More than a year after being filed, Imation Corporation v. Sanho Corporation is finally poised to move into the discovery phase after the recent denial of Sanho’s motion to dismiss.
The case centers on whether Sanho’s iStick product – a flash memory device that can connect to both USB 2.0 ports and Apple’s lightning connector – infringes several Imation patents. But since last fall, the dispute has focused on whether Sanho is subject to jurisdiction in Minnesota and whether Imation’s complaint, which comported with the no-longer-applicable Form 18, sufficiently stated a claim for patent infringement. According to Chief Judge Tunheim’s recent order, jurisdiction is proper and the complaint adequate.
Jurisdiction by Crowdfunding
Sanho moved to dismiss in October 2015, arguing that Minnesota lacked personal jurisdiction under both general and specific jurisdiction theories. Sanho noted that it had no offices, stores, employees or bank accounts in the state and that less than 2 percent of its total sales were made to Minnesota residents (all via online transactions). Thus, Sanho argued, the Court could not find that it had systematic or continuous contacts with Minnesota nor that it had directed relevant business activities toward the state.
Imation’s response focused on a specific jurisdiction theory. In fact, the company did not even argue general jurisdiction (but did ask for the opportunity to conduct discovery as to the extent of Sanho’s contacts with the state if the Court was unpersuaded on the specific jurisdiction front). Imation’s central argument was that jurisdiction was appropriate because Sanho had ‘sold’ the accused products in Minnesota by offering them in exchange for donations on a Kickstarter page. Imation specifically identified one Kickstarter backer in Minnesota.
Judge Tunheim was persuaded, holding that “many if not all of Sanho’s Kickstarter backers were sent the allegedly infringing product, and that at least one of those backers lives in Minnesota …[thus,] [t]he possibility and probability that Sanho shipped one of the products at issue to a Minnesota resident is enough to [make a prima facie showing of personal jurisdiction by a preponderance of the evidence].” Start-ups looking to incentivize crowdfunding: beware!
Sufficiency of the Complaint
Sanho also asserted that Imation’s complaint lacked sufficient specificity and failed to identify with any particularity which patent claims were being asserted. Sanho emphasized that simply meeting the requirements of Form 18 was not enough in light of the April 29, 2015, amendments to the Federal Rules of Civil Procedure (which eliminated Rule 84 and its accompanying forms as of December 1, 2015).
Tunheim again sided with Imation, and upheld the sufficiency of the Complaint. The Judge noted that, at the time the pleading was filed the amendments to the Federal Rules eliminating Rule 84 and its accompanying forms were not in effect and in fact had not even been announced. Accordingly, the Court found it would not be just or practicable to apply the new standard retroactively. Given that Rule 84 is unquestionably no longer in effect, itis hard to see this ruling having much bearing on future litigants.
The Court has not yet entered a Scheduling Order for the case. A pretrial conference will be held on October 6.