Fundamental Innovation Systems International LLC v. LG Electronics, Inc. et al

RESPONSE to 104 Memorandum & Opinion,, Terminate Motions, LG Defendants' Objections to the Court's January 3, 2018 Memorandum Opinion and Order Regarding Defendants' Motion to Transfer Venue

E.D. Tex.January 17, 2018

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION FUNDAMENTAL INNOVATION SYSTEMS INTERNATIONAL LLC, Plaintiff, vs. LG ELECTRONICS, INC., et al. Defendants. Case No. 2:16-CV-01425-JRG-RSP LEAD CASE FUNDAMENTAL INNOVATION SYSTEMS INTERNATIONAL LLC, Plaintiff, vs. HUAWEI DEVICE USA, INC. and HUAWEI DEVICE CO., LTD., Defendants. Case No. 2:16-CV-01424-JRG-RSP DEFENDANTS’ OBJECTIONS TO THE COURT’S JANUARY 3, 2018 MEMORANDUM OPINION AND ORDER REGARDING DEFENDANTS’ MOTION TO TRANSFER VENUE (DKT. 104) Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 1 of 9 PageID #: 3087 Under L.R. CV-72(b) and 28 U.S.C. §636(b)(1)(A), the LG Defendants respectfully object to the Court’s Opinion and Order (Dkt. 104) as clearly erroneous and contrary to law.1 I. The Court’s Failure to Analyze Personal Jurisdiction Over LGEAI Under Federal Circuit Law Is Clearly Erroneous and Contrary to Law The Court committed reversible error when it relied on regional circuit law, rather than Federal Circuit law, in analyzing whether the District of New Jersey (“D.N.J.”) has personal jurisdiction over LGEAI. See, e.g., 3D Sys. v. Aarotech Labs, Inc., 160 F.3d 1373, 1377 (Fed. Cir. 1998). Under Federal Circuit law, personal jurisdiction over LGEAI is prima facie proper if: (1) New Jersey’s (“NJ”) long-arm statute permits the assertion of personal jurisdiction;2 and (2) the exercise of personal jurisdiction comports with federal due process. Polar Electro Oy v. Suunto Oy, 829 F.3d 1343, 1347-48 (Fed. Cir. 2016). NJ’s long-arm statute provides that “[t]he primary method of obtaining in personam jurisdiction over a defendant in this State is by causing the summons and complaint to be personally served within this State… on any officer, director … or on a person at the registered office of the corporation in charge thereof…” and extends the exercise of personal jurisdiction over nonresidents to the full extent permitted by due process.3 N.J.Ct.R. 4:4-4(6) (emphasis added); Colida v. LG Elecs., Inc., 77 Fed. Appx. 523, 525 (Fed. Cir. 2003). Here, the Court not only failed to consider NJ’s long-arm statute, but also failed to analyze whether exercising jurisdiction over LGEAI would comport with due process under 1 At a minimum, the Court could have severed the non-LGEAI defendants and transferred them to D.N.J. Fed. R. Civ. P. 21 (“On motion or on its own, the court may at any time… sever any claim against a party.”). 2 In interpreting state long-arm statutes, the Federal Circuit defers to the interpretations of the relevant state and federal courts, including their determinations regarding whether such statutes are intended to reach to the limit of federal due process. Graphics Controls Corp. v. Utah Med. Prods., 149 F.3d 1382, 1386 (Fed. Cir. 1998). 3 NJ law requires every foreign corporation authorized to transact business in NJ to maintain a registered office and a registered agent at that office upon whom process against the corporation may be served. N.J.S.A. 14A:4-1. Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 2 of 9 PageID #: 3088 2 Federal Circuit law. The record shows that LGEAI satisfied its prima facie burden in establishing that it is subject to personal jurisdiction in NJ, and that the exercise of personal jurisdiction comports with due process. Polar Electro Oy, 829 F.3d at 1347 (holding that when a district court decides personal jurisdiction based on the record, movant need only make a prima facie showing, and the court must resolve any factual conflicts in the movant’s favor). Finally, the Federal Circuit has found personal jurisdiction when the complaint alleges infringement throughout the United States. Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com. De Equip. Medico, 563 F.3d 1285, 1297-1300 (Fed. Cir. 2009). Specifically, the uncontroverted record established that LGEAI: (1) conducts business in NJ (Dkts. 73-1, 100-1); (2) has been registered to conduct business in NJ since March 2001 (Dkts. 48-1, 73-6); (3) has a registered agent for service of process in NJ (Dkt. 73-6); (4) has two officers (Vice President and Treasurer Younkyoon Kim, and Controller Jaeyoun Kim) and a director (Soohan Bae) with offices in NJ (Dkts. 73-15, 100-1, 102-3, 102-4, 102-5; Tr. 14:6-15); (5) employs four individuals in NJ who service and repair LG products (Dkt. 73-15); (6) LGEAI lists postings for jobs in NJ (Dkt. 73-7); (7) services and repairs all LG products purchased in the United States, including the Accused Products purchased in NJ (Dkts. 48-1, ¶ 5, 67-6); (8) has sued and was previously sued in NJ and satisfied a judgment in NJ (Dkt. 73-9); and (9) FISI alleges that LGEAI makes, uses, sells, offers for sale, and imports the Accused Products via its own websites including http://www.lg.com/us/, and through authorized retailers and distributors, into the United States, including NJ (Dkt. 1, ¶¶ 8, 15; Dkt. 33, ¶¶ 22-23). Despite these uncontroverted facts, the Court, sua sponte, denied transfer to all the LG defendants based on the erroneous finding that D.N.J. does not have personal jurisdiction over LGEAI.4 The LG Defendants met their prima facie burden under 4 Importantly, in its briefing on LG’s transfer motion, FISI did not contest that LGEAI was subject to personal jurisdiction, making only a passing reference to jurisdiction in the context of its venue argument. Dkt. 67, pp. 5-6. In fact, FISI’s sur-reply does not even mention personal Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 3 of 9 PageID #: 3089 3 Federal Circuit case law of showing that D.N.J. had and has personal jurisdiction over them. II. The Court Erred in Relying on Daimler and Boswell for the Proposition that Registration to do Business and Maintaining an Agent for Service of Process Is Not a Basis for Personal Jurisdiction The Supreme Court has specifically held twice that a corporation’s prior appointment of an agent for service of process can constitute consent to the forum’s personal jurisdiction and does not offend due process. See, e.g., Pa. Fire Ins. Co. of Phila. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 95 (1917); Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 178-79 (1939). In recently affirming Daimler, the Supreme Court clarified that Daimler did not address, let alone abrogate, consent-based personal jurisdiction. BNSF Ry. v. Tyrell, 137 S. Ct. 1549, 1558-59 (2017). Further, Judge O’Malley’s recent concurrence in Acorda Therapeutics, Inc. v. Mylan Pharms., Inc. explained that registration to conduct business subjects a defendant to general personal jurisdiction. 817 F.3d 755, 764-773 (Fed. Cir. 2016) (O’Malley, J., concurring), cert. denied, 2017 WL 69716 (U.S. 2017). In patent cases, D.N.J. courts have held that registration to transact business and appointment of an agent for service of process confers personal jurisdiction over the nonresident defendant that actively does business in NJ, even post-Daimler.5 See, e.g., Boehringer Ingelheim Pharma GmbH v. Teva Pharms. USA Inc., 2015 U.S. Dist. LEXIS 92921, at *6 (D.N.J. July 17, 2015); Senju Pharm. Co., Ltd. v. Metrics, Inc., 96 F. Supp. 3d 428, 436-38 (D.N.J. 2015); Otsuka Pharm. Co., Ltd. v. Mylan Inc., 106 F. Supp. 3d 456, 467-70 (D.N.J. Mar. 23, 2015); Randolph jurisdiction over LGEAI even though LG’s reply clearly states that at the time FISI filed its Complaint, LGEAI was subject to personal jurisdiction in NJ. Dkt. 73, pp.5-6; Tr. 9:15-25. Nevertheless, the Court, sua sponte, based its denial of LG’s transfer motion solely on personal jurisdiction grounds despite the overwhelming record and acknowledging that D.N.J. might have personal jurisdiction over LGEAI. Zelson v. Thomforde, 412 F.3d 56, 59 (3d Cir. 1969) (where a defendant has appeared, dismissal sua sponte based on personal jurisdiction is improper). 5 Even in non-patent cases, D.N.J. courts have held that registration to conduct business and appointing an agent for service of process when defendant actually does business in NJ confers personal jurisdiction both pre- and post-Daimler. Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 4 of 9 PageID #: 3090 4 Labs v. Specialties Dev. Corp., 62 F. Supp. 897, 898–99 (D.N.J. 1945). Similarly, prior to Daimler, NJ state courts repeatedly held that such conduct confers personal jurisdiction over an out-of-state defendant that actively conducts business in the state. See, e.g., Litton Indus. Sys., Inc. v. Kennedy Van Saun Corp., 117 N.J. Super. 52, 61 (N.J. Super. Ct. Law Div. 1971); Allied- Signal Inc. v. Purex Indus., Inc., 242 N.J. Super. 362, 367 (N.J. Super. Ct. App. Div. 1990). The Court’s sole reliance on Boswell6 is misplaced because (1) it does not apply Federal Circuit law, (2) service was not made upon defendant’s NJ registered agent,7 and (3) Daimler did not address nor find that consent jurisdiction violates due process. Helsinn Healthcare S.A. v. Hospira, Inc., 2016 WL 1338601, at *2 (D.N.J. Apr. 5, 2016). III. The Court Committed Clear Error in Holding that D.N.J. Would Not Have Specific Jurisdiction Over LGEAI Because the Record Establishes that the Burger King Factors Are Met The Court erroneously concluded that LGEAI is not subject to specific jurisdiction in NJ because the record clearly establishes that (1) LGEAI purposely directs its activities at NJ residents, (2) FISI’s claims against LGEAI “arise out of or relate to” LGEAI’s contacts with NJ, and (3) NJ personal jurisdiction over LGEAI is “fair and reasonable.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 (1985). LG only needs to make a prima facie showing that D.N.J. has personal jurisdiction over LGEAI, and the Court must accept all uncontroverted allegations as true and resolve any factual disputes in favor of LG. Polar Electro Oy v. Suunto Oy, 829 F.3d at 1347. Besides the evidence in the record cited above, the record further shows that: (1) FISI 6 Boswell v. Cable Serv. Co., Inc., No. 2:16-cv-4498, 2017 WL 2815077, at *4-*6 (D.N.J. June 29, 2017) is one of a handful of cases applying regional circuit law that erroneously relied on Daimler in holding that consent jurisdiction was abrogated. See, e.g., Display Works, LLC v. Bartley, 182 F. Supp. 3d 166, 176-77 (D.N.J. 2016). See also Wright, Miller & Moore, 4A Fed. Prac. & Proc. Civ. § 1069.2 (4th ed.) discussing consent jurisdiction after Daimler and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011): “In states where registration or appointment is interpreted to subject a corporation to general jurisdiction, the effect of the Supreme Court’s decisions in Goodyear and Daimler remains to be seen.” 7 Boswell v. Cable Serv. Co., Inc. et al., No. 2:16-cv-04498, Dkt. 8, (D.N.J. Oct. 20, 2016) (Declaration of Jonathan K. Waldrop, Ex. A). Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 5 of 9 PageID #: 3091 5 alleges that LGEAI8 infringes the asserted patents throughout the United States, including NJ (Dkt. 1, ¶ 15; Dkt. 33, ¶¶ 22-23); and (2) FISI concedes that LGEAI “is the home of Customer Service for all LG products [including the Accused Products] purchased in the United States” – which obviously includes NJ (Dkt. 67-6). Because LG may rely on FISI’s allegations of infringement to establish personal jurisdiction, including allegations that infringing products were sold into NJ – D.N.J. has specific jurisdiction over LGEAI.9 Osteotech, Inc. v. GenSci Regeneration Sciences, 6 F. Supp. 2d 349, 354 (D.N.J. 1998); Balthasar Online, Inc. v. Network Solutions LLC, 654 F. Supp. 2d 546, 552 (E.D. Tex. 2009); Tr. 39:2-9. IV. The Court Failed to Fully Consider the Overwhelming Evidence in the Record Supporting Transfer to D.N.J. The record establishes that the private and public factors weigh heavily for transferring this case to D.N.J. by showing that: (1) the vast majority of evidence about the marketing, sales, and market analyses of the Accused Products is at LG’s North American headquarters in D.N.J. (Dkt. 48-1, ¶¶ 7-9, 15-17); (2) D.N.J. has absolute subpoena power over the vast majority of third parties (Dkts. 100, 102-1); (3) this District does not have absolute subpoena power over any third parties (Dkts. 100, 102-2); (4) it is far more convenient and less expensive for the 12 party witnesses LG identified to date to attend trial in D.N.J. (Dkt. 48-1, ¶¶ 16-17); (5) this Court has already transferred a related case (Dkts. 73, 100-1); and (6) D.N.J. has a substantial interest as LGEUS and LGEMU are headquartered there with significant expansion plans in NJ (Dkt. 48-1). Based on the foregoing, LG requests that this Court transfer this action to D.N.J. 8 In its complaints, FISI defines “LGE” to refer to each of the five LG defendants as a group, including LGEAI. Dkts. 1, 33. 9 The Court’s finding that there is “nothing in the record that would permit a conclusion that there is an authorized retailer or distributor in New Jersey that sells accused products[]” (Dkt. 104, p.5) fails to accept the allegations regarding LG’s website as part of the record. Dkt. 33, ¶ 22. LG’s website clearly shows that there are numerous authorized retailers and distributors of the Accused Products in NJ (e.g., inputting “New Jersey” in “Find a Store Near You” on https://www.lg.com/us/products/wtb?modelId=MD05902176 will provide 5 NJ Best Buy stores). Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 6 of 9 PageID #: 3092 6 Dated: January 17, 2018 RESPECTFULLY SUBMITTED, ALLEN GARDNER LAW, PLLC By: /s/ Allen G. Gardner Allen F. Gardner (TX Bar No.: 24043679) ALLEN GARDNER LAW, PLLC 609 S. Fannin Tyler, Texas 75701 Tel: (903) 944-7537 Fax: (903) 944-7856 Allen@allengardnerlaw.com Jonathan K. Waldrop California Bar No. 297903 jwaldrop@kasowitz.com Darcy L. Jones California Bar No. 309474 djones@kasowitz.com Marcus A. Barber California Bar No. 307361 mbarber@kasowitz.com Heather S. Kim California Bar No. 277686 hkim@kasowitz.com John W. Downing California Bar No. 252850 jdowning@kasowitz.com Jack Shaw California Bar No. 309382 jshaw@kasowitz.com KASOWITZ BENSON TORRES LLP 333 Twin Dolphin Drive Suite 200 Redwood Shores, CA 94065 Tel: (650) 453-5170 Fax: (650) 453-5171 Hershy Stern (pro hac vice) New York Bar No. 4631024 hstern@kasowitz.com KASOWITZ BENSON TORRES LLP 1633 Broadway New York, NY 10019 Tel: (212) 506-1700 Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 7 of 9 PageID #: 3093 7 Fax: (212) 506-1800 Attorneys for Defendants LG ELECTRONICS, INC., LG ELECTRONICS U.S.A., INC., LG ELECTRONICS MOBILECOMM U.S.A., INC., LG ELECTRONICS MOBILE RESEARCH U.S.A., LLC, AND LG ELECTRONICS ALABAMA, INC. Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 8 of 9 PageID #: 3094 8 CERTIFICATE OF SERVICE The undersigned hereby certifies that all counsel of record who are deemed to have consented to electronic service are being served with a copy of this document via the Court’s CM/ECF system per Local Rule CV-5(a)(3) on January 17, 2018. Any other counsel of record will be served by First Class U.S. Mail on this same date. /s/ Allen F. Gardner Allen F. Gardner Case 2:16-cv-01425-JRG-RSP Document 113 Filed 01/17/18 Page 9 of 9 PageID #: 3095