Communications Related to Retailers’ Patents Affecting Jurisdiction
In a recent case, Trimble Inc. v. PerDiemCo LLC, n ° 2019-2164 (May 12, 2021), the Federal Circuit found that, sometimes, threaten an action for patent infringement, or start lengthy patent license negotiations before filing a complaint, with a company having a presence in a particular state could subject you to the jurisdiction of that state, even if you are located elsewhere.
On the one hand, this could give a retailer the opportunity to gain declaratory judgment jurisdiction in a privileged home forum when the retailer is the subject of threats of infringement from a patent holder. . On the other hand, this means that retailers should be aware of their communications regarding their own patents and be careful not to inadvertently submit to legal action from a target alleging lack of infringement in an unwanted jurisdiction.
Trimble and its wholly owned subsidiary, Innovative Software Engineering (ISE), manufacture and sell GPS products and services, electronic logging devices, and geofencing products. Trimble is incorporated in Delaware and is headquartered in Sunnyvale, California. ISE is headquartered and headquartered in Coralville, Iowa.
In October 2018, Robert Babayi, the sole owner, officer and employee of PerDiemCo, sent a cease and desist letter and an un-filed patent infringement complaint for the Northern District of Iowa to ISE, seeking to initiate licensing discussions for nine PerDiemCo patents. Mr. Babayi lives and works in Washington, DC, and PerDiemCo rents office space in Marshall, Texas.
Trimble and ISE have responded to Mr. Babayi / PerDiemCo through Trimble’s senior intellectual property advisor that they would be prepared to enter into productive negotiations. For a few months, the parties communicated by phone and email, with offers from PerDiemCo as a first step to enter into binding mediation. But PerDiemCo subsequently claimed new claims and patents against Trimble’s products, bringing the total number of claimed patents to eleven. At one point, PerDiemCo even threatened to sue Trimble for patent infringement in the Eastern District of Texas, well known as a favorable forum for plaintiffs in infringement actions.
PerDiemCo’s communications with Trimble continued through December 2018, with a combination of at least 22 letters, emails and phone calls. The parties did not negotiate a license.
The Northern District of California declined jurisdiction
January 29, 2019 Trimble and ISE filed a complaint in the Northern District of California — before PerDiemCo filed in any jurisdiction — seeking a declaratory judgment which neither infringed PerDiemCo’s patents. Trimble and ISE claimed the court had specific jurisdiction over PerDiemCo due to repeated communications from PerDiemCo to them in California.
Although the District Court agreed that PerDiemCo’s communications were directed to California for purposes of personal jurisdiction, PerDiemCo successfully challenged jurisdiction on the basis of red wing. The court concluded that, even if Trimble had established the minimum contacts required, exercising specific personal jurisdiction over PerDiemCo would be constitutionally unreasonable and therefore refused to do so.
Inversion of the federal circuit
In a previous opinion, the Federal Circuit overturned the district court, ruling that there is personal jurisdiction in the Northern District of California for the declaratory judgment action. The Court noted afterred wing developments in law, including the United States Supreme Court, which clarified the scope of red wing and distinguished it from the present case:
(1) Case after red wing explained that Congress has enacted a patent law specific to personal competence, and red wing cannot be based on special considerations specific to patent cases.
(2) According to the Supreme Court, communications sent within a state may create specific personal jurisdiction, depending on their nature and scope. More specifically, can establish competence:
negotiation efforts through phone calls and e-mails from outside the forum purposely directed to forum residents;
communications threatening to sue or proposing settlement or patent licenses;
hire a lawyer or patent agent in the forum state to prosecute a patent application that leads to the claimed patent;
physically entering the forum to demonstrate the technology underlying a patent to the prospective applicant, or to discuss the infringement allegations with the prospective applicant; and
the presence of an exclusive licensee doing business in the forum State.
(3) And finally, the Supreme Court established in a very recent decision, Ford Motor Co. v. Mountain. Eighth Jud. Dist. Ct., 141 S. Ct. 1017 (2021), that a wide range of the respondent’s contact with a forum is relevant for the minimal contact analysis.
Although the Federal Circuit noted that red wing was properly decided (communications were limited), the Court ruled that there is no general rule that notices of default can never create a specific personal jurisdiction.
Here, the Federal Circuit has found that PerDiemCo’s actions establish personal jurisdiction in California. Twenty-two communications over a three-month period is much larger than those in Red wing. The actions of PerDiemCo went beyond simply informing a party who is in a forum of suspected infringement (as was the case in red wing). PerDiemCo amplified its threats as negotiations ensued, asserting more patents and accusing more products. PerDiemCo even went so far as to identify a body before which it intended to bring an action and an advice that it intended to retain for this purpose.
The Federal Circuit has also indicated that the exercise of personal jurisdiction here is not unreasonable because:
PerDiemCo’s burden for litigating in California is, at most, only slightly higher than it would be for litigating in Texas (or Iowa), as Babayi is located in Washington, DC and has never visited offices in Texas;
the Northern District of California has a significant interest in resolving the dispute, with Trimble headquartered in Sunnyvale;
Trimble has an interest in protecting itself against patent infringement by seeking redress from a neighboring federal court in its home forum;
jurisdiction over the claims of Trimble and ISE in California would result in effective resolution of the controversy; and
the same body of federal patent laws govern a non-infringement claim regardless of the forum, so there does not appear to be a conflict between the interests of California and any other state.
Take-out food for retailers
In order to Trimble, under the facts, a retailer may be better able to bring a declaratory non-infringement action in their forum of choice, potentially avoiding patent litigation (and often, patent-friendly homes) such as the eastern and western districts of Texas. This should be particularly useful for retailers targeted by patent claim campaigns where many communications are exchanged with patent trolls and other licensors seeking to negotiate a deal before a patent infringement claim is made. filed.
However, for retailers wishing to assert their patents, Trimble serves as a caveat to avoid directing too many communications of a certain type to a jurisdiction before taking steps to bring an infringement action.
 In Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), the Federal Circuit concluded that the mere assertion of letters to a particular forum did not establish personal jurisdiction over a patentee because “[g]circumventing personal jurisdiction over these contacts alone would not be in accordance with the principles of equity ”, and“[p]the principles of fair play and substantial justice give the patentee sufficient latitude to inform others of his patent rights [via a cease-and-desist letter that included an offer for a license] without submitting to the jurisdiction of a foreign forum. Identifier. at 1360-62.
Copyright © 2021, Hunton Andrews Kurth LLP. All rights reserved.Revue nationale de droit, volume XI, number 147