Caddo v. Siemens: Microsoft Settlement Covers Downstream Use and No Jurisdiction Over Foreign Parent

by Dennis Crouch

A short non-precedential opinion from the Federal Circuit provides guidance on two key issues: (1) downstream non-party reliance upon settlement agreements; and (2) personal jurisdiction over foreign corporations. Siemens Industry, Inc. Caddo Sys., Inc. v. Siemens Aktiengesellschaft (AG), Nos. 2022-1623, -1624 (Fed. Cir. Sept. 22, 2023).  In its decision, the Federal Circuit affirmed that a prior settlement agreement between the patentee Caddo and Microsoft barred the claims against Siemens. The court also found no personal jurisdiction over Siemens AG.

Caddo asserted infringement of six patents relating to user interface navigation methods against Siemens.  Caddo had previously sued Microsoft and reached a 2017 settlement agreement that covered third-party products using Microsoft technology, including .NET software that Siemens had relied upon.  In defending its actions, Siemens argued that the Microsoft .NET license provided a complete shield.

License is an affirmative defense to patent infringement and so the defendant typically has the burden of presenting and proving the elements. At the summary judgment stage, Siemens presented evidence that “the entirety of RadBreadcrumb—the accused instrumentality—uses and, indeed, would not function without .NET.”  Caddo was then given an opportunity to provide contrary evidence , but apparently did not.  As such, the district court awarded summary judgment of no infringement based upon the license.  On appeal, the Federal Circuit affirmed.

The Federal Circuit made clear that Caddo, as the non-moving party opposing summary judgment, shouldered the burden of presenting evidence that some portion of the RadBreadcrumb code fell outside the scope of the Caddo/Microsoft settlement agreement. As the court explained,

To justify our setting aside the summary judgment ruling for this reason, Caddo had to show on appeal, at the least, that it presented to the district court (in its opposition to the motion for summary judgment) evidence of a portion of the accused functionality of RadBreadcrumb that did not use .NET, where the presented evidence created a triable issue in the face of Siemens Industry’s assertion and evidence that all of the accused functionality used .NET.

Id.  This burden aligns with the general summary judgment standard requiring the non-movant to cite evidence of a disputed material fact.  The case arose in N.D. Ill., and so the Federal Circuit relied upon 7th Circuit decision of Ammons v. Aramark Uniform Services, 368 F.3d 809 (7th Cir. 2004) for the principle that “where a non-moving party denies a factual allegation by the party moving for summary judgment, that denial must include a specific reference to the affidavit or other part of the record that supports such a denial.”

The Federal Circuit found Caddo failed to satisfy this burden, noting that “[n]either passage [cited by Caddo] refers to evidence of a portion of RadBreadcrumb that does not ‘use’ .NET for the accused functionality.” Given this failure, the appellate court affirmed the dismissal based on the settlement agreement’s protections was warranted. This underscores the importance of the non-movant diligently citing its best evidence of disputed facts when opposing summary judgment.

I’ll note here that this outcome is in direct conflict with a 2022 jury verdict in Caddo v. Microchip, 20-cv-245 (W.D.TX. 2022).  In that case the jury was asked whether Microchip website (also built on .NET) was covered by the Microsoft license.  The jury answered No, in favor of Caddo. That case was later settled and jointly dismissed by the parties.

Personal Jurisdiction: The Federal Circuit also affirmed the district court’s dismissal of Caddo’s claims against a separate corporate defendant – Siemens AG – for lack of personal jurisdiction. The court agreed Siemens AG lacked sufficient minimum contacts with the forum for either general or specific personal jurisdiction even though the Germany-based company has over $10 billion in revenue derived from the US.

It is important to note here that it is the Siemans AG website that was accused of infringing the Caddo patents.  The district court found that the website had been designed and was hosted abroad, but included data protection and privacy provisions tailored specifically for U.S. residents.  And, in-fact, US visitors to Siemens AG website were required to accept a specific “Cookies” agreement before moving forward. Oddly, the district court found the US specific provisions should not be seen as directed toward the US because they “only come into play when a U.S. consumer navigates to Siemens AG’s website.”

On general jurisdiction, the Federal Circuit noted “Siemens AG is a German company, organized and existing under German law, with principal places of business in Munich and Berlin, and it has had no U.S. offices, no U.S. places of business, and no U.S. employees since at least February 2020, before this suit commenced.” Given these minimal forum contacts, the court found no error in dismissing for lack of general jurisdiction, citing precedents like Daimler AG v. Bauman, 571 U.S. 117 (2014).

The court also agreed Siemens AG could not be subject to specific personal jurisdiction in Illinois. It observed the accused website was developed and hosted outside the U.S. and did not directly facilitate U.S. sales. Under cases like Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com de Equip. Medico, 563 F.3d 1285 (Fed. Cir. 2009), this lack of accused product contacts doomed specific jurisdiction. The Federal Circuit thus affirmed dismissal, finding Caddo failed to demonstrate Siemens AG “purposefully directed [any] activities at residents of the forum.”

The patentee focused primarily on the Federal long-arm statute found in FRCP 4(k)(2) that comes into play in cases arising under federal law but where the defendant is foreign and “not subject to jurisdiction in any state’s courts of general jurisdiction.”  Normally, personal jurisdiction is done on a state-by-state basis, but under 4(k)(2), the question becomes whether the companies minimum contacts with the US are sufficient for an exercise of personal jurisdiction.  The Federal Circuit’s opinion did not directly address this issue.