The Software IP Report

Specific Personal Jurisdiction from NPE Enforcement Effort

Many people think that efforts to enforce a patent in a particular forum, without more, cannot give rise to personal jurisdiction over the patent owner in that forum.  If you so thought, you thought wrong.  In Xilinx, Inc., v. Papst Licensing GmbH & Co., KG, No. 2015-1919 (Fed. Cir. Feb 15, 2017), the court held that the non-practicing entity patent plaintiff was subject to both general and specific personal jurisdiction in California, based on the plaintiff’s efforts there to license and enforce U.S. Patent Nos. 6,574,759 and 6,704,891.

The efforts by Papst, a non-practicing entity, to enforce the ’759 and ’891 patents have a complex procedural history.  To recite a few salient facts in brief, although a California court said it lacked jurisdiction, a Delaware court had in its turn transferred litigation to the California court.  When the hot potato was passed back, the California court granted a motion to dismiss on the grounds that claims of the  ’759 and ’891 patents recited patent-ineligible subject matter under the patent-eligibility requirements of 35 U.S.C. § 101 and the Alice/Mayo abstract idea test.  Papst’s appeal of that decision is pending.

In the meantime, Papst had argued that it was not subject to the personal jurisdiction of the California courts for Xilink’s non-infringement counterclaims.  Xilink appealed after the California court agreed with Papst.  The Federal Circuit disagreed with Papst that transfer of the case back to California mooted the appeal, because Xilink had not reasserted its counterclaims.

The court then turned to the question of personal jurisdiction.  The Supreme Court’s three-factor test for specific personal jurisdiction is

“(1) whether the defendant ‘purposefully directed’ its activities at residents of the forum; (2) whether the claim ‘arises out of or relates to’ the defendant’s activities with the forum; and (3) whether assertion of personal jurisdiction is ‘reasonable and fair.’” [Citation omitted.] “The first two factors correspond with the ‘minimum contacts’ prong of the [International Shoe Co. v. Washington, 326 U.S. 310 (1945)] analysis, and the third factor corresponds with the ‘fair play and substantial justice’ prong of the analysis.”

The first two prongs deal with “minimum contacts,” and Papst did not dispute that the minimum contacts test was satisfied.  Further, Papst not only sent letters to Calififornia, but visited the state, attempting to enforce its patents.  The questions was whether jurisdiction over Papst in California would be “reasonable and fair.”

Typically, a showing of minimum contacts satisfies the requirement of reasonableness.  Papst met the minimum contacts test, and jurisdiction in California, where Xilink was headquartered, would allow for efficient resolution of the controversy.  No other state had a greater interest; patent laws are federal.

Thus, the question was whether jurisdiction in California would put an undue burden on Papst.  No, said the court.  Papst was a non-practicing patent holder operating form outside the United States.  Papst would be litigating far from home no matter what.  Moreover, “Papst has repeatedly availed itself of the California federal court system—at least seven times—by filing patent infringement lawsuits there.”  And, “Papst has not made any demonstration that it would be unduly burdensome to litigate in California.”

Lessons

NPEs often send demand letters, and then behave as if they are immune from jurisdiction in their target’s home forum.  And I have often heard lawyers repeat, as if it were a legal canon, that the mere sending of a demand letter cannot create personal jurisdiction for a declaratory judgment action.  Perhaps so.  But as this case shows, NPE activity in a jurisdiction can create minimum contacts, and can make personal jurisdiction reasonable.

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