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When Sending a Cease and Desist Letter Establishes Personal Jurisdiction

November 19, 2021

A patentee may establish “minimum contacts” in a forum, thus subjecting itself to specific personal jurisdiction, by sending a cease and desist letter to the forum. Precedent concerning this issue has been evolving. Previously, the Federal Circuit held in Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc. that the district court for the District of Minnesota did not have personal jurisdiction over the defendant (a Louisiana corporation with a principal place of business in New Mexico) because it did not have minimum contacts with Minnesota to support personal jurisdiction—even though the defendant had sent the plaintiff (a Minnesota corporation with a principal place of business in Minnesota) a cease and desist letter with an offer of a license to the defendant’s patent. 148 F.3d 1355, 1357 (Fed. Cir. 1998). However, the Federal Circuit has since clarified that Red Wing Shoe did not set a blanket rule that cease and desist letters were insufficient to establish minimum contacts with a forum for personal jurisdiction.

The evolution of the Federal Circuit’s precedent has helped to clarify when such communications do rise to the level of minimum contacts for personal jurisdiction in a forum in which a defendant does not otherwise have minimum contacts. Overall, the cases have shown that while the act of solely sending a cease and desist letter may not by itself satisfy minimum contacts to support personal jurisdiction in a forum (as in Red Wing Shoe), under the right set of facts this letter accompanied by more, e.g., an offer of a license, a draft complaint, or multiple communications regarding the same, may establish minimum contacts in the forum to subject the party to specific personal jurisdiction.

I. Trimble Inc. v. Perdiemco LLC, 997 F.3d 1147 (Fed. Circ. 2021)

Recently, the Federal Circuit clarified the Red Wing Shoe precedent and overturned the District Court for the Northern District of California’s finding of personal jurisdiction when the defendant was not incorporated in California, did not have any employees in California, or transact business in California. Defendant Perdiemco LLC was the assignee of the patents at issue. Trimble Inc. v. Perdiemco LLC, 997 F.3d 1147, 1150 (Fed. Cir. 2021). Defendant initially sent a letter to Innovative Software Engineering, LLC (“ISE”) accusing ISE’s products and services of using technology covered by defendant’s patents. Id. at 1151. To this letter the defendant attached, among other things, an unfiled complaint designated for the Northern District of Iowa asserting defendant’s patents against ISE’s products and services, and also an offer of a nonexclusive license to defendant’s patents. Id. at 1151. ISE, a wholly owned subsidiary of Trimble, sent defendant’s letter to Trimble, which then began discussions with defendant. Id. at 1150-51. Over the course of three months, defendant communicated with Trimble at least twenty-two times by letter, email, and telephone. Id. at 1151. During these communications, defendant threatened to sue Trimble and ISE for patent infringement in the Eastern District of Texas and identified its retained counsel. Id. at 1151. Subsequently, Trimble and ISE filed a complaint seeking a declaratory judgment of noninfringement against defendant in the Northern District of California. Id. at 1151-52. Defendant was a Texas limited liability company, rented office space in Marshall, Texas, and its sole owner, officer, and employee lived and worked in Washington, D.C. Id. at 1150-51. Trimble was incorporated in Delaware and headquartered in the Northern District of California, while ISE was an Iowa limited liability company with its headquarters and principal place of business in Coralville, Iowa. Id. at 1151. Citing Red Wing Shoe, defendant moved to dismiss plaintiff’s complaint for lack of jurisdiction on the grounds that “‘[a] patentee should not subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement’ because ‘[g]rounding personal jurisdiction on such contacts alone would not comport with principles of fairness.’” Trimble, 997 F.3d at 1152 (quoting Red Wing Shoe, 148 F.3d at 1361).

In Trimble, the Federal Circuit explained that “there is no general rule that demand letters can never create specific personal jurisdiction.” 997 F.3d at 1156. First, the Federal Circuit cited several decisions setting forth that patent cases are governed by the same procedural rules as other areas of civil litigation. Id. at 1154 (citing SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 137 S. Ct. 954, 964 (2017)). Specifically, the Federal Circuit explained that for personal jurisdiction there are no special considerations unique to patent cases. Trimble, 997 F.3d at 1155. With this in mind, the Federal Circuit analyzed case law from other areas of civil litigation, not just patent law, in discussing when an out-of-state defendant creates minimum contacts with a venue sufficient to establish specific personal jurisdiction.

Second, the Federal Circuit stated that “the Supreme Court has held that communications sent into a state may create specific personal jurisdiction, depending on the nature and scope of such communications.” Id. at 1155. The Federal Circuit went on to provide examples of communications that may create specific personal jurisdiction, including: (i) negotiation efforts, even by telephone and mail, outside of the forum that are purposefully directed at residents of the forum (citing Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1362 (Fed. Cir. 2001) and Quill Corp. v. North Dakota, 504 U.S. 298, 308 (1992)); (ii) threatening suit, proposing settlement, or proposing patent licenses (citing Jack Henry & Assocs., Inc. v. Plano Encryption Techs., LLC, 910 F.3d 1199, 1201, 1206 (Fed. Cir. 2018) and Genetic Veterinary Sciences, Inc. v. LABOKLIN, GmbH & Co. KG, 933 F.3d 1302, 1312 (Fed. Cir. 2019)); (iii) hiring an attorney or patent agent in the forum state to prosecute a patent application (citing Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1351 (Fed. Cir. 2003)); (iv) entering the forum to demonstrate the technology underlying the patent (citing Elecs. for Imaging, Inc. v. Coyle, 340 F.3d at 1351); (v) discussing infringement contentions with the alleged infringer (citing Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, 848 F.3d 1346, 1357 (Fed. Cir. 2017)); and (vi) “extra judicial patent enforcement” that targets business activities in the forum (citing Campbell Pet Co. v. Miale, 542 F.3d 879, 886 (Fed. Cir. 2008)). Trimble, 997 F.3d at 1155-56.

Third, the Federal Circuit noted that the defendant deliberately “reached out beyond its home” by exploiting the market in the forum or entering into a contractual relationship in the forum. Id. at 1156. Here, the court discussed the Supreme Court’s decision in Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017 (2021) to argue that a nonexclusive patent license can establish minimum contacts, such as the presence of a dealership selling similar vehicles. Id. at 1156.

In its Trimble opinion, the Federal Circuit did not overturn Red Wing Shoe, but instead discussed how the facts in Trimble differed from those in Red Wing Shoe to establish that the defendant’s contacts in the forum were sufficient to establish minimum contacts for personal jurisdiction. It decided that defendant’s “contacts with California [were] far more extensive than those in Red Wing.” Id. at 1156. The defendant had exchanged twenty-two communications with plaintiffs over three months, including sending an unfiled complaint and conducting license negotiations. Id. at 1156-57. Additionally, the defendant sought to enter into a binding mediation with the plaintiff in an attempt to reach a settlement, and threatened to sue the plaintiff in the Eastern District of Texas and even identified its intended counsel. Id. Under these facts, the Federal Circuit reasoned that the defendant’s twenty-two communications in three months was a short period of time to accumulate a sufficient number of contacts in California to establish specific personal jurisdiction. Id. at 1157.

In sum, the Federal Circuit held that the defendant had established minimum contacts for specific personal jurisdiction in California, and likened defendant’s actions to “an arms-length negotiation in anticipation of a long-term continuing business relationship,” rather than solely “informing a party who happens to be located [in California] of suspected patent infringement.” Id. (quotations omitted).

II. Genetic Veterinary Sciences, Inc. v. LABOKLIN GmbH & Co. KG, 933 F.3d 1302 (Fed. Cir. 2019)

A foreign party can be subject to specific personal jurisdiction in the United States even though the foreign party is not incorporated in nor have a place of business in the United States. In Genetic Veterinary Sciences, the Federal Circuit held that the foreign defendants, the University of Bern (patentee) and LABOKLIN GmbH & Co. KG (exclusive licensee) had minimum contacts in the United States to establish specific personal jurisdiction in the filed forum. Genetic Veterinary Sciences, Inc. v. LABOKLIN GmbH & Co. KG, 933 F.3d 1302, 1307 (Fed. Cir. 2019). The University of Bern had a principal place of business in Bern, Switzerland and gave an exclusive license to LABOKLIN, a German company with a principal place of business in Bad Kissingen, Germany, to commercialize its invention in North America. Id. LABOKLIN subsequently entered into two sublicenses in the United States, one in California and one in Michigan. Id. Defendants sent Genetic Veterinary Sciences, a corporation headquartered in Washington with its principal place of business in Spokane, Washington, a cease and desist letter alleging that its laboratory testing services infringed the University of Bern patent. Id. This letter detailed the exclusive license relationship between LABOKLIN and the University of Bern, identified Genetic Veterinary Sciences’ acts of infringement, and demanded that it either cease its infringing behavior or enter into a sublicense with LABOKLIN. Id. at 1307-08, 1311. Genetic Veterinary Sciences filed a declaratory judgment action of noninfringement and patent ineligibility under 35 U.S.C. § 101 against the University of Bern and LABOKLIN in the District Court for the Eastern District of Virginia. Id. at 1308. The defendants moved to dismiss the complaint for lack of personal jurisdiction, among other things. Id. The district court found that it had personal jurisdiction over defendants because the defendants had minimum contacts in the United States to comport with due process. Id.

The Federal Circuit affirmed, reasoning that the defendants established minimum contacts in the United States by sending the cease and desist letter, along with its other commercial licensing activities. Id. at 1310. More particularly, the defendants had sent a letter to plaintiff in the United States, threatened its business, and accused it of patent infringement. Id. at 1311. Additionally, this letter demanded that plaintiff either cease its infringing conduct or enter into a sublicense agreement with LABOKLIN. Id. Under these facts, the Federal Circuit found that defendant had established minimum contacts in the United States to satisfy specific personal jurisdiction. Id.

III. Jack Henry & Assocs., Inc. v. Plano Encryption Techs. LLC, 910 F.3d 1199 (Fed. Cir. 2018)

A party can establish minimum contacts with a different district by sending multiple cease and desist letters. This is what the Federal Circuit determined in 2018 in Jack Henry & Assocs., Inc. v. Plano Encryption Techs. LLC, 910 F.3d 1199 (Fed. Cir. 2018). Plano Encryption Tech (“PET”) was a limited liability company established in Texas with a registered address in the Eastern District of Texas. Id. at 1201. Plaintiffs all had their principal offices, branches, or customers in the Northern District of Texas. Id. PET sent each of the plaintiffs a letter saying they were infringing PET’s patents and offered non-exclusive licenses. Id. at 1201-02. Additionally, these letters identified a pending lawsuit that PET had filed against the Citizens National Bank in the Eastern District of Texas. Id. at 1202. Plaintiffs filed a declaratory judgment action against PET in the Northern District of Texas and PET moved for dismissal on grounds that venue is improper in the Northern District of Texas. Id. at 1203.

The district court granted PET’s motion to dismiss, citing Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324 (Fed. Cir. 2008), and stating that based on “policy considerations unique to the patent context,” the Federal Circuit has held that “letters threatening suit for patent infringement sent to the alleged infringer by themselves do not suffice to create personal jurisdiction.” Id. at 1203 (citing Jack Henry & Assocs., Inc. v. Plano Encryption Techs. LLC, No. 15-3745, 2016 WL 9282411 (N.D. Tex. Aug. 26, 2016)). However, the Federal Circuit disagreed with the district court’s use of Avocent, and explained that Avocent did not establish a bright line rule that a letter alleging infringement can never provide specific jurisdiction. Id. at 1203. In identifying whether PET had minimum contacts with the Northern District of Texas, the Federal Circuit reasoned that PET has “purposefully directed” its infringement charges at multiple banks in the Northern District of Texas, and had undertaken a “licensing program, with threats of litigation.” Id. at 1204, 1205. Therefore, PET had minimum contacts with the Northern District of Texas that satisfied specific personal jurisdiction requirements. Id. at 1206.

IV. Conclusion

Sending a cease and desist letter in and of itself often does not establish minimum contacts in a forum for specific personal jurisdiction purposes, especially where the letter simply warns the alleged infringer that it should cease its conduct. However, if a cease and desist letter then leads to multiple communications over a continuous time period between the parties or if the letter triggers another proceeding, such as a dispute resolution procedure, then the party may have satisfied minimum contacts in a forum that are sufficient to establish specific personal jurisdiction. Furthermore, as shown in the cases above, the Federal Circuit has determined that there were sufficient minimum contacts in a forum when the party not only sends a letter, but also offers a license. As the Federal Circuit stated in Trimble, this would be more akin to a business relationship, and would therefore be sufficient for the non-native party to establish minimum contacts in that forum. As demonstrated, determining whether specific personal jurisdiction has been established based on a party’s contacts with a forum involves a fact-specific analysis that may turn on the quantity and nature of such contacts.

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