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applying Federal Circuit law to trademark infringement and unfair competition claims that arise out of the same facts as plaintiff's patent claims
Summary of this case from Nana Joes, LLC v. MicroBiotic Health Foods, Inc.Opinion
Civil Action No. 04-2417, Section I/1.
March 4, 2005
ORDER AND REASONS
This matter is before the Court pursuant to a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) and improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure filed on behalf of defendant, Bill Ferrell Company. Alternatively, defendant requests a transfer of this action to the United States District Court for the Central District of California. For the following reasons, defendant's motion to dismiss pursuant to Rules 12(b)(2) and 12(b)(3) is DENIED. Defendant's motion to transfer this action is also DENIED.
Background
Parti-Line International, LLC ("Parti-Line"), a Louisiana limited liability company, promotes, manufactures and sells various confetti and confetti-related products. In June 2002, Parti-Line acquired certain confetti-related intellectual property assets when it purchased Flutter Fetti, Inc. ("Flutter-Fetti"). Among these assets were five United States patents and two registered trademarks. Before the purchase of these assets, Parti-Line alleges that Flutter-Fetti had an oral royalty agreement with defendant Bill Ferrell Company ("BFC") which provided for a fifteen percent payment on all products which BFC manufactured that were covered by Flutter-Fetti patents. Parti-Line further alleges that BFC initially paid royalties to Flutter-Fetti, but after Parti-Line purchased Flutter-Fetti, BFC refused to pay royalties due and refused to stop promoting and selling "licensed products." Parti-Line contends that BFC has manufactured and/or sold products that infringe on patents and trademarks acquired by Parti-Line from Flutter-Fetti.On August 23, 2004, Parti-Line filed a complaint alleging patent and trademark infringement as well as violations of the Lanham Act and Louisiana unfair competition laws. On October 19, 2004, BFC filed this motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b) (2) of the Federal Rules of Civil Procedure. BFC also alleges improper venue pursuant to Rule 12(b)(3) or, in the alternative, requests transfer to the Central District of California pursuant to 28 U.S.C. § 1404(a).
Parti-Line asserts claims for false advertising and unfair competition pursuant to the § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).
Rec. Doc. No. 1. La.R.S. Ann. 51:1409(A).
Rec. Doc. No. 4.
In support of its motion to dismiss, BFC argues: (1) that it does not have the requisite minimum contacts with this forum to justify the exercise of personal jurisdiction; (2) that it has never "purposefully availed" itself of the privilege of conducting business in this forum; (3) that any exercise of personal jurisdiction over it would be unreasonable and unfair; (4) that Parti-Line's cause of action does not arise out of or result from the limited contacts BFC has had with this forum; and (5) that any exercise of personal jurisdiction would offend traditional notions of fair play and substantial justice.
Rec. Doc. No. 4.
Parti-Line contends that two recent Federal Circuit Court of Appeals cases establish that personal jurisdiction lies when a defendant ships products to a specific forum and sells that product to customers in that forum. Parti-Line argues that BFC possesses the requisite "minimum contacts" with this forum required by the due process clause of the United States Constitution. Furthermore, Parti-Line argues that BFC is subject to this Court's personal jurisdiction because BFC should reasonably have anticipated being haled into this forum because it made direct sales of allegedly infringing products to Louisiana customers.
Rec. Doc. No. 7.
Parti-Line contends that BFC's activities with the forum are "continuous and systematic." The Court does not reach the issue of general personal jurisdiction in view of the finding of specific personal jurisdiction.
Choice of Law and Personal Jurisdiction
When deciding a personal jurisdiction issue where a patent claim is asserted, this Court applies the law of the Federal Circuit Court of Appeals rather than Fifth Circuit law. See Hockerson-Halberstadt, Inc. v. Costco Wholesale Corp., 93 F. Supp. 2d 738, 741 (E.D. La. 2000) (citing Amana Refrigeration Inc. v. Quadlux, Inc., 172 F.3d 852 (Fed. Cir. 1999)). With respect to the personal jurisdiction issue as to Parti-Line's other claims, the choice-of-law question is less clear. BFC contends that the personal jurisdiction law should be bifurcated, asserting that the Court should apply Federal Circuit law to the patent claims and the law of this Court's regional circuit, i.e. the Fifth Circuit, to the non-patent claims. Parti-Line argues that Federal Circuit law applies to all claims.The Federal Circuit has explained that the general rule is for district courts to apply Federal Circuit law to patent claims and regional circuit law to non-patent claims. Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 856 (Fed. Cir. 1999). However, the Federal Circuit has also established that when claims "go hand-in-hand with patent infringement claims," Federal Circuit law applies to both the patent and non-patent claims. 3D Systems, Inc. v. Aarotech Laboratories, Inc., 160 F.3d 1373, 1377 (Fed. Cir. 1998) (applying the Federal Circuit's personal jurisdiction law to patent infringement claims, trade libel and unfair competition claims); Electronics For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348 (Fed Cir. 2003) (stating "[o]ur prior decisions make clear that where the personal jurisdictional inquiry is 'intimately involved with the substance of the patent laws,' we apply Federal Circuit law" to the non-patent claims as well as the patent claims); cf. Quick Technologies, Inc. v. Sage Group PLC, 313 F.3d 338, 343-46 (5th Cir. 2002) (applying Fifth Circuit personal jurisdiction law to trademark infringement and unfair competition claims when no patent claims are present).
Parti-Line's trademark infringement and unfair competition claims arise out of the same facts as and are intimately related to its patent claim. See LSI Industries Inc. v. Hubbell Lighting, Inc., 232 F.3d 1369, 1371 (Fed. Cir. 2000) (applying Federal Circuit law to personal jurisdiction issue for patent and trademark claims). Therefore, the Court applies Federal Circuit law in resolving the personal jurisdiction issue with respect to Parti-Line's patent and non-patent claims.
Both the Federal Circuit and the Fifth Circuit require a plaintiff to make a "prima facie" showing that defendants are subject to personal jurisdiction in the absence of an evidentiary hearing. Electronics for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003); Revell v. Lidov, 317 F.3d 467, 469 (5th Cir. 2002); Doddy v. Oxy USA, Inc., 101 F.3d 448, 460 (5th Cir. 1996). Furthermore, the pleadings and affidavits are to be construed in the light most favorable to the plaintiff. Silent Drive, Inc. v. Strong Industries, Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003).
The personal jurisdiction analysis is virtually identical in both circuits, in large part because the due process inquiry is governed by several landmark United States Supreme Court decisions. In this case, under either circuits' standard, plaintiff has met its burden of establishing a prima facie case that this Court's exercise of specific personal jurisdiction over defendant BFC is proper for all claims.
Generally, a district court may exercise personal jurisdiction over a defendant if (1) the long-arm statute of the forum state confers personal jurisdiction over that defendant; and (2) exercise of such jurisdiction by the forum state is consistent with due process under the United States Constitution. See Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1359 (Fed. Cir. 2001). In this case, the parties agree that Louisiana's long-arm statute extends to the boundaries of constitutional due process. See La.Rev.Stat. Ann. § 13:3201(B). Because Louisiana's long arm statute provides that a court may exercise jurisdiction over a nonresident defendant to the full extent provided by the due process clause of the United States Constitution, the first prong collapses into the second. Therefore, the sole issue before this Court is whether constitutional due process permits BFC to be haled into court in the Eastern District of Louisiana.
Louisiana's personal jurisdiction statute states in pertinent part: "[A] court of this state may exercise personal jurisdiction over a nonresident on any basis consistent with the constitution of this state and of the Constitution of the United States." La.Rev.Stat. Ann. § 13:3201(B).
The Federal Circuit has interpreted the due process clause to permit a court to exercise personal jurisdiction "over nonresident defendants of a forum state . . . if the nonresident defendants have certain minimum contacts with the forum such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Electronics for Imaging, Inc., 340 F.3d at 1349 (internal quotations omitted) (quoting Int'l Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945))).
Minimum contacts can be established either through contacts sufficient to assert specific jurisdiction or contacts sufficient to assert general jurisdiction. Electronics for Imaging, Inc., 340 F.3d at 1349-50. "Specific jurisdiction 'arises out of' or 'relates to' the cause of action even if those contacts are 'isolated and sporadic.'" LSI Industries Inc. v. Hubbell Lighting, Inc., 232 F.3d 1369, 1375 (Fed. Cir. 2000) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S. Ct. 2174, 2183-84, 85 L. Ed. 2d 528 (1985)). General jurisdiction exists when the litigation does not necessarily arise out of or relate to the nonresident defendant's activities with the forum state, but when the defendant's contacts with the forum state are substantial, continuous, and systematic. Id. (quoting Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 416, 104 S. Ct. 1868, 1873, 80 L. Ed. 2d 404 (1984)).
In Akro Corp. v. Luker, the Federal Circuit set forth a three-part test for determining whether the exercise of specific jurisdiction comports with due process: (1) whether the defendant purposefully directed its activities toward the forum state or purposefully availed itself of the privilege of conducting activities therein; (2) whether the cause of action arises out of or relates to those activities; and (3) whether the exercise of personal jurisdiction is reasonable and fair. Akro Corp. v. Luker, 45 F.3d 1541, 1545-46 (Fed. Cir. 1995).
1. Purposeful Availment
The Court finds that Parti-Line has sufficiently carried its burden with regard to the first prong of the Akro test. Simply put, the minimum contacts prong is satisfied by actions, or even just a single act, by which the nonresident defendant purposefully avails himself of the privilege of conducting business within the forum state. Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998) ("even a single act can support jurisdiction, so long as it creates a substantial connection with the forum, as opposed to an attenuated affiliation"); see Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1565 (Fed. Cir. 1994).
BFC argues that it has not purposefully availed itself of the privilege of conducting business in Louisiana and that all of its contacts with the state are merely random and fortuitous. BFC supports this argument by claiming that the company has (1) never owned, leased or rented property in Louisiana; (2) never had any employees or agents in this state; (3) never operated any warehouses or had inventory in this state; and (4) never registered to do business in Louisiana. While these factors might weigh against the Court exercising general personal jurisdiction over the defendant, specific jurisdiction can attach after a single event as long as the cause of action arises out of or relates to that event. See Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998).
Rec. Doc. No. 4.
Rec. Doc. No. 4.
BFC also argues that the "stream of commerce" theory does not support the exercise of personal jurisdiction in this case, essentially because BFC did not use a distribution channel or middleman to distribute its allegedly infringing products in Louisiana. However, BFC directly sold its products to residents of Louisiana. Therefore, this Court need not rely on the stream of commerce theory in exercising personal jurisdiction over defendant. When a company directly sells its products in a particular forum, the company can reasonably foresee being haled into court in that forum. See Intel Corp. v. Broadcom Corp., 167 F. Supp. 2d. 692, 705 (D. Del. 2001) (citing Burger King v. Rudzewicz, 471 U.S. 477, 483, 105 S. Ct. 2174, 2185, 85 L. Ed. 2d 528 (1985)); see also Osteotech, Inc. v. GenSci Regeneration Sciences, Inc., 6 F. Supp. 2d. 349, 354 (D.N.J. 1998) ("where a defendant infringer is shown to have sold the allegedly infringing product in the forum state, the forum may exercise personal jurisdiction over the defendant"). In addition, other district courts have held that the voluntary, direct sale of even one product to a consumer of a state can satisfy the requirements for exercising specific personal jurisdiction. See Maxwell Chase Technologies, L.L.C. v. KMB Produce, Inc., 79 F. Supp. 2d 1364, 1372-73 (N.D. Ga. 1999) (citing Osteotech, Inc., 6 F. Supp. 2d at 354; Beverly Hills Fan, 21 F.3d at 1570-71; North American Philips Corp., 35 F.3d at 1578-79).
The stream of commerce theory is one way that a court can justify exercising jurisdiction over a nonresident defendant. See Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558 (Fed. Cir. 1994) (discussing World-Wide Volkswagen Corp. v. Wooden, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980)). In Beverly Hills Fan, the Federal Circuit explained that the presence of an established distribution channel is a significant factor in many cases that involve the stream of commerce theory. Id. at 1565 n. 15. The Beverly Hills Fan court found the exercise of jurisdiction to comport with due process because "defendants, acting in consort, placed the accused [product] in the stream of commerce, they knew the likely destination of the products, and their conduct and connections with the forum state were such that they should reasonably have anticipated being brought into court there." Id. at 1566. This Court need not rely on the "unpredictable current or eddies" of the stream of commerce because BFC directly delivered the accused products to this district. See Asahi Metal Ind. Co. v. Superior Ct. of Calif., Solano City, 480 U.S. 102, 117, 107 S. Ct. 1026, 94 L.Ed. 2d 92 (1987).
Rec. Doc. Nos. 8 and 21.
Parti-Line submits five "work orders" it received during discovery. These work orders clearly show that BFC entered into numerous sales contracts (over the course of nearly three years) with residents of the Eastern District of Louisiana to sell its goods. Far from being a mere "random" occurrence, when BFC directly sold its products to Louisiana consumers on multiple occasions, it purposefully availed itself of the privilege of conducting business in Louisiana and it established the requisite "minimum contacts" with this forum. The Federal Circuit has held "that to sell an infringing article to a buyer in [a state] is to commit a tort there (though not necessarily only there)." North American Philips Corp. v. American Vending Sales, Inc., 35 F.3d 1576, 1579 (Fed. Cir. 1994). Accordingly, the Court finds that Parti-Line has successfully met its burden of proving the first prong of the Akro test.
Rec. Doc. No. 21.
BFC argues at length that its "passive" website should not give rise to personal jurisdiction in this forum even though it can be accessed by Louisiana residents. Because the Court finds BFC has sufficient minimum, purposeful contacts with this forum independent of the website's existence, the Court does not consider whether BFC's website could serve as the basis for exercising personal jurisdiction.
2. "Arising out of"
The second prong of the Akro test requires that the cause of action "arise out of or result from" the defendant's forum-related contacts. Akro Corp., 45 F.3d at 1547. BFC contends that fewer than $10,000 of its total confetti sales have been delivered to consumers in Louisiana and, accordingly, plaintiff's causes of action do not arise out of or result from the defendant's forum-related minimum contacts.
Rec. Doc. No. 15.
BFC also relies on a recent patent infringement case originating in this district, Hockerson-Halberstadt, Inc. v. Costco Wholesale Corp., 2000 WL 726888, at *2 (E.D. La. June 5, 2000), aff'd sub nom Hockerson-Halberstadt, Inc. v. Propet USA, Inc., 62 Fed. Appx. 322, 337 (Fed. Cir. 2003). In Hockerson-Halberstadt, the district court found that sales to this district which accounted for less than .00008 percent of the defendant's total sales were insufficient to support the exercise of general personal jurisdiction. However, this case differs in an important respect: the analysis here pertains to specific personal jurisdiction, not general personal jurisdiction. Simply put, the percentage of total revenue that BFC derived from the allegedly infringing sales is irrelevant to this Court's analysis of whether specific personal jurisdiction exists.
Because the causes of action did not arise out of sales to consumers, specific jurisdiction was not available in Hockerson-Halberstadt, 2000 WL 726888, at *2 (E.D. La. June 5, 2000).
Patent infringement occurs when someone "without authority makes, uses, offers to sell or sells any patented invention." 35 U.S.C. § 271(a). BFC concedes that it sold some products in Louisiana that allegedly infringe on Parti-Line's patents and/or trademarks. Because BFC purposefully shipped products which are allegedly infringing into this forum, all of which gives rise to the patent, trademark and unfair competition claims, the Court finds that the second prong of the Akro test has been satisfied. 3. Traditional Notions of Fair Play and Substantial Justice
Rec. Doc. No. 4, exhibit A, affidavit of Bill Ferrell, ¶ 15.
Although not addressed by the parties, the Court notes that it would have supplemental personal jurisdiction over plaintiff's non-patent claims. See Silent Drive, Inc. v. Strong Industries, Inc., 326 F.3d 1194, 1206 (Fed. Cir. 2003) (stating that the supplemental jurisdiction statute "confers supplemental jurisdiction with respect to both subject matter and personal jurisdiction where the 'same case or controversy' requirement is satisfied").
Because Parti-Line has established that BFC purposefully availed itself of the privilege of doing business in Louisiana and because plaintiff's claims arise out of those contacts, the Court turns to the final prong of the due process inquiry, i.e., the reasonableness and fairness of exercising personal jurisdiction over the defendant. The burden is on the defendant to show that the exercise of personal jurisdiction would be unreasonable, and the defendant must present a "compelling case" that the presence of other considerations would render jurisdiction unreasonable. Akro, 45 F.3d at 1549; see Beverly Hills Fan Co., 21 F.3d at 1568 (describing such a compelling case as "rare"). In this case, defendant has failed to present such a "compelling case."
The United States Supreme Court has stated that a court must evaluate the following factors in discerning the reasonableness of exercising personal jurisdiction: (1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interest of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies. Asahi Metal Ind. Co. v. Superior Ct. of Calif., Solano City, 480 U.S. 102, 113-14, 107 S. Ct. 1026, 1033, 94 L.Ed. 2d 92 (1987). Applying these factors, the Court finds the exercise of personal jurisdiction over BFC to be both reasonable and fair.
First, BFC contends that requiring its representatives to travel to Louisiana to litigate this case would pose a burden on the company. However, in Beverly Hills Fan Company, the Federal Circuit found that the inconvenience of requiring a Chinese defendant to litigate a claim in Virginia was not "sufficiently compelling" to outweigh the plaintiff's interests. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1569 (Fed. Cir. 1994). Modern progress in communications and transportation has made the defense of a lawsuit in a foreign forum less burdensome than it might have been in the past. See id. (citing World-Wide Volkswagen, 444 U.S. at 298, 100 S. Ct. at 567). Consequently, any burden that travel might place on BFC is not sufficiently onerous in this case to preclude the exercise of personal jurisdiction.
BFC further contends that Louisiana has "no interest in this dispute as to [BFC], because [BFC] carries on no business activities here." Ignoring the factual inaccuracy of this statement with respect to BFC's "business activities," the State of Louisiana does have an interest in protecting the intellectual property rights of its business entities. Parti-Line, a limited liability company registered in Louisiana and a resident of this district, owns the intellectual property assets that BFC has allegedly misappropriated. Furthermore, plaintiff alleges that the infringing sales occurred in Louisiana. The Federal Circuit has expressly held that in patent cases, the situs of a patent infringement injury is the location "at which the infringing activity directly impacts on the interests of the patentee." Beverly Hills Fan, 21 F.3d at 1571. Here, that situs is the Eastern District of Louisiana. The Federal Circuit has also noted that a state "clearly has an interest in prohibiting the importation of infringing articles into its territory and regulating the conduct of the distributors with respect to the subsequent resales. North American Philips Corp. v. American Vending Sales, Inc., 35 F.3d 1576, 1580 (Fed. Cir. 1994).
Contrary to BFC's claims, Parti-Line has more than a "nominal" interest in litigating this case in Louisiana. Parti-Line has its principal (and only) place of business in New Orleans and it has no connection with California. While Parti-Line's attorneys might have to engage in limited travel to California to conduct discovery, this burden is far outweighed by the convenience of litigating the dispute in this forum. Furthermore, this Court does not find that litigating this case in California would substantially further the judicial system's interest in efficiency.
Finally, in light of the fact that the party alleged to be injured is a citizen of Louisiana and that plaintiff has sued, in part, for violations of Louisiana's unfair competition statute, the litigation has a greater bearing on Louisiana's substantive social policy than California's. See Gundle Lining Construction Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 207 (5th Cir. 1996) (citing Asahi, 480 U.S. at 113, 107 S. Ct. at 1033).
For the above reasons, the Court concludes that exercising specific personal jurisdiction over BFC is reasonable and comports with due process.
Venue
BFC also contends that venue is improper in this district. In light of the above personal jurisdiction analysis, however, this claim can be quickly dismissed because the issue of venue is subsumed by the personal jurisdiction issue. See North American Philips Corp. v. American Vending Sales, Inc., 35 F.3d 1576, 1577 n. 1 (Fed. Cir. 1994) (citing VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990)).
Pursuant to 28 U.S.C. §§ 1391(b) (2), 1400(b), venue is proper in a judicial district where the defendant resides. For purposes of venue, a corporate defendant "shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction." 28 U.S.C. § 1391(c); see also VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1580 (Fed. Cir. 1990) (applying § 1391(c) to § 1400(b)). Therefore, BFC, a corporation, resides in this judicial district because the Court has determined that personal jurisdiction exists over BFC with respect to Parti-Line's claims. Accordingly, venue properly lies in this district.
Section 1391(b) provides that a civil action not founded solely on diversity of citizenship may be brought only in:
(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.
Section 1400(b) also provides that "[a]ny civil action for patent infringement 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) (emphasis added).
Transfer of Venue
Alternatively, BFC requests a transfer of this action to the United States District Court for the Central District of California pursuant to 28 U.S.C. § 1404(a). Section 1404(a) provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district of division where it might have been brought."
Defendant contends that transfer "would be appropriate," but provides no basis for transferring this case to another district. Plaintiff summarily opposes transfer. Plaintiff and its witnesses are located in Louisiana. Furthermore, plaintiff asserts a Louisiana law cause of action for unfair competition.
District courts have broad discretion in deciding whether to order a transfer. Mills v. Beech Aircraft Corp., 886 F.2d 758, 761 (5th Cir. 1989). Exercising its sound discretion, for the reasons stated, this Court declines the invitation to order a transfer of this case to the Central District of California. See Caldwell v. Palmetto State Sav. Bank, 811 F.2d 916, 919 (5th Cir. 1987).
Conclusion
For the above and foregoing reasons,
IT IS ORDERED that defendant's motion to dismiss pursuant to Rules 12(b)(2) and 12(b)(3) is DENIED. IT IS FURTHER ORDERED that defendant's motion to transfer this case pursuant to 28 U.S.C. § 1404 is also DENIED.