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Holding Company Subject to Personal Jurisdiction Based on Subsidiary's Conduct

By Karen E. Keller, Andrew A. Lundgren et al.

One avenue to obtaining personal jurisdiction over a non-resident defendant is to assert the familiar "stream of commerce" theory of long-arm jurisdiction: the foreign party purposefully shipped the accused product through established distribution channels, thereby causing injury in the forum. But does the jurisdictional calculus change when the defendant is a patent holding company, operating solely through its subsidiaries? According to District of Delaware Chief Judge Gregory M. Sleet, it does not.

In a recent decision, the Court rejected the claim that a Danish holding company with no connections to Delaware can escape litigation in this district. By collaborating with its subsidiaries on the design, production, and distribution of the accused product, the holding company can properly be said to have directed its activities to the state.

"[The holding company] acted in consort with its subsidiaries to place the accused products in the stream of commerce; it knew that the accused products foreseeably would be sold in the United States and Delaware; and [its] conduct and connections with the forum state were such that it should reasonably have anticipated being brought to court here."

Notably, the Court accepted, as evidence of foreseeability, a subsidiary's website listing of a Delaware vendor selling the accused products. For purposes of personal jurisdiction, at least, a holding company now cannot hide behind the activities of its subordinate entities.

Energy Transportation Group, Inc. v. William Demant Holding A/S, C.A. No. 05-422-GMS (D. Del. Jan. 4, 2008) (Sleet, C.J.).

Full post as published by Delaware IP Law Blog on February 01, 2008 (boomark / email).