You’ve Got To Know When To Fold’em: Federal Circuit Affirms Dismissal Of Folding Table Patent Case On Personal Jurisdiction Grounds
On Thursday, November 29, 2018, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion affirming a decision by the District Court for the Eastern District of Tennessee dismissing Maxchief Investments Limited’s (“Maxchief”) declaratory judgment action against Wok & Pan, Ind., Inc. (“Wok”) for lack of personal jurisdiction. Maxchief Investments Limited v. Wok & Pan, Ind., Inc., —F.3d— (Fed. Cir. Nov. 29, 2018). The CAFC ruled that Wok lacked sufficient contacts with the forum state of Tennessee to support a finding of specific personal jurisdiction.
Maxchief and Wok complete in the plastic folding table business. Wok is the owner of several U.S. patents, and sued one of Maxchief’s customers, Staples, in the District Court for the Central District of California for patent infringement. Staples requested that its supplier, Maxchief’s Tennessee-based distributor, Meco Corporation (“Meco”) defend and indemnify it. Meco in turn requested that Maxchief defend and indemnify both Meco and Staples. Maxchief responded by filing an action against Wok in the District Court for the Eastern District of Tennessee seeking a declaration of patent non-infringement and invalidity, and also brought state law claims for tortious interference with business relations under Tennessee state law.
The district court dismissed the declaratory judgment claims for lack of personal jurisdiction, finding that although Wok “sought to enforce the patents against other parties in other courts,” Wok “did not seek to enforce its patents in the forum state of Tennessee” and also did not content that Wok was subject to general personal jurisdiction. The district court also dismissed the state law tortious interference claim because there is “no independent federal basis for subject matter jurisdiction on this claim.” Maxchief appealed.
On appeal, Maxchief argued that Wok’s lawsuit against Staples in the Central District of California created sufficient contacts with Tennessee because the suit sought a broad injunction against “all those in active concert” with Staples, including its “distributors,” and the distributor of Staples’ table was Meco, a Tennessee resident.
The CAFC rejected MaxChief’s argument, holding that it is “not enough that Wok’s lawsuit might have ‘effects’ in Tennessee” but rather “jurisdiction must be based on intentional conduct by the defendant directed at the forum.” The CAFC distinguished Calder v. Jones, 465 U.S. 783, 791 (1984) on the grounds that the defendant in that case “expressly aimed” their intentional and allegedly tortious actions at the forum state. In contrast, Wok’s lawsuit against Staples was directed at California, not Tennessee. “The fact that the requested injunction might apply to a Tennessee resident (Meco) and non-party to the action (acting in concert with the defendant) is too attenuated a connection to satisfy minimum contacts.”
The CAFC also distinguished its own precedent in Silent Drive, Inc. v. Strong Industries, Inc., 326 F.3d 1194 (Fed.Cir. 2003). In that case, the CAFC held that a defendant created minimum contacts with Iowa by making efforts to enforce a Texas state court injunction against the plaintiff, an Iowa resident. The court reasoned that, “[u]nlike the situation in Silent Drive, here there is no allegation that Wok has sent letters to a Tennessee resident in an attempt to enforce an out-of-state injunction against it.”
Finally, the CAFC rejected Maxchief’s argument that Wok created minimum contacts by sending an infringement notice letter to Maxchief’s lawyer in Tennessee. Because this letter alleged infringement by Coleman, a Kansas company that is not alleged to operate in Tennessee, the letter constitutes a contact with Kansas, not Tennessee, for purposes of both the declaratory judgment claims and the tortious interference claims. “[M]erely sending a notice letter to a lawyer in the forum state does not constitute activity directed at the forum state where the entity alleged to infringe does not operate in the state.”