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In the Absence of Supreme Court Consensus, Personal Jurisdiction Premised on a Stream-of-Commerce Theory Is Assessed on a Case-by-Case Basis

August 24, 2012

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Last Month at the Federal Circuit - September 2012

Judges: Rader (concurring), Newman, O'Malley (per curiam)

[Appealed from: D. Wyo., Judge Freudenthal]

In AFTG-TG, LLC v. Nuvoton Technology Corp., No. 11-1306 (Fed. Cir. Aug. 24, 2012), and AFTG-TG, LLC v. Winbond Electronics Corp., No. 11-1307 (Fed. Cir. Aug. 24, 2012), the Federal Circuit affirmed the district court’s dismissal of certain defendants for lack of personal jurisdiction, finding that the record and pleadings demonstrated insufficient contacts with the forum state.

AFTG-TG, LLC and Phillip M. Adams & Associates, LLC (collectively “AFTG”) filed two complaints in the District of Wyoming against Pegatron Corporation, Pegatron Technology Service, Inc., Unihan, ASUSTeK Computer Inc., and ASUS Computer International (collectively “Defendants”), generally alleging that the Defendants’ manufacture, use, testing, and importation of computer chips, motherboards, computers, and other products directly infringed AFTG’s patents and that the Defendants knowingly and intentionally induced and contributed to others’ infringement. The Defendants filed motions to dismiss for lack of personal jurisdiction, and the district court granted the motions, evaluating personal jurisdiction under Wyoming’s long-arm statute, which explicitly reaches to the full extent of the U.S. and Wyoming constitutions. AFTG appealed.

On appeal, the Federal Circuit noted that “[t]he Supreme Court has yet to reach a consensus on the proper articulation of the stream-of-commerce theory,” and that “[i]n the absence of such a consensus, [the Federal Circuit assesses] personal jurisdiction premised on the stream-of-commerce theory on a case-by-case basis by inquiring whether the particular facts of a case support the exercise of personal jurisdiction.” Slip op. at 7. The Court held that the district court employed such a fact-driven approach and correctly found insufficient contacts to support the exercise of personal jurisdiction.

The Court explained that the Supreme Court did not resolve the “long-standing split” on the stream-of-commerce theory in its decision in McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011). Because McIntyre did not produce a majority opinion, the Court was bound to follow the narrowest holding among the plurality opinions, which was Justice Breyer’s concurring opinion that the law remained the same after McIntyre. Accordingly, the Court applied its own precedent interpreting the Supreme Court’s stream-of-commerce precedents, Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558 (Fed. Cir. 1994).

Addressing the instant appeal, the Court declined to take a position on the stream-of-commerce theory, stating that the result is clear and would not change under any articulation of that theory. Specifically, the Court held that “[t]he paltry allegations in the complaint cannot support the exercise of personal jurisdiction in Wyoming.” Slip op. at 12. The Court distinguished the facts here from those in Beverly Hills Fan, finding that, at most, one defendant made isolated shipments to Wyoming at the request of third parties, and further, that the cause of action for patent infringement did not arise out of those shipments. The Court also noted that AFTG did not submit any declarations indentifying sales in Wyoming that would refute the Defendants’ assertions that their contacts with Wyoming were sporadic at best, or proffer any evidence indicating that Wyoming was part of any Defendant’s continuous, established distribution channels. “As the district court aptly observed, AFTG’s complaint represents nothing more than ‘bare formulaic accusation’ that the defendants maintain sufficient contacts with Wyoming.” Id. at 13. The Court concluded that “[t]his case is not a close call, regardless of how one articulates the stream of commerce theory.” Id. The Court thus affirmed the district court’s dismissal of the case for lack of personal jurisdiction.

Chief Judge Rader concurred with the opinion, agreeing that the Defendants’ actions did not satisfy personal jurisdiction in Wyoming. Judge Rader wrote separately to comment further on the Court’s application of the Supreme Court’s decision in McIntyre. According to Judge Rader, Justice Breyer adopted Justice O’Connor’s test from Asahi Metal Industry Co. v. Superior Court of California, Solano County, 480 U.S. 102 (1987), requiring “something more” than foreseeability to exercise personal jurisdiction. In Judge Rader’s view, “[e]mphasis on assessing the presence of ‘something more’ would clarify the muddled ‘stream of commerce’ concept.” Rader Concurrence at 3. Judge Rader contended that “Beverly Hills Fan, with its unfettered reliance on a ‘stream of commerce’ theory, is now shaky precedent to the extent that it runs counter to the McIntyre decision.” Id. at 4. “This court might reliably require that ‘something more’ be present to satisfy personal jurisdiction requirements.” Id.