District Court Has Personal Jurisdiction
April 16, 2003
Last Month at the Federal Circuit - May 2003
Judges: Dyk (author), Linn, and Prost
In Silent Drive, Inc. v. Strong Industries, Inc., No. 02-1329 (Fed. Cir. Apr. 16, 2003), the Federal Circuit reversed the district court’s dismissal of a complaint by Silent Drive, Inc. (“Silent Drive”) against Strong Industries, Inc. and Brooks Strong (collectively “Strong”) for lack of personal jurisdiction and remanded for further proceedings.
Silent Drive and Strong are competitors in the manufacture of trailing axles, which are suspension systems attached to the backs of trucks to increase their payload capacity. Silent Drive collaborated with F.S. New Products to create a new trailing axle named the “MAXLE.”
Strong alleged that its trade secrets had been misappropriated in creating MAXLE. In addition, Strong alleged that the MAXLE infringed U.S. Patent No. 6,116,698 (“the ‘698 patent”), which is directed to a trailing axle in combination with a truck.
Strong sued F.S. New Products and others in a Texas state court for trade-secret misappropriation. However, Silent Drive was not named as a party in this action. The Texas state court ruled in favor of Strong and granted an injunction. Even though Silent Drive was not named as a party, the Texas court’s injunction ordered Silent Drive to stop manufacturing and selling the MAXLE.
Strong then sent to Silent Drive and Silent Drive’s customers letters that included a copy of the Texas injunction and the ‘698 patent. The letters alleged serious consequences for disobeying the injunction and infringing the ‘698 patent, including litigation and damages. In addition, Strong issued a news release stating that it was inconceivable for someone to attach a trailing axle to a truck without infringing one of Strong’s patents.
Following these actions by Strong, Silent Drive filed a complaint against Strong in an Iowa federal district court. The first count sought declaratory relief from the Texas injunction. The second count alleged that Strong’s conduct constituted tortious interference, and the third count asked for a declaration that the ‘698 patent was invalid and not infringed.
However, the Iowa federal district court dismissed the complaint. The Iowa district court found that Strong’s activities in Iowa were too sporadic and lacked the required minimum contacts to confer personal jurisdiction. Strong Industries is a Texas corporation whose principal place of business is in Texas, and Brooks Strong, the president of Strong Industries, is a resident of Texas. Therefore, the Iowa district court dismissed the complaint for lack of personal jurisdiction over Strong.
On appeal, the Federal Circuit began its analysis with the third count of Silent Drive’s complaint, which sought a DJ that Strong’s ‘698 patent was invalid. The Federal Circuit noted that the sending of letters threatening litigation is insufficient to confer personal jurisdiction. Therefore, the Federal Circuit held that there was no personal jurisdiction over Strong by the Iowa district court with respect to the third count.
As to the second count of the complaint — tortious interference — the Federal Circuit found that there was no independent federal subject matter jurisdiction and, therefore, it was unnecessary to reach the question of personal jurisdiction with respect to this count.
As to the first count of the complaint, which sought relief from the Texas injunction, the Federal Circuit ruled that the Iowa district court had personal jurisdiction. In particular, the Federal Circuit noted that a fair reading of the first count was that the Texas state court’s exercise of jurisdiction over Silent Drive violated federal due process because Silent Drive was not a party to the Texas case. The Federal Circuit then noted that the relevant issue was whether Strong’s activities to enforce the Texas injunction were sufficiently connected to the forum to confer personal jurisdiction.
The Federal Circuit found that Strong’s activities to enforce the Texas injunction were “uniquely aimed” at Iowa and that Strong was seeking to extend the injunction’s effect into Iowa. Therefore, since Strong’s activities were aimed at Iowa, the Federal Circuit held that the Iowa district court could exercise personal jurisdiction. Since the other two counts were related to the same facts as the first count, the Federal Circuit held that the Iowa district court had supplemental jurisdiction over these counts.