Personal Jurisdiction, Patents and Trade Show Exhibitions

The U.S. Constitution and Supreme Court decisions have long held to the concept that to be dragged into an out-of-state federal court, the defendant must have ‘minimum contacts’ in that state.  Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985); Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).  However, in the recent Federal Circuit Court of Appeals case of Patent Rights Protection Group, LLC v. Video Gaming Techs., Inc., No. 2009-1391 (Fed. Cir. 2010), the court found that multiple appearances at trade shows may be enough to satisfy the due process requirement for personal jurisdiction.  The appellate court reversed the district court’s decision dismissing the case against out-of-state defendants and remanded the case back to the district court ordering that plaintiff’s demands for jurisdictional discovery be permitted.

Patent Rights Protection Group, LLC (“PRPG”) is a Nevada intellectual property holding company who filed lawsuits in Nevada District Court alleging infringement of casino-style gaming machine patents.  Out-of-state defendants, Video Gaming Technologies, Inc. (“VGT”) and SPEC International, Inc. (“SPEC”), moved to dismiss the lawsuits for lack of personal jurisdiction.  PRPG requested discovery on the extent of SPEC and VGT’s business in Nevada, but the district court denied that request.  Defendants claimed they had no employees, offices or bank accounts in Nevada and VGT had no sales revenue from Nevada and SPEC had only de minimis sales.  VGT and SPEC stated that they attended trade shows in Nevada “in the late 1990’s” and in the “early 2000’s, and more recently in 2007 and 2008.”

The district court granted the defendants’ motions and denied jurisdictional discovery, applying 9th Circuit law.

On May 10, 2010, the Federal Circuit reversed.  First, the Court of Appeals for the Federal Circuit applied Federal Circuit law regarding personal jurisdictional issues.  See Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir. 1995); Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (Fed. Cir. 1994).  Federal Circuit law determines (a) whether defendant is amenable to service of process (usually involving the state’s long arm statute) and (b) whether exercising jurisdiction over the defendant comports with due process.  See Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1329 (Fed. Cir. 2008); Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1359 (Fed. Cir. 2001). “The ‘constitutional touchstone’ of the due process inquiry ‘remains whether the defendant purposefully established ‘minimum contacts’ in the forum State.’” Patent Rights Protection Group, slip opn. 7 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) and citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).

Second, once minimum contacts are found, other factors are considered since “requirements inherent in the concept of ‘fair play and substantial justice’ may defeat the reasonableness of jurisdiction even if [a] defendant has purposefully engaged in forum activities.” Burger King at 477-78.  These factors include (i) the burden on the defendant, (ii) the forum State’s interest in adjudicating the dispute, (iii) the plaintiff’s interest in obtaining convenient and effective relief, (iv) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and (v) the shared interest of the several States in furthering fundamental substantive social policies.  See Id. at 476-77; and World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1985).

The Federal Circuit reversed the district court’s dismissal because the lower court did not fully apply the facts to the proper legal standard and did not permit plaintiff to engage in jurisdictional discovery.  Defendants’ attendance at trade shows did support plaintiff’s arguments of minimum contacts since the Federal Circuit, recognizing Supreme Court precedent, noted “where a defendant purposefully has directed [its] activities at forum residents [and now] seeks to defeat jurisdiction, [it] must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.” Id. at 477.

In conclusion, good practice will include a careful review of defendant’s acts in the local forum prior to filing suit in order to keep the defendant in that forum which is typically more favorable to plaintiff.

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