Opinion
No C-O1-1450 VRW
June 21, 2002
ORDER
Defendant Hotel Ramada of Nevada moves to dismiss this patent infringement action for lack of personal jurisdiction and improper venue under FRCP 12(b)(2) and 12(b)(3). Doc #17. For the reasons set forth below, the motion is GRANTED.
I
Plaintiff USA Payments, Inc, a Nevada corporation with a place of business in Santa Clara, California, is the holder of United States Patent No 6,081,792 (`792 patent) entitled "ATM and POS Terminal and Method of Use Thereof." Compl (Doc #1), Exh A. The `792 patent claims a method for providing money, goods or services to an account holder when the daily ATM limit set by the account holder's bank has been met or when the account holder cannot remember the PIN number for his debit or credit card. Id. Plaintiff alleges that defendant, which operates the Tropicana Resort and Casino in Las Vegas, Nevada, utilizes and offers an infringing ATM system in violation of 35 U.S.C. § 271. Compl (Doc #1), ¶ 7.
Plaintiff initiated this action in the Northern District of California on April 12, 2001. Defendant contends, however, that the case must be dismissed primarily because personal jurisdiction is lacking. In response, plaintiff's crucial argument is that because an inherent component of defendant's gaming services is the easy access to cash that the allegedly infringing ATM systems provide, defendant's marketing and promotion efforts of its gaming services to California residents triggers personal jurisdiction in this state. The court does not agree.
II
The question whether personal jurisdiction exists over an alleged out-of-state patent infringer is "intimately involved with the substance of the patent laws." Akro Corp v Luker, 45 F.3d 1541, 1543 (Fed Cir 1995). As a result, the precedent of the Federal Circuit, rather than that of the Ninth Circuit, determines whether defendant has triggered personal jurisdiction in California in this matter. Id (citing Beverly Hills Fan Co v Royal Sovereign Corp, 21 F.3d 1558, 1564 (Fed Cir 1994)). The court, however, may rely upon Ninth Circuit law regarding personal jurisdiction to the extent it is not inconsistent with Federal Circuit authority.
Personal jurisdiction over a defendant that does not reside in the forum state is proper if the state's long-arm statute permits the assertion of jurisdiction and if doing so will not violate federal due process. See HollyAnne Corp v TFT, Inc, 199 F.3d 1304, 1307 (Fed Cir 1999); Fireman's Fund Ins Co v National Bank of Cooperatives, 103 F.3d 888, 893 (9th Cir 1996). California's long-arm statute permits the assertion of jurisdiction on any basis not inconsistent with the state or federal constitutions. Cal CCP § 410.10. The jurisdiction of California courts is coextensive with the outer limits of due process under the state and federal constitutions, as those limits have been defined by the United States Supreme Court. Threlkeld v Tucker, 496 F.2d 1101, 1103 (9th Cir 1974). For due process to be satisfied when the defendant at issue is not present in California, the defendant must have minimum contacts with the state such that the assertion of jurisdiction "does not offend traditional notions of fair play and substantial justice." International Shoe Co v State of Washington, 326 U.S. 310, 315 (1945). As the party seeking to have this case heard in California, plaintiff has the burden of making a prima facie showing of the existence of the minimum contacts necessary to support jurisdiction. Cubbage v Merchent, 744 F.2d 665, 667 (9th Cir 1984).
Under the minimum contacts inquiry, personal jurisdiction can be established on either general or specific jurisdictional grounds. Panavision International, LP v Toeppen, 141 F.3d 1316, 1320 (9th Cir 1998). "General personal jurisdiction, which enables a court to hear cases unrelated to the defendant's forum activities, exists if the defendant has `substantial' or `continuous and systematic' contacts with the forum state. Fields v Sedgwick Associated Risks, Ltd, 796 F.2d 299, 301 (9th Cir 1986) (citations omitted). The parties agree that to the extent defendant has contacts with California, they do not rise to the level necessary to establish general jurisdiction. Indeed, defendant's one business is located in Nevada, all of the gaming activities offered by defendant take place in Nevada, defendant does not maintain any offices or employees in California and defendant has not filed its articles of incorporation with the Secretary of State or paid taxes in California. See Nelson Decl (Doc #11, Exh A), ¶¶ 5-9, 12; see also Cubbage, 744 F.2d at 667 (finding general jurisdiction over out-of-state doctors and hospital did not exist because "the doctors [were] not California residents, [were] not licensed in California, and did not treat [the plaintiff] in California; the hospital [was] not located, licensed or incorporated in California.").
Defendant's motion to dismiss thus turns on whether specific personal jurisdiction exists over defendant. Specific jurisdiction is present when the non-resident defendant purposefully establishes minimum contacts with the forum state, the cause of action arises out of those contacts, and jurisdiction is constitutionally reasonable. 3D Systems, Inc v Aarotech Laboratories, Inc, 160 F.3d 1373, 1378 (Fed Cir 1998) (citing Burger King Corp v Rudzewicz, 471 U.S. 462, 472, 476-77 (1985)). For the court's determination whether specific jurisdiction exists, therefore, the Federal Circuit has outlined the following three-prong test:
(1)whether the defendant purposefully directed its activities at the residents of the forum; (2) whether the claim arises out of or is related to those activities, and (3) whether assertion of personal jurisdiction is reasonable and fair.
HollyAnne, 199 F.3d at 1307 (citations omitted). Defendant's motion focuses on the second prong, which, the court agrees, is dispositive.
In order to satisfy the second prong, plaintiff must show that its cause of action "arises out of or is related to" activities that defendant has directed at California. Id at 1308. "[T]he test is whether the activity in the forum state is a basis for the cause of action." Id at 1308 n4 (emphasis omitted).
Plaintiff's cause of action asserts that defendant infringes, contributorily infringes and induces others to infringe the `792 patent. See Compl (Doc #1), ¶ 7. Plaintiff's argument with respect to the second prong, however, is based entirely on its claim that defendant is directly infringing the patent under 35 U.S.C. § 271(a). See Pl Opp B.R. (Doc #19) at 7-8. Patent infringement occurs when a party "without authority makes, uses, offers to sell or sells any patented invention." 35 U.S.C. § 271(a). For there to be specific personal jurisdiction over defendant here, plaintiff would have to allege that defendant is doing one of these activities in California. HollyAnne, 199 F.3d at 1308. Because defendant's "use" of the allegedly infringing ATM systems occurs solely in Las Vegas, plaintiff creatively argues that defendant "offers to sell" its gaming services to California residents. See Pl Opp B.R. (Doc #19) at 8. Specifically, as noted above, plaintiff contends that the allegedly infringing ATM service is an inherent component of defendant's gaming services, and thus defendant's efforts to market and promote such gaming services to California residents constitutes an "offer to sell" the patented method. The court is not persuaded.
To be sure, plaintiff has demonstrated that defendant affirmatively markets and promotes the Tropicana to California residents through newspaper advertisements, direct mailings and other programs directed at California. See, e g, Shoiket Decl (Doc #20), Exhs A-G. But advertising the services provided by defendant, of which the allegedly infringing ATM service is arguably one, is not the same as offering to sell that infringing system.
The Federal Circuit has stated that an "offer to sell" occurs when the alleged infringer sends "a description of the allegedly infringing merchandise [or service] and the price at which it can be purchased." 3D Systems, 160 F.3d at 1379. The court's review of the advertisements and other marketing documents submitted by plaintiff discloses an absence of any description of the ATM systems available at the Tropicana or the price at which they can be purchased. In any event, even if plaintiff could point to advertisements describing such ATM systems, they would more appropriately be characterized as "offers to use" rather than "offers to sell." An offer to use an allegedly infringing product, by itself, does not constitute patent infringement. See 35 U.S.C. § 271. As a result, such promotional efforts by defendant cannot serve as the basis for its claims against defendant. Plaintiff is thus unable to satisfy the second prong for specific jurisdiction.
In short, plaintiff has failed to make a prima facie case that personal jurisdiction over defendant exists in California. For this reason, dismissal under FRCP 12(b)(2) is appropriate. In light of this conclusion, the court need not reach defendant's argument for dismissal due to improper venue under FRCP 12(b)(3).
Defendant's motion to dismiss is thus GRANTED. The clerk is directed to close the file and terminate all pending motions.