United States: Don't Get Personal

Last Updated: July 27 2015
Article by Diana Rutowski and Cam Phan

Xilinx, Inc. v. Papst Licensing GMBH & Co. KG (Judge Lucy Koh) (July 9, 2015)

The Supreme Court's 2014 ruling in Daimler v. Bauman raised the bar to establish personal jurisdiction over a defendant. Daimler has made it substantially more difficult for a foreign corporation to be haled into US courts. While Daimler dealt specifically with the issue of whether the acts of a US-based subsidiary should be imputed to the parent foreign corporation for personal jurisdiction purposes, it generally found that a court only has general personal jurisdiction if the foreign defendant's affiliations with the forum state are "so continuous and systemic as to render [it] essentially at home in the forum state."

Here, Xilinx and Altera sought to pull in defendant Papst Licensing GMBH into a patent case before Judge Lucy Koh, but was unsuccessful in overcoming the personal jurisdiction hurdle in light of Daimler. First, though Judge Koh recognized that defendant Papst "certainly has many connections to the State of California," she found general jurisdiction lacking because Papst is not incorporated in California nor does it have its principal place of business here. Judge Koh made clear that, except in "exceptional case[s]," the paradigm forum for the exercise of general jurisdiction is a party's domicile, formal place of incorporation, or principal place of business. Nonresidents should not be subject to general jurisdiction "in every State in which [the defendant] engages in a substantial, continuous, and systematic course of business." Therefore, despite the fact that Papst had brought a number of patent infringement suits in California courts, had licensing agreements with California companies, allegedly obtained revenues from California companies, and had California-based counsel, Judge Koh found an insufficient connection to the state for general personal jurisdiction. Judge Koh noted that a court in the Eastern District of New York found general jurisdiction with a similar set of facts (Illinois non-practicing entity with a principal place of business in Arizona engaged in licensing agreements with companies in New York), but explained that the case was decided before Daimler and should not be followed because it was inconsistent with Daimler. Thus, facts that would have established general jurisdiction in the past may no longer suffice.

Second, with respect to specific jurisdiction, Judge Koh concluded that the facts related solely to Papst's attempts to license the patents, which the Federal Circuit has held insufficient to support exercise of personal jurisdiction. To establish specific jurisdiction in a declaratory judgment action, only activities related to the specific enforcement of the patents at issue are relevant. Accordingly, Judge Koh found no specific jurisdiction, rejecting plaintiffs' arguments based on the following alleged contacts with California:

  1. Cease-and-desist letters: Under well-established Federal Circuit precedent, cease-and-desist letters directed to the jurisdiction about the asserted patents threatening suit for patent infringement are insufficient;
  2. In-person meetings: Papst' meetings with plaintiffs in California are also insufficient because they were "mere attempts to license the patents at issue" and not "patent enforcement meetings."
  3. Potential license targets: The mere act of maintaining a list of potential license targets based in California, without more, is simply an activity related to Papst's attempts to license the patents-in-suit, and not "enforcement activities."
  4. Non-exclusive licensee: While the Federal Circuit has held that jurisdiction is proper where the defendant grants an exclusive license in the forum that includes the right to litigate infringement claims, Judge Koh concluded that the mere grant of a non-exclusive license to an in-state licensee does not subject Papst to personal jurisdiction in California.
  5. Enforcement obligations on the part of the licensee: Specific jurisdiction may be established if the license agreement contemplates a relationship beyond royalty or cross-licensing payment, including for example, imposing enforcement obligations with a party residing or regularly doing business in the forum. Here, however, Judge Koh concluded that the in-state licensee has no such obligations.
  6. California as the forum: Papst bought the asserted patents from FTE, who bought it from Rambus. The original purchase agreement between FTE and Rambus selected California as the forum to govern disputes. The purchase agreement between FTE and Papst selected Texas as the forum of choice. Accordingly, Judge Koh did not put much weight on the California forum selection clause.
  7. California-based attorney: The simple act of retaining patent counsel based in California to pay maintenance fees on a patent is insufficient to vest California with personal jurisdiction over a declaratory judgment action challenging the validity of that patent.
  8. Attorney licensed in California: Even more so, Papst's hiring of a license negotiations lawyer, who is based in Texas but licensed in California, is insufficient to justify an exercise of jurisdiction over Papst.
  9. Activities relating to other patents: Papst's enforcement activities regarding other patents are irrelevant to whether this Court can assert specific jurisdiction over Papst based on its efforts to enforce the current patents.

Getting personal, Courts will look to state of incorporation, principal place of business in the forum state, and specific enforcement activities relating to the asserted patents before exercising general or specific jurisdiction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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