Tag Archives: Personal Jurisdiction

Will Sprint Communications lead to a rethink of patent law’s standing doctrine?

Patent,

By TJ Chiang

Last week, the Supreme Court decided Sprint Communications Co. v. APCC Services, a case that received more attention for Chief Justice Roberts’ citation to Bob Dylan than the mundane federal jurisdiction issues involved. The case involved the collection of small debts by payphone operators from long-distance phone companies. Because the amounts involved were small, payphone operators assigned their claims to “aggregators,” who effectively brought the suit on their behalf. The issue was whether these aggregators, who had nothing but an assignment of the right to sue the phone companies, had standing in federal court.

The Court held that “an assignee of a legal claim for money owed has standing to pursue that claim in federal court.” As an example of this longstanding ability to assign legal claims to strangers who had not suffered any personal injury, the Court cited the early patent statute, which permitted (then and now) inventors to assign their patents to others.

The irony of the shout-out to patent law is that both the Supreme Court and the Federal Circuit have consistently held that the assignee of a legal claim for money owed on a patent does not have standing to pursue that claim in federal court. A bare assignment of the legal claim for past infringement damages—precisely the type of assignment in Sprint Communications, since the plaintiffs were not assigning their payphones to the aggregators—does not confer standing to sue. See, e.g., Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U.S. 24 (1923); Mars, Inc. v. Coin Acceptors, Inc., No. 07-1409 (Fed. Cir. June 2, 2008). Instead, the assignment must include the patent itself or an exclusive license.

There are certainly sound policy reasons for requiring the patentee to be a party to an infringement suit, not least because a judgment of invalidity might not be binding absent such participation. At the same time, the patentee standing requirement is a source of frequent litigation at the Federal Circuit. Moreover, because standing is jurisdictional, the issue of proper parties can require an entire case to be relitigated due to a procedural defect. Perhaps the time is ripe for some rethinking in this area, as Sprint Communications and Crown Die appear to be in some tension with each other.

[NOTE: This summer TJ Chiang is transitioning from his position as an associate at Quinn Emmanuel to become a professor at George Mason Law School. Along with yours truly and Jon Dudas, TJ Chiang is a graduate of the University of Chicago Law School. SSRN]

Purchasing Canadian Drugs & Patent Infringement

Patent

PatentLawPic289In the recent Litecubes case, the Court of Appeals for the Federal Circuit (CAFC) held that a product may be considered “sold” in the US even though title is transferred abroad.  [Background] A broad restatement of the court’s focus is that the sale is “within the United States” whenever the selling act would be sufficient to create personal jurisdiction over the accused infringer.  That conclusion is bolstered by the CAFC’s continued reliance of personal jurisdiction cases in its analysis.

One astute Patently-O comment by patent attorney Paul Morgan queried whether Litecubes could open the door to patent infringement litigation against Canadian pharmacies who sell to US customers who cross the border to purchase cheaper drugs.  There are some strong parallels between Litecubes and the pharmacy example that should give some reason to believe that such a lawsuit has some merit — especially if Canadian drug sellers knew they were selling to US nationals for transport back to the US. However, direct infringement would be a stretch from the facts of Litecubes:

“Since the American customers were in the United States when they contracted for the accused cubes, and the products were delivered directly to the United States, under North American Philips and MEMC there is substantial evidence to support the jury’s conclusion that GlowProducts sold the accused cubes within the United States.”

Litecubes focused on the issue of direct infringement.  Canadian sellers might alternatively be liable as indirect infringers under theories of inducement and/or contributory infringement.

Some have suggested that the a patentee should not be allowed to block importation of drugs that the patentee sold abroad.  I.e., if Pfizer sells Lipitor in Canada at a low price, the patentee should not be allowed to control the downstream free market — even if the result is US imports that undercut the company’s US price.  In patent lingo, this follows the theory of patent exhaustion.  However, US Courts have made clear that a patentees foreign sales do not exhaust its US patent rights.*

This type of case may never come to pass. However, that result may be more due to politics and difficulties in detection and enforcement rather than a lack of a strong legal case.

Notes:

  • Patent Exhaustion is currently being considered by the Supreme Court in a case titled Quanta v. LGE.
  • * Jazz Photo v. ITC, 264 F.3d 1094 (Fed. Cir. 2001), cert. denied, 536 U.S. 950 (2002)(“United States patent rights are not exhausted by products of foreign provenance. To invoke the protection of the first sale doctrine, the authorized first sale must have occurred under the United States patent.”).

Territorial Limits of Infringement via Sale

Patent

PatentLawPic282Litecubes v. Northern Light Productions (GlowProducts) (Fed. Cir. 2008).

Short Summary: (1) Subject Matter Jurisdiction is satisfied by a well pled complaint, even if the accused infringer is foreign and the infringing activity is potentially outside the US; (2) In an infringement analysis, a product may be considered “sold” in the US even though title is transferred abroad – so long as the seller deals directly with US customers and then ships the product to the US.

Litecubes are artificially illuminated pseudo-ice cubes. The company asserted both patent and copyright protection against GlowProducts of Canada.  Although GlowProducts has no US facilities or assets, the company does sell and ship directly to US customers.

Subject Matter Jurisdiction: On appeal, the CAFC raised the issue of subject matter jurisdiction. Specifically the court inquired whether the limits on subject matter jurisdiction require a patent plaintiff to establish some threshold level of infringement within the US. Or, are the elements of infringement merely factual elements to be proven at trial.

Well pled complaint rule: Under the well pled complaint rule, subject matter jurisdiction is satisfied by a complaint that establishes “either that federal patent law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law.”  Here, because Lightcubes complaint pled each element of the infringement statute (35 USC 271(a)), the federal court properly has jurisdiction. 

Furthermore, subject matter jurisdiction is not defeated by a failure to prove the allegations unless the allegations are “wholly insubstantial and frivolous.”

There are some prior that look at territoriality requirements as jurisdictional. However, the CAFC found that the territorial limitations of Section 271 are elements of infringement rather than requirements for subject matter jurisdiction.

“Thus, in these respects, a limitation on the extraterritorial scope of a statute is no different than any other element of a claim which must be established before relief can be granted under a particular statute.”

Thus, the district court should have rejected GlowProduct’s subject matter jurisdiction claims without even considering whether any products were actually imported into the U.S.  Rather, Litecubes satisfied the SMJ requirement by alleging US infringement in the complaint:

“by alleging a violation of § 271, has properly invoked federal question jurisdiction under § 1331 and § 1338. This jurisdiction does not depend on whether Litecubes is able to succeed on the merits in proving all of the elements of patent infringement that it alleged in the complaint.”

Applying a parallel analysis, the CAFC likewise held that the issue of territoriality of copyright infringement is “properly treated as an element of the claim which must be proven before relief can be granted, not a question of subject matter jurisdiction.”  Of course, foreign companies charged with infringement can still escape the court’s reach if there is a lack of personal jurisdiction. “In many such cases, the court may not have personal jurisdiction over the defendant.”

Sale in the US: GlowProducts argued that it had not made any US sales. In particular, the Canadian defendant argued that the sales were made in Canada and then shipped f.o.b.. On appeal, the CAFC found that that the location of a “sale” under Section 271 should not be limited by any formalistic rules.  Citing its 1994 North American Philips case, the appellate panel held that foreign company’s “sale” may properly be considered within the US if the seller deals directly with US customers and then ships to the US — regardless of whether title to the goods was legally transferred in another country.  

Interestingly, the court extensively relied on personal jurisdiction precedents interpreting constitutional law to broadly define the location of a sale. Yet, the court also argued foreign defendants should rely upon personal jurisdiction arguments to protect against constitutional due process violations — noting that those foreign companies “have substantial protection if the activity complained of took place wholly outside of the United States.  In many such cases, the court may not have personal jurisdiction over the defendant.” 

E.D. Texas Venue Case Goes En Banc; AIPLA Amicus Brief

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The AIPLA believes that the Eastern District of Texas is hearing too many patent cases. Legally, the organization has decided that E.D. Texas judges are “misapplying federal transfer rules by giving too much weight to plaintiffs’ choice of venue.”

In re Volkswagen is up for an en banc hearing in the 5th circuit court of appeals. The VW case is a product liability case stemming from a VW Golf crash that killed a 7–year old girl. The accident occurred in Dallas (location of the N.D. Tex.), but the case was filed 150 miles away in Marshall. 

VW argues that the District Court (Judge Ward) abused its discretion in denying the defendant’s §1404 venue transfer motion — arguing that it would be “unduly burdensome” for the multinational to litigate in the Eastern District of Texas rather than the Northern District of Texas.

28 U.S.C. §1391, the venue statute, broadly allows cases to proceed in any venue where a defendant corporation “is subject to personal jurisdiction at the time the action is commenced.”  Even when venue is proper, a court may still transfer the case to a more convenient location. 28 U.S.C. §1404 provides that a district court may transfer a civil action when it is both more convenient for the parties and witnesses and is “in the interest of justice.” 

In an amicus brief filed in the case, the AIPLA argues that there are many cases sitting in the Eastern District of Texas that should more properly be heard elsewhere, and that the district court has been too slow to transfer venue.

“The routine filing of patent infringement complaints in the Eastern District of Texas that have essentially no connection to that district has been encouraged by the seeming reluctance of courts in that district to transfer cases under § 1404(a).”

As a backstop to its arguments, the AIPLA also raised the threat of legislation:

“It is also worth noting that legislation on patent reform currently before Congress seeks to narrow drastically venue in patent cases, driven to a great extent by a desire to address the kind of forum shopping that occurs in the Eastern District of Texas.4 Providing the district courts clear guidance on applying the transfer provision will go a long way toward solving the forum shopping problem that is the impetus behind the pending venue legislation.”

The AIPLA Argument:

  1. The location of filing should only be a presumptive starting point in the venue analysis. If a defendant shows “good cause” reason to transfer, then the presumption should evaporate.
  2. “Proximity of evidence” should be a major factor.
  3. This decision is made at a very early stage in the litigation, thus the court should not require a high level of precise evidence to prove convenience.
  4. The “public interest” is usually a sham argument. (That the people of E.D. Tex. have an interest in having their courts adjudicate patent cases if the goods are sold there).

Read the AIPLA Brief

Issues With Employee Assignment Agreements

Patent,

PatentLawPic207DDB Tech v. MLB Advanced Media (Fed. Cir. 2008)

Mr. Barstow (head of DDB) was still an employee of Schlumberger when he invented his system for simulating a baseball game. As part of his employment agreement, Barstow assigned all rights to inventions relating to or resulting from Schlumberger business.  At the time, Schlumberger’s GC for software agreed that Barstow’s baseball software was his own personal work and not Schlumberger related. After DDB filed suit, MLB bought “any interest that Schlumberger had in the patents” along with a retroactive license.

The district court (Judge Yeakel) dismissed the case for lack of subject matter jurisdiction — finding that the baseball software invention fell within the employment agreement and that MLB is now the patent owner. DDB appeals.

Employee Assignment: Under the Texas law, the employment agreement creates an instant assignment as soon as a qualifying invention is created. Thus, if the patents “qualify” as within the employment agreement, then they were owned by employer regardless of any seeming waiver, estoppel, or statute of limitations. Those defenses could prevent enforcement of an agreement to assign, but do not negate an already consummated assignment.

The CAFC ordered the lower court to reopen discovery so that the parties could collect evidence on whether the baseball software invention fell within the scope of the employment agreement.

Notes:

  • Employees beware: Your employer likely owns your future inventions! Best practice for garage inventors is to obtain a written exception to the policy prior to inventing. Otherwise, you should obtain an assignment from the company.  Of course, this depends upon state law and whether the agreement includes the magic language: “[The employee] does hereby grant and assign.” If Barstow had been employed at the University of Missouri, he might have won because the employment agreement only requires the employee “upon request [to] assign … all domestic and foreign rights.”  For prolific home inventors, this difference may be enough to warrant a job change.
  • Loyalty?: Not to pick on Schlumberger, but isn’t it odd that they chose to do business with MLB over their own former employee…
  • Patently-O Discussion of district court case.
  • This case was handled by my former firm, MBHB LLP. However, I was in Boston by the time that they took over the litigation. 
  • Recordation of Assignment: A reader suggested that the patent recordation statute (35 U.S.C. 261) be considered. If you remember 1L property, the patent recordation statute is a notice statute with a three-month grace period.  Thus, a subsequent assignee of a patent will hold title over a prior assignee if two conditions are met: (1) the prior assignee did not record in time (which would give constructive notice); and (2) the subsequent assignee was “without notice” of the prior assignment. The timing is no question here — Schlumberger did not record until after DDB had already sued. The only issue then is whether DDB had notice of the prior assignment.
  • Notice of Prior Assignment: Under Federal Circuit law, a subsequent assignee can have notice of a prior assignment based on actual notice, constructive notice, or even inquiry notice under the principles of equity. Unfortunately, the leading CAFC case on this issue is non-precedential, Katz v. Lear Siegler, 1993 US App Lexis 17507 (Fed. Cir. 1993), and at least two law firms have been publicly chastised for citing the case to the CAFC.

Personal Jurisdiction: Patent Plaintiff must Link Accused Product with Accused Defendant

Patent,

F&G Research v. Paten Wireless (Fed. Cir. 2007)(Nonprecedential)

Part of the Congressional patent reform package focuses on venue reform. Defendants are tired of being sued in the Eastern District of Texas.

In this case, F&G sued Paten in the Southern District of Florida — alleging that Paten’s infringing computer mouse components were being distributed in the state.

On appeal, the CAFC affirmed the lower court’s dismissal of the case — finding that F&G failed to show that Florida courts have personal jurisdiction over the defendant. The Florida long-arm statute allows for specific jurisdiction over parties who commit tortious acts within Florida. The plaintiff has the burden of providing evidence of those acts.

Here, F&G showed that Paten sold components to several companies doing business in Florida (e.g., Logitech, Belkin, and Creative Technology) and also showed that accused products were being sold in Florida. However, the plaintiff did not provide evidence that the accused products sold in Florida were Paten’s products. Thus, no personal jurisdiction.

New Evidence on Appeal: At the appeal stage, F&G presented some evidence that Paten’s products were being sold in Florida. However, the CAFC refused to hear that new evidence. Although personal jurisdiction may be raised sua sponte by the appellate court, the court will not conduct de novo fact finding regarding jurisdiction.

What now?: Although now armed with more evidence of personal jurisdiction, F&G would likely be blocked from filing in Florida because the issue has already been decided between the parties. There are, of course, several hundred other venues available within the US.

Patent Venue and Jurisdiction: Why E.D. Texas?

Patent,

28 USC 1400(b) is the primary patent venue statute. Under the statute, a patent infringement lawsuit may be filed in a jurisdiction (a) where the defendant resides; or (b) where the infringement occurred — so long as the defendant has a “regular and established place of business” in that jurisdiction.

Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. 28 USC 1400

1400(b) has been around for a long time and has (historically) been given narrow interpretation. Corporate residence was often limited to the location of the principal place of business or corporate headquarters and an established place of business did not include stores owned by others or sales-persons covering the locale. Numerous patent cases were dismissed or transferred because the defendant did not meet the requirements of the law. For instance, in the 1964 case of Sheldon v. Norbute, a Pennsylvania district court transferred the patentee’s case to New York even though the infringement occurred in Pennsylvania. According to the court, the defendant did not fit under the statute because it did not “maintain, control, or pay for an establishment in the district.”

In 1990, Congress took to the pen and broadened the definition of a defendant’s “residence” to include any jurisdiction where the court has personal jurisdiction.

For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. 28 USC 1391

In VE Holdings (1990), the Federal Circuit interpreted the amended statute — determining that the statute’s “language is clear and its meaning is unambiguous.”  The appellate panel held that the new statute eviscerats the limitations of Section 1400(b) and allows for patent infringement suits in any jurisdiction where the defendant has sufficient contacts under the constitution.

This leads us to last week — where Orion IP filed suit against 63 defendants in the sparsely populated Eastern District of Texas.  It appears that only a handful of these large corporate defendants have any connection to the jurisdiction beyond a mere ‘stream of commerce’ analysis.  Is it time to return some teeth to Section 1400?

The Senate’s Patent Reform Bill of 2006 (S.3818) would have amended §1400 to, for the most part, eliminate the 1990 expansion.  Under that proposal, the revised venue statute would read as follows:

(b) Any civil action arising under any Act of Congress relating to patents, other than an action for declaratory judgment … may be brought only — (1) in the judicial district where either party resides; or (2) in the judicial district where the defendant has committed acts of infringement and has a regular and established place of business.

(c) Notwithstanding section 1391(c) of this title, for purposes of venue under subsection (b), a corporation shall be deemed to reside in the judicial district in which the corporation has its principal place of business or in the State in which the corporation is incorporated.

The proposal still goes beyond the original scope of §1400 by allowing suits in jurisdictions based on the residence of either the plaintiff or defendant. 

  • Full Disclosure: Several of MBHB’s are defendants in the Orion case. These comments are my own and not those of MBHB or its clients.

Voda v. Cordis: Plaintiff May Not Assert Foreign Patents in US Courts

Patent,

VodaCatheter_smallVoda v. Cordis (Fed. Cir. 2007).

Jan Voda, an Oklahoma medical doctor sued Cordis for infringement of his patent on an interventional cardiology catheter. Voda had obtained patents both in the US and abroad. Not wanting to waste time and money on multiple suits, Voda asked the US court to also determine his claims of foreign infringement based on his patents in the UK, Canada, France, and Germany.  The US court agreed, but Cordis appealed — arguing that the district court improperly extended its jurisdiction.

In a 2–1 decision, the Federal Circuit (Gajarsa) has held that the district court cannot exercise supplemental jurisdiction over Voda’s foreign patent claims.  Judge Newman dissents.

Supplemental Jurisdiction: Federal courts are designed to hear federal law. But, every day they exercise their power to decide issues that arise under the law of other jurisdictions. Usually the other jurisdictions are US states and municipalities. But, the courts are also regular interpreters of non-US law as well.  Non-Federal questions arise based on either “diversity jurisdiction” or “supplemental jurisdiction.”  Supplemental jurisdiction is spelled-out in 28 USC 1367:

[after establishing] original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.

In many cases, supplemental jurisdiction has been found to extend to include foreign law claims. However, the “so related” portion of the statute has been interpreted to require that the supplemental claims arise from a “common nucleus of operative fact” and that the claims would “ordinarily be expected to [all be tried] in one judicial proceeding.”  Here, the CAFC did not determine whether supplemental jurisdiction exists because it found that the district court had abused its discretion (see below).

Discretion and Comity: Even if jurisdiction exists, its exercise is “within the discretion of the district court.”  The CAFC found that the district court abused its discretion by ignoring the Paris Convention, TRIPS and concepts of comity.

 Like the Paris Convention, nothing in the PCT or the Agreement on TRIPS contemplates or allows one jurisdiction to adjudicate patents of another. . . . Based on the international treaties that the United States has joined and ratified as the “supreme law of the land,” a district court’s exercise of supplemental jurisdiction could undermine the obligations of the United States under such treaties, which therefore constitute an exceptional circumstance to decline jurisdiction under § 1367(c)(4). Accordingly, we must scrutinize such an exercise with caution. . . .

The territorial limits of the rights granted by patents are similar to those conferred by land grants. A patent right is limited by the metes and bounds of the jurisdictional territory that granted the right to exclude. Therefore, a patent right to exclude only arises from the legal right granted and recognized by the sovereign within whose territory the right is located. It would be incongruent to allow the sovereign power of one to be infringed or limited by another sovereign’s extension of its jurisdiction. Therefore, while our Patent Act declares that “patents shall have the attributes of personal property,” 35 U.S.C. § 261, and not real property, the local action doctrine constitutes an informative doctrine counseling us that exercising supplemental jurisdiction over Voda’s foreign patent claims could prejudice the rights of the foreign governments.

. . . Because the purpose underlying comity is not furthered and potentially hindered in this case, adjudication of Voda’s foreign patent infringement claims should be left to the sovereigns that create the property rights in the first instance.

Judicial Economy: While the CAFC agreed with voda that “consolidated multinational patent adjudication could be more efficient,” the court worried that it would also cause additional problems of confusion and difficulty understanding and enforcing foreign actions.

Changing Circumstances: Finally, the court left the door open if “circumstances change.”

In addition, we emphasize that because the exercise of supplemental jurisdiction under § 1367(c) is an area of discretion, the district courts should examine these reasons along with others that are relevant in every case, especially if circumstances change, such as if the United States were to enter into a new international patent treaty or if events during litigation alter a district court’s conclusions regarding comity, judicial economy, convenience, or fairness.

Vacated and Remanded

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Patently-O: Judge Takes Stand Against Forum Shopping

Patent, Patent Cases 2006,

Collaboration Properties v. Tandberg ASA, 2006 U.S. Dist. LEXIS 43930 (N.D.Cal. 2006)

Defendant Tandberg waited for six months before moving to amend its answer to add certain defenses and counterclaims.  At about the same time, Tandberg filed its own patent infringement lawsuit (through a holding company) against Collaboration Props in the Eastern District of Texas. Judge Patel of the Northern District of California was clearly peeved at Tandberg’s litigation strategy and forum shopping. 

The court’s concerns about gamesmanship have not diminished, particularly in light of Tandberg’s ongoing aggressive and arguably frivolous motion practice.

Despite these concerns, Judge Patel granted leave to amend subject to a “reasonable condition” that Tandberg’s holding company submit to personal jurisdiction in California and allow the case to be consolidated there.  Tandberg refused and so the court also refused to allow the amended answer and counterclaims.

Note: A reader e-mailed the decision to me because it is apparently the first federal court decision citing Patently-O. In particular, the court cites a draft version of patent reform legislation that I have stored online. At his blog, Ian Best, has compiled a directory of all 27 cases that thus far cite to legal blogs.  (A total of 8 legal blogs have been cited).  Mr. Best has also compiled a directory of all 489 law review articles that cite to legal blogs.  It turns out that Patently-O is in the top-ten with seventeen citations, thirteen of them coming in the past four months.

Personal Jurisdiction over Patent Holder Arises Based on Licensee’s Activities

Patent, Patent Cases 2006, ,

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:

  • 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.

EBay v. MercExchange: Automatic Injunction in Patent Cases

Patent,

MercExchangePatent_small1eBay v. MercExchange (on petition for certiorari).

In July, 2005, eBay filed a petition for writ of certiorari, asking the Supreme Court to review the Federal Circuit’s decision to grant a permanent injunction to MercExchange.  In this case, the Federal Circuit held that, absent exceptional circumstances, a district court should issue a permanent injunction after a finding of infringement.

I. eBay’s Petition: In its petition for certiorari, eBay spells out the traditional four-factor injunctive relief test and argues that the four-factor test should apply to patent cases rather than the de facto per se test applied by the CAFC.  The four-factor test includes consideration of (i) irreparable harm from not issuing an injunction; (ii) whether an adequate remedy exists in law (damages); (iii) whether the injunction would be in the public interest; and (iv) whether a balance of hardships would tip in the plaintiff’s favor.  Download eBay Brief.pdf (4452 KB)

II. MercExchange’s Opposition: MercExchange opposes the petition.  In its brief, MercExchange first point to the statutory guidelines:

  • 35 USC 154: Every patent shall contain . . . a grant . . . of the right to exclude others from making, using, offering for sale, or selling the invention . . .
  • 35 USC 261: . . . patents shall have the attributes of personal property . .
  • 35 USC 283: . . . courts having jurisdiction . . . may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.

Citing a series of Supreme Court cases that support the patentee’s right to exclusivity, MercExchange argues that eBay’s argument would require overruling long established precedent. Additionally, MercExchange provides its own argument under the four-factor test — explaining how it would easily fit within that test as well. Download MercExchange Brief.pdf (3480 KB)

III. Electronic Frontier Foundation in Support: In support of eBay’s petition, the EFF argues that the CAFC’s ‘per se’ injunction is inconsistent with 35 USC 283 and does not consider “countervailing free speech interests.”

Regarding free speech, the EFF argues that patent rights are “increasingly affecting free expression online” and that consideration of the public interest should not be limited to exceptional cases — rather those considerations should be routine.

The most offensive element . . . is [the CAFC’s] promulgation of an impoverished vision of the public interest. While public health concerns are doubtless important . . . courts must be encouraged to consider other public interests as well. In particular, the Federal Circuit offers little, if any, room for consideration of an increasingly evident public interest in patent litigation—free speech. . . . [C]ourts of equity must be free to weigh the need for injunctive relief against the potential impact such relief may have on speech and speech related activities.

Download the EFF brief. 

IV. Computer & Communications Industry Association in Support: With a litany of complaints against the Federal Circuit and PTO, the CCIA asked the Supreme Court to turn the tide of potent, low quality patents.  Specifically, CCIA argues that:

  • The CAFC has made patents more potent.
  • The CAFC has made patents easier to get.
  • The CAFC has made patents more versatile and broadly available.
  • The CAFC has made patents easier to assert.
  • The PTO’s Bureaucracy undermines patent quality.
  • And, that the automatic injunction rule exacerbates these problems by encouraging litigation.

Download the CCIA Brief.

Links:

Filing Counterclaim Does Not Waive Objections to Personal Jurisdiction

Patent, Patent Cases 2005

Patentlyo028

Rates Technology v. Nortel Networks (Fed. Cir. 2005).

by Bradley Crawford

The defendant, Nortel, was sued for patent infringement but raised the affirmative defense of lack of personal jurisdiction. Later, the defendant filed a permissive counterclaim. The plaintiff subsequently asserted that Nortel waived its lack of personal jurisdiction defense when it filed its permissive counterclaim. The district court disagreed. It ruled that the defendant’s filing a permissive counterclaim did not waive the lack of personal jurisdiction defense. It also ruled that it lacked personal jurisdiction over the defendant and dismissed the case.

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District Court Erred in Dismissing Case without Allowing Discovery on Personal Jurisdiction Issues

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Commissariat a L’Energie Atomique (CEA) v. Chi Mei OptoElectronics (CMO) (Fed. Cir. 2005).

Plaintiff CEA is a French governmental agency that develops new technologies for sale and license to the private sector for commercial use. One such technology is their design for liquid crystal display (LCD) technology used for flat panel monitors.

Defendant CMO is a Taiwanese company and is one of the largest manufacturers of LCD monitors in the world.  CMO serves as an original equipment manufacturer (OEM) for Dell and other companies.

Early on in the litigation, the Delaware district court dismissed CEA’s suit for lack of personal jurisdiction over CMO.  On appeal, the Federal Circuit vacated the dismissal.

Specifically, the appellate panel found that the trial court had erred in denying CEA’s request for discovery on the issue of personal jurisdiction.  According to the Court, CEA had established at least a prima facie case that the court had personal jurisdiction over the Defendant — and thus should be entitled to further discovery.

Indeed, CEA has gone beyond factual allegations, and has already made a prima facie case for CMO’s use of an established distribution network that likely results in substantial sales of its products in Delaware. As we have discussed, this showing likely satisfies the standard set forth by Justice Brennan in Asahi, of the "regular and anticipated flow of products from manufacture to distribution to retail sale."  However, CEA is entitled to jurisdictional discovery to determine whether it can satisfy Justice O’Connor’s more restrictive version of the stream of commerce theory.

VACATED AND REMANDED

NOTE: This is the second case in a row where the Federal Circuit has reversed findings of no personal jurisdiction. The last case was Pedre Promotional.

Sale of product through an intermediary can create personal jurisdiction for patent infringement.

Patent, Patent Cases 2005,

Trintec v. Pedre Promotional Products (Fed. Cir. 2005).

Trintec sued Pedre for patent infringement in the District of Columbia accusing Pedre of violating Trintec’s patents on automation of printed faces for use in clocks and watches.  Pedre moved to dismiss for lack of personal jurisdiction and improper venue.  Pedre attached a declaration attesting that its sole office and place of business was in NY and that it has no facilities or representatives in Washington D.C.  The district court granted Pedre’s motion and dismissed the complaint based on a lack of personal jurisdiction.

On appeal, the Federal Circuit reviewed the details of general and specific jurisdiction:

“Specific jurisdiction ‘arises out of’ or ‘relates to’ the cause of action even if those contacts are ‘isolated and sporadic.’ . . . General jurisdiction arises when a defendant maintains ‘continuous and systematic’ contacts with the forum state even when the cause of action has no relation to those contacts.

The appellate court also noted that they were "left totally in the dark about the reasons for the district court’s action.  The panel then vacated the dismissal, finding that jurisdiction could be established under D.C.’s long-arm statute if Pedre’s products were sold in DC. (The sale creating a tort).

Interestingly the court discussed the extent that Pedre’s interactive website would create jurisdiction — however, in the end, they expressly decided not to decide that issue. (because it was moot).

The case was remanded for a further exploration of factual issues to determine whether jurisdiction does exist.

Payless Shoesource v. Genfoot

Patent, Patent Cases 2004

Boot

Payless Shoesource v. Genfoot (D. Kans. 2004) (03-4227-JAR).

After receiving a threatening letter from Genfoot, Payless filed for a declaratory judgment in Kansas, requesting a judgment of patent invalidity, unenforceability, and noninfringement of Genfoot’s patent on a boot. Genfoot, a Canadian company, moved to dismiss based on a lack of personal jurisdiction.

Holding:

Sending an infringement letter, without more, is insufficient to satisfy the requirements of due process when exercising jurisdiction over an out-of-state patentee.

A web site may form the basis of personal jurisdiction. Genfoot’s website, however, does not allow for on-line sales. “Although a customer is interacting with the web sites, this interaction alone likely is not sufficient for minimum contacts without a more substantial exchange of commercial information.”

Genfoot sells to a national distributor. However, “doing business with a company that does business in the state is not the same as doing business in the state.”

The combination of all these elements may be sufficient to create minimum contacts with the state. … Therefore, Genfoot is subject to specific personal jurisdiction in Kansas.