Court Lacks Personal Jurisdiction over Foreign Patentee in Declaratory Judgment Action

Avocent Huntsville Corp. v. Aten Int'l (Fed. Cir. 2008)

Avocent (of Huntsville, Alabama) sued Aten (of Taiwan) for a declaratory judgment of non-infringement and invalidity. In a split appellate decision, the majority (Judges Schall and Linn) found that the district court lacked personal jurisdiction over Aten. The dissent (Judge Newman) would have allowed the Northern District of Alabama court to proceed with the declaratory judgment action.

Patent litigation follows the Supreme Court's well trod standards for determining whether a court has personal jurisdiction over the parties. Courts speak in the language of minimum contacts, purposeful availment, and traditional notions of fair play. At base, the facts of each case is individually assessed to determine whether those notions have been satisfied. For specific jurisdiction in the declaratory judgment setting, the courts must also determine whether the DJ claim "arises out of or relates to" the DJ defendant's contacts with the state.

The contacts here include (1) an infringement threat letter from Aten to Avocent mailed to Alabama and to Amazon.com; (2) distribution and sale of Aten products in Alabama through a subsidiary corporation; (3) Aten's previous patent enforcement litigation in Texas and the ITC.

The Federal Circuit has repeatedly held that a threat letter alone is insufficient to create personal jurisdiction. Rather, for specific personal jurisdiction, the threat letter must accompany other activities related to the DJ action. In that vein, the majority also held that Aten's "mere acts" of importing and selling products in the Alabama forum do not count as other activities because those sales do not "relate in any material way to the patent right that is at the center of any declaratory judgment claim." Finally, personal jurisdiction is examined on a state-by-state bases. Thus, the Aten's prior lawsuits in Texas and the ITC do not impact the issue of personal jurisdiction in Alabama. Open and shut.

In dissent, Judge Newman noted, inter alia, the lack of an alternative forum for the complaint and the existence of Alabama state law claims.

 

    

 

Comments

[Alan McDonald]

I rarely say this, but when it needs to be said I'm willing to do so:

Newman got this one right!

[Humorless Democrat]

Might this be a way for trolls to avoid DJ actions in the wake of Medimmune - just assign the patent to an offshore corporation? If the offshore company isn't actually making or selling anything in the USA, and the "Hi here's our patent we're going to make you an offer you can't refuse" letter is insufficient (alone) to confer jurisdiction, it would seem that the chances for DJ jurisdiction are pretty low.

[Alan McDonald]

And as soon as that happens the Supremes will reverse the CAFC, as usual.

[Sean]

Next development should be/will be that the DJ is an in rem proceeding, rather than in personam. Then there's no jurisdictional issue.

Alan, Newman is the most sensible one of the lot! No one provides clarity to the case law like she does. (Especially now that we have professors on the CAFC.)

[Hayden Frost]

@Humorless

I can see that happening easily. Assign to offshore entity. Send DJ-proof threat letter. Before trial, have a Marshall TX small business buy out offshore entity so throughout trial, everyone's saying "This big MNC is abusing our local guy's rights."

[Offshore corporations]

Hi,

An Offshore Company or International Business Company (IBC) is an artificial person or legal entity created under the authority of the law and capable of rights and obligations. It has a capital stock divided into shares and stockholders are liable only to extend of their contributions.

Thanks
Sofia.