Licensing Negotiations and Infringement Letter Sufficient for Personal Jurisdiction
May 15, 2001
Last Month at the Federal Circuit - June 2001
Judges: Clevenger (author), Linn, and Dyk
In Inamed Corp. v. Kuzmak, No. 00-1292 (Fed. Cir. May 15, 2001), the Federal Circuit reversed and remanded a district court’s determination that it lacked personal jurisdiction over the Defendant, Dr. Lubomyr Kuzmak, in a DJ action.
Dr. Kuzmak, a resident of New Jersey, is an inventor on four patents directed to the treatment of obesity through the use of a gastric band to constrict the size of a stomach. Inamed Corporation, Inamed Development Company, and Bioenterics Corporation (collectively “Inamed”) are all corporations with principal places of business in California.
Starting in 1989, Inamed and Dr. Kuzmak entered into a series of license agreements involving the gastric-band patents. The fourth license agreement (“the Agreement”) granted Inamed an exclusive license to practice all four patents. In 1998, Inamed unsuccessfully attempted to renegotiate the Agreement. Dr. Kuzmak conducted all discussions with Inamed concerning these agreements by telephone and mail from New Jersey.
Following the termination of the Agreement, Dr. Kuzmak sent a letter to Inamed (“the infringement letter”) stating that Inamed infringes valid claims of one of the gastric-band patents and willfully infringes two others.
In February 1999, Inamed filed a DJ action against Dr. Kuzmak in California seeking a declaration of patent invalidity, unenforceability, and noninfringement, and also alleging patent misuse and breach of contract. Dr. Kuzmak filed a motion to dismiss for lack of personal jurisdiction. The district court dismissed the action, finding that Dr. Kuzmak’s contacts with California were not sufficient to maintain personal jurisdiction over him.
The Federal Circuit first set out its framework for reviewing the issue. Personal jurisdiction exists over an out-of-state defendant when a forum state’s long-arm statute permits service of process and when the assertion of personal jurisdiction would not violate due process. Finding that California’s long-arm statute is coextensive with the limits of due process, the Court collapsed the two inquiries into one—whether jurisdiction satisfies due process.
The Federal Circuit then applied its following three-factor test to determine whether personal jurisdiction over Dr. Kuzmak comported with due process: (1) whether the Defendant purposefully directed its activities at residents of the forum; (2) whether the claim arises out of or relates to the Defendant’s activities with the forum; and (3) whether assertion of personal jurisdiction is reasonable and fair.
The Court first examined the facts concerning the infringement letter. Even though Dr. Kuzmak had sent the infringement letter to Inamed’s attorney in New York, the Court found that this letter was directed at Inamed, a resident of California. Also, the Court found that this infringement letter had created an objectively reasonable apprehension that suit would be brought, because the letter asserted that Inamed willfully infringed at least two of Dr. Kuzmak’s patents and infringed a third.
Recognizing that a notice of infringement letter, without more, is insufficient to satisfy due process over an out-of-state patentee, the Court considered Dr. Kuzmak’s other activities. The Federal Circuit found that Dr. Kuzmak’s successful negotiation of the license agreements with Inamed, even though conducted by Dr. Kuzmak by telephone or mail from New Jersey without any actual physical presence in California, were activities purposefully directed at residents of California.
The Federal Circuit also found that Inamed’s claim arises directly out of Dr. Kuzmak’s act of sending an infringement letter, because the central purpose of a DJ action is to clear the air of infringement charges. It further found that Inamed’s misuse cause of action at least relates to Dr. Kuzmak’s negotiation efforts leading to the license agreements.
Finally, the Court rejected Dr. Kuzmak’s argument that the exercise of jurisdiction over him by a district court in California is unreasonable because he is ill and unable to travel. The Court stated there are other procedural avenues for obtaining relief based on this argument, such as a change of venue.