From Casetext: Smarter Legal Research

PACIFIC AEROSPACE ELECTRONICS, INC. v. SRI HERMETICS

United States District Court, E.D. Washington
Nov 4, 2005
No. CV-05-0155-AAM (E.D. Wash. Nov. 4, 2005)

Opinion

No. CV-05-0155-AAM.

November 4, 2005


ORDER GRANTING MOTION TO DISMISS


BEFORE THE COURT is the Defendant's Motion To Dismiss For Lack Of Personal Jurisdiction (Ct. Rec. 4). This motion is heard without oral argument.

BACKGROUND

Plaintiff filed its complaint on March 25, 2005, alleging that Defendant is selling and offering for sale products that are covered by patents owned by Plaintiff. Plaintiff's principal place of business is Wenatchee, Washington. According to Plaintiff, it is "an industry leader in the design, engineering, integration, and assembly of the most advanced hermetic connector and packaging technologies available on the market." Plaintiff's connectors and packaging technologies are used in a variety of commercial and defense related applications, including the aerospace industry.

Defendant SRI Hermetics, Inc. (SRIH) is a Florida company that was incorporated in December 2003. It states that its sole place of business is in Florida. Prior to incorporation, however, Defendant established an office in Wenatchee, Washington when it hired Ed Taylor and Jim Petri in late 2003. SRIH was created as an adjunct to Summation Research ("SRI") and SRI Connector Gage Company ("SRICG"), which are companies that design, develop, manufacture, and sell electronics equipment to the Department of Defense and aerospace companies, as well as some commercial accounts.

In addition to hiring Mr. Taylor, SRIH also purchased equipment from RAAD Technologies, Ed Taylor, Jim Petri, and from various banks from which RAAD Technologies had leased equipment. The equipment included a laser welding system, an infrared belt furnace, miscellaneous chemicals, office furniture, kilns, microscopes, and computers that had been erased prior to SRI acquiring them. SRIH also reimbursed Mr. Taylor for the use of the space he previously leased under his company's name, Hermetic Design Concepts.

According to Defendant, it never intended to establish business operations in Washington, and did not seek a Washington State business license. It intended to accumulate the equipment in Washington and move it to Florida as soon as the weather and the convenience of Defendant's employees would allow.

In June, 2004, Defendant moved all of its equipment that was located in Washington to Florida. Mr. Taylor and Mr. Petri also relocated at the same time. Defendant maintains that between December, 2004 and June, 2004, it directed all business activities from Florida, with the exception of a small amount of welding which was performed in Washington. For the ten welding projects that were completed in Washington, the parts were shipped from Florida to Washington, and then the finished product was shipped back to Florida.

On May 1, 2005, SRIH entered into a contract with an independent sales representative in Washington. The contract states that SRIH appoints Sea-Port Technical Sales, Inc. as "its exclusive agent to solicit business for and to sell the products of" SRIH. The territory covered by the agreement consists of Idaho, Oregon, and Washington. Sea-Port Technical Sales is to receive a commission on any sales.

(1) Previous Litigation

Mr. Taylor and Mr. Petri were former employees of Plaintiff. In August 2002, the two men left their employment with Plaintiff to form another company, RAAD Technologies ("RAAD"). In November, 2002, Plaintiff sued Taylor, Petri, and RAAD in the United States District Court for the Eastern District of Washington, alleging misappropriation of trade secrets; breaches of confidentiality, non-solicitation, and assignment of invention agreements; and violation of the common law duties of loyalty and confidentiality. On June 20, 2003, the undersigned granted Plaintiff's motion for preliminary injunction, prohibiting Taylor, Petri, and RAAD from soliciting, contacting, or conducting business with Plaintiff's customers, delivering products or technology relating to hermetic electrical connectors to Plaintiff's customers, and requiring them to return all of Plaintiff's property, including customer lists and copies of designs and schematics. Pacific Aerospace Electronics, Inc. v. Taylor, 295 F. Supp.2d 1188, 1202-05 (E.D. Wash. 2003). On October 10, 2003, the undersigned found Taylor, Petri, and RAAD to be in contempt for violating the preliminary injunction. The undersigned also granted Plaintiff's motion for partial summary judgment for Taylor and Petri's breach of non-solicitation and confidentiality agreements. On November, 2003, the court entered a Consent Decree, which restricted Taylor and Petri's future business activities, and required them to maintain the confidentiality of Plaintiff's trade secrets and other confidential information regarding technology, processes, and customers. The decree also required Taylor and Petri to return all of Plaintiff's information, materials, and records that were taken from Plaintiff.

Shortly after the entry of the Consent Decree, Taylor and Petri left RAAD Technologies and began working for Defendant — Taylor as an employee and Petri as a independent contractor. On March 11, 2004, Plaintiff filed a motion for temporary restraining order (TRO) which the undersigned granted on March 15, 2004. The order directed that Taylor and Petri preserve evidence, and allowed inspection of Taylor and Petri's new business premises and computers without advance notice.

On March 18, 2004, Plaintiff attempted to execute the order and inspect the warehouse where Taylor and Petri worked. They refused to allow Plaintiff's counsel or forensic computer expert to enter the premises, and Plaintiff sought contempt sanctions. In response to that motion, Taylor and Petri filed a Motion for Protective Order that actually sought a protective order for the Defendant in this case, SRI Hermetics. The following representations were made in the defendant's Memorandum of Authorities in Support of SRI Hermetics' Motion for Protective Order:

(1) that Taylor and Petri were both working on important and proprietary aspects of anticipated patents in the "SRI Hermetics' Wenatchee Office;"
(2) that Plaintiff's attack on Taylor and Petri was an attempt to gain access to SRI Hermetics' product design information and manufacturing techniques;
(3) Taylor was told by SRIH's Florida counsel to defy the court order and to keep SRIH's property safe from Plaintiff's agents.
(4) the TRO was served at the office of SRI Hermetics;
(5) the Wenatchee office of SRI Hermetics maintained highly confidential and proprietary business information, including information regarding potential patents;
(5) customer documentation was present in the SRI Hermetics' Wenatchee office, including drawings, specifications and test plans.

On April 22, 2004, the undersigned denied the motion for a protective order, and on May 11, 2004, found Taylor and Petri to be in contempt. Plaintiff was awarded $125,000 in attorneys fees and costs.

(2) Present Litigation

With regard to this current lawsuit, on February, 2004, Plaintiff sent a letter to Defendant identifying products which Plaintiff was concerned could possibly infringe valid patents owned by Plaintiff. In the letter, Plaintiff requested that Defendant either cease and desist from manufacturing, using, offering to sell, or selling the identified products, or provide Plaintiff with a written explanation of why the products do not infringe Plaintiff's patents. On March, 8, 2004, Defendant replied, requesting that Plaintiff provide Defendant its claim charts. On March 15, 2005, Plaintiff responded, and denied it had a duty to provide Defendant with the charts. It appears that Plaintiff sent another letter on June 22, 2004, again asserting infringement by Defendant of Plaintiff's patents. In August, 2004, Defendant responded and addressed Plaintiff's allegations.

On April 14, 2005, Plaintiff sent a letter to Defendant in which it expressed concern that Defendant may have incorporated Plaintiff's patented technology in its response to a Request for Quotation ("RFQ") from Northrop Grumman Corporation. Plaintiff requested a copy of Defendant's response. Defendant declined the request.

DISCUSSION

Federal Circuit law applies to Plaintiff's patent claims; thus, this Court must apply Federal Circuit law to Defendant's motion to dismiss. See Electronics for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348 (Fed. Cir. 2003). Where a defendant moves to dismiss a complaint for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction is appropriate. Id. at 1349. If the district court does not hold an evidentiary hearing, a plaintiff need only make a prima facie showing of jurisdiction to survive a motion to dismiss. Id. To make such a showing, Plaintiff need only demonstrate facts that, if true, would support jurisdiction over Defendant. Id. Unless directly contravened, Plaintiff's version of the facts is taken as true, and conflicts between the facts contained in declarations submitted by the two sides must be resolved in Plaintiff's favor for purposes of deciding whether a prima facie case for personal jurisdiction exists. Id. At this stage in the proceedings, then, the Court need not decide whether Plaintiff has proven its contentions, but only whether it has made a prima facie case for personal jurisdiction. Id. A "prima facie" showing means that the Plaintiff has produced admissible evidence, which if believed, is sufficient to establish the existence of personal jurisdiction. Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995). Uncontroverted "well-pled" allegations in a complaint are deemed true for the purpose of determining whether a prima facie showing of personal jurisdiction has been made. Id.

In its complaint, Plaintiff alleges that "[t]he Court has personal jurisdiction over [Defendant] because [Defendant] had an office in this district and conducted business here, including the design of products sold and/or offered for sale that are covered by patents owned by [Plaintiff]."

Defendant is not a resident of Washington, and it was not served with process while present in this state. Thus, the only way for this Court to exercise jurisdiction over Defendants is for Plaintiff to establish either general jurisdiction, or specific jurisdiction.

It appears Defendant was served in Florida by personal delivery of a copy of the summons and complaint to Bonnie Greenwalt, Executive Secretary of SRI Hermetics. (Ct. Rec. 3)

(1) General Jurisdiction

Under the theory of general jurisdiction, a defendant whose contacts with a state are "substantial" or "continuous and systematic" can be haled into court in that state in any action, even if the action is unrelated to those contacts. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415, 104 S.Ct. 1868 (1984); Electronics for Imaging, Inc., 340 F.3d at 1349. There is not a specific test to follow when determining whether a defendant's activities within a state are 'continuous and systematic.' Instead, this court must look at the facts of each case to make the determination. Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952).

The threshold for satisfying the requirements for general jurisdiction is substantially greater than that for specific jurisdiction. See 16 James Wm. Moore et al., Moore's Federal Practice § 108.40 (3d ed. 1997) ( citing Helicopteros, 466 U.S. at 414-15). Typically, courts assert general jurisdiction only over nonresidents who are essentially domiciled within the forum state. See id. at § 108.41[3] ("The threshold for 'continuous and systematic' contact usually requires at least an office in the forum state.").

Plaintiff argues that Defendant's contacts with the state of Washington are continuous and systematic. Plaintiff relies on the following instances of Defendant's contacts:

(1) Defendant hired employees who were Washington residents;

(2) Defendant maintained an office in Wenatchee, in which its employees worked on several significant development projects for Defendant;

(3) Defendant owned a significant amount of property in Wenatchee.

It is clear that at the time the present lawsuit was filed, Defendant did not have an office, facilities, bank accounts, real estate, telephone number or postal address in Washington. The complaint does not specify when the alleged infringing actions took place. In its complaint, Plaintiff asserts that Defendant offered to sell products to Plaintiff's existing customers that are covered by one or more of Plaintiff's patents. Plaintiff does not identify the patent, nor does Plaintiff identify when or how Defendant offered to sell the product. In their response to the motion to dismiss, Plaintiff provides letters that it had written to Defendant regarding the alleged patent infringement. Plaintiff addressed a letter to Jim Twombly with an address of Melbourne, Florida. The reply letter was written by Defendant's counsel, who are located in Orlando, Florida.

In its complaint, Plaintiff alleges Defendant had an office in Wenatchee, and conducted business in Wenatchee. In doing so, Plaintiff appears to acknowledge that Defendant no longer has an office in Wenatchee and no longer conducts business there.

Defendant argues its presence in Wenatchee was happenstance and temporary. It says it directed all business activity from Florida, where the corporation was and remains located. It says certain equipment was temporarily located in Wenatchee and that employees were temporarily hired at that location until the planned relocation to Florida became feasible.

It appears to the court that the only conceivable support for general jurisdiction would be the claim that work on the infringing products or work on the RFQ for Nothrup Grumman Corp. must have been conducted, or completed while the two former employees (Taylor and Petri) were located in Wentachee, based on their representations to the Court in the earlier litigation, and because the two former employees had access to information that would allow them to create an infringing product. This argument, however, is not supported by any evidence.

The court finds Plaintiff has not met its burden of establishing that this Court can exercise general jurisdiction over the Defendant. Plaintiff has not made a "prima facie" showing that Defendant conducted continuous and systematic business activities in Washington, either at the time the infringement claims arose (whenever that may have been) or when the Plaintiff's complaint was filed (May 2005).

(2) Specific Jurisdiction

Specific jurisdiction is based on minimum contacts with the state and is limited to causes of actions that "arise out of' or are "related to" the contacts, even if those contacts are "isolated and sporadic." LSI Industries Inc. v. Hubbell Lighting, Inc., 232 F.3d 1369, 1375 (Fed. Cir. 2000).

Determining whether specific jurisdiction exists over a non-resident defendant involves two inquiries: (1) whether a forum state's long-arm statute permits the assertion of jurisdiction and (2) whether assertion of personal jurisdiction violates federal due process. Trintec Indust., Inc. v. Pedre Promotional Products, Inc., 395 F.3d 1275, 1282 (Fed. Cir. 2003). It is well-established that Washington state's long-arm statute comports to the full extent of the due process clause of the United States Constitution. Easter v. American West Financial, 381 F.3d 948, 960 (9th Cir. 2004). Thus, the two-prong analysis set forth in Trintec collapses into a due process analysis. Trintec, 395 F.3d at 1279.

Wash. Rev. Code § 4.28.185 provides in part:

(1) Any person, whether or not a citizen or resident of this state, who in person or through an agent does any of the acts in this section enumerated, thereby submits said person, and, if an individual, his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of said acts:
(a) The transaction of any business within this state;
(b) The commission of a tortious act within this state;
(c) The ownership, use, or possession of any property whether real or personal situated in this state;
(3) Only causes of action arising from acts enumerated herein may be asserted against a defendant in an action in which jurisdiction over him is based upon this section.

In determining whether due process allows the court to exercise jurisdiction over a non-resident, the court must examine whether Defendant has established "minimum contacts" with Washington, "such that [it] should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358-59 (Fed. Cir. 1998). "Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these 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 Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985); Red Wing, 148 F.3d at 1359. In sum, due process is satisfied if: (1) the defendant purposefully directed its activities at residents of the forum state; (2) the claim arises out of or relates to the defendant's activities within the forums state; and (3) the assertion of personal jurisdiction is reasonable and fair. Electronics for Imaging, Inc., 340 F.3d at 1350.

Once the plaintiff has shown there are sufficient minimum contacts to satisfy due process, the defendant bears the burden to present a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Electronics for Imaging, Inc., 340 F.3d at 1351-52. Reasonableness considerations include: (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 furthering fundamental substantive social policies. Id. at 1352.

(a) "Purposefully Directed"

Plaintiff asserts that Defendant offered to sell its product in the State of Washington, which establishes purposeful availment. Plaintiff relies on the fact that Defendant entered into a contract with Sea-Port to solicit business for and to sell the Defendant's products. According to the contract, Defendant will provide Sea-Port, its exclusive agent and a Washington resident, with "literature, catalogs, technical data, test results, prices, [and] service manuals, to help Sea-Port develop a market for Defendant's products in Washington." Defendant also has a website in which it identifies Sea-Port as its Northwest U.S. representative. The website has a screen where interested customers can fill out a form which includes the company name and the project description, including performance parameters. Defendant instructs the customer that "by filling in this form and sending it to us, we can start collaborating on your needs."

Also, Plaintiff asserts that Defendant has offered to sell its product to a Washington resident. In May, 2005, it appears that a representative from Sea-Port contacted Defendant and notified it that Honeywell was interested in a hermetic enclosure and connector for an avionics requirement. It appears that the Honeywell office is located in Redmond, Washington.

Defendant asserts that it did not direct any activities to Washington residents, except temporarily occupying a building, hiring two employees (Taylor and Petri), and completing a small welding project. Defendant characterizes its contract with Sea-port as "non-exclusive" and explains:

The description of Sea-Port as exclusive or nonexclusive is somewhat confusing. Sea-Port is [Defendant's] only sales representative in Washington . . . However, Sea-Port represents many manufacturers other than [Defendant], and it is thus a nonexclusive sales representative.

There is little doubt that Defendant is making a conscious effort to create a market in Washington. It is not hiding out in Florida and it appears to have every intention of wooing Washington customers. Otherwise, it would not be necessary for Defendant to have a sales representative in this state.

On the other hand, Defendant has also provided an affidavit of its Marketing Director in which he states that he was in contact with his Sea-Port sales representative, but as of August, 2005, there has been no response from Honeywell and there presently are no ongoing negotiations with Honeywell.

Case law is instructive on this issue. A nonresident is subject to specific personal jurisdiction in a patent infringement action in a local court if it can be shown that it deliberately placed the infringing product into the "stream of commerce" with the expectation of exploiting business in the forum state. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1566 (Fed. Cir. 1994) ("plaintiff has stated all of the necessary ingredients for an exercise of jurisdiction consonant with due process: defendants, acting in consort, placed the accused fan 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"). Regardless of the quantity of products sold or the shipping method used, the sale of patented products to buyers in the forum state creates specific personal jurisdiction over an out-of-state seller. North Am. Philips Corp. v. American Vending Sales, Inc., 35 F.3d 1576, 1579-80 (Fed. Cir. 1994). Here, however, Plaintiff is not asserting that Defendant actually sold an allegedly infringing product to a resident of the State of Washington. Instead, Plaintiff asserts that Defendant offered to sell a product.

The Court may exercise specific jurisdiction over Defendant if it offered to sell the allegedly infringing product in Washington state. See 3 D Sys. v. Aarotech Labs, Inc., 160 F.3d 1373, 1378-79 (Fed. Cir. 1998). Offers to sell may be formal or they may consist of "generating interest in a potential infringing product to the commercial detriment of the rightful patentee." Id. at 1379 (finding that price quotes were offers to sell despite disclaimers). Mere advertisements directed to a national audience are not "offers to sell" within a particular forum. Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 420 (9th Cir. 1997).

Even though Defendant maintains a website, this is not enough to exercise specific jurisdiction over Defendant. The Federal Circuit recently reviewed this issue in Trintec. In that case, the Federal Circuit examined prior case law and found that some cases suggested that the availability and use of highly interactive, transaction-oriented website, as opposed to an essentially passive website by itself could support specific jurisdiction wherever the site is available to potential customers. Id. (citations omitted). It also found that other cases have indicated that something additional beyond a website is required to establish personal jurisdiction. Id.

A passive site has been described as a site that merely advertises on the Internet. See Mieczkowski v. Masco Corp., 997 F.Supp. 782, 786 (E.D. Tex. 1998).

In this case, Defendant's website is not a highly interactive, transaction-oriented website. There is no pricing information on the website. There is no manner or method to order products on the web. It appears to be a fairly passive informational website that allows interested customers to contact the company. Thus, the website alone is not enough to establish specific personal jurisdiction.

The critical issue is whether the presence of an exclusive sales representative is enough to establish personal jurisdiction over Defendant. The fact that the sales representative has not been able to generate any business for Defendant in Washington mitigates against the Court finding it should exercise specific jurisdiction over Defendant.

(b) "Arises out of or relates to"

Plaintiff asserts its claims arise out of the products Defendant has made — many of which were designed in part by Mr. Taylor and Mr. Petri in Defendant's Wenatchee Office — and offered to sell to Washington residents.

Defendant argues that it has not sold any products in or from Washington and that all sales to date have been in Florida. Defendant asserts that it has not engaged in any of the alleged activities in Washington.

There is no evidence that the Defendant's response to Northrup Grumman Corporation's request for quotation, which is the alleged infringing conduct, was generated from the Washington office. Also, there is no evidence that Defendant has sold any products, let alone infringing products, to anyone in Washington. There is no evidence that the projects that Taylor and Petri worked on in Wentachee ever resulted in a salable product, other than Defendant's representations at the prior proceeding that there was information regarding products whose patents were pending, or at least were almost pending.

Plaintiff has not met its burden of showing that the alleged infringing sales or offers to sell arose out of or relate to Defendant's activities in Washington. Hence, it cannot be said that Plaintiff's cause of action arose out of the transaction of any business within the State of Washington, the commission of a tortious act within this state, and/or the ownership, use, or possession of any property situated in this state.

Plaintiff has not made a "prima facie" showing that Defendant either purposefully directed its activities at Washington residents or that Plaintiff's infringement claim arises out of or relates to the Defendant's activities in Washington. In other words, Plaintiff has not established that Defendant has sufficient "minimum contacts" with the State of Washington such that it would comport with due process for this court to exercise specific personal jurisdiction over the Defendant. As such, the burden does not shift to the Defendant to show it would otherwise be unreasonable for this court to exercise specific personal jurisdiction over the Defendant.

CONCLUSION

This court concludes it has neither general or specific jurisdiction over the Defendant. Accordingly, Defendant's Motion To Dismiss For Lack Of Personal Jurisdiction (Ct. Rec. 4) is GRANTED and this action is DISMISSED without prejudice pursuant to Fed.R.Civ.P. 12(b)(2). IT IS SO ORDERED. The District Executive is directed to enter this order, forward copies to counsel, and close this file.


Summaries of

PACIFIC AEROSPACE ELECTRONICS, INC. v. SRI HERMETICS

United States District Court, E.D. Washington
Nov 4, 2005
No. CV-05-0155-AAM (E.D. Wash. Nov. 4, 2005)
Case details for

PACIFIC AEROSPACE ELECTRONICS, INC. v. SRI HERMETICS

Case Details

Full title:PACIFIC AEROSPACE ELECTRONICS, INC., a Washington corporation, Plaintiff…

Court:United States District Court, E.D. Washington

Date published: Nov 4, 2005

Citations

No. CV-05-0155-AAM (E.D. Wash. Nov. 4, 2005)