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<img class="alignright wp-image-2449 size-medium" src="https://ipintelligencereport.bakerhostetlerblogs.com/wp-content/uploads/sites/11/2016/03/Patent-Pending-Stamp-300x225.jpg" width="300" height="225" />In Xilinx Inc. v. Papst Licensing GmbH &amp; Co. KG, Appeal No. 2015-1919 (Fed. Cir. Feb. 15, 2017), the Federal Circuit applied the usual test for in personam jurisdiction, in an apparently new way, to reverse dismissal of a declaratory judgment suit against an alien patent owner seeking to avoid the alleged infringer’s home forum. More specifically, a panel consisting of Chief Judge Prost and Circuit Judges Newman and Dyk held that the Northern District of California had specific personal jurisdiction over a German patent owner, Papst Licensing GmbH &amp; Co. KG, that, as a nonpracticing entity and in accordance with its usual practice, mailed notice to the alleged infringer, Xilinx, Inc., that it was infringing and should consider taking a license. After Papst mailed that notice, Papst representatives traveled to California and met with Xilinx representatives to discuss Papst’s allegations and potential licensing. When no agreement was reached, Xilinx filed a declaratory judgment suit in the Northern District seeking a declaration of invalidity and noninfringement. Papst moved to dismiss for lack of in personam jurisdiction or to transfer to the District of Delaware, where Papst had filed an infringement suit against Xilinx.

The district court granted Papst’s motion to dismiss. It held that there was no basis for general jurisdiction. As to specific jurisdiction, relying on Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), and Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1333 (Fed. Cir. 2008), the district court held that asserting jurisdiction did not comport with “fair play and substantial justice.” See International Shoe Co. v. Washington, 326 U.S. 310, 320 (1945). The district court reasoned that under Federal Circuit law, attempts to license patents are insufficient or even irrelevant. Although Papst had sued others in California for allegedly infringing other patents, the court also deemed those suits irrelevant.

The district court’s decision is not surprising based on Federal Circuit precedents. In Red Wing, the Federal Circuit held that the district court lacked in personam jurisdiction over a patent owner/defendant in a declaratory judgment suit because asserting jurisdiction based on only the defendant’s sending cease-and-desist letters would not comport with “fair play and substantial justice.” The court explained, “Principles of fair play and substantial justice afford a patentee sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum. 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.” 148 F.3d at 1360-61. The court further explained that offering a license is tantamount to the settlement of litigation, and federal policy encourages settlement negotiations. Id. at 1361. Accord Avocent, 552 F.3d at 1340.

Even more pertinent is Autogenomics, Inc. v. Oxford Gene Technology Ltd., 566 F.3d 1012 (Fed. Cir. 2009). Autogenomics, like Xilinx, was a declaratory judgment suit filed by a California company against an alien patent owner that had accused the California company of infringement (via email) and then sent two representatives to California for unsuccessful licensing negotiations. The alien patent owner, Oxford, appears to have had greater contacts with California than did Papst, since Oxford was not a nonpracticing entity, granted nonexclusive licenses and one exclusive license to about ten California companies regarding its microarray technology; granted a nonexclusive license of the patent-in-suit to a California company; had a supply agreement to purchase arrays from a California company for Oxford’s use or resale; had sold 20 microarrays to a California company for $7,600 (about 1% of its annual revenue); had attended four scientific conferences in California, the last of which focused on the technology of the patent-in-suit; and had issued a statement that it had a broad licensing policy for its patents. The district court in the Autogenomics case, like the district court in Xilinx, held on the basis of Red Wing that it lacked in personam jurisdiction over the alien patent owner, and the Federal Circuit affirmed. In both Autogenomics and Avocent, however, Judge Newman, a member of the unanimous panel in Xilinx, vigorously dissented.

The Federal Circuit in Xilinx distinguished Red Wing and reversed the district court’s holding that it lacked specific personal jurisdiction, but the court did not attempt to distinguish Autogenomics, even though it relied on Autogenomics for some of the controlling legal principles. Applying the same legal test it applied in its previous cases but reaching a different conclusion, the court observed that because California’s long-arm statute permits service of process to the full extent permitted by the due process clause, specific personal jurisdiction exists if the defendant purposefully directed its activities at residents of the forum, the claim arises out of or relates to the defendant’s activities with the forum, and the assertion of personal jurisdiction is reasonable and fair. Slip op. at 8-9. Citing Avocent, the court explained that the contacts relevant to the minimum contacts are those that the patentee purposefully directs at the forum that relate in a material way to enforcing or defending the patent. Id. at 9.

Thus, applying the same test for specific personal jurisdiction as in Red Wing and its progeny, the court in Xilinx reasoned, “[T]here is no question that Papst has the required minimum contacts with California. Papst purposefully directed its activities to California when it sent multiple notice letters to Xilinx and traveled there to discuss Xilinx’s alleged patent infringement and potential licensing arrangements.” Id. at 10. But now the court found it more significant that representatives of Papst visited the forum for negotiations with Xilinx. “As the Supreme Court has explained, ‘physical entry into the State—either by the defendant in person or through an agent . . . —is certainly a relevant contact.’” Id. (quoting Walden v. Fiore, 134 S. Ct. 1115, 1122 (2014)).

As to the remaining “reasonable and fair” prong of the in personam jurisdiction inquiry, the court observed that if the defendant had the required minimum contacts with the forum, a court should consider other factors, including circumstances beyond those relevant to the minimum contacts, such as the burden on the defendant, the forum state’s interest in adjudicating the dispute, the plaintiff’s interest in obtaining convenient relief, the judicial system’s interest in the most efficient resolution of the controversy, and the states’ interest in furthering fundamental substantive social policies. Id. at 12-13 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)). Moreover, the court noted that where the necessary minimum contacts exist, there is a presumption that in personam jurisdiction over the defendant is reasonable, and the defendant has the burden of presenting a compelling case to the contrary.

The court held that Papst failed to carry that burden. It reasoned that Xilinx had an interest in litigating in its home forum instead of in the Eastern District of Virginia under 35 U.S.C. § 293 (slip op. at 13 &amp; n.3), that California had a substantial interest in protecting its residents from unwarranted claims of infringement (id. at 14), that jurisdiction over Xilinx in California would be efficient (id.), and that there would be no conflict with the interests of any other state because the uniform federal patent law would govern regardless of the forum (id.). Finally, the court reasoned that Papst had not demonstrated that requiring it to litigate in California would be unduly burdensome. Id. at 17.

As noted above, the court distinguished its holding in Red Wing. Specifically, it observed that Papst did not merely send letters to Xilinx, but sent representatives to California for in-person negotiations. But, as also noted above, the court did not attempt to distinguish Autogenomics, which also involved an alien patent owner that sent representatives to California for in-person negotiations. The court cited other factors distinguishing Red Wing, however, namely Papst’s status as a nonpracticing entity that inherently must litigate its patents in jurisdictions far from its home (but which minimizes its contacts with the forum) and Papst’s filing at least seven previous patent infringement suits in California.
The apparent shift that at least this panel’s reasoning reflects is evidenced most clearly in the penultimate paragraph of the opinion:
In light of the totality of circumstances present in this case, this is not “one of the ‘rare’ situations in which sufficient minimum contacts exist but where the exercise of jurisdiction would be unreasonable.” . . . In other words, there is simply no “compelling case” here that personal jurisdiction over Papst is unreasonable. Burger King, 471 U.S. at 477.
Slip op. at 18 (citation omitted). Unless the court takes the issue up en banc or the Supreme Court enters the fray, patent owners and alleged infringers will both have authorities they can cite when in personam jurisdiction is contested under circumstances similar to those in Autogenomics and Xilinx.

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Federal Circuit Expands Personal Jurisdiction in Declaratory Judgment Suits