Sony Corporation v. Pace plc et al
REPORT AND RECOMMENDATIONS- denying 15 MOTION to Dismiss for Lack of Jurisdiction Over the Person pursuant to Federal Rule 12(b)(2) filed by Pace plc. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 2/29/2016. Signed by Judge Sherry R. Fallon on 2/12/2016. (lih)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
Civil Action No. 1:15-cv-00288-SLR
PACE PLC and PACE AMERICAS, LLC, )
REPORT AND RECOMMENDATION
Presently before the court in this patent infringement action is defendant Pace plc' s
("Pace") motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil
Procedure 12(b)(2). (D.I. 15) For the following reasons, I recommend that the court deny Pace's
motion to dismiss without prejudice and permit limited jurisdictional discovery.
Plaintiff Sony Corporation ("Sony") filed this action on April 1, 2015 against Pace and its
subsidiary, Pace Americas, LLC ("Pace Americas"), asserting causes of action for the alleged
infringement of six patents owned by Sony. 1 (D .I. 1) Sony is a corporation organized and
existing under the laws of Japan with offices in Tokyo, Japan. (Id at if 1) Pace is a corporation
organized and existing under the laws of the United Kingdom with a principal place of business
in West Yorkshire, England. (D.I. 1atif2; D.I. 18 at if 4) Pace Americas is a Delaware limited
The patents-in-suit include United States Patent Nos. 6,084,643 ("the '643 patent"), 6,467,093
("the '093 patent"), 8,032,919 ("the '919 patent"), 6,097,676 ("the '676 patent"), 7,733,295 ("the
'295 patent"), and United States Reissued Patent No. RE38,898 ("the '898 patent").
liability company with a principal place of business in Boca Raton, Florida. (D.I. 1 at if 3; D.I.
18 at if 5)
The complaint alleges that Pace and Pace Americas have infringed the patents-in-suit by
manufacturing, importing, offering for sale, and selling digital cable and satellite television settop box model numbers HR 34-700 and RNG-200N (the "Accused Products") to distributors
including cable and satellite service providers, who resell or otherwise provide the set-top boxes
to consumers throughout the United States. (D.I. 1 at if 4) It is undisputed that Pace designs the
Accused Products, which are manufactured by third parties outside of the United States and then
shipped to ports outside of Delaware by Pace Americas. (D.I. 18 at if 6) When the Accused
Products reach the United States, Pace transfers title to the Accused Products to Pace Americas
outside of Delaware. (Id. at if 7) Pace Americas then sells the Accused Products to cable
operators and distributors. (Id. at if 9)
Per Pace's annual report, Pace Americas is Pace's highest revenue-producing business
unit, accounting for approximately 60% of total revenue, or $1.5 billion, in 2014. (D.I. 21, Ex. 1
at 2) Pace is a major supplier of consumer electronic television equipment to both DirecTV and
Comcast, leaders in the U.S. satellite and cable television markets, respectively. (Id. at 14)
DirecTV provides pay TV service to over 20 million satellite service subscribers in the United
States. (D.I. 21, Ex. 2 at 3) A January 7, 2013, Pace press release discussed DirecTV's
"successful deployment of Pace manufactured HR34 Genie server ... throughout the United
States in 2012." (D .I. 21, Ex. 3 at 1) Pace is also one of a "limited number" of suppliers who
provide Comcast with set-top boxes. (D.I. 21, Ex. 7 at 7) Comcast offers cable TV service to
customers throughout Delaware and maintains service centers in New Castle, Dover, Lewes, and
Seaford, DE. (D.I. 21, Ex. 4; D.I. 21, Ex. 6)
Rule 12(b)(2) directs the court to dismiss a case when the court lacks personal
jurisdiction over the defendant. Fed. R. Civ. P. 12(b)(2). When reviewing a motion to dismiss
pursuant to Rule 12(b)(2), a court must accept as true all allegations of jurisdictional fact made
by the plaintiff and resolve all factual disputes in the plaintiffs favor. Traynor v. Liu, 495 F.
Supp. 2d 444, 448 (D. Del. 2007). Once a jurisdictional defense has been raised, the plaintiff
bears the burden of establishing, with reasonable particularity, that sufficient minimum contacts
have occurred between the defendant and the forum to support jurisdiction. See Provident Nat 'l
Bankv. Cal. Fed. Sav. & LoanAss'n, 819 F.2d 434, 437 (3d Cir. 1987). To meet this burden, the
plaintiff must produce "sworn affidavits or other competent evidence," since a Rule 12(b)(2)
motion "requires resolution of factual issues outside the pleadings." Time Share Vacation Club
v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n.9 (3d Cir. 1984).
To establish personal jurisdiction, a plaintiff must demonstrate facts sufficient to satisfy
both a statutory and a constitutional requirement. With respect to the statutory analysis, the court
analyzes the long-arm statute of the state in which the court is located. See IMO Indus., Inc. v.
Kiekert AG, 155 F.3d 254, 259 (3d Cir. 1998). Next, the court must determine whether
exercising jurisdiction over the moving defendant in this state comports with the due process
clause of the United States Constitution. See id.; Autogenoinics, Inc. v. Oxford Gene Tech. Ltd.,
566 F.3d 1012, 1016 (Fed. Cir. 2009) (noting that the court must apply the law of the Federal
Circuit to the constitutional inquiry in patent cases).
Pursuant to the relevant portions of Delaware's long-arm statute, 10 Del. C. § 3104(c)(l)(4), a court may exercise personal jurisdiction over a defendant when the defendant or its agent:
(1) Transacts any business or performs any character of work or service in the
(2) Contracts to supply services or things in this State;
(3) Causes tortious injury in the State by an act or omission in this State;
(4) Causes tortious injury in the State or outside of the State by an act or omission
outside the State if the person regularly does or solicits business, engages in
any other persistent course of conduct in the State or derives substantial
revenue from services, or things used or consumed in the State.
10 Del. C. § 3104(c)(l)-(4). With the exception of subsection (c)(4), the long.-arm statute
requires a showing of specific jurisdiction. See Shoemaker v. McConnell, 556 F. Supp. 2d 351,
354-55 (D. Del. 2008). Subsection (c)(4) confers general jurisdiction, which requires a great
number of contacts, but allows the exercise of personal jurisdiction even when the claim is
unrelated to the forum contacts. See Applied Biosystems, Inc. v. Cruachem, Ltd, 772 F. Supp.
1458, 1466 (D. Del. 1991).
If a defendant is found to be within the reach of the long-arm statute, the court then must
analyze whether the exercise of personal jurisdiction comports with due process by determining
whether the plaintiff has demonstrated that the defendant "purposefully avail[ ed] itself of the
privilege of conducting activities within the forum State," so that it should "reasonably anticipate
being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297
(1980) (citations omitted). For the court to exercise specific personal jurisdiction consistent with
due process, a plaintiffs cause of action must have arisen from the defendant's activities in the
forum state. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). The court may
exercise general personal jurisdiction consistent with due process if the plaintiffs cause of action
is unrelated to the defendant's activities in the forum state, so long as the defendant has
"continuous and systematic contacts with the forum state." Applied Biosystems, Inc., 772 F.
Supp. at 1458.
A. Long-Arm Statute
Pace contends that the court lacks personal jurisdiction under Delaware's long-arm
statute because Pace is a foreign company that does not conduct business or maintain con~inuous
and systematic contacts in Delaware. (D.I. 17 at 2-4) According to Pace, the incorporation of a
subsidiary, such as Pace Americas, in Delaware is not imputed to a corporate parent for
jurisdictional purposes. (Id. at 4) In response, Sony contends that personal jurisdiction exists
under a "dual jurisdiction" or "stream of commerce" theory that implicates both subsections
(c)(l) and (c)(4) of the Delaware long-arm statute. 2 (D.I. 20 at 5) Specifically, Sony argues that
Pace Americas offers for sale the accused set-top boxes to cable and satellite service providers
who Pace knew or should have known were reselling or providing those devices to customers in
Delaware, demonstrating an intent to serve the United States market at large via its subsidiary.
Sony does not allege that jurisdiction exists under any one prong of the Delaware longarm statute, but instead claims that personal jurisdiction exists under a "dual jurisdiction" or
"stream of commerce" theory, 3 which combines subsections (c)(l) and (c)(4) of the long-arm
Subsection (c)(l) confers "specific" jurisdiction over a non-resident defendant; subsection
(c)(4) confers "general" jurisdiction. See, e.g., LaNuova D & B, Sp.A. v. Bowe Co., 513 A.2d
764, 768 (Del. 1986); Boone v. Oy PartekAb, 724 A.2d 1150, 1155 (De. Super. 1997), ajf'd, 707
A.2d 765 (Del. 1998).
Courts within this district disagree as to whether the dual jurisdiction theory is supported by the
Delaware long-arm statute. Several recent cases have supported application of the doctrine,
noting that the Delaware Supreme Court has had opportunities to repudiate the doctrine but has
failed to do so. See Polar Electro Oy v. Suunto Oy, C.A. No. 11-1100-GMS, 2015 WL 2248439,
at *4 (D. Del. May 12, 2015); Robert Bosch LLC v. Alberee Prods., Inc., 70 F. Supp. 3d 665,
674-75 (D. Del. 2014) (citing Boone, 724 A.2d at 1156, aff'd, 707 A.2d 765 (Del. 1998); Wright
v. Am. Home Prods. Corp., 768 A.2d 518, 531 (Del. Super. Ct. 2000)). However, another judge
has predicted that the Delaware Supreme Court would not adopt the dual jurisdiction theory,
concluding that the Delaware Supreme Court's statements in LaNuova regarding subsections
statute. See Robert Bosch LLC v. Alberee Prods., Inc., 70 F. Supp. 3d 665, 672-76 (D. Del.
2014). The approach was adopted by Delaware courts as a mechanism by which to apply the
long-arm statute to "stream of commerce" situations, or situations where a non-resident places its
product in the market place and may, under certain circumstances, be found to have sufficient
contacts with Delaware.
[T]he enumerated activities in [subsection (4)] should be analyzed to determine
whether there is an intent or purpose on the part of the [non-resident] to serve the
Delaware market with its product. Likewise, when analyzing [subsection] (1) it is
not important that the [non-resident] itself act in Delaware. Instead, if the intent
or purpose on behalf of the [non-resident] to serve the Delaware market results in
the introduction of the product to this State and plaintiffs cause of action arises
from injuries caused by that product, this section is satisfied.
Power Integrations, Inc. v. BCD Semiconductor Corp., 547 F. Supp. 2d 365, 371-72 (D. Del.
2008). "Thus, the dual jurisdiction analysis requires a showing of both: (1) an intent to serve the
Delaware market; and (2) that this intent results in the introduction of the product into the market
and that plaintiffs cause of action arises from injuries caused by that product." Belden Techs.,
Inc. v. LS Corp., 829 F. Supp. 2d 260, 267 (D. Del. 2010) (citing Power Integrations, 547 F.
Supp. 2d at 372).
"Under the Delaware long-arm statute, the 'touchstone' of stream-of-commerce theory
relates to the first prong of this analysis, the 'intent and purpose to serve the Delaware market.'"
Eastman Chem. Co. v. AlphaPet Inc., C.A. No. 09-971-LPS-CJB, 2011WL6004079, at *16 (D.
Del. Nov. 4, 2011) (citing Power Integrations, 547 F. Supp. 2d at 372). A non-resident
(c)(l) and (c)(4) were mere dicta. Round Rock Research LLC v. ASUSTeK Computer Inc., 967
F. Supp. 2d 969, 976-77 (D. Del. 2013). The Round Rock court noted that the Delaware Superior
Court's adoption of the dual jurisdiction theory is inconsistent with well-established principles
that the long-arm statute should be separately analyzed from due process considerations, and its
interpretation should flow from the statutory language. Id at 976. Because the Delaware
Supreme Court has not overruled the dual jurisdiction theory, this-court will proceed with the
dual jurisdiction analysis.
defendant's intent to serve the United States market is sufficient to establish an intent to serve the
Delaware market, unless there is evidence that the defendant intended to exclude Delaware from
its marketing and distribution efforts. Power Integrations, Inc., 547 F. Supp. 2d at 373.
The record in the present case establishes Pace's intent to serve the Delaware market by
transferring title to the Accused Products to Pace Americas, which then sells the Accused·
Products to national distributors. Under the relevant case authorities regarding dual jurisdiction,
Pace's intent to distribute the products throughout the United States is sufficient to establish
Pace's intent to serve the Delaware market specifically. 4 See Power Integrations, 547 F. Supp.
2d at 373; Eastman Chem., 2011WL6004079, at *16. The parties do not dispute that Pace
designs the Accused Products, which are subsequently transferred to Pace Americas as the
importer of record in the United States, and sold by Pace Americas to cable operators and
distributors such as Comcast and DirecTV. (D.I. 18 at~~ 6-9; D.I. 21, Ex. 1 at 14) Pace has
provided no evidence that it intended to exclude Delaware from its efforts to distribute the
Accused Products in the United States. Thus, the first prong of the test for stream of commerce
jurisdiction under the Delaware long-arm statute has been met.
The plurality decision written by Justice Kennedy in the United States Supreme Court's
decision in J. Mcintyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011) rejected the idea that an
intent to serve the United States market could demonstrate purposeful availment of the forum
state. Nicastro, 131 S. Ct. at 2790. ·The Supreme Court's plurality decision concluded that "the
defendant's transmission of goods permits the exercise of jurisdiction only where the defendant
can be said to have targeted the forum; as a general rule it is not enough that the defendant might
have predicted that its goods will reach the forum state." Id. at 2788. However, dual jurisdiction
cases in this district are distinguishable because they "d[o] not rely solely on targeting the
national market to satisfy the stream-of-commerce test," and also stress the importance of
establishing that the accused products are shipped to Delaware and that a relationship exists with
end users of the products in Delaware. Eastman Chem., 2011WL6004079, at *18 (citing Power
Integrations, 547 F. Supp. 2d at 367). The District of New Jersey has stressed that "Nicastro
does not clearly or conclusively define the breadth and scope of the stream of commerce theory,
as there was not a majority consensus on a singular test." Oticon, Inc. v. Sebotek Hearing Sys.,
LLC, 865 F. Supp. 2d 501, 513 (D.N.J. 2011).
However, Sony has failed to allege facts sufficient to satisfy the second prong of the
analysis because there is no evidence on the record that the Accused Products were actually sold
in Delaware. Although Sony indicates that DirecTV has over 20 million satellite television
subscribers in the United States, and a Pace press release indicated that it sold a particular model
of the accused set-top boxes to DirecTV, no evidence explicitly states that DirecTV
the Accused Products in Delaware. (D.I. 21, Exs. 1-3) Moreover, although Sony demonstrates
that Comcast offers cable TV services in over fifty Delaware cities and towns and maintains
service centers in Delaware, there is no evidence affirmatively connecting Comcast' s presence in
Delaware with Pace's set-top box distribution to Comcast. (Id, Exs. 5-7) Sony cites no
controlling precedent in which a court found that the second prong of Delaware's dual
jurisdiction analysis was met absent evidence of actual sales of the products at issue within
Delaware. See Graphics Properties Holdings, Inc., 70 F. Supp. 3d at 662 (statutory analysis
satisfied by evidence of sales in Delaware by three physical resale outlets); Polar Electro, 2015
WL 2248439, at *4 (statutory analysis satisfied by evidence of eight e-commerce transactions·
made in Delaware); Robert Bosch LLC, 70 F. Supp. 3d at 678-80 (stream of commerce
jurisdiction over out of state manufacturer and seller found when sales were made to U.S. chain
retailer with a location in Delaware, and said store sold the accused product). In this district,
Judge Robinson has declined to exercise personal jurisdiction under the dual jurisdiction theory
based solely on distribution agreements and contracts to service the U.S. cable market, when
there was no showing that any products actually ended up in Delaware. See Belden Techs., Inc.,
626 F. Supp. 2d 448, 456 (D. Del. 2009) ("While it is possible that the accused products
penetrated Delaware's market, plaintiff presents no competent evidence to substantiate this
conclusion. Therefore, because plaintiff fails to meet its burden with respect to the second
prong, its argument for personal jurisdiction under the dual jurisdiction theory fails.").
B. Due Process
Because Sony failed to satisfy the statutory basis for personal jurisdiction under the
Delaware long-arm statute, the court need not reach the constitutional due process prong of the
personal jurisdiction analysis. See Belden Techs., Inc. v. LS Corp., 626 F. Supp. 2d 448, 457 (D.
Del. 2009); see also Brennerman v. Guardian News & Media Ltd, C.A. No. 14-188-SLR-SRF;
2015 WL 9484466, at *9 (D. Del. Dec. 29, 2015).
C. Rule 4(k)(2)
Rule 4(k)(2) provides that, "[fJor a claim that arises under federal law, serving a
summons or filing a waiver of service establishes personal jurisdiction over a defendant if: (A)
the defendant is not subject to jurisdiction in any state's courts of general jurisdiction; and (B)
exercising jurisdiction is consistent with the United States Constitution and laws." The concern
underlying Rule 4(k)(2)-known as the federal long-arm statute- is "with defendants escaping
jurisdiction in U.S. federal courts while still having minimum contacts with the United States."
Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1415 (Fed. Cir. 2009) (emphasis added).
Therefore, "[a] defendant who wants to preclude the use of Rule 4(k)(2) has only to name some
other state in which the suit could proceed." Id. at 1414 (quoting ISi Int'!, Inc. v. Borden Ladner
Gervais LLP, 256 F.3d 548, 552 (7th Cir. 2001)).
Pace has acknowledged that it is properly the subject of Florida's jurisdiction. (D.I. 23 at
9) This stipulation is sufficient to defeat Sony's Rule 4(k)(2) argument because the state of
Florida is the principal place of business of Pace Americas, and the court is satisfied that Pace
has continuous contacts with Florida for this reason.
D. Jurisdictional Discovery
"If a plaintiff presents factual allegations that suggest with reasonable particularity the
possible existence of the requisite contacts between the parties and the forum state, the plaintiffs
right to conduct jurisdictional discovery should be sustained." Toys "R" Us, Inc. v. Step Two,
S.A., 318 F.3d 446, 456 (3d Cir. 2003) (internal quotations omitted). Stated another way, a court
must consider whether exploration of certain discovery avenues "might provide the 'something
more' needed" to establish personal jurisdiction. Id Courts have found jurisdictional discovery
to be "particularly appropriate where the defendant is a corporation." Metcalfe v. Renaissance
Marine, Inc., 566 F.3d 324, 336 (3d Cir. 2009).
In the present case, Sony's jurisdictional allegations regarding Pace are not clearly
frivolous. Sony has pointed to Pace's business relationships with Pace Americas, Comcast, and
DirecTV, and alleges contacts with Delaware through these relationships. 5 It is possible that
jurisdictional discovery focused on these relationships will produce the required "something
more" to establish personal jurisdiction. See Belden Techs., Inc., 626 F. Supp. 2d at 459.
"Through exploring these relationships, [Sony] could unearth transactions [or] sales" of the
Accused Products in Delaware. Id (emphasis in original). Allowing limited jurisdictional
discovery based on Sony's specific allegations and competent evidence regarding the established
distribution channel between Pace and Delaware is not authorizing a "fishing expedition based
[only] upon ... bare allegations." See Accenture Global Servs. GMBHv. Guidewire Software
Inc., 581 F. Supp. 2d 654, 663 (D. Del. 2008). Therefore, I recommend that the court deny
Sony has supported its allegations with evidence including Pace's 2014 Annual Report,
Comcast's 2014 Annual Form 10-K Report, and press releases from Pace's own website. (D.1.
21) The court is satisfied that these exhibits are not the type of "internet research" that has been
found inadmissible "as a compilation of hearsay." See generally Belden Techs. Inc., 626 F.
Supp. 2d at 459 (quoting In re Ameriserve Food Distrib. Inc., 267 B.R. 668, 672 (D. Del. 2001)).
without prejudice the motion to dismiss and permit Sony to conduct limited jurisdictional
For the foregoing reasons, I recommend that the court deny without prejudice Pace's
motion to dismiss for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2), and grant the
request for limited jurisdictional discovery. Specifically, I recommend that Sony be permitted to
pursue jurisdictional discovery for the next thirty (30) days. I recommend that Pace be permitted
to renew its motion to dismiss for lack of personal jurisdiction within three weeks of the close of
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(l)(B), Fed. R.
Civ. P. 72(b)(l), and D. Del. LR 72.1. The parties may serve and file specific written objections
within fourteen (14) days after being served with a copy of this Report and Recommendation.
Fed. R. Civ. P. 72(b)(2). The objections and responses to the objections are limited to ten (10)
pages each. The failure of a party to object to legal conclusions may result in the loss of the right
to de novo review in the District Court. See Sincavage v. Barnhart, 171 F. App'x 924, 925 n.l
(3d Cir. 2006); Henderson v. Carlson, 812 F.2d 874, 878-79 (3d Cir. 1987) ..
During oral argument held on February 10, 2016, the parties indicated a willingness to work
together and reach an agreement on the limited scope of jurisdictional discovery needed in this
case to resolve any outstanding jurisdictional issues. The court encourages the parties to meet
and confer on the scope of discovery necessary in light of this ruling identifying deficiencies
limited to the second prong of the dual jurisdiction analysis.
The parties are directed to the court's Standing Order for Objections Filed Under Fed. R.
Civ. P. 72, dated October 9, 2013, a copy of which is available on the court's website,
Dated: February~' 2016
Sherry R. Fal
United~ trate Judge
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