Funai Electric Co., Ltd. v. Personalized Media Communications LLC

Filing 20

MEMORANDUM re 10 MOTION to Dismiss. Signed by Judge Richard G. Andrews on 1/29/2016. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

FUNAI ELECTRIC CO., LTD.,
Plaintiff,
v.
PERSONALIZED MEDIA
COMMUNICATIONS, LLC,
Defendant.

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Civ. No. 15-558-RGA

MEMORANDUM

Plaintiff Funai Electric Co., Ltd. brought this suit against defendant Personalized Media
Communications, LLC ("PMC") on June 29, 2015, seeking a declaratory judgment of noninfringement, invalidity, and unenforceability of U.S. Patent Nos. 7,747,217 (the "'217 patent"),
7,752,649 (the "'649 patent"), and 7,752,650 (the '"650 patent") (collectively, the "Patents-InSuit). (D.I. 1). On September 25, 2015, PMC filed a motion to dismiss pursuant to Fed. R. Civ.
Pro. 12(b)(2), arguing lack of personal jurisdiction. For the reasons that follow, PMC's motion is
GRANTED.
Because PMC's reply brief (D.I. 14) raised new arguments, the court sua sponte granted
Funai a sur-reply and ordered PMC's counsel to show cause why their pro hac vice status should
not be revoked for saving their better argument for the reply brief. (D.I. 16). PMC filed a timely
response. (D.I. 17). In light of the decision regarding PM C's motion to dismiss, the order to show
cause is now moot. I will therefore vacate it.

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I.

BACKGROUND
Funai is a Japanese corporation with its principal place of business in Japan. (D.I. 1, ifl).

PMC is a Texas limited liability company with its principal place of business in Texas. (D.1. 12,
if4). The co-inventors of the Patents-in-Suit are two individuals, both residing in New York. (Id.
atif3).

As assignee of the Patents-in-Suit, PMC has sought to license its intellectual property rights
in these patents to others, including Funai. (Id.). On or about August 10, 2012, PMC's in-house
counsel sent a letter to in-house counsel at Funai's subsidiary, Funai Corporation, Inc., based in
California. (Id. at if5). The letter provided Funai with notice of infringement of the Patents-inSuit.

(D.1. 1, if6).

For the next three years, the parties engaged in discussions regarding

infringement and possible licensing of the Patents-in-Suit. (D.1. 12, if5). As a part of those
discussions, PMC representatives met with Funai representatives in Japan. (Id.). No meetings
took place in Delaware. (Id.).
PMC claims that all of PMC's operations are conducted in either Texas or Virginia. (Id.
at if4). PMC does not regularly conduct business in Delaware. (Id.). It is not registered to do
business in Delaware, nor does it have a registered agent authorized for receipt of service in
Delaware. (Id.). PMC has no offices, employees, agents, real estate, or other assets in the state,
nor does it own, operate, or manage any entity located or doing business in Delaware. (Id.). In
addit!on, PMC does not manufacture or sell any products in Delaware or to Delaware residents.

(Id.).
Funai does not dispute PMC's assertions. Instead, Funai focuses on the fact that PMC
previously filed two actions in this court asserting fifteen patents. (D.I. 13 at 4). The first action,
captioned Pegasus Development Corp. v. DirectTV, Inc., C.A. No. 00-1020-GMS, alleged

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infringement of U.S. Patent Nos. 4,694,490, 4,704,725, 4,965,825, 5,109,414, 5,233,654,
5,335,277, and 5,887,243 (the '"243 patent"). (D.I. 13 Ex. 6). The second action, captioned
Personalized Media Communications, LLC v. Amazon. com, Inc., C.A. No. 13-1608-RGA, alleged

infringement of U.S. Patent Nos. 7,769,170; 7,783,252; 7,801,304; 7,827,587; 8,046,791;
7,864,956; 7,805,749; 7,940,931; and the '243 patent. (Id.).

All the patents asserted in those

actions as well as the Patents-in-Suit claim priority to the same 1981 and 1987 patent applications.
(Id.). In addition, Funai states that it will raises legal issues similar to the issues raised in the prior

actions, including prosecution laches and § 101. (D.I. 13 at 5).
II.

STANDARDOFREVIEW
The court must dismiss a case when it lacks personal jurisdiction over a defendant. Fed.

R. Civ. Pro. 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). The
plaintiff, however, bears the burden of alleging facts sufficient to make a prima facie showing of
personal jurisdiction over the defendant. JCT Pharms., Inc. v. Boehringer Ingelheim Pharms.,
Inc., 147 F. Supp. 2d 268, 270-71 (D. Del. 2001). To meet this burden, the plaintiff must offer

facts which "establish with reasonable particularity" that jurisdiction exists. Id.
In the absence of consent, personal jurisdiction exists if two requirements are satisfied.

!named Corp. v. Kuzmak, 249 F.3d 1356, 1359 (Fed. Cir. 2001). First, there must be a statutory

basis for jurisdiction pursuant to Delaware's long-arm statute. Id.

Second, the ·exercise of

jurisdiction over the defendant must comport with the Due Process Clause of the Fourteenth
Amendment. Id. Delaware's long-arm statute "has been broadly construed to confer jurisdiction
,r
to the maximum extent possible under the Due Process Clause." LaNuova D & B, S.p.A. v. Bowe

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Co., Inc., 513 A.2d 764, 768 (Del. 1986). However, the personal jurisdictional analysis "must not
be collapsed into a single constitutional inquiry." Power Integrations, Inc. v. BCD Semiconductor
Corp., 547 F. Supp. 2d 365, 370 n. 3 (D. Del. 2008).
III.

DISCUSSION
In opposing PMC's motion, Funai asserts two bases for this court's exercise of personal

jurisdiction over PMC: (i) jurisdiction based on consent, and (ii) specific jurisdiction based on the
transaction of business in this state.
A. Consent to Jurisdiction
Funai argues that PMC implicitly consented to the jurisdiction of this court by previously
filing two patent infringement suits in Delaware. (D.I. 13 at 10-12). Because the requirement of
personal jurisdiction is an individual right, it can be waived by a party's express or implied consent.
Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703-04 (1982);
Capriotti 's Sandwich Shop, Inc. v. Taylor Family Holdings, Inc., 857 F. Supp. 2d 489, 499 (D.
Del. 2012). Determining whether a corporation consented to the personal jurisdiction of the courts
of a particular state is a matter to be determined by examination of the law of that state. Acorda
Therapeutics, Inc. v. Mylan Pharm. Inc., 78 F. Supp. 3d 572, 584 (D. Del. 2015), appeal pending,
No. 15-1456 (Fed. Cir.).
Under Delaware law, a party can be considered to have consented to jurisdiction by
"instituting another, related suit" that has some "logical relationship" to the present suit. Foster
. Wheeler Energy Corp. v. Metallgesellschaft AG, 1993 WL 669447, at *1, 4 (D. Del. Jan. 4, 1993).
Generally, Delaware courts have found that a logical relationship exists where there are parallel
suits between identical parties. For example, in Foster Wheeler, the court found that it had
personal jurisdiction over Metallgesellschaft AG ("MG") as to Foster Wheeler's claim against MG

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for patent infringement, because MG had procured a dismissal of that exact claim when it was a
counterclaim in a parallel suit by MG against Foster Wheeler. Id. at *4; see also Capriotti 's, 857
F. Supp. 2d at 499 (finding .that a franchisor-defendant consented to jurisdiction in Delaware
district court by initiating a second suit against franchisee-plaintiff in Delaware state court with
mirror-image claims).

Here, Funai cannot demonstrate the same type of logical relationship,

because PMC has never brought a suit against Funai in Delaware.
Funai cites a single Delaware case, Attorneys Liability Protection Society, Inc. v.
Eisenhofer, to argue that Foster Wheeler's holding may extend to situations where the parties are
not identical. (D.I. 13 at 15 n.5). But even in Eisenhofer there was a logical relationship between
the parties in the first and second suits; The defendant in Delaware state court previously filed a
class action in Delaware federal court against a law firm for malpractice. Attorneys Liab. Prat.
Soc'y, Inc. v. Eisenhofer, 2011 WL2089718, at *1 (Del. Sup. Ct. Apr. 29, 2011). The plaintiff in
Delaware state court was the law firm's insurance carrier. Id. It sought a declaratory judgment
that it did not owe a duty to defend or indemnify the law firm in the federal class action. Id. The
Delaware Superior Court found personal jurisdiction to be proper because, having come to
Delaware to sue the law firm, the defendant "impliedly agreed" to participate in "closely related"
litigation based, in part, on the same transaction. Id. at *2.

In comparison, Funai has not

demonstrated the same type of close relationship between this suit and PMC' s earlier suits on other
patents against unrelated defendants sufficient to find PMC impliedly consented to jurisdiction in
Delaware.

B. Specific Jurisdiction Pursuant to Delaware's Long Arm Statute
Subsection (c)(l) of Delaware's long-arm statute provides that specific personal
jurisdiction is proper over any nonresident who, in person or through an agent, "[t]ransacts any

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business" in the State, so long as the claims in question "arise out of' that transaction of business.
8 Del. C. § 3104(c)(l); Gould v. Gould, 2011 WL 141168, at *8 (Del. Ch. Jan. 7, 2011). Thus,
"even a single transaction is sufficient if the claim has its origin in the asserted transaction." Uribe

v. Maryland Auto. Ins. Fund, 2015 WL 3536574, at *4 (Del. May 21, 2015) (quoting LaNuova,
513 A.2d at 768).
Funai argues that PMC voluntarily transacted business in Delaware by filing two patent
infringement actions in this court. (D.I. 13 at 13). Filing an action in Delaware constitutes a
business transaction for the purposes of subsection (c)(l). Gould, 2011 WL 141168, at *8; see

also Microsoft Corp. v. Amphus, Inc., 2013 WL 5899003, at *12 (Del. Ch. June 27, 2013) (noting
parties' agreement that filing of a patent infringement claim constituted an act of business under
subsection (c)(l)). The issue for Funai is whether its action for declaratory judgment "arises out
of' PMC's earlier patent enforcement actions. Funai argues that this is not a demanding standard. ·
(D.I. 18).
PMC's earlier enforcement actions in Delaware involved different parties and different
patents. Regardless, Funai claims that this action "arises out of' PMC's earlier Delaware actions
because all of the patents have the same title, assignees, and inventors, and most of them share the
same specification. (D.I. 13 at 13). Moreover, all of the patents claim priority to the same family
of patents, and share common ancestors. (Id.). Finally, PMC's earlier Delaware litigations-like
this litigation-involve the same issues of prosecution laches and§ 101. (Id.).
As an initial matter, a defendant's other patent enforcement activities "need not be directed
at the declaratory judgment plaintiff." Active Video Networks, Inc. v. Trans Video Elecs., Ltd., 975
F. Supp. 2d 1083, 1097 (N.D. Cal. 2013); Avocent Huntsville Corp. v. Aten Int'/ Co., 552.F.3d
1324, 1334 (Fed. Cir. 2008). Thus, it is not relevant to the jurisdictional analysis that Funai had

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no involvement in PMC's earlier lawsuits. However, it is also not relevant to the jurisdictional
analysis that Funai will raise similar legal issues regarding prosecution laches and § 101. It is the
"nature of the acts giving rise to a claim, rather than the nature of the claims, that determines
whether a cause of action arises from contacts with the forum." Sprint Nextel Corp. v. iPCS, Inc.,
2008 WL 2737409, at *9 (Del. Ch. July 14, 2008) (emphasis in original) (quoting Sears, Roebuck
& Co. v. Sears pie, 752 F. Supp. 1223, 1226-27 (D. Del. 1990)). The crux of the issue is whether

Funai's claims has its origin in the same facts giving rise to PMC's earlier patent enforcement
activities.
Delaware courts have not addressed whether a declaratory judgment action regarding
patent non-infringement, invalidity, and unenforceability "arises out of' defendant's earlier patent
enforcement actions. Federal courts, however, have analyzed the "arises out of' requirement in
the context of determining whether constitutional due process is satisfied because the test is the
same-whether the litigation "arises from" the defendant's activities. See Boston Sci. Corp. v. Wall
Cardiovascular Techs., LLC, 647 F. Supp. 2d 358, 365 (D. Del. 2009) ("For the court to exercise

specific personal jurisdiction consistent with due process, plaintiff's cause of action must have
arisen from the defendant's activities in the forum state."). Thus, review of federal decisions can
be illuminating.
Under the law of the Federal Circuit, only activities that relate to the enforcement of the
patents-in-suit are relevant to the "arises out of' analysis.

Avocent, 552 F.3d at 1332-33.

Accordingly, federal courts have found that a plaintiffs declaratory judgment action arises out of
defendant's prior actions enforcing the same patents at issue. See Kyocera Commc 'ns, Inc. v.
Potter Voice Tech., LLC, 2013 WL 2456032, at *3 (S.D. Cal. June 5, 2013) (finding personal

jurisdiction over a non-resident defendant because plaintiff's declaratory judgment action arises

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out of or relates to defendant's activities in the forum enforcing the very same patent at issue); Pro

Sports Inc. v. West, 639 F. Supp. 2d 475, 482 (D.N.J. 2009) (same); Active Video, 975 F. Supp. 2d
at 1097 (finding that defendant's six earlier patent infringement actions involving the same and
related patents gave rise to the later declaratory judgement action). In contrast, federal courts have
found that a plaintiff's declaratory judgment action does not arise out of defendant's enforcement
of other patents. See Xilimc, Inc. v. Papst Licensing GMBH & Co.KG, 2015 WL 4149166, at *12
(N.D. Cal. July 9, 2015) (finding that plaintiffs' case does not "arise out of' defendant's prior
litigation in the state involving other patents).
Delaware cases suggest that the Delaware Supreme Court would adopt a similar analysis.
In Uribe v. Maryland Automobile Insurance Fund, the Delaware Supreme Court affirmed a
decision finding no personal jurisdiction pursuant to subsection (c)(l) over a non-resident
insurance company. 2015 WL 3536574, at *4 (Del. May 21, 2015). The court rejected plaintiffs'
argument that defendant's earlier filings in Delaware of several unrelated insurance suits satisfied
the "arising out of' requirement. Id. The court explained that for the purposes of subsection (c)(1 ),
lawsuits that did not involve the same insurance policies under which plaintiffs were covered had
"no relation whatsoever to the subject of the action at issue." Id.
Similarly, in Sprint Nextel Corp. v. iPCS, Inc., the Delaware Court of Chancery declined
to find that a second action "arose from" an earlier action, despite the fact that the earlier action
involved the same contracts, same provisions, and same parties. 2008 WL 2737409, at *10. The
first Delaware action determined whether Sprint's operation ofNextel's iDEN network pursuant
to the Sprint-Nextel merger violated the exclusivity provisions in themanagement agreements with
Sprint PCS affiliates. Id. at *2. In the second Delaware action, the Sprint PCS affiliates claimed
that Sprint again violated the exclusivity provisions in the management agreements by entering

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into a transaction with Clearwire Corporation to operate a future broadband wireless network based
on technology using the Woldwide Inter-Operability for Microwave Access standard. Id. at *3-4.
The dispositive factor for the court was that the underlying facts of each action were sufficiently
different from and independent of the other. Id. at *9-10.
Funai claims that Sprint-Nextel applied a higher standard than required by the Delaware
Supreme Court. (D.I. 18). Funai focuses on the court's statement in Sprint-Nextel that the arising
out of requirement was not satisfied because defendant's earlier actions were not "critical steps in
the chain of events resulting in the cause of action before the court." Id. at *10. However, that
was not the sole basis for the court's conclusion. The court also considered whether, under Foster
Wheeler, a case on which Funai heavily relies, the two actions had a "logical relationship." Id.

The court concluded that the Sprint PCS affiliates failed to demonstrate a logical relationship as
well, because although the claims arose out of the same contracts, they involved different
underlying factual contexts. Finally, the court in Sprint Nextel quoted the standard set forth by the
Delaware Supreme Court in LaNuova that a claim arises out of a transaction where "the claim has
its origin in the asserted transaction." Id. at *7 n. 51 (citingLaNuova, 513 A.2d.at 768). Thus, I
disagree with Funai' s argument that Sprint Nextel is a departure from the standards set forth by the
Delaware Supreme Court.
In conclusion, Funai has not demonstrated that its claims arise out of PMC's transaction of
business in this state as required by Delaware's long-arm statute. Because this court cannot
exercise personal jurisdiction over PMC pursuant to Delaware's long-arm statute, I do not need to
consider PMC's constitutional right to due process.

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IV.

CONCLUSION
For the foregoing reasons, PMC's motion to dismiss pursuant to Fed. R. Civ. Pro. 12(b)(2)

(D.I. 10) is GRANTED. The court's order to show cause (D.I. 16) is moot. That order is therefore
VACATED. An appropriate order will be entered.

Dated: January

Jj_, 2016

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