Opinion
3:22-cv-00482-JR
07-12-2022
TK PRODUCTS, INC., a Washington corporation dba UKIAH CO., Plaintiff, v. GHB GROUP, INC., an Illinois corporation, Defendant.
FINDINGS AND RECOMMENDATION
Jolie A. Russo United States Magistrate Judge
Defendant GHB Group, Inc. moves to dismiss plaintiff TK Products, Inc.'s complaint pursuant to Fed.R.Civ.P. 12(b)(2). For the reasons set forth below, defendant's motion should be granted.
BACKGROUND
Defendant is an Illinois corporation with its principal place of business in Illinois. Compl. ¶ 4 (doc. 1). Plaintiff is a Washington corporation, but its “principal offices and warehouse are located in Portland, Oregon.” Id. at ¶ 3; Erickson Decl. ¶ 7 (doc. 29).
Filings with the Oregon Secretary of State reflect that the principal place of business and mailing address for “Ukiah Co.” are located in the State of Washington. In contrast, the Oregon Secretary of State's page for “TK Products, Inc.” displays Portland, Oregon, addresses. Because plaintiff's filings with the Oregon Secretary of State are part of the public record, and therefore not subject to reasonable dispute, the Court takes judicial notice thereof in accordance with Fed.R.Evid. 201(b). Intro-Plex Tech., Inc. v. Crest Grp., Inc., 499 F.3d 1048, 1052 (9th Cir. 2007).
In March 2022, plaintiff initiated this action against defendant, seeking a declaration that its product - the Loom II - did not infringe on defendant's U.S. Patent No. 10,520,188 (“188 Patent”). Compl. ¶¶ 16-21 (doc. 1); Muffo Decl. Ex. A (doc. 5). In particular, plaintiff asserts that it developed the Loom II in April 2018 but, in February 2022, defendant sent plaintiff a “cease-and-desist letter” regarding the 188 Patent, claiming “willful infringement” based on plaintiff's recent hiring of defendant's former employee. Compl. ¶¶ 9-13 (doc. 1); Muffo Decl. Ex. B (doc. 5). Plaintiff alleges further that defendant “contacted the factory [it] uses to manufacture the Loom II [and] wrongfully instructed the factory to stop producing the product.” Compl. ¶ 14 (doc. 1).
On April 13, 2022, defendant filed the present motion to dismiss for lack of personal jurisdiction. On April 27, 2022, plaintiff moved for jurisdictional discovery in lieu of filing an opposition. The Court granted, in part, plaintiff's request and extended the response deadline. Briefing was completed in regard to defendant's motion on June 29, 2022.
STANDARD OF REVIEW
Pursuant to Fed.R.Civ.P. 12(b)(2), dismissal is appropriate when the court lacks personal jurisdiction over the defendant. The plaintiff bears the burden of establishing that personal jurisdiction is proper. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004).
Federal courts ordinarily follow the state law of the forum to determine the bounds of personal jurisdiction. Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015) (citation omitted). Under Oregon's long-arm statute, personal jurisdiction is authorized to the full extent permitted by the United States Constitution. Id. (citation omitted). The Due Process Clause of the Fourteenth Amendment, in turn, requires nonresident defendants to “have certain minimum contacts with [the forum state] 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) (citation and internal quotations omitted).
The plaintiff need only make a prima facie showing of jurisdictional facts to withstand a motion to dismiss. Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001). Where the motion is based on written materials rather than an evidentiary hearing, the court focuses on the plaintiff's pleadings and affidavits. Caruth v. Int'l Psychoanalytical Ass'n, 59 F.3d 126, 127-28 (9th Cir. 1995). While the plaintiff cannot rest solely on the bare allegations of the complaint, uncontroverted factual allegations must be accepted as true. Amba Mktg. Sys. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977).
DISCUSSION
Defendant contends that “the mere selling of products within a forum state” does not confer general personal jurisdiction. Def.'s Mot. Dismiss 5 (doc. 4). Additionally, defendant argues specific personal jurisdiction is lacking because it “is well settled that the mere sending of a cease and desist letter does not confer specific personal jurisdiction over a patent owner informing another party of its infringement” and the complaint otherwise “offers only one sentence in support of personal jurisdiction: ‘This court has personal jurisdiction over the parties because the parties conduct business in the state of Oregon and within the district regarding the subject matter of this case.'” Id. (quoting Compl. ¶ 7 (doc. 1)).
Conversely, plaintiff maintains defendant is subject to general personal jurisdiction because “GHP's contacts with Oregon are significant” Pl.'s Resp. to Mot. Dismiss 2 (doc. 27). In particular, plaintiff cites to the following facts:
(1) GHP sells its products under three brands to Fred Meyer in Oregon, including DynaGlo, Vitapur, and Bond[;] (2) Fred Meyer in Oregon is the seasonal buyer for all Kroger stores, providing a unique pipeline through this Oregon connection for GHP products to be sold in Kroger stores nationwide[;] (3) GHP sells its products to 278 retailers, including the following with locations in Oregon - Costco, Walmart, Target, Ace Hardware, Lowes, Home Depot, and True Value - and through these retailers, GHP products are consistently available in Oregon stores[;] (4) [t]he Costco located in Portland, Oregon is the second largest Costco in the United States[;] (5) GHP hired a sales representative in Oregon to work on the Fred Meyer account[;] (6) GHP acquired the assets of Bond in May 2021, a company with a substantial presence in Oregon, and whose products GHP continues to sell through Fred Meyer in Oregon[;] (7) [r]epeated contacts with Ukiah, which GHP knows is based in Oregon, asserting escalating allegations of infringement and seeking to interfere with Ukiah's economic relations in Oregon.Id. at 7. Plaintiff also points to defendant's cease-and-desist letter and communications with its counsel as evidence of specific personal jurisdiction. Id. at 8-9.
I. General Jurisdiction
There are two types of personal jurisdiction a forum state may exercise over nonresident defendants: general and specific. Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008). General jurisdiction exists if the foreign corporation's “affiliations with the State are so ‘continuous and systematic' as to render [it] essentially at home in the forum State,” even when the cause of action has no relation to those affiliations. Daimler AG v. Bauman, 571 U.S. 117, 119 (2014) (quoting Goodyear Dunlop Tires Operations v. Brown, 564 U.S. 915, 919 (2011)). “Neither the United States Supreme Court nor [the Federal Circuit] has outlined a specific test to follow - when analyzing whether a defendant's activities within a [forum] are ‘continuous and systematic.'” Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com de Equip. Medico, 563 F.3d 1285, 1297 (Fed. Cir. 2009) (citation and internal quotations omitted). However, “[f]ollowing Daimler [it is] incredibly difficult to establish general jurisdiction in a forum other than the place where a defendant is incorporated or has its principal place of business.” Torrent Pharm. Ltd. v. Daiichi Sankyo, Inc., 196 F.Supp.3d 871, 878 (N.D. Ill. 2016) (collecting cases).
Initially, the fact defendant acquired Bond Manufacturing Co., Inc. (which, according to defendant, “was never domiciled or registered in Oregon”) does not, in-and-of-itself, support the exercise of general jurisdiction. Def.'s Reply to Mot. Dismiss 4 (doc. 30). Likewise, the fact Fred Meyer does the seasonal buying for its non-Oregon based parent company, Kroger, or that the Portland Costco is the second largest in the nation does not speak to the continuousness or systemic-ness of defendant's forum-related contacts. As defendant denotes, “[i]t is also irrelevant that GHP at one time hired an Oregon-based sales representative . . . this fact would be insufficient to confer specific jurisdiction over the facts related to the contract with that sales representative, much less render GHP at home under a theory of general jurisdiction for any matter in Oregon.” Id.; see also900 Support, Inc. v. Microportal.com, Inc., 2002 WL 31466441, *4 (D. Or. Jan. 9, 2002) (“merely contracting with a resident of a forum state is insufficient to confer specific jurisdiction over a nonresident”) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)).
Moreover, the happenstance associated with where a company retains counsel is not sufficient to confer personal jurisdiction. See Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir. 2001) (“the fact that [the lawyer receiving the letter] was located in New York is immaterial” to whether the exercise of personal jurisdiction existed in California was reasonable). This is especially true considering that most remote forms of communication do “not exist in any location.” See Advanced Tactical Ordinance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 803 (7th Cir. 2014) (as amended) (“[t]he connection between the place where an email is opened and a lawsuit is entirely fortuitous”); see also Wellpartner, Inc. v. DeLeon Pharm. Inc., 2015 WL 7568591, *6 (D. Or. Nov. 24, 2015) (“the Ninth Circuit has made clear that ordinary use of the mail, telephone, or other communications simply do not qualify as purposeful activity invoking the benefits and protections of the forum state”).
Accordingly, given the record before the Court, whether defendant's sale of products through Fred Meyer and other big box retailers is sufficient to confer general personal jurisdiction hinges on the amount of overall revenue and/or sales generated in this forum. See Leupold &Stevens, Inc. v. U.S. Optics, Inc., 2015 WL 3606376, *3 (D. Or. June 4, 2015) (no general jurisdiction where the defendant's Oregon sales totaled less than one percent of its overall revenue, and the defendant had “no facility based in Oregon” and was “not the top seller of riflescopes in the state,” explaining that, “[i]n Daimler, the Supreme Court determined that ten percent of a foreign corporation's total sales did not establish California's general jurisdiction over a defendant . . . even when combined with the corporation's California-based facilities and its position as largest supplier of luxury vehicles in the state”); see also Control Sols., Inc. v. MicroDAQ.com,Inc., 126 F.Supp.3d 1182, 1188-89 (D. Or. 2015) (“[w]here a corporate defendant is neither headquartered nor incorporated in the forum state [general personal jurisdiction] would be an exceptional case and should be based not solely on the magnitude of the defendant's in-state contacts but rather on an appraisal of a corporation's activities in their entirety, nationwide and worldwide”) (citations and internal quotations omitted).
Although plaintiff has set forth evidence concluding defendant has “substantial sales” and “a significant presence in Oregon,” it has not attempted to quantify the percentage of defendant's gross revenue or overall business activities associated with this forum. Nehls Decl. ¶ 5 (doc. 28); see also Bogner v. R & B Sys., Inc., 2011 WL 1832750, *3 (E.D. Wash. May 12, 2011) (court “is not bound by [a declarant's] legal conclusions”; a party cannot prevail “by simply averring that an act ‘was [a legal violation or]' declaring that one's versions of events is ‘consistent' with one's theory of the case . . . declarations [must only be considered] for the facts contained therein”). The facts submitted by plaintiff merely reflect “Fred Meyer is the only customer [defendant] sell[s] directly to in Oregon,” and that defendant has not had a local sales representative since early 2021. Erickson Decl. Ex. 1, at 5-6, 8 (doc. 29). The remaining 270-plus retailers that defendant sells its products to are national chains, although some do have physical locations in Oregon. Id. at 6.
In light of these facts, the Court cannot conclude that Oregon has general personal jurisdiction over defendant. Indeed, defendant is neither incorporated in Oregon nor is its principal place of business located in Oregon, and plaintiff has otherwise not shown that defendant is “at home” in this forum. While defendant sells its products to one Oregon retailer and hundreds of national retailers that have locations in Oregon, plaintiff has not set forth any evidence establishing that defendant's sales emanating from this forum overall comprise a substantial portion of its business activities. Cf.Control Sols., Inc., 126 F.Supp.3d at 1189 (“[a] corporation that operates in many places can scarcely be deemed at home in all of them”) (citation and internal quotations omitted); see alsoDaimler, 571 U.S. at 138 (alleging general jurisdiction over an out-of-state corporation merely because it is “doing business” in the forum state is “unacceptably grasping” -general personal jurisdiction is proper only where the corporation's “operations within a state are so substantial and of such a nature as to justify suit on causes of action arising from dealings entirely distinct from those activities”) (citation and internal quotations, brackets, emphasis, and ellipses omitted).
II. Specific Jurisdiction
Where, as here, general jurisdiction is lacking, a court may still exercise specific jurisdiction if the case arises out of the defendant's minimum contacts with the forum state. Int'l Shoe Co., 326 U.S. at 316. Federal Circuit law applies to the “issue of personal jurisdiction in a declaratory action for non-infringement [if the case] is intimately related to patent law.” Lake Assocs., LLC v. DNZ Prods. LLC, 886 F.Supp.2d 1203, 1207 (D. Or. 2012) (citation and internal quotations omitted). The following three-prong test governs whether specific jurisdiction is proper in a patent infringement action: (1) a defendant must purposefully direct its activities at residents of the forum; (2) the plaintiff's claim must be one which arises out of or relates to the defendant's forum-related activities; and (3) the exercise of personal jurisdiction over the defendant must be “reasonable and fair.” Id. at 1210. “The plaintiff has the burden of proving parts one and two of the test, and then the burden shifts to the defendant to prove that personal jurisdiction is unreasonable.” Id. (citation and internal quotations omitted).
In actions such as this for a declaratory judgment of non-infringement, the Federal Circuit has articulated the quality and quantum of evidence necessary to satisfy this test. Under that precedent, it is well-established that “[t]he sending of an infringement letter - that is, a letter sent from the defendant-patentee to the plaintiff alleging the infringement of a patent - without more, is insufficient to satisfy the requirements of due process.” Id. (citation and internal quotations omitted); see also Red Wing Shoe Co., Inc. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1361 (Fed. Cir. 1998) (“cease-and-desist letters alone do not suffice to justify personal jurisdiction . . . Standards of fairness demand that [a defendant] be insulated from personal jurisdiction in a distant - foreign forum when its only contacts with that forum were efforts to give proper notice of its patent rights”).
Thus, to demonstrate specific personal jurisdiction, “there must be other activities directed at the forum and related to the cause of action besides the letters threatening an infringement suit.” Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1202 (Fed. Cir. 2003). These “other activities” do not encompass a “patentee's mere acts of making, using, offering to sell, selling, or importing products - whether covered by the relevant patent(s) or not.” Avocent Huntsville Corp.v. Aten Int'l Co., Ltd., 552 F.3d 1324, 1336 (Fed. Cir. 2008). Instead, “only enforcement or defense efforts related to the patent . . . are to be considered for establishing specific personal jurisdiction in a declaratory judgment action.” Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1018 (Fed. Cir. 2009). As such, “other activities” include “initiating judicial or extra-judicial patent enforcement within the forum, or entering into an exclusive license agreement or other undertaking which imposes enforcement obligations with a party residing or regularly doing business in the forum.” Avocent, 552 F.3d at 1334.
As defendant correctly denotes, “[n]one of these ‘other activities' is alleged in the Complaint.” Def.'s Mot. Dismiss 11 (doc. 4). Similarly, no “other activities” were unearthed in the course of jurisdictional discovery. That is, plaintiff does not put forth any argument or evidence suggesting that defendant has exclusive licensing agreements with any local retailer or has otherwise garnered enforcement obligations in relation thereto.
Rather, the only potential forum-related activities cited are defendant's cease-and-desist letter, unspecified communications with plaintiff's factory, and Oregon-related business activities. Compl. ¶¶ 7, 12, 14 (doc. 1). As discussed above, however, the cease-and-desist letter alone is inadequate, especially considering that it was addressed to Ukiah Co.'s corporate headquarters in - the State of Washington. Muffo Decl. Ex. B (doc. 5); see also Radio Sys. Corp. v. Accession, Inc., 638 F.3d 785, 792 (Fed. Cir. 2011) (“enforcement activities taking place outside the forum state do not give rise to personal jurisdiction in the forum”). Beyond remotely communicating with Oregon attorneys for a brief period prior to the commencement of this suit, plaintiff has not come forth with any facts indicating that defendant purposefully directed its activities to this forum.
As a result, the precedent that plaintiff relies on is distinguishable. Namely, in Apple Inc. v. ZipitWireless, Inc., 30 F.4th 1368 (Fed. Cir. 2022), the defendant-patentee sent notice letters to the declaratory-judgment plaintiff over the course of several years, and traveled to the forum multiple times to meet with the plaintiff to discuss allegations of infringement and potential licensing of the patents involved. Further, Def. Distrib. v. Grewal, 971 F.3d 485 (5th Cir. 2020), cert. denied, 141 S.Ct. 1736 (2021), revolved around the New Jersey Attorney General's efforts to “hamstring the plaintiffs' distribution of materials related to the 3D printing of firearms,” and therefore did not concern an underlying patent or its enforcement.
Further, the complaint does not allege that plaintiff's factory is located in Oregon (and, according to defendant, “it is not”). Def.'s Mot. Dismiss 12 (doc. 4). Finally, the fact that defendant had a regional sales representative covering Oregon and sells its products through Fred Meyer, Home Depot, Lowes, Ace Hardware, and Costco does not support a finding of specific personal jurisdiction. See Avocent, 552 F.3d at 1336 (“mere evidence of sales within the forum of products covered by the relevant patent(s) is insufficient to guarantee specific personal jurisdiction over the patentee”); see also Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d 1356, 1366 (Fed. Cir. 2006) (specific personal jurisdiction is not proper even where the patentee “has successfully licensed the patent in the forum state [if it] has no dealings with those licensees beyond the receipt of royalty income”); Body Fit Training USA Inc. v. F45 Training Pty. Ltd., 2020 WL 8372966, *6 (C.D. Cal. Dec. 3, 2020) (“[o]rdinary commercialization or sale of products is not ‘other activity' that would create specific jurisdiction when combined with litigation threats . . . What the defendant-patentee makes, uses, or sells is not relevant to the enforcement of a patent”).
In sum, because the cease-and-desist letter is insufficient, plaintiff was required to show that defendant engaged in other activities related to the enforcement or defense of the 188 Patent. Plaintiff has not done so. Significantly, plaintiff has not cited to, and the Court is not aware of, any evidence reflecting that defendant entered into licensing agreements in Oregon that are either exclusive or impose enforcement obligations on the licensee, and defendant's sale of products in Oregon is “irrelevant to the specific personal jurisdiction analysis in a declaratory judgment action.” Lake Assocs., 886 F.Supp.2d at 1211.
Given plaintiff's inability to satisfy the first and second prong of the test for specific personal jurisdiction, the Court need not analyze the third prong. The Court nonetheless notes that, because defendant has no apparent 188 Patent forum-related enforcement activities, the exercise of personal jurisdiction would not be reasonable or fair in this case. See Maxchief Inv. Ltd. v. Wok& Pan, Ind., Inc., 909 F.3d 1134, 1141 (Fed. Cir. 2018) (“[i]n the declaratory judgment context, notice letters do not suffice for personal jurisdiction because they do not satisfy the ‘fair play and substantial justice' prong due to policy considerations unique to patent law”).
RECOMMENDATION
For the reasons stated herein, defendant's Motion to Dismiss (doc. 4) should be granted and judgment should be prepared dismissing this case. Defendant's request for oral argument is denied as unnecessary.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.