Acumed LLC v. Skeletal Dynamics L.L.C.

Filing 37

ORDER: Granting Motion to Dismiss Case for Lack of Jurisdiction 10 . This case is DISMISSED without prejudice. Signed on 7/13/2016 by Judge Owen M. Panner. (jkm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

Civ. No. 3:15-cv-01581-PA

ACUMEDLLC,
Plaintiff,

OPINION & ORDER

v.
SKELETAL DYNAMICS, LLC,
Defendant.

PANNER, Senior District Judge.
This matter comes before the Court on Defendant's Motion to Dismiss. ECF No. 10. In
the alternative, Defendant moves to transfer this case to the United States District Court for the
Southern District of Florida. For the reasons set forth below, Defendant's motion is GRANTED.
Background

Plaintiff in this case is Acumed LLC ("Acumed"), a Delaware limited liability company
with its principal place of business in Hillsboro, Oregon. Acumed holds a number of patents,
including U.S. Patent No. 6,030,162("the'162 patent"), which was issued on February 29, 2000,
and is titled as "Axial Tension Screw."

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Defendant Skeletal Dynamics LLC ("Skeletal") is a privately held Florida limited
liability company with its principal place of business in Miami, Florida. Skeletal produces a
number of medical devices for use in upper extremity orthopedic surgery..

In March 2015

Skeletal began selling a product called the Reduct Headless Compression Screw ("the Reduct
screw").
On August 20, 2015, Acumed brought this action, alleging that Skeletal's Reduct screw
infringed on the '162 patent.
Legal Standards

Federal Circuit law, rather than regional circuit law, determines whether a district court
has personal jurisdiction over the defendant in a patent infringement case. Avocent Huntsville
Corp. v. Aten Intern. Co. Ltd., 552 F.3d 1324, 1328 (Fed. Cir. 2008). If the parties have not

conducted discovery, the plaintiff need only make a prima facie showing that the defendant is
subject to personal jurisdiction. Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1201
(Fed. Cir. 2003).

In evaluating a Rule 12(b)(2) motion to dismiss for lack of personal

jurisdiction without holding an evidentiary hearing, the court construes the pleadings and
affidavits in the light most favorable to the non-moving party. Graphics Controls Corp. v. Utah
Med. Prods., Inc. 149 F.3d 1382, 1383 n.l (Fed. Cir. 1998).

Personal jurisdiction over an out-of-state defendant in a patent-related dispute involves
two questions: whether jurisdiction exists under the forum state's long-arm statute and, if so,
whether asserting personal jurisdiction is consistent with the limitations of the Due Process
Clause of the Constitution. Trintec Indus. Inc. v. Pedre Promotional Prods., Inc., 395 F.3d 1275,
1279 (Fed. Cir. 2005). These inquiries essentially merge because Oregon's long-arm statute
extends jurisdiction to the outer limits of due process. Columbia Sportswear North America, Inc.

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v. Seirus Innovative Accessories, No. 3:15-cv-00064-HZ, 2015 WL 3986148, at *2 (D. Or. June

29, 2015); see also Trintec, 395 F.3d at 1279 ("collaps[ing]" the two-part inquiry where a state's
long-arm statute is coextensive with the limits of due process).
The Due Process Clause "protects an individual's liberty interest in not being subject to
the binding judgment of a forum with which he has established no meaningful contacts, ties, or
relationships." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (internal quotation
marks and citations omitted). To satisfy this due process protection, the plaintiff must show that
the defendant has "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." Int 'l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945). "The requirement for purposeful minimum contacts

helps ensure that non-residents have fair warning that a particular activity may subject them to
litigation within the forum." Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558,
1565 (Fed. Cir. 1994).
"Under the 'minimum contacts' test, a defendant may be subject to either specific
jurisdiction or general jurisdiction." LSI Indus., Inc. v. Hubbell Lighting, Inc., 232 F.3d 1369,
1375 (Fed. Cir. 2000). A court has general jurisdiction over a nonresident defendant when that
defendant has "continuous and systematic" contacts with the forum state.
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984).

Helicopteros

A court has specific

jurisdiction where "the defendant has purposefully directed his activities at residents of the
forum and the litigation results from alleged injuries that arise out of or relate to those activities."
Burger King, 471 U.S. at 472 (internal quotation marks and citations omitted); see also Beverly
Hills Fan Co., 21 F.3d at 1562 n: 10 (citation omitted). In contrast to general jurisdiction,

"specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the

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very controversy that establishes jurisdiction." Goodyear Dunlop Tires Operations, SA. v.
Brown, 564 U.S. 915, 919 (2011) (internal quotation marks and citation omitted).

A district court may exercise specific personal jurisdiction over a defendant subject to a
three part test: (1) the defendant must have purposefully directed its activities at residents of the
forum; (2) the plaintiff's claim must arise out of or relate to those activities; and (3) the exercise
of personal jurisdiction must be reasonable and fair. Autogenomics, Inc. v. Oxford Gene Tech.
Ltd., 566 F.3d 1012, 1018 (Fed. Cir. 2009) (citing Breckenridge Pharm. Inc. v. Metabolite Labs,
Inc., 444 F.3d 1356, 1363 (Fed. Cir. 2006)). Under this test, a court may properly assert specific

jurisdiction "even if the contacts are isolated and sporadic," as long as the cause of action arises
out of or relates to those contacts. Silent Drive, Inc., 326 F.3d at 1200 (citing Burger King, 471
U.S. at 472-73). The plaintiff bears the burden at steps one and two, but the burden shifts to the
defendant at step three to prove that personal jurisdiction is unreasonable. Grober v. Mako
Prods., Inc., 686 F.3d 1335, 1346 (Fed. Cir. 2012).

Discussion
Skeletal moves to dismiss this action, alleging a lack of personal jurisdiction. 1 In the
alternative, Skeletal moves to transfer this action to the Southern District of Florida.
I.

Skeletal's Activities in Oregon
Before proceeding to the jurisdictional analysis, it is necessary to describe Skeletal's

activities as they relate to Oregon and the Reduct screw. As previously noted, Skeletal is a
Florida limited liability company that has never registered to do business in Oregon. Escagedo
Deel. at 2. Skeletal has no offices or property in Oregon, nor does it have an Oregon mailing

1

Skeletal also initially moved to dismiss on the basis of improper venue, but concedes that the Federal Circuit's
recent decision inln Re: TC Heartland LLC, 821F.3d1338 (Fed. Cir. 2016), is contrary to that argument. ECF Dkt.
# 36. I accept Skeletal's concession and commend counsel for their prompt notice to the Court regarding the
Federal Circuit's decision.

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address or telephone number, and none of its manufacturing is done in Oregon. Escagedo Deel.
at 2. Skeletal does have a website that describes its products, but which does not offer the
products for sale, consistent with industry regulations. Escagedo Deel. at 3.
The sale and marketing of Skeletal's products in Oregon is overseen by Trey Campbell
("Campbell"), Skeletal's Director of Sales and Marketing for the Western United States.
Escagedo Deel. at 2; Campbell Deel. at 2. Campbell lives in Texas, but periodically travels to
Oregon on behalf of Skeletal. Escagedo Deel. at 2; Campbell Deel. at 2. Campbell is also
responsible for directing the independent distributors who promote the sale of Skeletal products.
Escagedo Deel. at 2-3; Campbell Deel. at 2-3. Oregon sales account for 1 percent of Skeletal's
total sales. Escagedo Deel. at 3.
Skeletal works with one independent distributor in Oregon, Rocky Mountain Medical
("Rocky Mountain"). Escagedo Deel. at 3. Rocky Mountain is based in Spokane, Washington,
and is responsible for distribution in Oregon, Idaho, and Washington. Escagedo Deel. at 3.
Skeletal' s Sales Representation Agreement with Rocky Mountain includes the Reduct screw.
Kolitch Deel. Ex. D, at 15. Skeletal also provided Rocky Mountain with price sheets for its
products, including the Reduct screw.

Kolitch Deel. Ex. B.

One of Rocky Mountain's

employees, Michael MacDonald ("MacDonald") is authorized to sell certain Skeletal products in
Oregon. Campbell Deel. at 3. After the commencement of this lawsuit, Skeletal amended its
Sales Representation Agreement with Rocky Mountain to prevent the sale of Reduct screws in
Oregon. Kolitch Deel. Ex. F at 41.
Skeletal first sold the Reduct screw in March 2015. Escagedo Deel. at 2. Skeletal sells
the Reduct screw as part of the Reduct Headless Compression Screw System ("Reduct System"),
which includes a sterilization tray, specially designed instruments, and implants required for use

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l

I

I

of the Reduct screw. Escagedo Deel. at 3. When Skeletal first began to sell the Reduct screws it
had only a limited number of Reduct Systems available, none of which were designated for sale
in Oregon. Kolitch Deel. Ex. F, at 46. Regulations require that Skeletal keep track of the names
and addresses of any facility to which Skeletal ships its products. Second Escagedo Deel. at 4.
After Skeletal was served with the Complaint in this case, it took steps to ensure that no Reduct
screws were shipped to Oregon. Kolitch Deel. Ex. F, at 46. Neither Skeletal or Rocky Mountain
have sold any Reduct screws in Oregon, nor has Skeletal shipped any Reduct Systems to Oregon.
Escagedo Deel. at 3; Campbell Deel. at 3. Rocky Mountain cannot access either the Reduct
System or the Reduct screw without authorization from Campbell and Campbell has not given
that authorization. Campbell Deel. at 3. Rocky Mountain denies that it has marketed or sold the
Reduct product in Oregon without Skeletal's knowledge. Campbell Deel. at 3.
Skeletal's target demographic is orthopedic surgeons.

Second Escagedo Deel. at 2.

Before selling its products, either Skeletal or its independent sales representatives will approach
surgeons directly to gauge their interest in Skeletal's products. Second Escagedo Deel. at 2-3.
Product pricing is not generally discussed in Skeletal' s meetings with surgeons.

Second

Escagedo Deel. at 3; Price Deel. Ex. 4, at 35-36. Rather, if the surgeon expresses interest in
using a particular product, Skeletal will approach the hospital or surgery center where the
physician works or where a particular procedure will be performed. Second Escagedo Deel. at 3.
Generally, the facility refers the matter to a "Value Analysis" program ("VA") and Skeletal will
negotiate with the VA on issues of pricing and product availability. Second Escagedo Deel. at 3.
If Skeletal reaches an agreement with a facility's VA on the use of Reduct products, it will send

the facility a "tray" containing the Reduct System. Second Escagedo Deel. at 3-4. If the facility

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uses a part from the Reduct system, it will inform Skeletal and only then will Skeletal bill the
facility. Second Escagedo Deel. at 4.
In April 2015, Campbell met with an Oregon physician to show him the Reduct screw.
Kolitch Deel. Ex. E, at 31. For the purposes of the meeting, Campbell brought a single Reduct
screw with him. Kolitch Deel. Ex. E, at 31. Campbell was not authorized to discuss price,
quantity, delivery, or any other terms for the sale of the Reduct screw. Second Escagedo Deel. at
5. Campbell informed the physician that the screw would be available at some point in the
future, but Campbell did not provide the physician with any literature about the Reduct screws,
nor did they discuss pricing. Kolitch Deel. Ex. E at 35. Skeletal never approached the facility
where the Oregon surgeon worked about purchasing the Reduct screw and never initiated the VA
process. Second Escagedo Deel. at 5. Campbell described this meeting as "preselling." Kolitch
Deel. Ex.Eat 35.
On October 1, 2015, Skeletal was awarded a three-year non-exclusive contract with
Trinity Health, a healthcare provider that covers 78 hospitals, including three in Oregon, which
would permit Skeletal to sell its products, including the Reduct screw, to Trinity Health
hospitals. Kolitch Deel. Ex. C; Ex. E at 26. Actual sale of Skeletal products would still require
approval by the individual hospitals through the VA process, and none of Trinity Health's
Oregon hospitals have entered into agreements to purchase the Reduct screws. Kolitch Deel. Ex.
Eat 26-28; Second Escagedo Deel. at 3; Price Deel. Ex. 4, at 27. Skeletal has not gone through
the VA process with any of Trinity Health's Oregon hospitals. Price Deel. Ex. 4, at 27.

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I

II.

Personal Jurisdiction
Skeletal contends that this Court lacks personal jurisdiction.

Skeletal is not subject general personal jurisdiction in this district, but contends that Skeletal is
subject to specific personal jurisdiction.
The first prong of the specific jurisdiction test refers to both purposeful availment and
purposeful direction, but in cases involving tortious conduct, court most often apply a purposeful
direction analysis. College Source, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1076 (Fed. Cir.
2011 ). Acumed contends that Skeletal has purposefully directed its activities related to this
lawsuit at residents of Oregon 'by (1) entering into an exclusive sales agreement with Rocky
Mountain, which included an obligation to promote the sale of Reduct products in Oregon; (2)
providing price sheets to Rocky Mountain for use with Oregon sales and approving Rocky
Mountain's requests for product literature and samples of the Reduct screw; (3) transporting a
sample of the Reduct screw to Oregon and using it in a "sales pitch" to an Oregon surgeon; (4)
entering into purchase agreements with Trinity Health hospitals, which included the Reduct
screw; and (5) selling 1 percent of its products to residents of Oregon.
Skeletal asserts that this case turns on the second prong of the test for specific
jurisdiction: whether Acumed's claim "arises out of or directly relates to" the activities Acumed
alleges are purposefully directed at Oregon.

I

In making that determination, "the test is whether

the activity in the forum state is a basis for the cause of action." HollyAnne Corp. v. TFT, Inc.,
199 F.3d 1304, 1308 n. 4 (Fed. Cir. 1999) (emphasis in orginal). To establish that a lawsuit
"arises out of or relates to" a defendant's contacts with the forum state, "the plaintiffs must make
a prima facie showing that their claim for patent infringement is connected" to the defendant's
activities within the forum state.

I

I

Acumed concedes that

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Moldjl.ow Corp. v. Simeon, Inc., 296 F. Supp. 2d 34, 41 (D.

Ma. 2003); Authentify Patent Co., LLC v. Strikeforce Tech., Inc., 39 F. Supp. 3d 1135, 1145 (W.
D. Wa. 2014) ("Plaintiff must demonstrate by a preponderance of the evidence that its claim for
patent infringement is connected to Strikeforce's activity within the State of Washington related
to its '858 patent."); Hockerson-Halberstadt, Inc. v. Costco Wholesale Corp., 93 F. Supp. 2d
738, 743 (E.D. La. 2000) ("HHI has not shown that Costco's alleged footwear patent
infringement arises out of or directly relates to any Costco activities directed at the state of
Louisiana.").
Patent infringement occurs when someone "without authority makes, uses, offers to sell,
or sells any patented invention ... during the term of the patent[.]" 35 U.S.C. § 271(a). Acumed
argues that Skeletal has offered to sell the Reduct screw in Oregon. The Federal Circuit has
interpreted "offer to sell" liability under § 271 (a) "according to its ordinary meaning in contract
law, as revealed by traditional sources of authority." Rotec Indus., Inc. v. Mitsubishi Corp., 215
F.3d 1246, 1254-55 (Fed. Cir. 2000). A party has made an "offer to sell" if it communicates "a
'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."' Id at 1257 (quoting
Restatement 2d of Contracts § 24 (1975)); see also MEMC Elec. Silicon Materials, Inc. v.
Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1376 (Fed. Cir. 2005) (finding email

exchanges containing a description of the allegedly infringing product did not constitute an offer
to sell because they lacked a price term and could not, therefore, be transformed into a contract
by the recipient's acceptance).
A. Rocky Mountain Medical

Acumed argues that three aspects of Skeletal's relationship with Rocky Mountain create
personal jurisdiction over Skeletal in Oregon: the distribution of price sheets for Skeletal

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products, the sales agreement between Skeletal and Rocky Mountain, and Rocky Mountain's
employment of a sales representative, Michael MacDonald, who resides in Oregon.
1. The Price Sheets

Skeletal distributed price sheets for its products, including the Reduct screws to Rocky
Mountain. These price sheets included pricing for a number of hospitals in Oregon. Kolitch
Deel. Ex. B. Acumed asserts that the price sheets "can easily be interpreted as an 'offer to sell'
the accused product to Oregon customers at least through the distributor."
The price sheets were sent to Skeletal' s distributors, including Rocky Mountain Medical,
but they were not shown to customers. Price Deel. Ex. 4, at 19. Based on the record, it does not
appear that the price sheets sent by Skeletal to Rocky Mountain were ever communicated to any
third party in Oregon and contained no description of the Reduct product or any other traditional
indicia of an offer. I cannot, therefore, conclude that the price sheets constituted an offer to sell
within the meaning of§ 271(a).
2. The Sales Agreement

As previously discussed, Skeletal and Rocky Mountain signed a sales agreement under
which Rocky Mountain was obligated to market Skeletal products in Oregon, Washington, and
Idaho. Kolitch Deel. Ex. D. At least initially, this agreement included an obligation to market
Reduct screws in Oregon, although no Reduct screws were actually sold in Oregon and Skeletal
amended the sales agreement to forbid the sale or marketing of Reduct screws in Oregon after it
was served with the Complaint in this case. Kolitch Deel. Ex. F, at 45.
As previously discussed, Skeletal' s practice was to negotiate sales of Skeletal products
directly with the facility where they would be used and there is no indication that Rocky
Mountain ever engaged in any such negotiations in Oregon on behalf of Skeletal.

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To the

contrary, the record indicates that Rocky Mountain could not sell Reduct screws without
permission from Skeletal. Campbell Deel. at 3.
Furthermore, the contract does not contain the sort of specific terms that constitute an
offer to sell under Rotec and MEMC. The fact that the contract between Rocky Mountain and
Skeletal contemplated the eventual sale of the Reduct screw to third parties in Oregon does not
rise to the level of an offer to sell within the meaning of § 271 (a).
3. Michael MacDonald
Rocky Mountain employs Michael MacDonald, an Oregon resident, as a sales
representative for Oregon and Washington. Price Deel. Ex. 4 at 12. Campbell approved a
request for product literature on the Reduct screw to be sent to MacDonald, but no product
literature was ever sent because none was available. Price Deel. Ex. 4, at 13-14.
The simple fact that Rocky Mountain employs an Oregon-based sales representative who
markets Skeletal products in Oregon is not sufficient to create personal jurisdiction, as only
Skeletal' s Reduct screws are at issue in this case. There is no indication that MacDonald ever
approached any Oregon customers about the Reduct screws or that he entered into any
negotiations sufficient to constitute an "offer to sell" within the meaning of§ 27l(a).
B. The Trinity Medical Contract
Acumed asserts that the contract between Skeletal and Trinity Health, which permits
Skeletal to sell its products to Trinity Health hospitals, constitutes an "offer to sell" the Reduct
screw in Oregon.
Acumed overstates the scope of the agreement between Trinity Health and Skeletal. The
agreement permitted Skeletal to sell its products to Trinity Health hospitals, but each individual
hospital still makes its own purchasing agreements through the VA process. Second Escagedo

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Deel. at 3; Price Deel. Ex. 4, at 26. Skeletal never actually approached any of Trinity Health's
Oregon hospitals about purchasing the Reduct screw. Price Deel. Ex. 4, at 27. I must conclude
that there was never an "offer to sell" the Reduct screw in Oregon based on the Trinity Health
contract.
C. The Preselling Meeting

In April 2015, Campbell met with an Oregon surgeon to discuss the Reduct screw.
Campbell brought a single Reduct screw with him and showed it to the surgeon, telling him that
it was a new product that would soon be available. Price Deel. Ex. 4, at 31; 35. Campbell did
not provide the surgeon with any literature about the Reduct screw and they did not discuss
pricing or other terms. Price Deel. Ex. 4, at 35-36. Acumed argues that this meeting, which
Campbell characterized as "preselling," constituted an offer to sell the accused product.
In support of its argument, Acumed relies on JD Sys., Inc. v. Aarotech Lab., Inc., in
which the Federal Circuit held that the purpose of the§ 27l(a) provision against "offers to sell"
was to prevent "generating interest in a potential infringing product to the commercial detriment
of the rightful patentee." JD Sys., Inc. v. Aarotech Lab., Inc., 160 F.3d 1373, 1379 (Fed. Cir.
1998). The Federal Circuit later clarified, however, that "offers to sell" under§ 271(a) were to
be assessed under the traditional theory of contract law and that, in order to qualify, the offer to
sell would need to contain sufficient terms that the recipient's acceptance of the offer would
create a contract. Rotec, 215 F.3d at 1257. The price is an essential term in an "offer to sell"
under§ 27l(a). MEMC, 420 F.3d at 1378.
Other district courts have found that advertisements and solicitations do not rise to the
level of offers. See Moldflow Corp. 296 F. Supp. 2d at 43-44.

In Moldflow Corp., the

defendant's marketing representative distributed "flyers" which contained "a description of the

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of the allegedly infringing software as well as some pricing information," but "lacked other
terms necessary to create the power of acceptance on the part of the recipients." Id. at 44. In
particular, the court noted the lack of information about quantity, time of delivery, or terms of
payment and found that, without those terms, "none of the companies that received the
promotional materials could contractually bind [the defendant] without at least some additional
negotiation," and found that the distribution of the flyers did not constitute an offer to sell under
§ 271(a). Id.
In this case, Skeletal' s "preselling" meeting with the Oregon surgeon fell below even the
conduct described in Moldflow Corp. It is undisputed that Campbell did not discuss the price of
the Reduct screw when he met with the surgeon, nor did he discuss availability or any other
terms of sale. Skeletal never approached the facility where the surgeon worked about purchasing
the Reduct screw and never initiated the VA process necessary to sell the Reduct screws to that
facility. The meeting cannot, therefore, be considered an offer to sell the Reduct screw.

D. Skeletal's Oregon Sales
Finally, the fact that Oregon accounts for 1 percent of Skeletal's sales is not sufficient to
create specific personal jurisdiction.

Acumed does not dispute that Skeletal never sold any

Reduct screws in Oregon. Skeletal's Oregon sales are derived from other, unrelated Skeletal
products. Acumed' s claims in this case do not, therefore, arise from or relate to those activities.
As I have concluded that Plaintiffs claims do not arise from or relate to Skeletal' s
activities within the State of Oregon, it is not necessary to determine whether the exercise of
personal jurisdiction would be reasonable and fair. I conclude that this Court lacks personal
jurisdiction over Skeletal.

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III.

Motion to Transfer

Skeletal moves to transfer this case to the Southern District of Florida as the more
convenient venue. "For the convenience of parties and witnesses, in the interest of justice, a
district court may transfer any civil action to any other district or division where it might have
been brought." 28 U.S.C. § 1404(a). In determining whether transfer is proper, the Federal
Circuit applies regional circuit law. In re Link A Media Devices Corp., 662 F.3d 1221, 1222-23
(Fed. Cir. 2011). However, once a district court determines that it lacks personal jurisdiction and
dismisses a complaint, it may not transfer the case to another district. HollyAnne Corp., 199
F.3d at 1307.
As I have determined that this Court lacks personal jurisdiction over Skeletal and that
dismissal is appropriate, I decline to transfer this case to the Southern District of Florida.
Conclusion

This Court lacks personal jurisdiction over Defendant Skeletal Dynamics, LLC.
Accordingly, Defendant's Motion to Dismiss, ECF No. 101 is GRANTED.

This case is

DISMISSED without prejudice.

/_z
__

It is SO ORDERED and DATED this __

OWEN M. PANNER
Senior District Judge

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day of July 2016.