French Bank Whose Transactions Benefitted Sudan Generally, But Were Not Otherwise Related To The Commission Of Terrorist Acts Supported By Sudan, Could Not Have Violated ATA And ATS.
Ofisi v. BNP Paribas, S.A., US District Court for the District of Columbia, September 29, 2017
Victims of 1998 al Qaeda terrorist bombings in Kenya and Tanzania and their relatives have engaged in protracted litigation in the US for relief under the ATS and the ATA. In 2011, they obtained judgment against the Republic of Sudan. In this case, they sued the French bank BNP Paribas (BNPP), alleging it was culpable for the attacks under the US statutes.
As relevant here, the Court first addressed the ATA, noting that it required a plaintiff to allege (i) injury to a US national, (ii) an act of international terrorism, and (iii) “causation” linking the act with the plaintiff’s injury. Courts additionally have required “deliberate misconduct,” a term whose meaning will vary based on the underlying US statute cited as defining the predicate act of terrorism. BNPP was alleged to have violated 18 USC 2332d(a) (prohibiting a “US person” from engaging in a “financial transaction” with a government identified by the US as supporting international terrorism), as a result of conduct that “aided and abetted” violations by others. The Court found, however, that the statute only provided for “aiding and abetting” as a result of amendments effective after the incident at issue in this case. It also concluded that the term “US Person” had been given a specific definition under the ATA that a corporation organized and headquartered in France could not satisfy. The Claim under Section 2332d(a) was thus dismissed.
BNPP was also alleged to have violated 2339A(a) (prohibiting the provisions of “material support or resources” to terrorists), through an allegation that the bank was “illegally processing U.S. dollar transactions Sudan prior to the 1998 terrorist attacks.” The Court rejected the claim on grounds that the plaintiffs had come forward with only conclusory allegations, not facts, to suggest that the bank knew the funds it was processing were being used to support al Qaeda or any terrorist activity. The Court thus found that the plaintiffs had failed to allege the requisite “deliberate misconduct.” The Court concluded “for similar reasons” that the plaintiffs failed to allege that their injuries had been “proximately caused”—i.e., “directly” caused—by the bank. “Plaintiffs have made no detailed factual allegations showing, for example, that BNPP participated in the attacks or provided money directly to any terrorist group, that any money BNPP processed for Sudan or Sudanese banks was transferred to al Qaeda prior to the attacks, or that Sudan would have been unable to assist al Qaeda without the funds the bank processed.”
The Court then addressed the plaintiffs ATS claim, finding as a preliminary matter that a corporate defendant could be liable under the ATS—a rule under review by the US Supreme Court but, for the time being, followed by most courts but not those in New York and surrounding regions.
On the merits, the Court observed that the plaintiffs must allege a violation of an “international law norm” recognized when the ATS was enacted in 1789, and that can be characterized as “specific, universal, and obligatory.” The plaintiffs argued that BNPP was liable under the ATS as a result of “aiding and abetting” a specific terrorist act, and the Court observed that this claim required that (i) the alleged terrorist act violate an “international law norm,” and (ii) BNPP’s conduct satisfy the definition of “aiding and abetting” as defined under “customary international law.”
The Court addressed the attacks at issue and found that they constituted “crimes against humanity” and an “infringement of the rights of ambassadors,” both qualifying “international law norms.” But it found that the plaintiffs’ allegations failed to establish “aiding and abetting.” Looking to definitions employed by international tribunals required to apply only “customary international law,” the Court stated that the plaintiffs’ allegations must first show “actus reus”—“practical assistance, encouragement, or moral support which has a substantial effect on the perpetration of the crime.” As discussed above, the plaintiffs’ failure to link BNPP directly to the terrorist act prevented an inference of the bank’s “actus reus” from being made. The second requirement for “aiding and abetting” liability is “mens rea”—knowledge that one’s actions are assisting in the commission of the principal offense. Again, the Court concluded that the plaintiffs’ failure to allege facts that BNPP knew that the transactions it was assisting were to benefit al Qaeda generally or the terrorist acts specifically made such a finding impossible.
For these reasons, the ATA and ATS claims against BNPP were dismissed.
Swiss University Subject To FSIA’s “Commercial Activity” Exception Where It Consented, Outside The US, To The Delivery of a Cease-And-Deist Letter to a US Entity in Connection With Alleged Patent Infringement
Genetic Veterinary Sciences, Inc., d/b/a Paw Prints Genetics v. Laboklin GmbH & Co., KG, US District Court for the Eastern District of Virginia, October 16, 2017
The University of Bern, in Switzerland, and its licensee, Laboklin, a German company, assert rights to a US patent for genetic testing of dogs to determine the presence of a defect likely to lead to the development of a disease. They claim that the plaintiff GVS is infringing that patent, and GVS filed suit for a declaratory judgment that it is not.
Among other issues, the Court considered whether the university—an “agency or instrumentality” of Switzerland—was subject to suit in the US under the “commercial activity” exception to the FSIA. That exception applies where a governmental unit engages in “the type of actions by which a private party engages in trade … or commerce.” The Court found this requirement met by the university’s having obtained the patent and consenting to the delivery of cease-and-desist letters to GVS in the US in an effort to enforce it. The fact that the consent was provided outside the US was not relevant because the FSIA specifically applies to non-US conduct having a US effect (here, an effort to enforce the patent against a US entity).
[Editor’s Note: This summary also appears in the Personal Jurisdiction/Forum non Conveniens Section of this Report.]
Discovery In Aid Of Attachment Permitted With Limitations Against The Arab Republic Of Egypt, The Egyptian Embassy, And Egypt’s Cultural And Educational Bureau
Lasheen v. The Loomis Company, US District Court for the Eastern District of California, October 4, 2017
The plaintiff Lasheen was an Egyptian national who came to the US as a visiting scholar and enrolled in the health plan of the Embassy of Egypt. The defendant Loomis contracted with the embassy to manage the plan. Lasheen became ill and ultimately died in the US, and a dispute arose as to his coverage. Default judgments were entered against defendants the Arab Republic of Egypt, the Egyptian embassy, and Egypt’s Cultural and Educational Bureau, and Lasheen’s estate sought post-judgment discovery regarding certain of the Egyptian defendants’ assets in the US. The Egyptian defendants opposed the discovery as overbroad because it sought mostly information about assets that are immune from execution under the FSIA.
The Court explained that the FSIA does not confer immunity from discovery, but the statute indirectly can have that effect: discovery in general is limited to information likely to lead to relevant facts, and the FSIA’s “execution immunity” informed what facts were relevant. Specifically, the statute limits the circumstances in which property held by non-US states and their agencies and instrumentalities could be attached and sold in satisfaction of judgments.
As regards non-US sovereigns like the Arab Republic of Egypt, property held in the US for “commercial purposes” is subject to attachment and execution if one or more of 7 conditions is met, generally described as follows: (i) the non-US state has waived its FSIA rights, (ii) the property is or was used for a commercial purpose on which the underlying judgment was based, (iii) the execution relates to property taken or exchanged in violation of international law, (iv) the execution relates to a judgment that established rights to property that either were acquired by succession or gift or that is “immovable” and not used for diplomatic purposes, (v) the property subject to execution is an insurance-related contractual indemnification, (vi) the judgment followed from an arbitration award, or (vii) the judgment related to a claim for which the non-US state was not immune under certain FSIA provisions. The Court found the condition numbered (ii) above applied, but only to the extent the property about which discovery was sought related to the health plan that was the subject of the underlying judgment. The Court found that Egypt had only partially produced relevant information, and required it to finish the job.
Property held by “agencies or instrumentalities” of a non-US sovereign are subject to attachment and sale under a different and more generous standard from that applicable to a sovereign and its “political subdivisions.” In determining whether the Egyptian embassy and the Cultural and Educational Bureau qualified under these rules, the Court noted that “instrumentalities” typically refer to an economic actor chartered by a sovereign for some commercial purpose. It also noted that neither party provided information sufficient to allow the Court to determine the status of the embassy and the bureau, and for purposes of analysis the Court assumed both would be “instrumentalities.” Attachment and sale of property held in the US by such entities for commercial purposes is permitted under the FSIA where one or more of two conditions is met, generally described as follows: (i) the agency or instrumentality has waived its FSIA rights, or (ii) the judgment related to a claim for which the agency or instrumentality was not immune under certain FSIA provisions (different and more expansive provisions than those identified in subpart (vii) above). The Court found the second subsection applicable because the judgment arose out of the defendants’ commercial activities in the US, and so found discovery relating to the property should proceed.
FSIA Governs Effort to Convert ICSID Arbitration Award to Judgment
Micula v. Government of Romania, October 23, US Court of Appeals for the Second Circuit, October 23, 2017
Swedish nationals and affiliated companies won an ICSID arbitration award in Paris against the Government of Romania. They then sought to utilize a summary ex parte proceeding in federal court in New York to convert the award into a judgment that could be executed against Romanian property located in the US. In this decision, the Court of Appeals vacates an order entering that judgment, finding that the district court had no jurisdiction over the dispute. It first concludes that the FSIA provides the exclusive means by which an ICSID arbitration award may be enforced against a sovereign, and observes that the summary ex parte procedure did not satisfy the FSIA’s procedural requirements, including service of process on the sovereign. The Court of Appeals also noted that New York would not in any event have been an appropriate venue, as the FSIA’s default venue of the District of Columbia would not have been displaced in favor of New York, which had no connection with the dispute.
[Editor’s note: The Micula case is also addressed in the Arbitration section of this report.]
Absence Of US “Domestic Injury” Claim Dooms Antitrust Claim
Biocad JSC v. F. Hoffman-La Roche Ltd., US District Court for the Southern District of New York, September 30, 2017
Generic drug manufacturer Biocad alleged that Hoffman-La Roche (HLR) and its subsidiaries illegally deterred entry into the US of certain generic oncological drugs. The Court found that the claim was precluded by the FTAIA because no US “domestic injury” had been alleged. A discussion of this case appears in Orrick’s AntitrustWatch blog, and may be found here.
Antitrust Claim Based On Korean Conspiracy To Fix The Price Of Ramen Proceeds To Trial Because Conspiracy May Have Affected The Prices Charged By Defendants To Their US Subsidiaries And Downstream Pricing To US Customers
In re Korean Ramen Antitrust Litigation, US District Court for the Northern District of California, December 28, 2017
A prior opinion in this class action by direct and indirect US purchasers of Korean-made ramen held that the claim alleged an injury to US “import commerce,” and as a result the FTAIA did not bar the action from proceeding. (The Court’s November 4, 2014 opinion is discussed in our Fall 2014 issue.) This opinion addresses motions for summary judgment filed by the defendants following the close of discovery.
After finding that the plaintiffs had come forward with sufficient evidence of an illegal conspiracy to raise prices in Korea, the Court addressed the question whether the conspiracy produced any effect in the US that could give rise to a claim under the Sherman Act. The Court observed that no direct evidence linked the Korean conspiracy with products (i) sent to the US from Korea or (ii) manufactured by the defendants’ subsidiaries in the US. It then focused on the plaintiffs’ allegation that indirect evidence of this linkage could be found in the “connections between and the control exercised by the Korean parent companies over their wholly-owned subsidiaries.” General information about the operation of Korean “chaebols” was deemed inadequate without more to inform the facts of this case, and the Court turned to the facts presented regarding two of the defendants, Ottogi and Nongshim.
The Court identified the key factual question to be the price at which Ottogi Korea sold ramen for export: “If the export price was inflated due to the conspiracy, then products with an inflated price were sent into the U.S. market and sold by Ottogi America.” The Court concluded that the plaintiffs had come forward with “some (albeit slim) evidence” of such impact, and found it sufficient to allow the claim to proceed to trial. The Court did not detail its reasoning but cited the presence of directors, senior officers, and employees with “day-to-day operations” shared between Ottogi Korea and its US subsidiary. It also noted the exchange of information in Korea between officials responsible for domestic and export pricing. Ottogi cited evidence that US pricing was subject to discounting and otherwise competitively set to “gain a stronger foothold” in the US market, but the Court dismissed the significance of it as providing “at most” an argument about the amount of damages.
Nongshim ramen sold in the US was made in both Korea and the US. As to the Korean ramen, Nongshim argued that the price for sales to Nongshim’s US subsidiary was set through negotiations, with the price of US sales determined solely by officials having no link to the alleged conspiracy. But the Court cited evidence that pricing to the US was affected by the “factory price” in Korea, or otherwise affected by ramen prices in the Korean market, as well as disputed evidence that Nongshim-US “allowed input if not control by [Nongshim Korea] for the prices it charged.” As with Ottogi, the Court concluded that the existence of negotiations and discounting by Nongshim-US would go to the question of potential damages if liability were found.
By contrast, the Court found documentary evidence that the sales price of US-manufactured ramen was affected by the Korean conspiracy to be “extremely thin,” consisting mainly of speculation and inferences from ambiguous documents and testimony. The Court did, however, give credence to plaintiffs’ expert opinions that pricing between Korea and the US was correlated, with the apparent inference that a conspiracy affecting the former was thereby shown to have affected the latter. The Court noted that the plaintiffs did not attempt to correlate pricing between the Ottogi and Nongshim defendants, and suggested that this might have undermined their argument if there had not been other evidence of an effect of a Korean conspiracy on US pricing: that a conspiracy existed, that it affected the price of ramen sold to the defendants’ US subsidiaries, that the Korean defendants exercised control over prices charged by their US subsidiaries, and that economic models showed “artificially high prices” in the US.
The Court observed that the plaintiffs were required to establish that they had standing to sue and that their alleged injuries were proximately caused by the violations of law alleged. It surveyed recent cases addressing principally the causation requirement, and relied on its prior discussion to conclude that the plaintiffs had created genuine issues of fact for trial based on the existence of a conspiracy and the impact of that conspiracy on US purchaser-plaintiffs.
The Court denied the defendants’ motions and set the case to proceed to trial. To underscore that it had not made determinations of fact but was leaving these to the jury, the Court cited evidence that the export price of Korean ramen did not rise for two years after the alleged conspiracy began, noting that the jury “might or might not” conclude from this evidence that a conspiracy existed and affected US pricing.
Economic Testimony Inadequate To Permit Claim Of US Impact From Asian Conspiracy To Proceed To Trial
In re Optical Disk Drive Antitrust Litigation, US District Court for the Northern District of California, December 18, 2017
The opinion in this long-running case addressed claims by a class of indirect purchasers of products containing optical disc drives (ODDs) who allege injury from an Asian price-fixing conspiracy. At issue was the defendants’ motion for summary judgment following completion of fact and expert discovery. As relevant here, the Court discussed whether the plaintiffs came forward with sufficient evidence to show a genuine issue for trial on the questions of causation, injury, and damages. Specifically, the Court stated that indirect-purchaser plaintiffs “must proffer evidence not only as to the calculation of the overcharge on ODDs, that this overcharge resulted in offsetting with other lower quality component parts, and that the offsetting would have occurred at 100% of the value of the overcharge, meaning that no link in the supply chain would have swallowed any portion of the overcharge. This theory of pass-through . . . establishes the necessary link between Defendants’ conduct and [plaintiffs’] injury as alleged.”
The plaintiffs rested principally on the testimony of their expert economic witness, and the Court found it lacking. Observing that an expert opinion may provide guidance as to how to interpret facts but cannot take the place of facts, the Court observed that the facts the expert did rely upon were “often tangentially related and at best, of uncertain application to the pass-through issue.” Indeed, it noted that certain of the facts were “wholly consistent with what any seller in a competitive market would desire,” and thus could not be used to support the allegation of a conspiracy. The Court also rejected the use of “empirical studies” in economic literature that had not been shown to reflect the market at issue. Finally, the Court found testimony of an executive from retailer Circuit City too general in nature to be probative, rejecting it because the executive could provide no instances of overcharges having been passed on to US customers or reductions in quality to save costs. For these reasons, the Court entered judgment for the defendants.
Arbitration
FSIA Governs Effort to Convert ICSID Arbitration Award to Judgment
Micula v. Government of Romania, October 23, US Court of Appeals for the Second Circuit, October 23, 2017
Swedish nationals and affiliated companies won an ICSID arbitration award in Paris against the Government of Romania. They then sought to utilize a summary ex parte proceeding in federal court in New York to convert the award into a judgment that could be executed against Romanian property located in the US. In this decision, the Court of Appeals vacates an order entering that judgment, finding that the district court had no jurisdiction over the dispute. It first concludes that the FSIA provides the exclusive means by which an ICSID arbitration award may be enforced against a sovereign, and observes that the summary ex parte procedure did not satisfy the FSIA’s procedural requirements, including service of process on the sovereign. The Court of Appeals also noted that New York would not in any event have been an appropriate venue, as the FSIA’s default venue of the District of Columbia would not have been displaced in favor of New York, which had no connection with the dispute.
[Editor’s note: The Micula case is also addressed in the Foreign Sovereign Immunity Act (FSIA) section of this report.]
Sale Of Products To Delaware Corporation That Distributes Products Nationwide Constitutes “Targeting” Of Delaware Market
3G Licensing, S.A., Koninklijke KPN N.V. v. HTC Corp., US District Court for the District of Delaware, December 18, 2017
This patent infringement action, apparently related to the Koninklijke KPN N.V. case discussed below, considered among other issues whether specific personal jurisdiction could be asserted over HTC, a Taiwanese corporation. The District Court in Delaware stated that jurisdiction could be shown under what it termed the “dual jurisdiction” or “stream of commerce” theory, which requires that a plaintiff show (i) that the defendant intended to serve the Delaware market specifically; (ii) that this intent resulted in the introduction of the product into the market; and (iii) that the plaintiff’s cause of action arises from injuries caused by that product. The Court focused on the first prong of this test, and found that it was satisfied by statements in HTC’s annual report that it “released particular smartphones in partnership with US carrier Verizon,” a company incorporated in Delaware. The Court also considered that HTC’s products were sold in Delaware through a number of outlets. No other relevant facts were cited.
[Editor’s note: The 3G Licensing case is also discussed in the Personal Jurisdiction/Forum non Conveniens section of this report.]
Personal Jurisdiction In Michigan Over Taiwanese Manufacturer Based On Manufacturer’s Custom-Manufacture Of Allegedly Infringing Products For Michigan Corporation
BOS GmbH & Co. KG v. Macauto Industrial Co., Ltd., US District Court for the Eastern District of Michigan, December 21, 2017
A German manufacturer and its US subsidiary (Bos) sued a Taiwanese corporation and its US subsidiary for infringing a patent relating to the production of retractable rear window shades for automobiles. The Taiwanese corporation (Macauto) argued that it was not subject to personal jurisdiction in Michigan over the claim, and sought dismissal.
The Court observed that precedent from the US Court of Appeals for the Federal Circuit, which has jurisdiction over appeals in patent infringement cases, requires that jurisdiction be judged based on the law of the forum State and be consistent with the Due Process Clause of the US Constitution. Because Michigan asserts jurisdiction to the full extent permitted under the Due Process Clause, only the constitutional test was relevant. That test requires a plaintiff to show that the defendant “purposefully directed its activities at residents of the forum state” and the litigation arises out of or is related to those activities. If those showings are made, the burden falls on the defendant to show that that requiring it to participate in the litigation is otherwise unreasonable or unfair.
The Court stated that the plaintiff would have to satisfy the requirements of the “stream of commerce” theory of personal jurisdiction, and that two versions of this test appeared in the law. It observed that the Federal Circuit had followed the more stringent of the tests, requiring that a defendant not only place a product into “the stream of commerce” in the US with a “reasonable expectation that it could end up in the forum state,” but also that it have undertaken conduct “specifically targeting the forum state.” In the case at bar, the plaintiffs alleged that Macauto custom-manufactured for, and sold its products to, the Michigan-based Ford Motor Company, and that cars containing the products were sold in that State. The Court found this conduct to reflect the required “targeting” of Michigan, especially given the requirement that facts be construed “in the light most favorable to Plaintiff” where a jurisdictional motion is decided without discovery or an evidentiary hearing.
The Court also rejected Macauto’s argument that subjecting it to jurisdiction was unfair, stating that Macauto’s burden among other things was to establish that Michigan’s interests in having the case adjudicated in-State are “so attenuated that they are clearly outweighed by the burden of subjecting the defendant to litigation within the forum.” The Court noted that cases increasingly find that technology has reduced the burden associated with litigation in the US against a non-US entity, and found the fact that Macauto and its US subsidiary (over which jurisdiction was not challenged) were represented by the same counsel also to suggest that the burden of litigation would not be unreasonable. It also recognized that Michigan has a “significant interest in discouraging patent infringement-related injuries that impact the residents of this state from products sold here.”
Personal Jurisdiction Over Taiwanese Company For Patent Infringement Claim Upheld On “Stream of Commerce” Theory
FOX Factory, Inc. v. SRAM, LLC, US District Court for the Northern District of California, October 11, 2017
FOX sued SRAM, a US corporation, for infringing patents for bicycle shock absorbers. Among the defendants was Sandleford Limited, Taiwan Branch (Ireland), a Taiwanese limited liability company that is an indirect wholly-owned subsidiary of SRAM. Sandleford manufactures the allegedly infringing products in Taiwan and transfers title to them to SRAM in Taiwan. Third-party distributors then purchase the products from SRAM and resell them to customers in many States, including the Court’s forum State of California.
As relevant here, Sandleford moved to dismiss, arguing that its contacts with California were insufficient to support the assertion of specific personal jurisdiction under the Due Process Clause of the US Constitution, which in patent infringement cases only permits actions against non-US defendants that have “purposefully availed” themselves of the protection of a State’s laws. The Court analyzed the question under the “stream of commerce” theory, pursuant to which personal jurisdiction exists where a defendant has placed a product into the “stream of commerce” with an understanding that it would ultimately be sold in a forum State. The Court noted that the contours of the theory remained uncertain, but that it had been adopted by the US Court of Appeals for the Federal Circuit, whose personal jurisdiction rulings apply in patent infringement cases nationwide. Under the Federal Circuit rule, jurisdiction exists over a non-US defendant if “it knowingly participates in a distribution channel that sends accused products to California.” The Court found that test to be met, concluding that “Sandleford knew or should have known that the accused products were ending up in California.”
The Court rejected as irrelevant various additional facts that Sandleford cited to argue that its intentional conduct towards California was insufficient to infer an expectation that it might be sued in the State: That title to the products was transferred in Taiwan, that SRAM’s conduct in California could not be imputed to Sandleford, that Sandleford had no role in determining how or where its products were distributed in the US, and (unlike prior cases) that California sales occurred only through the intervention of two levels of third parties.
The Court found the Due Process requirement that the exercise of jurisdiction be “reasonable” also was satisfied. The litigation was not “so gravely difficult and inconvenient” to Sandleford as to leave the company at a “severe disadvantage,” in part because of “transportation options” and Sandleford’s affiliation with a US corporation. The Court also found that both FOX and California had legitimate interests in wanting the case to proceed in the State.
[Editor’s note: The FOX Factory case is also discussed in the Personal Jurisdiction/Forum Non Conveniens section of this report.]
Evidence Of Extraterritorial Actions Relevant To Claim Of Induced Infringement Under 35 USC 371(b)
Kaneka Corp. v. SKC Kolon PI, Inc., US District Court for the Central District of California, December 8, 2017
A Japanese company sued a Korean company and its US subsidiary for infringing patents related to polyimide films, which can be made into flexible printed circuit boards. Following a jury trial that ended with a verdict of infringement, the parties filed various motions. Among other issues, the Court rejected the defendants’ argument that the verdict for inducing infringement under 35 USC 371(b) was impermissibly based on “on activities and market conditions in Korea.” The Court concluded that Section 371(b) lacked language limiting the statute’s geographic applicability contained in other provisions of the Patent Act and thus found extraterritorial conduct potentially relevant. It also observed that in any event the analysis of the plaintiff’s damages expert “centers on pinpointing how much of Defendants’ infringing activity took place within the United States.”
Sale Of Products To Delaware Corporation That Distributes Products Nationwide Constitutes “Targeting” Of Delaware Market
Koninklijke KPN N.V. v. Kyocera Corp., US District Court for the District of Delaware, December 18, 2017
This patent infringement action, apparently related to the 3G Licensing case discussed above, considered among other issues whether specific personal jurisdiction could be asserted over Kyocera, a Japanese corporation. The District Court in Delaware stated that jurisdiction could be shown under what it termed the “dual jurisdiction” or “stream of commerce” theory, which requires that a plaintiff show (i) that the defendant intended to serve the Delaware market specifically; (ii) that this intent resulted in the introduction of the product into the market; and (iii) that the plaintiff’s cause of action arises from injuries caused by that product. The Court focused on the first prong of this test, and found that it was satisfied by statements in Kyocera’s annual report that it “develops, manufactures and sells mobile phones such as smartphones ... mainly for telecommunications carriers,” including carriers that are incorporated in Delaware. No other relevant facts were cited.
[Editor’s note: The Koninklijke case is also discussed in the Personal Jurisdiction/Forum non Conveniens section of this report.]
Extraterritorial Conduct That Cannot Form Basis For Infringement Still Relevant To Finding Of Willfulness
Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., US District Court for the District of Delaware, December 8, 2017
This patent infringement litigation began twelve years ago, and returns to District Court for the reconsideration of a number of issues in light of changes to the law made by recent decisions of the US Supreme Court. Among other issues, the Court addressed the extent to which extraterritorial conduct that could not form the basis for a finding of patent infringement might nevertheless be considered for purposes of determining whether US infringement was “willful,” and therefore supported the imposition of enhanced damages. The Court believed that extraterritorial conduct could be so used, but it did not articulate a general standard against which to judge future cases. Rather it concluded simply: “Fairchild’s extraterritorial conduct is relevant to willfulness because it enabled Fairchild to manufacture a product that subjected it to liability under U.S. patent law.”
Extraterritorial Sales Of Product Made From Patented Us Component Could Constitute Infringement Under 35 USC 271(f)(2) And “Irreparable Injury” Sufficient To Support Injunction
Veeco Instruments Inc. v. SGL Carbon, LLC, US District Court for the Eastern District of New York, November 2, 2017
Plaintiff Veeco holds patents on and manufactures LEDs and other electronic components and devices. It licensed defendant SGL to manufacture a subcomponent for it and sued SGL for patent infringement when, in substance, it came to believe that SGL was manufacturing and selling an infringing copy of the subcomponent to one of Veeco’s competitors in China. SGL among other things denied that the products it sold were infringing. In this opinion, the District Court in Brooklyn considered Veeco’s motion for a preliminary injunction to prevent SGL from selling the subcomponent to Veeco’s competitors.
As relevant here, the Court first concluded that Veeco showed “a clear likelihood of success” on its claim of indirect infringement under 35 USC 271(f)(2). Although the Patent Act does not apply extraterritorially, Section 271(f)(2) generally establishes infringement where a defendant supplies or causes to be supplied from the US a patented component, having no substantial noninfringing uses, that it intends will be combined with other products outside the US in a manner that would constitute infringement if it had occurred domestically. The Court stated that Section 271(f)(2) should be understood as “designed to put [US] domestic entities who export components to be assembled into a final product in a similar position to [US] domestic manufacturers who sell the final product domestically or export the final product.”
The Court considered many factors in evaluating whether to issue a preliminary injunction, one of which was the extent to which Veeco had shown an “irreparable injury”—i.e., an injury that could not satisfactorily be remedied after trial through money damages. In the course of its discussion, the Court addressed SGL’s argument that its sales to customers in China could not cause an “irreparable injury” because those sales were outside the geographic scope of the Patent Act. The Court rejected this argument based on the interpretation of Section 271(f)(2) cited above.
Personal Jurisdiction Not Found Where Only 10 Copies of Allegedly Infringing Newsletter Were Sent To Recipients In California
Axiom Foods, Inc. v. Acerchem International, Inc., US Court of Appeals for the Ninth Circuit, November 1, 2017
Plaintiffs are US manufacturers of natural and organic foods that sued the defendants, a Chinese company and its UK subsidiary, for copyright infringement. The claims arose from the UK defendant’s alleged misappropriation of the plaintiffs’ copyrighted logos in a newsletter sent to 334 recipients. Most of the recipients were located in Western Europe; “no more than ten” were in the forum State of California. In this case, the Court of Appeals affirmed the decision of the district court that it did not have personal jurisdiction over the defendants.
The Court of Appeals observed that personal jurisdiction must be judged under the law of the forum, and that California courts could assert their authority to the full extent permitted by the Due Process Clause of the US Constitution. As relevant to the tort of infringement, due process imposes an “effects test,” which requires (1) the defendant must . . . “purposefully direct” his activities toward the forum . . . ; (2) “the claim must be one which arises out of or relates to the defendant’s forum-related activities”; and (3) “the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.” “Purposeful direction,” in turn, requires the commission of an “intentional act,” “expressly aimed” at the forum state, which causes harm “that the defendant knows is likely to be suffered in the forum state.”
Focusing on the maximum ten California-based recipients of the newsletter, the Court of Appeals found that the State was not “the focal point both of the [newsletter] and of the harm suffered,” and that specific jurisdiction under the “effects test” thus could not be found. In so doing, it dismissed arguments that other recipients outside of California may themselves have had corporate or other connections with the State, noting that jurisdiction must be based only on a defendant’s forum-related contacts, not links to the forum possessed by entities with which the defendant dealt.
The Court of Appeals similarly found no basis for jurisdiction under Federal Rule of Civil Procedure 4(k)(2), which “is nearly identical to traditional personal jurisdiction analysis with one significant difference: rather than considering contacts between [the defendant] and the forum state, we consider contacts with the nation as a whole.” The plaintiffs provided evidence that the newsletter was sent to 70 recipient companies with affiliated companies in the US, but did not establish the relationship between those recipients and the US companies. Citing this failure of proof, the Court of Appeals declined to assert jurisdiction under the Rule 4(k)(2).
[Editor’s note: The Axiom Foods case is also addressed in the Personal Jurisdiction/Forum non Conveniens section of this report.]
Canadian Government Agency Distribution Of US Copyrighted Material Copied By Defendant Does Not Render Those Copies “Lawfully Made” Under US Copyright Law, And The Statutory “First Use” Doctrine Does Not Protect That Copying And Transmittal Of The Material To The US
Geophysical Services, Inc. v. TGS–NOPEC Geophysical Services, US District Court for the Southern District of Texas, November 22, 2017
Plaintiff Geophysical Service is a Canadian company in the business of creating “seismic lines”—visual cross-sections of land below the earth’s surface from seismological data. Under Canadian law, it is required to submit all such seismic lines to a Canadian governmental entity, which in turn is authorized to release copies upon request after a ten-year waiting period. Defendant TGS-NOPEC Geophysical Services (TGS) is a Texas company that obtained copies of 33 of Geophysical’s lines and is alleged to have committed copyright infringement by sending them to US customers, and contributory copyright infringement. TGS sought to dismiss the case on grounds that Geophysical failed to allege US domestic copyright infringement, as the law required.
The case had already once been decided and appealed, and it returned to the District Court for resolution of the remaining issues. (The appellate decision in the case was handed down in March 2017 and was discussed in the Spring 2017 issue of this report.) Specifically, the Court considered the meaning of 17 USC 109(a), which codifies the “first sale doctrine” and, as relevant here, permits a person to sell a copy of a copyrighted document that was “lawfully made” under Title 17 of the US Code. In the transnational context presented, the Court was required to determine whether a copy is “lawfully made” with reference to the law of the place where the copying occurred (in this case, Canada) or whether only copies lawfully made under US law would trigger the provision.
The Court noted that the US Supreme Court, in the 2013 Kirtsaeng case, ruled that Section 109(a) applied to imported goods. But the lawfulness of the goods’ manufacture outside the US was not questioned, and so the case did not provide the standard for determining “lawfulness.” The Court considered a number of alternatives and ultimately concluded in essence that the “first sale” provision of Section 109(a) should apply extraterritorially:
The court interprets “lawfully made under this title” to mean that a copy is lawful if it was made in the United States in compliance with Title 17 or in a foreign country in a manner that would comply with Title 17 if United States copyright law applied.
Some of the conceptual difficulties of the issue were made apparent by application of this rule to the facts of the case. The Court noted that both US and Canadian law required the submission of seismic data to the respective Governments with an expectation that the data would ultimately be released, but that Title 17 of the US Code (the Copyright provisions) contained neither the submission requirement nor the expectation of public disclosure. It concluded as a consequence that the submission/distribution regimes of the governments did not render subsequent copying “lawfully made,” and the first-use exception to an infringement action established by Section 109(a) was inapplicable.
The Court thus declined to dismiss the plaintiff’s copyright infringement claim based on Section 109(a). The defendant advanced two additional defenses, however—“fair use” and an implied license—and the Court determined that it was premature to address them on the record presented.
Personal Jurisdiction Over Canadian Defendants In A Copyright Infringement Action Rejected Under California Law But Upheld Under Rule 4(k)(2)
L.A. Gem & Jewelry Design, Inc. v. An & Associates Co. Inc., US District Court for the Central District of California, December 6, 2017
The plaintiff designs, manufactures, and sells jewelry having US copyright protection. It sued the defendants, all Canadian residents and citizens, for copyright infringement and contributory copyright infringement arising from the sale of their jewelry in the US through various websites. The defendants moved to dismiss the case on grounds that the District Court in California could not assert personal jurisdiction over them.
The Court observed that personal jurisdiction was to be judged under the standards of the forum State of California, which permits jurisdiction to the full extent of the Due Process Clause of the US Constitution. As applicable to a copyright infringement case, Due Process may be satisfied under the “effects” test, requiring that the defendant have allegedly “(1) committed an intentional act; (2) expressly aimed at the forum state; (3) causing harm that the defendant knows is likely to be suffered in the forum state.” The Court added that remote acts merely having a “foreseeable” effect in the forum State are not sufficient to establish jurisdiction; “express aiming” at or “individual targeting” of the forum must also be shown.
The Court found that the defendants’ allegedly intentional violation of copyrights held by a California corporation was insufficient by itself to establish jurisdiction in that State. It further found no evidence that the defendants’ promotional activity—through social media sites including Facebook—had focused on California in any way, and that the relatively few sales to California residents (10 out of allegedly 2400 infringing sales) were “simply too attenuated and isolated to suggest that California was the focal point of the sales and the harm suffered.” The small number of California sales also meant that the plaintiff could not show that its claim arose from contacts with the forum State.
Alternatively, the Court considered whether personal jurisdiction could be established under Federal Rule of Civil Procedure 4(k)(2), which applies where a federal claim is involved, the defendant must not be subject to the personal jurisdiction of any one State court based on its contacts with the State, and Due Process requirements of fundamental fairness are satisfied. Notably, the Due Process test under Rule 4(k)(2) is applied to the defendants’ contacts with the US as a whole, not their contacts with the forum State. This focus required the Court to consider whether the defendants had “expressly aimed” their sales and marketing efforts at the US. The Court “easily” found that the defendants targeted the US, citing principally the following:
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The defendants maintained “fully interactive” websites specifically referring to deals available to US and Canadian customers, handling transactions in US dollars, and addressing US shipping restrictions;
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The defendants’ marketing employed Facebook’s “global targeting” feature to focus promotions on different countries, and that the US would have been one of these countries;
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The defendants shipped products directly from Canada to the US, avoiding middlemen and therefore escaping the “stream of commerce” theory that can complicate efforts to establish personal jurisdiction; and
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Jurisdiction over individual defendants was upheld where they were alleged to be principal figures in the operation of their employers.
Finally, the Court found that the defendants had not made the required “compelling case” that jurisdiction based on adequate contacts might otherwise be “unfair.” It rejected their argument that their recordkeeping system was not adequately automated and that litigation would be burdensome, noting that this burden was the consequence of the record-keeping system and not the product of having to litigate in a different country.
[Editor’s note: The L.A. Gem & Jewelry Design case is also addressed in the Personal Jurisdiction/Forum non Conveniens section of this report.]
Court Of Appeals In New York Holds That Misappropriation Of Tangible Property In The US Is A US “Domestic Injury,” Even If Suffered By A Non-US Plaintiff
Bascuñán v. Elsaca, US Court of Appeals or the Second Circuit, October 30, 2017
Bascuñán is the first decision of a court of appeals to address the requirement that a private claim under the RICO must be based on a “domestic” injury to the plaintiff’s business or property. It has two principal holdings: First, if “a civil RICO plaintiff alleges separate schemes that harmed materially distinct interests to property or business, each harm—that is to say, each ‘injury’—should be analyzed separately for purposes of [the domestic injury] inquiry.” Second, “a plaintiff who is a foreign resident may nevertheless allege a civil RICO injury that is domestic. At a minimum, when a foreign plaintiff maintains tangible property in the United States, the misappropriation of that property constitutes a domestic injury.” Our commentary on the decision was published by Law360 on November 3, 2017, and may be found here.
Relocation Expenses Incurred In Mexico And Loss Of Income From Mexican Job Cannot Be Recovered In Private Civil RICO Suit
Castellanos v. Worldwide Distribution Systems USA, LLC, US District Court for the Eastern District of Michigan, November 16, 2017
Castellanos is a Mexican Citizen and computer analyst who contracted with Worldwide, an IT staffing firm, for placements with Worldwide clients in the US. He gave up a job in Mexico and incurred costs in Mexico and the US in connection with his move to the US to perform under the contract. After five months in the US Castellanos had received no placements and no salary from Worldwide, and he returned to Mexico. He then filed suit against Worldwide, claiming that he was entitled to that salary, his lost salary in Mexico, and the reimbursement of his expenses. As relevant here, his claims included a violation of the civil RICO provision, 18 USC 1964(c), based on underlying violations of the substantive RICO provisions, 18 USC 1962(c) and (d).
The Court preliminarily observed that while underlying violations may be based on conduct occurring outside the US, private civil actions under Section 1964(c) only reach US “domestic” injuries. The Court found that this standard had not been satisfied as to the elements of damages claimed by Castellanos. Specifically, the salary from the job Castellanos left in Mexico as well as his unreimbursed expenses incurred in Mexico in connection with travel to the US could only constitute an “injury” that occurred in Mexico. The Court noted that a failure to make a promised reimbursement in the US could be a US injury, but concluded that no such fact had been properly alleged. The Court also found that Castellanos had no right to recover his allegedly unpaid US salary, but only because his “at will” contract—pursuant to which his employment could be freely terminated by Worldwide—created no “property” interest, as required for a civil RICO claim.
US “Domestic” Injury Found Where US-Based Employees Authorized Mailing of Subject Publications from One Non-US Location to Another
Elsevier Inc. v. Grossmann, US District Court for the Southern District of New York, November 3, 2017
This opinion is the latest in a long-running dispute between Elsevier, a distributor of technical publications, and defendant Grossman, a customer found at trial to have obtained discounted subscriptions from Elsevier based on a false representation that they were for Grossman’s own use. The publications were all ultimately shipped to customers of Grossman’s company in Brazil.
The District Court in New York had previously denied Elsevier’s motion for summary judgment, finding the facts did not establish that the company had suffered a US “domestic injury,” as required for private RICO claims by the US Supreme Court’s 2016 decision in the RJR Nabisco case. Elsevier submitted additional information showing that publications comprising 31 of the 51 fraudulent subscriptions were shipped from the US, and that a US-based employee authorized the shipment of publications comprising 17 of the remaining 20 subscriptions—presumably shipments that originated outside the US.
The Court first noted that courts in New York had adopted a “locus of effects” test, meaning that the location of a RICO injury would be determined based on “where the plaintiff suffered the injury,” not where the injurious conduct took place. Citing the recent appellate decision in the Bascuñán case (see note above), the Court also observed that an injury to “tangible” property would be deemed to be US “domestic” if the property “was located in the United States when it was stolen or harmed.”
The Court found that standard to be met, and that Elsevier’s injury was adequately “linked” to the US. As to copies of journals mailed from the US, the Court concluded that the injury occurred “when Elsevier relinquished control . . . under false pretenses.” The Court also found the standard to be met where the journals had never been in the US, but where a US-based employee had authorized the mailing.
The Court’s opinion came against the background of sanctions having been imposed against Grossman that, among other things, resulted in Elsevier’s motion being deemed unopposed.
Exercise Of Personal Jurisdiction Over Italian Defendants For RICO Claim Not Reasonable Where Almost All Relevant Conduct Occurred In Italy And Italian Law Would Largely Govern
World Depot Corp. v. Onofri, US District Court for the District of Massachusetts, December 4, 2017
World Depot is a Massachusetts-based distributor of cabinetry and flooring products that allegedly had an oral supply agreement with an Italian manufacturer of wood flooring. As a result of corporate transactions and other actions in Italy, the manufacturer came under new ownership which, as relevant here, allegedly interfered with World Depot’s US customer relationships and committed the RICO predicate acts of wire fraud and mail fraud that allegedly caused World Deport to be unable to serve its US customers. Two Italian defendants moved to dismiss the complaint, arguing that the Court lacked personal jurisdiction over them.
As a preliminary matter, the Court addressed a split of authority among the federal judicial circuits regarding the scope of personal jurisdiction under RICO, which contains a provision authorizing the service of complaints anywhere in the country under certain circumstances. Siding with the majority view, the Court concluded that “the plaintiff must establish that the forum state has personal jurisdiction over at least one defendant, and that service of process (and therefore the conferring of personal jurisdiction) over other defendants may occur as ‘the ends of justice require.”
The Court then addressed the question whether jurisdiction could be asserted over either of the Italian defendants. It found that “general” personal jurisdiction did not exist over the defendants, an Italian resident and an Italian business, because neither met the applicable requirement that it be “at home” in Massachusetts. “Specific” personal jurisdiction, by contrast, has three different requirements: (i) “the plaintiff’s claim must be related to the defendant’s contacts with the state,” (ii) “the defendant’s contacts with the state must be purposeful,” and (iii) “the exercise of jurisdiction must be reasonable under the circumstances.”
Addressing the first, “relatedness,” requirement, the Court explained that “the defendant’s in-state conduct must form an ‘important, or at least material, element of proof’ in the plaintiff’s case.” Here, the RICO claim was based on World Depot’s inability to serve its customers, and a Massachusetts State claim for “tortious interference” with World Depot’s business was based on the defendants’ supposed interference with World Depot’s relationship with its customers. The Court noted, however, that the first alleged injury was caused by the defendants’ actions in Italy, not in Massachusetts. That was also the case as to the second alleged injury, except for allegations of interference by the defendants with one Massachusetts customer of World Depot. The Court thus considered the defendants’ contacts with the forum to have only a “slight connection” to the tortious interference claims, because “virtually the entirety of defendants’ conduct occurred in Italy.” That conduct, moreover, was principally directed towards another Italian company. On balance, the Court concluded that World Depot’s claims were only “marginally related” to the defendants’ in-State contacts.
Turning to the second specific personal jurisdiction requirement, the Court noted that “purposeful availment” of the benefits of Massachusetts law could be shown even where a defendant had not physically been present in the State through the solicitation of business from in-State customers. This had been alleged and so the Court deemed this portion of the test at least arguably satisfied.
The third part of the test requires that the exercise of jurisdiction be “reasonable and fundamentally fair” in light of five factors. Those factors, and the Court’s evaluation of their application in this case, are as follows: (i) the defendant’s burden of litigating in the forum (‑‑potentially significant for Italian defendants accused of violating Italian law, where almost all discovery would occur in Italy); (2) the forum State’s interest in adjudicating the dispute (‑‑relatively modest because almost all of the relevant conduct occurred in Italy); (3) World Depot’s interest in obtaining convenient and effective relief (‑‑deemed significant, as a resident plaintiff’s choice of a local forum is entitled to deference); (4) the judicial system’s interest in obtaining the most effective resolution of the controversy (‑‑the US court, unlike an Italian court, would not easily be able to address issues of Italian law and evidence where witness testimony and documents would principally be in Italian); and (5) the common interests of all sovereigns in promoting substantive social policies” (‑‑inconclusive here, as Massachusetts’ interest in protecting its citizens is balanced by Italy’s interest in regulating the conduct of its citizens in Italy). The Court weighed these factors and concluded that the exercise of jurisdiction was not reasonable. On this basis, it dismissed the complaint.
It is worth noting the Court’s observation that RICO’s expansive provisions for personal jurisdiction create an opportunity for abuse, as a plaintiff might try to use an infirm RICO claim to secure jurisdiction over defendants that could not otherwise be sued in the forum. It thus recognized that courts should be “particularly vigilant” in ensuring at an early stage that RICO claims are not “spurious,” and in following this advice the Court concluded, in dictum, that the complaint failed to state a RICO claim.
[Editor’s note: the World Depot case is also discussed in the Personal Jurisdiction/Forum non Conveniens section of this report.]
White Collar Criminal Law/Money Laundering
“Bright-Line” Rule Applying Wire Fraud Statute Based Solely On Use Of US Wires Criticized But Applied
United States v. Hussein, US District Court for the Northern District of California, October 27, 2017
The defendant in this criminal case, Sushovan Hussain, sought to dismiss wire fraud charges on grounds that they reflected an impermissibly extraterritorial application of the Wire Fraud Act, 18 USC 1343. The case arose out the alleged fraud on California-based Hewlett-Packard Corporation in connection with its acquisition of a UK software provider. Hussein was the UK company’s Chief Financial officer. Acknowledging that the law was unsettled and that binding precedent in the Ninth Circuit Court of Appeals and the US Supreme Court was “somewhat in tension,” the Court upheld the indictment.
The Court began by observing that the determination whether a federal statute applies to a cross-border transaction involves a two-step process. First, the statute may apply without further analysis if it contains a clear indication of intent to be applied extraterritorially. If no such intent is found, a court must then determine the “focus” of the statute, and determine whether US domestic facts relevant to this focus are sufficient to establish a violation. The Court found that Section 1343 contained no indication of extraterritorial application. But the Court noted that disagreement existed as to the “focus” of the statute. Some courts (and the Government in this case) promoted a “bright line” test in which any use of a US “wire” would trigger application of the statute. Other decisions looked at the geographic scope of the broader scheme to defraud and considered multiple factors. The Court ultimately expressed its view that the most appropriate test was a “holistic” one that centered on the fraud, and it believed this approach more consistent with the most recent decisions of the US Supreme Court. But the Court also acknowledged earlier appellate precedent suggesting that the “focus” of the Wire Fraud Statute was the “use of the wires.” Because the later Supreme Court decisions did not “necessarily compel” a different result, the Court considered itself bound by the “bright line” test focusing on whether US means of communication had been employed in the commission for a fraud anywhere in the world. That test was easily satisfied by the indictment, which was based on alleged misrepresentations made by Hussein “in e-mails, press releases, phone calls, and videos transmitted within the Northern District of California.”
Hussein was also charged with conspiracy to commit wire fraud, in violation of 18 USC 1349. The Court observed that the extraterritorial reach of an “ancillary” violation like conspiracy should follow that of the underlying offense, and so found that Section 1349 could only apply domestically. It also cited precedent suggesting that the “focus” of a conspiracy statute is the “object of the conspiracy, and thus that the conspiracy is domestic so long as the object, if executed, would constitute a domestic violation of the underlying statute.” Because the “object” of the conspiracy was the domestic wire fraud already found to have been properly charged, the Court rejected Hussein’s effort to dismiss the charge of conspiracy.
Finally, the Court considered Hussein’s argument that several counts of the indictment alleging criminal use of US wires in defrauding ex-US holders of the UK company’s stock violated the Due Process Clause of the US Constitution because they had insufficient contacts with the US. The Court disagreed, noting that the alleged violations had been found to be US domestic, and that US wires had also been used.
Personal Jurisdiction/Forum Non Conveniens
Sale Of Products To Delaware Corporation That Distributes Products Nationwide Constitutes “Targeting” Of Delaware Market
3G Licensing, S.A., Koninklijke KPN N.V. v. HTC Corp., US District Court for the District of Delaware, December 18, 2017
This patent infringement action, apparently related to the Koninklijke KPN N.V. case discussed below, considered among other issues whether specific personal jurisdiction could be asserted over HTC, a Taiwanese corporation. The District Court in Delaware stated that jurisdiction could be shown under what it termed the “dual jurisdiction” or “stream of commerce” theory, which requires that a plaintiff show (i) that the defendant intended to serve the Delaware market specifically; (ii) that this intent resulted in the introduction of the product into the market; and (iii) that the plaintiff’s cause of action arises from injuries caused by that product. The Court focused on the first prong of this test, and found that it was satisfied by statements in HTC’s annual report that it “released particular smartphones in partnership with US carrier Verizon,” a company incorporated in Delaware. The Court also considered that HTC’s products were sold in Delaware through a number of outlets. No other relevant facts were cited.
[Editor’s note: The 3G Licensing case is also discussed in the Intellectual Property-Patents section of this report, as certain courts apply special personal jurisdiction standards in patent infringement cases.]
Personal Jurisdiction Exists Where Canadian Citizen Was Personally Served In Forum State, And Where He Had Travelled To Conduct Business, Lease Space, And Hire Independent Contractor In State In Connection With Allegedly Breached Contract
Alley Cat, Inc. v. Duncan, US District Court for the District of Nevada, September 28, 2017
Plaintiffs Nicholas Pinkowski and two corporations he controls create and distribute adult entertainment. Pinkowski contracted with defendant Stuart Duncan for the sale of the companies. Pinkowski sued Duncan for breach of contract in federal court in Nevada, claiming Duncan failed to make required payments and undertake certain marketing and licensing activities.
Among other motions, Duncan moved to dismiss the complaint for lack of personal jurisdiction. Pinkowski is a resident of Nevada, while his companies are Wyoming and Nevada corporations respectively, both with their principal place of business in Nevada. Defendant Duncan is a Canadian citizen who owns a home in California.
The District Court denied Duncan’s motion to dismiss. The Court first held that personal service of the complaint on Duncan when he was in Nevada was likely sufficient unto itself to establish personal jurisdiction, but noted that the US Supreme Court had never definitively so ruled, and so conducted a “minimum contacts” jurisdictional analysis under the Due Process Clause of the Constitution. After noting that Pinkowski had not alleged general jurisdiction, the Court applied the three-prong test applicable in the Ninth Circuit for finding specific personal jurisdiction:
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The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
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The claim must be one which arises out of or relates to the defendant’s forum related activities; and
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The exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.
The Court found that Pinkowski had established a prima facie showing of personal jurisdiction based principally on the following facts: Duncan had travelled to Las Vegas at least three times for matters related to the purchase, had personally rented office space in Las Vegas to store assets acquired in the purchase, had hired and managed an independent contractor who conducted business related to the purchase in Las Vegas, and had submitted paychecks to employees in the State. The Court also noted that the majority of the parties’ negotiations occurred over phone calls Duncan “knowingly made and initiated into the State of Nevada, text messages that Duncan sent to Pinkowski while he knew Pinkowski was in Nevada and during Duncan’s admitted trips to Nevada.” The Court held that these facts, in conjunction with personal service within the State, established the court’s personal jurisdiction over Duncan.
Personal Jurisdiction Not Found Where Only 10 Copies of Allegedly Infringing Newsletter Were Sent To Recipients In California
Axiom Foods, Inc. v. Acerchem International, Inc., US Court of Appeals for the Ninth Circuit, November 1, 2017
Plaintiffs are US manufacturers of natural and organic foods that sued the defendants, a Chinese company and its UK subsidiary, for copyright infringement. The claims arose from the UK defendant’s alleged misappropriation of the plaintiffs’ copyrighted logos in a newsletter sent to 334 recipients. Most of the recipients were located in Western Europe; “no more than ten” were in the forum State of California. In this case, the Court of Appeals affirmed the decision of the district court that it did not have personal jurisdiction over the defendants.
The Court of Appeals observed that personal jurisdiction must be judged under the law of the forum, and that California courts could assert their authority to the full extent permitted by the Due Process Clause of the US Constitution. As relevant to the tort of infringement, due process imposes an “effects test,” which requires (1) the defendant must . . . “purposefully direct” his activities toward the forum . . . ; (2) “the claim must be one which arises out of or relates to the defendant’s forum-related activities”; and (3) “the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.” “Purposeful direction,” in turn, requires the commission of an “intentional act,” “expressly aimed” at the forum state, which causes harm “that the defendant knows is likely to be suffered in the forum state.”
Focusing on the maximum ten California-based recipients of the newsletter, the Court of Appeals found that the State was not “the focal point both of the [newsletter] and of the harm suffered,” and that specific jurisdiction under the “effects test” thus could not be found. In so doing, it dismissed arguments that other recipients outside of California may themselves have had corporate or other connections with the State, noting that jurisdiction must be based only on a defendant’s forum-related contacts, not links to the forum possessed by entities with which the defendant dealt.
The Court of Appeals similarly found no basis for jurisdiction under Federal Rule of Civil Procedure 4(k)(2), which “is nearly identical to traditional personal jurisdiction analysis with one significant difference: rather than considering contacts between [the defendant] and the forum state, we consider contacts with the nation as a whole.” The plaintiffs provided evidence that the newsletter was sent to 70 recipient companies with affiliated companies in the US, but did not establish the relationship between those recipients and the US companies. Citing this failure of proof, the Court of Appeals declined to assert jurisdiction under the Rule 4(k)(2).
[Editor’s note: The Axiom Foods case is also discussed in the Intellectual Property-Copyright section of this report, as certain courts apply special personal jurisdiction standards in copyright infringement cases.]
Personal Jurisdiction Over Japanese Manufacturer In Product Liability Action Based On Manufacturer’s Involvement With Design And Distribution In US
C.C., through his natural mother and guardian, Melanie Ginnever v. Suzuki Manufacturing of America Corp., US District Court for the Eastern District of Missouri, October 16, 2017
This product liability action arose out of an accident involving an allegedly defective all-terrain vehicle made by Suzuki Motor Corporation of Japan and sold through two of Suzuki’s US subsidiaries. Suzuki-Japan was sued and sought to dismiss the complaint on grounds that it was not subject to personal jurisdiction in the State of Missouri.
Personal jurisdiction was predicated on the “steam of commerce” theory, pursuant to which some courts have permitted cases to proceed consistent with the Due Process Clause of the US Constitution where the manufacturer-defendant’s only contact with the forum was some expectation that its products would be sold to consumers in the State where a product liability case was brought. The Court observed that the US Supreme Court, despite several attempts, had failed to describe definitively the circumstances where a “stream of commerce” theory might be viable, with the most notable point of contention whether some evidence of targeting a jurisdiction was required above and beyond a mere expectation that products would be sold there. The Court noted that it was bound by the law of the Eighth Circuit, which had accepted a version of the “targeting” requirement under which jurisdiction exists where a “foreign manufacturer . . . pours its products into a regional distributor with the expectation that the distributor will penetrate a discrete, multi-State trade area.”
The Court found this test to be met, relying on facts suggesting the direct involvement of Suzuki-Japan in the sale of ATVs in the US generally and Missouri specifically. The Court observed that Suzuki-Japan “created the distribution network that brought the subject ATV to Missouri”; that it employs one US distributor, which it owns; that the ATVs are assembled in the US “according to the design of” Suzuki-Japan; and that authorized dealerships (including in Missouri) were created, showing “intent to penetrate the Missouri market, and reap the benefit of sales from the Missouri market.” The Court also cited references to Suzuki-Japan as the copyright holder for the ATV’s owner’s manual, which would play a role in litigating the merits of the product liability claim. These facts persuaded the Court that the ATV involved in the accident did not “end up in Missouri on an attenuated, random, or fortuitous basis,” and that the assertion of jurisdiction was thus appropriate.
Australian Company That Obtained Injunction In Australia Having Impact In California Subject To Specific Personal Jurisdiction
Electronic Frontier Foundation v. Global Equity Management, United States District Court for the Northern District of California, November 17, 2017
The defendant, Global Equity Management (GEMSA), is an Australian corporation that holds a number of patents and has filed several patent infringement suits in the US. Plaintiff Electronic Frontier Foundation (EFF) is a nonprofit focusing on issues relating to the internet and modern technology, including what it considers to be patent reform. As part of a regular article series titled “Stupid Patent of the Month,” EFF published an article about a patent owned by GEMSA. EFF’s article highlighted the lawsuits brought by GEMSA relating to this patent, described GEMSA as a “classic patent troll,” and called on Congress to pass venue reform to mitigate the harm caused by frequent patent litigators. GEMSA sued EFF in Australia, alleging that the article made several misstatements, harmed GEMSA’s litigation efforts, and was part of a conspiracy between EFF, Airbnb (a defendant in one of GEMSA’s suits), and entrepreneur Mark Cuban. Despite what GEMSA considered procedural defects with service of the suit and its own decision not to appear, the Australian court required EFF to remove the article form its website and enjoined EFF from publishing any content regarding GEMSA’s intellectual property. EFF did not remove the article and stated it does not intend to do so. Instead, it brought an action for declaratory relief in federal court in California under the Securing the Protection of our Enduring and Established Constitutional Heritage Act (the “SPEECH Act”), alleging that the Australian injunction violated EFF’s free speech rights under the US Constitution and that the Australian court’s exercise of jurisdiction did not comport with due process and thus did not comply with the Hague convention. GEMSA did not appear in the case to defend itself.
EFF asserted that the District Court had personal jurisdiction over GEMSA because GEMSA had brought complaints against nine companies with principal places of business in California, had “reached out” to the State by prosecuting three unrelated infringement actions there, and through its Australian litigation had engaged in a “course of conduct explicitly aimed at suppressing a Californian’s [EFF’s] speech about litigation involving California companies such as Airbnb that is of interest to readers” in California. A Magistrate Judge found that jurisdiction over GEMSA did not exist, and EFF appealed the decision to the District Judge overseeing the case. EFF argued that GEMSA knowingly injured EFF in California because GEMSA knew EFF operated in California when it sought its injunction, and that the effect of GEMSA’s injunction is felt in California, where EFF does its speaking and where many of its readers reside. To determine whether these contacts constituted the “minimum contacts” required by the Due Process Clause of the US Constitution for specific personal jurisdiction to attach, the Court applied a three-prong test: Specific personal jurisdiction exists where (i) the defendant purposefully availed itself of the privilege of doing business in the forum State, (ii) the claim arises out of the defendant’s forum-related activities, and (iii) the exercise of jurisdiction is reasonable.
To determine whether the first prong was met, the Court applied the “effects test” set forth in Calder v. Jones, which is satisfied if the defendant “committed an intentional act,” the act was “expressly aimed” at the forum State, and the act caused harm that the defendant knew was likely to be suffered in the forum State. The Court added that the sole focus of inquiry was conduct by GEMSA directed towards California; connections that EFF had with California were not relevant.
The Court found two instances of relevant conduct by GEMSA directed at California: seeking the injunction granted by the Australian court, and its threat to enforce that injunction in California. “California may properly be said to be the epicenter of the parties’ dispute.” The Court further noted that EFF was a California nonprofit with employees, and a significant number of donors and readers, in the State; that the challenged speech was “uttered” in California; that any actions to take down the speech pursuant to the Australian injunction would take place in California, and that the harm to EFF would occur in California. The Court also found that GEMSA had “expressly aimed” its conduct at California by sending two demand letters to EFF in the State, obtaining an Australian injunction requiring EFF to take action in California, and serving EFF with an injunction at its California office. While acknowledging that either the demand letters or service might alone be insufficient to establish personal jurisdiction, the Court considered them in conjunction with the more substantial contact of seeking the Australian injunction. Notably, the Court expressly did not rely on GEMSA’s active engagement in other patent litigation in California (including its physical presence in the State on some occasions related to that litigation) because those cases were unrelated to the EFF action and EFF’s suit did not arise out of or result from those forum-related activities.
Having found that GEMSA had purposefully availed itself of the forum, that EFF’s suit arose out of GEMSA’s California-related activities, and that GEMSA (by not appearing) had failed to show that the exercise of personal jurisdiction would be unreasonable, the Court ruled that it had specific jurisdiction over GEMSA and granted default judgment in favor of EFF.
Flow of Defendants’ Products Into State Did Not Establish General Personal Jurisdiction
Flaherty v. Lidestri Foods, Inc., US District Court for the Eastern District of Pennsylvania, November 17, 2017
Plaintiff Flaherty was injured in a workplace accident and brought suit against multiple corporate and individual defendants for negligence. He was injured while installing food processing equipment at Lidestri Foods’ facility in New Jersey under a contract between Lidestri and his employer, while employees of two other companies, Cheer Pack and Guala Pack, were supervising him. Cheer Pack, Guala Pack, Inc., and Guala Pack, S.p.A. filed motions to dismiss for lack of personal jurisdiction. Flaherty only argued that the defendants were subject to the Court’s “general” personal jurisdiction, but the Court found that none of them was either incorporated or had its principal place of business in Pennsylvania, which are the principal criteria to be applied. The Court also rejected Flaherty’s argument that the Defendants’ “sheer output of products in Pennsylvania” rendered them “at home” in the State and therefore subject to general personal jurisdiction, finding the shipment of goods germane, if at all, to the question whether the defendants were subject to the Court’s “specific” personal jurisdiction.
Personal Jurisdiction Over Taiwanese Company For Patent Infringement Claim Upheld On “Stream of Commerce” Theory
FOX Factory, Inc. v. SRAM, LLC, US District Court for the Northern District of California, October 11, 2017
FOX sued SRAM, a US corporation, for infringing patents for bicycle shock absorbers. Among the defendants was Sandleford Limited, Taiwan Branch (Ireland), a Taiwanese limited liability company that is an indirect wholly-owned subsidiary of SRAM. Sandleford manufactures the allegedly infringing products in Taiwan and transfers title to them to SRAM in Taiwan. Third-party distributors then purchase the products from SRAM and resell them to customers in many States, including the Court’s forum State of California.
As relevant here, Sandleford moved to dismiss, arguing that its contacts with California were insufficient to support the assertion of specific personal jurisdiction under the Due Process Clause of the US Constitution, which in patent infringement cases only permits actions against non-US defendants that have “purposefully availed” themselves of the protection of a State’s laws. The Court analyzed the question under the “stream of commerce” theory, pursuant to which personal jurisdiction exists where a defendant has placed a product into the “stream of commerce” with an understanding that it would ultimately be sold in a forum State. The Court noted that the contours of the theory remained uncertain, but that it had been adopted by the US Court of Appeals for the Federal Circuit, whose personal jurisdiction rulings apply in patent infringement cases nationwide. Under the Federal Circuit rule, jurisdiction exists over a non-US defendant if “it knowingly participates in a distribution channel that sends accused products to California.” The Court found that test to be met, concluding that “Sandleford knew or should have known that the accused products were ending up in California.”
The Court rejected as irrelevant various additional facts that Sandleford cited to argue that its intentional conduct towards California was insufficient to infer an expectation that it might be sued in the State: That title to the products was transferred in Taiwan, that SRAM’s conduct in California could not be imputed to Sandleford, that Sandleford had no role in determining how or where its products were distributed in the US, and (unlike prior cases) that California sales occurred only through the intervention of two levels of third parties.
The Court found the Due Process requirement that the exercise of jurisdiction be “reasonable” also was satisfied. The litigation was not “so gravely difficult and inconvenient” to Sandleford as to leave the company at a “severe disadvantage,” in part because of “transportation options” and Sandleford’s affiliation with a US corporation. The Court also found that both FOX and California had legitimate interests in wanting the case to proceed in the State.
[Editor’s note: The FOX Factory case is also discussed in the Intellectual Property – Patents section of this report, as certain courts apply special personal jurisdiction standards in patent infringement cases.]
Personal Jurisdiction Over German Licensee Of US Patent Exists Under Rule 4(k)(2) Because The License Had US Commercialization and Patent Enforcement Obligations, But Not Under 35 USC 293 Because The License Was Not Tantamount To An Assignment
Genetic Veterinary Sciences, Inc., d/b/a Paw Prints Genetics v. Laboklin GmbH & Co., KG, US District Court for the Eastern District of Virginia, October 16, 2017
The University of Bern, in Switzerland, and its licensee, Laboklin, a German company, assert rights to a US patent for genetic testing of dogs to determine the presence of a defect likely to lead to the development of a disease. They claim that the plaintiff GVS is infringing that patent, and GVS filed suit for a declaratory judgment that it is not.
Among other issues, the Court considered whether the university—an “agency or instrumentality” of Switzerland—was subject to suit in the US under the “commercial activity” exception to the FSIA. That exception applies where a governmental unit engages in “the type of actions by which a private party engages in trade … or commerce.” The Court found this requirement met by the university’s having obtained the patent and consenting to the delivery of cease-and-desist letters to GVS in the US in an effort to enforce it. The fact that the consent was provided outside the US was not relevant because the FSIA specifically applies to non-US conduct having a US effect (here, an effort to enforce the patent against a US entity).
[Editor’s Note: This summary also appears in the Personal Jurisdiction/Forum non Conveniens Section of this Report.]
No Personal Jurisdiction Over Non-Us Bank Whose New York Correspondent Banking Relationship Was Not “Integral” To Madoff Fraud, And That Did Not Exercise Actual Principal-Agent Relationship With Madoff
Hau Yin To v. HSBC Holdings, plc, US Court of Appeals for the Second Circuit, November 4, 2017
Plaintiffs brought claims against US and non-US entities associated with HSBC Bank stemming from the fraud perpetrated by Bernard Madoff. The District Court ruled that it lacked personal jurisdiction over the non-US defendants, and in this summary opinion the Court of Appeals affirmed that decision.
The Court of Appeals first considered whether jurisdiction was appropriate under New York’s “long-arm” statute, which as relevant here required a showing that the bank “purposefully availed itself of the privilege of conducting activities in New York,” through initiatives that constituted a “sustained and substantial transaction of business.” The Court of Appeals found no such contacts, dismissing as inadequate the fact that the non-US entities may have communicated and transmitted information to Madoff and established correspondent bank relationships that were not an “integral part” of the fraud.
The plaintiffs also attempted to establish personal jurisdiction on the theory that the non-US banks had used Madoff as an agent, and so jurisdiction over Madoff would be tantamount to jurisdiction over the bank. The Court of Appeals observed that the agency theory requires that the New York agent have “acted in New York for the benefit of, with the knowledge and consent of, and under some control by, the nonresident principal.” It found that “the actual exercise of control, based on the realities of the situation” was required; the plaintiffs’ allegation that the bank merely that the “legal ability” to exercise such control was inadequate.
No US “Domestic Injury” Found Where Relevant Conduct And Impact Occurred In China
Humphrey v. GlaxoSmithKline, plc, US District Court for the Eastern District of Pennsylvania, September 29, 2017
Plaintiff Humphrey his wife operated a company in China helping Western businesses comply with Chinese anti-bribery laws. They had a consulting agreement with GlaxoSmithKline, a UK company, and with GSK’s US sub. As a result of a complicated series of events relating to allegations that GSK’s Chinese subsidiary engaged in bribery in China, Humphrey and his wife were tried and incarcerated, and ultimately expelled from China. The plaintiffs attribute these reversals to fraud on the part of the GSK entities, and alleged as a result that “their business was destroyed and their prospective business ventures eviscerated.” They filed suit against the defendants in Philadelphia, where GSK’s US subsidiary is based, alleging violations of the civil RICO statute, 18 USC 1962(c) and (d).
The District Court first considered whether the plaintiffs had standing to sue. Standing, it observed, required both that the plaintiffs have been “injured in their business and property” and that the injury was “proximately caused” by the defendants’ alleged RICO violation. The Court added that the plaintiffs must also plead that they suffered a US “domestic” injury, noting that courts had taken different approaches to determining where a RICO injury had occurred—some focusing on the location of the relevant conduct and others on the location of the plaintiffs or the property allegedly injured. While suggesting that the latter approach was preferable, the Court concluded it need not decide because the plaintiffs had not suffered a US “domestic” injury under either test. All of the conduct alleged to have given rise to the RICO violation occurred in China, which was also where the plaintiffs and their company were based. Because the plaintiffs performed services exclusively in China, it did not matter that some clients or would-be clients may have been based in the US. The Court disregarded as “conclusory” allegations that certain of the acts allegedly giving rise to RICO liability were authorized or directed by GSK in the UK, noting that those allegations did not even relate to GSK’s US subsidiary.
Personal Jurisdiction Over Brazilian Bank Executive Based On His Approval Of A Press Release Used In SEC Filings
In re Banco Bradesco S.A. Securities Litigation, US District Court for the Southern District of New York, September 29, 2017
In this securities class action, plaintiffs sued Banco Bradesco S.A. and several of the Bank’s senior executives, including Domingos Figueiriedo de Abreu, alleging violations of the Securities and Exchange Act of 1934. Brazilian prosecutors had previously indicted the Bank and several executives for violations of Brazilian anti-corruption law stemming from a complicated bribery scheme aimed at securing favorable tax rulings from a Brazilian tax tribunal. The complaint in this case claimed that statements made by the Bank were misleading in light of the previously-charged crimes and other bribery schemes, and violated the US securities laws In connection with purchases of preferred American Depositary Shares of the Bank. As relevant here, defendant Abreu moved to dismiss the claims against him for lack of personal jurisdiction.
The District Court in New York rejected Abreu’s argument. The Court noted that that the Exchange Act extends personal jurisdiction “to the limit of the Due Process Clause,” and so the only relevant test was that under the US Constitution: i) whether Abreu had sufficient “minimum contacts” and ii) whether exercising personal jurisdiction over Abreu would comport with “traditional notions of fair play and substantial justice.” On the first factor, the Court noted that because the Exchange Act authorizes worldwide service of process, Abreu’s contacts with the US as a whole, not just with the forum State, were to be considered. The plaintiffs were required to show that Abreu had “purposefully availed” himself of the privilege of doing business in, or directed his actions toward, the US, and the Court found their proffers sufficient: The allegation that Abreu was aware of the Bank’s bribery scheme when he signed off on a press release that was filed with the SEC and his senior positions with the Bank supported the inference that he knew the statements would be relied upon by US investors. Because the allegedly misleading statement formed a core component of the plaintiffs’ claim, the Court also concluded their claim arose from Abreu’s contacts with the US.
As to fairness, the Court noted that once minimum contacts have been established, a defendant must demonstrate “a compelling case” that jurisdiction would be unreasonable in order to defeat personal jurisdiction. Abreu in fact made no such assertion, but the Court independently reviewed the facts and found the assertion of jurisdiction reasonable. First, it concluded that personal jurisdiction would not impose a significant burden on Abreu (especially as he made no argument on this point). Second, it noted that, as plaintiffs were suing under federal law, the US judicial system had an obvious interest in resolving the case in the US, and that the plaintiffs’ interest in a convenient and efficient resolution was likewise “self-evidently strong.”
Personal Jurisdiction Over British Company That Did Not Sell Product In The US
In re Suboxone Antitrust Litigation, US District Court for the Eastern District of Pennsylvania, October 17, 2017
Several states sued multiple defendants, including British company Reckitt Benckiser Healthcare Ltd. (RBH), in multi-district litigation involving Suboxone, a medication used to treat opioid addiction. The plaintiffs alleged a “product hopping” scheme in which the defendants attempted to escape competition by moving consumers from Suboxone tablets to Suboxone film, in violation of antitrust, unfair trade, and consumer protection laws. RBH never sold Suboxone film within the US and moved to dismiss all claims for lack of personal jurisdiction. The Court found that it had jurisdiction over RBH, but ultimately granted RBH’s motion to dismiss after finding that plaintiffs failed to plead a plausible antitrust claim.
The Court only addressed the question whether specific personal jurisdiction could be asserted over RBH, and explained that the test had three elements. First, a plaintiff must show that a defendant has “minimum contacts” with the forum, meaning that it “purposefully directed” its activities towards the residents of the forum State, or otherwise “purposefully availed” itself of the privilege of conducting activities there. Second, the plaintiff’s claim must “arise out of or relate to” those contacts. Finally, if the first two requirements are satisfied, jurisdiction attaches unless a defendant meets the heavy burden of showing that proceeding would be inconsistent with traditional notions of “fair play and substantial justice.”
The Court considered the allegations of the complaint as well as additional facts contained in exhibits attached to the plaintiffs’ opposition to the motion to dismiss. It concluded that these facts were sufficient to show that RBH purposefully availed itself of the privilege of doing business in the US. Most notably, the Court observed that, even though RBH did not sell Suboxone film within the US, RBH (i) worked in conjunction with two American companies to have Suboxone film placed into a national distribution network, (ii) worked on prosecuting US patents and securing trademarks related to Suboxone film, and (iii) scheduled meetings with the US Food and Drug Administration FDA and prepared regulatory filings to secure US approval of the product.
Because RBH did not raise any facts establishing that a finding a personal jurisdiction would violate principles of fair play and substantial justice, the Court found that satisfying the first two prongs of the test was sufficient to assert personal jurisdiction over RBH.
German Manufacturer’s Alleged Participation In Conspiracy To Undermine Effectiveness Of Us Pollution Control Regulations Supports Assertion Of Personal Jurisdiction Under Rule 4(K)(2)
In re: Volkswagen “Clean Diesel” Marketing, Sales Practices, And Products Liability Litigation, US District Court for the Northern District of California, October 30, 2017
Extensive litigation arose following disclosure of the Volkswagen “Dieselgate” fraud, and many cases were consolidated in California. One issue addressed in this opinion is whether personal jurisdiction exists over the German defendant, Bosch GmbH, which is alleged to have worked with Volkswagen to design an electronic control unit that would defeat the application of anti-pollution standards.
Jurisdiction over Bosch was premised on Federal Rule of Civil procedure 4(k)(2), which generally applies where the claim arises under federal law and the defendant has insufficient contacts with any one State to support the exercise of jurisdiction, but its contacts with the US as a whole are extensive enough to satisfy the Due Process Clause of the US Constitution. The case involved federal claims (RICO) and Bosch did not assert that it could be sued elsewhere, so the focus of the Court’s opinion was whether Bosch had sufficient contacts with the US as a whole to support jurisdiction. In finding that the contacts were adequate, the Court noted that the defendants were alleged to have violated the law specifically to defeat US pollution requirements, that “hundreds of thousands” of allegedly defective products had been shipped to the US, that Bosch employees lobbied US regulators and legislators, and that the claims arose out of or related to these contacts. The Court also rejected Bosch’s argument that requiring the company to defend itself would violate Due Process principles of fundamental fairness, dismissing general concerns over inconvenience and concluding that Germany’s acknowledged interest in “regulating” the behavior of a German company in Germany was not controlling because the alleged scheme targeted the US.
Maryland Plaintiff’s Choice Of Pennsylvania Forum For Trial Of Alleged Injury In The Dominican Republic Rejected On Forum Non Conveniens Grounds
Jones v. FC USA, Inc. d/b/a Liberty Travel, US District Court for the Eastern District of Pennsylvania, November 14, 2017
The plaintiff Jones claimed she was assaulted while receiving a massage during a beach excursion in the Dominican Republic. She sued the resort and the travel agency through which she booked the vacation for negligence. As relevant here, the defendants moved to dismiss the claim under the doctrine of forum non conveniens.
The Court explained that the forum non conveniens doctrine permits the discretionary dismissal of a case where retaining jurisdiction would result in “oppressiveness and vexation to a defendant out of all proportion to plaintiff’s convenience, or when the chosen forum is inappropriate because of considerations affecting the court’s own administrative and legal problems.” Four factors are involved in applying the doctrine, which the Court analyzed as follows:
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The availability of an alternative forum. The Court found the Dominican Republic’s judicial system adequate, and its law to provide a remedy for bodily injuries of the type alleged. It noted a potential statute of limitations defense, however, and so conditioned satisfaction of this requirement on the condition that the defendants (who sought the dismissal) agree to waive any limitations defense.
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Deference to the plaintiff’s choice of forum. Ordinarily, resident plaintiffs are entitled to deference in their choice of a local forum. Here, the plaintiff is a citizen of the State of Maryland, not of the forum State of Pennsylvania, but the Court observed that her US citizenship was all that was required to warrant deference because the alternative forum was outside the country.
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“Private” factors. The Court assessed the parties “ease of access to sources of proof,” ability to compel the attendance of witnesses, and “other potential obstacles to a cost-effective and expeditious trial.” It noted that all of the key witnesses were in the Dominican Republic and could not be compelled to travel to the US to testify, and it determined that trial by videotaped deposition would not be an adequate alternative. This factor thus favored dismissal.
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“Public” factors. The Court identified the Dominican Republic’s stronger interest in resolving the case, its own desire to avoid an analysis of conflict of laws, and the likely application of foreign law as factors supporting dismissal. It noted here that the Pennsylvania forum had no interest in resolving an injury to a Maryland plaintiff, which also weighed against burdening its courts and potential jurors with a trial. For these reasons and on the condition noted, the Court dismissed the case.
Sale Of Products To Delaware Corporation That Distributes Products Nationwide Constitutes “Targeting” Of Delaware Market
3G Licensing, S.A., Koninklijke KPN N.V. v. HTC Corp., US District Court for the District of Delaware, December 18, 2017
This patent infringement action, apparently related to the Koninklijke KPN N.V. case discussed below, considered among other issues whether specific personal jurisdiction could be asserted over HTC, a Taiwanese corporation. The District Court in Delaware stated that jurisdiction could be shown under what it termed the “dual jurisdiction” or “stream of commerce” theory, which requires that a plaintiff show (i) that the defendant intended to serve the Delaware market specifically; (ii) that this intent resulted in the introduction of the product into the market; and (iii) that the plaintiff’s cause of action arises from injuries caused by that product. The Court focused on the first prong of this test, and found that it was satisfied by statements in HTC’s annual report that it “released particular smartphones in partnership with US carrier Verizon,” a company incorporated in Delaware. The Court also considered that HTC’s products were sold in Delaware through a number of outlets. No other relevant facts were cited.
[Editor’s note: The 3G Licensing case is also discussed in the Personal Jurisdiction/Forum non Conveniens section of this report.]
Personal Jurisdiction Over Canadian Defendants In A Copyright Infringement Action Rejected Under California Law But Upheld Under Rule 4(k)(2)
L.A. Gem & Jewelry Design, Inc. v. An & Associates Co. Inc., US District Court for the Central District of California, December 6, 2017
The plaintiff designs, manufactures, and sells jewelry having US copyright protection. It sued the defendants, all Canadian residents and citizens, for copyright infringement and contributory copyright infringement arising from the sale of their jewelry in the US through various websites. The defendants moved to dismiss the case on grounds that the District Court in California could not assert personal jurisdiction over them.
The Court observed that personal jurisdiction was to be judged under the standards of the forum State of California, which permits jurisdiction to the full extent of the Due Process Clause of the US Constitution. As applicable to a copyright infringement case, Due Process may be satisfied under the “effects” test, requiring that the defendant have allegedly “(1) committed an intentional act; (2) expressly aimed at the forum state; (3) causing harm that the defendant knows is likely to be suffered in the forum state.” The Court added that remote acts merely having a “foreseeable” effect in the forum State are not sufficient to establish jurisdiction; “express aiming” at or “individual targeting” of the forum must also be shown.
The Court found that the defendants’ allegedly intentional violation of copyrights held by a California corporation was insufficient by itself to establish jurisdiction in that State. It further found no evidence that the defendants’ promotional activity—through social media sites including Facebook—had focused on California in any way, and that the relatively few sales to California residents (10 out of allegedly 2400 infringing sales) were “simply too attenuated and isolated to suggest that California was the focal point of the sales and the harm suffered.” The small number of California sales also meant that the plaintiff could not show that its claim arose from contacts with the forum State.
Alternatively, the Court considered whether personal jurisdiction could be established under Federal Rule of Civil Procedure 4(k)(2), which applies where a federal claim is involved, the defendant must not be subject to the personal jurisdiction of any one State court based on its contacts with the State, and Due Process requirements of fundamental fairness are satisfied. Notably, the Due Process test under Rule 4(k)(2) is applied to the defendants’ contacts with the US as a whole, not their contacts with the forum State. This focus required the Court to consider whether the defendants had “expressly aimed” their sales and marketing efforts at the US. The Court “easily” found that the defendants targeted the US, citing principally the following:
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The defendants maintained “fully interactive” websites specifically referring to deals available to US and Canadian customers, handling transactions in US dollars, and addressing US shipping restrictions;
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The defendants’ marketing employed Facebook’s “global targeting” feature to focus promotions on different countries, and that the US would have been one of these countries;
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The defendants shipped products directly from Canada to the US, avoiding middlemen and therefore escaping the “stream of commerce” theory that can complicate efforts to establish personal jurisdiction; and
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Jurisdiction over individual defendants was upheld where they were alleged to be principal figures in the operation of their employers.
Finally, the Court found that the defendants had not made the required “compelling case” that jurisdiction based on adequate contacts might otherwise be “unfair.” It rejected their argument that their recordkeeping system was not adequately automated and that litigation would be burdensome, noting that this burden was the consequence of the record-keeping system and not the product of having to litigate in a different country.
[Editor’s note: The L.A. Gem & Jewelry case is also discussed in the Intellectual Property-Copyrights section of this report, as certain courts apply special personal jurisdiction standards in copyright infringement cases.]
No Personal Jurisdiction in California Over Swiss Shipper Pursuant To Rule 4(k)(2) Where Claim Could Be Brought Against Shipper In New Jersey
Mitsui O.S.K. Lines, Ltd. v. Swiss Shipping Line S.A.L, US District Court for the Northern District of California, November 30, 2017
The plaintiff Mitsui is an ocean common carrier that was hired by the defendant, Swiss Shipping Line (SSL), to transport various minimum quantities of goods from various ports on the East Coast of the US to Benin. When the contractual minima were allegedly not satisfied, Mitsui invoiced SSL for contractual damages. SSL did not pay, and Mitsui filed suit against SSL, a Swiss company, in California, alleging a federal claim of breach of maritime contract. Personal jurisdiction was claimed under Federal Rule of Civil Procedure 4(k)(2), which applies where a claim is brought under federal law and the defendant is not subject to jurisdiction in any one State but its contacts with the United States are, in the aggregate, sufficient to satisfy the Due Process Clause of the US Constitution.
SSL admitted that it was subject to jurisdiction in New Jersey with regard to the plaintiff’s claim and argued that it Rule 4(k)(2) did not thus apply. The Court noted that a defendant may only claim it are subject to jurisdiction in another State where the facts bear that out, and concluded that the facts supported SSL’s assertion: The relevant contract was negotiated and signed in New Jersey (where a Mitsui party was based) and provided for shipment from two ports in New Jersey. The Court thus concluded that jurisdiction in California was not provided by Rule 4(k)(2) because SSL could be sued in New Jersey.
The Court also rejected Mitsui’s argument that general personal jurisdiction over SSL existed in California, finding no cause to deviate from the rule, applicable in all but “exceptional” circumstances, that general jurisdiction exists only where a corporation is organized or has its principal place of business.
