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Hildebrand v. Steck Manufacturing

February 07, 2002

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Last Month at the Federal Circuit - March 2002

In Hildebrand v. Steck Manufacturing Co., No. 01- 1087 (Fed. Cir. Feb. 7, 2002), the Federal Circuit reversed a district court’s DJs of noninfringement, invalidity, and tortious interference with contract for lack of personal jurisdiction.

David L. Hildebrand, a Colorado resident, invented socket wrenches called “Screw Offs” for removing damaged car tire lug nuts. In 1995, Hildebrand filed for a patent and contacted two Ohio manufacturers, Mac Tools (“Mac”) and Matco Tools (“Matco”), to explore possible licensing agreements. This contact proved unfruitful. Later that year, Hildebrand discovered that Mac and Matco, along with two other Ohio manufacturers, Quality Tools and Steck Manufacturing Company (“Steck”), were selling devices that he claimed were identical to his invention. In February 1996, Hildebrand mailed two cease-and-desist letters to Matco and Steck, and an alleged third to Mac. A sample set of tools accompanied the letters. Hildebrand followed up the letters with phone calls and sent an additional letter to Steck in December 1997.

Hildebrand’s patent issued in 1998 and he promptly notified the Ohio manufacturers. As a result, Mac canceled a $25,000 order for Steck’s product.

Steck then filed a DJ action in Ohio, and Hildebrand filed an infringement action in Colorado. The Colorado court granted a motion by Steck to transfer the case to Ohio, and, when Hildebrand ceased participating in the Ohio case, the Ohio court entered a DJ against him.

The Federal Circuit reversed, ruling that the Ohio court had improperly asserted personal jurisdiction over Hildebrand. In a two-part inquiry, the Federal Circuit determined that Hildebrand was not amenable to service of process under the Ohio long-arm statute and that his activities in the forum state did not satisfy the minimum contacts requirement of the Due Process Clause.

In concluding that Hildebrand was not amenable to service of process in Ohio, the Federal Circuit noted that the Ohio long-arm statute does not grant to Ohio courts jurisdiction to the limits of the Due Process Clause. Ohio law requires that, to be transacting business under the long-arm statute, any negotiations must result in a substantial connection with the forum, creating an affirmative obligation there. The Court found that Hildebrand’s initial attempt to license his product as well as his subsequent letters and phone calls did not equate to his transacting business in Ohio.

Likewise, according to the Federal Circuit, the tortious injury components of the Ohio long-arm statute did not support personal jurisdiction. In Ohio, the presence of the tort-feasor in the state is required to meet this requirement, and Hildebrand was never in Ohio. Further, Hildebrand did not meet the prong of the Ohio long-arm statute regarding injury in the state caused by an action outside the state because the statute only applies to those who conduct business in Ohio. The Federal Circuit found that he did not. In addition, the Court ruled that Mac’s cancellation of its contract with Steck was not tortious because Mac was simply satisfying its legal duty to avoid infringement until the issue had been appropriately considered.

Applying Federal Circuit law, the Court held that Hildebrand’s contacts were insufficient to sustain personal jurisdiction under the Due Process Clause of the Fifth Amendment. In so holding, the Court noted that an offer to license is so closely akin to an offer to settle that it may not be a separate contact on which to base jurisdiction. According to the Federal Circuit, Hildebrand’s letters and phone calls, accompanied by his licensing offers, were insufficient to create jurisdiction. In addition, the inclusion by Hildebrand of sample tools with the letters and the cancellation of an order by Mac did not constitute contacts upon which jurisdiction could be premised. Accordingly, Hildebrand’s interaction with the forum state did not comport with the constitutional precepts of minimum contacts and fair play and substantial justice so as to warrant the exercise of personal jurisdiction by an Ohio court.