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Dismissal of Plaintiff’s DJ Complaint for Lack of Personal Jurisdiction over Defendants Reversed

September 18, 2008

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Last Month at the Federal Circuit - October 2008

Judges: Bryson (author), Archer, Prost

[Appealed from: W.D. Wash., Judge Leighton]

In Campbell Pet Co. v. Miale, No. 08-1109 (Fed. Cir. Sept. 18, 2008), the Federal Circuit reversed the district court’s dismissal of plaintiff’s DJ complaint, finding that the presence and activities of the defendant patent holder in the state of Washington were sufficient for the Washington district court to exercise in personam jurisdiction over the defendants.

Plaintiff Campbell Pet Company (“Campbell”), a company located in Washington, manufactures and sells pet products, including mobile folding stretchers for transporting injured animals. Defendant Ty-Lift Enterprises (“Ty-Lift”) is a California corporation, wholly owned by defendant and California resident Theresa Miale (“Ms. Miale”) and Ms. Miale’s mother. Ty-Lift sells mobile stretchers for transporting injured animals, including a mobile folding animal stretcher called the “Ty-Lift I.” Ms. Miale is the owner of U.S. Patent Nos. 6,199,508 and 6,230,662, relating to the Ty-Lift I stretcher. In addition to selling its products through other means of commerce, Ty-Lift advertises and sells its products on a website that it operates.

In June 2007, Ms. Miale attended a three-day convention in Seattle, Washington, during which she demonstrated her products and offered them for sale. During the course of the convention, Ms. Miale and her mother confronted several Campbell employees in attendance and accused the Campbell employees of infringing Ms. Miale’s patents. They stated to the Campbell employees that Ms. Miale had contacted her patent attorney and threatened Campbell with patent litigation. They also sought from the convention manager the removal of Campbell’s display because it infringed Ms. Miale’s patents. And they “bad mouthed” Campbell and its products to Campbell’s customers, accusing Campbell of “copying” Ms. Miale’s patents.

The following month, Ty-Lift sent a letter to Campbell claiming that one of Campbell’s mobile folding stretchers infringed Ms. Miale’s patents. Shortly after receiving Ty-Lift’s letter, Campbell filed a DJ complaint in the U.S. District Court for the Western District of Washington, seeking a declaration of noninfringement and invalidity with respect to Ms. Miale’s patents. In response, Ty-Lift moved for dismissal of Campbell’s complaint for lack of personal jurisdiction. The district court granted Ty-Lift’s motion.

On appeal, the Federal Circuit held the district court was correct in ruling that it did not have general jurisdiction over the defendants. A forum does not have general jurisdiction over a defendant business entity unless the defendant has continuous and systematic general business contacts with the forum state. The Court concluded that defendants’ website did not give rise to general jurisdiction in Washington, as the website was not directed to customers in Washington and did not appear to have generated any sales in Washington. Further, the Court credited the district court’s findings that the defendants had made a very small volume of sales in Washington. This, the Court concluded, amounted to a “classic case of sporadic and insubstantial contacts with the forum state, which [were] not sufficient to establish general jurisdiction over the defendants in the forum.” Slip op. at 7.

The Federal Circuit then turned to specific jurisdiction, noting that even where general jurisdiction is not available, specific jurisdiction may be exercised if the forum state’s long-arm statute would permit service of process on the defendant under the circumstances of the case, and due process considerations would permit exercise of personal jurisdiction over the defendant under those circumstances. The Court further noted that where a state’s long-arm statute extends to the limits of due process, as is the case in Washington, the two-part inquiry collapses into one—whether due process considerations permit the exercise of jurisdiction.

Resolving that question requires the Court to address two issues that bear on whether the defendant has purposefully established minimum contacts with the forum state: (1) whether the defendant has purposefully directed his activities at residents of the forum; and (2) whether the litigation results from alleged injuries that arise out of or relate to those activities. If those two factors are met, a third factor, which is applied sparingly, comes into play—whether the assertion of personal jurisdiction would comport with fair play and substantial justice. Indeed, defeats of otherwise constitutional personal jurisdiction are limited to the rare situation in which plaintiff’s interest and the state’s interest in adjudicating the dispute in the forum are so attenuated that they are clearly outweighed by the burden of subjecting the defendant to litigation within the forum. The Federal Circuit noted that the “reasonableness” inquiry encompasses factors including (1) the burden on the defendant, (2) the interests of the forum state, (3) the plaintiff’s interest in obtaining 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.

In applying the test, the Federal Circuit agreed with the district court that the first two parts of the three-part test for specific jurisdiction were satisfied. Specifically, the defendants had purposely engaged in transactions in Washington during the June 2007 convention, and Campbell’s cause of action for a DJ of patent noninfringement and invalidity arose from or was connected with those transactions.

The Court, however, disagreed that due process considerations barred the Washington court from exercising personal jurisdiction over the defendants. Specifically, the Federal Circuit acknowledged that its prior line of cases has held that sending an infringement letter or merely informing others of patent rights and an intention to enforce those rights through litigation, without more, is insufficient to satisfy the requirements of due process when exercising jurisdiction over an out-of-state patentee. The Court, however, disagreed with the district court’s characterization that Ms. Miale’s actions at the June 2007 convention constituted mere attempts to inform Campbell of suspected infringement. The Court noted Ms. Miale’s attempt to have Campbell’s allegedly infringing products removed from the convention and the reports that Ms. Miale told Campbell’s customers that Campbell’s products infringed her patents. The Court found this conduct went beyond simply informing the accused infringer of the patentee’s allegations of infringement.

Similarly, defendants’ efforts to interfere with Campbell’s business by attempting to enlist the convention manager to take action against Campbell were particularly compelling for the Court. While those efforts were ultimately unsuccessful, the Court found that the pertinent step taken by Ms. Miale was the request that action be taken. Those “efforts at private enforcement occurred within the forum state and while she was personally present there.” Id. at 14. Under the circumstances of the case, the Federal Circuit held that it would not be contrary to its precedent for the district court to assert jurisdiction over defendants based on Campbell’s allegations.

The Court also rejected defendants’ argument that Ms. Miale’s conduct at the convention could not serve as the basis for exercising personal jurisdiction over her because she was acting in her official capacity as the president of Ty-Life, not in her personal capacity. The Federal Circuit found this argument was without merit because it was contrary to Supreme Court precedent.