Arlington Industries, Inc. v. Electronic Custom Distributors, Inc.
Filing
43
MEMORANDUM AND ORDER granting 8 Motion to Dismiss for Lack of Jurisdiction.Signed by Honorable A. Richard Caputo on 9/15/11 (jam, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ARLINGTON INDUSTRIES, INC.,
CIVIL ACTION NO. 3:10-CV-842
Plaintiff,
v.
(JUDGE CAPUTO)
ELECTRONIC CUSTOM
DISTRIBUTORS, INC.,
Defendant.
MEMORANDUM
Defendant Electronic Custom Distributors moves to dismiss the present action for
lack of personal jurisdiction. (Doc. 8). Because the Court lacks personal jurisdiction over
the Defendant, the Motion will be granted.
I. Background
Arlington Industries, Inc. (A rlington), brought this acti on against Electronic Custom
Distributors, Inc. (ECD). Ar lington seeks a declaratory j udgment of non-infringement and
invalidity of one of ECD’s patents.
Arlington is in the business of distributing electrical fittings, connectors, and related
materials, while ECD distributes audio, video, and telecommunication products to dealers.
Arlington is the record owner ofPatent Number 7,563,979, whichrelates to a protective cable
chute for routing low-voltage cables through walls. Arlington manufactures products that are
covered by the claims of the cable chute patent.
At issue in this case is ECD’s Patent Number 7,654,405 (‘405 Patent), relating to a
method and system of a detachable nose faceplat e. When an installe r embeds electrical
wires in a wall, the detachable nose faceplate can cover the unsightly hole while allowing a
wire to be threaded through the wall. The application leading to the faceplate patent was
filed on October 17, 2006. Around March 2, 2007, the patent was assigned to ECD.
While the patent applicati on was still pending, ECD amended it three times. The
second amendment was filed on April 8, 2008 andadded five new claims. On February 26,
2009, ECD filed a third amendment to the application, adding nine new claims. Arlington
alleges that ECD made these amendm
ents in order to expand the cove
rage of its patent so it
would encompass some of Arlington’s products.
On September 23, 2009, an ex-parte requ
est for a reexamination was filed for
Arlington’s cable chute patent pursuant to 35 U.S.C. § 302. The request cited to prior art,
including the ECD faceplate application, as bearing on the patentability of the cable chute
patent. Although the party requesting the reexam ination is kept confidential, ECD has
admitted in jurisdictional discovery that it requested the reexamination.
Anticipating that ECD would file suit fo r infringing on the faceplate patent, Arlington
brought this action, seeking a declaration that it is not infringing on the faceplate patent and
that the claims of the faceplate patent are invalid.
ECD moved to dismiss for lack of personal jurisdiction pursuant to Federal Rule of
Civil Procedure 12(b)(2). (Doc. 8). Arlington opposed the Motion, moving in the alternative
for jurisdictional discovery. The parties were a
llowed forty-five days to conduct discovery on
the issue of personal jurisdiction pertaining to the time period beginning January 1, 2003, to
the date the complaint was filed, and were gi ven the opportunity to submit supplemental
2
briefing. The Motion to Dismiss has now been fully briefed and is ripe for review.1
II. Discussion
A. Legal Standard
The law of the Federal Circuit, rather
than the regional circuit, controls the
determination of personal jurisdiction “over out-of-state patentees as declaratory judgment
defendants.” Hildebrand v. Steck Mfg. Co, Inc., 279 F.3d 1351, 1354 (Fed. Cir. 2002) (citing
Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed. Cir. 1998)).
When personal jurisdiction is challenged, the pl aintiff carries the bur den of showing that
jurisdiction exists. Iowa State Univ. Research Found., Inc. v. Greater Continents Inc., 81 F.
App’x 344, 349 (Fed. Cir. 2003) (citingBurlington Indus., Inc. v. Maples Indus., Inc., 97 F.3d
1100, 1102 (8th Cir. 1996)).
District courts are permitted to exercise perso jurisdiction over a nonresident to the
nal
extent allowed under the laws of the state where the district court sits. Fed. R. Civ. P. 4(e).
Two inquiries are required in determining whether jurisdiction exists over an out-of-state
defendant: whether a forum state's long-arm stat te permits service of process and whether
u
assertion of personal jurisdiction violates due process." Autogenomics, Inc. v. Oxford Gene
Tech. Ltd., 566 F.3d 1012, 1017 (Fed. Cir. 2009) (quoting
Genetic Implant Sys. v. Core-Vent
Corp., 123 F.3d 1455 (Fed. Cir. 1997)). Here, as Pennsylvania’s long-arm statute ex
tends to
the limits of due process, 42 Pa.C.S. § 5322(b), the two tests collapse solely into a due
1 The parties’ supplemental briefs have been filed under seal. (Docs. 28, 31 and 40). As such,
some specific statistics have been excluded to avoid disclosure of confidential or privileged
information.
3
process inquiry.
Such due process requires that an out-o f-state defendant “have certain minimum
contacts with [the forum] such that the maint enance of the suit does not offend ‘traditional
notions of fair play and substantial justice.’” International Shoe Co. v. Washington, 326 U.S.
310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
See Goodyear
Dunlop Tires Operations v. Brown, 131 S. Ct. 2846, 2853 (U.S. 2011) (affirming that “[t]he
canonical opinion in this area remai s International Shoe”). Due process also requires some
n
voluntary action by the defendant; this action servesas “fair warning that a particular activity
may subject [it] to the jurisdiction of a foreign sovereign.” Burger King Corp. v. Rudzewicz,
471 U.S. 462, 472 (1985) (citations omitted).
Having the requisite minimum contacts with the forum state may subject the defendant
to either general jurisdiction or specific jurisd iction. General jurisdiction allows a court to
“hear any and all claims against [a party] w
hen their affiliations with the State are so
‘continuous and systematic’ as to render them essentially at home in the forum State.”
Goodyear, 131 S. Ct. at 285 (citing International Shoe, 326 U.S. at 317). The hallmark of
general jurisdiction are “conti nuous and systematic” contacts with the forum state, even
where the cause of action is unrelated to those contacts. See Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414–16 (1984).
Conversely, specific jurisdiction “arises out of or “relates to” the cause of action when
”
the contacts are “isolated or specific.” Burger King, 471 U.S. at 472–73. It depends not on
an entity’s overall vulnerability to suit in a form, “on an ‘affiliatio[n]between the forum and
but
4
the underlying controversy,’ principally, [an] activity or an occurrence that takes place in the
forum State and is therefore subjec to the State's regulation.” Goodyear, 131 S. Ct. at 2851
t
(citing von Mehren & Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv.
L. Rev. 1121, 1136 (1966)).
Federal Rule of Civil Procedure 12(b)(2) prov
ides for dismissal of an action where the
district court lacks personal jurisdiction over the defendant. Once challenged, the plaintiff
bears the burden of establishing personal jurisdiction. Iowa State Univ. Research Found.,
Inc. v. Greater Continents, Inc., 81 Fed. Appx. 344 (Fed. Cir. 2003). Where, as here, there
has been no evidentiary hearing, “a plaintiff need only to make a prima facie showing that
defendants are subject to personal jurisdiction.” Elecs. for Imaging, Inc. v. Coyle, 340 F.3d
1344, 1349 (Fed. Cir. 2003).
B. General Jurisdiction
“When the cause of action does not arise out of or relate to the foreign corporation's
activities in the forum State, due process
is not offended by a State's subjecting the
corporation to its in personam jurisdiction when there are sufficient contacts between the
State and the foreign corporation.” Helicopteros Nacionales De Colom. v. Hall, 466 U.S. 408,
414 (1984). Unfortunately, “[n] either the United States S upreme Court nor [the Federal
Circuit’ has outlined a specific test to follow when analyzing whether a defendant’s activities
within a [forum] are ‘continuous and systematic.’” LSI Indus. Inc. v. Hubbell Lighting, Inc.,
232 F.3d 1369, 1375 (Fed. Cir. 2000).
Instead, in analyzing the Defendant’s contacts with the forum, a district court will look
to the aggregate effect of those contacts as a whole.Aeration Solutions, Inc. v. Dickman, 85
5
Fed. Appx. 772, 774 (Fed. Cir. 2004). Taken together, the court will consider “whether the
company's contacts are substantial for the forum.” Lakin v. Prudential Sec., 348 F.3d 704,
709 (8th Cir. 2003); Provident Nat'l Bank v. California Federal Sav. & Loan Asso., 819 F.2d
434, 437-38 (3d Cir. 1987).
Helicopteros Nacionales De Colom. v. Hall considered whether a Texas state court
could exercise jurisdiction over a Colombian co
rporation (“Helicol”) for the crash of one of its
helicopters in Peru. 466 U.S. 408, 409 (1984). The combined contacts with the Tex forum
as
included “sending its chief executive officer to Houston for a contract-negotiation session;
accepting into its New York bank account checks drawn on a Houston bank; purchasing
helicopters, equipment, and training services from[a Texas corporation] for substantial sums;
and sending personnel to . . . Fort Worth for training.” Id. at 416. These contacts were not
trivial; the helicopters purchased in Texas constituted 80% of Helicol’s fleet and constituted
more than four million dollars of commerce over seven years preceding the accident. Id. at
411. Still, the Court held that these contacts did not “constitute the kind of continuous and
systematic general business contacts” nec essary for general jurisdiction. Id. at 412. In
finding as much, the Court promulgated a long list of considerationsit found relevant to a lack
of jurisdiction:
Helicol never has been authorized to dobusiness in Texas and never has had
an agent for the service of process within the State. It never has performed
helicopter operations in Texas or sold any product that reached Texas, never
solicited business in Texas, never signed any contract in Texas, never had any
employee based there, and neverrecruited an employee in Texas. In addition,
Helicol never has owned r eal or personal property in Texas and never has
maintained an office or establishment ther . Helicol has ma
e
intained no records
in Texas and has no shareholders in that State.
6
Id. at 411.
Relying on Helicopteros, the Federal Circuit found a lack of general jurisdiction by the
State of California in a similar declaratory judgment action asserting patent invalidity and noninfringement against a British defendant. Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566
F.3d 1012, 1014-18 (Fed. Cir. 2009). That defendant was “not registered to do business in
California, nor [did] it have any facilities, assets, employees, or agents there.” Id. at 1014.
However, weighing in favor of general juri sdiction, the defendant had: (1) flown company
representatives to California to negotiate a potential license agreement with the plaintiff; (2)
entered into a “collaborative agreement” to “j
ointly develop a Centre of (Microarray)
Excellence” with a third-party company with Califor ia offices; (3) “entered into non-exclusive
n
licenses with ‘about ten’ Californi companies;” (4) participated i three scientific conferences
a
n
in California; (5) electronically published (via website) a scientific publication to which the
University of California was a top-ten institutional visitor; and (6) sold twenty of its systems to
a California company for at total of $7,600,or 1% of its revenue for that year.Id. at 1015-16.
Even with so many forum contacts, the Feder l Circuit held that “nothing here exceeds
a
the commercial contacts that the Supreme Court held were insufficient in Helicopteros.” Id.
at 1018 (noting that “[ l]ike the defendant in Helicopteros, Oxford has no actual physical
presence or license to do businessin California”). Instead, itwas a “classic case of sporadic
and insubstantial contacts with the forum state, which are not sufficient to establish general
jurisdiction over the defendants in the forum.” Id. at 1017 (citing Campbell Pet Co. v. Miale,
542 F.3d 879, 884 (Fed. Cir. 2008)).
The instant case concerns Defendant ECD, a Texas corporatio n with its principal
7
place of business in Texas. It has never r egistered to do business in Pennsylvania, never
held any license or permit issued by a Pennsyl vanian authority, or paid any Pennsylvania
taxes. It has never employed a Pennsylvani
a resident or utilized one as an agent or
consultant. ECD has never had any facility in Pennsylvania, nor maintained any interest in
real estate, personal property, or intangible pr perty in Pennsylvania. It has never attended
o
any trade shows or marketing functions in Pennsylvania, does not advertise in Pennsylvania,
and none of its employees have ev er traveled to Pennsylvania on business. Aside from
limited purchases and sales, Defendant has never contracted with a Pennsylvania resident.
Instead, Plaintiff alleges ECD’s activity within the forum in the form of sales, purchases,
newsletters, and websites combines to form the basis of general personal jurisdiction. For
the reasons stated below, the C ourt finds these contacts insufficient to form the basis for
general jurisdiction over Defendant ECD.
1. Defendant’s Purchases and Sales in Pennsylvania
Defendant’s extremely limited commerce in Pennsylvania is an inadequate foundation
for general jurisdiction. It s clear that limited commercial activity shall “not foreclose a finding
i
that the company has sufficient minimum contacts with the forum.”
Intermec, Inc., 2007 U.S. Dist. LEXIS 2851 at
Alien Tech. Corp. v.
*14-16 (D.N.D. Jan. 4, 2007) (citations
omitted). However, this does not mean that neg
ligible commercial activity is alone sufficient.
“[T]he overall nature of a business's activity is a more reliable indicator of ‘continuous and
systematic’ contacts, than focusing on a small percentage of revenue generated from that
particular state.” Verona v. United States Bancorp, 2009 U.S. Dist. LEXIS 14863 (E.D. Pa.
Feb. 23, 2009).
8
Instead of considering percentages alone, a court should look to whether a company
“has substantial and significant ties with the Commonwealth through the sale of its product.”
AMP Inc. v. Methode Electronics Inc., 823 F.Supp. 259, 268 (M.D. Pa. 1993). In
Alien Tech.,
the court applied such an analysis to find that 0.0571% of sales revenue was sufficient for
general jurisdiction over a foreign corporation registered in the forum, paying taxes in the
forum, and conducting business trips within the forum. Alien Tech. Corp. v. Intermec, Inc.,
2007 U.S. Dist. LEXIS 2851 at*14-16 (D.N.D. Jan. 4, 2007) (ci ations omitted). Similarly, 3M
t
Innovative Props. Co. v. InFocus Corp. held that 0.064% of sales in a forum were adequate
to exercise general jurisdiction where the defendant had established distribution channels,
generated twenty million dollars in sales over thepreceding five years, contracted with forum
companies for repair and warranty services, and s employees on twenty-one visits to the
ent
forum in the preceding year. 2005 U.S. Dist. LEXIS 2381 at *6-7 (D. Minn. Feb. 9, 2005).
Conversely, Verona found a lack of general jurisdiction for a company with 2.88% of
its revenues in Pennsylvania. 2009 U.S. Dis t. LEXIS 14863, at *9-10 (E.D. Pa. Feb. 23,
2009). That court compiled a non-exhaustive list of factors that contributed to its decision:
(1) whether the defendant is incorporated or licensed to do business in
Pennsylvania; (2) whether the defendant has ever filed any tax returns in
the Commonwealth; (3) whether the defendant files administrative reports
with any agency or department of Pennsylvania; (4) whether the defendant
regularly purchases products or supplies within Pennsylvania for use in its
business outside the state; (5) whether the defendant owns land or property
within the state; (6) whether the defendant advertises in Pennsylvania; and
(7) whether the defendant maintains an agent in the Commonwealth.
Id. at *8. Specifically, that court found the
company’s lack of incor poration, property or
employees in the state failed to provide a sufficient nexus to the forum. Id.
9
The Federal Circuit, controlling in the instant case, has offered some authority as to
the necessary quantum of commerce to establish general jurisdiction. Campbell Pet Co. v.
Miale, 542 F.3d 879 (Fed. Cir. 2008). There, a “very small volume of sales”–approximately
2% of defendant’s total sales–was deemed “far s ort of enough to reflectthe substantial and
h
continuous presence in the state necessa ry to support general jurisdiction.”
Id. at 884.
However, that defendant also had additional cont acts to the forum weighing in favor of
general jurisdiction. The defendant had a websit e (available in the forum, but doing no
business there), and had attended a trade conventi on in the forum where she took orders
and “demonstrated her products and offered them for sale.” Id. at 881-82.
Therefore, while small amounts of business do not preclude general jurisdiction, they
are also generally are not enough to satisfy it. See e.g. Lakin v. Prudential Sec., 348 F.3d
704, 708 n.7 (8th Cir. 2003) (“Other circuits, wh ile not addressing this issue directly, have
considered the percentage of a company's total business as just one of the factors to
consider in a general personal jurisdiction analysis--wit varying results.” (emphasis added)).
h
In the instant case, there is disagreement as to the exact percentage of ECD’s
business conducted in Pennsylvania. Suffice to say, it is small. Plaintiff concedes this, but
maintains that these transactions are subs tantial as they are frequent and systematic.
Specifically, Plaintiff alleges general jurisdicti on exists for ECD as it “regularly engages in
business with dealers, vendors, and customers in the Commonwealth of Pennsylvania, and,
further, distributes products in this judicial dist rict.” (Doc. 1 at ¶ 6). Plaintiff avers that
Defendant is in constant comm unication with all of its vendor s to ensure availability of
product on demand, to follow up on product wa
10
rranties, and to perform returns and
exchanges. Plaintiff calculates that in c
onsidering the sales and purchased in tandem, ECD
has had contact with Pennsylvania on almost a daily basis. (Doc. 28 at 6). This, Plaintiff
argues, constitutes continuous and systematic for the purposes of general jurisdiction.
In the period between January 2003 to April 2010, ECD has sold to forty-six different
states, and at least 31 different states in any giv year. (Doc. 28-7 at 4-19, Ex. G.) In that
en
same period, ECD sold products to twenty-f ur Pennsylvania customers on a weekly basis,
o
but no more than twelve in any given year. (Doc.
28-3 at 5, Ex. B). Plai tiff alleges a high of
n
.59% of sales to a low of 0.08%. (Doc. 28 at
11). Defendant responds that “ECD’s few sal
es
to Pennsylvania were not the result of soliciting specific customers, were items of ordinary
inventory and not an important part of ECD’s business, and amount to only 0.167 percent of
ECD’s total sales.” (Doc. 19 at 1; Provenzano 3d Decl., Doc. 32 at 3).
As for purchases, ECD’s inventor consists of its own produc as well as acquisitions
y
ts
from outside vendors. The purchase order
s appear to require communication, i.e.
confirmation with the vendor before finalization. (Doc. 28 at 8). ECD has eight vendors
located in Pennsylvania, never doing business withmore than five of themin any given year.
(Doc. 28 at 4; Doc. 28-3 at 6, Ex. B). In
the period of January 2003 to April 2010, this
comprised a high of 1.28% of national vendor purc
hases to a low of .45%of national vendor
purchases (per unit). (Doc. 28 at 4).
In fact, the majority of these Pennsylvania pur hases (98%) appear to be from Plaintiff
c
Arlington. However, they were placed at Arlington’s office in Houston, Texas, shipped from
Arlington’s warehouse in Houston, Texas, and pay ment disbursed to Arlington’s office in
Atlanta, Georgia. (Provenzano 3d Decl., Doc. 32 at 1). As such, Defendant contends that
11
98% of its Pennsylvania purchases actually have no transactional nexus to Pennsylvania,
though it is undisputed that Ar lington is a Pennsylvania corporation and ECD has itself
classified Arlington as a Pennsylvania supplier. Still, ECD contests the notion that it could
have reasonably anticipated being hauled into court byArlington in Pennsylvania. Similarly,
Defendant contends that five more of the ei ht Pennsylvania vendors have no transactional
g
connection with Pennsylvania due to similar arr ngements. (Claiming that between January
a
1, 2009 and August 9, 2010, only .065 percent of all sales were shipped to a Pennsylvania
address. (Provenzano 2d Decl., Doc. 19 at 2)).
Regardless of how these sales and purchases are tabulated, it is clear that they are
not sufficiently substantial or significant to c onfer the basis for general jurisdiction. In the
face of such a small proportion, never exceeding two percent, courts require some further
nexus with the forum in order to establish generaljurisdiction. Unlike the above cited cases,
there is little beyond these regular sales and pur
chases that connects Defendant ECD to the
forum. Looking to the other factors, it is not ble that ECD is not registered in Pennsylvania,
a
possesses no property there, has never sent agents there, and do es not pay taxes there.
Aside from its website and newsletter, ECD’s totacontact with Pennsylvania is a mere sliver
l
of its overall commerce.
Plaintiff maintains that ECD’s strong dedica tion to customer service enlarges the
nature of its contacts with the fo
rum. Specifically, Plaintiff c
ontends that Defendant maintains
ongoing of dealer relationships with the Pennsylvania businesses to which Defendant sold
products. (Doc. 16 at 17). The Court reject this argument as it double-counts Defendant’s
s
contacts with the forum. It may be true that cotact with the forum accompanies each sale or
n
12
purchase. However, it would be rather difficultfor Defendant to complete such transactions
without some communication, and to argue that the communication itself is a forum contact
essentially counts each sale twice for the purposes of substantial contacts. In other words,
each communication is directly related to a sale or purchase, adequately tallied above as a
proportion of overall commerce. Moreover, in every case where general jurisdiction has been
found to be lacking because of insufficient commerce, it could generally be argued that the
commerce in those instances also included a requisite communication. In the instant case,
the parties present no evidence that Def endant’s limited commerce in Pennsylvania is
qualitatively different from that in any other state, and ther
efore this Court finds that
Defendant’s accompanying contact is adequately represented inthe percentage figures listed
above.
Finally, Plaintiff urges us to follow the test promulgated inProvident National Bank v.
California Federal Savings & Loan Association, 819 F.2d 434 (3d Cir. 1987), asserting that
Defendant’s contacts are such that they go tothe core of ECD’s business model. Ultimately,
this is unhelpful to Plaintiff’s position. While the Federal Circuit is controlling in the instant
patent case, Provident indicated that it was the centrality of the conduct to the defendant’s
business was more important than t he magnitude of the conduct itself. Id. at 438. In the
Third Circuit, centrality appears to be additional requirement, and is not alone sufficient.
Fisher v. Teva PFC SRL, 212 Fed. Appx. 72, 75 (3d Cir.N.J. 2006) (“The contacts mustalso
be a central part of the defendant's busness.” (emphasis added)). See alsoPhila. Macaroni
i
Co. v. Italpasta Ltd., 2010 U.S. Dist. LEXIS 39030, at * 14-15 (E.D. Pa. Apr. 20, 2010)
(explaining that “courts within the Third Circuit have recognized that general jurisdiction is
13
lacking with respect to a defendant who conducts
a minimal amount of business in the
relevant forum and where such business activity does not qualify as a central part of the
non-resident's business”). Moreover, such centra has been interpreted not that the acti n
lity
o
itself is central to the business model, but that the action in the forum must be central to the
business model. Molnlycke Health Care AB v. Dumex Med. Surgical Prods. Ltd., 64 F. Supp.
2d 448, 452 (E.D. Pa. 1999). In Molnlyckle, the court found no indication that business
conducted in Pennsylvania was central to def ndant’s business where the defendant had no
e
regular place of business in the state and sold
less than one percent ofits products there. Id.
In so much a particular business model
requires buying and selling, Plaintiff’s
centrality argument would confer jurisdiction ov er a retailer for any purchase or sale in a
given forum. This cannot be. As the foregoing illustrates, a minuscule proportion of sales,
central or not, are not alone sufficient to alone carry general jurisdiction. In ECD’s case, such
a small proportion of sales within the form are notsignificant enough to label them central to
the business. Therefore, I find that the purchases and sales listed above, although perhaps
central to ECD’s business model, do not meet the requisite level for general jurisdiction.
2. Defendant’s Periodic Newsletter
ECD’s extremely limited distribution of materials in Pennsylvania similarly does not
subject it to general jurisdiction.
Defendant maintains a periodic newslette r goes out to over 1,000 customers and
potential customers, two of which are located in Pennsylvania (0.02%). (Provenzano Decl. at
¶ 9, Doc. 9 at 2). Analogous to the analysis above,
such a small fractionof incidental contact
is not enough to support general jurisdiction. See e.g. Blackwell v. Marina Associates, No.
14
No. Civ.A. 05-5418, 2006 WL 573793 at *4 (E.D. Pa.March 9, 2006) (finding “the mere fact
that defendant mailed promotional materials to at least two Pennsylvania residents is not
sufficient to demonstrate that defendant engaged incontinuous and systematic contacts with
Pennsylvania.”).
O’Connor v. Sandy Lane Hotel Co., Ltd., No. Civ.A. 04-2436, 2005 WL 994617 at *3
(E.D. Pa April 28, 2005), failed to find continuous and systematic contacts where a defendant
periodically mailed newsletters to 865 Pennsyl
vania residents. Specifically, as the
newsletters were “sent only to a targeted c lientele of individuals who have independently
sought out information, this limited interaction with Pennsylvania residents [was] insufficient
to establish general jurisdiction.” Id. Similarly, Romeo Entertainment Group, Inc. v. Showing
Animals Respect & Kindness, there was no general jurisdic tion where only five of 1,426
addresses were in the forum state, and only 0.087% of the donationsreceived as a result of
the mailing came from within the forum. 643 F.Supp. 2d 1109, 1114-15 (D. Neb. 2009). In
Romeo, corporate officers had also visited the forum on business further strengthening the
argument for general jurisdiction. Id. at 1114. Still, that court rejected the claim that such
jurisdiction existed, finding the quantity of these contacts “ minimus, at most.” Id. at 1115.
de
Like the above instances, Defendants newslette directed at Pennsylvania residents
rs
are similarly de minimus. The existence of two periodic mailings, without additional evidence
of purposeful targeting or a substantial connection to forum transactions, is simply too
attenuated in the general jurisdiction calculation. As such, t e Court finds them insufficient to
h
confer the basis of general jurisdiction.
3. Defendant’s Website
15
ECD’s websites of limited interactivity are not sufficient to confer the basis of general
jurisdiction. ECD has two publically accessible websites. Over the past seven years, these
two websites made a total of forty-five sales totaling $14,303 to Pennsylvania customers.
(Provenzano 3d Decl., Doc. 32 at 3). Of thos e sales, only seven, totaling about $2,056,
included a Pennsylvania billing or shipping address. Id. at 5.
In support of jurisdiction, Defendant’s webs ite claims that ECD “serv[es] the entire
U.S. with over 100 v endors and 4,000 stocked items to se
rve the custom installation
industry.” (Ex. 10 to Boak Decl.). ECD boasts hat it “sells the finest brands of electronics to
t
installing dealers all over the country—who then sell the items to e users.” (Ex. 1 to Boak
nd
Decl.). It also allows users to contact the Defendant, and to place orders that are “ready to
ship anywhere in the U.S.” (Ex. 10 to Boak Decl). However, in order to “purchase products
.
through defendant’s website (or to purchase genera lly from defendant), a user must first
apply to become an installing dealer and establish an account with Defendant.” (Doc. No. 16
at 5). In short, internet sales require registration.
Zippo Mfg. Co. v. Zippo DOT Com was an early attempt to set a standard for general
jurisdiction when considering internet contacts. 952 F. Supp. 1119 (W.D. Pa. 1997). It held
general jurisdiction proper for “active websites”—where a “defendant clearly does business
over the Internet.” Id. at 1124. However, Zippo Mfg. offers two other possibilities: (1)
“passive websites”—inappropriate for general jurisdiction—which do “little more than make
information available to those who are interested;” and (2) a middle ground, “where a user
can exchange information with the host computer.” Id. Yet, “[i]n the wake of Zippo, courts
have been reluctant to find generaljurisdiction based on internet contacts only, even in those
16
cases where the websites are highly interactive.”
Nationwide Contr. Audit Serv. v. Nat'l
Compliance Mgmt. Servs., 622 F. Supp. 2d 276, 292 (W.D. Pa. 2008).
As such, within the middle category, traditional notions of general jurisdiction generally
apply. For cases falling in the gray area, “t
he exercise of jurisdic tion is determined by
examining the level of interactivity and commerc nature of the exchange of information that
ial
occurs on the Web site.” Id. “As Zippo and the Courts of Appeals decisions indicate, the
mere operation of a commercially interactive web site should not subject the operator to
jurisdiction anywhere in the world. Rather , there must be evidence that the defendant
‘purposefully availed’ itself of conducting activity in the forum state, by directly targeting its
web site to the state, knowingly interacting with residents of the forum state via its web site,
or through sufficient other related contacts.” Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d
446, 454 (3d Cir. 2003).
Plaintiff argues that Defendant’s website is a “virtual store,” “an interactive and highly
commercial website by which Defendantclearly transacts business.” (Doc. 16 at 14). Thi is
s
an appeal to place Defendant’s websites in the ac tive category. According to Plaintiff, the
fact “[t]hat a customer must first be approved as an installing dealer and complete a
“Web Access Form” before ma
king online purchases does not undermine the
commercial nature of Defendant’s website.” (Doc. 16 at 13). In s upport of this, Plaintiff
cites to Obabueki v. Int’l Bus. Machs. Corp., Nos. 99 Civ. 11262 (AGS), 99 Civ. 12486
(AGS), 2001 U.S. Dist. LEXIS 11810 (S.D.N.Y. Aug. 14, 2001). However, that case found
the “middle category” applicable to a websit e requiring customers to download and fax
applications before accessing website’s services. Id. at *11-12. This is highly analogous to
17
the instant case where users wishing to pur chase from Defendant’s password-protected
website must first apply before having the ability to make purchases.
In a similar patent infringement suit, it was held that a website “does not, on its own,
suffice to establish general jurisdiction. To hol that the possibility ofordering products from
d
a website establishes general jurisdiction woul d effectively hold that any corporation with
such a website is subject to general jurisdictionin every state. The court is not willing to take
such a step.” Molnlycke Health Care AB v. Dumex Med. Surgical Prods. Ltd., 64 F. Supp. 2d
448, 451 (E.D. Pa. 1999). In Molnlycke, it was unclear whether Defendant’s website had
transacted business within the forum. However,like the instant case,the defendant had two
websites, one of which, unlike
the instant case, allowed fo r direct orders without prior
approval. Id. at 451. The court analogized these sites to “a general advertising campaign:
while they are available in ever state, they are not necessarilytargeted towards every state.”
y
Id. at 452. Finding that there was no evi
dence that the defendant had targeted the
Pennsylvania forum, nor that Pennsylvania was asubstantial part of defendant’s business (at
less than one percent of total sales), there was no general jurisdiction. Id. at 452-54.
The Federal Circuit has held that the “ab
ility of [forum] residents to access the
defendants' websites . . . does not by itself s how any persistent course of conduct by the
defendants in the [forum]." Campbell Pet Co. v. Miale, 542 F.3d 879, 884 (Fed. Cir. 2008)
(quoting Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 419-20 (9th Cir. 1997)). In
Campbell, a nationally accessible website was held insufficient for general jurisdiction as it
was “not directed at customers in [in theforum] and does not appear to have generated any
sales in [in the forum].”
Id. There, a lack of general juri sdiction was found where that
18
defendant had also attended a trade convention in the forum where she took orders and
“demonstrated her products and offered them for sale.” Id. at 881-82.
The Federal Circuit has not opined whether a “h
ighly interactive, transaction-oriented
website . . . may support long-arm jurisdiction w herever the site is available to potential
customers.” Trintec Indus. v. Pedre Promotional Prods., 395 F.3d 1275, 1281 (Fed. Cir.
2005). However, as established,
Defendant’s website is not of that category anyway.
Instead, Plaintiff contends that the link to their website “effectively established a continuous
presence in Pennsylvania, a virtual gateway
through which cust omers pass to enter
Arlington’s facility.” (Doc. No. 16).
Plaintiff’s argument is ultimately unconvincing. As noted above, there mere availability
of Defendant’s websites within the forum is
not dispositive of a continuous presence in
Pennsylvania. Nor are the websites highly interactive under theZippo test as the registration
requirements renders them, at best, mildly intera ctive. Ultimately, there is no purposeful
availment to the forum in which to hang general
jurisdiction. Despite the fact that
Defendant’s website is nationally accessible, t here is no evidence that they have targeted
Pennsylvania, nor have they accounted for a significant proportion of sales in Pennsylvania.
Rather, as in Molnlycke, these two websites are better analogized to an advertising
campaign. Therefore, like the contacts listed above, their contact with the form does not rise
to a sufficient level in which it would be proper
to exercise general personal jurisdiction.
Separately, none of Defendant’s contacts with the forum are significant enough to
confer the basis of general jurisdiction. Taken together, the result is still the same.Campbell
analogizes extremely well to the instant case. 542 F.3d 879. There, as here, defendant
19
never did more than 2% business in the forum st ate. There, as here, Plaintiff also had a
website that was available in the forum. However, unlike here, defendant in Campbell had
actually attended a trade show in the forum where it sold product. Yet, this all was still not
enough to sustain general jurisdiction. Here, the C
ourt arrives at a similar result. Within the
forum, Defendant conducts less than two percent ofits commerce, distributes an insignifi ant
c
numbers of newsletters, and operates two nationallyavailable websites. This falls below the
level of contacts found insufficient in Campbell, and it therefore falls below the level of
contacts necessary to confer general jurisdic tion.
Therefore, I find a lack of general
jurisdiction over Defendant ECD in the instant case.
B. Specific Jurisdiction
Specific jurisdiction exists where (1) “the defendant has purposef ully directed his
activities at residents of the forum;” and (2) “the litigation results from alleged injuries that
'arise out of or relate to' those activities.” Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d
1324, 1330 (Fed. Cir. 2008) ( quotations and citations omitted). As a final matter, a court
shall also determine whether the “assertion of personal jurisdiction is reasonable and fair.”
Id. at 1332 (citation omitted). The plaintiff has the burden of making a prima facie showing
on the first two elements, and if they ar
e met the defendant may still defeat personal
jurisdiction by “present[ing] a compelling case
that jurisdiction would be constitutionally
unreasonable.” Akro Corp. v. Luker, 45 F.3d 1546 (Fed. Cir. 1995). “This ‘purposeful
availment’ requirement ensures that a defendant will not be haled intoa jurisdiction solely as
a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or of
the ‘unilateral activity of
another party or a third person.’” Burger King, 471 U.S. at 475 (internal citations omitted).
20
“With respect to the last prong, the burden of proof is on the defendant, which must present a
compelling case that the presenc e of some other considerati ons would render jurisdiction
unreasonable under the five-factor test ar ticulated by the Supreme Court in Burger King.”
Avocent, 552 F.3d at 1332.
Plaintiff’s sole argument concerning specific jurisdiction rests on Defendant’s alleged
patent enforcement activities. However, certain enforcement activities are exempted from
the exercise of personal jurisdiction. Based on “policy considerations unique to the patent
context,” Silent Drive, Inc. v. Strong Indus., 326 F.3d 1194, 1202 (Fed. Cir. 2003), “letters
threatening suit for patent infringement sent to the alleged infr inger by themselves ‘do not
suffice to create personal jurisdiction.’” Id. at 1202 (quoting Red Wing Shoe, 148 F.3d at
1359-60). “[W]ithout more, a patentee's act of
sending letters to another state claiming
infringement and threatening litigation is not sufficient to confer personal jurisdiction in that
state.” Campbell Pet Co., 542 F.3d at 885. In this, the Federal Circuit has explained that:
Principles of fair play and substantial justce afford a patentee sufficient latitude
i
to inform others of its patent rights without subjecting itself to jurisdiction in a
foreign forum. A patentee should not subjec itself to personal jurisdiction in a
t
forum solely by informing a party
who happens to be located there of
suspected infringement. Grounding pers onal jurisdiction on such contacts
alone would not comport with principles of fairness.
Red Wing Shoe, 148 F.3d at 1360-61. Thus, “there must be ‘other activities’ directed at the
forum and related to the cause of action besides letters threatening an infringement suit.”
the
Silent Drive, 326 F.3d at 1202.
Examples of these "other ac tivities" include initiating judici al or extrajudicial patent
enforcement within the forum, or entering into an exclusiv e license agreement or other
21
undertaking which imposes enforcement obligations with a party residing or regularly doing
business in the forum.” Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d 1324, 1334 (Fed.
Cir. 2008). Yet, even these instances are viewed as the outer limits of specific jurisdiction:
“Even a patentee's exclusive licensing and enfor
cement activities in the forum raise
questions as to the propriety of an assertion of personal jurisdiction over a non-resident
defendant.” Id. at 1336.
In the instant case, Plaintiff contends thatDefendant is subject to specific jurisdiction
as the instant suit allegedly arises out of Defendant’s patent enforcement activities. “Here,
Defendant has purposefully directed activity (ext ajudicial patent enforcement and threats of
r
litigation) at Arlington, a Pennsylvania resident.” (Doc. 28 at 20). In support of this position,
Plaintiff cites two supposed instances of extrajudicial enforcement. These instances included
Defendant amending its patent application to apparently expand its scope, and a request for
an ex-parte re-examination of Arlington’s patent inan attempt to invalidate it. (Doc. 16 at 22).
“While Defendant filed its amendments and request for re-exami ation with the [U.S. Patent
n
and Trade Office] in Alex
andria, Virginia, its actions were aimed at, and their effects intended
to be felt in, Pennsylvania. Where, as here, acts are both aimed at and intended to cause
injury in the forum state, such acts are sufficientto confer specific personal jurisdiction over
the defendant.” (Doc. 16 at 22-23).
Principles of fair play and substantial justice require that Defendant not be subject to
specific jurisdiction due to a pat nt infringement notice. Asnoted above, informing others of
e
your patent rights does not alone s
ubject you to specific jurisdiction within the forum. To hol
d
otherwise would subject defendants to suit wher
22
ever a plaintiff was located, however
attenuated that forum is to the defendant’s activi
ties. Furthermore, such patent infringement
notices can include threats of lit igation: “As we have noted, the e-mails and letters from
[defendant’s] counsel to [plaintiff] are insufficient togive rise to personal jurisdiction in light of
the principles of Red Wing Shoe. Warnings and threats of infringement suits are typical in
such correspondence, as are offers to license.” Radio Sys. Corp. v. Accession, Inc., 638
F.3d 785, 791 (Fed. Cir. 2011).
ECD submits that, prior to the previous lawsuit that Arlington withdrew, “ECD had
never communicated with Arlington regarding the ‘405 patent, much less did ECD threaten to
file suit against Arlington.” (Provenzano Decl., Doc. 9 at 5). Regardless, as ECD’s alleged
assertion of patent infringement did nothing more than put Arli ngton on notice of potential
infringement, it is not alone enough to subject it to specific jurisdiction in Pennsylvania.
Furthermore, Defendant has not initiated anyother activities against Plaintiff that can
be characterized as “other activities” directedat patent enforcement within the forum. Putting
aside the matter as to whether actions directed towards an unrelated patent can constitute
patent enforcement, the requests for amendments and reexamination were directed at the
Patent and Trade Office (PTO) in Alex
andria, Virginia—not Pennsylvania. Analogous to the
instant case is Radio Systems Corp. v. Accession, Inc., 638 F.3d 785 (Fed. Cir. 2011).
There, the Federal Circuit affirmed the District Court’s holding that similar contacts with the
PTO were directed at Virginia rather than the forum. Id. at 792. Specifically, the defendant in
Radio Systems left a voice message with the PTOexaminer, in Virginia, causing the PTO to
withdraw its notice of allowance on the plaintiff’s patent. Id. at 788. In doing so, the court
was firm that it had “made clear in Avocent that enforcement activities taking place outside
23
the forum state do not give rise to personal ju risdiction in the forum, and that decision is
controlling here.” Id. at 792. Here, Defendant’s activities regarding the PTO similarly took
place in Virginia and do not give rise to personal jurisdiction within the forum.
Therefore, the Court concludes that specific jurisdiction is inapplicable in the instant
case. As such, it is unnecessary to consider whether such jurisdiction would comport with
fair play and substantial justice.
III. Conclusion
For the reasons stated above, the Court will grant Electronic Custom Distributors’
Motion to Dismiss on the present action for lack of personal jurisdiction. (Doc. 8.). An
appropriate order follows.
September 15, 2011
/s/ A. Richard Caputo
Date
Richard Caputo
United States District Judge
A.
24
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ARLINGTON INDUSTRIES, INC.,
Plaintiff,
v.
ELECTRONIC CUSTOM
DISTRIBUTORS, INC.,
CIVIL ACTION NO. 3:10-CV-842
(JUDGE CAPUTO)
Defendant.
ORDER
NOW, this 15th day of September, 2011, IT IS HEREBY ORDERED that
Electronic Custom Distributors’ Motion to Dismiss (Doc. 8) is GRANTED.
/s/ A. Richard Caputo
A. Richard Caputo
United States District Judge
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