Case 1:17-cv-00868-CFC-SRF Document 32 Filed 11/27/18 Page 1 of 6 PageID #: 1243
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`UNIVERSITY OF MASSACHUSETTS
`MEDICAL SCHOOL and CARMEL
`LABORATORIES, LLC,
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`L’ORÉAL S.A. and L’ORÉAL USA, INC.,
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`Plaintiffs,
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`v.
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`Defendants.
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` Case No. 17-cv-868-CFC-SRF
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`PLAINTIFFS’ OBJECTIONS TO MAGISTRATE JUDGE FALLON’S
`NOVEMBER 13, 2018 REPORT AND RECOMMENDATION
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`Pursuant to Rule 72(b) of the Federal Rules of Civil Procedure, Plaintiffs University of
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`Massachusetts Medical School (“UMass”) and Carmel Laboratories, LLC (“Carmel Labs”)
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`(together, “Plaintiffs”) submit these objections to the Report and Recommendation (the
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`“Report”) dated November 13, 2018 (D.I. 31), which recommends that the Court grant
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`Defendant L’Oréal S.A.’s Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction.
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`The Report discredits Plaintiffs’ argument that L’Oréal U.S.A. is L’Oréal S.A.’s United
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`States agent for the purpose of designing and developing the accused products (“Accused
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`Adenosine Products”), and therefore recommends dismissing L’Oréal S.A. for lack of personal
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`jurisdiction. But, as set forth in the First Amended Complaint (“FAC”), in Plaintiffs’ brief in
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`opposition to L’Oréal S.A.’s Motion (“Plaintiffs’ Opposition”) (D.I. 27 and 28, incorporated
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`herein by reference), and as explained further below, the Report’s findings on agency should be
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`rejected, and Plaintiffs’ objections should be sustained.
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`Case 1:17-cv-00868-CFC-SRF Document 32 Filed 11/27/18 Page 2 of 6 PageID #: 1244
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`A. Standard of Review
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`Pursuant to 28 U.S.C. § 636(b)(1)(C) and Federal Rule of Civil Procedure 72(b), the
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`district court “shall make a de novo determination of those portions of the report or specified
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`proposed findings or recommendations to which objection is made” and “may also receive
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`further evidence or recommit the matter to the magistrate judge with instructions.” 28 U.S.C. §
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`636(b)(1)(C). Likewise, Rule 72(b) requires de novo review of any recommendation that is
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`“dispositive of a claim or defense of a party.”
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`B. An Agency Relationship is Not Appropriate for a Motion to Dismiss
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`“Under the agency theory [of personal jurisdiction], the court may attribute the actions of
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`a subsidiary company to its parent where the subsidiary acts on the parent’s behalf or at the
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`parent’s direction.” Cephalon, Inc. v. Watson Pharm., Inc., 629 F. Supp. 2d 338, 348 (D. Del.
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`2009). “[A]n agency relationship is determinable only after appropriate discovery and, thus, is
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`not appropriate for a motion to dismiss.” Kuhn Const. Co. v. Ocean & Coastal Consultants, Inc.,
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`844 F. Supp. 2d 519, 531 (D. Del. 2012) (citing Jurimex Kommerz Transit G.M.B.H. v. Case
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`Corp., 65 F. App’x 803, 808 (3d Cir. 2003) (“[D]iscovery is necessary when an agency
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`relationship is alleged, thereby implicitly allowing allegations of agency to survive a facial
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`attack.”)).
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`Therefore, the Report’s recommendation that the Court dismiss L’Oréal S.A., based on
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`finding no agency between L’Oréal S.A. and L’Oréal U.S.A., is contrary to controlling law.
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`C. The Undisputed Record Demonstrates an Agency Relationship Between L’Oréal
`S.A. and its Subsidiary L’Oréal U.S.A. with Respect to at Least Design and
`Development of the Accused Products
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`Even without the aforementioned presumption, the record in this case demonstrates an
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`agency relationship between L’Oréal S.A. and L’Oréal U.S.A.
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`2
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`Case 1:17-cv-00868-CFC-SRF Document 32 Filed 11/27/18 Page 3 of 6 PageID #: 1245
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`The FAC alleges that Defendant L’Oréal USA, a wholly-owned subsidiary of Defendant
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`L’Oréal S.A, “is the agent of L’Oréal [S.A.], which controls or otherwise directs and authorizes
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`the activities of L’Oréal USA.” (FAC ¶ 7; see also ¶¶ 32 (“On information and belief,
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`Defendants both create and design the Accused Adenosine Products.”), 33 (“On information and
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`belief, L’Oréal USA manufactures, markets, and sells the Accused Adenosine Products across
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`the United States, including in Delaware. L’Oréal USA’s activities are controlled by its parent,
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`L’Oréal.”).) Although “plaintiffs cannot be expected to have personal knowledge of the details of
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`corporate internal affairs” at the pleading stage, Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628,
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`645 (3d Cir. 1989), even without the benefit of discovery, Plaintiffs’ Opposition sets forth
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`extensive publicly available facts demonstrating that L’Oréal USA is L’Oréal S.A.’s agent for at
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`least the purpose of designing, manufacturing, and selling Accused Adenosine Products in the
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`United States and in Delaware.
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`The Report brushed this evidence aside, relying instead on a conclusory and self-serving
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`affidavit submitted by L’Oréal S.A., which claims that L’Oréal S.A. and L’Oréal U.S.A.
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`“observe standard corporate formalities” and do not have an agency relationship. (See D.I. 25.)
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`L’Oréal S.A. purports that its subsidiary “maintains separate licensing and distribution contracts,
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`manufactures and distributes its own products, has its own board of directors, issues separate
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`financial statements, files separate tax returns, and maintains its own workforce from L’Oréal
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`S.A.[,]” and that “L’Oréal S.A. does not directly develop, sell, market, or advertise to consumers
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`in Delaware any of the products at issue in this action.” (Id. ¶¶ 4, 6.)
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`But Plaintiffs’ Opposition advanced substantial evidence that L’Oréal S.A. develops and
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`sells the Accused Adenosine Products in the United States, and in Delaware, by designing and
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`3
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`Case 1:17-cv-00868-CFC-SRF Document 32 Filed 11/27/18 Page 4 of 6 PageID #: 1246
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`developing the infringing Accused Adenosine Products, which its subsidiary then manufactures
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`and distributes here.
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`Specifically, L’Oréal S.A. “defines . . . global strategy and spearhead[s] the portfolio of
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`innovations” for the international group’s “skin care” “line[ ] of business.” (D.I. 28 at Ex. 8.)
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`That “global strategy” includes L’Oréal S.A.’s international patent portfolio, by which it
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`“patent[s] major active ingredients,” including “over 130 molecules,” “well in advance of
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`competitors.” (Id. at Ex. 9 at 2.) L’Oréal S.A.’s “global strategy” to “patent major active
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`ingredients” extends to its efforts to patent infringing adenosine technology, the subject of
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`multiple L’Oréal S.A. United States patents and patent applications. Indeed, L’Oréal S.A.’s
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`United States patents and applications, which it relies on to design and develop the Accused
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`Adenosine Products, are specifically connected to this case, repeatedly cite the patents-in-suit,
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`and in one instance, a L’Oréal S.A. patent application was rejected as obvious over one of the
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`patents-in-suit. (FAC ¶¶ 19-22.) That rejection prompted an agent of L’Oréal S.A. to reach out to
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`the inventor of the patents-in-suit in an attempt to obtain a license, and, as alleged in the FAC,
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`was the subject of correspondence between Plaintiff Carmel Labs and Jean-Paul Agon, the CEO
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`of L’Oréal S.A. (Id. ¶¶ 23, 30.) L’Oréal U.S.A. publicly credits this work by its parent company
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`for the inclusion of adenosine in the Accused Adenosine Products (See FAC ¶¶ 26, 27; see also
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`D.I. 28
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`at Ex. 12
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`(L’Oréal Paris: Adenosine Anti-Aging Skincare Benefit,
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`https://www.loralparisusa.com/ingredientlibrary/adenosine.aspx) at 6, Ex. 13 (M.I. Abella,
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`L’Oréal Recherche, Evaluation of anti-wrinkle efficacy of adenosine-containing products using
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`the FOITS technique, International Journal of Cosmetic Chemistry, 2006 at 447-451)).
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`L’Oréal S.A. argues that its subsidiary “manufactures and distributes” the Accused
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`Adenosine Products in the United States, but L’Oréal S.A.’s own pivotal role in developing and
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`4
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`Case 1:17-cv-00868-CFC-SRF Document 32 Filed 11/27/18 Page 5 of 6 PageID #: 1247
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`designing the Accused Adenosine Products for sale in the United States is undisputed. Plaintiffs
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`will obtain discovery from both L’Oréal U.S.A. and L’Oréal S.A. that conclusively proves
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`L’Oréal S.A.’s role in at least developing, designing, and testing the Accused Adenosine
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`Products, but at this stage—before any such discovery has been provided—Plaintiffs’ agency
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`argument passes muster. For that reason, the Report’s reliance on Nespresso USA, Inc. v. Ethical
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`Coffee Co. SA—in which, unlike here, the foreign parent did not “design or manufacture” the
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`infringing goods—is misplaced, and the Report should be overruled in this respect. 263 F. Supp.
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`3d 498, 502 (D. Del. 2017) (emphasis added). At the very least, Plaintiffs’ argument that L’Oréal
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`S.A. designs and develops the Accused Adenosine Products is not “clearly frivolous,” given the
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`extensive supporting public evidence, and Plaintiffs should be permitted to take jurisdictional
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`discovery. Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir. 2003).
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`D. Conclusion
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`For the reasons stated above, Plaintiffs respectfully request the Court overrule the
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`Report’s recommendation that the Court dismiss Defendant L’Oréal S.A. for lack of personal
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`jurisdiction.
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`Dated: November 27, 2018
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`Respectfully submitted,
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`FARNAN LLP
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`/s/ Brian E. Farnan
`Brian E. Farnan (Bar No. 4089)
`Michael J. Farnan (Bar No. 5165)
`919 North Market Street, 12th Floor
`Wilmington, DE 19801
`Telephone: (302) 777-0300
`Facsimile: (302) 777-0301
`bfarnan@farnanlaw.com
`mfarnan@farnanlaw.com
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`Case 1:17-cv-00868-CFC-SRF Document 32 Filed 11/27/18 Page 6 of 6 PageID #: 1248
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`William Christopher Carmody (pro hac vice)
`Tamar E. Lusztig (pro hac vice)
`SUSMAN GODFREY L.L.P.
`1301 Avenue of the Americas, 32nd Floor
`New York, NY 10019
`Telephone: (212) 336-8330
`Facsimile: (212) 336-8340
`bcarmody@susmangodfrey.com
`tlusztig@susmangodfrey.com
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`Justin A. Nelson (pro hac vice)
`SUSMAN GODFREY L.L.P.
`1000 Louisiana Street, Suite 5100
`Houston, Texas 77002
`Telephone: (713) 651-9366
`Facsimile: (713) 654-6666
`jnelson@susmangodfrey.com
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`for University of Massachusetts
`Attorneys
`Medical School and Carmel Laboratories, LLC
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`Of Counsel:
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`Matthew B. Lowrie
`FOLEY & LARDNER LLP
`111 Huntington Avenue, Suite 2600
`Boston, MA 02199
`Telephone: (617) 342-4000
`Facsimile: (617) 342-4001
`mlowrie@foley.com
`mambros@foley.com
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`Attorneys for Carmel Laboratories, LLC
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`COMMONWEALTH OF
`MASSACHUSETTS,
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`By its attorney,
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`MAURA HEALEY ATTORNEY GENERAL
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`By: William Christopher Carmody
`William Christopher Carmody
`Special Assistant Attorney General
`SUSMAN GODFREY L.L.P.
`1301 Avenue of the Americas, 32nd Floor
`New York, NY 10019
`Telephone: (212) 336-8330
`Facsimile: (212) 336-8340
`bcarmody@susmangodfrey.com
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`Attorney for University of Massachusetts
`Medical School
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