American Recreation Products LLC v. Tennier Industries, Inc.
Filing
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MEMORANDUM AND ORDER. (see order for details) IT IS HEREBY ORDERED that plaintiff's motion to enforce settlement [# 26 ] is denied. IT IS FURTHER ORDERED that defendant's motion to dismiss or transfer [# 13 ] is granted and the case will be dismissed without prejudice on this day in a separate Order of Dismissal. Signed by District Judge Catherine D. Perry on 03/31/2014. (CBL)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
AMERICAN RECREATION
PRODUCTS, LLC.,
Plaintiff,
vs.
TENNIER INDUSTRIES, INC.,
Defendant.
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Case No. 4:13CV421 CDP
MEMORANDUM AND ORDER
American Recreation Products, LLC, (ARP) brings this suit against Tennier
Industries, Inc., seeking a declaration that ARP does not infringe a patent held by
Tennier. Tennier challenges this court‟s personal jurisdiction over it. As set forth
in more detail later, I agree that there is no general jurisdiction over Tennier in
Missouri and that Tennier‟s enforcement actions in Missouri, including cease-anddesist letters, do not provide specific jurisdiction for this patent declaratory
judgment action.
Shortly after this case was filed, Tennier filed its own patent infringement
suit against ARP in Tennessee, where ARP contested personal jurisdiction. While
the parties were litigating the jurisdictional issues, they engaged in some settlement
negotiations. ARP has filed a motion to enforce settlement in this case, contending
that they actually settled both cases and that Tennier breached the settlement
agreement by dismissing the Tennessee suit without prejudice. Even though I lack
personal jurisdiction over Tennier for the declaratory judgment action, there is a
theoretical possibility that I might have personal jurisdiction to enforce a
settlement agreement. But because I conclude there was no settlement reached, I
will deny the motion to enforce and will dismiss the case without prejudice for lack
of personal jurisdiction.
Background
Tennier Industries, Inc. is the assignee of U.S. Patent No. 5,533,216, which
encompasses the design of a modular sleeping bag. American Recreation
Products, LLC (ARP) produces a modular sleeping bag known as the Slumberjack
MSS Complete Modular Sleep System. The accused product is actually
manufactured for ARP by a third company, American Discovery Textile
Manufacturing, LLC, and ARP buys American Discovery‟s entire output of this
sleeping bag. On February 19, 2013, Tennier sent cease-and-desist letters to ARP
and to its supplier American Discovery, both in Missouri, in which Tennier stated
its belief that the accused product infringed upon its patent, demanded information
related to the sale of the accused product, and asserted its willingness to discuss
licensure of the „216 Patent.
Tennier is a New York Corporation with principal places of business in
Tennessee and Florida. Tennier primarily sells its products to the United States
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military and ships those products to Pennsylvania and California. The only
business that Tennier conducts in Missouri is the purchase of labels, which
amounts to less than one percent of Tennier‟s purchases in a given year. Tennier is
not licensed to do business in Missouri, does not advertise or sell its products in
Missouri, and its agents do not attend trade shows in Missouri.
In addition to the February 19, 2013, cease-and-desist letters, Tennier had
previously sent two other infringement letters related to the „216 patent. In 2007,
Tennier issued a cease-and-desist letter regarding sales of ARP‟s Slumberjack
VariCom product line. After ARP responded that the modular sleeping bag‟s
design could not infringe the „216 Patent because its components were “free
floating,” Tennier took no further action related to the VariCom line. In 2010,
Tennier sent a letter to ARP‟s subsidiary, Kelty, referencing a United States
military solicitation for a sleep system. Tennier asserted its belief that any product
manufactured in compliance with that solicitation would infringe upon its patents.
The letter offered to license its modular sleep system patents to Kelty and stated
that Tennier would pursue all available remedies if Kelty‟s products infringed upon
the patent.
Personal Jurisdiction
Because jurisdictional issues are “intimately involved with the substance of
the patent laws,” Federal Circuit law governs this issue. Avocent Huntsville Corp.
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v. Aten Intern. Co., 552 F.3d 1324, 1328 (Fed. Cir. 2008). As plaintiff, ARP bears
the burden of establishing personal jurisdiction. See id. at 1330. Because the
parties have not yet conducted discovery, ARP need only make a prima facie
showing that Tennier is subject to personal jurisdiction; thus, the pleadings and
affidavits are construed in the light most favorable to ARP. Silent Drive, Inc. v.
Strong Indus., Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003). Factual disputes are
decided in favor of the plaintiff when determining whether a prima facie case for
personal jurisdiction exists. Id.
The Federal Rules of Civil Procedure allow a party to file a motion to
dismiss for lack of personal jurisdiction. Fed. R. Civ. P. 12(b) (2). In order for a
Court to exercise jurisdiction over an out-of-state defendant, two requirements
must be met: 1) jurisdiction must be allowed by the Missouri long-arm statute; and
2) the reach of the long-arm statute must comport with due process. Pennington
Seed, Inc. v. Produce Exchange No. 299, 457 F.3d 1334, 1343–44 (Fed. Cir. 2006).
Missouri‟s long-arm statute authorizes personal jurisdiction over defendants who,
inter alia, transact business or make a contract within the state. R.S. Mo.
§ 506.500.1. The two requirements essentially collapse into the latter, as Missouri
interprets its long-arm statute in accordance with the limits permitted under the due
process clause. See Enterprise Rent-A-Car Co. v. U-Haul Int’l Inc., 327 F. Supp.
2d 1032, 1036 (E.D. Mo. 2004); see also State ex rel. K-Mart Corp. v. Holliger,
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986 S.W.2d 165, 168 (Mo. banc 1999). In order to subject a defendant to a court‟s
personal jurisdiction, due process requires that it have certain minimum contacts
with the state, such that the 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). What minimum contacts are required depends on whether
personal jurisdiction is general or specific.
General Jurisdiction
General jurisdiction arises when a defendant maintains contacts with the
forum state that are “so constant and pervasive „as to render it essentially at home
in the forum State.‟” Daimler AG v. Bauman, 134 S. Ct. 746, 751 (2014)
(alteration omitted) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown,
131 S. Ct. 2846, 2851 (2011); see also Grober v. Mako Prods., Inc., 686 F.3d
1335, 1346 (Fed. Cir. 2012) (describing the necessary contacts as “continuous and
systematic”) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S.
408, 414–16 (1984)).
There is no evidence before me to suggest that Tennier‟s contacts with
Missouri are so continuous and systematic that it should be considered at home in
Missouri. It is undisputed that Tennier is a New York corporation with principal
places of business in Tennessee and Florida. Tennier is not licensed to do business
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in Missouri, does not advertise or sell its products in Missouri, and its agents do
not attend trade shows in Missouri.
ARP argues that Tennier‟s purchase of labels from a Missouri company
establishes sufficient contacts for personal jurisdiction to attach. However,
purchases alone cannot establish general jurisdiction. See Helicopteros, 466 U.S.
at 418 (“[M]ere purchases, even if occurring at regular intervals, are not enough to
warrant a State‟s assertion of in personam jurisdiction over a nonresident
corporation in a cause of action not related to those purchase transactions.”); see
also Goodyear, 131 S. Ct. at 2856–57 (holding sporadic sales through
intermediaries insufficient for general jurisdiction). Moreover, Tennier‟s label
purchases amount to less than one percent of its purchases. To find that these
meager transactions expose Tennier to general jurisdiction in Missouri would
violate Tennier‟s right to due process. See Autogenomics, Inc. v. Oxford Gene
Tech. Ltd., 566 F.3d 1012, 1015–18 (Fed. Cir. 2009) (no general jurisdiction in
state where sales were one percent of revenue).
Specific Jurisdiction
To determine whether due process supports asserting specific jurisdiction,
the court and must determine three things: (1) whether the defendant purposefully
directed its activities at residents of the forum, (2) whether the plaintiff‟s claims
arise from or relate to those activities, and (3) whether the assertion of personal
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jurisdiction under the circumstances is reasonable and fair. Breckenridge Pharm.,
Inc. v. Metabolite Labs, Inc., 444 F.3d 1356, 1363 (Fed. Cir. 2006); see also
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) (requiring jurisdiction
to comport with “fair play and substantial justice”). The party opposing
jurisdiction bears the burden of proof as to the last inquiry, and must “present a
compelling case that the presence of some other considerations would render
jurisdiction unreasonable” under the five-factor test set forth by the Supreme Court
in Burger King. Breckenridge, 444 F.3d at 1363 (quoting Burger King). Those
five factors are: the burden on the defendant, the interests of the forum state in
adjudicating the dispute, the plaintiff‟s interest in obtaining effective and
convenient relief, the interstate judicial system‟s interest in obtaining the most
effective resolution of controversies, and the shared interest of the several states in
furthering fundamental substantive social policies. Burger King, 471 U.S. at 476–
77.
A patent holder‟s sending cease-and-desist letters to an alleged infringer in a
state does not, without more, cause the patentee to be subject to personal
jurisdiction in that state. Red Wing Shoe Co., Inc. v. Hockerson-Halberstadt, Inc.,
148 F.3d 1355, 1360 (Fed. Cir. 1998). Although cease-and-desist letters alone are
could meet the first two requirements of minimum contacts related to the dispute,
they do not meet the third requirement. “Principles of fair play and substantial
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justice afford a patentee sufficient latitude to inform others of its patent rights
without subjecting itself to jurisdiction in a foreign forum.” Id. at 1360–61.
Inclusion of an offer for a license in a cease and desist letter does not change this
result. Id. at 1361. As the cases explain, jurisdiction will only be appropriate if the
patentee takes additional enforcement or other actions in the forum. See also
Radio Sys. Corp. v. Accession, Inc., 638 F.3d 785, 790 (Fed. Cir. 2011); Avocent
Huntsville Corp. v. Aten Intern. Co. Ltd., 552 F.3d 1324, 1333–34 (Fed. Cir. 2008);
Silent Drive, 326 F.3d at 1202.
ARP contends that Tennier‟s conduct here is more than simply sending the
cease-and-desist letter that prompted this lawsuit. It points out that Tennier sent
multiple letters over multiple years. It argues that Tennier‟s a cease-and-desist
letter to ARP‟s manufacturer (American Discovery Textile Manufacturing, LLC)
was an attempt to interfere with its business and, therefore, represents the type of
“extra-judicial enforcement” that has been used to subject a non-resident defendant
to specific personal jurisdiction.
ARP believes the facts of this case are analogous to those in JHRG LLC v.
StormWatch, Inc., No. 1:09CV919, 2011 WL 3111971 (M.D.N.C. July 26, 2011).
In that case, the defendant sent a cease-and-desist letter to JHRG, stating that its
incorporation of decorative fabric panels into its hurricane shutters infringed upon
the defendant‟s patents. Id. at *11. The defendant also contacted Tri-Vantage, the
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manufacturer of the fabric that JHRG used, alleging that it had a patent on
hurricane shutters made with Tri-Vantage‟s product and threatening to sue TriVantage if it continued to supply JHRG. Id. at *4. The court noted that the
defendant‟s letter to Tri-Vantage only referenced that party‟s role as a supplier of
fabric “for use in the infringing product” and did not claim that Tri-Vantage‟s
product was itself infringing. Id. at *13. The court held that it was reasonable to
assert specific jurisdiction over the defendant because it had attempted to interfere
with the supply of components of JHRG‟s product. Id. at *11.
The facts in this case differ from those of JHRG. There, the defendant
contacted a party not accused of patent infringement in an attempt to cut off the
supply of components to the plaintiff. But here,Tennier sent its letter to the
company that actually manufactured the accused product, which is purchased
entirely by ARP. Thus, Tennier‟s letter was not sent to an innocent third party in
an attempt to harm a business rival; it was a permissible cease-and-desist letter sent
to an accused infringer.
The Federal Circuit has made it clear that the public policy interests asserted
in Red Wing extends down the supply chain: “a patent owner may, without more,
send cease and desist letters to a suspected infringer, or its customers, without
being subjected to personal jurisdiction in the suspected infringer‟s home state.”
Avocent, 552 F.3d at 1340 (emphasis in original) (quoting Breckenridge, 444 F.3d
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at 1362). I see no reason why those public policy interests would not also protect a
patent owner that sends notice to a supplying manufacturer who was suspected of
infringing. Under these circumstances, it would be unreasonable and unfair to
Tennier to subject it to personal jurisdiction in Missouri.
The remaining cases that ARP cites are distinguishable on the grounds that
the defendant in each took actions beyond sending infringement notices. For
example, in Campbell Pet Co. v. Miale, the court asserted specific jurisdiction over
a defendant who not only sent cease-and-desist letters but also attempted to have
the plaintiff‟s allegedly infringing products removed from a convention and told
potential customers there that the plaintiff‟s products were infringing. 542 F.3d
879, 886 (Fed. Cir. 2008). Because the defendant “took steps to interfere with the
plaintiff‟s business by enlisting a third party to take action against the plaintiff,” it
was reasonable to hale the defendant into court. Id. at 887. Similarly, in Dudnikov
v. Chalk & Vermilion Fine Arts, Inc., the court subjected a defendant to personal
jurisdiction where the defendant sent a notice of infringement to eBay and caused
the auction site suspend the plaintiff‟s auction of allegedly infringing products.
514 F.3d 1063, 1082 (10th Cir. 2008). Finally, in Sudden Valley Supply LLC v.
Neal P. Zeigmann, the defendant sent an infringement letter and attended a
convention in the forum state where he discussed his patent claims with the
convention attendees. No. 4:13CV53 JCH, 2013 WL 2099440, at *4 (E.D. Mo.
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May 14, 2013). Tennier‟s conduct related to the declaratory judgment action is
limited to the sending of cease-and-desist letters and invitations to discuss a
license. Under those circumstances, it would be unfair to subject it to Missouri‟s
jurisdiction. See Avocent, 552 F.3d at 1334.
Motion to Enforce Settlement
In its motion to enforce settlement, ARP argues that Tennier is subject to
personal jurisdiction in Missouri for purposes of enforcing a settlement agreement.
In Minn. Mining & Mfg. Co. v. Nippon Carbide Indus. Co., Inc., 63 F.3d 694, 698
(8th Cir. 1995), the Eighth Circuit held that personal jurisdiction in Minnesota was
proper over a Japanese company that had negotiated a settlement of a patent
dispute with a Minnesota company. In that case the parties had held numerous
meetings and discussions, including some in Minnesota. After both parties signed
the contract, and after significant follow-up activities, including meetings in
Minnesota, a dispute arose and the Minnesota company sued the Japanese
company for breaching the contract.
Tennier argues that without personal jurisdiction to resolve the patent
dispute, this court cannot enforce a settlement of that dispute. It also argues that no
settlement agreement exists, because: (1) the parties did not intend for the
settlement to be effective until it was reduced to writing and signed and (2) the
parties did not agree on essential settlement terms, as evidenced by the phrasing in
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their emails and Tennier‟s subsequent rejection of the terms of the draft settlement
agreement.
“Under Missouri law, a motion to enforce settlement is a collateral action
which imposes on the party seeking specific performance „the burden of proving,
by clear, convincing and satisfactory evidence, his claim for relief.‟” Stewart v.
M.D.F., Inc., 83 F.3d 247, 251–52 (8th Cir. 1996) (quoting Randall v. Harmon,
761 S.W.2d 278, 278 (Mo. Ct. App. 1988) (citation omitted)). Before a plaintiff
can establish a breach of contract, it must establish that a contract existed.
Gateway Exteriors, Inc. v. Suntide Homes, Inc., 882 S.W.2d 275, 279 (Mo. Ct.
App. 1994). Missouri determines the existence of a contract according to the
“mirror-image rule,” which demands a definite offer and a “mirror-image”
acceptance. Brown v. Donham, 900 S.W.2d 630, 633 (Mo. banc 1995). “An offer
is made when the offer leads the offeree to reasonably believe that an offer has
been made.” Brown Mach., Div. of John Brown, Inc. v. Hercules, Inc., 770 S.W.2d
416, 419 (Mo. Ct. App. 1989). An offer is defined under the Restatement as “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.” Volker Court, LLC v. Santa Fe Apartments, LLC, 130 S.W.3d 607, 611 (Mo.
Ct. App. 2004) (citation omitted) (quoting Restatement (Second) of Contracts, § 24
(1981)). “A „manifestation of willingness to enter into a bargain,‟ however, „is not
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an offer if the person to whom it is addressed knows or has reason to know that the
person making it does not intend to conclude a bargain until he has made a further
manifestation of assent.‟” Id. (quoting Restatement (Second) of Contracts § 26).
Thus, the parties‟ negotiations, proposals, or preliminary steps do not constitute a
contract. Kalivas v. Hauck, 290 S.W.2d 94, 101 (Mo. 1956). The existence and
terms of a contract depend upon the objective manifestations of the parties, and not
upon their subjective intent. Volker Court, 130 S.W.3d at 611; see also McDaniel
v. Park Place Care Ctr., Inc., 918 S.W.2d 820, 827 (Mo. Ct. App. 1996).
I have carefully reviewed the evidence provided by the parties regarding
their settlement discussions. Both sides have provided affidavits and copies of
emails between counsel. The evidence shows that they had initial discussions
about settling the cases, and had agreed on a framework for a settlement, but that
the negotiations broke down when they began exchanging documents. After
examining all the evidence I am not “firmly convinced” from the “objective
manifestations” of the parties that they had reached a final, binding, oral agreement
that can be enforced. Instead, their oral framework required written terms that
could be discussed with their clients. Their inability to ultimately agree on the
written terms shows that, in fact, the oral framework was not a binding settlement
agreement, because there were material issues that were never resolved.
Additionally, the parties did not inform either court that they had actually reached
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a settlement, and even the draft notice that was proposed (but never filed) for the
Tennessee court stated merely that they were working on a settlement. Cf. Visiting
Nurse Ass’n, St. Louis v. VNAHealthcare, Inc., 347 F.3d 1052, 1054 (8th Cir.
2003) (interpreting parties‟ cancellation of pending hearing as strong evidence that
a binding settlement agreement had been formed).
ARP has not met its heavy burden of establishing the existence of a
settlement.
Accordingly,
IT IS HEREBY ORDERED that plaintiff‟s motion to enforce settlement
[# 26] is denied.
IT IS FURTHER ORDERED that defendant‟s motion to dismiss or
transfer [# 13] is granted and the case will be dismissed without prejudice on this
day in a separate Order of Dismissal.
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 31st day of March, 2014.
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