IP Law Daily Lawsuit threats, licensing offers subjected patent holder to personal jurisdiction
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Wednesday, May 12, 2021

Lawsuit threats, licensing offers subjected patent holder to personal jurisdiction

By Thomas Long, J.D.

In a dispute over electronic logging device patents, the patent owner’s communications with an accused infringer in California constituted sufficient contacts with that state with respect to an action seeking a declaration of noninfringement.

A Texas limited liability company that was the assignee of 11 patents related to electronic logging devices and geofencing was subject to personal jurisdiction in the Northern District of California with respect to a declaratory judgment noninfringement action brought by manufacturers and sellers of positioning and navigation products, the U.S. Court of Appeals for the Federal Circuit has held. The appellate court reversed a decision of the district court dismissing the suit on the ground that it would be "constitutionally unreasonable" to assert personal jurisdiction over the Texas company based on its cease-and-desist letters and other communications directed to the manufacturers in California. The Federal Circuit noted that it had previously rejected the notion that patent enforcement letters could never provide the basis for jurisdiction in a declaratory judgment action. The Texas company had done more than merely inform the manufacturers of suspected patent infringement; it repeatedly threatened litigation, identified counsel it planned to engage in an infringement suit, and initiated licensing negotiations. These actions were sufficient to subject the Texas company to personal jurisdiction, the court concluded (Trimble Inc. v. PerDiemCo LLC, May 12, 2021, Dyk, T.).

Patent holder; patented technology. The defendant, PerDiemCo LLC, based in Texas, held 11 patents with a common specification, six of which related to electronic logging devices and geofencing, and five of which related solely to electronic logging devices. These devices are used to keep track of the hours and activities of truck drivers and other commercial vehicle drivers to assist in compliance with federal and state safety regulations. Geofencing involves monitoring whether a vehicle enters or leaves a specific preset area. PerDiemCo’s sole owner, officer, and employee resided in Washington, D.C., and the company rented office space in Marshall, Texas, but the owner had never visited the space, and no employees worked there.

Accusations of infringement. The plaintiffs, Trimble Inc. and its wholly owned subsidiary, Innovative Software Engineering, LLC (ISE), made and sold positioning and navigation products and services that relied on the Global Positioning System. Trimble and ISE supplied electronic logging devices and related services, and Trimble sold geofencing products. Incorporated in Delaware, Trimble was headquartered in Sunnyvale, California. ISE was based in Coralville, Iowa.

In October 2018, PerDiemCo sent a letter to ISE accusing the latter of infringing PerDiemCo’s electronic logging device patents. Attached to the letter was an unfiled complaint for the Northern District of Iowa, which asserted nine of PerDiemCo’s patents against ISE’s products and services, and a claim chart detailing the alleged infringement. The letter offered ISE a nonexclusive license to the asserted patents and invited ISE to engage in negotiations. Trimble took over as the point of contact between the parties, and PerDiemCo informed Trimble that it, too, had infringed PerDiemCo’s patents. During mediation talks, PerDiemCo added two more patents to the list of allegedly infringed patents. Throughout negotiations, which lasted through December 2018, PerDiemCo communicated with Trimble via letter, email, or telephone at least 22 times. In those communications, PerDiemCo threatened to sue Trimble for patent infringement in the Eastern District of Texas.

Declaratory judgment action. On January 29, 2019, Trimble and ISE filed suit against PerDiemCo in the Northern District of California, seeking a declaratory judgment that they did not infringe any of the patents asserted by PerDiemCo. They argued that PerDiemCo was subject to personal jurisdiction in that district under a specific jurisdiction theory. PerDiemCo moved to dismiss, contending that the district court lacked personal jurisdiction under Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), in which the Federal Circuit held that "[a] patentee should not subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement" because "[g]rounding personal jurisdiction on such contacts alone would not comport with principles of fairness." The district court granted the motion to dismiss, reasoning that the communications between the parties constituted the requisite minimum contacts with the forum, but exercising specific personal jurisdiction over PerDiemCo would be "constitutionally unreasonable." Trimble and ISE appealed.

Personal jurisdiction. The parties did not dispute the underlying facts, so the Federal Circuit reviewed the question of personal jurisdiction de novo. PerDiemCo argued that the district court was correct in applying Red Wing because the court in that case held that the sending of demand letters did not create personal jurisdiction. However, noted the Federal Circuit, subsequent developments had clarified the scope of that case. First, the Supreme Court had made it clear that the analysis of personal jurisdiction cannot rest on special considerations unique to patent cases. Second, the Supreme Court had held that communications sent into a state may create specific personal jurisdiction, depending on their nature and scope. Following this guidance, recent Federal Circuit cases had concluded that, in the context of patent litigation, communications threatening suit or proposing settlement or patent licenses can be enough to establish personal jurisdiction. The court had specifically rejected the notion that patent enforcement letters could never provide the basis for jurisdiction in a declaratory judgment action. Finally, the Supreme Court had established that minimum contacts required that a defendant deliberately "reached out" beyond its home, such as by entering into contractual relations in the forum at issue. In the Federal Circuit’s view, nonexclusive patent licenses—such as those offered by PerDiemCo—could support personal jurisdiction under the principle enunciated by the High Court.

Although Red Wing remained good law with respect to scenarios involving "limited" communications that amounted to "isolated or sporadic" contacts, the Federal Circuit distinguished the facts of the current case from Red Wing and held that the minimum contacts or purposeful availment test was satisfied here. PerDiemCo’s contacts with California were far more extensive than those in Red Wing, and PerDiemCo had repeatedly contacted Trimble and ISE in California within a short period of time. PerDiemCo did more than merely inform Trimble and ISE that it suspected them of infringing patents; PerDiemCo threatened litigation multiple times, informed Trimble and ISE of the name of the lawyer it intended to hire in the Eastern District of Texas, and initiated arms-length negotiations over potential licenses. Moreover, Trimble was headquartered in California—a connection to the forum that was not present in Red Wing.

The appellate court rejected PerDiemCo’s contention that assertion of jurisdiction would still be unreasonable. Litigating the case in California would not unduly burden PerDiemCo, as indicated by its prior willingness to litigate infringement claims in districts far from its home base. The Northern District of California had a strong interest in adjudicating the dispute, which involved a resident of the district, Trimble. Trimble indisputably had an interest in protecting itself against patent infringement liability in a nearby district, the court said. Jurisdiction in California would result in an efficient resolution of the controversy, and there did not seem to be any conflict between California’s interests and those of any other state.

Therefore, the Federal Circuit reversed the district court’s order finding a lack of personal jurisdiction and remanded for further proceedings.

This case is No. 2019-2164.

Attorneys: Amanda Tessar (Perkins Coie LLP) for Trimble Inc. and Innovative Software Engineering LLC. Laurence M. Sandell (Mei & Mark LLP) for PerDiemCo LLC.

Companies: Trimble Inc.; Innovative Software Engineering LLC; PerDiemCo LLC

MainStory: TopStory Patent GCNNews FedCirNews

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