Canadian Law Firm Is Subject to the Jurisdiction of U.S. Federal Courts in Malpractice Claim Based on U.S. Patent Application
August 03, 2009
Last Month at the Federal Circuit - September 2009
Judges: Lourie (author), Gajarsa, Prost (dissenting)
[Appealed from: E.D. Va., Judge Cacheris]
In Touchcom, Inc. v. Bereskin & Parr, No. 08-1229 (Fed. Cir. Aug. 3, 2009), the Federal Circuit considered whether the act of filing an application for a U.S. patent at the PTO is sufficient to subject the filing attorney to personal jurisdiction in a malpractice claim that is based on that filing. The Court concluded that it is and reversed and remanded the district court’s dismissal of the suit based on lack of personal jurisdiction over Bereskin & Parr (“B&P”) and H. Samuel Frost.
Touchcom, Inc. and Touchcom Technologies, Inc. (collectively “Touchcom”) retained Frost of B&P, a Canadian law firm, to prosecute patent applications in Canada, the United States, and various European countries. Frost filed a Canadian patent application and an application under the Patent Cooperation Treaty (“PCT”) in the United Kingdom to obtain patent protection outside of Canada. The PCT application, unlike the Canadian application, did not contain the complete computer source code for the invention because a portion of the source code was unintentionally omitted.
Under the PCT process, a national phase application was filed at the PTO in Alexandria, Virginia. The U.S. application was identical to the PCT application and lacked the omitted portion of the computer source code. Frost transmitted various documents to the PTO before U.S. Patent No. 5,027,282 (“the ’282 patent”) was issued. Several years later, the U.S. District Court for the Eastern District of Texas held that the ’282 patent was invalid for indefiniteness based in large part on the absence of portions of the source code. Touchcom filed a malpractice action against B&P and Frost, which the U.S. District Court for the Eastern District of Virginia dismissed for lack of personal jurisdiction. Touchcom appealed.
On appeal, the Federal Circuit considered whether the district court’s exercise of specific jurisdiction over B&P and Frost was proper. The Court reminded that analysis of personal jurisdiction in federal court begins with Fed. R. Civ. P. 4. The Court agreed with the district court that personal jurisdiction is lacking under Fed. R. Civ. P. 4(k)(1)(A), which states that service of process establishes jurisdiction over a defendant “who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.” Slip op. at 7 (quoting Fed. R. Civ. P. 4(k)(1)(A)). Specifically, the Court found B&P’s and Frost’s contacts with Virginia were limited to the filing of a patent application at the PTO and subsequent communications and filings made in connection with that filing. The Court found that no representative of B&P, including Frost, travelled to Virginia in connection with the patent application or engaged in any conduct in Virginia concerning the interests of Virginia, such as protecting its citizens, businesses, or property. Indeed, the Court found B&P’s contacts were limited to long-distance communications with a federal agency that “happens to be located in Virginia . . . .” Id. at 10.
Turning to Rule 4(k)(2), the Court concluded that this rule permits the exercise of jurisdiction over B&P and Frost. Rule 4(k)(2) permits a federal district court to exercise jurisdiction over a foreign defendant if “(1) the plaintiff’s claim arises under federal law, (2) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction, and (3) the exercise of personal jurisdiction comports with due process.” Id. at 7-8 (quoting Synthes (U.S.A.) v. G.M. dos Reis Jr. Ind. Com. de Equip. Medico, 563 F.3d 1285, 1294 (Fed. Cir. 2009)).
The Court concluded that, because Touchcom’s malpractice claim involved a substantial question of patent law, the district court possessed subject matter jurisdiction under 28 U.S.C. § 1338. Accordingly, the Court concluded that Touchcom’s claims necessarily arose under federal law for purposes of Rule 4(k)(2).
Turning to the second requirement of Rule 4(k)(2) that the defendant is not subject to the jurisdiction of any state’s courts of general jurisdiction, the Federal Circuit concluded that “a court is entitled to use Rule 4(k)(2) to determine whether it possesses personal jurisdiction over the defendant unless the defendant names a state in which the suitcan proceed.” Id. at 15. In other words, “the defendant is afforded the opportunity to avoid the application of the rule only when it designates a suitable forum in which the plaintiff could have brought suit.” Id. at 16.
Here, B&P and Frost failed to name any state in which they would be subject to jurisdiction. Thus, the Court found that for purposes of Rule 4(k)(2), Touchcom has made a prima facie showing that B&P and Frost are not subject to the jurisdiction of any state’s courts of general jurisdiction. The Court noted, however, that if, on remand, the district court determines that B&P and Frost are subject to personal jurisdiction in another state, or if B&P and Frost designate such a forum, the district court is permitted to transfer the case to that forum.
Finally, to decide whether due process permits the exercise of personal jurisdiction under Rule 4(k)(2), the Court considered whether “(1) defendant has purposefully directed its activities at residents of the forum, (2) the claim arises out of or relates to the defendant’s activities with the forum, and (3) assertion of personal jurisdiction is reasonable and fair.” Id. at 18 (quoting Synthes (U.S.A.), 563 F.3d at 1297). Rule 4(k)(2) “contemplates a defendant’s contacts with the entire United States, as opposed to the state in which the district court sits.” Id. (quoting Synthes (U.S.A.), 563 F.3d at 1295).
The Federal Circuit found that the first factor was satisfied because B&P and Frost purposefully directed their activities at parties in the United States and thus had “minimum contacts” sufficient to satisfy due process. B&P and Frost entered into a contract to obtain a U.S. patent. This contemplated and resulted in seeking and obtaining a property interest from a U.S. agency, the PTO, and therefore, B&P and Frost availed themselves of the laws of the United States. The Court found that the second factor was satisfied because Touchcom’s claims of malpractice arose out of Frost filing an allegedly deficient U.S. application with a U.S. agency. Touchcom would not have a claim if Frost had not chosen to file a national phase entry of the PCT application in the United States.
Finally, the Court analyzed whether jurisdiction over B&P and Frost was reasonable and fair, relying on five factors: (1) the burden on the defendant; (2) the forum’s interest in adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and (5) the shared interests of the states in furthering fundamental substantive policies.
The Court held with respect to the first factor that the burden for Canadians who are U.S. registered patent agents to defend this case in the United States is minimal. With regard to the second factor, the Court decided that “the United States has an interest in regulating malpractice occurring at the USPTO regardless of the nationalities [of the parties] involved.” Id. at 21. The Court held that since both U.S. and Canadian courts could equally provide the relief that Touchcom seeks, the third factor is neutral. The Court similarly determined that the fourth and fifth factors do not favor either party.
As a result, the Federal Circuit held that the district court had personal jurisdiction over B&P and Frost, reversed the district court’s judgment dismissing Touchcom’s complaint for lack of personal jurisdiction, and remanded the case to the district court for further proceedings.
In a dissenting opinion, Judge Prost stated that this case presents one of the “rare situations” in which minimum contacts are present but exercising personal jurisdiction would nevertheless violate due process because “the 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.” Prost Dissent at 1 (quoting Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1568 (Fed. Cir. 1994)). Judge Prost disagreed that subjecting B&P and Frost to suit in the United States is a “minimal” burden. Judge Prost noted the burden due to the distance of travel between B&P’s office and the district court and the unique burdens placed upon one who must defend oneself in a foreign legal system. Judge Prost disputed the notion that the eligibility to practice before the PTO gives one a special familiarity with U.S. law. Moreover, with regard to the second fairness factor, Judge Prost stated that the United States’ interest in regulating malpractice in this case is minimal since neither party is a citizen of the United States and, in general, foreign patent agents are not permitted to represent U.S. citizens.
Summary authored by Eli Mazour, student associate at Finnegan.