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• Case Summary: An alleged patent infringer cannot file for declaratory judgment of noninfringement or validity in its home state and is now likely to face a lawsuit in the patent owner's home state.
• Key Takeaway: The court, in the latest of several cases dealing with the issue of personal jurisdiction in declaratory judgment actions, clearly distinguished commercialization efforts by the patent owner--not giving rising to jurisdiction--from conduct related to patent enforcement.
Building on its personal jurisdiction rulings over the last decade, the U.S. Court of Appeals for the Federal Circuit held April 25 that a patent owner's attempts to convince a Tennessee company to make or market his patented invention were insufficient to confer jurisdiction in that forum (Radio Systems Corp. v. Accession Inc., Fed. Cir., No. 2010-1390, 4/25/11).
The court affirmed the Tennessee court's dismissal of a declaratory judgment action brought by the alleged infringer. The appeals court made clear that only efforts at enforcement, and not those aimed at commercialization, are relevant to the question of whether a patent owner's actions are of the type that might give rise to personal jurisdiction.
Further, the court said that enforcement activities must be directed to the alleged infringer's forum as well, departing from two regional circuit courts that have held otherwise.
Thomas Sullivan, president and sole employee of Accession Inc., owns a patent (7,207,141) on a pet access door that can be inserted into sliding glass doors. He created prototypes of a corresponding product called the Wedgit and attempted to find a manufacturer or distributor.
Sullivan sent communications to and met with Radio Systems Corp. at its headquarters in Knoxville, Tenn., but failed to convince the company to license the Wedgit. Radio Systems proceeded to develop its own product, the SmartDoor, and received a notice of allowance from the Patent and Trademark Office of a patent on that device.
Sullivan hired a New Jersey lawyer to represent his interests. The attorney communicated with the PTO and successfully stopped issuance of Radio Systems' patent. He also sent letters and e-mail messages to Radio Systems related to the communications with the PTO and to outline Accession's potential infringement allegations.
Radio Systems then filed a declaratory judgment action in its home jurisdiction, the U.S. District Court for the Eastern District of Tennessee.
However, Judge Thomas A. Varlan granted Accession's motion to dismiss for lack of personal jurisdiction.
Radio Systems appealed, arguing not that the district court in Tennessee has general jurisdiction over Accession, but that it has specific jurisdictionbased on events related to the instant dispute.
In the opening paragraph of the opinion, Judge William C. Bryson noted, “This is another in a series of cases presenting us with the question whether a patentee's activities directed at the forum state were sufficient to give the forum court personal jurisdiction over the patentee in a declaratory judgment action.” The opinion sets the underlying rules derived from and then compares and contrasts the holdings in that series of cases.
The court began by stating that ordinary cease-and-desist notices do not create specific jurisdiction in the place where they were sent, unless “certain other patent enforcement activities [are] taken in conjunction with” the notices, per Autogenomics Inc. v. Oxford Gene Technology Ltd., 566 F.3d 1012, 1019, 91 USPQ2d 1006 (Fed. Cir. 2009) (78 PTCJ 84, 5/22/09).
However, the court explained further, “only those activities of the patentee that relate to the enforcement or defense of the patent can give rise to specific personal jurisdiction for such an action,” per Avocent Huntsville Corp. v. Aten International Co., 552 F.3d at 1332, 89 USPQ2d 1481 (Fed. Cir. 2008) (77 PTCJ 222, 1/2/09).
In the instant case, the court distinguished Sullivan's activities prior to the attorney's involvement as attempts at commercialization of the patent and not enforcement of the patent. According to Avocent, the court said, “attempts to sell a product or license a patent do not give rise to personal jurisdiction in declaratory judgment actions for non-infringement or invalidity.”
The court further made clear that it did not matter whether Accession's commercialization attempts were directed to sales in Tennessee generally or to Radio Systems specifically. “Mr. Sullivan's correspondence with Radio Systems was focused on generating a market for the Wedgit, not on enforcing or defending the '141 patent,” Bryson said.
Bryson then cited distinguishing characteristics of the court's holdings in two other cases.
In Electronics for Imaging Inc. v. Coyle, 340 F.3d 1344, 67 USPQ2d 1940 (Fed. Cir. 2003) (66 PTCJ 487, 8/22/03), the court allowed jurisdiction because the attorney in the case was based in the same forum as the alleged infringer. “In that context, the attorney-client relationship effectively became an agency relationship in which the principal retained agents in the forum state to assist in the enforcement of its patent rights,” Bryson said.
Also, he noted, the patent owner in Electronics for Imaging had threatened litigation unless the alleged infringer paid $25 million for the patented technology. Bryson again distinguished that communication from Sullivan's communications relevant to marketing efforts.
Radio Systems further argued that communications between Accession's counsel and the PTO to challenge the SmartDoor patent showed more extensive enforcement efforts directed at Radio Systems in Tennessee, citing Campbell Pet Co. v. Miale, 542 F.3d 879, 88 USPQ2d 1252 (Fed. Cir. 2008) (76 PTCJ 732, 9/26/08).
The Campbell Pet court, however, Bryson noted, affirmed jurisdiction when the patentee issued the threats in a trade convention in the forum state where the declaratory judgment action was filed.
In the instant case, the specific threats were directed at Virginia, the home of the PTO, Bryson said, rather than Tennessee.
The court also acknowledged that its jurisprudence differed from that of two other circuits.
The Ninth and Tenth Circuits both found jurisdiction when an intellectual property owner sought to enforce rights through a third party--respectively, an internet registrar in Virginia and an internet retailer in California--against an accused infringer in the court's forum. Bancroft & Masters Inc. v. Augusta National Inc., 223 F.3d 1082, 55 USPQ2d 1941 (9th Cir. 2000) (60 PTCJ 366, 8/25/00), and Dudnikov v. Chalk & Vermilion Fine Arts Inc., 514 F.3d 1063, 85 USPQ2d 1705 (10th Cir. 2008) (75 PTCJ 355, 2/8/08).
“We made clear in Avocent that enforcement activities taking place outside the forum state do not give rise to personal jurisdiction in the forum, and that decision is controlling here,” Bryson said.
Finally, the court considered an additional argument by Radio Systems related to the confidentiality agreement Sullivan signed when he was trying to convince the company to market the Wedgit. The agreement contained a forum selection clause, requiring that a lawsuit be brought in Tennessee for “any cause of action arising under this Agreement or arising out of the subject matter relating to this Agreement.”
However, the “subject matter” at issue was the confidential information Sullivan was to supply to Radio Systems about the Wedgit, Bryson said. The Wedgit patent was already public by that time, so it clearly was not confidential, he said. The agreement was further written such that information was not confidential if it “can be shown to be in the possession of Radio Systems at the time of the disclosure,” which certainly covered the SmartDoor, he added.
“Because this action did not arise out of the subject matter of the confidential disclosure agreement, the forum selection clause of that agreement has no effect on the question of personal jurisdiction,” Bryson said.
He consequently affirmed the lower court's dismissal of the action
Judges Richard Linn and Timothy B. Dyk joined the opinion.
R. Bradford Brittian of Pitts & Brittian, Knoxville, Tenn., represented Radio Systems. Accession was represented by Robert J. Basil of Collier & Basil, New York.
By Tony Dutra
Opinion at http://pub.bna.com/ptcj/101390Apr25.pdf
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