Patent Rights Protection Group, LLC v. Video Gaming Technologies, Inc., 603 F.3d 1364 (Fed. Cir. 2010) (LINN, Rader & Archer) PatentRightsProtectionGroup05122010
Major Issues: personal jurisdiction; trade show attendance; reasonableness of exercise of jurisdiction; suits against multiple accused infringers; jurisdictional discovery; 2011 Supreme Court decisions, J. McIntyre, Goodyear
As summarized below, the Federal Circuit held that a Nevada district court erred in dismissing for want of personal jurisdiction a patent infringement suit against two companies that had displayed products at trade shows in the state (Nevada). Also, the district court abused its discretion in denying jurisdictional discovery.
Note on 2011 Supreme Court Cases on Personal Jurisdiction; Effect on Federal Circuit Precedent in Infringement and Declaratory Judgment Suits. Patent Rights Protection Group is one of a substantial line of decisions in which the Federal Circuit applies the principles on personal jurisdiction in patent infringement and declaratory judgment suits over nonresident defendants. See Chisum on Patents Sec. 21.02[a]; Chisum, Patent Law Digest Sec. 8230.
The Federal Circuit derived the principles from Supreme Court decisions. E.g., Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985). In June 2011, the Supreme Court discussed and applied jurisdictional principles to “stream-of-commerce” fact scenarios in two cases.
One decision, Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011), addressed whether “foreign subsidiaries of a United States parent corporation [is] amenable to suit in state court on claims unrelated to any activity of the subsidiaries in the forum State.” The Court held unanimously that “[b]ecause the episode-in-suit, [a] bus accident, occurred in France, and the tire alleged to have caused the accident was manufactured and sold abroad, North Carolina courts lacked specific jurisdiction to adjudicate the controversy.” Also, there was no “general jurisdiction” in North Carolina by virtue of the fact that some products made abroad by the subsidiaries made their way to North Carolina via the “stream of commerce.”
The second case is potentially more pertinent to patent infringement suits based on “stream-of-commerce” theories, but the justices did not provide a clear message in a majority opinion. J. JcIntrye Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), involved a New Jersey state court products liability suit against a foreign (English) manufacturer of the product that alleged caused personal injury to the plaintiff in New Jersey. The manufacturer had not targeted New Jersey and had distributed its products in the United States only through an independent distributor. Only a few (perhaps only one) of its products ended up in New Jersey. The manufacturer’s representatives had attended trade shows in the United States but not in New Jersey.
The plurality opinion for four justices by Justice Kennedy criticized the “stream-of-commerce” theory and attempted to resolve “decades-old questions left open in Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U.S. 102 (1987).”
Justice Breyer, joined by Justice Alito, concurred but deemed it “unwise to announce a rule of broad applicability without full consideration of the modern-day consequences” and indicated that “the outcome of this case is determined by our precedents.”
Justice Ginsburg dissented, joined by Justices Sotomayor and Kagan. Justice Ginsburg opinion opened with strong language:
A foreign industrialist seeks to develop a market in the United States for machines it manufactures. It hopes to derive substantial revenue from sales it makes to United States purchasers. Where in the United States buyers reside does not matter to this manufacturer. Its goal is simply to sell as much as it can, wherever it can. It excludes no region or State from the market it wishes to reach. But, all things considered, it prefers to avoid products liability litigation in the United States. To that end, it engages a U.S. distributor to ship its machines stateside. Has it succeeded in escaping personal jurisdiction in a State where one of its products is sold and causes injury or even death to a local user?
Under this Court’s pathmarking precedent in International Shoe Co. v. Washington, 326 U.S. 310 (1945), and subsequent decisions, one would expect the answer to be unequivocally, “No.” But instead, six Justices of this Court, in divergent opinions, tell us that the manufacturer has avoided the jurisdiction of our state courts, except perhaps in States where its products are sold in sizeable quantities. Inconceivable as it may have seemed yesterday, the splintered majority today “turn[s] the clock back to the days before modern long-arm statutes when a manufacturer, to avoid being haled into court where a user is injured, need only Pilate-like wash its hands of a product by having independent distributors market it.” Weintraub, A Map Out of the Personal Jurisdiction Labyrinth, 28 U. C. Davis L. Rev. 531, 555 (1995).
Summary of Patent Rights Protection Group (2010); Reasonableness. In Patent Rights Protection Group (2010), the patent in suit concerned “seams including thermal adhesive to reduce pucker.” U.S. Pat. No. 5,568,779. USPatNo5568779
The Federal Circuit noted that the only issues addressed by the district, and therefore, the only issues appropriate for review on appeal were: the reasonableness of exercising personal jurisdiction, and the patent owner’s request for jurisdictional discovery. Not addressed were: whether the accused infringers had sufficient minimum contacts with the forum state (Nevada), and the preclusive effect of a decision by another Nevada district court judge dismissing a related infringement suit.
To exercise personal jurisdiction over a defendant, a court must, in addition to finding amenability to service of process, apply the federal constitutional standard of due process of law. Due process requires not only that a defendant have minimum contacts with a foreign state, but also that exercising jurisdiction comply with “fair play and substantial justice.” A defendant who has minimum contacts with a forum through activities purposefully directed at the forum residents may defeat jurisdiction by making a compelling case that exercising jurisdiction would be unreasonable. Such situations are “rare.”
Relevant factors on reasonableness enumerated by the Supreme Court in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985), include (1) “the burden on the defendant,” (2) “the forum State’s interest in adjudicating the dispute,” (3) “the plaintiff’s interest in obtaining convenient and effective relief,” (4) “the interstate judicial system’s interest in obtaining the most efficient resolution of controversies,” and (5) “the shared interest of the several States in furthering fundamental substantive social policies.”
The district court, applying (erroneously) the Ninth Circuit’s seven-factor test, found that three factors militated toward unreasonableness: the accused infringers (1) had only limited purposeful contact with Nevada in the form of trade show appearances, (2) were located outside Nevada, and (3) were subject to jurisdiction in another forum (Michigan or Tennessee). It found the other factors neutral.
The Federal Circuit noted that modern transportation and communication lessen the burden of defending a suit away from home. Here, the accused infringer’s attendance at Nevada trade indicated that travel to Nevada was not particularly onerous.
Weighing the burden on the accused infringers against the other Burger King factors showed that the accused infringer did not make a compelling case that exercising jurisdiction would be unreasonable. The state of Nevada “has an interest in providing a convenient forum for all Nevada citizens, not just those who might face severe economic hardship if forced to litigate outside Nevada. … This interest extends to actions for patent infringement.” Nevada has an interest in sparing other states from the burden of providing a forum for suits by Nevada residents.
Exercising jurisdiction here served the patent owner’s interest in efficiency, avoiding the burden of pursuing separate, similar infringement suits against the two accused infringers in their home states (Tennessee and Michigan).
Because the suit concerned patent infringement under federal law, there was not need to consider ” `the shared interest of the several States in furthering fundamental substantive social policies’ …. See Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1352 (Fed. Cir. 2003).”
Jurisdictional Discovery. The district court’s denial of jurisdictional was prejudicial and an abuse of discretion because the discovery could “help clarify the issues.”
The patent owner supported its request for discovery with a declaration by the named inventor, stating that the accused infringers had exhibited and operated infringing products at Nevada trade shows.
The accused infringers argued that they attended the trade shows in Las Vegas, Nevada, “without a commercial purpose,” a position that “strain[s] credulity.”