In a DJ Action, the District Court Lacks Jurisdiction over an Out-of-State Patentee Who, Except for Cease-and-Desist Letters, Has Not Engaged in Any Other Activities to Defend or Enforce the Patent
May 18, 2009
Last Month at the Federal Circuit - June 2009
Judges: Newman (dissenting), Moore (author), Gettleman (District Judge sitting by designation)
[Appealed from: C.D. Cal., Senior Judge Pfaelzer]
In Autogenomics, Inc. v. Oxford Gene Technology Ltd., No. 08-1217 (Fed. Cir. May 18, 2009), the Federal Circuit affirmed the district court’s decision that it lacked DJ jurisdiction over the defendant.
Oxford Gene Technology Limited (“Oxford”) is a British biotechnology company. Oxford is not registered to do business in California, nor does it have any facilities, assets, employees, or agents in that state. Oxford is the owner of U.S. Patent No. 6,054,270 (“the ’270 patent”), which relates to oligonucleotide microarrays for analysis of polynucleotides. Autogenomics, Inc. (“Autogenomics”) is a biotechnology company organized under the laws of California, with its main office in California.
In early 2006, Oxford contacted Autogenomics, contending that Autogenomics infringed the ’270 patent by manufacturing and selling microarray products. Following unsuccessful license negotiations, Autogenomics sued Oxford in the Central District of California, seeking DJ of invalidity and noninfringement of two claims of the ’270 patent. The district court granted Oxford’s motion to dismiss for lack of personal jurisdiction. Autogenomics appealed that ruling, as well as the district court’s denial of jurisdictional discovery.
To support its contention that the district court could exercise personal jurisdiction over Oxford, Autogenomics referred to multiple contacts between Oxford and California. Slip op. at 2-5. Those contacts included failed licensing negotiations between Oxford and Autogenomics, for which two Oxford representatives flew to California; licenses related to microarray technology granted by Oxford to “about ten” California companies; a collaboration agreement between Oxford and Agilent, a company with offices in California; a supply agreement between Oxford and Agilent; three scientific conferences in California in which Oxford participated, made presentations, or set up a booth; sales of twenty microarrays by Oxford to a California company, not necessarily related to the patent-at-issue, and constituting about 1% of Oxford’s annual revenue; and publication of an “application note” on the UK website Nature.com, which Autogenomics characterized as an advertisement to California companies. The district court found these contacts insufficient to establish personal jurisdiction over Oxford and granted Oxford’s motion to dismiss.
On appeal, the Federal Circuit first addressed whether Oxford was subject to either general personal jurisdiction and specific personal jurisdiction. Regarding general personal jurisdiction, the Court held that “Oxford does not have contacts with the forum state that qualify as ‘continuous and systematic general business contacts.’” Id. at 8. “Rather, this ‘is a classic case of sporadic and insubstantial contacts with the forum state, which are not sufficient to establish general jurisdiction over the defendants in the forum.’” Id. The court then cited Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984), in which the Supreme Court rejected general personal jurisdiction over a defendant, although the defendant had sent its officer to the forum state for a contract-negotiation session, had accepted into its bank account checks drawn on a bank in the forum state, and had purchased equipment and services from, and sent its personnel for training to, a company in the forum state. As in Helicopteros, the Federal Circuit held that “Oxford has no actual physical presence or license to do business in California, and nothing here exceeds the commercial contacts that the Supreme Court held were insufficient in Helicopteros.” Slip op. at 8.
The Court also rejected Autogenomics’s assertion that Oxford’s attendance at several conferences in California is similar to having an office because it helps Oxford meet potential customers. The Court stated that “[a]lthough we must resolve factual conflicts in Autogenomics’s favor, it is entitled to only those inferences that are reasonable.” Id. at 9. The Court regarded it as unreasonable to treat Oxford’s conference booths as “mobile offices” and stated that “four conferences over five years constitute only sporadic and insubstantial contacts.” Id. Further, comparing the agreement between Oxford and Agilent with the contacts of the defendant in Helicopteros, the Court rejected Autogenomics’s assertion that the Agilent agreement is evidence of continuous and systematic contacts.
Regarding specific personal jurisdiction, the district court considered whether Oxford had minimum contacts with California by considering whether “(1) the defendant purposefully directed its activities at residents of the forum, (2) the claim arises out of or relates to those activities, and (3) assertion of personal jurisdiction is reasonable and fair.” Id. at 10 (quoting Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d 1356, 1363 (Fed. Cir. 2006)).
The Federal Circuit observed that the district court’s decision for lack of specific personal jurisdiction was largely based on a prior Federal Circuit ruling that cease-and-desist letters alone do not suffice to justify personal jurisdiction in a DJ action. Id. The district court had acknowledged that, “in combination with cease-and-desist communications, other activities [in the forum state, e.g., attempts at extrajudicial patent enforcement, exclusive license agreement, exclusive distribution contract to sell patented product, and suing others over patents-at-issue] can give rise to specific personal jurisdiction.” Id. at 11. The district court thus concluded that the e-mail and in-person negotiations between Oxford and Autogenomics were “clearly analogous to the ‘cease-and-desist’ communications at issue in the bevy of cases on this subject.” Id. at 10.
The Federal Circuit augmented the district court’s analysis with the more recent opinion by the Federal Circuit in Avocent Huntsville Corp. v. Aten International Co., 552 F.3d 1324, 1328 (Fed. Cir. 2008), which narrowed the above criteria and stated that “the contacts material to the specific jurisdiction analysis in a declaratory judgment action are not just any activities related to the patent-at-issue.” Id. at 12. For example, “[w]hat the patentee makes, uses, offers to sell, sells, or imports isof no real relevance to the enforcement or defense of a patent.” Id. at 14 n.1 (alteration in original). Rather, the relevant activities are those that “relate in some material way to the enforcement or the defense of the patent.” Id. at 12. Applying this rule, the Federal Circuit distinguished cases cited by the dissent, reasoning that in each of those cases, jurisdiction over the defendant was proper because the defendant had engaged in such relevant activities, including suing another infringer in the same court on the same patent or enlisting a third party to remove the defendant’s products from a trade show held in the forum state. Id. at 13. The Court further explained that cease-and-desist letters from a defendant to a plaintiff that initiate a DJ action do not qualify as such additional relevant activities, because those letters are the very reason for the action. Moreover, based on principles of fairness, a “patentee should not subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement.” Id. (quoting Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1360-61 (Fed. Cir. 1998)). The Federal Circuit asserted that this situation does not leave a plaintiff like Autogenomics completely helpless, because, based on 35 U.S.C. § 293, “[j]urisdiction over foreign patentees like Oxford continues to be available in the United States District Court for the District of Columbia.” Id. at 14.
The Court then affirmed the district court’s holding that Oxford was not subject to specific personal jurisdiction because none of the contacts asserted by Autogenomics qualified as a minimum contact. Specifically, the Court stated that there was no evidence that the Agilent agreement involved the ’270 patent.
Finally, applying the law of the regional circuit, the Federal Circuit affirmed the district court’s denial of jurisdictional discovery. The Court observed that Autogenomics failed to submit a formal motion for jurisdictional discovery. Instead, Autogenomics made such requests in its briefs and during oral arguments, which the district court found insufficient. Accordingly, the Court stated that, “[i]n this case, there is no denial of a motion for jurisdictional discovery for us to review because there was no formal motion for jurisdictional discovery.” Id. at 16.
In a dissenting opinion, Judge Newman disagreed. Applying Federal Circuit precedent in which personal jurisdiction was deemed proper, Judge Newman argued that Oxford did satisfy requirements of minimum contact with California. Moreover, Judge Newman reasoned that, even if the showing of minimum contacts were weak, considerations of fairness and reasonableness tilted the balance toward establishing jurisdiction. Judge Newman argued that “[d]epriving Autogenomics of the opportunity to resolve the threat of infringement is contrary to the purpose and principles of the Declaratory Judgment Act.” Newman Dissent at 7. Moreover, Judge Newman stated, “Athough undoubtedly there are circumstances in which a foreign patent owner can properly avoid jurisdiction, here the foreign patentee is actively and forcefully using its United States patents in a competitive context within the forum of this suit.” Id. at 8-9. Judge Newman cautioned that the question of jurisdiction over foreign patentees “is not a trivial question” because ”[t]he PTO reports that 50.3% of the patents granted in 2008 were issued to foreign patentees.” Id.