Search the Archives           Subscribe           About this News Service           Reader Comments

Archived updates for Thursday, April 13, 2006

Ongoing Relationship with Licensee Creates Jurisdiction in Licensee's State

In Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories, Inc. et al. (Fed. Cir. April 7, 2006), the court applied Federal Circuit law to hold that an ongoing relationship with the licensee was sufficient to give the court jurisdiction over the patent owner where the licensee did business.
The issue of personal jurisdiction in a declaratory action for
non-infringement is "intimately related to patent law" and thus governed by
Federal Circuit law regarding due process. Silent Drive, Inc. v. Strong Indus.,
Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003). Where a suit involves both patent
and non-patent claims, Federal Circuit law regarding due process also applies to
the question of personal jurisdiction on non-patent claims if "the resolution of
the patent infringement issue will be a significant factor" in determining
liability under the non-patent claims. 3D Sys., Inc. v. Aarotech Labs., Inc.,
160 F.3d 1373, 1377 (Fed. Cir. 1998). A court must inquire whether the defendant
has "purposefully directed his activities" at the forum state and, if so,
whether "the litigation results from alleged injuries that arise out of or
relate to those activities." Burger King, 471 U.S. at 472. Then, to defeat
jurisdiction, the burden of proof shifts to the defendant, which must "present a
compelling case that the presence of some other considerations would render
jurisdiction unreasonable." Id.

. . . In sum, our case law has held as follows: where a defendant has sent cease
and desist letters into a forum state that primarily involve a legal dispute
unrelated to the patent at issue, such as an injunction obtained for
misappropriation of trade secrets, the exercise of personal jurisdiction is
improper. Silent Drive, 326 F.3d at 1202. Likewise, a defendant may not be
subjected to personal jurisdiction if its only additional activities in the
forum state involve unsuccessful attempts to license the patent there.
Hildebrand, 279 F.3d at 1356. The same is true where the defendant has
successfully licensed the patent in the forum state, even to multiple
non-exclusive licensees, but does not, for example, exercise control over the
licensees’ sales activities and, instead, has no dealings with those licensees
beyond the receipt of royalty income. Red Wing Shoe, 148 F.3d at 1357-58.

In contrast, the defendant is subject to personal jurisdiction in the forum
state by virtue of its relationship with its exclusive forum state licensee if
the license agreement, for example, requires the defendant-licensor, and grants
the licensee the right, to litigate infringement claims. Akro, 45 F.3d at 1546.
Finally, the defendant will also be subject to personal jurisdiction in the
forum state if the exclusive licensee (or licensee equivalent) with which it has
established a relationship is not headquartered in the forum state, but
nonetheless conducts business there. Genetic Implant, 123 F.3d at 1457-59.

. . . Thus, the crux of the due process inquiry should focus first on whether the
defendant has had contact with parties in the forum state beyond the sending of
cease and desist letters or mere attempts to license the patent at issue there.
Where a defendant-licensor has a relationship with an exclusive licensee
headquartered or doing business in the forum state, the inquiry requires close
examination of the license agreement. In particular, our case law requires that
the license agreement contemplate a relationship beyond royalty or
cross-licensing payment, such as granting both parties the right to litigate
infringement cases or granting the licensor the right to exercise control over
the licensee’s sales or marketing activities.

Here, in addition to sending letters into the forum state, which we
presume qualify as "cease and desist" letters, Metabolite has entered into an
exclusive license with PamLab, a company that, while not headquartered or
incorporated in Florida, conducts business in Florida. As part of the license
agreement, Metabolite granted PamLab the right to sue for patent infringement
with Metabolite’s written consent, and the parties agreed to "discuss in good
faith the appropriate action, if any, with respect to third party infringers of
the Licensed Patents, and to cooperate reasonably in any enforcement actions".
Metabolite granted PamLab "full control of the prosecution or maintenance" of
any patent or application that Metabolite abandons or permits to lapse and
agreed to provide PamLab with an executed power of attorney for that purpose.
Metabolite further agreed to "provide consultation to PamLab in the science,
medicine and marketing of vitamins and related products, from time to time".

That this exclusive license agreement not only contemplated an ongoing
relationship between PamLab and Metabolite beyond royalty payments but has
actually resulted in such a relationship is obvious from the facts of this case.
Metabolite coordinates with PamLab in sending cease and desist letters and in
litigating infringement claims in Florida and elsewhere and, as is the case
here, licensor and licensee are often represented jointly by counsel. As such,
we hold that, through its relationship with PamLab, which sells products in
Florida, Metabolite has purposefully availed itself to the privilege of
conducting activities within Florida.
    (0)comment(s)     translate     More Updates     Send