Tortilla Chip Makers to Duke It Out in Texas

(CN) - Frito-Lay can sue a competitor that it claims copied patented bowl-shaped tortilla chips, a federal judge ruled.

The Plano, Texas-based Pepsico subsidiary says its Tostitos Scoops have a unique shape.

Despite a Feb. 8 cease-and-desist letter, however, Medallion Foods and its parent, Ralcorp Holdings, sell a similarly shaped chip called Bowlz.

Frito-Lay gave the competition until noon on Feb. 10 to comply with the letter.

Instead, Medallion and Ralcorp filed a federal complaint on Feb. 10 for declaratory relief in the Eastern District of Arkansas, where Medallion is based.

Frito-Lay in turn sued the companies in Texas' Eastern District.

Medallion and Ralcorp moved to dismiss the Texas case on Feb. 22 for lack of personal jurisdiction. As an alternative, they said the case should be transferred to Arkansas.

Though Medallion and Ralcorp claimed not to have substantial tortilla-chip-related contacts in Texas, Frito-Lay pointed out that hundreds of Wal-Marts in Texas are stocked with Medallion chips.

Frito-Lay also rejects claims that it cannot pierce corporate veil to establish jurisdiction over the Missouri-based Ralcorp. Ralcorp's participation in the Arkansas lawsuit with Medallion shows that it is involved in chip manufacturing, according to Frito-Lay. It says Medallion is also described as a "division of Ralcorp" on Ralcorp's website.

U.S. Magistrate Judge Amos Mazzant sided with Frito-Lay last week.

"Given these facts presented by plaintiff, the court finds that Ralcorp and Medallion have sufficient minimum contacts with the state of Texas to justify subjecting them to personal jurisdiction," Mazzant wrote Friday.

Mazzant then addressed Ralcorp and Medallion's motion to transfer venue.

The companies claim the bulk of evidence concerning the supposedly infringing chip is located at Medallion's plant in Newport, Ark., 30 miles from the federal courthouse. They also point out that Wal-Mart is headquartered in Bentonville, Ark., which is 200 miles away from the Arkansas federal court. The Eastern District of Texas, on the other hand, is 300 miles away from corporate Wal-Mart.

Machines that produce Bowlz are also located in Arkansas, according to Medallion.

Frito-Lay countered that the inventors behind their patented Scoops are in the Eastern District of Texas. It also attacked the Wal-Mart arguments as extraneous since the company may not need to produce evidence for the case.

Mazzant again sided with Frito-Lay.

"The court finds that six (6) of the private and public interest factors are neutral, and two (2) factors weigh slightly against transfer," he wrote. "Therefore, the court finds that defendants have not satisfied their burden to show that the Eastern District of Arkansas is a 'clearly more convenient' forum for this litigation."

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