Declaratory Judgment Action Tabled for Lack of Personal Jurisdiction

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Addressing the requisite minimum contacts for personal jurisdiction over a patent owner, the US Court of Appeals for the Federal Circuit affirmed the dismissal of a patent infringement declaratory judgment action and related state law claim. Maxchief Invs. Ltd. v. Wok & Pan, Ind., Inc., Case No. 18-1121 (Fed. Cir. Nov. 29, 2018) (Dyk, J).

Maxchief and Wok & Pan both have their principal places of business in China and compete in the market for plastic folding tables. Maxchief distributes its plastic folding tables through Meco Corporation located in Greenville, Tennessee, which distributes the tables through retailers, including Staples, Inc.

Wok & Pan sued Staples in the Central District of California in February 2015, alleging that Staples’ sales of a Maxchief folding table infringed certain Wok & Pan patents. In response, Maxchief filed suit in the Middle District of Tennessee seeking declarations of non-infringement and invalidity and recovery on a state law claim of tortious interference with business relations arising out of Wok & Pan’s patent enforcement activities. 

The Tennessee district court dismissed Maxchief’s declaratory judgment claims for lack of personal jurisdiction because Wok & Pan had not sought to enforce its patents in the state of Tennessee. The district court also dismissed Maxchief’s state law tortious interference claim for lack of subject-matter jurisdiction, finding no independent jurisdictional grant over the claim. Maxchief appealed.

The Federal Circuit affirmed, agreeing that the district court lacked personal jurisdiction over the declaratory judgment claims. Specifically, the Court reaffirmed its rule that for a state to have personal jurisdiction over a patent owner in a declaratory judgment action, the patent owner must have engaged in “some enforcement activity in the forum state.” The Court rejected Maxchief’s argument, based on Calder v. Jones, that the “effect” of Wok & Pan’s California lawsuit against Staples would reverberate to Meco in Tennessee and thereby created Wok & Pan’s minimum contacts. The Court also rejected Maxchief’s argument that Wok & Pan created minimum contacts by sending a notice letter alleging infringement by a Kansas company to Maxchief’s Tennessee-based lawyer. The Court considered the letter to be a contact with Kansas, referring to its line of cases holding that a notice letter sent to a lawyer in the forum state does not qualify as activity directed at the forum state where the alleged infringer does not operate in the state. 

The Federal Circuit also affirmed the dismissal of the tortious interference claim on the alternative ground that the district court lacked personal jurisdiction over the declaratory judgment defendant. The Court observed in a footnote that the Tennessee court’s conclusion that it lacked subject matter jurisdiction may have been in error, suggesting that a state law claim based on false statements about a patent could suffice to confer jurisdiction under 28 USC § 1338. However, the Court explained that tortious interference claims predicated on false allegations of patent infringement must satisfy the same personal jurisdiction rules as those for declaratory judgment claims, i.e., the patent owner must purposefully direct enforcement activities at the forum state. Because Wok & Pan had not done so, the Tennessee court lacked personal jurisdiction.

Practice Note: Selecting a desirable forum is an important consideration in bringing any lawsuit. More important, however, is selection of a proper one. Jurisdictional issues can be costly to litigate and can result in the dismissal of claims years later and after full merits litigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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