Opinion
Civ. File No. 02-4276 (MJD/JGL)
September 15, 2003
Stephan J. Snyder, Laura J. Hein, Peter R. Forrest, Gray, Plant, Mooty, Mooty Bennett, P.A., for and behalf of Plaintiff Travel Tags, Inc.
William F. Mohrman, Mohrman Kaardal, P.A., for and on behalf of Digital Replay, Inc.
Memorandum Opinion Order
Digital Replay seeks to either dismiss the present action, claiming that its ties to Minnesota do not warrant personal jurisdiction, or, in the alternative, to transfer venue to Colorado pursuant to 28 U.S.C. § 1406(a). Travel Tags opposes the motion. For the reasons set forth below, the Court finds that Digital Replay has sufficient contacts with the forum state to exercise personal jurisdiction.
FACTUAL BACKGROUND
Both Travel Tags and Digital Replay are in the business of manufacturing a novelty plastic beverage container known as a "lenticular cup," which displays multiple, exaggerated, or three-dimensional depth images, depending on the angle in which they are viewed. Both companies use a similar "molding" process to manufacture their cups.
Travel Tags manufactures its cups according to the specifications of U.S. Patent Application number 09,566,063. Travel Tags' `063 Application was filed on May 5, 2000 with the United States Patent and Trademark Office (USPTO) by Raymond Enterprises, LLC ("REL"). Its inventor is Mark Raymond. At the time the application was filed, Richard Guest was Vice President of Sales and Marketing of REL. The application was assigned to Travel Tags by virtue of a chain to title evidenced by assignments and other transfers of title recorded in the USPTO.
Digital Replay manufactures its cups according to the specifications of patent number 6,490,093. This patent was provisionally applied for through Digital Replay's `097 Application on December 22, 2000, more than eight months after the REL patent application was filed. According to the Complaint, much of the language of the Digital Replay patent application is identical to the REL patent application. Further, the patent designates Richard Guest, REL's former sales and marketing vice president, as sole inventor.
On December 3, 2002, in response to a "cease-and-desist" letter from Digital Replay, Travel Tags filed a Complaint in federal district court, seeking declaratory judgments that (1) Digital Replay's patent is invalid; (2) Travel Tags is not infringing the `093 Patent; (3) any patent from the Digital Replay `917 Application is unenforceable; (4) Digital Replay has violated 35 U.S.C. § 292 for false patent marking; (5) Digital Replay misappropriated Travel Tags' trade secrets; and (6) the true inventor of the Digital Replay `093 Patent is not Richard Guest.
Travel Tags asserts that Guest, as an officer of REL, breached his fiduciary duties by misappropriating the company's trade secrets. (Compl. at 6, ¶ 27).
Further, Travel Tags asserts that Digital Replay failed to disclose Travel Tags' provisional application and application despite Digital Replay's knowledge of the applications and verbatim replication of the applications' language in its own applications.
SUMMARY OF MOTION TO DISMISS
Digital Replay claims that it lacks sufficient contacts to Minnesota to confer personal jurisdiction. Digital Replay emphasizes that personal jurisdiction in Minnesota is improper because the contacts do not relate to the "patent invalidity" claim alleged in Travel Tags' declaratory judgment action. Digital Replay admits having a website that can be accessed anywhere in the world; having contracts with two Minnesota companies, Challenge Printing and GC Dynopress, to manufacture the lenticular lenses for the cups; having sent a letter to Travel Tags demanding that Travel Tags not infringe on its patented process; and that its product is sold in Minnesota. However, it argues that these contacts are insufficient to warrant specific jurisdiction in the present case, because such ties are unrelated to the patent applications at issue. It further claims that such ties to Minnesota lack the deliberate, continuous, and systematic nature required to warrant general jurisdiction.
Travel Tags responds that Digital Replay's admitted contacts, coupled with the presumptively true allegations set forth in the Complaint, fully support the conclusion that Digital Replay purposely availed itself of the privilege of doing business in Minnesota. It claims that the manufacturing contracts in Minnesota were established "through its patented process," that Digital Replay sold its product (which included products of national appeal, such as cups with Coca-Cola, Harry Potter, and professional sports team logos) to Minnesota consumers "through a national distribution network," that Digital Replay sent a cease and desist letter to Travel Tags' Minnesota offices, and that Digital Replay promoted its manufactured cups to a national audience through an interactive Internet website.
In reply, Digital Replay argues that a distinction exists between patent infringement and patent invalidity cases and that since all of the relevant actions relating to patent validity took place in Colorado, no specific personal jurisdiction exists Minnesota.
DISCUSSION
A. Governing Law
Digital Replay contests personal jurisdiction as it relates to the patent claims in Travel Tags' declaratory judgment action. Digital Replay is mistaken in its reliance on regional circuit law in this matter. A district court applies Federal Circuit law, rather than regional circuit law, in determining personal jurisdiction in patent related cases. See Red Wing Shoe Company, Inc., v. Hockerson-Halberstadt Inc., 148 F.3d 1355, 1358, 47 U.S.P.Q.2d 1192 (Fed. Cir. 1998) (citing Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564-65, 30 U.S.P.Q.2d 1001, 1006 (Fed. Cir. 1994)). Likewise, federal law applies, "to personal jurisdiction in declaratory judgment actions that involve patentees as defendants." Id. (citing Akro Corp. v. Luker, 45 F.3d 1541, 1543, 33 USQ2d 1505, 1506-07 (Fed. Cir. 1995)). Thus, "because the issue of personal jurisdiction in a declaratory action for patent invalidity and non-infringement is intimately related to patent law, personal jurisdiction" is governed by the law of the Federal Circuit. Silent Drive, Inc.v. Strong Industries, Inc., 326 F.3d 1194, 66 U.S.P.Q.2d 1602 (Fed. Cir. 2003).
A district court's consideration of personal jurisdiction over a non-consenting defendant outside the boundaries of the forum involves a two-part analysis:" (1) whether the facts presented satisfy the forum state's long-arm statute, and (2) whether the nonresident has `minimum contacts' with the forum state, so that the court's exercise of jurisdiction would be fair and in accordance with due process." Wines v. Lake Havasu Boat Mfg., 846 F.2d 40, 42 (8th Cir. 1988).
Minnesota's long arm statute extends as far as the Due Process Clause allows. Valspar Corp. v. Lukken Color Corp., 495 N.W.2d 408, 411 (Minn. 1992). Therefore, the Court may exercise personal jurisdiction over Digital Replay in the present case to the extent allowed under the Due Process Clause. Id.,
Due Process requires that a defendant have sufficient "minimum contacts" with a jurisdiction before its courts may exercise personal jurisdiction. Bell Paper Box, Inc. v. U.S. Kids, Inc. 22 F.3d 816, 818 (8th Cir. 1994). These "contacts" are sufficient when "the defendant's conduct and connection with the forum State are such that it should reasonably anticipate being haled into court there," and the "reasonable anticipation" requirement is satisfied if the defendant has engaged in some act by which it purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 (1985); World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297 (1980). At the pretrial stage, the plaintiff need only make a prima facie showing of sufficient contact through the complaint and supporting evidence, which will be taken as true. Beverly Hills Fan, 21 F.3d at 1563. But even if sufficient contacts can be established, Due Process still requires that "maintenance of the suit . . . not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Specific jurisdiction is exercised where a court premises jurisdiction over a defendant upon the relationship between the plaintiff's claims and the defendant's activities within the forum state. Morris v. Barkbuster, Inc., 923 F.2d 1277, 1280 (8th Cir. 1991). Where the plaintiff's claims "arise out of or are connected with the [defendant's] activities within the forum state," the defendant ordinarily should anticipate being "haled into court" in the forum. Int'l Shoe, 326 U.S. at 320; Barkbuster, 923 F.2d at 1280-81.
General jurisdiction over a nonresident defendant is exercised where a court premises jurisdiction over a nonresident defendant who has "continuous and systematic" contacts with the forum state, regardless of whether the plaintiff's claims are related to any of those contacts.Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S at 416-19. Exercising general jurisdiction over a nonresident defendant satisfies due process because a defendant who has extensive, systematic and continuous contacts with a forum state should reasonably anticipate being haled into court there — even if the particular plaintiff's claims "neither arise out of nor are related to the defendant's contacts with the forum." Barkbuster, 923 F.2d at 1280-81.
In Akro, the Federal Circuit consolidated the U.S. Supreme Court's jurisprudence for determining personal jurisdiction into a three factor test:
(1) whether the defendant "purposefully directed" its activities at residents of the forum; (2) whether the claim "arises out of or relates to" the defendant's activities with the forum; and (3) whether assertion of personal jurisdiction is "reasonable and fair."Silent Drive, 326 F.3d 1194 at 1202 (citing Akro, 45 F.3d at 1545).
The first two inquiries correspond to the "minimum contacts" requirement of International Shoe. Likewise, the third inquiry corresponds to the "fair play and substantial justice" requirement.Inamed Corp v. Kuzmak, 249 F.3d 1356, 1359, 58 USPQ2d 1774 (Fed. Cir. 2001).
B. Patent Invalidity Patent Infringement
Digital Replay asserts that because this is an action for patent invalidity rather than patent infringement, the `minimum contacts' that Travel Tags assert in support of specific personal jurisdiction over Digital Replay, are irrelevant because they do not deal with the invalidity of the patent. In particular, Digital Replay argues, "the facts relevant to the assertion of specific personal jurisdiction in a patent invalidity case are the contacts defendant has with the forum state related to the defendant's creation of the invention and application for the patent." (Def.'s Reply Mem. Supp. Mot. Dismiss at 2).
Initially, the Court observes that Digital Replay cites no authority for this argument. Further, patent invalidity is but one claim asserted in the Complaint regarding the patent at issue. The Complaint states that Travel Tags, "seeks a declaratory judgment under 28 U.S.C. § 2201 and 2202 of patent noninfringement, invalidity, unenforceability, determination of proper inventorship, damages for false patent marking, misappropriation of trade secrets, and award of attorney fees and expenses, interest, and other relief." (Compl. ¶ 4).
The Federal Circuit has stated, "Under our law, a potential defendant in an infringement suit may, in a proper case, preempt the patentee and initiate a suit challenging the enforcement of the patent. The issues on the merits are essentially the same in either situation; the test for personal jurisdiction, for the forum's power to hear the issues is the same." Viam Corp. v. Iowa Export-Import Trading Co., 84 F.3d 424, 428, 38 USPQ2d 1833 (Fed. Cir. 2003).
Further, in determining, whether exercising personal jurisdiction over the nonresident party satisfies due process, the Court considers the three-pronged Akro test. The specific jurisdiction inquiry into whether the defendant "has purposefully directed his activities at residents of the forum and the litigation results from alleged injuries that arise out of or relate to those activities," Burger King, 471 U.S. at 476-477, are encompassed in the Akro test. See Med-Tec Iowa, Inc., v. Computerized Imaging Reference Sys., 223 F. Supp.2d 1034 (S.D. Iowa 2002)(citing Akro, 45 F.3d at 1546-49)). Accordingly, the Court need not follow the rigid analytical structure that Digital Replay suggests and only consider the contacts relating to the "creation of the invention and the application for the patent" in evaluating personal jurisdiction.
C. The Akro Test
In applying the Akro test, the Court must first determine whether the defendant "purposely directed" its activities at residents of the forum state. Akro, 45 F.3d at 1545. When a "defendant deliberately has engaged in significant activities within a State, or has created continuing obligations between himself and residents of the forum, he manifestly has availed himself of the privilege of conducting business there. . . ."Id. (quoting Burger King, 471 U.S. at 471-76) (emphasis in original). Second, the Court must decide whether the claim "arises out of or relates to" those activities. Akro, 45 F.3d at 1545. The disjunctive nature of "arises out of or relates to" indicates "added flexibility," and signals "a relaxation of the applicable standard" from a pure "arise out of standard. Id. (quoting Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 206 (1st Cir. 1994)). Third, the Court must determine whether assertion of personal jurisdiction is "reasonable and fair" to the defendant.Akro, 45 F.3d at 1545-46.
1. Purposefully Directed
Travel Tags relies on multiple contacts between Digital Replay and the state of Minnesota. Digital Replay does not refute these contacts but, rather, argues that they are insufficient to confer personal jurisdiction. The parties appear to agree that Digital Replay, has an established contractual relationship with two Minnesota companies, Challenge Printing and GC Dynopress, to manufacture laminated lenticular lens sheets; that Minnesota consumers may purchase Digital Replay's cups at Wal-Mart stores as a result of its contract with Coca-Cola; that Digital Replay sent a cease-and-desist letter to Travel Tags at their Minnesota offices, and that Digital Replay has an Internet website that is accessible in Minnesota.
Further, the parties entered a stipulation regarding certain contacts. (See Stipulation of Fact Regarding Contacts by Digital Replay with the State of Minnesota). The parties stipulated that Digital Replay has had almost daily contact with Challenge Printing, a Minnesota corporation, doing business from Eden Prairie, Minnesota, and with G.C. Dynopress located in Golden Valley, Minnesota. Id. at 2, ¶¶ 1-4. The almost daily contacts with Challenge Printing are regarding such matters as "ordering, purchasing, accounting, inventory matters, shipping, printing issues, sending art files and other miscellaneous issues relating to the printing process for the lenticular lenses." Id. at 2, ¶ 1. The almost daily contacts with GC Dynopress pertain to such matters as "ordering, purchasing, accounting, inventory matters, shipping, printing issues, sending art files and other miscellaneous issues relating to the process of attaching the bonding agent to the lenticular lenses." Id. at 2, ¶ 3.
The stipulation also indicates that Digital Replay repeatedly visited Minnesota regarding the printing and manufacturing of its lenticular cups prior to the filing of this lawsuit. The record indicates that Digital Replay representatives traveled to Minnesota on eleven different occasions between November 2001 and September 2002 to meet with representatives of either Challenge Printing or GC Dynopress. Further, on two occasions, Digital Replay met with Target Corporation in Minnesota to discuss possible sales and marketing opportunities for Digital Replay's manufactured cups. Id. at 2-3.
Lastly, regarding Travel Tags' claim that Digital Replay's cups have been sold at a Minnesota Wal-Mart, the parties stipulate that, "Digital Replay does not contest that lenticular cups that it sold to entities not located in Minnesota may have been re-sold or otherwise transferred or shipped into Minnesota. Digital Replay claims that it does not retain any contractual control over its cups once sold to a purchaser that would prohibit Digital Replay's purchasers from selling or using those purchased cups in Minnesota." Id. at 3, ¶ 9.
The Court notes that there is no requirement that the purposefully directed activities be directed at the plaintiff. Rather, as the court inAkro observed, the U.S. Supreme Court has indicated, "that the plaintiff need not be the forum resident toward whom any, much less all, of the defendant's relevant activities were purposefully directed." Akro, 45 F.3d at 1547 (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984), and Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984)). Given Digital Replay's extensive and undisputed contacts with residents of the forum, the Court concludes that Digital Replay has purposefully directed its activities at Minnesota.
2. Arises Out of or Relates To
Having found that Digital Replay has purposefully directed its activities at the forum, the Court must proceed to the second prong of the Akro test and determine whether Digital Replay's cause of action "arises out of or relates to those activities" that were purposefully directed at the forum state. Akro, 45 F.3d at 1547 (citing Burger King, 471 U.S. at 472, 105 S.Ct. at 2182).
The courts have provided little guidance for the phrase "arises out of or relates to." See. e.g., Carnival Cruise Lines v. Shute, 499 U.S. 585, 589 (1991) (declining to set guidelines for "arise out of or relate to" despite having certified it for review); Helicopteros, 466 U.S. at 415 n. 10 (declining to reach the issue). The only clear guidance, as stated above, is that the phrase is intended to be more flexible than a simple "arises out of" standard. Akro, 45 F.3d at 1545.
Given the flexibility permitted by the standard, the Court finds that Travel Tags' patent claims arise out of or relate to Digital Replay's purposefully directed activities. Without evaluating each contact alleged, the Court finds that Travel Tags' claims arise out of Digital Replay's sending a cease-and-desist letter to Travel Tags in Minnesota.See, e.g., Red Wing Shoe Co., 148 F.3d at 1359, Inamed, 249F.3d at 1361.
The Federal Circuit has determined that a declaratory judgment action "arises out of" a party sending a cease-and-desist letter into the forum state.
The central purpose of a declaratory action is often to "clear the air of infringement charges." Hence, [the plaintiff's] claim arises directly out of [the defendant's] act of sending an infringement letter.Inamed, 249 F.3d at 1362.
However, a cease-and-desist letter alone is insufficient to establish personal jurisdiction. See Genetic Implant Sys. Inc. v. Core-Vent Corp., 123 F.3d 1455, 1458, 43 USPQ2d 1786, 1789 (Fed. Cir. 1997); Redwing Shoe Co. v. Hockerson-Halverstadt Inc., 148 F.3d 1355, 1360, 47 USPQ2d 1192,Inamed, 249 F.3d at 1361. There must be sufficient "other activities" to meet the "minimum contacts" requirement of International Shoe. See Red Wing Shoe, 148 F.3d at 1361; Akro, 45 F.3d at 1548. In the present case, there are multiple contacts between Digital Replay and Minnesota, including Digital Replay's contracts with two Minnesota companies.
The Court finds that the litigation either arises out of or relates to Digital Replay's contracts with Challenge Printing and GC Dynopress. The patent at issue deals with a process for attaching lenticular lenses to plastic cups. The parties have stipulated that Challenge Printing and GC Dynopress both do production work on the lenticular lenses to which the patented process is applied. Significantly, Digital Replay admits that GC Dynopress employs the patented process: "once the printing is completed, the lenticular lens sheets are then sent on to GC Dynopress to be laminated to an oriented polypropylene through Digital Replay's patented process . . ." (Def.'s Mem. Supp. Mot. Dismiss at 8). Further, the parties have stipulated that Digital Replay contacts GC Dynopress regarding "the process of attaching the bonding agent to the lenticular lenses." (See Stipulation at 2, ¶ 3). In light of these uncontested facts, the Court is satisfied that the contacts between Digital Replay and the two Minnesota companies meet the "arises out of or relates to" prong of theAkro test. In short, "the defendant's conduct and connection with the forum state are such that [it] could reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490. As such, it is unnecessary to consider Digital Replay's other contacts with the state of Minnesota.
3. Reasonable and Fair
The third and final prong of the Akro test requires the Court to evaluate whether jurisdiction in the forum is constitutionally reasonable and fair. Under this test, the Court must balance (1) the burden on the defendant; (2) the interests of the forum State; (3) the plaintiff's interest in obtaining relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the interest of the states in furthering their social policies. Asahi Metal Indus. Co. v. Super. Ct. of Cal., 480 U.S. 102, 103, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987).
Digital Replay argues that litigating the present case in Minnesota does not comport with "fair play and substantial justice" because none of the events giving rise to either the creation of the REL patent application, or the creation of the Digital Replay patent, took place in Minnesota. Further, Digital Replay argues that most, if not all, of the witnesses and records relating to Travel Tags' claims are situated in Colorado. As such, it argues that even if the Court can find personal jurisdiction in the present case, the matter should be transferred to Colorado under 28 U.S.C. § 1406(a). Digital Replay concedes, however, that 28 U.S.C. § 1406(a) is generally applied in cases "that are much different than the case at bar." (Def.'s Mem. Supp. Mot. Dismiss at 20).
In examining "fair play and substantial justice," the courts have placed the burden squarely on defendants to prove that jurisdiction is "constitutionally unreasonable." Akro, 45 F.3d at 1546. Dismissals for lack of personal jurisdiction "limited to the rare situation in which the plaintiff's interest and the state's interest in adjudicating the dispute in the forum are so attenuated that they are clearly outweighed by the burden of subjecting the defendant to litigation within the forum." Id., at 1549 (quoting Beverly Hills Fan Co., 21 F.3d at 1568).
It the present case, Digital Replay is unable to pass this hurdle. A state has a "`manifest interest' in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors." Burger King, 471 U.S. at 473. The injury of which Travel Tags complains — restraint of its production of goods by means of a non-infringed, invalid and unenforceable patent — is within the kind of injuries Minnesota has an interest in discouraging. Akro, 45 F.3d at 1549. As such, the plaintiff's and state's interests are not sufficiently "attenuated" for the Court to decline jurisdiction.
Further, as this Court stated in B.F. Goodrich v. Auxitrol, S.A., "a transfer of venue would merely shift the inconvenience of the forum to the plaintiff's." 2001 WL1640103 at *6 (D. Minn. Nov. 30, 2001) (citing Norval Indus., Inc. v. Superior Co., 515 F. Supp. 895, 899 (D. Minn. 1991)). Such a transfer is generally inappropriate, for the courts have an overwhelming preference for permitting plaintiff's to choose their forum. See Hoppe v. G.D. Searle Co., 683 F. Supp. 1271, 1276 (D. Minn. 1988).
Based on the above, together with all files, records, and proceedings herein,
IT IS HEREBY ORDERED that,
1. Defendant Digital Replay's Motion to Dismiss or Transfer Venue [Docket No. 3] is DENIED.