Opinion
Civil No. 04-2710 ADM/AJB.
January 26, 2005
David A. James, Esq., and David T. Schultz, Esq., Halleland, Lewis, Nilan Johnson. P.A., Minneapolis, MN, appeared for and on behalf of Plaintiff.
Thomas J. Leach, III, Esq., and Jeffer Ali, Esq., Merchant Gould P.C., Minneapolis, MN, appeared for and on behalf of Defendants.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On January 5, 2005 oral argument was heard before the undersigned United States District Judge on Brad R. Wettstein ("Wettstein") and James Hassler's ("Hassler") (collectively "Defendants") Motion to Dismiss for Lack of Personal Jurisdiction [Docket No. 11]. Full Circle International, Inc.'s ("Full Circle" or "Plaintiff") Complaint [Docket No. 1] seeks a declaratory judgment that its "Radius 360°" drywall sanding tool does not infringe U.S. Patent No. 6,659,852 ("the '852 Patent"). For the reasons set forth below, Defendants' Motion to Dismiss for Lack of Personal Jurisdiction is granted and all claims against Wettstein and Hassler are dismissed without prejudice.
Steve Dodds ("Dodds") did not answer Plaintiff's Complaint and is not a party to the instant motion.
II. BACKGROUND
Wettstein and Hassler are California residents who, with Dodds, invented a sanding tool for preparing drywall surfaces for painting. Wettstein Decl. [Docket No. 23] ¶ 3; Hassler Decl. [Docket No. 24] ¶ 3. The three Defendants entered into an oral partnership, the Wettstein Hassler Partnership (the "Partnership"), in order to patent and exploit their invention. Wettstein Decl. ¶¶ 3, 4; Hassler Decl. ¶¶ 3, 4. The U.S. Patent and Trademark Office ("PTO") granted Wettstein, Hassler and Dodd's application and issued the '852 Patent. Wettstein Decl.¶ 4; Hassler Decl. ¶ 4. Defendants agree the Partnership currently owns the '852 Patent. Wettstein Decl. ¶ 4; Hassler Decl. ¶ 4.
Wettstein and Hassler allege Dodds renounced his membership in the Partnership before the PTO issued the '852 Patent. A jury trial is currently pending in California state court to resolve whether Dodds has any ownership interest in the '852 Patent. See Leach Decl. [Docket No. 22] Exs. A-C. Resolution of Dodds' interest in the patent is irrelevant to this motion.
Full Circle is a Minnesota corporation with its principal place of business in Burnsville, Minnesota. Annis Aff. [Docket No. 27] ¶ 1. In April 2004, Kent Annis, the President of Full Circle, attended a trade show in Las Vegas, Nevada. Id. ¶¶ 1, 2. At the trade show, Wettstein and Hassler showed Annis their product and a copy of the '852 Patent and alleged Full Circle's Radius 360° drywall sanding tool infringed on their patent. Id. ¶¶ 4-6. Wettstein and Hassler stated they intended to sell or license their product but were not interested in manufacturing it themselves. Id. ¶ 7. They said they were negotiating with Wallboard Tool Co. Inc. ("Wallboard") to manufacture their product. Annis Decl. ¶ 9. Wallboard is a California corporation with its principal place of business in California, that sells products in Minnesota, through retailers such as Home Depot and Sherwin-Williams. Id. ¶ 9; Second Leach Decl. [Docket No. 29] ¶ 2, Ex. A. Later, Hassler returned to Full Circle's booth and asked Mike Collins ("Collins"), a Full Circle employee, for a Radius 360° tool. Annis Aff ¶ 10. Collins refused the request. Id.
Wettstein and Hassler also solicited a number of other companies present at the Las Vegas trade show to buy or license their patented product. Annis Aff. ¶ 11. Several companies incorporated in Minnesota, such as Warner Manufacturing, or who do business in Minnesota but are incorporated in another state, were present at the show. Id.
On April 20, 2004, the Partnership, through its attorney Dean Broyles ("Broyles"), sent a cease-and-desist letter to Full Circle in Minnesota. April 20, 2004 letter (Complaint Ex. B). The letter acknowledged Wettstein and Hassler's meeting with Annis in Las Vegas and asserted that Full Circle's Radius 360° infringed on the '852 Patent. Id. The letter demanded Full Circle "immediately cease and desist from manufacturing, marketing or selling the Radius 360." Id. Furthermore, the letter insisted Full Circle provide Broyles' office "with a complete and detailed accounting of the number and price of any and all Radius 360 units manufactured and/or ordered and/or sold by your company." Id. The letter warned that, having received notice of the '852 Patent, any future infringements would "be considered intentional, which could subject [Full Circle] to substantial additional damages." Id. Finally, the letter suggested Wettstein and Hassler would be willing to enter into some unspecified future partnership with Full Circle. Id. The letter asked for a substantive response from Full Circle's Board of Directors by April 30, 2004. Id.
Through its counsel, Full Circle responded to Broyles in a letter dated April 25, 2004. April 25, 2004 letter (Complaint Ex. C). The response stated that Full Circle was "in the process of reviewing the file history of the '852 Patent in view of [Full Circle's] product" and would respond if Wettstein and Hassler's allegations proved true. Id. On May 12, 2004, Broyles sent a second cease-and-desist letter restating Wettstein and Hassler's demands and requesting Full Circle's attorney contact him to discuss the matter. May 12, 2004 letter (Complaint Ex. D).
Sometime after the Las Vegas trade show, Collins visited an Ames Tools, Supplies Services ("Ames") store, located in Edina, Minnesota, on behalf of Full Circle. Annis Aff. ¶¶ 13-14. Ames, a corporation whose principal place of business is Duluth, Georgia, was also present at the Las Vegas trade show. Id. ¶ 12; Second Leach Decl. ¶ 3, Ex. B. During his visit, an Ames salesperson asked Collins about Wettstein and Hassler and their product. Annis Aff. ¶ 14. Collins had not previously mentioned anything about Wettstein, Hassler, or their product to Ames. Id.
On May 18, 2004, Full Circle filed a complaint seeking a declaratory judgment that the Radius 360° did not infringe on the '852 Patent. Defendants move to dismiss on three grounds. First, Defendants contend that insufficient contacts exist to support personal jurisdiction in Minnesota. Second, Defendants claim because Plaintiff's Complaint fails to name the owner of the '852 Patent, the Partnership, the suit should be dismissed for insufficient process. Finally, Defendants argue the suit should be dismissed because the Court lacks personal jurisdiction over Dodds, an indispensable party.
A. Standard of Review
District courts apply the law of the Federal Circuit, rather than that of regional circuits, to determine whether personal jurisdiction is appropriate in patent infringement cases. Red Wing Shoe Co., Inc. v. Hockerson-Halbertstadt, Inc., 148 F.3d 1355, 1358 (Fed. Cir. 1998). This choice of law also applies to personal jurisdiction in declaratory judgment actions when the patentee is the defendant. Id. When personal jurisdiction is based on affidavits and other written materials, rather than an evidentiary hearing, a plaintiff need only make a prima facie showing that defendants are subject to personal jurisdiction.Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343, 1347 (Fed. Cir. 2002). In considering a motion to dismiss, the facts alleged in the complaint must be accepted as true and any factual conflicts must be resolved in the plaintiff's favor. Id.
B. Personal Jurisdiction
Under the Due Process Clause of the United States Constitution, a party may be subject to either general or specific jurisdiction. Under general jurisdiction, the exercise of jurisdiction is proper where the defendant has continuous and systematic contacts with the forum state, even if those contacts are unrelated to the cause of action. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984). Neither party contends Defendants are subject to general jurisdiction in Minnesota. Instead, Full Circle claims Wettstein and Hassler's various contacts and activities make them subject to specific jurisdiction in Minnesota.
Generally, specific jurisdiction may be exercised over a non-consenting defendant outside the boundaries of the forum if: (1) the exercise of jurisdiction is permitted by the forum state's long-arm statute; and (2) the exercise of jurisdiction by the courts of the forum state comports with the Due Process Clause of the United States Constitution. See Genetic Implant Sys., Inc. v. Core-Vent Corp., 123 F.3d 1455, 1458 (Fed. Cir. 1997) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-76 (1985)). The Minnesota Supreme Court has interpreted the state's long-arm statute to "extend the personal jurisdiction of Minnesota courts as far as the Due Process Clause of the federal constitution allows." Valspar Corp v. Lukken Color Corp., 495 N.W.2d 408, 410 (Minn. 1992). As a result, the two-step inquiry collapses into the single question of whether jurisdiction comports with due process. Red Wing, 148 F.3d at 1358.
The Federal Circuit has promulgated a three factor test to determine whether asserting jurisdiction over an out-of-state defendant comports with due process: (1) whether the defendant "purposefully directed" its activities at residents of the forum; (2) whether the claim "arises out of or relates to the defendant's activities with the forum;" and (3) whether assertion of personal jurisdiction is "reasonable and fair." Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed Cir. 2001) (quoting Akro Corp. v. Luker, 45 F.3d 1541, 1545-46 (Fed. Cir. 1995)). Should the plaintiff meet the burden of establishing minimum contacts, defendants must prove that the exercise of jurisdiction is unreasonable. Akro, 45 F.3d at 1546.
The first two factors correspond with the "minimum contacts" prong of the International Shoe analysis, and the third factor corresponds with the "fair play and substantial justice" prong of the analysis. See International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); see also Akro, 45 F.3d at 1546.
1. Specific Jurisdiction Analysis
Full Circle argues that Wettstein and Hassler have sufficient minimum contacts with Minnesota to satisfy Due Process and make the exercise of specific jurisdiction appropriate. Full Circle alleges Wettstein and Hassler purposefully directed activities at residents of Minnesota when they: (1) sent two cease-and-desist letters to Full Circle in Minnesota; (2) approached Full Circle at a Las Vegas trade show; (3) approached Minnesota corporations or corporations doing business in Minnesota at the trade show; and (4) allegedly communicated to Ames that Full Circle was infringing the '852 Patent.
Wettstein and Hassler's contacts with this forum do not satisfy due process and are insufficient to confer personal jurisdiction. It is well-established that cease-and-desist letters alone are not sufficient to confer personal jurisdiction in declaratory judgment actions. Red Wing, 148 F.3d at 1360; Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1202 (Fed. Cir. 2003). Although such letters are purposefully directed at the forum, "[p]rinciples of fair play and substantial justice afford a patentee sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum." Red Wing, 148 F.3d at 1360-61. Furthermore, to facilitate settlement negotiations, a licensing offer within a cease-and-desist letter is, without more, insufficient to support personal jurisdiction. Id. at 1361. Full Circle seeks to differentiate Wettstein and Hassler's cease-and-desist letters by arguing that their aggressive language exceeds the licensing offers countenanced in Red Wing. However, the language used is consistent with the purpose of a cease-and-desist letter attempting to facilitate settlement.
Full Circle specifically cites to language requiring it to "immediately cease and desist from manufacturing, marketing or selling the Radius 360" and provide Broyles' office "with a complete and detailed accounting of the number and price of any and all Radius 360 units manufactured and/or ordered and/or sold by your company." April 20, 2004 letter.
Plaintiff contends Wettstein and Hassler created the additional contacts necessary to support personal jurisdiction by approaching Full Circle and other corporations that are based in Minnesota or do business in Minnesota at the Las Vegas trade show. The limited nature of these contacts is fatal to this attempt to create jurisdiction. Wettstein and Hassler only briefly spoke with Full Circle representatives at the Las Vegas trade show. This single, in person interaction consisted of Wettstein and Hassler claiming the Radius 360° infringed on the '852 Patent, showing Annis a copy of the '852 Patent and indicating their willingness to license or sell the '852 Patent. In effect, the brief interaction in Nevada was functionally similar to the purpose of a cease-and-desist letter that includes a licensing offer. No protracted negotiations ever occurred. Furthermore, "the mere solicitation of business by a foreign person does not constitute transacting business in the state. To be doing business, negotiations must ultimately lead to a `substantial connection' with the forum, creating an affirmative obligation there." Hillebrand v. Streck Mfg. Co., 279 F.3d 1351, 1354 (Fed. Cir. 2002).
Additionally, Full Circle contends Wettstein and Hassler's negotiations with corporations that sell products to companies who do business in Minnesota, such as Wallboard, a California company, is sufficient to confer jurisdiction. As the Red Wing court succinctly stated, however, "doing business with a company that does business in Minnesota is not the same thing as doing business in Minnesota." 148 F.3d at 1361. The Supreme Court has made clear that contacts resulting from "the unilateral activity of another party or third person" are not attributable to a defendant. See Burger King, 471 U.S. at 745 n. 17.
Full Circle also alleges Wettstein and Hassler solicited several Minnesota-based companies at the Las Vegas trade show; however, only Warner Manufacturing is identified. The affidavits indicate that Wettstein and Hassler merely showed Warner Manufacturing their product, the '852 Patent and generally discussed their intent to utilize the Patent. Second Wettstein Decl. ¶ 2; Second Hassler Decl. ¶ 2. Wettstein and Hassler have had no subsequent contact with Warner Manufacturing. Second Wettstein Decl. ¶ 2; Second Hassler Decl. ¶ 2. One interaction in Las Vegas with a third-party Minnesota company is insufficient to confer personal jurisdiction. Franklin Sports, Inc. v. Gentile, 2001 U.S. Dist. LEXIS 16174, *8-9 (D. Minn. July 20, 2001) (stating that negotiations with a third-party forum company unrelated to plaintiff do not support the exercise of personal jurisdiction). Furthermore, as previously noted, the mere solicitation of business does not constitute transacting business in the state. See Hillebrand, 279 F.3d at 1354.
Finally, Full Circle claims an inference can be made that Wettstein and Hassler contacted Ames or visited Minnesota because salespersons at Ames' Edina, Minnesota store questioned Collins as to whether the Radius 360° infringed on the '852 Patent. The specifics of the linkage between Ames and the Defendants have not been adduced by Plaintiff. Conversely, Wettstein and Hassler submitted declarations stating they have no personal contacts in Minnesota and do not have sales agents or offices in Minnesota. Wettstein Decl. ¶ 2; Hassler Decl. ¶ 2. Ames attendance at the Las Vegas trade show could be the source of information about the '852 Patent. Regardless, it is Full Circle's burden to assert sufficient minimum contacts to support specific jurisdiction. Akro, 45 F.3d at 1546. Although the Court resolves all factual conflicts in favor of the plaintiffs when resolving a motion to dismiss, mere unsupported allegations will not carry Plaintiff's burden.
Plaintiff cites several cases that it claims demonstrate the aforementioned "other activities" are sufficient to establish personal jurisdiction. However, a thorough evaluation reveals these cases are inapposite to the present matter. The defendant in each of these cases had far greater contacts with the forum states than Wettstein and Hassler did here. See Elec. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1351 (Fed. Cir. 2003) (Defendant patentee hired attorney in forum state, called plaintiff several times to discuss the technology covered by the patent in question and twice visited plaintiff's facility to demonstrate the technology); Deprenyl Animal Health, 297 F.3d at 1354 (Canadian defendant purposefully availed itself of the benefits of United States patent law by exclusively licensing patent to Kansas corporation); Inamed, 249 F.3d at 1361 (Defendant patentee had previously negotiated four license agreements with plaintiff involving the patents at issue in the infringement action); Genetic Implant Sys., 123 F.3d 1455, 1458-59 (Fed. Cir. 1997) (Defendant patentee entered into exclusive, worldwide distributorship agreement with corporation that transacted business in forum state); Akro, 45 F.3d at 1546-47 (Defendant patentee entered into exclusive licensing agreement with corporation located in forum state). In the instant case, Wettstein and Hassler have not engaged in extensive (or even multiple) negotiations with Full Circle. No evidence exists to show they have entered into any licensing agreement, much less the exclusive licensing and distributorship agreements with forum corporations in the cases cited by Plaintiff. See Hillebrand, 279 F.3d at 1356 ("All of [defendant's] documented contacts were for the purpose of warning against infringement of negotiating license agreements, and he lacked a binding obligation in the forum").
The Court finds that Wettstein and Hassler did not purposefully direct their activities at the residents of Minnesota. As a result, it is unnecessary to consider the other two prongs of the Akro test. 45 F.3d at 1545.
2. Jurisdictional Discovery
Having found insufficient contacts exist to support personal jurisdiction, Plaintiff's request for jurisdictional discovery is next considered. Jurisdictional discovery is within the sound discretion of the District Court but may be denied where the plaintiff has failed to meet its burden of making out a threshold prima facie case of personal jurisdiction. See Maynard v. Philadelphia Cervical Collar Company, Inc., 18 Fed. Appx. 814, 817-18 (Fed. Cir. 2001); Tuttle v. Lorillard Tobacco Co., 118 F. Supp. 2d 954, 959 (D. Minn. 2000). Plaintiff's Complaint is facially defective in that it fails to allege sufficient facts to confer personal jurisdiction over Defendants. Therefore, to the extent Plaintiff's Complaint names Wettstein and Hassler, it is dismissed without prejudice. Should Plaintiff garner additional facts sufficient to confer personal jurisdiction, they may refile the claims against Wettstein and Hassler in the appropriate forum.
C. Motion to Dismiss for Naming an Incorrect Party and for Failing to Name an Indispensable Party
As Defendants do not have sufficient minimum contacts with Minnesota to confer personal jurisdiction in this forum, it is unnecessary for the Court to consider Defendants' other arguments; namely, that the Court should dismiss Plaintiff's Complaint for naming an incorrect party and for failing to name an indispensable party.
Defendant Dodds has not responded to the Complaint and is not a party to the instant motion. His status precludes entry of judgment at this time.
III. CONCLUSION
Based upon the foregoing, and all the files, records, and proceedings herein, IT IS HEREBY ORDERED that:1. Defendants Wettstein and Hasler's Motion to Dismiss for Lack of Jurisdiction [Docket No. 11] is GRANTED;
2. Plaintiff is to notify the court by February 11, 2005, as to whether it intends to pursue the case with Defendant Dodds or whether judgment may be entered.