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Personal Jurisdiction Proper over Out-of-State Defendants in DJ Action

August 18, 2003

Decision icon Decision

Last Month at the Federal Circuit - September 2003

Judges: Gajarsa (author), Rader, and Bryson

In Electronics for Imaging, Inc. v. Coyle, No. 02-1536 (Fed. Cir. Aug. 18, 2003), the Federal Circuit reversed a district court’s dismissal of Electronics for Imaging, Inc.’s (“EFI”) complaint for declaratory and injunctive relief and remanded that personal jurisdiction over Jan R. Coyle and Kolbet Labs (collectively “Defendants”) would be proper.

On December 9, 1997, Jan R. Coyle, a Nevada resident, filed U.S. Patent Application No. 08/987,212 (“the ’212 application”), which issued as U.S. Patent No. 6,337,746 (“the ’746 patent”) on January 8, 2002. The ’212 application concerned an interface card for coupling a computer to an external device.

EFI, a Delaware corporation with its principal place of business in Foster City, California, develops, manufactures, and sells print controllers, which are devices that control printers and copiers. EFI believes that Coyle does business as Kolbet Labs, a Nevada corporation. In late 1999 or early 2000, Coyle solicited EFI and proposed that EFI purchase Defendants’ technology related to an interface card for controlling printers and copiers. On or about January 28, 2000, EFI and Kolbet Labs entered into a mutual nondisclosure agreement (“NDA”), which Coyle signed as “owner” of Kolbet Labs.

After signing the NDA, Defendants provided information regarding their technology to EFI. At several different times around May and June 2000, Coyle’s attorney in California, Newton Lee, sent EFI various documents relating to the progress of the ’212 application, including copies of selected parts of the ’212 application. In September 2001, Coyle informed EFI by telephone that the claims of the ’212 application had been allowed by the PTO, alleged that the allowed patent claims covered EFI’s print controllers, and continued to report further new developments in his technology.

On December 11, 2001, before the ’746 patent issued, EFI filed a complaint for declaratory and injunctive relief against Defendants in the United States District Court for the Northern District of California. EFI’s complaint alleged that (1) EFI did not misappropriate any trade-secret information belonging to Defendants by sales of its print controllers or otherwise, and (2) EFI did not breach any NDA with Defendants. After the ’746 patent issued, EFI amended its complaint to allege that the claims of the ’746 patent were invalid. Defendants moved to dismiss the amended complaint for lack of personal jurisdiction.

The district court, applying Ninth Circuit law, granted Defendants’ motion holding that EFI had failed to show that Defendants had purposefully directed their activities at California, thereby failing to establish that Defendants had the “minimum contacts” in California necessary to justify the exercise of jurisdiction over Defendants.

On appeal, the Federal Circuit first determined that the district court had erred in applying the law of personal jurisdiction of the Ninth Circuit to all three claims in the complaint. The Court held that Ninth Circuit law governs for personal jurisdiction of the declaratory claims of nonmisappropriation of trade secrets and nonbreach of contract because these claims do not present questions that are intimately involved with the substance of the patent laws. However, Federal Circuit law applies to personal jurisdiction for the patent-invalidity claim because this question is intimately involved with the substance of the patent laws.

In determining whether the district court could assert specific personal jurisdiction over Defendants, the Court considered whether the forum state’s long-arm statute permits service of process, and whether the assertion of jurisdiction would be inconsistent with due process. Because California’s long-arm statute permits service of process to the limits of the due-process clauses of the federal Constitution, the personal jurisdiction analysis is whether the jurisdiction comports with federal due process.

In finding that personal jurisdiction would be proper for the patent-invalidity claim, the Federal Circuit considered whether (1) the Defendants purposefully directed their activities at residents of the forum state, (2) the claim arises out of or relates to the Defendants’ activities with the forum state, and (3) assertion of personal jurisdiction is reasonable and fair. The first two factors correspond to the “minimum contacts” prong and the third factor with the “fair play and substantial justice” prong of Supreme Court precedents on jurisdiction.

Applying the first factor, the Court determined Defendants’ contacts were “purposefully directed” at California because Coyle hired two California law firms to prosecute the ’212 application, Coyle hired a California attorney who contacted EFI at various times to report on the progress of the pending application, Coyle telephoned EFI in California at various times between approximately late 1999 (or early 2000) and fall of 2001 regarding the subject matter of the technology covered by the patent application, and two representatives of Defendants visited EFI’s facility in California for the purpose of demonstrating the technology underlying what later issued as the ’746 patent.

Applying the second factor, the Court held that the contacts with California made by Coyle and Kolbet Labs clearly arise out of or are related to EFI’s claim that the ’746 patent is invalid.

Regarding the third factor, the Court held that Defendants were unable to demonstrate that it would be unreasonable for the district court to exercise jurisdiction over them for the following reasons: it would not impose much of a geographic burden for Nevada defendants to litigate in California; California has a substantial interest in protecting its residents from unwarranted claims of patent infringement; EFI has an interest in protecting itself from patent infringement, even though Coyle has filed a complaint against EFI in the District Court for the District of Nevada because the still-pending Nevada case can be consolidated with the current action; and, finally, there is no conflict between the interests of California and Nevada in furthering their own respective substantive laws because federal patent law would govern the patentinvalidity claim irrespective of the forum.

Applying Ninth Circuit law, the Court also held that personal jurisdiction would be proper for the breach of contract claim. Defendants had purposefully availed themselves of the laws of California because the confidentiality principles of the NDA governed Defendants’ repeated communications with and solicitation of EFI’s business in California, and the NDA itself envisioned and governed such communications and included a California choice-of-law clause. As for the second part of the personal jurisdiction inquiry, whether a particular claim arises out of forum-related activities, the Ninth Circuit requires that “but for” Defendant’s contacts with the forum, EFI’s claims against Defendants would not have arisen. The Court held that but for Defendants’ contacts with California, EFI would not be seeking a judicial declaration that it did not breach the NDA’s confidentiality principles.

Similarly, the Court concluded that the district court’s exercise of jurisdiction over Defendants regarding the nonmisappropriation of trade secrets claim would comport with due process. The Court held that Defendants purposefully availed themselves of the privilege of conducting activities in California, thereby invoking the benefits and protections of the laws of California.