Ingeniador, LLC v. Jeffers, Inc.
Filing
27
OPINION AND ORDER denying 7 Motion to Dismiss for Lack of Personal Jurisdiction. Signed by US Magistrate Judge Silvia Carreno-Coll on 6/26/2014. (NBB)
IN THE UNITED STATES COURT
FOR THE DISTRICT OF PUERTO RICO
INGENIADOR, LLC,
Plaintiff,
v.
CIV. NO.: 13-1654(SCC)
JEFFERS, INC.,
Defendant.
OPINION AND ORDER
Plaintiff Ingeniador, LLC, is the holder of U.S. Patent No.
7,895,127 (the “‘127 patent”). The ‘127 patent teaches a ratingbased method of sorting and displaying reviews, including on
websites. Defendant Jeffers, Inc., is the operator of a web-based
pet supply business. Via Jeffers’s website, customers can buy
a variety of pet-related products. Ingeniador alleges that
Jeffers’s website includes a system for permitting, storing,
organizing, and displaying customer reviews that infringes the
‘127 patent.
INGENIADOR v. JEFFERS
Page 2
Jeffers contends that this Court lacks personal jurisdiction
over it. A district court has personal jurisdiction over a foreign
defendant when the long-arm statute of the state in which the
court sits “permits the assertion of jurisdiction without
violating due process.” 3D Sys., Inc. v. Aarotech Labs., Inc., 160
F.3d 1373, 1376–77 (Fed. Cir. 1998).1 Puerto Rico’s long-arm
statute is sufficiently capacious that the statutory and due
process inquiries collapse into a single question. See BenitezAllende v. Alcan Aluminio de Brasil, S.A., 857 F.2d 26, 29 (1st Cir.
1988) (citing Siderugica v. Thyssen Steel Caribbean, Inc., 14 P.R.
Offic. Trans. 708 (1983)). Precedent recognizes two types of
personal jurisdiction: general and specific. Akro Corp. v. Luker,
45 F.3d 1541, 1546 (Fed. Cir. 1995). The parties agree that
general jurisdiction over Jeffers does not exist here, and so we
focus exclusively on whether we have specific jurisdiction over
Jeffers. To establish specific jurisdiction, Ingeniador must show
three things:2 (1) that Jeffers “purposefully directed” its
1.
Because this is a patent case, we apply the law of the Federal Circuit,
rather than the First Circuit, to the personal jurisdiction inquiry. 3D
Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1377 (Fed. Cir. 1998).
2.
Where, as here, the personal jurisdiction inquiry is “based on affidavits
and other written materials in the absence of a jurisdictional hearing,
INGENIADOR v. JEFFERS
Page 3
activities towards Puerto Rico; (2) that the cause of action
against Jeffers “arises out of” those activities; and (3) that the
exercise of jurisdiction would be constitutionally reasonable. Id.
at 1546–49.
Primarily, the parties’ filings dispute whether Jeffers has
purposefully directed its activities towards Puerto Rico; more
specifically, the parties spend a great deal of time arguing
about whether Jeffers’s website, which allows customers from
Puerto Rico to buy products and have them shipped to Puerto
Rico, is sufficient to satisfy the first prong of the specific
jurisdiction test under Zippo Manufacturing Co. v. Zippo Dot
Com, Inc., 952 F. Supp. 1119 (W.D. Penn. 1997). Zippo Manufacturing, which dates from near the beginning of the e-commerce
revolution, is considered to be the seminal case on whether
websites, which typically may be viewed from any jurisdiction,
can create personal jurisdiction. Zippo Manufacturing held that
the existence of personal jurisdiction over a foreign defendant
depended on “the nature and quality of commercial activity
a plaintiff need only make a” prima facie case that personal jurisdiction
exists. Elecs. for Imaging, Inc. v. Coyle, 304 F.3d 1344, 1349 (Fed. Cir.
2003). In such circumstances, we “must accept the uncontroverted
allegations in the plaintiff’s complaint as true and resolve any factual
conflicts in the affidavits in the plaintiff’s favor.” Id.
INGENIADOR v. JEFFERS
Page 4
that [the defendant] conducts over the Internet.” Id. at 1124.
The court understood that there would be a spectrum of
internet contacts. On one end, it placed defendants that
“clearly do[] business over the Internet,” e.g., by “enter[ing]
into contracts with residents of a foreign jurisdiction that
involve the knowing and repeated transmission of computer
files over the Internet”; in these circumstances, the court held,
“personal jurisdiction is proper.” Id. On the other end of the
spectrum were cases where the defendants simply operated
“passive Web site[s] that do[] little more than make information available to those who are interested”; jurisdiction over
these defendants would not be proper. Id. The harder cases, in
the court’s opinion, were defendants with “interactive Web
sites where a user can exchange information with the host
company”; in such circumstances, jurisdiction would depend
on “the level of interactivity and commercial nature of the
exchange of information that occurs.” Id.
At a minimum, the Second, Third, Fourth, Fifth, Sixth,
Eighth and Ninth Circuits have concluded that Zippo Manufacturing created a useful paradigm for considering minimum
INGENIADOR v. JEFFERS
Page 5
contacts in the internet context.3 See, e.g., Best Van Lines, Inc. v.
Walker, 490 F.3d 239, 252 (2d Cir. 2007); Lakin v. Prudential Secs.,
Inc., 348 F.3d 704, 711 (8th Cir. 2003); Toys “R” Us, Inc. v. Step
Two, S.A., 318 F.3d 446, 452 (3d Cir. 2003); Revell v. Lidov, 317
F.3d 467, 470 (5th Cir. 2002); ALS Scan, Inc. v. Digital Serv.
Consultants, Inc., 293 F.3d 707, 713 (4th Cir. 2002); Cybersell, Inc.
v. Cybersell, Inc., 130 F.3d 414, 418 (9th Cir. 1997). Only the
Seventh Circuit has explicitly rejected Zippo Manufacturing, see
Tamburo v. Dworkin, 601 F.3d 693, 703 n.7 (7th Cir. 2010)
(declining to “fashion a special jurisdictional test for Internetbased cases”), though it has considered the relevancy of
website interactivity to the personal jurisdiction inquiry, see
Jennings v. AC Hydraulics A/S, 383 F.3d 546, 549–50 (7th Cir.
2004) (finding that personal jurisdiction could not be based on
the operation of a passive website). In any case, most courts
3.
Likewise, the First Circuit has acknowleded that Zippo Manufacturing
might be useful in the specific jurisdiction context. See Cossaboon v. Me.
Med. Ctr., 600 F.3d 25, 36 n.5 (1st Cir. 2010). And the Eleventh Circuit
has acknowledged that Zippo Manufacturing has been widely followed
by the federal courts, though it had been the subject of some scholarly
criticism. Oldfield v. Pueblo de Bahia Lora, S.A., 558 F.3d 1210, 1219 n.26
(11th Cir. 2009). (Notably, the one scholarly article that Oldfield cites
criticizes Zippo Manufacturing for being too restrictive in its findings of
personal jurisdiction. Id.)
INGENIADOR v. JEFFERS
Page 6
relying on Zippo Manufacturing have not viewed it as a
replacement for the typical due process inquiry; instead, they
have seen it as offering helpful guideposts for applying that
general inquiry to the specific context of interactive websites.
See, e.g., Best Van Lines, 490 F.3d at 252 (“As the Zippo court
itself noted, personal jurisdiction analysis applies traditional
principles to new situations.”); Roblor Mktg. Grp., Inc. v. GPS
Indus., Inc., 645 F. Supp. 2d 1130, 1142 (S.D. Fla. 2009) (holding
that while the Zippo Manufacturing analysis is not dispositive,
it may be used “as a guidepost” in “analyz[ing] the purposeful
availment requirement”).
The Federal Circuit has only once cited Zippo Manufacturing, but it has done so in a way that suggests that it may offer
useful guidance in a case like this. In Trintec Industries, Inv. v.
Pedre Promotional Products, Inc., the Federal Circuit considered
a district court’s dismissal of a patent suit for lack of personal
jurisdiction. See 395 F.3d 1275, 1277 (Fed. Cir. 2005). As part of
its case for jurisdiction, the plaintiff in Trintec pointed to the
fact that the defendant maintained an interactive website over
which individuals in the court’s jurisdiction could buy
allegedly-infringing products. See id. at 1278. The Circuit held
that because the website was “available to all customers
INGENIADOR v. JEFFERS
Page 7
throughout the country,” it did not by itself specifically target
the jurisdiction. Id. at 1281 (internal quotations omitted). The
Circuit then considered Zippo, but it concluded that its applicability to the case was not obvious because it was unclear
whether or how often the website’s interactive sales features
had been used in the jurisdiction. Id. (citing Zippo Mfg., 952 F.
Supp. at 1125–26). Furthermore, the other facts in addition to
the website that the plaintiff had adduced, such as the dollar
value of products sold in the district, were insufficiently
specific because they did not say whether the products sold
were infringing. Id. at 1282. Still, the Circuit concluded that the
record before the district court “suggested that [the plaintiff]
made a prima facie showing of personal jurisdiction.” Id. at
1283. Reversing the district court’s order of dismissal, the
Circuit then remanded to the district court for further proceedings, including, if necessary, jurisdictional discovery.4 Id. (“If
the district court concludes that the existing record is insufficient to support personal jurisdiction, [the plaintiff] is entitled
4.
A look at the docket in the underlying case reveals that on remand, the
district court ordered jurisdictional discovery, but the parties settled
before that discovery could be completed. See Trintec Indus., Inc. v. Pedre
Promotional Prods., Inc., No. 1:03-CV-01267-RCL (D.D.C. filed June 12,
2003).
INGENIADOR v. JEFFERS
Page 8
to jurisdictional discovery.” (emphasis added)). District courts
have thus tended to understand Trintec as acknowledging that
sales via a website may create specific personal jurisdiction.
See, e.g., M2M Solutions LLC v. Simcom Wireless Solutions Co.,
935 F. Supp. 2d 740, 745 (D. Del. 2013) (citing Trintec for the
proposition that the Federal Circuit “has indicated that the
interactivity of a web-site is relevant to the personal jurisdiction analysis”); see also Roblor Mktg. Grp., Inc. v. GPS Indus., Inc.,
645 F. Supp. 2d 1130, 1139 (S.D. Fla. 2009); Laseraim Tools, Inc.
v. SDA Mfg., LLC, 624 F. Supp. 2d 1027, 1032 (E.D. Ark. 2008).5
Here, the evidence shows that some 0.20% of Jeffers’s
5.
One of the district court cases following Trintec that we have found
most helpful to Jeffers’s position is Original Creations, Inc. v. Ready Am.,
Inc., 836 F. Supp. 2d 711 (N.D. Ill. 2011). There, the court interpreted
Trintec as holding that “the Federal Circuit will not find that mere
allegations of potential, but as-yet-unquantified, sales to forum
residents via a defendant’s website are sufficient to support an exercise
of personal jurisdiction.” Id. at 715. Thus, the court concluded that on
the basis of a single documented sale to a forum resident via the
defendant’s website, which did not target the forum in any specific
way, there was no personal jurisdiction. Id. at 716. But even so, it
acknowledged that internet sales, if they are sufficiently numerous or
show indicia of targeting the forum, may support the exercise of
jurisdiction. Id. (citing Illinois v. Hemi Grp. LLC, 622 F.3d 754, 758 (7th
Cir. 2010) (finding the exercise of jurisdiction warranted where there
were substantial internet sales and the website excluded certain
jurisdictions but not the forum jurisdiction)).
INGENIADOR v. JEFFERS
Page 9
orders since 2011 have come from Puerto Rico. See Docket No.
7-1, ¶ 19. This amounts to a minimum of 200 orders fulfilled to
Puerto Rico customers over that time period.6 Since January
2013, Jeffers’s revenue from sales to Puerto Rico amounts to
approximately 0.44% of its total revenue, which it says is in the
“the tens of millions of dollars.” Id. ¶ 20. This means that
Jeffers has generated at least $44,000 (and perhaps much
more)7 in revenue from sales to Puerto Rico customers in 2013
alone. Furthermore, Jeffers gives special treatment to orders
made from Puerto Rico: because it cannot calculate shipping
charges for Puerto Rico residents before the time of shipment,
Jeffers sends a special confirmation email at the time of
shipment informing the customer of those charges; the website
also provides a special procedure whereby a Puerto Rico
6.
According to Jeffers, it has received “hundreds of thousands” of orders
since 2011. See Docket No. 7-1, ¶ 19. To arrive at the figure of 200
orders, we multiplied a very conservative estimate of the
orders—100,000—by the 0.20% of orders that are said to have been
made to Puerto Rico customers. The true number of orders may be
several times higher.
7.
Once again, in arriving at this number we used a conservative estimate
of $10,000,000 as total 2013 revenues, despite the fact that Jeffers itself
said that its revenues in that period were “tens” of millions.
Accordingly, the true amount may several times higher.
INGENIADOR v. JEFFERS
Page 10
customer can learn of these charges prior to the order being
shipped. See Docket No. 9-5, at 2. We conclude that these facts
are sufficient to find that Jeffers has purposefully directed its
activities at this forum. First, it operates a highly interactive
website via which forum residents can make purchases.
Second, Jeffers fulfills those orders by sending its products into
the forum.8 Third, these sales are not potential or speculative;
to the contrary, they number in the hundreds in the last several
years alone, and they have generated a not insignificant
amount of revenue for Jeffers. And finally, Jeffers has specifically targeted Puerto Rico by establishing special shipping
procedures that apply to sales to the Commonwealth (and a
few other jurisdictions), but not to most others. Cf. Illinois v.
Hemi Grp. LLC, 622 F.3d 754, 757–58 (7th Cir. 2010) (holding
that the defendant’s website’s exclusion of sales to a single
state implied that it had “expressly elected” to do business
8.
We reject Jeffers’s reliance on J. McIntyre, which is a case concerning
specific personal jurisdiction predicated on a stream of commerce
theory. See J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).
Jeffers’s products do not reach Puerto Rico via the stream of commerce;
they are shipped directly to the forum by Jeffers, pursuant to
transactions made on Jeffers’s website. Stream of commerce principles
are therefore inapplicable.
INGENIADOR v. JEFFERS
Page 11
with the other forty-nine, including the forum state); EON
Corp. IP Holdings v. AT&T Mobility, LLC, 879 F. Supp. 2d 194,
206 (holding that a website specifically targeted Puerto Rico
where it referenced special “process[es] specific to Puerto
Rico”). Purposeful availment having been shown, we proceed
to the rest of the specific jurisdiction analysis.
The second issue is whether Ingeniador’s claim arises out
of or is related to Jeffers’s activities directed at Puerto Rico. See
Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1330
(Fed. Cir. 2008) (noting the test’s disjunctive nature). Jeffers’s
directs its website to Puerto Rico for the purposes of making
product sales. Its products are displayed on its website,
accompanied by the allegedly-infringing customer rating
system. The purpose of this system is quite obviously to help
Jeffers sell its products. In this sense, Jeffers is using the
allegedly-infringing service as part of its forum-directed
activities, and the test is easily satisfied. See id. at 1332 (explaining that in the patent context, the test is satisfied if the claim
arises out of or relates to the infringing product’s use in the
forum).
Finally, we consider whether subjecting Jeffers to jurisdiction in this forum would be reasonable and fair. Courts
INGENIADOR v. JEFFERS
Page 12
consider a number of considerations in making this determination, see Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343, 1355 (Fed. Cir. 2003), but the bottom
line is that when a defendant, like Jeffers, has “purposefully
directed his activities at forum residents seeks to defeat
jurisdiction, [it] must present a compelling case that the
presence of some other considerations would render jurisdiction unreasonable.” Burger King Corp. v. Rudzewicz, 471 U.S.
462, 477 (1985). In its motion to dismiss, Jeffers correctly cites
the relevant factors, see Docket No. 7, at 8–9 (citing Deprenyl,
297 F.3d at 1355), but it neither elaborates further upon them
or makes any effort whatsoever to apply them to the circumstances of this case. Jeffers has thus failed to make any
case—much less a compelling one—that jurisdiction is unreasonable, and this is grounds enough to decide the matter. In its
reply, Jeffers does for the first time flesh out its argument. This
is procedurally improper, see Loc. Civ. R. 7(c) (providing that
new matters cannot be raised for the first time in a reply brief),
but even if we consider Jeffers’s late arguments, we would
necessarily reject them. Essentially, Jeffers makes much of how
burdensome it will be to litigate in Puerto Rico, but as the
Supreme Court explained in Burger King, “because ‘modern
INGENIADOR v. JEFFERS
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transportation and communications have made it much less
burdensome for a party sued to defend [it]self in a State where
[it] engages in economic activity,’ it will usually not be unfair
to subject [it] to the burdens of litigating in another forum for
disputes relating to such activity.” 471 U.S. at 474 (citing McGee
v. Int’l Life Ins. Co., 355 U.S. 220, 223 (1957)). Indeed, in Burger
King the Court held that it did not offend due process to force
an individual franchisee to litigate in Florida despite the fact
that his residence was in Michigan. Id. at 484 (holding that
while proceeding in Florida was likely inconvenient, that
inconvenience was not “so substantial as to achieve constitutional magnitude”). We therefore reject Jeffers’s argument that
this Court’s assertion of jurisdiction would offend notions of
fair play and basic justice.9
9.
Jeffers also argues that by asserting jurisdiction over it, an Alabama
resident, despite its lack of minimum contacts with this forum, we
would be “diminish[ing] the sovereignty of Alabama.” Docket No. 13,
at 9. But because we have found that Jeffers does have sufficient contacts
with Puerto Rico, this argument fails. Finally, Jeffers argues that
“Puerto Rico has no greater interest in providing an adequate forum
than a state where the accused infringer resides.” Id. This may well be
true, but it misapprehends the relevant inquiry. Puerto Rico certainly
has a “manifest interest in providing effective means for redress of its
residents,” Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 776 (1984), and
for holding Jeffers “answerable on a claim related to the contacts
INGENIADOR v. JEFFERS
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Before concluding, we briefly address two cases on which
Jeffers heavily relies, both of which involve Ingeniador
(represented by the same counsel as here). See Ingeniador, LLC
v. Interwoven (hereinafter, “Interwoven I”), 874 F. Supp. 2d 56
(D.P.R. 2012); Ingeniador, LLC v. Interwoven (hereinafter,
“Interwoven II”), 882 F. Supp. 2d 274 (D.P.R. 2012). Both of these
case concerned a different patent owned by Ingeniador, which
covered an internet publishing system. See Interwoven I, 874 F.
Supp. 2d at 59. Ingeniador sued a large number of defendants
for selling products that it claimed infringed on its patent. See
id. In Interwoven I, several of the defendants moved to dismiss
for lack of personal jurisdiction, and the court granted all of the
movants’ requests. Id. Two of the defendants in that case had
contacts with Puerto Rico that were arguably similar to
Jeffers’s. First, Compulink had made a small number of sales
in Puerto Rico via resellers, amounting to some 0.01% of its
revenue (or just under $3,000). See id. at 63. These sales—which
were, moreover, indirect—were much less substantial than
Jeffers’s direct sales to Puerto Rico. And yet, the court held that
[Jeffers] established” within its borders, Burger King, 471 U.S. at 482–83.
Without a stronger showing of unfairness by Jeffers, this is all that is
necessary.
INGENIADOR v. JEFFERS
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they “may be sufficient to show that Compulink directed its
activity towards” Puerto Rico. Id. It did not decide the matter,
however, because there was no allegations that those sales
included infringing products, and thus the infringement claim
could not be said to arise out of the forum-specific contacts. Id.
Such an infirmity does not exist here, however, where the
infringing method was used as part of Jeffers’s forum-specific
contacts.10 And with respect to the defendant Tridion, the
plaintiffs alleged that specific jurisdiction existed because of
sales over Tridion’s website. See id. at 63–64. The Interwoven I
court rejected this argument, but only because no evidence had
been offered suggesting that the internet sales were of infringing products. Id. at 64 (“[I]f Plaintiff had demonstrated its cause
of action arose out of the sale of products from this website to
Puerto Rico, then the existence of the interactive website might
have been sufficient to hold personal jurisdiction over
Tridion.”). Here, by contrast, the cause of action does arise out
of the alleged infringement. Finally, in Interwoven II, the court
held that personal jurisdiction did not exist as to another
10. The Interwoven I court also held that it would offend notions of fair play
and substantial justice, 874 F. Supp. 2d 56, 63 (D.P.R. 2012), but we do
not endorse that analysis for the reasons stated in our discussion above.
INGENIADOR v. JEFFERS
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defendant, Bridgeline, because once again no evidence suggested that infringing products had been sold over its website.
Interwoven II, 882 F. Supp. 2d at 275. Again, these facts do not
mirror those of the present case.
Having found all three specific jurisdiction factors satisfied,
we DENY Jeffers’s motion to dismiss.11
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 26th day of June, 2014.
S/ SILVIA CARREÑO-COLL
UNITED STATES MAGISTRATE JUDGE
11. Jeffers’s argument that venue is improper is rejected because “[v]enue
in a patent action against a corporate defendant exists wherever there
is personal jurisdiction.” Trintec, 395 F.3d at 1280.
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