KGM Industries Co Inc v. Yigal Cohen Harel et al

Filing 27

ORDER by Judge Dean D. Pregerson: granting 16 defendant Yigal Cohen Harel Motion to Dismiss for Lack of Jurisdiction (MD JS-6. Case Terminated) (lc). Modified on 10/30/2012 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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KGM INDUSTRIES CO., INC., a
California corporation,

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Plaintiff,
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v.
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YIGAL COHEN HAREL, an
individual; INTEGRAL
LOGISTICS, LLC, a Florida
limited liability company,
Defendants.
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Case No. CV 12-03209 DDP (JEMx)

ORDER GRANTING DEFENDANT’S MOTION
TO DISMISS

[Dkt. No. 16]

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Presently before the court is Defendant Yigal Cohen Harel

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(“Harel”)’s Motion to Dismiss for Lack of Jurisdiction.

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considered the submissions of the parties, the court grants the

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motion and adopts the following order.

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I.

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Having

Background
Plaintiff manufactures and distributes lighters and related

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products.

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owns United States Design Patent numbers D498,328 and D501,274

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(Compl. ¶ 7, Exs. 1-2; Declaration of Yigal Cohen Harel in Support

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of Motion ¶ 5.)

(Complaint ¶ 6.)

Defendant Harel, a Florida resident,

Defendant Integral Logistics, LLC (“Integral”) is

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a non-exclusive licensee of Harel’s patents.

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(Harel Dec. ¶ 7.)

On March 30, 2012, Harel’s counsel sent Plaintiff a letter

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claiming that Plaintiff sells lighter and lighter inserts that

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infringe upon Harel’s patents.

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this action on April 12, 2012, seeking a declaratory judgment that

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its products do not infringe upon Harel’s patents and that Harel’s

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patents are invalid.

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lack of personal jurisdiction.

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II.

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(Compl., Ex. 3.)

Plaintiff filed

Harel now moves to dismiss the complaint for

Legal Standard
In a patent case, Federal Circuit law determines whether this

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court may exercise personal jurisdiction over a defendants.

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Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir. 1995).

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jurisdiction analysis under California’s long-arm statute, which

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applies here, and federal law are the same.

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v. Abby Software House, 626 F.3d 1222, 1230 (Fed. Cir. 2010).

Akro

The personal

Nuance Commc’ns, Inc.

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A court may only exercise personal jurisdiction over a foreign

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defendant if the defendant has sufficient minimum contacts with the

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forum to satisfy due process concerns.

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326 U.S. 310, 316 (1945).

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Avocent Huntsville Corp. v. Aten Int’l Co., Ltd., 552 F.3d 1324,

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1330 (Fed. Cir. 2008).

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proper, a plaintiff must demonstrate that the defendant maintains

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continuous and systematic contacts with the forum state.

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establish specific jurisdiction, a plaintiff need only show that a

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defendant has purposefully directed his activities at forum

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residents and that the injuries alleged arise from or relate to

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those activities.

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then show some compelling reason why the exercise of personal

Id.

Int’l Shoe v. Washington,

Jurisdiction may be general or specific.

To show that general jurisdiction is

Id.

To

Under Federal Circuit law, a defendant may

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jurisdiction would be unreasonable.

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Metabolite Labs., Inc., 444 F.3d 1356, 1363 (Fed. Cir. 2006).

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III. Discussion

Breckenridge Pharm., Inc. v.

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A.

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KGM argues that this court has general jurisdiction over Harel

General Jurisdiction

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under a “stream of commerce” theory.

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commerce theory jurisprudence is unsettled.

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Tech. Corp., 689 F.3d 1358, 1362 (Fed. Cir. 2012).

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the theory posits that, in the jurisdictional context, due process

(Opp. at 8.)

Stream of

AFTG-TG,LLC v. Nuvoton
One strand of

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is satisfied where a defendant places a product in the stream of

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commerce with the knowledge that the product is being marketed in

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the forum state.

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Court of California, Solano County, 480 U.S. 102, 107 (1987)).

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competing formulation of the theory counsels that placement of a

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product into the stream of commerce, without “something more,” is

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insufficient to establish the minimum contacts necessary to satisfy

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due process.

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whether the facts of a given case support the exercise of personal

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jurisdiction on a case-by-case basis, and should not specifically

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apply either of the competing formulations of the stream of

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commerce doctrine where the result is clear under either

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interpretation.

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Id., (citing Asahi v. Metal Ind. Co. v. Superior

Id.

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Under Federal Circuit law, a court must decide

Id. at 1364.

Under the facts of this case, there is no general jurisdiction

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over Harel.

There is no allegation or evidence that Harel

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individually placed anything in the stream of commerce.

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KGM acknowledges that only Integral, not Harel, markets and sells

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Indeed,

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products in California.1

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that the licenses Harel granted to Integral are products in the

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stream of commerce, KGM is mistaken.

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a covenant not to sue, which never itself enters the stream of

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commerce.

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148 F.3d 1355, 1362 (Fed. Cir. 1998).

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(Opp. at 7.)

To the extent KGM suggests

At best, Harel’s “product” is

Red Wing Shoe Co., Inc. V. Hockerson-Halberstadt, Inc.,

KGM appears to suggest that Integral’s activities should be

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imputed to Harel because Harel receives royalties from Integral’s

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sales in California (Opp. at 7.)

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authority for this proposition.

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any constitutionally cognizable contacts with California, Harel’s

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“receipt of royalty income from [his] licensees . . . is . . .

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irrelevant.”

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Nowhere does KGM cite any
To the contrary, in the absence of

Red Wing Shoe, 148 F.3d at 1361.

KGM further asserts, without authority, that Harel is

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responsible for Integral’s actions as Integral’s majority owner and

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licensor of the patents-in-suit.

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granting a license to an entity that does business in a particular

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forum is not equivalent to doing business in that forum, and is

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therefore insufficient to subject a licensor to personal

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jurisdiction.

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control does not eviscerate the separate corporate identity that is

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the foundation of corporate law.”2

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Inc. v. M-MLS.com, 394 F.3d 1143, 1149 (9th Cir. 2004).

Id.

KGM is mistaken.

First, simply

Second, the “mere fact of sole ownership and

Katzir’s Floor and Home Design,

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The court notes that KGM’s opposition interweaves and
conflates arguments regarding the stream of commerce theory of
general jurisdiction (Opp. at 7-9) with arguments regarding
specific jurisdiction (Opp. at 9-10.).
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KGM has not alleged that Integral is an alter ego of Harel.
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Absent any indication that Harel had systematic contacts with

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California or placed any product in the stream of commerce with the

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knowledge that that product would be sold in California, there is

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no general jurisdiction over Harel.

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B.

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Courts apply a three-prong test when determining whether

Specific Jurisdiction

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specific jurisdiction exists over a defendant.

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at 1332.

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directed its activities at residents of the forum, (2) the claim

Avocent, 552 F.3d

Courts look to whether “(1) the defendant purposefully

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arises out of or relates to those activities, and (3) assertion of

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personal jurisdiction is reasonable and fair.”

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Id.

As in its arguments regarding the stream of commerce theory,

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KGM consistently and repeatedly conflates Integral’s activities

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with Harel’s.

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employed a sales agent in the state of California . . . .”).)

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discussed above, the granting of a license is insufficient to hold

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a patent owner liable for the actions of a licensee.

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evidence of sales of a product covered by a relevant patent is

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insufficient to confer specific jurisdiction over a patent holder

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who merely receives royalty income.

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(See, e.g. Opp. at 15 (“Harel and his company
As

Furthermore,

Avocent, 55 F.3d at 1336.

KGM further argues that Harel purposefully directed contact

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with California residents by sending a cease and desist letter to

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KGM.

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patentee does “not subject itself to personal jurisdiction in a

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forum solely by informing a party who happens to be located there

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of suspected infringement.”

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defendant must undertake “other activities directed at the forum

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and related to the cause of action besides the letters threatening

(Opp. at 14.)

As KGM appears to recognize, however, a

Avocent, 552 F.3d at 1333.

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A

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an infringement suit.”

Id. (internal quotation and emphasis

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omitted).

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identifies no “other activities” that Harel individually directed

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to California.

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enforcement or defense of a patent, and may include exclusive

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licensing agreements with parties residing or doing business with a

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forum.

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allegation that Integral is an exclusive licensee.

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Dec. ¶ 7 (“Integral is currently a non-exclusive licensee . . .

Aside from his licensing arrangements with Integral, KGM

Other activities generally must relate to the

Id. at 1334.

Here, however, there is no evidence or
(See also Harel

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.”).)

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directed activities toward residents of California sufficient to

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justify the exercise of specific jurisdiction over Harel.

KGM has failed to demonstrate that Harel individually

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C.

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A party is necessary if 1) the court cannot grant complete

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relief in the absence of that party or 2) the party has an interest

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in the subject of the action and resolution of the action without

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that party would either prejudice the absent party or expose an

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existing party to the risk of inconsistent obligations.

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Civ. P. 19(a).

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action are necessary parties.

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F.3d 1213, 1217 (Fed. Cir. 2010).

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party.

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Whether Harel Is An Indispensable Party

Fed. R.

Generally, patentees in a declaratory judgment
A123 Sys., Inc. v. Hydro-Quebec, 626
Harel is, therefore, a necessary

As discussed above, this court lacks personal jurisdiction

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over Harel.

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the court must determine whether that party is indispensable, and

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whether “in equity and good conscience,” the action should be

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dismissed.

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of joiner is not unique to patent law, regional circuit law

Where, as here, a necessary party cannot be joined,

Id. at 1220, Fed. R. Civ. P. 19(b).

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Because the issue

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applies.

A123, 626 F.3d at 1220.

The court must consider (1) the

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extent to which a judgment rendered in a necessary party’s absence

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might prejudice that party or the other parties, (2) the extent to

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which the court could lessen or avoid any prejudice, (3) whether a

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judgment rendered without the absent necessary party would be

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adequate, and (4) whether the plaintiff has some other adequate

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remedy.

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Bishop Cmty. Colony v. City of Los Angeles, 637 F.3d 993, 1000 (9th

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Cir. 2011).

Fed. R. Civ. P. 19(b); see also Paiute-Shoshone Indians of

The court must make a “practical examination of the

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circumstances to determine whether an action may proceed.”

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Shoshone, 637 F.3d at 1000.

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Paiute-

Here, Harel would be greatly prejudiced by a judgment rendered

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in his absence.

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has granted only a non-exclusive license to Integral.3

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prevail, there does not appear to be any way that this court could

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tailor the relief sought so as to minimize the prejudice to Harel

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resulting from the invalidation of his design patents.

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judgment in this court would certainly be adequate, KGM also has

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adequate remedies elsewhere, such as Harel’s home state of Florida.

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Thus, a balancing of the relevant factors compels the conclusion

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that this action cannot, in equity and good conscience, proceed

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without Harel, the holder of the patents currently in dispute.

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Accordingly, this action should be dismissed.

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Harel is the holder of the patents at issue, and
Were KGM to

While a

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In addition to the legal distinction between Harel and
Integral, described above, Harel argues that, contrary to KGM’s
assertion, he is neither the majority owner nor controlling
director of Integral. (Harel Reply Dec. ¶ 3.)
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IV.

Conclusion
For the reasons stated above, Defendant Harel’s Motion to

Dismiss is GRANTED.

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IT IS SO ORDERED.

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Dated:October 30, 2012
DEAN D. PREGERSON
United States District Judge

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