Bear, Delaware location of Great Escapes-a franchisee of Expedia-WA subsidiary CruiseShipCenters ("CSCI")-is Expedia-WA's "place of business;"

         WHEREAS, on August 7, 2019, Defendants filed objections to the 12(b)(3) Report ("12(b)(3) Objections") (D.I. 176), specifically objecting that (1) Judge Burke had not resolved Defendants' 12(b)(6) challenges that Defendants raised in their motion to dismiss; (2) IBM should not be allowed to conduct venue discovery; and (3) Defendants Expedia-WA, Hotels.com, and Travelscape should be dismissed rather than transferred;

         WHEREAS, on August 21, 2019, IBM filed a response to Defendants' Objections (D.I. 194) ("12(b)(3) Response");

         WHEREAS, the Court has reviewed de novo the portions of Judge Burke's Reports relating to the dispositive issues of dismissal and adequacy of the pleadings, see Brown v. Astrue, 649 F.3d 193, 195 (3d Cir. 2011); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3);

         WHEREAS, the Court has reviewed Judge Burke's order for venue discovery for abuse of discretion, see Davis v. Harlow, 632 Fed.App'x 687, 690 (3d Cir. 2015);

         WHEREAS, the Court has reviewed Judge Burke's recommendation to transfer de novo, although a motion to transfer venue is non-dispositive and subject to a "clearly erroneous" or "contrary to law" standard of review, see 360Heros, Inc. v. GoPro, Inc., 2019 WL 4316296, at *1 n.l (D. Del. Sept. 12, 2019) (applying de novo review to motion to transfer venue "for the sake of argument" when parties disputed applicable standard of review);

         NOW THEREFORE, IT IS HEREBY ORDERED that Expedia's Objections (D.I. 109) and Defendants' Objections (D.I. 176) are OVERRULED, Judge Burke's Reports (D.I. 104, 160) are ADOPTED, Defendants' motion to dismiss (D.I. 31) is DENIED as to all Defendants except for Hotels.com and Travelscape and GRANTED as to Defendants Hotels.com and Travelscape but only to the extent that IBM's actions against Hotels.com and Travelscape are transferred to the Northern District of Texas and the District of Nevada, respectively.

         1. Expedia Group first objects that Judge Burke has not resolved its Rule 12(b)(6) challenges to IBM's "alter ego and agency theories of liability." (D.I. 109 at 2) Judge Burke was not obligated to resolve these challenges. Judge Burke found that IBM stated a claim for patent infringement by alleging that Expedia Group directly infringes IBM's patents "by offering travel services through its travel brands' websites and mobile applications." (D.I. 104 at 5) Since IBM satisfied its burden through these allegations, the Court "need not reach [IBM's] other asserted grounds for surviving the motion to dismiss." Kick/lip, Inc. v. Facebook, Inc., 999 F.Supp.2d 677, 686 n.3 (D.Del. 2013).

         2. Expedia Group next objects to Judge Burke's conclusion that IBM stated a plausible claim for direct infringement. (D.I. 109 at 2) It argues that Judge Burke reached this conclusion by misinterpreting two documents IBM attached to its Amended Complaint: (1) Expedia Group's 10-K form, which states that "[w]e operate several technology platforms that support our brands;" and (2) Expedia Group's filing in a different case, in which Expedia Group admitted it "offers" three of the accused websites. (D.I. 109 at 3) Judge Burke concluded that these documents could suggest that Expedia Group operated or controlled the infringing websites. (D.I. 104 at 8) Expedia Group supports its contrary interpretation of these documents by citing a declaration from its executive, Michael Marron, that it filed with its motion to dismiss. (D.I. 109 at 3-4) However, courts deciding motions to dismiss must "construe the complaint in the light most favorable to the plaintiff." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). Thus, at this stage the Court must, and does, take as true IBM's plausible interpretation of its documents notwithstanding Expedia's denial of the well-pleaded allegations. See generally Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (noting that "[t]o decide a motion to dismiss, courts generally consider only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record.").

         3. Defendants first object to the 12(b)(3) Report on the ground that Judge Burke did not resolve Defendants' Rule 12(b)(6) challenge to IBM's alter ego and agency theories of liability. (D.I. 176 at 1) The Court already rejected this same objection in the ...


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