Declaratory Judgment Jurisdiction, A Curious Decision in the Federal Circuit

May 6, 2011

Creating a circuit split with the Ninth and Tenth Circuits, the Federal Circuit drew a distinction between efforts directed toward commercialization of a patent and those efforts directed toward enforcement of a patent. The former contacts were held to be irrelevant to the personal jurisdiction analysis, while the latter contacts can confer personal jurisdiction but only if there are sufficient patent enforcement activities beyond the mere sending of a cease and desist letter. Radio Systems Corp. v. Accession, Inc., Case No. 2010-1390 (Fed. Cir. April 25, 2011).

The Radio Systems decision follows other Federal Circuit decisions in holding that sending enforcement letters or cease and desist letters to a potential infringer are insufficient to confer personal jurisdiction in the forum where the letters were sent. What makes the decision different, however, is that the patent holder in this case undertook substantial efforts with Radio Systems to commercialize the invention in the forum state before sending the enforcement letter. Indeed, it was undisputed that there were numerous contacts, including at least one in person meeting, in the forum state to discuss potential commercialization and a nondisclosure agreement (with a choice of venue provision for the forum state) was also signed. The pending patent application was also discussed by the patent holder in the forum state.

Nonetheless, the Federal Circuit disregarded all of these contacts and held that these contacts were not enforcement activities, but instead were commercialization attempts that could not be considered for purposes of determining personal jurisdiction. Rather, the only contact that could be considered was that of the patent holder's attorney sending a letter seeking to enforce the patent, which prior Federal Circuit cases have held is insufficient to confer personal jurisdiction. Acknowledging that this result differed from other circuits, specifically the Ninth and the Tenth circuits, the Federal Circuit held that it would follows its prior precedent and would disregard the patent enforcement activities for purposes of determining personal jurisdiction. As a result, there was no jurisdiction over the patent holder on Radio Systems' complaint for declaratory judgment.

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The interplay of this decision with the Federal Circuit's recent decisions on when declaratory judgment actions may be filed is significant. It is now much easier to file a declaratory judgment action when a potential infringer receives a cease and desist letter. But now a potential infringer seeking declaratory judgment must determine if there is sufficient patent enforcement activity directed to the forum beyond the cease and desist letter in order to obtain personal jurisdiction over the patent holder. This is likely to be difficult to establish in most cases as it requires some additional act of the patent holder such as using an attorney in the forum state or disrupting sales of the allegedly infringing product by, for example, notifying customers or advertisers in the forum. Absent this type of conduct, this means that the alleged infringer is unlikely to be able to file the declaratory judgment action in their home state and is much more likely to have to file where the patent holder lives or, in the case of a corporation, where it is incorporated, has its headquarters or conducts sufficient business such that it can found for purposes of establishing general jurisdiction based on continuous and systematic contacts.
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The authors of www.PatentLawyerBlog.com are patent litigation lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.