Loyalty Conversion Systems Corporation v. American Airlines Inc

Filing 128

MEMORANDUM OPINION AND ORDER. Signed by Judge William C. Bryson on 9/2/2014. (ch, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION

LOYALTY CONVERSION SYSTEMS
CORPORATION,
Plaintiff,
v.
AMERICAN AIRLINES, INC., et al.,
Defendants.

LOYALTY CONVERSION SYSTEMS
CORPORATION,
Plaintiff,
v.
JETBLUE AIRWAYS CORPORTATION,
Defendant.

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Case No. 2:13-CV-655
(LEAD CASE)

Case No. 2:13-CV-662

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant JetBlue Airways Corporation’s Rule 12(b)(3) Motion to
Dismiss for Improper Venue. Case No. 2:13-cv-662, Dkt. No. 11. After considering full
briefing and argument on the motion, the Court DENIES the motion.
I. BACKGROUND
This action against JetBlue Airways Corporation (“JetBlue”) is one of nine separate
actions brought against various United States airline companies by plaintiff Loyalty Conversion

1

Systems Corporation (“Loyalty”). Loyalty owns two U.S. patents, U.S. Patent Nos. 8,313,023
(“the ’023 patent”) and 8,511,550 (“the ’550 patent”), which relate to methods and computer
program products for converting loyalty award credits earned from one vendor into loyalty
award credits of a second vendor that the second vendor will accept as payment for purchases.
Loyalty alleges that JetBlue, like the other eight defendant airlines, infringes those patents
through the operation of its frequent flyer mileage program. In particular, Loyalty alleges that
JetBlue infringes the patents by allowing customers to exchange loyalty award credits earned
from other vendors for mileage credits in JetBlue’s frequent flyer program, which is known as
TrueBlue.
JetBlue is a Delaware corporation with its principal place of business and corporate
headquarters in New York. Although JetBlue has flights to three airports in Texas, none of those
airports are in the Eastern District of Texas. It has no offices or employees in the Eastern
District of Texas, nor does it own any property in the district. Based on the absence of contacts
between JetBlue and this district, JetBlue has moved to dismiss for improper venue under Fed. R.
Civ. P. 12(b)(3).
A. Governing Legal Principles
A patent infringement action may be brought “in the judicial district where the defendant
resides, or where the defendant has committed acts of infringement and has a regular and
established place of business.” 28 U.S.C. § 1400(b); see In re Cordis Corp., 769 F.2d 733, 73435 (Fed. Cir. 1985). JetBlue does not have “a regular and established place of business” in the
Eastern District of Texas. Venue is therefore proper in the Eastern District only if JetBlue can be
said to “reside” there.

2

As a defendant, a corporation or other entity that is subject to suit is deemed to reside, for
venue purposes, “in any judicial district in which such defendant is subject to the court's personal
jurisdiction with respect to the civil action in question.” 28 U.S.C. § 1391(c)(2); see also VE
Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed. Cir. 1990). A different
subsection of the same statute, 28 U.S.C. § 1391(d), provides that when a suit is filed against a
corporate defendant in a multidistrict state such as Texas, the corporation is “deemed to reside in
any district in that State within which its contacts would be sufficient to subject it to personal
jurisdiction if that district were a separate State.” See In re Volkswagen of Am., Inc., 545 F.3d
304, 312-13 (5th Cir. 2008). In a case such as this one, then, the question of proper venue turns
on the question whether there is personal jurisdiction over the defendant in the district where the
action has been brought.
The general principles that apply to the question whether a federal court has in personam
jurisdiction over a non-resident defendant are well-settled. If the federal statute under which an
action is brought contains an applicable service-of-process provision, the court looks to whether
that provision can be satisfied by service of process on the defendant. See Omni Capital Int’l,
Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 105-06 (1987). When the federal statute has no such
applicable service of process provision, as is the case for the Patent Act, 1 the federal court may
reach those entities that are subject to the jurisdiction of the state in which the district court sits.

1

A federal statute, 28 U.S.C. § 1694, provides that in a patent infringement action
commenced in a district “where the defendant is not a resident but has a regular and established
place of business, service of process, summons or subpoena upon such defendant may be made
upon his agent or agents conducting such business.” That statute, however, does not apply in
this case, as JetBlue does not have a regular and established place of business in the Eastern
District of Texas.
3

See Fed. R. Civ. P. 4(e). In that setting, federal courts “follow state law in determining the
bounds of their jurisdiction over persons.” Daimler AG v. Bauman, 134 S. Ct. 746, 753 (2014).
A district court may exercise personal jurisdiction over a defendant if the defendant “is
subject to the jurisdiction of a court of general jurisdiction in the state where the district court is
located.” Fed. R. Civ. P. 4(k)(1)(A). In order to satisfy that requirement, the district court’s
exercise of jurisdiction over an out-of-state defendant must be consistent with both the forum
state’s long-arm statute and the requirements of due process. See Walden v. Fiore, 134 S. Ct.
1115, 1121 (2014); Radio Sys. Corp. v. Accession, Inc., 638 F.3d 785, 788-89 (Fed. Cir. 2011);
Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1329 (Fed. Cir. 2008); Red Wing
Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed. Cir. 1998). 2
Texas’s long-arm statute is coterminous with the extent of personal jurisdiction permitted
by due process principles. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S.
408, 413 & n.7 (1984); Great W. United Corp. v. Kidwell, 577 F.2d 1256, 1266 (5th Cir. 1978),
rev’d on other grounds, 443 U.S. 173 (1979); Prod. Promotions, Inc. v. Cousteau, 495 F.2d 483,
491 (5th Cir. 1974); Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990); U-Anchor
Advertising, Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977). Where, as here, the forum state’s
long-arm statute “is coextensive with the limits of due process, the two inquiries collapse into a
single inquiry: whether jurisdiction comports with due process.” Inamed Corp. v. Kuzmak, 249
F.3d 1356, 1360 (Fed. Cir. 2001).

2

Federal Circuit law governs the question whether a particular district court may
exercise personal jurisdiction over the defendant in a patent case. See Inamed Corp. v. Kuzmak,
249 F.3d 1356, 1359 (Fed. Cir. 2001); Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir. 1995).

4

Due process requires that, to subject a defendant to the judicial power of a forum state,
the defendant must have sufficient “minimum contacts” with the forum “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), quoting Milliken v. Meyer, 311 U.S.
457, 463 (1940). As a general matter, the sovereign’s exercise of judicial power requires “some
act by which the defendant ‘purposefully avails itself of the privilege of conducting activities
within the forum state, thus invoking the benefits and protections of its laws.’” J. McIntyre
Mach., Ltd. v. Nicastro, 131 S. Ct. 2780, 2787 (2011) (plurality opinion), quoting Hanson v.
Denckla, 357 U.S. 235, 253 (1958). In that manner, due process principles “give[] a degree of
predictability to the legal system that allows potential defendants to structure their primary
conduct with some minimum assurance as to where that conduct will and will not render them
liable to suit.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
There are several ways that a defendant can submit to the adjudicative authority of a
forum state (and thus of federal courts sitting within that state). Besides consent or presence
within the state at the time the suit is filed and process is served, citizenship or domicile
“indicates general submission to a State’s powers.” McIntyre, 131 S. Ct. at 2787. For a
corporation, the state of “citizenship or domicile” means the state of incorporation or the
corporation’s principal place of business, or some equivalent.

Id.

In such instances, the

defendant is said to be subject to “general jurisdiction” in the forum.

Because general

jurisdiction exposes the defendant to suit on any claim, regardless of the place of its origin, the
minimum contacts required to establish general jurisdiction must satisfy “an exacting standard”
that “‘approximate[s] physical presence’ in the forum state.” Schwarzenegger v. Fred Martin

5

Motor Co., 374 F.3d 797, 801 (9th Cir. 2004) (minimum contacts standard for general
jurisdiction is high “because a finding of general jurisdiction permits a defendant to be haled into
court in the forum state to answer for any of its activities anywhere in the world”).
A more limited form of submission to a state’s authority, referred to as “specific
jurisdiction,” applies only in cases of disputes that “arise out of or are connected with the
activities within the state.” Int’l Shoe, 326 U.S. at 319. “[W]here the defendant deliberately has
engaged in significant activities within a State, or has created continuing obligations between
himself and residents of the forum, he manifestly has availed himself of the privilege of
conducting business there, and because his activities are shielded by the benefits and protections
of the forum’s laws it is presumptively not unreasonable to require him to submit to the burdens
of litigation in that forum as well.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76
(1985) (citations and internal quotation marks omitted). That is, when a defendant “purposefully
avails itself of the privilege of conducting activities within the forum State, thus invoking the
benefits and protections of its laws,” Hanson, 357 U.S. at 253, “it submits to the judicial power
of an otherwise foreign sovereign to the extent that power is exercised in connection with the
defendant’s activities touching on the State,” McIntyre, 131 S. Ct. at 2788. For that reason,
“submission through contact with and activity directed at a sovereign may justify specific
jurisdiction ‘in a suit arising out of or related to the defendant’s contacts with the forum.’” Id.,
quoting Helicopteros, 466 U.S. at 414 n.8.
To satisfy the due process standard for specific jurisdiction, the defendant must have “fair
warning that a particular activity may subject [it] to the jurisdiction of a foreign sovereign.”
Burger King, 471 U.S. at 472. That is, the defendant’s “conduct and connection with the forum

6

State” must be “such that he should reasonably anticipate being haled into court there.” Id. at
474.
When a court seeks to exercise specific jurisdiction over an out-of-state defendant, the
“fair warning” requirement is satisfied “if 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 (citations omitted). That is, there must be
“some act by which the defendant purposefully avails itself of the privilege of conducting
activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson,
357 U.S. at 253. The “purposeful availment” requirement “ensures that a defendant will not be
haled into a 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
(citations omitted). Thus, if the sale of a product in the forum district is “not simply an isolated
occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or
indirectly, the market for its product in other [districts], it is not unreasonable to subject it to suit
in one of those [districts]” in which a claim arises. World-Wide Volkswagen, 444 U.S. at 297.
Jurisdiction is therefore proper where the contacts with the forum state “proximately result from
actions by the defendant himself that create a ‘substantial connection’ with the forum State.”
Burger King, 471 U.S. at 475 (emphasis in original).
The minimum contacts determination does not end the due process inquiry. Once it has
been determined that a defendant purposefully established minimum contacts with the forum,
those contacts “may be considered in light of other factors to determine whether the assertion of
personal jurisdiction would comport with ‘fair play and substantial justice.’” Burger King, 471

7

U.S. at 476.

However, the Supreme Court has emphasized that “where a defendant who

purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must
present a compelling case that the presence of some other considerations would render
jurisdiction unreasonable.” Id. at 477. Normally, when a corporation “purposefully avails itself
of the privilege of conducting activities within the forum State,” Hanson, 357 U.S at 253, its
contacts with that state giving rise to a cause of action there are deemed sufficient to satisfy the
requirement that the exercise of specific personal jurisdiction by a court in that forum be fair and
reasonable.

See Burger King, 471 U.S. at 477.

As the Court explained in World-Wide

Volkswagen:
When a corporation ‘purposefully avails itself of the privilege of conducting
activities within the forum State,’ it has clear notice that it is subject to suit there,
and can act to alleviate the risk of burdensome litigation by procuring insurance,
passing the expected costs on to customers, or, if the risks are too great, severing
its connection with the State. Hence if the sale of a product of a manufacturer or
distributor . . . is not simply an isolated occurrence, but arises from the efforts of
the manufacturer or distributor to serve, directly or indirectly, the market for its
product in other States, it is not unreasonable to subject it to suit in one of those
States if its allegedly defective merchandise has there been the source of injury to
its owners or to others.
444 U.S. at 297 (citation omitted).
The Federal Circuit has summarized the Supreme Court’s guidance regarding the due
process requirement for establishing specific jurisdiction as follows: The plaintiff bears the
burden of showing (1) that the defendant purposefully directed its activities at residents of the
forum, and (2) that the plaintiff's claim arises out of or relates to those activities. See Synthes
(U.S.A.) v. G.M. Dos Reis Jr. Ind. Com de Equip. Medico, 563 F.3d 1285, 1297 (Fed. Cir.
2009); Elecs. For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1350 (Fed. Cir. 2003); see also Revell
v. Lidov, 317 F.3d 467, 469-70 (5th Cir. 2002); Stuart v. Spademan, 772 F.2d 1185, 1191 (5th
8

Cir. 1985). However, if jurisdictional discovery has not taken place and an evidentiary hearing
on jurisdiction has not been held, the plaintiff need only make a prima facie showing that the
defendants are subject to personal jurisdiction in the forum.

See Pennington Seed Inc. v.

Produce Exchange No. 299, 457 F.3d 1334, 1344 (Fed. Cir. 2006); Elecs. for Imaging, 340 F.3d
at 1349; Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343,
1347 (Fed. Cir. 2002); Johnston v. Multidata Sys. Int’l Corp., 523 F.3d 602, 609 (Fed. Cir.
2008); see also Paz v. Brush Engineered Materials, Inc., 445 F.3d 809, 812 (5th Cir. 2006);
Wilson v. Belin, 20 F.3d 644, 647-48 (5th Cir. 1994); Guidry v. U.S. Tobacco Co., 188 F.3d 619,
625 (5th Cir. 1999). In that setting, the Court must accept as true the uncontroverted allegations
in the complaint and resolve in favor of the plaintiff any factual conflicts. Deprenyl, 297 F.3d at
1347; Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999); Bullion v. Gillespie, 895 F.2d
213, 217 (5th Cir. 1990).
If the plaintiff makes such a showing, the burden shifts to the defendant to show that the
assertion of personal jurisdiction would not be fair and reasonable under the circumstances. See
Radio Sys. Corp., 638 F.3d at 789; Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d
1356, 1363 (Fed. Cir. 2006); Inamed Corp., 249 F.3d at 1360, 1363. That factor “applies only
sparingly.” Nuance Commc’ns, Inc. v. Abbyy Software House, 626 F.3d 1222, 1231 (Fed. Cir.
2010); see Campbell Pet Co. v. Miale, 542 F.3d 879, 885 (Fed. Cir. 2008); Beverly Hills Fan Co.
v. Royal Sovereign Corp., 21 F.3d 1558, 1568 (Fed. Cir. 1994). Once the plaintiff has shown
that the defendant purposefully directed its activities at residents of the forum and that the
plaintiff’s claim arises out of or relates to those activities, the assertion of personal jurisdiction is
considered unfair and unreasonable only in “the rare situation in which the plaintiff’s interest and

9

the state’s interest in adjudicating the dispute in the forum are so attenuated that they are clearly
outweighed by the burden of subjecting the defendant to litigation within the forum.” Akro
Corp. v. Luker, 45 F.3d 1541, 1549 (Fed. Cir. 1995).
B. General Personal Jurisdiction over JetBlue
Loyalty argues that this Court has general personal jurisdiction over JetBlue.

That

contention is clearly without merit.
To be subject to general jurisdiction in a forum, a foreign corporation, i.e., a corporation
that is not incorporated or headquartered in the forum state, must engage in “continuous
corporate operations within a state” that are “so substantial and of such a nature as to justify suits
against it on causes of action arising from dealings entirely distinct from those activities.”
Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014), quoting Int’l Shoe, 326 U.S. at 318. 3 The
Supreme Court has described that test as requiring that the corporation’s “affiliations with the
State [be] so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.”
Daimler, 134 S. Ct. at 754, quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.
Ct. 2846, 2851 (2011). That means that the defendant corporation must either be headquartered
in the forum state, incorporated in the forum state, or have some equivalent presence in the state.

3

Loyalty attempts to distinguish Daimler on the ground that it dealt with a non-United
States corporation. That distinction is not viable, as Daimler did not restrict its analysis to
foreign-country corporations. While the Court addressed the “transnational context” of the case
in the last section of its opinion, see 134 S. Ct. at 762-63, it is clear that the rest of the opinion,
which includes the portions quoted here, dealt with the issue of general jurisdiction as to
corporations that were either sister-state or foreign-country corporations, and that it used the term
“foreign” to refer to both of those categories. See 134 S. Ct. at 754 (“‘[a] court may assert
general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all
claims against them when their affiliations with the State are so ‘continuous and systematic’ as to
render them essentially at home in the forum State.’”), quoting Goodyear Dunlop Tires
Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011) (alteration in original).
10

Daimler, 134 S. Ct. at 761 n.19; Goodyear, 131 S. Ct. at 2853-54; see also Johnston v. Multidata
Sys. Int’l Corp., 523 F.3d 602, 611 (5th Cir. 2008) (“This circuit has consistently imposed the
high standard set by the Supreme Court when ruling on general jurisdiction issues. . . . [W]e
emphasized that in order to confer general jurisdiction a defendant must have a business presence
in Texas. . . .

It is not enough that a corporation do business with Texas.”); see also

Helicopteros, 466 U.S. at 414-16; LSI Indus. Inc. v. Hubbell Lighting, Inc., 232 F.3d 1369, 1375
(Fed. Cir. 2000); Submersible Sys., Inc. v. Perforadora Cent., S.A. de C.V., 249 F.3d 413, 419
(5th Cir. 2001).
JetBlue has no such presence in this district. It has no flights into or out of this district; it
has no office or other physical presence in Texas; and it has no employees in this district. While
JetBlue makes sales to persons residing in the district and offers loyalty award credits to those
customers, doing business with persons in a particular district is not enough to satisfy the
requirement of general jurisdiction that the corporation’s contacts with the forum be so
continuous and systematic as to render the corporation essentially at home in the forum.

See

Daimler, 134 S. Ct. at 761-62 (general jurisdiction does not exist in a forum just because a
defendant’s has sizeable sales in that forum).
Loyalty argues that even if that proposition is true as a general matter, the volume of
business that JetBlue conducts with residents of this district is enough to subject it to the general
personal jurisdiction of this Court. However, the Supreme Court in Daimler directly addressed,
and rejected, the argument that the volume of business done within a forum is sufficient to form
the basis for general jurisdiction. The Court wrote:
the general jurisdiction inquiry does not “focu[s] solely on the magnitude of the
defendant’s in-state contacts.” General jurisdiction instead calls for an appraisal
11

of a corporation’s activities in their entirety, nationwide and worldwide. A
corporation that operates in many places can scarcely be deemed at home in all of
them. Otherwise, “at home” would be synonymous with “doing business” tests
framed before specific jurisdiction evolved in the United States. Nothing in
International Shoe and its progeny suggests that “a particular quantum of local
activity” should give a State authority over a “far larger quantum of . . . activity”
having no connection to any in-state activity.
Daimler, 134 S. Ct. at 762 n.20 (alteration and omission in original) (citations omitted).
The Supreme Court’s decision in the Helicopteros case illustrates just how far short
Loyalty’s evidence falls. In that case, the Supreme Court held that the Texas courts could not
exercise general jurisdiction over Helicol, a Colombian helicopter transportation company, in a
suit arising from a fatal helicopter crash in Peru. 466 U.S. at 418-19. The decedents' employer,
a Texas-based joint venture, had contracted with Helicol in Peru to provide transportation in
Peru. As the Supreme Court summarized the facts relevant to jurisdiction, “Helicol's contacts
with Texas consisted of 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 service from [a Texas helicopter manufacturer] for
substantial sums; and sending personnel to [the manufacturer's] facilities in Fort Worth for
training.” Id. at 416. The Court held that those contacts, although extensive, were not sufficient
to serve as a basis for the exercise of general jurisdiction. Id.
By contrast, the Supreme Court’s decision in Perkins v. Benguet Consolidated Mining
Co., 342 U.S. 437 (1952), shows how much is required in order to support a claim for general
jurisdiction against a corporation that is neither headquartered nor incorporated in the forum
state. The defendant in Perkins was a Philippines mining company that had stopped its mining
operations when Japan invaded the Philippines. The company's president relocated to Ohio,

12

where he continued to carry on the company's business from an office in that State. Within that
office, the president “kept . . . office files of the company,” “carried on . . . correspondence
relating to the business of the company,” and “drew and distributed . . . salary checks on behalf
of the company.” Id. at 448. The corporation employed two secretaries in Ohio, maintained
“two active bank accounts carrying substantial balances,” and used an Ohio bank to “act[] as
transfer agent for [its] stock.” Id. The president hosted “[s]everal directors' meetings . . . at his
office or home” in Ohio, “supervised policies dealing with the rehabilitation of the corporation's
properties in the Philippines,” and “dispatched funds to cover purchases of machinery for such
rehabilitation.” Id. Under those circumstances, the Supreme Court concluded that the president
had “carried on in Ohio a continuous and systematic supervision of the necessarily limited
wartime activities of the company.” Id. That was enough to persuade the Court that Ohio courts
could exercise general personal jurisdiction over the company, and thus adjudicate a suit against
the company that did not arise in Ohio and did not relate to the corporation’s activities there. Id.
The jurisdictional facts in this case are not as strong as the facts presented by the
plaintiffs in Helicopteros and are not even remotely as strong as the jurisdictional facts that were
present in Perkins. The best that Loyalty can do by way of an argument on general jurisdiction
is to say that some of JetBlue’s customers reside in this district and that some of those customers
earn frequent flyer miles from JetBlue. The domicile of customers of a company, however, says
nothing about whether the company has a sufficient presence in the state where those customers
are located.
Loyalty’s argument on general jurisdiction is essentially the same as the argument made
by the respondent in the Daimler case—that the Court should “approve the exercise of general

13

jurisdiction in every State in which a corporation ‘engages in a substantial, continuous, and
systematic course of business.’” Daimler, 134 S. Ct. at 761. The Supreme Court, however,
referred to that formulation as “unacceptably grasping.” The Court noted that if Daimler’s
California activities sufficed to allow the adjudication of foreign claims in California courts, “the
same global reach would presumably be available in every other State in which [Daimler’s
subsidiary’s] sales are sizable.” Id. That argument, the Court held, would be an “exorbitant
exercise[] of all-purpose jurisdiction.” Id. In sum, because there is no evidence that JetBlue is
“essentially at home” in the Eastern District of Texas, the Court rejects Loyalty’s argument that
the Court may exercise general personal jurisdiction over JetBlue.
C. Specific Personal Jurisdiction over JetBlue
Loyalty’s argument that this Court can exercise specific personal jurisdiction over
JetBlue presents a very different question. Specific jurisdiction, unlike general jurisdiction,
applies only to disputes that “arise out of or are connected with the activities within the state.”
Int’l Shoe, 326 U.S. at 319. The Supreme Court has explained that a defendant may fairly be
subjected to the jurisdiction of the courts of a forum state if 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 (citations and internal
quotation marks omitted).
After a review of the evidence pertaining to the jurisdictional question, the Court is
satisfied (1) that JetBlue has purposefully directed certain of its activities at residents of the
district—in particular, its loyalty awards program with its conversion features; and (2) that this
litigation results from alleged injuries that are related to those activities.

14

The Court also

concludes that JetBlue cannot defeat personal jurisdiction by showing that the assertion of
personal jurisdiction in this case would not comport with fair play and substantial justice. Burger
King, 471 U.S. at 472-73, 476; Campbell Pet Co., 542 F.3d at 884-85. The Court therefore holds
that it has specific personal jurisdiction over JetBlue in this case.
In its complaint, Loyalty alleges that JetBlue “has entered into agreements with partners
such as Marriott, and provides for the conversion of Marriott Rewards points to TrueBlue miles.
JetBlue provides related support services and instructions for the infringing operation of such
[award credit conversion] systems to its customers.” Case No. 2-13-cv-662, Dkt. No. 1, at 3. In
addition, the complaint alleges:
Through its actions, JetBlue has directly infringed the ’023 and ’550 Patents. In
addition, with knowledge of the ’023 and ’550 Patents at least as early as the
filing of Plaintiff’s complaint, JetBlue has actively induced others including its
customers to infringe and contributed to the infringement by others of the ’023
and ’550 Patents throughout the United States, knowing that Loyalty alleges such
activities to be infringing. JetBlue agrees and specifies with its loyalty program
partners that conversions shall occur in the manner claimed in the ’023 and ’550
Patents. JetBlue has designed, installed, operated and implemented its computer
systems to operate in an infringing manner. The infringing systems have no
substantial non-infringing uses.
Id. at 3-4.
Although JetBlue disputes those allegations and contends that it has not actively
participated in the alleged infringing activity, the Court is required to “accept as true the
uncontroverted allegations in the complaint and resolve in favor of the plaintiff any factual
conflicts posed by the affidavits.” Latshaw, 167 F.3d at 211.
JetBlue introduced evidence that although 8,943 persons with addresses in the district are
members of its TrueBlue loyalty award program, none of those members has ever used Marriott
Rewards points to obtain TrueBlue points. Case No. 2:13-662, Dkt. No. 11-3, at 2-3. Loyalty
15

has not taken factual issue with that representation. However, Loyalty points out that JetBlue’s
interrogatory responses reveal that there have been 887 instances in which a TrueBlue member
having an address in the Eastern District of Texas has converted American Express Membership
Rewards points into TrueBlue points. See id., Dkt. No. 26-3, at 7.
Notwithstanding the number of TrueBlue members who live in the Eastern District of
Texas and the number of occasions on which those customers have converted American Express
Membership Rewards points into TrueBlue points, JetBlue argues that it does not engage in
infringing activity in the Eastern District of Texas because it “does not make, use, sell, offer to
sell, or import the accused methods or systems” in the district. However, the conversions of
loyalty points that JetBlue has offered and made constitute activities that are purposefully
directed at residents of the district. Moreover, Loyalty’s claims arise from injuries relating to
JetBlue’s contacts with the district. The alleged injury suffered by Loyalty is the infringement of
its patents. That injury occurred, according to Loyalty, when the conversions of reward points
were made and recorded, and when they resulted in customers’ purchases of goods and services.
JetBlue’s acts of making the conversion process available to almost 9000 TrueBlue members
living in the Eastern District of Texas, and its conversion of American Express loyalty points on
nearly 900 occasions, is conduct that is directly related to the infringement allegations.
Loyalty’s theory of the case against JetBlue under the ’023 patent claims is that JetBlue is
a party to the agreement to convert loyalty award credits with various “commerce partners” and
that it is responsible, at least in part, for causing the infringement of the claimed method by
granting its customers award credits with JetBlue and accepting the converted award credits of
its commerce partners as payment for purchases of airline travel. Loyalty’s theory under the

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’550 patent claims is that JetBlue has created Web pages accessible by customers that allow the
customers to convert loyalty award credits with JetBlue’s commerce partners.
The allegations of infringement against JetBlue plainly relate to interactions between
JetBlue and its customers in the Eastern District of Texas.

Under Loyalty’s infringement

theories, JetBlue is responsible for acts of infringement by making it possible for its loyalty
award program members, many of whom live in the Eastern District, to convert points of its
commerce partners into TrueBlue miles.

It is thus incorrect to say, as JetBlue does, that

Loyalty’s allegations of infringement against JetBlue “have no relationship to the Eastern
District of Texas.” Case No. 2:13-cv-662, Dkt. No. 11, at 11.
JetBlue argues that Loyalty’s evidence does not show that JetBlue is responsible for any
acts of alleged infringement in this district. In the case of the conversions of American Express
Membership Awards points into TrueBlue miles, JetBlue argues that even under Loyalty’s
theory, none of the limitations of the asserted claims are performed by customers, and that if
JetBlue had performed any of the steps of the asserted claims, “such performance necessarily
would have taken place outside this District,” as JetBlue has no employees or servers in the
district. Case No. 2:13-cv-662, Dkt. No. 29, at 7. While it may be true that the agreements
between JetBlue and its commerce partners to allow transfers of loyalty award credits in
exchange for TrueBlue miles were executed outside the district and that the computers that
effectuate and record the transfers are located outside the district, the process of converting
loyalty award credits into TrueBlue miles necessarily begins with requests from the customer,
requests that are presumably sent from customers within the district, who are notified of the

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transfers when they are completed, and are allowed to purchase services from JetBlue as a result,
again presumably from their residences in the district.
JetBlue enables its customers to interact with JetBlue’s loyalty program through the use
of JetBlue’s website. Indeed Loyalty’s theory of infringement with respect to the ’550 patent is
that JetBlue infringes through web pages it has created that allow customers to convert loyalty
award credits with its commerce partners. When a defendant’s interactions with its contacts in a
forum state occur through a website, courts frequently analyze the issue of personal jurisdiction
by applying the test enunciated in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.
Supp. 1119 (W.D. Pa. 1997). Under that test, courts “examin[e] the level of interactivity and
commercial nature of the exchange of information that occurs on the Web site” to determine
whether the defendant has subjected itself to personal jurisdiction in a state or district where the
defendant’s customers receive the defendant’s messages. Id. at 1124. On one end the spectrum,
personal jurisdiction is most likely to exist where the defendant “clearly does business over the
Internet.” Id. On the other end of the spectrum are passive websites where a defendant “has
simply posted information” that customers can access. Id. In between are interactive websites,
where the existence of personal jurisdiction “is determined by examining the level of
interactivity and commercial nature of the exchange of information that occurs on the Web site.”
Id.; see also Mink v. AAAA Development LLC, 190 F.3d 333, 336 (5th Cir. 1999) (adopting the
Zippo framework in the Fifth Circuit); Maynard v. Phila. Cervical Collar Co., 18 F. App’x 814,
816-17 (Fed. Cir. 2001) (nonprecedential) (“A passive website is insufficient to establish
purposeful availment for the purpose of due process.”). This case falls at the end of the spectrum
that allows for the exercise of personal jurisdiction. The allegedly infringing activity involves

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customers who purchase air travel on JetBlue with converted loyalty miles.

When those

purchases occur through JetBlue’s website, they clearly constitute “do[ing] business over the
Internet.” Furthermore, the conversion of American Express Membership Rewards into True
Blue points is itself a commercial transaction that constitutes “do[ing] business over the
Internet.”

The exercise of jurisdiction over JetBlue in this case is therefore proper under the

Zippo test. See also Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 452 (3d Cir. 2003) (“In
cases where the defendant is clearly doing business through its web site in the forum state, and
where the claim relates to or arises out of use of the web site, the Zippo court held that personal
jurisdiction exists.”); Autobytel, Inc. v. Insweb Corp, 2009 WL 901482, at *2-3 (E.D. Tex. Mar.
31, 2009) (personal jurisdiction existed where Texas residents could use defendant’s website to
contact auto dealers in Texas, submit financial information, and apply for a loan); AdvanceMe,
Inc. v. Rapidpay LLC, 450 F. Supp. 2d 669, 673-74 (E.D. Tex. 2006) (accused infringer’s
website allowed potential customers in Texas to receive state-specific quotes, apply for the
allegedly infringing services, and receive those services through the website); CoolSavings.com,
Inc. v. IQ.Commerce Corp., 53 F. Supp. 2d 1000, 1001-03 & n.3 (N.D. Ill. 1999) (noting, in a
case in which the alleged contact with the forum state occurred through the defendant’s operation
of its allegedly infringing interactive website, that “a case in which the contact itself is the wrong
is a stronger case for jurisdiction than one in which the contact merely relates to the wrong”).
Based on the foregoing analysis, the Court is satisfied that Loyalty has met the first two
elements of the showing required for specific jurisdiction: (1) that JetBlue has purposefully
directed its loyalty awards program and the conversion feature of that program at residents of
this district and (2) that this litigation results from injuries related to those activities.

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The defendant has the burden of showing that the third element—the “fair play and
substantial justice” factor—requires dismissal. See Autogenomics, Inc. v. Oxford Gene Tech.
Ltd., 566 F.3d 1012, 1018 (Fed. Cir. 2009); Breckenridge Pharm., 444 F.3d at 1363. Moreover,
the Supreme Court and the Federal Circuit have made clear that the “fair play and substantial
justice” factor is to be applied “sparingly” and only in extreme cases. See Burger King, 471 U.S.
at 477 (“[W]here a defendant who purposefully has directed his activities at forum residents
seeks to defeat jurisdiction, he must present a compelling case that the presence of some other
considerations would render jurisdiction unreasonable.” (emphasis added)); Campbell Pet Co.,
542 F.3d at 885 (rare situations); Elecs. for Imaging, 340 F.3d at 1351-52; Deprenyl, 297 F.3d at
1355-56; Inamed Corp., 249 F.3d at 1363.

Such cases, in which otherwise constitutional

personal jurisdiction is defeated, “are limited to the rare situation in which the plaintiff's interest
and the state's interest in adjudicating the dispute in the forum are so attenuated that they are
clearly outweighed by the burden of subjecting the defendant to litigation within the forum.”
Beverly Hills Fan, 21 F.3d at 1568. The Court is not persuaded that JetBlue has met its burden
to show that this is a “compelling” case in which “fair play and substantial justice” require a
finding that personal jurisdiction over it does not exist.
Determining whether JetBlue has demonstrated that the exercise of jurisdiction would be
so unreasonable as to violate fair play and substantial justice requires consideration of several
factors, including (1) the burden on the defendant, (2) the interests of the forum state, (3) the
plaintiff's interest in obtaining relief, (4) the interstate judicial system's interest in obtaining the
most efficient resolution of controversies, and (5) the shared interest of the several states in

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furthering fundamental substantive social policies. Deprenyl, 297 F.3d at 1355; Inamed, 249
F.3d at 1363.
It is no doubt burdensome for JetBlue to have to defend this action in Texas rather than in
New York, the location of its headquarters, or even Delaware, where it is incorporated. Other
factors, however, cut the other way. As for the interests of the forum state, the Federal Circuit
has recognized that a state has a significant interest in discouraging injuries that occur within the
state, including patent infringement. Beverly Hills Fan, 21 F.3d at 1568, citing Keeton v. Hustler
Magazine, Inc., 465 U.S. 770, 776 (1984). Texas’s interest in preventing infringement by
JetBlue is sufficient, in light of the volume of alleged infringing acts, to make the state’s interest
a significant factor in the fairness inquiry. Moreover, the several states have a “shared interest”
in preventing infringement, which bears on the “fair play” factor and supports the exercise of
personal jurisdiction in one such state.
With respect to its activities in Texas, JetBlue is in the same situation as many other
national corporations that sell products or services nationwide. Those companies are subject to
specific jurisdiction in any district in which they sell their infringing products. The volume of
business that JetBlue does with residents of this district, and the number of district residents who
are members of JetBlue’s loyalty rewards program and have used the conversion feature of that
program bear heavily on the “fair play and substantial justice” factor. This is not a case in which
a single isolated sale or use of a product is being employed to obtain personal jurisdiction over a
defendant that otherwise has had no business relationship with the forum, and in which it would
be perverse to impose on the defendant the burden of defending in a foreign forum based on so
little contact there.

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Beyond that, the interest of the plaintiff in obtaining relief and the interest of the judicial
system in obtaining the most efficient resolution of controversies weigh against dismissal of
JetBlue for improper venue based on lack of personal jurisdiction. Some of the factors bearing
on JetBlue’s personal jurisdiction argument apply to several of the other defendant airlines in this
case. If the Court were to conclude that it would be unfair to exercise personal jurisdiction over
JetBlue, a similar argument could be made with respect to several of the other defendant airlines
as well. The result of ruling in JetBlue’s favor on “fair play” grounds would thus be to divide
this case into several parts and among several districts, imposing a substantial burden not only on
the plaintiff but on other district courts. The Court concludes that the plaintiff’s interests and the
interest of judicial economy favor retaining jurisdiction over JetBlue in this forum, and that it is
not unfair to exercise jurisdiction over JetBlue in a district where it has engaged in substantial
business activity, including activity relating to the alleged infringement. Accordingly, the Court
concludes that JetBlue has not met its burden to show that this is one of those rare cases in which
the defendant has met its burden of showing that the action should be dismissed for lack of
personal jurisdiction based on the “fair play and substantial justice” factor.
The motion to dismiss is DENIED.
IT IS SO ORDERED.
SIGNED this 2d day of September, 2014.

_____________________________
WILLIAM C. BRYSON
UNITED STATES CIRCUIT JUDGE
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