Opinion
04-CV-891(JMR/FLN).
November 2, 2004
ORDER
Defendants move to dismiss plaintiff's complaint for lack of personal jurisdiction and improper venue, or in the alternative, to transfer venue to the Northern District of California. For the following reasons, defendants' motion to dismiss is denied, and their motion to transfer is granted.
I. Background
The facts are either undisputed or considered in the light most favorable to plaintiff. Plaintiff and defendant Visto Corp. compete in producing e-mail software for wireless devices such as personal digital assistants. Plaintiff is developing software which has not yet reached the market. Defendant Brian Bogosian is President and CEO of Visto, an established supplier.
In 2003 and early 2004, Visto tried to acquire plaintiff, and engaged in due diligence to that end. In the process, Visto learned the identities of major sources of plaintiff's capital, which included investor Gerald Trooien. Visto also learned that, until plaintiff could begin selling its product and creating a revenue stream, it had to depend on investor capital. While plaintiff and Visto negotiated, Mr. Trooien offered to make a substantial investment in plaintiff. Upon receiving this offer, plaintiff told Visto it was no longer interested in being acquired.
In January, 2004, at the direction of Mr. Bogosian, counsel for Visto sent plaintiff a cease-and-desist letter warning of possible patent infringement. Plaintiff received this letter at its Washington State headquarters. Plaintiff claims Visto served this patent infringement threat in bad faith, actually intending to frighten Mr. Trooien into withdrawing his investment. This plot failed: Mr. Trooien made the investment.
On February 10, 2004, plaintiff filed this action seeking a declaration of non-infringement as to Visto (Counts I-IV) claiming defamation by Visto and Brian Bogosian, and asserting tortious interference with its business (Counts V and VI). On February 17, 2004, prior to being served with plaintiff's complaint, Visto brought a patent infringement claim against plaintiff in the Northern District of California.
Neither plaintiff nor Visto is incorporated in Minnesota, nor do they own property, or maintain offices, facilities, employees or assets in this state. Brian Bogosian, a California resident, has never visited Minnesota or corresponded with anyone in Minnesota concerning the subject matter of this litigation.
II. Analysis
Personal jurisdiction is analyzed from two perspectives: a court looks to Federal Circuit precedent concerning the patent claims, and to the Eighth Circuit for the tort claims. See Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003). Each Circuit requires that the plaintiff make only a prima facie showing that defendants are subject to personal jurisdiction. Id.; Dakota Industries, Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991).
Here, the Court considers first whether defendants may be served under Minnesota's long-arm statutes; and second, whether the exercise of personal jurisdiction comports with due process. Silent Drive, 326 F.3d at 1200; Dakota Indus., 946 F.2d at 1388. Minnesota's long-arm statutes extend jurisdiction to the full extent permitted by the due process clause. Soo Line R.R. Co. v. Hawker Siddeley Canada, Inc., 950 F.2d 526, 528 (8th Cir. 1991), citing Rostad v. On-Deck, Inc., 372 N.W.2d 717, 719 (Minn. 1985). Therefore, this Court need only determine whether jurisdiction over defendants is consistent with constitutional due process. Soo Line, 950 F.2d at 528.
Patent claims are governed by the due process clause of the Fifth Amendment, while tort claims are governed by the due process clause of the Fourteenth Amendment. The clauses are identically construed. See Akro Corp. v. Luker, 45 F.3d 1541, 1544 (Fed. Cir. 1995); Dakota Industries, 946 F.2d at 1389 n. 2.
Constitutional due process requires "minimum contacts" between defendant and the forum state, such that jurisdiction "does not offend traditional notions of fair play and substantial justice."International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945);World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980); Silent Drive, 326 F.3d at 1201 (acknowledging both Eighth and Federal Circuits "appl[y] this test virtually unchanged"); Oriental Trading Co. v. Firetti, 236 F.3d 938, 943 (8th Cir. 2001).
Minimum contacts exist 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."Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985), citing Hanson v. Denckla, 357 U.S. 235, 253 (1958). "Purposeful availment" means deliberately engaging in significant activities within a state or creating "continuing obligations" between the defendant and residents of the forum; the contacts must not be "random, fortuitous, attenuated or the result of unilateral activity of a third person or another party." Burger King, 471 U.S. at 475-76.
The Eighth and Federal Circuits examine slightly different factors when considering personal jurisdiction. The Eighth Circuit considers (1) the nature and quality of the contacts, (2) the quantity of the contacts, (3) the connection between the cause of action and the contacts, (4) the interest of the forum state, and (5) the convenience of the parties. Digi-Tel Holdings, Inc. v. Proteq Telecommunications (PTE), Ltd., 89 F.3d 519, 522-23 (8th Cir. 1996). The Federal Circuit examines (1) whether the defendant "purposefully directed" its activities at residents of the forum, (2) whether the claim "arises out of or relates to" those activities, and (3) whether assertion of personal jurisdiction is "reasonable and fair." Silent Drive, 326 F.3d at 1202.
A. Specific Jurisdiction
Specific jurisdiction exists when the cause of action arises out of or relates to a defendant's contacts with the forum. See Helicopteros Nacionales, 466 U.S. 408, 415 n. 8 (1984). Here, the Court finds that any tort claim had by plaintiff grows from defendants' cease-and-desist letter. Accordingly, the Court considers whether this single California-to-Washington letter supports jurisdiction in Minnesota.
Ordinarily, a letter sent from state "A" to state "B" would not be considered a jurisdictionally significant contact in state "C." Even if the letter had been sent to Minnesota, a single letter is a slender reed upon which to assert personal jurisdiction over the sender. See Digi-Tel, 89 F.3d at 523 (letters and faxes sent into forum not enough by themselves to establish jurisdiction); Silent Drive, 326 F.3d at 1202, 1206 (infringement letters alone do not establish jurisdiction).
Here, plaintiff claims the letter itself was the mechanism by which defendants committed the purported tort. As such, the Court must assess its effects in Minnesota. Dakota Indus., 946 F.2d at 1390-91, citing Calder v. Jones, 465 U.S. 783, 789 (1984). To find jurisdiction, the Court must ultimately find that defendants "expressly aimed [their] tortious conduct" at Minnesota, such that Minnesota "can be said to be the focal point of the tortious activity." Plaintiff also must have felt the "brunt of the harm" in Minnesota. Calder, 465 U.S. at 788-89;see also Imo Indus., Inc. v. Kiekert AG, 155 F.3d 254, 265-66 (3d Cir. 1998) (collecting cases and establishing three-part "effects test" for intentional tort jurisdiction).
The Federal Circuit has twice turned to Calder to support personal jurisdiction over defendants sending infringement letters; in each case, the court found defendants' other activities, beyond the letters, gave rise to jurisdiction. See Akro Corp., 45 F.3d at 1548 (defendant licensed patent to one of plaintiff's competitors in forum state); Silent Drive, 326 F.3d at 1205-06 (defendants obtained and attempted to enforce out-of-state injunction against forum resident who had not been a party to underlying lawsuit). The Federal Circuit has noted that:
[T]he sending of infringement letters would satisfy the minimum contacts requirement of due process except for policy considerations unique to the patent context. . . . The patent system has national application. If infringement letters created jurisdiction, the patentee could be haled into court anywhere the letters were sent.Silent Drive, 326 F.3d at 1206. Thus, Federal Circuit law counsels against exercising Minnesota jurisdiction based on a simple infringement letter. Logic suggests this would be particularly true when the letter was not even sent to Minnesota.
Plaintiff fares no better under Eighth Circuit precedent. The Eighth Circuit construes Calder narrowly in the context of business torts. It requires that a defendant's activity be directed not simply at a forum resident, but at the forum itself. Thus, jurisdiction is proper over defendants who send false or misleading communications to a plaintiff in a forum while intending to promote commercial activity there. See Oriental Trading Co., 236 F.3d at 943 (defendants initiated business relationship with forum resident and made numerous misrepresentations in phone calls and faxes); Finley v. River North Records, Inc., 148 F.3d 913, 916 (8th Cir. 1998) (defendants sought to generate ticket sales at concert in forum by making misrepresentations to forum-based concert promoter). But the Eighth Circuit does not find that Calder is satisfied where defendant's activities are directed elsewhere, or where the contact with the forum state is only incidental. See Hicklin Eng'g v. Aidco, Inc., 959 F.2d 738, 738 (8th Cir. 1992) (defendant's letters to plaintiff's out-of-state customers did not allow jurisdiction in forum where plaintiff resided);General Elec. Capital Co. v. Grossman, 991 F.2d 1376, 1387 (8th Cir. 1993) (no jurisdiction in Minnesota over Canadian auditors who sent financial statements of Canadian company to its Minnesota purchaser for inclusion in purchaser's own financial statement).
Turning to the case at hand, these precedents suggest defendants' letter cannot meet the requirements of Calder; the only connection between Minnesota and this litigation is Mr. Trooien, and he is not a party to this lawsuit. Certainly defendants knew Mr. Trooien's identity, residence, and significance to plaintiff. They also knew plaintiff would have to disclose any threatened litigation to him, and that such a disclosure might chill potential investment. Yet this does not make Minnesota the "focal point" of this litigation, nor does it mean plaintiff suffered the "brunt of the harm" here.
Ultimately, it is difficult to see how plaintiff experienced the "brunt of the harm," or indeed any harm, here. If the letter was meant to frighten Mr. Trooien, it failed to do so. Apparently, he redoubled his commitment to plaintiff. Plaintiff points to no discouraged Minnesota investors, nor any other harm in Minnesota. While this would seem to be good news for plaintiff, it is bad news for a Minnesota-based injury claim.
Accordingly, the Court concludes it cannot exercise specific jurisdiction over Visto or Mr. Bogosian.
B. General Jurisdiction Over Visto
General jurisdiction arises from a defendant's "continuous and systematic" contacts with a forum. See Helicopteros Nacionales, 466 U.S. at 415-16. Plaintiff concedes Mr. Bogosian has no such contacts with Minnesota. Visto, however, has (1) an unknown number of sales to or through wireless providers; (2) a website that allows inquiries and sales; and (3) one institutional customer and fourteen direct sales to Minnesota residents, all of which are unrelated to plaintiff's cause of action. The Court addresses each in turn.
The existence of Minnesota contacts with wireless providers such as ATT or NEXTEL cannot be imputed to Visto. A third-party's contacts may be imputed to a defendant when the third-party acts on the defendant's behalf, when the defendant directs third-party activity in the forum state, or when the third-party is part of the defendant's exclusive distribution network. See Digi-Tel, 89 F.3d at 524; Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1565-66 and n. 15 (Fed. Cir. 1994). This does not apply, however, when the third-party pursues its own interests or sells products other than the defendant's. Digi-Tel, 89 F.3d at 524; Stairmaster Sports/Medical Prods. Inc. v. Pacific Fitness Corp., 916 F. Supp. 1049, 1053 (W.D. Wash. 1994), aff'd, 78 F.3d 602 (Fed. Cir. 1996) (table). Here, there is no suggestion these wireless providers act on Visto's behalf rather than their own, that Visto controls their Minnesota activities, or that they are mere distributors of Visto's products. The Court therefore cannot impute their Minnesota contacts to Visto.
The record is too sparse, beyond the mere existence of Visto's website, to allow the Court to assess the quantity and quality of its website-generated contacts as directed by the Eighth Circuit.Lakin v. Prudential Securities, Inc., 348 F.3d 704, 712 (8th Cir. 2003). There is a paucity of evidence concerning Minnesotans' access to the site, and nothing about the nature of those contacts or any of Visto's commercial responses.
Visto's direct sales to Minnesota residents are admittedly small: In 2003, Visto did approximately $5,000 in business with a mere fourteen individuals and one institutional customer. This is not a great deal of commercial activity for either Visto or Minnesota. See Lakin, 348 F.3d at 709 (court inquires whether contacts are significant for forum rather than for defendant);see also Hockerson-Halberstadt, Inc. v. Propet USA, Inc., 62 Fed. Appx. 322, 337 (Fed. Cir. 2003) (unpublished). The Court questions whether these small contacts are of a sufficient basis to confer jurisdiction on this Court.
But even assuming that minimum contacts exist, a court must examine the interests of the parties, the forum, and the interstate judicial system to determine whether it is fair and reasonable to exercise general jurisdiction. Here again, plaintiff falls short.
An infringement action based on the same events is pending in the Northern District of California. That District is closer to both parties. A California court is able to exercise personal jurisdiction over Mr. Bogosian which this Court cannot do. Accordingly, were this Court to retain jurisdiction over plaintiff's action against Visto, there is a great risk of piecemeal litigation. In such a case, both the parties and the judicial system risk parallel litigation and inconsistent rulings. These factors counsel against exercising jurisdiction.
Minnesota has precious little interest in this matter. It has no particular interest in providing a forum to resolve a dispute between two out-of-state parties. No Minnesota statutes or social policies are implicated. Other than some inconvenience, there is no showing that any Minnesota resident — including Mr. Trooien — was harmed. Any discrepancy in the two Districts' caseloads is insignificant. Caseload is but one factor, of course, and the Court finds it outweighed by the considerations which counsel against jurisdiction.
The Court finds this case to be:
[that] 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 defendant to litigation within the forum.Beverly Hills Fan, 21 F.3d at 1568. Accordingly, the exercise of general jurisdiction over Visto would not be reasonable or fair.
III. Conclusion
The Court declines to exercise general jurisdiction over Visto. In lieu of dismissal, and in the interest of justice, the Court grants defendants' motion to transfer, and the Clerk of Court is hereby directed to transfer this case the Northern District of California.
IT IS SO ORDERED.