The plaintiff filed a patent infringement action against the defendant in the Northern District of Illinois after licensing negotiations fell apart. Defendant, a Delaware corporation, with its principal place of business in Michigan moved to dismiss for lack of personal jurisdiction or, in the alternative, to transfer. The district court granted defendant's motion to dismiss, finding that it lacked personal jurisdiction over the defendant, but it permitted plaintiff to amend the complaint.
The plaintiff, operating out of Illinois, owned four patents pertaining to laser-etching technology, which is used to etch patterns and effects onto a wide range of materials, including fabrics and leather. Defendant sold leather for use in automotive interiors for distribution throughout the United States, including in the district. The parties had worked together since 2004, with the goal of selling leather etched with plaintiff's technology to automotive companies. In 2009, the plaintiff sent defendant some samples on a new etching which the plaintiff alleged defendant converted for its own use and sold to an automotive company. Ultimately, the parties began to negotiate a license to resolve these issues, among others. As part of these negotiations, the parties exchanged e-mails and negotiated by telephone as well. When the negotiations ceased, the plaintiff filed suit for patent infringement, breach of a non-disclosure agreement, and trade secret misappropriation, among other claims. The defendant moved to dismiss or transfer venue.
In analyzing whether there was personal jurisdiction over the defendant in Illinois for the patent infringement counts, the district court noted that the defendant's telephone calls and emails to the plaintiff during the negotiations were purposefully directed at the plaintiff in Illinois. Nonetheless, the district court found that the patent infringement claims did not "arise out of" or "relate to" those contacts. In reaching this conclusion, the district court relied on the Federal Circuit's decisions on personal jurisdiction in declaratory judgment actions against out of state patent holders. In particular, the district court noted that "[t]he Federal Circuit has held that it would not comport with fair play and substantial justice to subject a patentee to personal jurisdiction based solely on cease-and-desist letters sent to accused infringers in the forum." Rather, the "accused infringer must shows that the patentee engaged in 'other activities' related to patent enforcement in the forum" and "[m]erely attempting to license patents to someone in the forum is insufficient." Thus, based on Federal Circuit precedent, the district court found that "plaintiffs' patent infringement claims do not 'arise out of' or 'relate to' [defedant's] failed license negotiation with [plaintiff]."
The plaintiff also argued that jurisdiction was appropriate in Illinois because that is where plaintiff was injured by the patent infringement. The district court noted that it was not aware of any patent infringement case in which this doctrine was applied to an out of state defendant accused o patent infringement. It also concluded that it not believe that the Federal Circuit would construe personal jurisdictional so broadly as to allow personal jurisdiction wherever a patentee is located.
Thus, the district court found that plaintiff had not made a prima facie case showing that the defendant was subject to personal jurisdiction in Illinois with respect to the patent infringement claims. The district court did, however, provide plaintiff with a potential opening -- it might have personal jurisdiction over the state law claims brought by plaintiff if there was diversity jurisdiction and then it could exercise pendent personal jurisdiction over the patent claims. The district court could not tell from plaintiff's complaint whether such jurisdiction existed so it granted plaintiff leave to amend and, if plaintiff could establish that the parties were diverse, it would then analyze personal jurisdiction over the state law claims at that time.
This case highlights two important points. First, it continues to be very difficult to establish personal jurisdiction as a result of negotiations over patent rights. Second, if you expect a jurisdictional battle, it may be wise to add state law claims into your patent infringement complaint as it may well provide an additional, stronger basis for personal jurisdiction.
Technolines, LP and Echelon Laser System, LP v. GST Autoleather, Inc., Case No. 11 C 965 (N.D. Ill. June 30, 2011)