Federal Circuit Finds Cease and Desist Letters Do Not Establish Personal Jurisdiction Over a Patentee

In Radio Systems Corporation v. Accession, Inc., 98 U.S.P.Q.2d 1485 (Fed. Cir. 2011), Accession, Inc. is the owner of U.S. Patent No. 7,207,141 (“the ‘141 patent). The ‘141 patent is directed to a portable pet access door (the “Widget”) that can be inserted into sliding glass doors. The company is a New Jersey corporation with its principal place of business in Hamilton, New Jersey. Accession’s sole employee is its president and inventor of the Widget, Thomas Sullivan.

Radio Systems Corporation is a Delaware corporation with its principle place of business in Knoxville, Tennessee. It manufactures several pet related products, including a patented electronic pet access door (the “SmartDoor”), which unlocks in response to a transmitter worn by the pet.

Starting in November 2006, Mr. Sullivan approached Radio System on various occasions regarding licensing and marketing of the Widget. These attempts were received with little or no response from Radio Systems. In 2007, Radio Systems applied for a patent on its SmartDoor device. In February of 2009, Radio Systems agreed to meet with Mr. Sullivan to view a demonstration of the Widget. Both parties signed a nondisclosure agreement prior to the meeting. Mr. Sullivan travelled to Tennessee to demonstrate the Widget to a Radio Systems’ representative. Following the meeting, Mr. Sullivan sent several more emails to Radio Systems, but Radio Systems neither expressed interest in the marketing proposal nor in licensing the Widget.

In June of 2009, the United States Patent and Trademark Office (USPTO) issued a notice of allowance for Radio Systems’ SmartDoor device. On August 2009, Accession retained legal counsel and alerted the USPTO examiner for SmartDoor to the existence of Accession’s ‘141 patent. The USPTO examiner then withdrew the notice of allowance issued for SmartDoor. Accession’s counsel then notified Radio Systems’ counsel stating that SmartDoor infringed the ‘141 patent and that interference proceedings would be warranted between the ‘141 patent and SmartDoor application. In September of 2009, Accession counsel sent letters to Radio Systems outlining Accession’s infringement allegations and suggesting the dispute be settled through a licensing agreement.

On November 5, 2009, Radio Systems filed a complaint in the United States District court for the Eastern District of Tennessee seeking a declaratory judgment of noninfringement and invalidity with respect to the ‘141 patent.  Radio Systems justified suit in this forum based on specific jurisdiction – arising out of events related to the instant dispute – and not general jurisdiction – arising from continuous and systematic general business contacts. Accession moved to dismiss the action for lack of personal jurisdiction, or in the alternative, to transfer the case to the United States District Court for the District of New Jersey. The Tennessee district court granted Accession’s motion to dismiss. Shortly after Accession filed an infringement action in the District of New Jersey, where the suit was stayed pending Federal Circuit appeal.

On appeal, the Federal Circuit explained that an action for a declaratory judgment “arises out of or relates to the activities of the defendant patentee in enforcing the patent or patents in suit,” and that the relevant inquiry for specific jurisdiction is “to what extent… the defendant patentee purposefully directed such enforcement activities at residents of the forum and the extent to which the declaratory judgment claim arises out of or relates to those activities.” Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1332 (Fed. Cir. 2008). Only the activities of the patentee which relate to the enforcement or defense of the patent can give rise to specific personal jurisdiction. Relying on Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), the Federal Circuit noted that ordinary cease-and-desist notices sent by a patentee to an alleged infringing party in a different state are not sufficient to subject the patentee to specific jurisdiction in that state.  Relying on Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1019 (Fed. Cir. 2009), the Federal Circuit held that cease-and-desist notices must be taken in conjunction with other enforcement actions to support specific jurisdiction in a foreign forum.

In applying this precedent, the Federal Circuit rejected Radio Systems’ argument that Accession’s communications regarding marketing strategies, licensing proposals and commercialization efforts establishes personal jurisdiction over Accession in Tennessee. Specifically, the Federal Circuit held that these commercialization efforts were not enforcement or defense efforts related to the ‘141 patent, and it is only the enforcement or defense efforts  rather than the patentee’s own commercialization efforts which are to be considered for establishing specific personal jurisdiction in a declaratory judgment action against the patentee. Thus Accession’s marketing, licensing and commercialization communications were insufficient to find specific jurisdiction since they were not part of the enforcement or defense of the ‘141 patent.

Radio Systems next argued that infringement threats delivered by Accession’s counsel along with Accession’s communications with the USPTO give rise to a more extensive enforcement effort and thus specific jurisdiction over Accession. The Federal Circuit noted that warnings and threats of infringement suites are typical and not enforcement or defense correspondence. In contrast, the Federal Circuit in Campbell Pet Co. v. Miale, 542 F.3d 879 (Fed. Cir. 2008) did find specific jurisdiction as there were extrajudicial enforcement activities in the forum state in the form of contacts at trade shows in the forum state as a form of self help enforcement.  As such, the Federal Circuit found the communications between Accession’s counsel and the USPTO inVirginia were insufficient to establish specific personal jurisdiction because the attempts were neither made in the forum state ofTennessee nor were they enforcement or defense efforts.

Lastly, the Federal Circuit also held that though the 2009 nondisclosure agreement contained a forum clause naming the Eastern District of Tennessee, the clause only pertained to confidential information.  In patenting the Widget, Accession disclosed the information to the public such that anything in the ‘141 patent was not confidential.  Moreover, since the SmartDoor had been in the marketplace since August 2007, it was not confidential information under the 2009 nondisclosure agreement as it was information independently owned by Radio Systems prior to the nondisclosure agreement. Therefore, the nondisclosure agreement had no bearing on establishing personal jurisdiction in this action for declaratory judgment, which related to the ‘141 patent.  As such, the Federal Circuit affirmed the dismissal for lack of personal jurisdiction.

Significance for Patent Owners

Finding mechanisms to contact potential licensees has been problematic after MedImmune, Inc. v. Genentech Inc., 549 U.S. 118 (2007), which lowered the standard for bringing declaratory judgment actions.  Thus, almost any contact with a potential licensee could be characterized as a threat of serious business injury sufficient to give rise to such an action.  However, Radio Systems highlights the fact that not all contacts present such a serious business threat.  Of special interest is the Federal Circuit finding that contacting the examiner of a licensee’s application does not give rise to a declaratory judgment action.  Since the current version of the Patent Reform Act contains numerous new mechanisms for contacting examiners prior to patent grant as discussed below in the Feature Comment, Radio Systems provides some comfort that such contacts should not give rise to a retaliatory declaratory judgment action by the patent applicant.

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