i play, Inc. v. D. Catton Enterprise, LLC

Filing 46

ORDER granting 31 Motion for Sanctions as set forth in this order; granting 36 Motion to Amend complaint, amended complaint due within 7 days of this order; denying 14 Motion to Dismiss for Lack of Jurisdiction. Signed by District Judge Martin Reidinger on 3/23/13. (bsw)

THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:12-cv-00022-MR

i play. inc.,

)
)
Plaintiff,
)
)
vs.
)
)
)
D. CATTON ENTERPRISE, LLC, a
)
New York Limited Liability Company, )
)
Defendant.
)
_______________________________ )

ORDER

THIS MATTER is before the Court on the Defendant’s Motion to
Dismiss for Lack of Personal Jurisdiction or in the Alternative Motion to
Transfer Venue for Lack of Personal Jurisdiction [Doc. 14]; Plaintiff’s
Motion for Sanctions [Doc. 31]; and the Plaintiff’s Motion to Amend
Complaint [Doc. 36].
I.

PROCEDURAL BACKGROUND
On February 3, 2012, the Plaintiff i play. inc. initiated this action

against the Defendant D. Catton Enterprise, LLC seeking the following
declaratory relief: (1) a declaration of non-infringement of U.S. Patent No.
7,553,831 (“the ‘831 Patent”); (2) a declaration of invalidity of the ‘831

Patent; (3) a declaration of non-infringement of trade dress or trademark
rights; and (4) a declaration of non-infringement of copyright. [Doc. 1]. The
Plaintiff’s Complaint also asserts claims for false patent marking and unfair
competition and unfair and deceptive trade practices. [Id.]. On July 9,
2012, the Defendant filed a motion to dismiss the Complaint on the grounds
that the Court lacks personal jurisdiction over the Defendant. [Doc. 14]. In
response to the Defendant’s motion, the Plaintiff sought leave to take early
discovery on the jurisdictional issue prior to responding to the motion to
dismiss. [Doc. 16]. The Court granted the Plaintiff’s request for expedited
discovery on August 28, 2012, giving the Defendant thirty (30) days to
respond to the Plaintiff’s written discovery; allowing the Plaintiff thirty (30)
days from the receipt of responses to the written discovery to take
depositions; and giving the Plaintiff forty-five (45) days from receipt of the
Defendant’s written discovery responses to respond to the Motion to
Dismiss. [Doc. 21 at 4].
The Plaintiff served its Interrogatories and Requests for Production of
Documents on August 29, 2012. On October 2, 2012, the Court granted
the Defendant’s Motion for an Extension of Time to respond to the
discovery up to October 15, 2012. [Doc. 23]. On October 5, 2012, the
Defendant served verified responses to the discovery but did not produce
2

any documents responsive to the requests. In response to the Defendant’s
objections and confidentiality concerns, on October 9, 2012, counsel for the
Plaintiff drafted and proposed a Consent Protective Order, which was
agreed to by the parties and entered by the Court on October 15, 2012.
[Doc. 25]. Also on October 9, 2012, counsel for the Plaintiff sent counsel
for the Defendant a good faith letter in an attempt to resolve the remaining
discovery disputes.

The Defendant, however, did not supplement its

discovery responses, and the Plaintiff filed a motion to compel on October
18, 2012. [Doc. 26].
The Defendant’s response to the Plaintiff’s motion to compel was due
on November 5, 2012. On October 29, 2012, the Defendant filed a motion
requesting an additional thirty (30) days, through and including November
28, 2012, to respond to the Plaintiff’s motion and to produce the requested
discovery. [Doc. 28]. The Court denied the Defendant’s motion by a text
order entered November 2, 2012. The Defendant did not respond to the
Plaintiff’s motion to compel by the November 5, 2012 deadline.

On

November 7, 2012, the Court granted the Plaintiff’s motion to compel,
directing the Defendant to respond fully to the Plaintiff’s request for
production of documents and interrogatories within twenty-one (21) days.

3

The Plaintiff’s request for an award of fees and expenses was held in
abeyance pending further Order of the Court. [Doc. 30].
On December 1, 2012, the Plaintiff filed a motion for sanctions
against the Defendant for failing to comply with the Court’s Order of
November 7, 2012. [Doc. 31]. The Court held a hearing on this motion on
January 25, 2013. Following the hearing, the Court took the motion for
sanctions under advisement and directed the Defendant to provide further
supplemental responses to the jurisdictional discovery by February 1, 2013.
The Court further directed the parties to complete jurisdictional discovery
and file any further supplemental briefs regarding the issues of jurisdiction
and/or sanctions by March 1, 2013. [See Text-Only Order entered Jan. 28,
2013].
As directed, the parties filed their supplemental briefs. [Docs. 38, 39].
Additionally, the Plaintiff filed a motion seeking leave to amend its
Complaint.

[Doc. 36].

The Defendant has not opposed the Plaintiff’s

motion to amend.
Having been fully briefed, these matters are now ripe for disposition.

4

II.

DISCUSSION
A.

Plaintiff’s Motion for Sanctions

The Plaintiff moves the Court to sanction the Defendant for its failure
to provide full and complete responses to the Plaintiff’s jurisdictional
discovery, as previously ordered by the Court. Specifically, the Plaintiff
requests that the Court enter an Order (1) denying the Defendant’s Motion
to Dismiss or Transfer or finding that the defenses raised therein have been
waived; (2) prohibiting the Defendant from using any of the information
sought in Plaintiff’s Motion to Compel and ordered to be produced by the
Court on November 7, 2012, at a subsequent hearing or at the trial of this
matter; (3) directing that the matters addressed in the November 7, 2012
Order be deemed as established in the Plaintiff’s favor for the purposes of
this action; and (4) awarding the Plaintiff its reasonable attorneys’ fees and
expenses incurred in bringing the Motion to Compel and the Motion for
Sanctions.
Where a party fails to obey a discovery order the Court may issue
such “just orders” as may be appropriate, including but not limited to:
(i) directing that the matters embraced in the order
or other designated facts be taken as established
for purposes of the action, as the prevailing party
claims;

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(ii) prohibiting the disobedient party from supporting
or opposing designated claims or defenses, or from
introducing designated matters in evidence;
(iii) striking pleadings in whole or in part; . . . or
(vii) treating as contempt of court the failure to obey
any order . . . .
Fed. R. Civ. P. 37(b)(2)(A). “Instead of or in addition to the orders above,
the court must order the disobedient party, the attorney advising that party,
or both to pay the reasonable expenses, including attorney's fees, caused
by the failure, unless the failure was substantially justified or other
circumstances make an award of expenses unjust.”

Fed. R. Civ. P.

37(b)(2)(C).
In the present case, the question of personal jurisdiction has centered
largely around the origin and dissemination of a November 10, 2011 letter
(“Infringement Letter”) written by Defendant’s attorney, Anthony LoCicero,
in which the Defendant alleges that the Plaintiff’s water bottle nipple
adapter infringes the ‘831 Patent. [Doc. 1-3]. It is alleged in the Complaint
that the letter was delivered to one of the Plaintiff’s major customers, Buy
Buy Baby. [Doc. 1 at ¶20]. In Interrogatory No. 9, the Plaintiff asked the
Defendant to “[i]dentify all customers or third parties of whom you are
aware that received the [Infringement Letter] or a similar letter.” [Doc. 27-2
at 6].

In response, the Defendant simply referenced the copy of the
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Infringement Letter attached to the Complaint. This letter, however, does
not identify any specific addressee, as it is addressed only to “Dear Sir or
Madam.” The Defendant further stated that it was unaware of any “other”
recipients of the Infringement Letter. [Id.].
At the January 25, 2013 hearing, counsel for the Defendant advised
the Court that attorney LoCicero had told him that he (LoCicero) had sent
the Infringement Letter to only one person, David Catton, the sole member
of the Defendant. On February 1, 2013, the Plaintiff took the deposition of
a representative of Frederick Hart Company d/b/a/ Compac Industries
(“Hart”), the exclusive licensee and manufacturer of the Defendant’s
product. In that deposition, the representative testified that he received the
Infringement Letter from Catton and forwarded it to Buy Buy Baby. The
Defendant, however, has never supplemented its discovery responses to
clarify the recipients of the Infringement Letter.
In Interrogatory No. 8, the Plaintiff asked the Defendant to “[i]dentify
and describe in detail all communication you had with . . . any officer,
employee or representative of [Hart] regarding communications with
customers of [Plaintiff] regarding asserted infringement of patents.” [Doc.
27-2 at 5]. In its initial discovery response, the Defendant objected to this

7

interrogatory on the grounds of attorney-client privilege and work-product
immunity. [Id.]. These objections have never been withdrawn.
The Defendant subsequently produced emails from August 2011
which clearly contemplate prior communications between the Defendant
and Hart regarding the Plaintiff’s alleged patent infringement.

The

Defendant, however, has yet to identify any other communications
discussing or analyzing the asserted infringement, planning a response or
reflecting the transmission of the Infringement Letter from the Defendant to
Hart and subsequently to the Plaintiff’s customer.
In Interrogatory No. 2, the Plaintiff asked the Defendant as follows:
2. For the time period of 2005 to the present, did
you authorize, license, or otherwise allow any third
party to sell the Disputed Products? If so, please
state:
a. The identity of the seller;
b. Whether the seller sold the product in North
Carolina in any of those years;
c. Your gross revenues from sales of the Disputed
Products in North Carolina with respect to each year
identified; and
d. Your gross revenues from sales of the Disputed
Products worldwide with respect to each year
identified.

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[Doc. 27-2 at 2-3].

In its initial discovery responses, the Defendant

responded that “Frederick Hart Co. has been licensed to sell products
covered by defendant's patent.

Hart does not report sales of covered

products by State, either by revenue or units sold. A schedule of products
sold by Defendant's licensee will be provided to counsel for plaintiff on an
attorney's eyes only basis pursuant to a Protective Order.” [Id. at 3]. A
Consent Protective Order was drafted by Plaintiff's counsel, reviewed with
Defendant's counsel, and submitted to the Court within one week and
entered by the Court on October 15, 2012. [Doc. 25]. Despite entry of the
Protective Order, no further response was given to this interrogatory.
Even after Plaintiff's Motion to Compel [Doc. 26], the Court's Order
granting Plaintiff’s Motion to Compel [Doc. 30], and the Plaintiff's Motion for
Sanctions [Doc. 31], no additional information or documents were
forthcoming in response to this interrogatory. In fact, in a Declaration dated
December 20, 2012, David Catton asserted under penalty of perjury that
the Defendant was “not in possession” of any documents evidencing such
gross revenues or the sales of its products in North Carolina, as Hart “does
not provide the defendant with . . . sales figures.” [Doc. 33-1]. Catton
reiterated these statements in his verified supplemental discovery
responses dated December 18, 2012. [Doc. 33-2 (stating that “Hart does
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not report sales of covered products.

Defendant does not have any

knowledge concerning sale of the product worldwide by Frederick Hart
Co.”)].
After the January 25, 2013 hearing on the motion for sanctions, the
Defendant finally produced documents that revealed that as early as the
date of the Defendant’s initial discovery responses, David Catton had in his
possession copies of royalty reports from Hart which detailed all of Hart’s
sales of the licensed products under the Licensing Agreement from August
2010 through September 30, 2012, both nationally and in the state of North
Carolina, as well as the Defendant’s gross revenues from such sales.
As outlined above, the Defendant repeatedly delayed providing full
and complete responses to the Plaintiff’s straightforward discovery
requests.

Additionally, the discovery responses that were eventually

produced were non-responsive, evasive, and in at least some instances,
manifestly false. Thus, in addition to its repeated delays in providing basic
jurisdictional information to the Plaintiff, the Defendant appears to have
attempted to mislead both the Plaintiff and the Court about its sales of its
patented products in North Carolina. The Defendant’s conduct can only be
classified as willful. Further, the Defendant’s evasive tactics have been
neither harmless nor substantially justified under the circumstances.
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See

Fed. R. Civ. P. 37(b)(2)(C).

Such tactics have caused the Plaintiff to

expend substantial resources in an effort to obtain the Defendant’s
compliance with discovery and the Court’s Orders and have unnecessarily
prolonged what should have been a relatively short period for jurisdictional
discovery. For these reasons, the Court concludes that the imposition of
Rule 37 sanctions is warranted.
A party who fails to comply with jurisdictional discovery may be
deemed to have waived any objection to the exercise of personal
jurisdiction. See Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de
Guinee, 456 U.S. 694, 708-09, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982);
English v. 21st Phoenix Corp., 590 F.2d 723, 728-29 (8th Cir. 1979); Knox v.
Palestine Liberation Org., 229 F.R.D. 65, 70 (S.D.N.Y. 2005); Volkart Bros.,
Inc. v. M/V “Palm Trader,” 130 F.R.D. 285, 289 (S.D.N.Y. 1990). For the
reasons set forth above, the Court concludes that finding such waiver
would be entirely appropriate in this case. Furthermore, as the Defendant
has not identified any circumstances which would make an award of
expenses unjust, the Court will award the Plaintiff its reasonable fees and
expenses incurred in filing and pursuing the Motion to Compel and Motion
for Sanctions.

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B.

Defendant’s Motion to Dismiss or Transfer Venue

Alternatively, the Court concludes that the Defendant’s Motion to
Dismiss or Transfer Venue should be denied because personal jurisdiction
exists over the Defendant in this forum.
Where personal jurisdiction is challenged in a declaratory action
related to non-infringement of a patent, the issue of personal jurisdiction “is
‘intimately related to patent law’ and thus governed by Federal Circuit law
regarding due process.” Breckenridge Pharm., Inc. v. Metabolite Labs.,
Inc., 444 F.3d 1356, 1361 (Fed. Cir. 2006) (quoting Silent Drive, Inc. v.
Strong Indus., Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003)). Where nonpatent claims are also asserted, Federal Circuit law is still applicable so
long as “‘the resolution of the patent infringement issue will be a significant
factor’ in determining liability under the non-patent claims.” Breckenridge
Pharm., 444 F.3d at 1361 (quoting 3D Sys., Inc. v. Aarotech Labs., Inc.,
160 F.3d 1373, 1377 (Fed. Cir. 1988).
Here, in addition to the patent-related claims, the Plaintiff has
asserted a state law claim for unfair and deceptive trade practices arising
from the Defendant’s threats of litigation and communication of false
assertions to the Plaintiff’s customer of patent infringement by the Plaintiff.
As such, the resolution of the patent infringement issue will be “a significant
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factor” in determining liability under the Plaintiff’s state law claim.
Accordingly, the Court will apply the law of the Federal Circuit in
determining whether the exercise of personal jurisdiction is proper as to all
claims asserted in this case.
Where a defendant is not subject to general jurisdiction in a forum,
the Court may nevertheless exercise specific jurisdiction over the
defendant if the action “arises out of” or “relates to” the defendant’s activity
in the forum.

Breckenridge Pharm., 444 F.3d at 1360-61 (quoting Burger

King Corp. v. Rudzewicz, 471 U.S. 462, 472-73, 105 S.Ct. 2174, 85
L.Ed.2d 528 (1985)). Determining the existence of specific jurisdiction is a
two-part inquiry. First, the Court must determine whether the state longarm statute permits service of process on the defendant. Breckenridge
Pharm., 444 F.3d at 1361. Second, the Court must determine that the
exercise of personal jurisdiction would satisfy the requirements of due
process. Id. The North Carolina long-arm statute was intended to give “the
North Carolina courts the full jurisdictional powers permissible under
federal due process.”

JHRG LLC v. Stormwatch, Inc. No. 1:09CV919,

2011 WL 3111971, at *6 (M.D.N.C. July 26, 2011) (quoting Dillon v.
Numismatic Funding Corp., 291 N.C. 674, 676, 231 S.E.2d 629, 630
(1977)).

Accordingly, the “jurisdictional analysis collapses into a single
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determination of whether the exercise of personal jurisdiction comports with
due process.” JHRG, 2011 WL 3111971, at *6 (quoting Avocent Huntsville
Corp. v. Aten Int’l Co., 552 F.3d 1324, 1329 (Fed. Cir. 2008)).

To

determine whether asserting jurisdiction over an out-of-state defendant
comports with due process, the Court must assess: (1) whether the
defendant has “purposefully directed” its activities at the forum state; (2)
whether the claim “arises out of” such activities; and (3) whether the
assertion of jurisdiction would be “reasonable and fair.” Inamed Corp. v.
Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir. 2001); Akro Corp. v. Luker, 45
F.3d 1541, 1545 (Fed. Cir. 1995). “The first two factors correspond with the
‘minimum contacts’ prong of the traditional 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.
The Federal Circuit has repeatedly held that “the sending of an
infringement letter, without more, is insufficient to satisfy the requirements
of due process when exercising jurisdiction over an out-of-state patentee.”
Id. at 1361; Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d
1355, 1360-61 (Fed. Cir. 1998) (“Principles of fair play and substantial
justice afford a patentee sufficient latitude to inform others of its patent
rights without subjecting itself to jurisdiction in a foreign forum.”). “For the
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exercise of personal jurisdiction to comport with fair play and substantial
justice, there must be ‘other activities’ directed at the forum and related to
the cause of action besides the letters threatening an infringement suit.”
Silent Drive, 326 F.3d at 1202 (quoting Inamed, 249 F.3d at 1361). Such
“other activities” may include “initiating judicial or extrajudicial patent
enforcement with the forum, or entering into an exclusive license
agreement or other undertaking which imposes enforcement obligations
with a party residing or regularly doing business in the forum.” Avocent
Huntsville Corp., 552 F.3d at 1334.
In Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories., Inc.,
444 F.3d 1356 (Fed. Cir. 2006), a Colorado licensor, in cooperation with its
exclusive licensee, sent a letter to customers of the plaintiff within the State
of Florida informing them of the licensor's patent and urging the customer
to consult with its patent attorney before entering into any arrangements for
the distribution, dispensing or substitution of the disputed product. The
plaintiff filed suit in Florida eight days after learning of the letters. Id. at
1360. The Federal Circuit reversed the district court’s grant of the licensor’s
motion to dismiss for lack of personal jurisdiction. Id. at 1360, 1369. In
addition to the letters sent in the forum state, the Federal Circuit found the
following facts supported the exercise of jurisdiction over the licensor: (1)
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the licensor had an exclusive licensing agreement with the licensee; (2) the
licensee, although not headquartered or incorporated in Florida, conducted
business there; (3) the license agreement granted the licensee the right to
sue for patent infringement with the licensor's consent and the licensor and
licensee agreed to cooperate in any enforcement actions; (4) the license
agreement granted the licensee control of the prosecution or maintenance
of any patent or application that the licensor abandoned or permitted to
lapse.

Id. at 1366-67.

The Court further noted that the agreement

contemplated “an ongoing relationship” between the licensor and licensee
"beyond royalty payments" and that such a relationship actually existed in
that the licensor coordinated with the licensee in sending cease and desist
letters, in litigating infringement claims, and being represented jointly by
counsel.

Id.

Therefore, the Court concluded that the licensor had

“purposefully availed itself to the privilege of conducting activities within [the
forum].” Id.
Similarly, in the present case, the Defendant made multiple contacts
to the Plaintiff’s offices in Asheville North Carolina in July 2011, claiming
that the Plaintiff's Green Sprouts® Water Bottle Cap Adapter infringes the
‘831 Patent and threatening to initiate litigation and to prevent Plaintiff from
selling its product. In a letter dated August 26, 2011, attorney Anthony
16

LoCicero, on behalf of the Defendant, wrote to the Plaintiff's counsel at his
offices in Asheville, North Carolina, asserting that the Plaintiff's product
infringes the Defendant’s ‘831 Patent, as well as asserting possible
additional claims for trademark and trade dress infringement, and
demanding on behalf of the Defendant that the Plaintiff stop selling its
product and compensate the Defendant for the claimed infringement.
E-mails obtained by the Plaintiff through jurisdictional discovery
demonstrate that Hart solicited and encouraged the Defendant to
undertake the activities of contacting the Plaintiff and sending the Plaintiff
letters asserting infringement. Further, Hart, through its officer, solicited
and encouraged the Defendant to have its attorney send letters or notices
to retailers asserting infringement by the Plaintiff so that Hart could
pressure retailers to replace the Plaintiff's product. The Defendant and
Hart, through their respective officers, corresponded multiple times
regarding the pursuit of this strategy and the preparation of such a letter by
the Defendant’s attorney. [Doc. 33-2 at 22-25].
Attorney Anthony Lo Cicero prepared the November 10, 2011
“Infringement Letter” and provided it directly to the Defendant.

The

Defendant provided the Letter directly to Hart, which in turn sent the letter
to Buy Buy Baby, a major customer of the Plaintiff which sells the Plaintiff’s
17

products, including the Green Sprouts® Water Bottle Cap Adapter, through
its retail outlets including stores in Charlotte, Durham, and Morrisville, North
Carolina and through its website, www.buybuybaby.com.1
Effective July 29, 2010, the Defendant granted Hart an exclusive
license to market and manufacture a water bottle nipple adapter
incorporating the ‘831 Patent.

[Doc. 33-2 at 8-21].

The licensing

agreement requires Hart to pay the Defendant royalties in the amount of
7% of orders of water bottle adapter sold under this Licensing Agreement,
with the exception of certain wholesalers for which royalties were 4%. [Id.].
The licensing agreement further gives Hart substantial rights with respect to
patent enforcement and patent litigation issues. Specifically, the exclusive
license agreement grants Hart the right to sue for patent infringement with
the Defendant’s consent, and it provides that the Defendant and Hart will
agree to cooperate in any enforcement actions. The license agreement
further grants Hart control of the prosecution or maintenance of any patent
or application if Defendant is unable or unwilling to do the same abandoned
or permitted to lapse. [Id.].
Although not headquartered or incorporated in the forum, Hart is the
exclusive manufacturer and initial seller of the licensed products in North
1

It is still not known if the Infringement Letter was sent to customers other than Buy Buy
Baby as the Defendant stated in its interrogatory response that it is unaware of the
identities of the letter’s recipients.
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Carolina and conducts substantial business here.

The jurisdictional

discovery produced by Hart establishes that sales of the licensed product
were made directly to a customer in North Carolina. Additionally, Hart sells
the licensed product through its own website to individuals, small
businesses and wholesalers, and also through wholesale merchandisers
who place the products online and in retail outlets throughout the United
States, including North Carolina.
For the foregoing reasons, the Court concludes that the Defendant
has, through its relationship with its licensee, “purposefully availed itself to
the privilege of conducting activities within” North Carolina. Breckenridge
Pharm., 444 F.3d at 1366-67. Moreover, the Plaintiff’s cause of action is
clearly related to or arises out of the Defendant’s activities in North
Carolina. See Akro, 45 F.3d at 1548-49.
Having determined that the Defendant has purposefully availed itself
of conducting activities within the forum and that the cause of action is
clearly related to or arises out of the Defendant’s activities in the forum
state, the Court turns to the third prong of the due process inquiry, namely,
whether the exercise of personal jurisdiction would be reasonable and fair.
On this issue, the burden falls on the Defendant to demonstrate “a
compelling case that the presence of some other considerations would
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render jurisdiction unreasonable.” Id. at 1549 (quoting Burger King, 471
U.S. at 477, 105 S.Ct. 2174).
The Defendant argues that the exercise of personal jurisdiction would
be unfair and unreasonable because there is no evidence that the
Defendant’s exclusive licensee purposefully directed any marketing
activities of the disputed products to North Carolina before the filing of this
lawsuit.

[Doc. 38 at 9].

Specifically, the Defendant argues that the

evidence produced in response to the Plaintiff’s jurisdictional discovery
requests makes clear that there was no sale or shipment of the licensed
product prior to August 2012 and that the Infringement Letter was sent only
to one customer of the Plaintiff, Buy Buy Baby, and not purposefully
directed to any customer actually headquartered in North Carolina. [Id. at
12]. This argument must fail for several reasons. First, the Defendant
relies upon the evidence produced during jurisdictional discovery to argue
that there were no sales of the licensed product in North Carolina prior to
August 2012. As previously discussed, however, the Court has found the
Defendant’s discovery responses on this issue to be incomplete and
evasive, at best. The Defendant’s steadfast refusal to be forthcoming with
discovery regarding sales of its licensed products supports a reasonable
inference that the information provided to date is not entirely accurate and
20

that subsequent discovery may in fact reveal more sales than the amount
to which the Defendant currently admits. Moreover, Defendant’s lack of
compliance in discovery taken with the existence of post-complaint activity
in North Carolina leads to a reasonable inference that pre-complaint activity
in North Carolina did, in fact, occur. Accordingly, the fact that the current
state of discovery indicates only post-complaint sales of the licensed
product within the forum state is not dispositive of the issue of constitutional
reasonableness.
Similarly, the fact that the Plaintiff has so far been able to identify only
one of its customers that was contacted by the Defendant or its licensee
does not render the exercise of jurisdiction unfair or unreasonable. The
Defendant has never supplemented its discovery responses to clarify the
actual recipients of the Infringement Letter, and thus, it is unclear whether
there are in fact other customers that were contacted by the Defendant or
its exclusive licensee. Even if only the one customer was in fact contacted,
however, the fact that this customer is not headquartered in North Carolina
is irrelevant, as the Plaintiff has established that this customer conducts
substantial business in North Carolina. See Genetic Implant Sys., Inc. v.
Core-Vent Corp., 123 F.3d 1455, 1459 (Fed. Cir. 1997).

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As the domicile of the Plaintiff, North Carolina “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 473, 105
S.Ct. 2174).

“The injury of which [Plaintiff] complains – restraint of its

production of goods by means of a non-infringed, invalid and/or
unenforceable patent – falls well within the boundaries of the sorts of
injuries that [North Carolina] has an interest in discouraging.” Akro, 45 F.3d
at 1549. Despite bearing the burden on this issue, the Defendant has
failed to identify any considerations which would render the exercise of
personal jurisdiction unfair or unreasonable in this case. Accordingly, the
Court concludes that personal jurisdiction may be exercised over the
Defendant consistent with due process. The Defendant’s motion to dismiss
or transfer venue for lack of personal jurisdiction is denied.
C.

Plaintiff’s Motion to Amend

Finally, the Plaintiff moves to amend its Complaint in order to add
facts related to personal jurisdiction in light of information through
jurisdictional discovery; to add a new defendant, Frederick Hart Co., Inc.
d/b/a Compac Industries, Inc. (“Hart”); and to assert that the Defendant and
Hart were engaged in a conspiracy to commit the underlying unfair and

22

deceptive acts previously alleged.

[Doc. 36].

The Defendant has not

opposed the Plaintiff’s motion.
Rule 15(a)(2) of the Federal Rules of Civil Procedure states that, after
the time period set forth in 15(a)(1), “a party may amend its pleading only
with the opposing party's written consent or the court's leave.” Fed. R. Civ.
P. 15(a)(2). The Rule further provides that leave to amend shall be freely
given “when justice so requires.” Id. Therefore, absent a showing of undue
delay, bad faith, futility, or prejudice to the opposing party, a Court should
grant a party leave to amend. See Foman v. Davis, 371 U.S. 178, 182, 83
S.Ct. 227, 9 L.Ed.2d 222 (1962).
Upon consideration of the Plaintiff’s Motion, the Court concludes that
the proposed Amended Complaint would not result in undue delay or
prejudice to the Defendant. The present case is still in its infancy. Due to
the pending Motion to Dismiss, the Defendant has not yet filed an Answer,
the parties have not held the Initial Attorneys' Conference, and discovery
(other than limited jurisdictional discovery) has not commenced. Further,
the proposed amendment does not appear to be futile or made in bad faith.
Accordingly, the Court will grant the Plaintiff’s Motion to Amend.

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III.

ORDER
Accordingly, IT IS, THEREFORE, ORDERED that the Defendant’s

Motion to Dismiss for Lack of Personal Jurisdiction or in the Alternative
Motion to Transfer Venue for Lack of Personal Jurisdiction [Doc. 14] is
DENIED.
IT IS FURTHER ORDERED that the Plaintiff’s Motion for Sanctions
[Doc. 31] is GRANTED, and the Defendant shall, within fourteen (14) days
of the entry of this Order, pay the Plaintiff its reasonable fees and expenses
incurred in pursuing the Motion to Compel and Motion for Sanctions,
including any attorney’s fees incurred in briefing the motions and attending
the January 25, 2013 hearing.
IT IS FURTHER ORDERED that the Plaintiff’s Motion to Amend
Complaint [Doc. 36] is GRANTED.

The Plaintiff shall file its Amended

Complaint within seven (7) days of the entry of this Order.
IT IS SO ORDERED.

Signed: March 23, 2013

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