Patentee’s commercial sales not relevant for personal jurisdiction in DJ actionMay 20, 2009

In a decision addressing personal jurisdiction in declaratory judgment actions, the Federal Circuit affirmed a district court's dismissal of an action against a foreign patent owner. The plaintiff sought a declaration that two patents owned by a Taiwanese company were invalid and not infringed in the plaintiff's home forum, the Northern District of Alabama. The patentee sells products covered by the patent in that district and sent a cease and desist letter to the DJ plaintiff there.

The district court dismissed the case for lack of personal jurisdiction. Citing the Federal Circuit's Red Wing Shoe decision, the district court observed a cease and desist letter alone is insufficient to confer personal jurisdiction. Further, the district court rejected the contention that the sales in the district subjected the patentee to general jurisdiction.

The Federal Circuit affirmed, stating explicitly that the contact relevant for specific personal jurisdiction in a declaratory judgment case are those relating "to the activities of the defendant patentee in enforcing the patent or patents in suit," making the "relevant inquiry . . . to what extent the defendant patentee has purposefully directed" its enforcement activity "at residents of the forum." Based on this standard, the patentee's sales of goods covered by the patent are irrelevant to personal jurisdiction in the declaratory judgment context, as such sales are irrelevant to enforcement of the patent.

Here, the Federal Circuit had little trouble affirming the district court, as the only non-cease and desist contacts with the forum alleged to support jurisdiction were the patentee's sales. While the court was concerned about the potential for foreign patentees to avoid personal jurisdiction in declaratory judgment cases, the court observed the District Court for the District of Columbia is always available under § 293.

Judge Newman dissented, and would have held the patentee's sales and other contacts supporting the related state law claims were sufficient to confer personal jurisdiction in this case. She also criticized the majority's reference to § 293, observing it would be unlikely the state law claims would be permitted to be adjudicated in that forum.

Aten International owns two patents relating to keyboard-video-mouse switches (KVM switches) that permit sharing of such devices among multiple computer users. It competes in the marketplace with Avocent. Over the course of several years, Aten sent Avocent three letters regarding potential infringement of Aten's patents, as detailed below:

• May 28, 2004: Letter sent to Avocent enclosing published application that led to one of the patents "pursuant to § 154(d)" (provisional rights)
• April 27, 2006: Letter sent to Amazon.com (retailer of Avocent products) encouraging them to discontinue selling Avocent products because of infringement concerns
• March 15, 2007: Letter sent to counsel for Avocent alleging infringement of the two patents

When the third letter was sent, the parties were in litigation. Avocent had sued Aten for infringement of its own patents on KVM switches, and the notice of infringement was brought in the hopes of resolving the parties' dispute regarding those patents at the same time as the then-asserted Avocent patents. In response, on April 6, 2007 Avocent filed a declaratory judgment action in the Northern District of Alabama seeking a declaration that the two Aten patents were invalid and not infringed. Aten sought to dismiss the case for lack of personal jurisdiction.

The district court granted Aten's motion to dismiss, holding it was without personal jurisdiction over Aten. Under Red Wing Shoe, simply sending cease and desist letters is insufficient to subject a patentee to personal jurisdiction in the forum to which the letter is sent. Instead, "something more" is necessary for jurisdiction to attach. Here, the only additional contacts with Alabama were Aten's sales of products covered by the patents in the district, which the court held was insufficient to confer jurisdiction. Avocent appealed.

The Federal Circuit affirmed. The court first traced the history of personal jurisdiction jurisprudence from International Shoe to Hanson to Burger King to Calder. Under these principles, the court analyzed whether there was specific personal jurisdiction, or whether the declaratory judgment claim arose out of the patentee's contacts with the forum. However, the question was from which contacts did the declaratory judgment action arise? On this subject, the court stated (internal quotations omitted):

Such a claim neither directly arises out of nor relates to the making, using, offering to sell, selling, or importing of arguably infringing products in the forum, but instead arises out of or relates to the activities of the defendant patentee in enforcing the patent or patents in suit. The relevant inquiry for specific personal jurisdiction purposes then becomes to what extent has the defendant patentee purposefully directed such enforcement activities at residents of the forum, and the extent to which the declaratory judgment claim arises out of or relates to those activities.

Based on this, the court held Aten's sales of products covered by the patents were irrelevant to the jurisdictional analysis. This left only the cease and desist letters, which the Federal Circuit has previously held are insufficient, standing alone, to confer jurisdiction. Instead, there must be "other activities" relating to the enforcement of the patents in the forum. The court provided some examples from its previous cases: "Examples of these 'other activities' include initiating judicial or extra-judicial patent enforcement within the forum, or entering into an exclusive license agreement or other undertaking which imposes enforcement obligations with a party residing or regularly doing business in the forum."

Based on these principles, the court affirmed the district court's decision dismissing the case for lack of personal jurisdiction. Noting the potential problems inherent when the patentee is a foreign entity or individual (and therefore does not "reside" in any district), the court pointed out that under § 293, a foreign patentee is subject to personal jurisdiction in the District Court for the District of Columbia, and thus alleged infringers are not without a forum in which the suit could be brought.

Judge Newman dissented. In her opinion, the facts were sufficient to confer personal jurisdiction in Alabama. Specifically, she noted that the activities that gave rise to the pendent state commercial tort claim, and were, under Calder, "intentionally directed" at an Alabama resident. She also was uncomfortable with the prospect with the idea of the District Court for the District of Columbia as an adequate alternative forum, given the discretion of that district court as to whether to hear the related tort claims. As a result, she would have reversed the district court and held jurisdiction was proper.

To read the full decision in Avocent Huntsville Corp. v. Aten Int'l Co., click here.