A foreign defendant is subject to specific personal jurisdiction when it imports and controls the distribution of allegedly infringing products into the forum.

Nuance Communications Inc. v. Abbyy Software House, No. 2010-1100 (Fed. Cir. Nov. 12, 2010).

The patentee filed a patent infringement action involving optical character recognition (OCR) technology against several alleged infringers including a U.S. entity responsible for selling and distribution of the allegedly infringing product, and related corporations organized under the laws of the Russian Federation and the Republic of Cyprus. The alleged infringers moved to dismiss the foreign entities for (1) lack of personal jurisdiction in the Northern District of California; and (2) improper service of process of the Russian entity. The district court, without holding an evidentiary hearing, granted the motions to dismiss as the alleged infringers on both grounds. On appeal, the Federal Circuit reversed and remanded for further proceedings.

Specific personal jurisdiction over the alleged infringers is governed by a three-pronged test. First, whether the alleged infringers purposefully directed activities at residents of California. Second, whether the claim of the lawsuit arises out of or relates to those activities. Third, whether the assertion of personal jurisdiction is reasonable and fair.

All three prongs of this test were met as to the entity organized under the law of the Russian Federation. For the first prong, the Russian entity had significant business activities in California, including the importation of allegedly infringing products, the extraction of royalty payments for sales of the products, and assistance to the related U.S. entity selling the products. The second prong was satisfied because the case related to the purposeful importation of the allegedly infringing goods into California. Under the third prong, the assertion of personal jurisdiction was fair because the alleged infringers “established a distribution system . . . that was intended to deliver products to the U.S. market via a commonly owned California entity.”

Although the record was insufficient to determine whether the parent company organized under the laws of Cyprus “purposefully availed itself of the privilege of conducting activities in California,” public information suggested facts supporting personal jurisdiction. In particular, the parent company’s Web site identified multiple California entities as customers and provided information about retail stores in California selling the allegedly infringing product. Hence, the district court abused its discretion by dismissing the parent company without jurisdictional discovery.

The district court also erred in its findings of improper service. Because the Russian Federation does not currently follow the Hague Convention, the plaintiff was not obligated to follow the procedures for service contained therein. Thus, personal service was acceptable because it was an appropriate means of service of corporations under the Russian Federation’s law. The district court erred in sua sponte finding improper service of the parent company because the parent company did not address the issue and thus waived any objection to service of process.

A copy of the opinion can be found here.