Breckenridge Pharmaceuticals v. Metabolite Labs. (Fed. Cir. 2006, 05–1121).
Metabolite (patent holder) and PamLab (exclusive licensee) sued Breckenridge in Colorado — asking for a TRO stopping Breckenridge from selling its Folbee product, which is similar to PamLab’s FOLTX. The plaintiffs, however, dismissed their suit after their motion for TRO was denied. Their next step was to send letters to retailers warning them against selling generic equivalents of FOLTX. The letters to the retailers not name Breckenridge or threaten a lawsuit, but did include a PamLab brochure.
Breckenridge then sued Metabolite and PamLab in Florida for declaratory judgment of non-infringement and for various torts based on Florida law.
Metabolite was dismissed from the suit for lack of personal jurisdiction, and summary judgment was granted to PamLab because Metabolite, as patent holder, was an indispensable party.
On appeal, the CAFC agreed with the lower court that Federal Circuit law should be applied to determine whether personal jurisdiction would comport with due process — because even the non-patent issues were “intimately linked to patent law.”
The panel summarized its licensor due process case law:
In sum, our case law has held as follows: where a defendant has sent cease and desist letters into a forum state that primarily involve a legal dispute unrelated to the patent at issue, such as an injunction obtained for misappropriation of trade secrets, the exercise of personal jurisdiction is improper. Silent Drive, 326 F.3d at 1202. Likewise, a defendant may not be subjected to personal jurisdiction if its only additional activities in the forum state involve unsuccessful attempts to license the patent there. Hildebrand, 279 F.3d at 1356. The same is true where the defendant has successfully licensed the patent in the forum state, even to multiple non-exclusive licensees, but does not, for example, exercise control over the licensees’ sales activities and, instead, has no dealings with those licensees beyond the receipt of royalty income. Red Wing Shoe, 148 F.3d at 1357-58.
In contrast, the defendant is subject to personal jurisdiction in the forum state by virtue of its relationship with its exclusive forum state licensee if the license agreement, for example, requires the defendant-licensor, and grants the licensee the right, to litigate infringement claims. Akro, 45 F.3d at 1546. Finally, the defendant will also be subject to personal jurisdiction in the forum state if the exclusive licensee (or licensee equivalent) with which it has established a relationship is not headquartered in the forum state, but nonetheless conducts business there. Genetic Implant, 123 F.3d at 1457-59.
Thus, the crux of the due process inquiry should focus first on whether the defendant has had contact with parties in the forum state beyond the sending of cease and desist letters or mere attempts to license the patent at issue there. Where a defendant-licensor has a relationship with an exclusive licensee headquartered or doing business in the forum state, the inquiry requires close examination of the license agreement. In particular, our case law requires that the license agreement contemplate a relationship beyond royalty or cross-licensing payment, such as granting both parties the right to litigate infringement cases or granting the licensor the right to exercise control over the licensee’s sales or marketing activities.
Here, the CAFC found that the licensing relationship between Metabolite and PamLab, that PamLab’s sales activities in Florida create are sufficient to give the court jurisdiction over Metabolite.
As such, we hold that, through its relationship with PamLab, which sells products in Florida, Metabolite has purposefully availed itself to the privilege of conducting activities within Florida.
Reversed, vacated, and remanded
Notes:
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Although apparently a different patent, the patent at suit here is related to Metabolite’s method for diagnosing hyperhomocysteinemia. The validity of that patent is currently being considered by the U.S. Supreme Court in the case of LabCorp v. Metabolite.