C.R. Daniels. Inc. et al v. Naztec International Group, Inc.
Filing
17
MEMORANDUM OPINION. Signed by Judge Ellen L. Hollander on 12/2/11. (dass, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
C.R. DANIELS, INC., AND CASTO
& HARRIS, INC.,
Plaintiffs,
v.
NAZTEC
GROUP, LLC,
Civil Action No.: ELH-11-01624
INTERNATIONAL
Defendant.
MEMORANDUM OPINION
Plaintiffs C.R. Daniels, Inc. (“C.R. Daniels”) and Casto & Harris, Inc. (“Casto &
Harris”), filed suit against defendant Naztec International Group, LLC (“Naztec”), alleging
patent infringement with respect to a particular type of voting booth, in violation of 35 U.S.C. §
271 et seq. See “Complaint For Injunctive Relief And Damages And Demand For Jury Trial”
(“Complaint,” ECF 1).1 Pursuant to FED. R. CIV. P. 12(b)(2), Naztec has filed “Defendant’s
Motion To Dismiss For Lack Of Personal Jurisdiction” (“Motion,” ECF 11), as well as a
supporting memorandum (“Memo,” ECF 12).2 Plaintiffs oppose the Motion. See “Plaintiffs’
Opposition To Defendant’s Motion To Dismiss Or, In The Alternative, Request For
1
Plaintiffs assert that this Court has subject matter jurisdiction over this case pursuant to
28 U.S.C. § 1331, which governs “federal question” jurisdiction; 28 U.S.C. § 1338(a), which
confers on the district courts original jurisdiction over civil actions arising under any Act of
Congress relating to patents; and 28 U.S.C. § 1332(a)(1), which governs diversity jurisdiction.
Complaint at 2 ¶¶ 4-6.
2
Defendant has appended numerous exhibits to its Memo, including the Declaration of
Mohamed “Sal” Pazhoor, President of Naztec (“Exhibit B”); pamphlets describing the
Smartpoll voting booth, the product at issue in this case (“Exhibit B1” and “Exhibit B2”); an
“Analysis of the FY 2012 Maryland Executive Budget” (“Exhibit B3”); a 2010 “Maryland
Voting Systems Study” (“Exhibit B4”); the Declaration of Sarfraz Pazhoor, Project Manager for
Naztec (“Exhibit C”); photographs of voting booths (“Exhibit C1”); and pamphlets describing
the Smartpoll voting booth (“Exhibit C2” and “Exhibit C3”).
Jurisdictional Discovery” (“Opposition,” ECF 13).3 In reply, defendant filed “Defendant’s
Reply In Support Of Its Motion To Dismiss For Lack Of Personal Jurisdiction” (“Reply,” ECF
16).
As the matter has been fully briefed, the Court rules now pursuant to Local Rule 105.6,
no hearing being necessary.
Factual and Procedural Background4
C.R. Daniels, a Maryland corporation with its principal place of business in Ellicott City,
Maryland, is a manufacturing company that produces, among other things, voting booths, utility
carts, and other accessories for the election supply industry. Complaint at 1 ¶ 1. Casto &
Harris, a West Virginia corporation with its principal place of business in Spencer, West
Virginia, is a distributor of election supplies throughout the United States, including products
made by C.R. Daniels. Id. at 2 ¶ 2. Naztec, a Florida corporation with its principal place of
business in West Palm Beach, Florida, manufactures and sells voting booths for the election
supply industry. Id. at 2 ¶ 3.
In 2008, Gary Abel, President of C.R. Daniels, and Joe Wilson, of Casto & Harris,
designed a wheeled voting booth that nests with other like voting booths and, when nested
together, can be transported in groups. Id. 3 at ¶ 13. Unlike conventional voting booths, which
are “cumbersome to store and transport,” Opposition at 2, and must be assembled and
3
Plaintiffs have appended numerous exhibits to their Opposition. See Affidavit of Gary
V. Abel, President of C.R. Daniels (“Exhibit 1”); “Vendor Information” brochure from the
Maryland Association of Election Officials 2011 Annual Meeting (“Exhibit 2”); and a map
showing the location of vendors’ booths at the conference held in Ocean City, Maryland
(“Exhibit 3”).
4
Most of the facts are undisputed. In any event, the Court construes the facts alleged in
the Complaint in the light most favorable to plaintiffs, as the parties opposing the motion. See
Mylan Laboratories, Inc. v. Akzo, N.V., 2 F.3d 56 (4th Cir. 1993).
2
disassembled in order to be transported and stored, Complaint at 3 ¶ 11, the booth designed by
Abel and Wilson requires no assembly and can be stored compactly. Id. at 3 ¶¶ 12-13. Because
polling places tend to be temporary facilities set up in schools, churches, and other permanent
structures, multiple voting booths must be brought in during elections.
Id. at 3 ¶ 9.
Consequently, ease of transport and removal, simplicity of setup, durability and compactness of
storage are crucial design concerns for voting booths. Id. at 3 ¶ 10.
On March 9, 2009, Abel and Wilson filed a U.S. provisional patent for the voting booth
in issue. Id. at 4 ¶ 14. That application eventually matured into United States Utility Patent
7,895,954 (the “954 patent”).5 Id. The 954 patent, entitled “Portable, nesting voting booth,”
was issued on March 1, 2011. Id. Abel and Wilson subsequently obtained five design patents
covering the ornamental appearance of the portable nesting voting booth: D622,975 (the “975
patent”); D603,184 (the “184 patent”); D603,621 (the “621 patent”); D616,217 (the “217
patent”); and D603,183 (the “183 patent”). Id. at 4 ¶¶ 15, 16.6 Abel and Wilson subsequently
assigned their joint ownership interests in these patents to plaintiffs. Id. at 4 ¶ 17.
Since mid 2009, C.R. Daniels has manufactured, and Casto & Harris has marketed, the
portable nesting voting booth, under the “ReadyVoteTM” brand name (“ReadyVote”). Id. at 4 ¶
18. According to plaintiffs, the Ready Vote has developed significant market share. Id.
Naztec has been manufacturing and selling a voting booth under the “Smartpoll TM”
brand name (“Smartpoll”). Id. at 5 ¶ 19. According to plaintiffs, the Smartpoll employs a
design that infringes upon the patents they hold relating to the ReadyVote booth, namely the
5
Plaintiffs appended a copy of the 954 patent to their Complaint as “Exhibit A.”
6
Plaintiffs appended to their Complaint copies of the 975 patent, the 184 patent, the 621
patent, the 217 patent, and the 183 patent, as “Exhibits B, C, D, E, and F,” respectively.
3
954 patent, the 975 patent, the 184 patent, the 621 patent, the 217 patent and the 183 patent. Id.7
Plaintiffs allege Naztec has infringed upon plaintiffs’ patents by distributing the Smartpoll
throughout the United States, and by continuing their acts of infringement after plaintiffs
provided notice of the patent.8 Id. at 5 ¶¶ 20-21.
Defendant admits its “recent participation in a conference in Ocean City, [Maryland] at
which it displayed several of its voting system products, including the accused voting booth.”
Memo at 2.9 But, it also contends: “It has not otherwise manufactured, used, sold or offered to
sell the booth within the state. Naztec maintains no presence in Maryland.” Id.
In particular, Naztec attended the Annual Meeting of the Maryland Association of
Election Officials, held in conjunction with the State Board of Elections Biennial Meeting, in
Ocean City, Maryland, from June 12 through June 15 of 2011 (the “Conference”). Opposition
at 3. Commercial vendors were required to pay a $750 entry fee, which included space on the
vendor floor. Id. at 3-4 (citing Opposition Exh. 2).
Plaintiffs emphasize the importance of such conferences to their business, asserting:
“One of the primary means by which the Plaintiffs market the ReadyVote booths is through
conferences, conventions and trade shows geared towards state and local elections officials.”
Opposition at 3. Plaintiffs explain that this is “because there is no market for voting booths
outside of state and local governments.” Id. Citing the affidavit of Gary Abel, who attended the
7
For the purpose of this Motion, I must assume that the Smartpoll is, in fact, an
infringing product. See Mylan Laboratories, Inc., 2 F.3d 56.
8
Plaintiffs claim they notified Naztec of its alleged infringement by way of a letter from
counsel sent on May 13, 2011. Opposition at 4.
9
Defendant also notes that it “utilizes an independent sales representative based in
Minnesota[, who] recently advised that it may have made a single WebEx webinar presentation
– concerning a Naztec product which is not implicated in this litigation – in January 2010 to an
audience that included Maryland election officials, but that it cannot confirm whether the
presentation was made.” Memo at 6 (citation omitted).
4
Conference, Opposition Exh. 1, plaintiffs maintain that “it is uncommon for the Plaintiffs to
make an actual sale of voting booths at a conference. Rather, because of governmental or
municipal purchasing cycles, there is often a lag time of anywhere from a couple of weeks up to
three (3) years before a client contacts the Plaintiffs about purchasing voting booths after seeing
them at a conference.” Opposition at 3. Again citing Abel’s affidavit, plaintiffs assert that
“representatives rarely talk about prices with potential customers at the conferences. Rather, the
pricing discussion occurs later, after the buyer has secured approval for the purchase and knows
how much can be spent and how many booths are needed.” Id.
Abel avers in his Affidavit that “Naztec had the largest marketing display at the Ocean
City Conference.” Opposition Exh. 1 ¶ 11. According to Abel, “Naztec display[ed] three
different voting booths, including two nesting voting booth[s].” Id. ¶ 12. Referring to the
vendor floor plan, Opposition Exh. 3, plaintiffs note that Naztec’s display “was approximately
three (3) times as big as any other vendor at the conference.” Opposition at 5.
Further, Abel avers, Opposition Exh. 1 ¶ 12-13:
[I]n direct competition with C.R. Daniels, I observed Naztec demonstrating their
nesting voting booth to some of the same Maryland state and county employees
with whom I had spoken [to market our nesting voting booths at the Conference].
Over the course of the Conference, I personally saw Naztec
representatives use the infringing voting booths[, nesting them together,] to
attract potential customers to stop at their booth. I also observed them using the
booth by demonstrating the nesting feature . . . not only during each day of the
conference as a demonstration, but also at the end of each day and at the
conclusion of the conference as a means of consolidating them for storage and
transport.
Standard of Review
In the Complaint, at 2 ¶ 7, plaintiffs assert:
[Naztec] has established minimum contacts with the forum by purposely availing
itself of the laws and benefits of the forum, and the exercise of jurisdiction over
5
the Naztec [sic] would not offend traditional notions of fair play and substantial
justice . . . [as] . . . Naztec has voluntarily conducted business in this judicial
district by using, selling and/or offering infringing voting booths for sale in this
district.
In patent infringement cases, personal jurisdiction is governed by the law of the Federal
Circuit. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (Fed. Cir. 1994).
When a motion to dismiss is made under FED. R. CIV. P. 12(b)(2), for lack of personal
jurisdiction, the plaintiff bears the burden of establishing personal jurisdiction over the
defendant. Avocent Huntsville Corp. v. Aten Intern. Co., Ltd., 552 F.3d 1324 (Fed. Cir. 2008).
In this District, it has been held that the pleading standards set forth by the United States
Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal,
__ U.S. __, 129 S. Ct. 1937 (2009), apply to allegations of personal jurisdiction in the same
manner as they govern other complaints, although the Federal Circuit has not ruled on the issue
of the applicability of Twombley. See Haley Paint Co. v. E.I. Dupont De Nemours & Co., 775
F. Supp. 2d 790 (D. Md. 2011) (citing similar holdings from Sixth Circuit, Tenth Circuit, and
Eastern District of New York). In the context of a dispute as to personal jurisdiction, Twombley
and Iqbal would require a plaintiff to establish a claim of personal jurisdiction “that is plausible
on its face.” 550 U.S. at 570. This requires “more than labels and conclusions.” Id. at 555.
Neither discovery nor an evidentiary hearing are necessarily required to resolve a motion
under Rule 12(b)(2). See generally 5B WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE §
1351, at 274-313 (3d ed. 2004, 2010 Supp.). Rather, the district court may address the question
of personal jurisdiction as a preliminary matter, ruling on the basis of pleadings, affidavits, and
other written materials. Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1017
(Fed. Cir. 2009). In that circumstance, the plaintiff need only make a prima facie showing that
the defendant is subject to personal jurisdiction. Id. However, the plaintiff must eventually
6
prove the existence of personal jurisdiction by a preponderance of the evidence, either at trial or
at a pretrial evidentiary hearing. Bledsoe v. Merit Systems Protection Bd., No. 2011–3054, 2011
WL 4537804, at *3 (Fed. Cir. Oct. 03, 2011); Campbell Pet Co. v. Miale, 542 F.3d 879, 889
(Fed. Cir. 2008); Pieczenik v. Dyax Corp., 265 F.3d 1329, 1334 (Fed. Cir. 2001).
A federal district court has personal jurisdiction over a defendant if two requirements are
satisfied. Patent Rights Protection Group, LLC v. Video Gaming Technologies, Inc., 603 F.3d
1364, 1368 (Fed. Cir. 2010). “First, the defendant must be amenable to service of process.” Id.
(citing Omni Capital Int’l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987)). “Second,
exercising jurisdiction over the defendant must comport with due process.” Id. at 1369 (citing
Avocent Huntsville Corp., 552 F.3d at 1329).
Determining whether a defendant is “amenable to service of process” requires an
examination of the forum state’s long-arm statute.
Red Wing Shoe Co. v. Hockerson-
Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed. Cir. 1998). Citing Burger King v. Rudzewicz, 471
U.S. 462, 471-78 (1985), the Federal Circuit said in Amana Refrigeration, Inc. v. Quadlux, Inc.,
172 F.3d 852, 857 (Fed. Cir. 1999): “To exercise personal jurisdiction over an out-of-state
party, a court must determine whether personal jurisdiction is (1) permitted by the forum state's
long-arm statute, and (2) consistent with due process.”
Maryland’s long-arm statute provides, in part, that a Maryland court has personal
jurisdiction over a defendant if that defendant “[c]auses tortious injury in the State by an act or
omission in the State” or “[t]ransacts any business or performs any character of work or service
in the State.” Md. Code (2006 Repl. Vol., 2011 Supp.), §§ 6-103(b)(3) and (1) of the Courts &
Judicial Proceedings Article (“C.J.”). As to C.J. § 6-103(b)(3), it is well settled that “[patent]
[i]nfringement, whether direct or contributory, is essentially a tort, and implies invasion of some
7
right of the patentee.” Carbice Corp. of Am. v. American Patents Dev. Corp., 283 U.S. 27, 33
(1931); see also Orthokinetics, Inc. v. Safety Travel Chairs Inc., 806 F.2d 1565, 1579
(Fed.Cir.1986) (“Patent infringement is a tort . . ..”). As to C.J. § 6-103(b)(1), the Maryland
Court of Appeals has construed the Maryland long-arm statute as authorizing the exercise of
personal jurisdiction to the full extent allowable under the Due Process Clause.
Bond v.
Messerman, 391 Md. 706, 721, 895 A.2d 990, 999 (2006). When “personal jurisdiction . . .
reaches to the limits of due process, . . . the inquiry . . . is whether exercise of personal
jurisdiction . . . is consistent with due process.” Amana Refrigeration, 172 F.3d at 857. See
also Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir. 2001) (stating that when a state’s
“long-arm statute is coextensive with the limits of due process, [there is] a single inquiry:
whether jurisdiction comports with due process.”).
In order to exercise personal jurisdiction, due process requires that the non-resident
defendant have “certain minimum contacts” with the forum state “such that the maintenance of
the suit does not offend ‘traditional notions of fair play and substantial justice.’” International
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citation omitted). “Minimum contacts” are
established if the defendant “purposefully avails itself of the privilege of conducting activities
within the forum, thus invoking the benefits and protections of its laws.” Hanson v. Denckla,
357 U.S. 235, 253 (1958).
To establish general personal jurisdiction over a defendant, a plaintiff must show that the
defendant has “‘continuous and systematic’ contacts with the forum state, which “confers
personal jurisdiction even when the cause of action has no relationship with those contacts.”
Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1200 (Fed. Cir. 2003) (citation omitted).
But, even “[w]here a defendant is not subject to general jurisdiction in the forum state, a district
8
court may nonetheless exercise specific [personal] jurisdiction over the defendant . . . .”
Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories, Inc., 444 F.3d 1356, 1360-61
(Fed. Cir. 2006). “Specific personal jurisdiction must be based on activities that ‘arise[ ] out of’
or ‘relate [ ] to’ the cause of action and can exist even if the defendant's contacts are ‘isolated
and sporadic.’” Id. (citation omitted).
The Federal Circuit “has adopted a three-factor test embodying the Supreme Court's
jurisprudence on specific personal jurisdiction.” Electronics For Imaging, Inc. v. Coyle, 340
F.3d 1344, 1350 (Fed. Cir. 2003). They are as follows:
(1) whether the defendant “purposefully directed” its activities at residents of the
forum; (2) whether the claim “arises out of or relates to” the defendant's activities
with the forum; and (3) whether assertion of personal jurisdiction is “reasonable
and fair.” . . . The first two factors correspond with the “minimum contacts” prong
of the International Shoe analysis, and the third factor corresponds with the “fair
play and substantial justice” prong of the analysis.
Inamed, 249 F.3d at 1360 (quoting Akro Corp. v. Luker, 45 F.3d 1541, 1545 (Fed. Cir. 1995)).
Contentions
Defendant urges the Court to dismiss this action for lack of personal jurisdiction.
Claiming that its contacts with Maryland were “sporadic” and “insubstantial,” Naztec maintains
that its contacts were insufficient to establish either general or specific personal jurisdiction over
Naztec. As to general jurisdiction, defendant posits, Memo at 6-7 (citations omitted):
Naztec does not have continuous and systematic general business contacts
with the State of Maryland. In fact, it maintains no presence in the forum at all.
It maintains no offices or regular and established places of business in the state. It
has no employees, agents or distributors in the state. It does not own property or
anything of value in the state. It is not registered to do business in Maryland, and
conducts no business in the state. It has no subsidiary or affiliated companies in
Maryland. It maintains no bank accounts within the state. It has not placed
advertisements in local newspapers, magazines or television stations, nor has it
advertised through telemarketing, in Maryland. . . .
9
. . . Naztec has not . . . conducted any directed internet advertising, nor has
it conducted an[y] mailing campaigns, focused on Maryland residents. Naztec’s
websites are not directed to Maryland residents, but rather are generally available
to anyone in the United States having internet access.
With respect to the nature of Naztec’s business, which is the production,
marketing and sale of voting booths, Naztec has not had any participation or
involvement with any request for proposal (RFP) or other bidding requests issued
from any state or municipal government agency in Maryland as part of a
procurement process.
Defendant also disputes specific personal jurisdiction.
Naztec concedes that it
“participated as an exhibiting vendor” at the Conference from June 12-15, 2011. Memo at 7.
Naztec also concedes that, at the Conference, it “displayed” its “voting booth products,”
including the Smartpoll voting booth. Id. Indeed, Naztec characterizes its attendance at the
Conference as its “most significant connection to the State of Maryland.” Id. But, Naztec
claims that it merely “attended the conference for informational and networking purposes.” Id.
(citing Memo Exh. B ¶ 19; Memo Exh. C ¶ 21).
Naztec contends that it “did not use or sell” any of its products at the Conference. Id. It
states: “It did not offer to sell the accused voting booth, and only provided specific pricing for
other voting system products. . . .” Id. Further, Naztec contends that “the attendees at the
conference were in no position to purchase or request bidding for voting system products.” Id.
Citing the affidavits of Naztec President Sal Pazhoor (Exh. B ¶ 28) and Project Manager Sarfraz
Pazhoor (Exh. C ¶ 12), Naztec asserts that the attendees did not hold “purchasing or decisionmaking power to acquire voting booths, because only the State Board of Elections or the
Maryland Department of Legislative Services would have such authority.”
Memo at 11.
Moreover, Naztec insists that defendant “and perhaps everyone else in the election industry
attending the conference . . . knew full well that there [would] not be any sales of voting booths
10
in Maryland until at least 2013 because of the state’s budget issues.” Memo at 12 (citing Exh. B
¶¶ 24-28; Exh. C ¶ 14).
Addressing the three prongs articulated in Inamed, 249 F.3d at 1360, and Akro Corp., 45
F.3d at 1545, defendant maintains that the facts described above do not give rise to specific
personal jurisdiction over Naztec. Memo at 8.
As to the first prong, defendant denies that it “purposefully directed” its activities at
Maryland residents, as it has “no established distributors in Maryland,” and the only contact it
had with Maryland were the “single web presentation by an independent sales representative for
an unrelated product” and its attendance at the Conference. Memo at 8-9. With regard to the
Conference, defendant maintains that it “merely displayed the accused voting booth, and
otherwise did not use, sell or offer to sell the booth at the conference [and] did not make specific
pricing for the booth available to attendees.” Id. at 9. Thus, Naztec claims it had only “isolated
activity directed toward Maryland.” Id. at 8.
With respect to the second prong, Naztec disputes that the claim at issue “arises out of or
relates to” defendant's activities in Maryland. Defendant recognizes that, pursuant to 35 U.S.C.
§ 271(a), “[p]atent infringement occurs when one makes, uses, sells or offers to sell a patented
invention without the patent owner’s consent.” Id. at 9. But, argues defendant: “It is clear that
Naztec committed none of these acts, but rather merely displayed the accused voting booth at
the conference,” id., and “made available a single-page brochure about the product.” Id. at 10.
Noting that it did not sell the product or “provide any definitive pricing terms . . . .,”
Naztec observes that “it would have been impossible for Naztec to initiate an actual transaction
at the conference to sell the booth in Maryland,” because the attendees lacked the “decisionmaking process to acquire voting booths. . . .” Id. at 11. Indeed, argues Naztec, “as early as
11
February 2011 Naztec–and perhaps everyone else in the election industry attending the
conference – knew full well that there will not be any sales of voting booths in Maryland until at
least 2013 because of the state’s budget issues.” Id. at 12. Instead, Naztec “used the conference
as an opportunity to network and introduce itself to officials for future consideration.” Id.
Further, Naztec asserts: “Naztec has not sold the accused voting booth in Maryland. It had no
sales in the state prior to the conference. . . . It did not sell the booth at the conference, and has
not sold the booth in Maryland since the conference concluded. No orders have been received
or offered for the sale of the accused voting booth in Maryland, either at the conference or at
any time prior or subsequent thereto” (emphasis in original). Id. at 13.
With respect to the third prong, defendant claims that the assertion of personal
jurisdiction in this case “would be “unreasonable and unfair.” Id. Naztec explains, id. at 13-14:
Naztec’s contacts with Maryland to date have been less than minimal, consisting
entirely of its attendance at one conference in Ocean City. While attending the
conference, Naztec . . . committed no acts from which the Plaintiffs’ patent
infringement claim could arise or relate. . . . [T]here is no connection between the
Plaintiffs’ infringement action, Naztec and the State of Maryland. Rather, the
only apparent connection to Maryland is that it is the home state of one of the
Plaintiffs, C.R. Daniels, Inc.
In their Opposition, plaintiffs do not directly dispute Naztec’s claim that the Court lacks
general personal jurisdiction. In a footnote, they state: “It is unclear at this juncture whether this
Court can maintain general jurisdiction over Naztec.” Opposition at 7 n. 3.10
As to specific personal jurisdiction, plaintiffs address each of the three prongs articulated
in Inamed and Akro Corp.
10
Plaintiffs assert that, “before the Court rules that it does not have general personal
jurisdiction over Naztec, the Plaintiffs should be entitled to discovery on the true nature and
extent of Naztec’s contacts with Maryland.” Opposition at 7 n. 3.
12
With respect to the first prong, plaintiffs insist that Naztec “purposefully directed” its
activities at Maryland. In support of this contention, they cite Naztec’s attendance at the
Conference, paying “a minimum of . . . $700” to participate and maintaining “the largest display
of any of the vendors at the Conference,” in an effort to compete for the business of the
attendees, who “were employees of state and local governments in Maryland . . . .” Id. at 8. In
this regard, plaintiffs observe that “[o]ne of the primary means” by which voting booths are
marketed is through “conferences, conventions and trade shows geared towards state and local
elections officials,” because “there is no market for voting booths outside of state and local
governments.” Id. at 3. They add that “the bulk of the Plaintiffs’ sales of voting booths are a
direct result of exposure at state or regional elections conferences.” Id.
In regard to the second prong, plaintiffs insist that their claim “arises out of or relates to”
Naztec’s activities at the Conference. In their view, defendant committed patent infringement in
Maryland “by displaying the infringing booths in its Webinar and at the Ocean City
Conference,” id. at 12, and by “using” the Smartpoll booths at the Conference for their
“intended purposes,” i.e., “nesting the voting booths together, both in demonstration to
Conference attendees and to store and transport the booths at the beginning and end of the
Conference. . . .” Id. at 9.
Plaintiffs also contend that defendant committed patent infringement in Maryland by
offering to sell the infringing booths at the Conference.
In this regard, plaintiffs reject
defendant’s argument that it did not offer the booths for sale merely because it never discussed
prices with the attendees; none of the attendees had authority to purchase the booths at the
Conference; and the Maryland budget was so constrained that voting booths could not be
purchased for two to three years. Id. at 11. Plaintiffs point out that defendant has admitted “that
13
its representatives discussed ‘indicative pricing’ as well as the price for which the infringing
booths had recently been sold to the City of New York,” and that “it is uncommon to actually
discuss pricing with attendees at a conference when marketing these types of voting booths.”
Id. 11 In addition, plaintiffs observe that “it is uncommon to make actual sales at a conference.”
Id. at 12. Instead, “the point is to market the products at the conference and await a call from
interested purchasers following the conference.” Id.12 They also describe as “misleading”
Naztec’s “argument that there would be no funding for voting equipment for several years,”
explaining that “funding for voting booths [may] open up prior to 2014.” Id.
Plaintiffs also assert that, for the purpose of establishing infringement in Maryland, they
need only show that defendant “‘exposed for sale’ an allegedly infringing article in the State of
Maryland,” which was accomplished when defendant displayed the booths at the Conference.
Id. at 13. Noting that they own not only “a utility patent in the nesting voting booths, but
also . . . five . . . design patents . . . .”, id. at 12, plaintiffs assert that the infringement of design
patents is covered by both 35 U.S.C. § 271, discussed supra, pertaining to utility patents, and 35
U.S.C. § 289, which is specific to design patents and states, in relevant part:
Whoever during the term of a patent for a design, without license of the owner,
(1) applies the patented design, or any colorable imitation thereof, to any article of
manufacture for the purpose of sale, or (2) sells or exposes for sale any article of
manufacture to which such design or colorable imitation has been applied shall
be liable to the owner to the extent of his total profit . . . . (Emphasis added.)
11
Plaintiffs assert that “the pricing discussion occurs later, after the buyer has secured
approval for the purchase and knows how much can be spent and how many booths are
needed.” Opposition at 3.
12
In fact, plaintiffs note that “because of governmental or municipal purchasing cycles,
there is often a lag time of anywhere from a couple of weeks up to three (3) years before a client
contacts the Plaintiffs about purchasing voting booths after seeing them at a conference.”
Opposition at 3.
14
In addition, plaintiffs contend that, even if Naztec’s conduct at the Conference did not
constitute an “offer to sell,” “Federal Circuit precedent makes clear that [defendant’s] activities
were sufficiently related to the Plaintiffs’ claims for infringement that the Court can and should
exercise personal jurisdiction over Naztec.” Opposition at 13. In their view, a “close nexus
between Naztec’s acts and the Plaintiffs’ claims” is sufficient to establish that their claims “arise
out of or relate to” Naztec’s activities at the Conference. Id. at 14.
Finally, with respect to the third prong, plaintiffs contend that, according to Federal
Circuit case law, “[t]he assertion of personal jurisdiction over Naztec in this matter would be
“reasonable and fair.’” Id. They elaborate: “[S]ince Naztec has demonstrated its ability to send
two representatives and several samples of its voting booths to Maryland for a four day
conference, it would not be unfair or unreasonable for this Court to exercise personal
jurisdiction over it.” Id. at 15.
Discussion
Defendant denies “continuous and systematic” contact with Maryland so as to justify
this Court’s assertion of general personal jurisdiction over defendant. Although plaintiffs seem
to concede that, on the face of the submissions, this Court lacks general jurisdiction over
Naztec, they have offered evidence of defendant’s attendance at the Conference and the
Webinar, in support of their claim for specific personal jurisdiction.
It appears that defendant has had only “sporadic and insubstantial contacts with the
forum state,” and its contacts are not sufficient to establish general personal jurisdiction.
Campbell Pet Co., 542 F.3d 879 (declining to assert general jurisdiction over defendant despite
her having made twelve sales totaling almost $14,000 and attended a convention in the forum
state). See also Autogenomics, Inc., 566 F.3d at 1018 (declining to assert general jurisdiction
15
over defendant, because attendance at “four conferences over five years constitute[s] only
sporadic and insubstantial contacts”).
But, under the three-factor test articulated in both
Inamed, 249 F.3d 1356, and Akro Corp., 45 F.3d 1541, plaintiffs have established specific
personal jurisdiction.
As noted, defendant concedes that it “attended the [C]onference for informational and
networking purposes.” Memo at 9. It sought to “introduce itself” to members of the Maryland
Association of Election Officials “for future consideration.”
Id. at 12.
In attending the
Conference, defendant obviously hoped to make connections that would eventually lead to sales
of its products in Maryland, including the allegedly infringing booths. Clearly, defendant
“purposely directed” its activities at residents of Maryland.
Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com. de Equip. Medico, 563 F.3d 1285,
1297-98 (Fed. Cir. 2009), provides guidance. There, in finding specific personal jurisdiction,
the Federal Circuit determined that the defendant had purposefully directed its activities at the
forum by displaying allegedly infringing products at a trade show in order to bolster its “sales
effort,” even though no residents of the forum could actually purchase the products due to a lack
of FDA approval.13
I am also satisfied that plaintiffs’ claim “arises out of or relates to” defendant's activities
in the forum. As indicated, 35 U.S.C. § 271(a) states that “whoever without authority makes,
uses, offers to sell, or sells any patented invention, within the United States or imports into the
United States any patented invention during the term of the patent therefor, infringes the
13
In Synthes, the defendant was a foreign corporation, and the forum was the United
States. However, the analysis the court performed was identical to that which is performed with
regard to a domestic corporation’s contacts with a given forum state. The contacts that
defendant had with the United States were essentially limited to its appearance at a trade show,
in a scenario substantially similar to the case at bar.
16
patent.” As the claim at issue here is one of alleged patent infringement, the claim would be
one that “arises out of or relates to” defendant’s activities in the forum, if defendant made, used,
sold, or offered to sell an infringing product in Maryland.
As defendant notes, “It appears undisputed that Naztec has not manufactured the
accused voting booth in Maryland.” Memo at 10. Defendant also asserts, and plaintiffs do not
dispute, that Naztec
had no sales in the state prior to the conference. It did not sell the booth at the
conference [in June 2011], and has not sold the booth in Maryland since the
conference concluded. No orders have been received or offered for the sale of the
accused voting booth in Maryland, either at the conference or at any time prior or
subsequent thereto.
Id. at 13 (citations omitted). In my view, however, the evidence is sufficient to establish that
defendant did use and offer to sell the allegedly infringing product in Maryland.14
“In terms of the infringing act of ‘use,’ courts have interpreted the term ‘use’ broadly.”
NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1316 (Fed. Cir. 2005). “The ordinary
meaning of ‘use’ is to ‘put into action or service.’” Id. at 1317 (citing Webster's Third New
International Dictionary 2523 (1993)). However, “[t]he inquiry as to what constitutes a ‘use’ of
a patented item is highly case-specific.” Medical Solutions, Inc. v. C Change Surgical, LLC,
541 F.3d 1136, 1141 (Fed. Cir. 2008).
Medical Systems involved patented technology pertaining to “systems for warming and
controlling the temperature of medical and surgical items.” Id. The alleged infringer attended a
trade show, where it “displayed a prototype of its product, staffed its booth with representatives,
and made available brochures about the product.” Id. But, the only “active[] demonstrate[ion]”
14
Having so found, I need not resolve the dispute over whether 35 U.S.C. § 289, which
applies specifically to design patents, “should [or should] not be taken as a definition of what
constitutes infringement of a design patent,” such that “displaying” the infringing product
constitutes “expos[ing] for sale” and, consequently, infringement. Reply at 6.
17
of the product at the trade show was of “how to take the basin off the device when the basin still
had fluid in it,” a use that did not go to the ultimate function of the product, nor the function for
which it was patented. Id. The Federal Circuit determined that, “to qualify as an infringing
use,” plaintiff had to show “[m]uch more” than it had, “including that the device was used to
heat medical items at the show.” Id.
Notably, the court stated, id. at 1140:
Several courts addressing whether a defendant has “used” a patented invention
have held that “the mere demonstration or display of an accused product, even in
an obviously commercial atmosphere” is not an act of infringement for purposes
of § 271(a).
Yet, contrary to defendant’s suggestion, the court went on to state: “In this case we need not
(and do not) decide whether the demonstration of a product at a trade show could ever be
sufficient to establish an infringing use.” Id. at 1141.
Defendant insists that the booths are only “used” within the meaning of the statute when
they are used to record votes during an election. It asserts:
The accused product in this case is a voting booth. Not a stackable convention
chair. Not a shopping cart. A voting booth is a device that when put into service
enables a voter to prepare and cast his or her ballot with privacy, so as to protect
the secrecy of the ballot. The booth is put to such use by state and municipal
government officials during elections . . ..
Reply at 3. However, plaintiffs allege, and defendant does not dispute, that at the Conference
“Naztec actually demonstrated how its infringing booths could nest together . . . .” Opposition
at 9. According to plaintiffs, the nesting “is the prime function that distinguishes the booths
from all others and enabled C.R. Daniels to obtain the ‘954 Patent.” Id.
In the context and circumstances of this case, I reject defendant’s cramped interpretation
of the term “use,” and its claim that the booths could not be used unless they were actually in
service for the ultimate function of recording votes during an election.
18
In my view, for
analytical purposes concerning the Motion, Naztec used the infringing voting booths by
demonstrating a key feature of them at the Conference ― the nesting ability ― and by actually
nesting the booths to store and transport them.
I am also satisfied that defendant “offered to sell” the allegedly infringing booths at the
Conference. The Federal Circuit defines “§ 271(a)'s ‘offer to sell’ liability according to the
norms of traditional contractual analysis.” Rotec Industries, Inc. v. Mitsubishi Corp., 215 F.3d
1246, 1254-55 (Fed. Cir. 2000). “An offer is the manifestation of willingness to enter into a
bargain, so made as to justify another person in understanding that his assent to that bargain is
invited and will conclude it.” Restatement (Second) of Contracts § 24 (1981) (“Restatement”).
However, even if “a manifestation of intention is intended to be understood as an offer, it cannot
be accepted so as to form a contract unless the terms of the contract are reasonably certain.”
Restatement § 33.
In general, a price term is included in an offer of sale.
But, a price term is not
necessarily required. “Occasionally, those who offer or agree to employ others, or to buy
goods, will make no statement as to the wages or price to be paid. In such a case, the law
invokes a standard of reasonableness so that the fair value of the services or property is
recoverable.
The Uniform Commercial Code codifies such a rule . . ..” 1 Williston on
Contracts § 4:25 (4th ed.) (citing Uniform Commercial Code § 2-305, “Open Price Term,”
stating: “The parties if they so intend can conclude a contract for sale even though the price is
not settled.”). See also Restatement § 33, Comment “a” (“[T]he actions of the parties may show
conclusively that they have intended to conclude a binding agreement, even though one or more
terms are missing or are left to be agreed upon.”). And, “according to the norms of traditional
19
contractual analysis,” “price quotations are ordinarily not interpreted as offers.” Restatement §
33, Comment “c” (“Preliminary Negotiations”).
The Federal Circuit has indicated that a price term is necessary to constitute an “offer to
sell” within the meaning of § 271.
See, e.g., MEMC Elec. Materials, Inc. v. Mitsubishi
Materials Silicon Corp., 420 F.3d 1369, 1376 (Fed. Cir. 2005) (“[T]he e-mails, while containing
a description of the allegedly infringing wafers, do not contain any price terms. Accordingly, on
their face, the e-mails cannot be construed as an ‘offer’ which [could be made] into a binding
contract by simple acceptance.”). Yet, the Federal Circuit has also indicated a desire to retain a
measure of flexibility. In 3D Systems, Inc. v. Aarotech Laboratories, Inc., 160 F.3d 1373 (Fed.
Cir. 1998), the court determined that price quotation letters sent by the defendant to residents of
the forum, which stated on their face that they were not offers, nonetheless constituted an “offer
to sell” within the meaning of § 271(a). In its view, “a description of the allegedly infringing
merchandise and the price at which it can be purchased” were sufficient “substance” to find an
offer to sell. Id. at 1379. The court reasoned: “[T]o treat [the letters] as anything other than
offers to sell would be to exalt form over substance. We have consistently held that such
exaltation is not appropriate in the due process analysis.” Id. Further, the court stressed: “One
of the purposes of adding ‘offer[ ] to sell’ to § 271(a) was to prevent exactly the type of activity
[defendant] has engaged in, i.e., generating interest in a potential infringing product to the
commercial detriment of the rightful patentee.” 160 F.3d at 1379.
To be sure, defendant’s conduct is clearly far from the typical “offer to sell.” The
allegedly infringing products were not displayed with specific prices, Memo at 11, and no sale
could have been consummated at the Conference. Id. at 12. Yet, the inquiry cannot end there.
Due to the nature of the product, which is necessarily “customizable according to customer
20
specifications, Naztec does not have fixed pricing for the product to advertise.” Id. at 11.
Further, plaintiffs assert, and defendant does not dispute, that trade custom dictates that “it is
uncommon to actually discuss pricing with attendees at a conference when marketing these
types of voting booths,” Opposition at 11, or to “make actual sales at a conference like the
Ocean City Conference; rather, the point is to market the products at the conference and await a
call from interested purchasers following the conference . . ..” Id. at 12. Moreover, Naztec
discussed “indicative pricing” with attendees at the Conference, and “verbally advised attendees
of sample pricing from a previous, unrelated contract executed with the Board of Elections for
the City of New York.” Memo at Exh. C. It also concedes that it “attended the [C]onference
for informational and networking purposes,” id. at 9, and to “introduce itself to [members of the
Maryland Association of Election Officials] for future consideration.” Id. at 12.
Were the lack of definitive pricing or the prospect of an immediate sale dispositive,
sellers of products that by their nature defy such pricing and are incapable of being purchased in
a prototypical way, with one party “assent[ing] to” and thus “conclud[ing]” the transaction,
Restatement § 24, would be out of reach for the purpose of specific personal jurisdiction, free to
peddle their allegedly infringing wares in any forum without having made an “offer to sell.” 35
U.S.C. § 271(a). As the Federal Circuit has stated, “[o]ne of the purposes of adding ‘offer[ ] to
sell’ to § 271(a) was to prevent exactly the type of activity [defendant] has engaged in, i.e.,
generating interest in a potential infringing product to the commercial detriment of the rightful
patentee.” 3D Systems, Inc., 160 F.3d at 1379.
In Patent Rights Protection Group, LLC, 603 F.3d 1364, the Federal Circuit determined
that the district court erred in refusing to grant jurisdictional discovery as to the issue of
personal jurisdiction. In that case, the defendants had attended an industry trade show in the
21
forum, where they exhibited allegedly infringing products, but claimed to have attended
“without a commercial purpose.” Id. at 1372. The court stated, id.:
To the extent that either [defendant] contends that they attended these trade shows
without a commercial purpose, we consider this contention to strain credulity. It
is simply unrealistic to contend that either [defendant], companies engaged in the
business of selling gaming products, would exhibit its products at a gaming trade
show in Las Vegas, Nevada, one of the world's larger gaming markets, without
some prospect of commercial benefit.
Similarly, it “strain[s] credulity” to conclude that Naztec did not attend the Conference
in order to “offer to sell” its allegedly infringing booths. Defendant’s arguments about the lack
of a specific price term and the inability to consummate an actual sale at the Conference are
neither persuasive nor dispositive.
These characteristics—individualized pricing and long
latency periods before the consummation of sale—appear to be typical of the industry.
Nevertheless, defendant did all that it could to “offer to sell” the infringing booths within the
bounds of the industry in which it operates.
Having found that defendant’s conduct amounted to “purposefully direct[ing] “its
activities at residents of Maryland, the forum state, and that plaintiffs’ claim “arises out of or
relates to” the defendant's activities within the forum, I must next address the third prong of
analysis, i.e., whether the assertion of specific personal jurisdiction over defendant would be
“reasonable and fair.” Defendant has put forth only one argument in support of its contention
that this Court’s exercise of personal jurisdiction over Naztec would be “unfair and
unreasonable”—that “Naztec’s contacts with Maryland to date have been less than minimal.”
Memo at 13-14.
The following factors are relevant to the consideration of reasonableness:
‘[T]he burden on the defendant,’ ‘the forum State's interest in adjudicating the
dispute,’ ‘the plaintiff's interest in obtaining convenient and effective relief,’ ‘the
interstate judicial system's interest in obtaining the most efficient resolution of
22
controversies,’ and the ‘shared interest of the several States in furthering
fundamental substantive social policies.’ These considerations sometimes serve
to establish the reasonableness of jurisdiction upon a lesser showing of minimum
contacts than would otherwise be required.
Burger King Corp., 471 U.S. at 477 (quoting World-Wide Volkswagen Corp. v. Woodson,
supra, 444 U.S. 286, 292 (1980)).
Again, Patent Rights is instructive. In that case, in assessing reasonableness, the
court stated, 603 F.3d at 1370 (citation omitted):
‘[B]ecause modern transportation and communications have made it much less
burdensome for a party sued to defend [itself]’ outside its home state, defending
this suit in Nevada is not prohibitively burdensome for either SPEC or VGT.
Indeed, their admitted presence at numerous trade shows in Nevada indicates that,
despite their arguments to the contrary, neither company faces a particularly
onerous burden in defending itself in Nevada.
The same reasoning applies here. Maryland is the home state of plaintiff C.R. Daniels,
and is substantially closer to West Virginia, the home state of plaintiff Casto & Harris. Clearly,
Naztec was able to attend the Conference in Maryland. Further, “[a] State generally has a
‘manifest interest’ in providing its residents with a convenient forum for redressing injuries
inflicted by out-of-state actors.” Burger King, 471 U.S. at 474. “This interest extends to actions
for patent infringement.” Patent Rights, 603 F.3d at 1371 (citing Beverly Hills Fan Co., 21 F.3d
at 1568).
“[W]here a defendant who purposefully has directed his activities at forum residents
seeks to defeat jurisdiction,” as is the case here, “he must present a compelling case that the
presence of some other considerations would render jurisdiction unreasonable.” Burger King,
471 U.S. at 477. Defendant has not presented a “compelling case” that litigating this case in
Maryland would be unreasonable. Although defendant claims that its contacts with Maryland
23
have been “minimal,” its contacts were substantial enough to sustain jurisdiction in this case.15
Accordingly, I find that it is “reasonable and fair” for this Court to exercise specific personal
jurisdiction over defendant Naztec.
Conclusion
For the foregoing reasons, the Court will deny defendant Naztec International Group,
LLC’s motion to dismiss for lack of personal jurisdiction. A separate Order consistent with this
Memorandum Opinion follows.
Date: December 2, 2011
/s/
Ellen Lipton Hollander
United States District Judge
15
Defendant has not raised any other argument as to why litigating the case in Maryland
would not comport with “fair play and substantial justice.”
24
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