Rotochopper, Inc. v. Bandit Industries, Inc.
MEMORANDUM OPINION AND ORDER. 1. Defendant's Motion to Dismiss for lack of personal jurisdiction (Doc. No. 9 ) is GRANTED. 2. Plaintiff's Complaint (Doc. No. 1 ) is DISMISSED WITHOUT PREJUDICE. (Written Opinion) Signed by Judge Donovan W. Frank on 5/3/2017. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 16-3368 (DWF/LIB)
OPINION AND ORDER
Bandit Industries, Inc.;
Alexander Farrell, Esq., and Jonathan D. Jay, Esq., Hellmuth & Johnson PLLC,
counsel for Plaintiff.
Andrew M. Grove, Esq., Howard & Howard Attorneys PLLC; and Steven L.
Reitenour, Esq., Bowman & Brooke, counsel for Defendant.
This matter is before the Court on Defendant Bandit Industries, Inc.’s Motion to
Dismiss. (Doc. No. 9.) For the reasons set forth below, the Court grants Defendant’s
Plaintiff Rotochopper, Inc., is a Minnesota company with its principal place of
business in St. Martin, Minnesota. (Doc. No. 1 (“Compl.”) ¶ 1.) Defendant is a
Michigan Corporation with its principal place of business in Remus, Michigan. (Id. ¶ 2;
Doc. No. 11 (“Mocny Decl.”) ¶ 4.) Plaintiff is the owner by assignment of the entire
right, title, and interest in U.S. Patent No. 6,207,228 (the ’228 Patent), entitled
Concurrent Fragmentation and Impregnation Machine and Processing. (Compl. ¶¶ 9, 10,
Ex. A (the ’228 Patent).) In this action, Plaintiff alleges that Defendant manufactures,
assembles, and sells horizontal wood grinder products, stump grinders, hand-fed
chippers, and whole-tree chippers, including a horizontal grinder called “The Beast.”
(Compl. ¶¶ 11-12.) Plaintiff further alleges, upon information and belief, that Defendant
has marketed and sold “The Beast” along with a separate coloring system that, when used
together, infringe the ’228 Patent (together, the “allegedly infringing product”). (Id. ¶¶ 6,
14.) “The Beast” can be sold with or without a coloring system. Plaintiff alleges that
Defendant sells “The Beast” throughout the United States, including through a dealer in
Minnesota. (Doc. No. 14 (“Brick Decl.”) ¶ 8.)
According to Defendant, “The Beast” is made and sold by a separate Michigan
entity, Smoracy, LLC, and that Defendant helps Smoracy, LLC, market certain large
specialty products, including the allegedly infringing product. (Mocny Decl. ¶¶ 9-10.)
Defendant also submits that the allegedly infringing product is not mass produced and
costs approximately $500,000. (Id. ¶ 11.) In addition, Defendant submits that only two
have ever been produced and none has ever been manufactured or sold in Minnesota. (Id.
¶¶ 11, 12.) Defendant has sold 119 other products in Minnesota, totaling approximately
$7,000,000 in sales; however, Defendant submits that these products are unrelated to the
allegedly infringing product and account for less than 1% of Defendant’s total annual
sales. (Id. ¶ 13.) Defendant also points out that it does not have any offices in
Minnesota, does not own or lease property in Minnesota, has no bank accounts in
Minnesota, and has no employees in Minnesota. (Id. ¶¶ 15-18.) Defendant
acknowledges that it has an independent dealer in Minnesota, but submits that the dealer
is not an employee and does not (and is not authorized to) sell the allegedly infringing
product. (Id. ¶ 14.)
On October 5, 2016, Plaintiff sued Defendant for patent infringement, asserting a
single claim for the direct infringement of the ’228 Patent. (Id. ¶¶ 32-37.) Defendant
now moves to dismiss the claim for lack of personal jurisdiction. (Doc. No. 9.)
Motion to Dismiss
Defendant seeks dismissal of Plaintiff’s claims for lack of personal jurisdiction.
To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must make a
prima facie showing that personal jurisdiction exists; that is, a plaintiff must allege facts
to support a reasonable inference that defendant may be subjected to jurisdiction in the
chosen forum. Steinbuch v. Cutler, 518 F.3d 580, 585 (8th Cir. 2008) (citing Dever v.
Hentzen Coatings, Inc., 380 F.3d 1070, 1072 (8th Cir. 2004)). If, as is the case here, the
defendant denies jurisdiction, the plaintiff bears the burden of proving facts supporting
personal jurisdiction. See Wells Dairy, Inc. v. Food Movers Int’l, Inc., 607 F.3d 515, 518
(8th Cir. 2010) (quotation omitted). Once a defendant offers affidavits to challenge
personal jurisdiction, “facts, not mere allegations, must be the touchstone” in determining
whether personal jurisdiction exists. Dever, 380 F.3d at 1072 (citation omitted); see also
Abbasi v. Leading Edge Aviation Servs., Inc., Civ. No. 16-295, 2016 WL 4007571, at *3
(D. Minn. July 26, 2016).
In determining whether personal jurisdiction exists in a patent infringement case,
courts apply Federal Circuit law. See 3D Sys. v. Aarotech Labs., Inc., 160 F.3d 1373,
1377 (Fed. Cir. 1998). Under Federal Circuit law, “[p]ersonal jurisdiction over an
out-of-state defendant is appropriate if the relevant state’s long-arm statute permits the
assertion of jurisdiction without violating federal due process.” Id. at 1376-77.
Minnesota’s long-arm statute extends jurisdiction to the maximum limit consistent with
federal due process; therefore the Court need only evaluate whether the requirements of
due process are satisfied. Wessels, Arnold & Henderson v. Nat’l Med. Waste, Inc., 65
F.3d 1427, 1431 (8th Cir. 1995).
Federal due process requires that defendants have “certain minimum contacts”
with the forum state such that “maintenance of the suit does not offend traditional notions
of fair play and substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316
(1945) (internal quotations omitted). A defendant’s conduct and connection with the
forum state must be such that the defendant should reasonably anticipate being haled into
court there. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). It is
essential in each case that the defendant has purposefully availed itself of the privilege of
conducting activities within the forum state, thus invoking the benefits and protections of
its laws. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v.
Denckla, 357 U.S. 235, 253 (1958)).
Under the minimum contacts analysis, personal jurisdiction over a non-resident
defendant may be either general or specific. LSI Indus., Inc. v. Hubbell Lighting, Inc.,
232 F.3d 1369, 1375 (Fed. Cir. 2000). Specific jurisdiction arises out of or relates to the
cause of action, and general jurisdiction arises when a defendant maintains continuous
and systematic contacts with the forum state. Id. Plaintiff argues that Defendant’s
contacts with Minnesota are sufficient to subject it to both general and specific personal
jurisdiction in Minnesota. Defendant, on the other hand, argues that it lacks the requisite
minimum contacts with Minnesota to support the exercise of either general or specific
“Specific jurisdiction exists when a non-resident defendant purposefully
establishes minimum contacts with the forum state, the cause of action arises out of those
contacts, and jurisdiction is constitutionally reasonable.” 3D Sys., Inc., 160 F.3d at 1378.
Plaintiff argues that Defendant is subject to specific jurisdiction in Minnesota because it
is possible that an infringing product will be sold to a customer in Minnesota. See
Imation Corp. v. Sanho Corp., Civ. No. 15-1883, 2016 WL 4179363, at *3 (D. Minn.
Aug. 5, 2016) (explaining that “[t]he possibility and probability that [the defendant]
shipped one of the [allegedly infringing products] to a Minnesota resident is enough” for
specific jurisdiction). In support, Plaintiff asserts that there is evidence that Defendant
sells the allegedly infringing product to existing customers of The Beast, and that the
possibility that Defendant will sell an allegedly infringing product to a customer of The
Beast in Minnesota is enough to warrant the exercise of specific jurisdiction.
Defendant submits that the allegedly infringing product has never been
manufactured, assembled, sold, or offered for sale in Minnesota, and that it has not been
imported or shipped into Minnesota. (Mocny Decl. ¶ 12.) Defendant points out that
Plaintiff defines the allegedly infringing product as “The Beast sold in conjunction with a
colorizer system” (Doc. No. 13 at 4 n.1), but concedes that “[a]ll known sales [of The
Beast] in Minnesota are without the [colorizer].” (Id. at 5.) Thus, Defendant argues,
contrary to Plaintiff’s assertion, there is no evidence that Defendant has deliberately
placed the allegedly infringing product (The Beast with a colorizer) into the stream of
commerce in Minnesota. The Court agrees. To demonstrate contact sufficient for
specific jurisdiction based on a “stream of commerce” argument, Plaintiff must
demonstrate that Defendant’s sale of the allegedly infringing product was not an isolated
occurrence, but instead that any sales arose from Defendant’s efforts to deliver the
allegedly infringing products into the stream of commerce in Minnesota with the
expectation that it would be purchased in the state. See Grober v. Mako Prod., Inc., 686
F.3d 1335, 1347 (Fed. Cir. 2012) (finding lack of specific jurisdiction where there was no
evidence that the accused product was shipped to the forum state); Beverly Hills Fan. Co.
v. Royal Sovereign Corp., 21 F.3d 1558, 1565-66 (Fed. Cir. 1994) (finding due process
requirement met where a non-resident defendant purposefully shipped accused product
into the forum through an established distribution channel). Here, however, Defendant
has put forth evidence that the allegedly infringing product is factory-direct or “made by
request,” costs roughly $500,000, and that only two such products have ever been
manufactured, neither of which has been shipped into Minnesota. (Mocny Decl . ¶¶
11-12.) Based on these facts, the Court finds that there is insufficient evidence that
Defendant “purposely directed” its activities in Minnesota or that the litigation results
from alleged injuries that “arise out of or relate to” those activities. Burger King, 471
U.S. at 472.
“A court may assert general jurisdiction over foreign . . . corporations to hear any
and all claims against them when their affiliations with the State are so ‘continuous and
systematic’ as to render them essentially at home in the forum State.” Goodyear Dunlop
Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011) (quoting Int’l Shoe, 326
U.S. at 317). In Daimler AG v. Baumann, 134 S. Ct. 746 (2014), the Supreme Court
clarified the standard for exercising general personal jurisdiction over a foreign
[A] court may assert jurisdiction over a foreign corporation “to hear any
and all claims against [it]” only when the corporation’s affiliations with the
State in which suit is brought are so constant and pervasive “as to render
[it] essentially at home in the forum State.”
Id. at 751 (citation omitted).
[T]he inquiry . . . is not whether a foreign corporation’s in-forum contacts
can be said to be in some sense “continuous and systematic,” it is whether
that corporation’s “affiliations with the State are so ‘continuous and
systematic’ as to render [it] essentially at home in the forum State.”
Id. at 761 (citations omitted).
For an individual, the paradigm forum for the exercise of general
jurisdiction is the individual’s domicile; for a corporation, it is an
equivalent place, one in which the corporation is fairly regarded as at
home. . . . With respect to a corporation, the place of incorporation and
principal place of business are paradigm bases for general jurisdiction. . . .
Those affiliations have the virtue of being unique—that is, each ordinarily
indicates only one place—as well as easily ascertainable. . . . These bases
afford plaintiffs recourse to at least one clear and certain forum in which a
corporate defendant may be sued on any and all claims.
Id. at 760 (internal quotations, punctuation, and citations omitted). Notably, it has not
been held “that a corporation may be subject to general jurisdiction only in a forum where
it is incorporated or has its principal place of business,” but those are the “paradigm
all-purpose forums.” Id.
Here, Plaintiff asserts that general jurisdiction over Defendant is appropriate. In
particular, Plaintiff points to evidence that, in the past three years, Defendant has sold
119 products (unrelated to the allegedly infringing product) in the State of Minnesota,
totaling approximately $7,000,000 in sales. (Mocny Decl. ¶ 13.) In addition, Plaintiff
points to the fact that Defendant has an authorized dealer in Minnesota and a regional
sales employee as evidence of widespread solicitation of business that, in conjunction
with the amount of sales, places this case in the realm of general jurisdiction.
Defendant argues that the above evidence does not demonstrate sufficient contacts
to warrant the exercise of general jurisdiction. Defendant points out that it is a
corporation organized under the laws of Michigan with a principal place of business in
Michigan. (Compl. ¶ 6; Mocny Decl. ¶ 4.) Defendant also asserts that: (1) in the past
three years, its Minnesota sales (of 119 unrelated products) accounts for less than 1% of
its total sales over that same time period; (2) it has only one independent dealer located in
Minnesota and that the dealer is not an employee and does not offer (and is not
authorized to offer) the allegedly infringing product; (3) it does not have any employees
who reside in Minnesota, and that its regional sales manager for the Midwest covers
thirteen states and visits Minnesota roughly three times per year; (4) it has no offices in
Minnesota and does not lease or rent any real property in Minnesota; (5) it is not licensed
to do business in Minnesota and has no registered agent in Minnesota; (6) it has no bank
accounts in Minnesota; (7) it does no advertising in Minnesota; and (8) it does not offer
to sell any equipment, including the allegedly infringing product, through its website.
(Mocny Decl. ¶¶ 13-20.)
While there is evidence that Defendant does a substantial amount of business in
Minnesota on an ongoing basis, as noted above, the proper general jurisdiction inquiry is
whether Defendant’s affiliations with Minnesota are so “continuous and systematic” as to
render Minnesota essentially at home in the state. Daimler, 134 S. Ct. at 760. “[A]t
home” is not synonymous with “doing business.” Id. at 762 n.20. As explained in
Daimler, “[a] corporation that operates in many places can scarcely be deemed at home
in all of them,” and therefore determining whether a defendant is “at home” in a
particular state “calls for an appraisal of [its] activities in their entirety, nationwide and
The Court concludes that the amount of business conducted by Defendant in
Minnesota with respect to products unrelated to the allegedly infringing product, in
conjunction with its other contacts, such as having an independent dealer in Minnesota
and a non-resident regional sales representative who visits Minnesota roughly three times
each year, is insufficient to warrant the exercise of general jurisdiction. Significantly,
Defendant does not have a place of business, bank account, or any employees in
Minnesota. Defendant is incorporated and headquartered in the state of Michigan. This
record reveals that Defendant is subject to suit in its “paradigmatic all-purpose forum” of
Michigan, and does not support a finding that Defendant is “essentially at home” in
Minnesota. Therefore, the exercise of general jurisdiction is unwarranted. Moreover,
although there is evidence that Defendant sold products to Minnesota residents, the sales
are insufficient to qualify as “continuous and systematic” so as to justify the exercise of
general jurisdiction. See, e.g., Stairmaster Sports/Med. Prods., Inc. v. Pac. Fitness Corp.,
78 F.3d 602, 602 (Fed. Cir. 1996) (affirming dismissal of non-resident defendant when
products shipped into forum state constituted only 3% of total sales, shipped products did
not include the claimed invention, and employee visits were unrelated to asserted patent).
In sum, Defendant is not properly subject to specific or general personal
jurisdiction in Minnesota. First, there is insufficient evidence that Defendant’s activities
in Minnesota gave rise to or are related to the present cause of action. Second, there is
insufficient evidence that Defendant has maintained sufficient minimum contacts with
Minnesota such that Defendant would reasonably anticipate being haled into court in
Minnesota. Based on the files, records, and proceedings herein, and for the reasons stated
above, IT IS HEREBY ORDERED that:
Defendant’s Motion to Dismiss for lack of personal jurisdiction (Doc.
No. ) is GRANTED.
Plaintiff’s Complaint (Doc. No. ) is DISMISSED WITHOUT
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: May 3, 2017
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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