Friday, June 09, 2017

CAFC discusses personal jurisdiction in New World case

The outcome was "no personal jurisdiction":

New World International, Inc., and National Auto
Parts, Inc., (collectively, “New World”) appeal from a final
decision by the United States District Court for the
Northern District of Texas dismissing New World’s declaratory
judgment complaint for lack of personal jurisdiction
over defendant-appellee Ford Global Technologies,
LLC (“FGTL”). We affirm.

As to the law:

“Personal jurisdiction is a question of law that we review
de novo.” Autogenomics, Inc. v. Oxford Gene Tech.
Ltd., 566 F.3d 1012, 1016 (Fed. Cir. 2009). We review the
pleadings and other submitted evidence in the light most
favorable to New World. Id. at 1017. Because the complaint
involves issues of patent infringement and validity,
we apply Federal Circuit law to the jurisdictional issue.
Id. at 1016.


For personal jurisdiction, the nonresident defendant
must have “certain minimum contacts with [the forum]
such that the maintenance of the suit does not offend
‘traditional notions of fair play and substantial justice.’”
Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
For minimum contacts in the context of specific jurisdiction,
the plaintiff must show that the defendant “has
purposefully directed his activities at residents of the
forum, and [that] the litigation results from alleged
injuries that arise out of or relate to those activities.”
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985);
see also id. at 475 & n.18. If those minimum contacts are
sufficient, the defendant may point to other factors “to
determine whether the assertion of personal jurisdiction
would comport with ‘fair play and substantial justice.’”
Id. at 476. This court has articulated those requirements
in the form of a three-part test: “(1) whether the defendant
‘purposefully directed’ its activities at residents of the
forum; (2) whether the claim ‘arises out of or relates to’
the defendant’s activities with the forum; and (3) whether
assertion of personal jurisdiction is ‘reasonable and fair.’”
Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir.
Under the first two parts of the test, as applied in the
patent context, the question is what minimum contacts
are necessary to establish personal jurisdiction over a
nonresident defendant for a declaratory judgment of
noninfringement or invalidity of a patent.


Under the third part of the test, however,
this court has held that it is improper to predicate
personal jurisdiction on the act of sending ordinary cease
and desist letters into a forum, without more. Red Wing
Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355,
1360-61 (Fed. Cir. 1998) (concluding that “[p]rinciples of
fair play and substantial justice afford a patentee sufficient
latitude to inform others of its patent rights without
subjecting itself to jurisdiction in a foreign forum”); see
also, e.g., Radio Sys. Corp. v. Accession, Inc., 638 F.3d
785, 789 (Fed. Cir. 2011); Breckenridge Pharm., Inc. v.
Metabolite Labs., Inc., 444 F.3d 1356, 1363 (Fed. Cir.
2006); Genetic Implant Sys., Inc. v. Core-Vent Corp., 123
F.3d 1455, 1458 (Fed. Cir. 1997).
While the act of sending cease and desist letters is insufficient
by itself to trigger a finding of personal jurisdiction,
other activities by the defendant, in conjunction with
cease and desist letters, may be sufficient. One such
activity that this court has recognized may meet the
minimum contacts requirement is the grant of an exclusive
license to a licensee that resides or regularly does
business in the forum. Avocent Huntsville Corp. v. Aten
Int’l Co., 552 F.3d 1324, 1334 (Fed. Cir. 2008); see also,
e.g., Breckenridge, 444 F.3d at 1366

To be sure, the mere existence of an exclusive license
does not support a finding of specific jurisdiction. For
example, a license that establishes no relationship between
a patent holder and a licensee beyond the payment
and receipt of royalty income is not sufficient, because a
declaratory judgment action does not typically “arise from
or relate to” a patent holder’s efforts to license or commercialize
its patent. Avocent, 552 F.3d at 1336; see also
Radio Sys. Corp., 638 F.3d at 789-90.


What matters, then, is whether the agreement between
the patent holder and the exclusive licensee imposes
an obligation on the patent holder to enforce or defend
the patent on behalf of the licensee that is engaged in
exploiting the patent rights in the forum state. That
question is important because a patent holder’s undertaking
of such continuing enforcement obligations to a party
that does business in the forum may qualify as purposeful
availment by the defendant of the privilege of conducting
activities within the forum state. See Burger King, 471
U.S. at 479-80; Perdue Foods LLC v. BRF S.A., 814 F.3d
185, 191 (4th Cir. 2016) (“[I]mplicit in the Supreme
Court’s distinction between a contract—which cannot, by
itself, establish purposeful availment—and a contract
with continuing obligations—which ‘manifestly’ constitutes
purposeful availment—is the assumption that the
continuing obligations strengthen a defendant’s contacts
with the plaintiff’s forum.”) (quoting Burger King, 471
U.S. at 476).

The arguments of New World are rejected:

New World argues that under the precedents discussed
above, FGTL’s license with LKQ creates the basis
for a finding of specific personal jurisdiction because it
imposes continuing obligations on FGTL by virtue of its
character as an exclusive license—i.e., by preventing
FGTL from granting a license to New World. New World
also points to the indemnification and enforcement provisions
as independently sufficient bases for specific jurisdiction.
Those arguments are not persuasive.


New World has not provided a persuasive reason to
interpret the provision differently. Its only argument,
made in a footnote, is that “reasonableness” is an enforceable
standard under Michigan law, which governs the
interpretation of the license agreement. But New World
does not explain how the interpretation of the agreement
under Michigan law would conflict with FGTL’s interpretation.


In sum, under the license agreement, FGTL retains
nearly complete control over the patent enforcement
decision. New World has not shown that the obligations
contemplated in the license have resulted in an undertaking
by FGTL to enforce or defend the patents with LKQ.
Therefore, although the license to the licensee doing
business in the forum is exclusive, the license does not
impose a sufficient obligation on the patent holder regarding
the enforcement of the patent rights to subject the
patent holder to specific jurisdiction there. Nor has New
World pointed to any additional activities in the forum
beyond the license that would give rise to specific jurisdiction.
See Burger King, 471 U.S. at 480 (finding specific
jurisdiction in Florida because “the ‘quality and nature’ of
[the defendant’s] relationship to the company in Florida
can in no sense be viewed as ‘random,’ ‘fortuitous,’ or



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