May 18, 2021
On May 12, in Trimble Inc. v. PerDiemCo LLC, the Federal Circuit reaffirmed that there is no general rule preventing patent enforcement letters from providing the basis for jurisdiction in a declaratory judgment action. The court reversed and remanded the dismissal of a declaratory judgment action in an appeal from the Northern District of California.
PerDiemCo, a Texas LLC, is the assignee of 11 patents related to electronic devices for logging hours and activities of truck and/or other commercial vehicle drivers for compliance with federal and state safety regulations. Although registered in Texas and renting office space there, PerDiemCo’s sole owner and employee lives and works in Washington, D.C.
Trimble and Innovative Software Engineering (ISE) both supply electronic logging devices and related services. Trimble is a Delaware corporation with its headquarters in Sunnyvale, California (within the Northern District of California). ISE, a wholly owned subsidiary of Trimble, is an Iowa LLC headquartered in Iowa.
In 2018, PerDiemCo sent an initial letter to ISE accusing it of infringing several of PierDiemCo’s electronic logging patents. PerDiemCo proposed negotiation of a nonexclusive license to its patents and included an unfiled complaint for patent infringement poised to be filed in the Northern District of Iowa. In response, ISE forwarded the letter to an in-house attorney of its parent company, Trimble, who thereafter took over the negotiations on behalf of ISE.
PerDiemCo, Trimble, and ISE thereafter engaged in negotiations. During that time, the parties exchanged 22 communications in which PerDiemCo expanded its previous infringement allegations, additionally accusing Trimble of independently infringing some of the same patents as ISE, as well as others, and threatening to bring suit in the Eastern District of Texas and identifying its counsel there. PerDiemCo also identified 10 nonexclusive licensees of the same set of patents that it accused Trimble and ISE of infringing.
After three months of correspondence, Trimble and ISE filed a declaratory judgment complaint in the Northern District of California. In response, PerDiemCo moved to dismiss for lack of personal jurisdiction. Applying the Federal Circuit’s prior decision in Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., the district court found that PerDiemCo’s communications concerning potential licensing and enforcement were insufficient to establish personal jurisdiction and dismissed the complaint. Trimble appealed the personal jurisdiction finding.
On appeal, the Federal Circuit first reiterated that Red Wing and its progeny did not create a bright-line rule that patent enforcement letters can never provide the basis for jurisdiction in a declaratory judgment action. Looking to Supreme Court jurisprudence for guidance, the court made clear that “the analysis of personal jurisdiction cannot rest on special patent policies.” Instead, the inquiry must consider a “variety of interests” in assessing whether jurisdiction would be fair because “[p]atent law is governed by the same . . . procedural rules as other areas of civil litigation.”
The court recognized that in other areas, the Supreme Court has counseled that communications sent into a state may create specific personal jurisdiction, “depending on the nature and scope of such communications.” The Federal Circuit reiterated that its decision in Jack Henry (previously discussed here) is consistent with this guidance, finding that “in the context of patent litigation, communications threatening suit or proposing settlement or patent licenses can be sufficient to establish personal jurisdiction” under some circumstances. The court identified other contacts that may be relevant to the inquiry as established by its prior decisions, including a patent owner/defendant who physically enters the forum to demonstrate technology or discuss contentions with the eventual declaratory judgment plaintiff, the presence of exclusive licensees doing business in the forum state, or extra-judicial patent enforcement targeting businesses in the forum state.
Finally, the court recognized that the Supreme Court has“established that a broad set of a defendant’s contacts with a forum are relevant to the minimum contacts analysis.” This requires looking to whether the defendant deliberately reached out to the forum state, such as by deliberately and continuously developing and exploiting a market there.
With these principles in mind, the Federal Circuit examined the facts before it and found that the “extensive” nature of PerDiemCo’s contacts with California constituted sufficient minimum contacts. The court found PerDiemCo’s exchange of 22 communications with Trimble significant, noting that they “amplified” in intensity in just a three-month period and included explicit and specific threats to bring lawsuits in two different states. The court contrasted the facts before it from Red Wing, noting that PerDiemCo’s contacts went far beyond solely informing a party who happens to be located in the forum state of suspected infringement and making its interactions much more akin to an arms-length negotiation that would satisfy the minimum contacts requirement.
The PerDiemCo decision is relevant for anyone considering enforcing their patents by sending enforcement letters or actively negotiating potential licenses with suspected infringers located in other judicial districts. Even when communications related to enforcement or licensing are the only contacts with a foreign forum, courts may nonetheless find that fairness dictates exercising personal jurisdiction over the sender in that forum depending on the content and extent of the communications. In contrast, under Red Wing, a “limited number of communications” informing a suspected infringer of infringement may still fall short for establishing specific jurisdiction in a declaratory judgment action. In the end, whether jurisdiction exists will depend upon the entirety of facts and circumstances surrounding the communications and the nature and extent of the defendant’s relationship to the forum state.