________________________________________________ Federal Circuit

Rules that patent discussions

Yield jurisdiction

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The Federal Circuit has held that communications related to buying or licensing patents can form the basis for personal jurisdiction in a patent infringement lawsuit.

The case of APPLE INC. v. ZIPIT WIRELESS, INC. involves Apple’s appeal from a judgment of a federal court in California dismissing its complaint about the declaratory judgment of non-infringement against Zipit for lack of personal jurisdiction.

Zipit is a small company based in South Carolina that is the assignee of two US patents for wireless instant messaging devices that use Wi-Fi.

Starting around 2013, Zipit first contacted Apple (which is based in the Northern District of California).

Over the course of three years, the companies exchanged several rounds of written communications, talked on the phone, and met at Apple headquarters. They discussed the possibility of Apple buying or licensing the patents at issue, the technical details of Apple’s alleged infringement of the patents, and other matters relating to the patents. In 2014, they exchanged drafts of a patent license.

Apple asserted that it didn’t practice any claims of the Zipit patents and that the patents were invalid.

Eventually, in 2020, Zipit sued Apple for alleged patent infringement in Georgia.

Shortly thereafter, Apple filed a complaint in the Northern District of California seeking a declaratory judgment of non-infringement of the patents-in-suit.

Zipit moves to dismiss Apple’s complaint due to a lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2).

The district court granted this motion.

As the Federal Circuit noted,

The court concluded that Apple had established the requisite minimum contacts, highlighting that Zipit sent “multiple letters and claim charts accusing Apple of patent infringement” and in fact had “travel[ed] to Apple’s offices in California to discuss these accusations.” … This, the court determined, made the exercise of specific personal jurisdiction over Zipit “presumptively reasonable.”

The district court then considered whether the exercise of jurisdiction of the California court would be unreasonable.

The district court noted that

the Federal Circuit has held that “the exercise of personal jurisdiction . . . would be unconstitutional when ‘[a]ll of the contacts were for the purpose of warning against infringement or negotiating license agreements, and [the defendant] lacked a binding obligation in the forum.’”

The district court, therefore, concluded that

the exercise of jurisdiction over Zipit would be unreasonable because of “Zipit’s lack of binding obligations tying it to California and because Zipit’s contacts with California all related to the attempted resolution of the status of” the patents-in-suit, i.e., “for the purpose of warning against infringement.”

The Federal Circuit disagreed with the district court’s interpretation of its prior decisions:

Specifically, the district court read our precedent as applying a bright-line rule that patent infringement notice letters and related communications can never form the basis for personal jurisdiction. We agree with Apple that the district court erred in this regard.

Instead, courts must “‘consider a variety of interests’ in assessing whether jurisdiction would be fair.”

The relevant factors are:

• “the burden on the defendant,”
• “the forum State’s interest in adjudicating the dispute,”
• “the plaintiff’s interest in obtaining convenient and effective relief,”
• “the interstate judicial system’s interest in obtaining the most efficient resolution of controversies,” and
• “shared interest of the several States in furthering fundamental substantive social policies.”

The Federal Circuit noted that while going to court in California would create some burden for Zipit, given the distance from South Carolina, “we are not convinced that this would be so unreasonably burdensome as to be unconstitutional.”

The court pointed out that Zipit representatives had been easily able to travel to California to meet at Apple headquarters.

As to the second factor,

California has “definite and well-defined interests in commerce and scientific development,” and it has “a substantial interest in protecting its residents from unwarranted claims of patent infringement.”

As to the third factor,

Apple, ‘which is headquartered in California, indisputably has an interest in protecting itself from patent infringement by obtaining relief from a nearby federal court in its home forum.’

As to the fourth factor, the court noted that

Zipit’s communications with Apple arguably went further [than attempting to settle the dispute], extending over the course of several years and reaching beyond license negotiations to include the sale of its patents.

As for the fifth factor, “the same body of federal patent law would govern the patent [noninfringement] claim irrespective of the forum.”

Thus, the Federal Circuit reversed the district court’s dismissal and remanded the case for further proceedings.

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