Serving Foreign Defendants: Navigating the Hague and Texas Substituted Service

by Dennis Crouch

An increasing number of foreign defendants are being sued for IP infringement in US courts.  These cases raise important procedural questions of district court personal jurisdiction over the foreign defendants. One ongoing debate involves proper service of process for foreign defendants under the Hague Service Convention.

Freedom Patents LLC v. TCL Electronics provides some interesting nuance.  The case was filed in E.D.Tex before Judge Mazzant with Freedom Patents suing TCL companies located in the China, Hong Kong, and Vietnam for infringing its antennae patents, including US8284686.

Several defendants challenged the propriety of service of process, and moved to dismiss under Federal Rule of Civil Procedure R. 12(b)(5) (“insufficient service of process”).  Judge Mazzant initially delayed any ruling on the motion, but after the TCL companies petitioned for mandamus, he eventually issued his split decision in the case — ultimately finding that the HK and Vietnamese defendants had been properly served, and providing a simple mechanism for serving the PRC China-based defendants (delivering the summons to their US attorneys). [Mazzat Order on Service of Foreign Defendants].

Texas law provides a mechanism for service of process of non-Texas-residents who engage in business in Texas, but without a regular place of business or a designated agent.  This substitute service process is that the Texas Secretary of State legally serves as the designated agent for foreign defendants conducting business within the state who have not already established a registered agent. Here, the plaintiff alleged that each of the defendants were conducting business in the state of Texas without any designated agent. This allowed the plaintiff to serve the Texas Secretary, he then forwarded a copy of the summons to each defendant.

Although all of the defendants received actual notice, they still complain that they were not formally served and therefore are not subject to the Court’s jurisdiction. TCL Vietnam argued that it does not engage in business in Texas, and therefore the Texas approach is improper. The Hong Kong and PRC defendants argued that the approach did not comport with the Hague Convention.

TCL Vietnam: Texas law defines ‘doing business’ within the state to include committing a tort in the state.  Here, the sale of infringing product in the state is patent infringement — a tort. Although TCL Vietnam is not necessarily the importer or seller within the US, prior Texas cases have have held that a foreign manufacturer  is doing business in the US by producing products with plans for them to be sold in the US, and then putting them into the stream of commerce in a way that sends them to the US.  Based upon this line of reasoning along with the patentees factual allegations, Judge Mazzant found that the patentee had shown enough to conclude TCL Vietnam was doing business in the US. And, therefore, that the service was proper.

The PRC and Hong Kong defendants raised a second issue — that the transmission of documents from the Texas Secretary of State to their offices in PRC and Hong Kong implicates the Hague Convention.

On this point, the patentee disagreed and argued that it served the defendants’ legally designated agent in the State of Texas, a domestic service. And therefore, that the Hague Convention has no applicability since it only addresses foreign service.

FRCP 4(h) governs service of process for corporations, including foreign corporations.  A foreign defendant being served within the US may be served by “following state law for serving a summons” as it would be done in state court in that district. See 4(h)(1)(A) referring to 4(e)(1).  The patentee argues that this is what is happening — that the foreign defendants are constructively in the state of Texas via their legally designated agent and therefore can be served in the manner permitted by Texas law.   On the other hand, a foreign defendant being served outside of the US can be served “by any internationally agreed means … reasonably calculated to give notice, such as those authorized by the Hague Convention.” R.4(f)(1). The rule for international service also gives district courts latitude in determining the means of service so long as “not prohibited by international agreement” so long as reasonably calculated to notify the defendants. R.4(f)(3).  The defendants point here though is that service of foreign defendants outside of the US requires consideration of international agreements, namely Hague.

After reviewing these issues, the district court sided with the defendants, concluding that “when a signatory to the Hague Convention is served through the Texas Secretary of State, the Hague Convention is implicated.”  Primarily here, the court concluded that due process considerations should be incorporated into the rule — and so it makes sense to ensure that the notice is reasonably calculated to reach the defendants.  Normally, a party is deemed served if their designated agent is properly served. Here, however, because we have involuntary agent created by law, due process requires an additional step – that the agent then forward the materials to the defendant in a way calculated to achieve notice.  Because this international forwarding is part of the service process, the rules of international service (i.e., Hague) are implicated.

At the next inquiry, the court looked to see whether the actions — mailing from the  Texas Secretary comport with Hague.  Now the actual Hague process is fairly slow and cumbersome. The plaintiffs instead successfully argued that the service should be deemed to pass muster so long as it is reasonably calculated to put the defendant on notice and is not contrary to any international agreement such as Hague.

• With regard to Hong Kong, the court concluded (contrary to defendants arguments) that Hong Kong continues to permit service by mail. “In their Motion, Defendants stated ‘service of process by mail is not allowed in . . . the Hong Kong SAR.’ This is false.”
• With regard to PRC, the court found that China has expressly objects to service by mail.

When incorporated into the Hague analysis, these contrary results allowed the court to find that service by mail from the secretary of State was proper in Hong Kong as well as Vietnam. On the other hand, the service by mail to PRC defendants was improper.

In the case, Plaintiffs requested alternative relief — allowing service of process through an alternative means.  Namely, the court noted that the PRC defendants had hired US counsel and that it would be proper to serve those defendants via their US attorneys. Although Hague does not proved for service to US Counsel, it also does not prohibit that approach that the court found would be reasonably calculated to provide notice.

The defendants have moved for reconsideration — arguing the order contains clear errors of law creating “manifest injustice”if allowed to stand.

First, the defendants contend that even if Hong Kong generally permits mail service, substituted service on the Hong Kong defendants through the Texas Secretary of State was improper because they do not engage in business in Texas as required by Texas law.  (Judge Mazzant seems to have skipped that initial issue for PRC/Hong Kong defendants).

Second, the defendants argue that alternative service on the China-based defendants through their U.S. counsel would violate principles of international comity.  The key Federal Circuit case on point is the non-precedential In re Oneplus Tech. Co., No. 2021-165, 2021 U.S. App. LEXIS 27282, at *9-10 (Fed. Cir. Sep. 10, 2021).  In Oneplus, the court explained that “even when other methods of obtaining service of process are technically allowed, principles of comity encourage the court to insist, as a matter of discretion, that a plaintiff attempt to follow foreign law in its efforts to secure service of process upon defendant.”  Id. The delay caused by proper Hague service is not sufficient justification.