United States: District Court Determines No Personal Jurisdiction Exists Under Rules (4)(K)(1) And (4)(K)(2) Of The Federal Rules Of Civil Procedure Where Plaintiff Could Show Only A Single Infringing Unit Was Sold In The State And Defendant's Website And Other Activities Were Not Directed At Residents Of The State

In Miller Industries Towing Equipment Inc., v. NRC Industries, Plaintiff Miller Industries Towing Equipment Inc. ("Plaintiff" or "Miller") alleged infringement of a patent by NRC Industries ("Defendant" or "NRC"). The patents in question involve towing recovery vehicles designs and uses. Defendant moved to dismiss under Federal Rule of Civil Procedure ("FRCP") 12(b)(2), alleging that the Court lacked personal jurisdiction over NRC. Defendant also moved to dismiss the claims under FRCP 12(b)(6), but this was ultimately determined to be moot in light of the Court's determination.

Plaintiff argued that the district court could exercise personal jurisdiction over NRC as it has exercised sufficient "minimum contacts" with the state of Tennessee under Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), because NRC advertises in two magazines that have Tennessee subscribers, posts training videos to nationally accessible third-party websites (such as YouTube), maintains a website accessible by Tennessee residents, participates in trade shows where NRC markets its infringing products to Tennessee residents, and because NRC has sold the infringing product to at least one Tennessee resident.

The legal standard for determining whether a court may exercise personal jurisdiction over a defendant is based on FRCP 4(k)(1) and 4(k)(2). Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1410 (Fed. Cir. 2009).

Analysis Under Federal Rule of Civil Procedure 4(k)(1)

Under FRCP 4(k)(1), the "[d]etermination of whether jurisdiction exists over an out-of-state defendant involves two inquiries: whether a forum state's long-arm statute permits service of process and whether assertion of personal jurisdiction violates due process." Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1017 (Fed. Cir. 2009).

With regard to the first inquiry, the district court found that the Tennessee Supreme Court has decided that the state's long-arm statute expands the jurisdiction of Tennessee courts to the full limit permitted by the due process clause, thereby allowing personal jurisdiction by service of process. Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1410 (Fed. Cir. 2009) (the Federal Circuit "defer[s] to the interpretation of a state's long-arm statute given by that state's highest court."). Therefore, the district court determined that it need only determine whether the exercise of personal jurisdiction over NRC would violate due process.

As explained by the district court, to determine whether the assertion of personal jurisdiction would violate due process, a court must analyze whether a defendant has sufficient "minimum contacts with [the forum state] such that maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). There are three considerations relevant to determining whether sufficient minimum contacts exist: (1) Whether the defendant purposefully directs its activities at residents of the forum state, (2) whether the claim arises out of or relates to the defendant's activities with the forum state, and (3) whether assertion of personal jurisdiction is reasonable and fair." Celgard, LLC v. SK Innov. Co., Ltd., 792 F.3d 1373, 1377-78 (Fed. Cir. 2015).

(1) NRC's Advertisements in National Trade Magazines

The district court found that NRC's advertisements of the allegedly infringing products in two national trade magazines, where approximately 1,967 Tennessee residents subscribed, was not sufficient to establish purposeful availment due to the fact that no evidence existed showing that Tennessee residents were specifically targeted. Grober v. Mako Products, Inc., 686 F.3d 1335, 1347 (Fed. Cir. 2012).

(2) NRC's Maintenance of Its Website

The district court determined NRC's website was passive, rather than interactive, and therefore did not establish purposeful availment sufficient for personal jurisdiction because all users of the website are able to use the site's features regardless of where they are located, users cannot purchase products from the website, and the content of the website as it relates to residents of Tennessee does not rise to a degree that shows NRC specifically intended for interaction with residents of the state. Maynard v. Philadelphia Cervical Collar Co., 18 F. App'x 814, 816-17 (Fed. Cir. 2001); Nexlearn v. Allen Interactions, Inc., 859 F.3d 1371, 1378-1380 (Fed. Cir. 2017).

(3) NRC's Posting of YouTube Videos Involving the Infringing Product

For reasons similar to the above, the district court found that NRC's posting of videos onto sites like YouTube do not constitute sufficient minimum contacts for the Court to exercise personal jurisdiction. The Court found that YouTube is a passive website that does not specifically target customers in Tennessee, does not allow viewers to purchase products, and therefore does not constitute purposeful availment. Maynard, 18 F. App'x. at 816-17.

(4) NRC's Attendance at Trade Shows

The district court also determined NRC's participation in trade shows in Baltimore, Maryland, and Orlando was not sufficient to confer personal jurisdiction upon NRC, reasoning that a defendant's attendance at a trade show, even if in the forum state, cannot confer personal jurisdiction where the defendant has not purposefully engaged in other activities in the forum. Autogenomics Inc., 566 F.3d 1012, 1016 (Fed.Cir. 2009) (holding defendant's attendance at three scientific conferences in the forum state was insufficient to establish personal jurisdiction). Because NRC engaged in no "other activities" in the Tennessee rising to the level of conferring personal jurisdiction, its participation in trade shows did not support the district court's exercise of personal jurisdiction.

(5) NRC's Sale of Products to a Tennessee Resident

The district court next concluded that one sale to a Tennessee resident containing the alleged infringing patents does not provide support for jurisdiction. In making this determination, the district court rejected Miller's argument that NRC had inserted itself into the "stream of commerce," instead reasoning that courts have found that "isolated" or "sporadic" shipments into the forum state are insufficient to support the exercise of personal jurisdiction. AFTG-TG, LLC v. Nuvoton Tech. Corp., 689 F.3d 1358, 1365 (Fed. Cir. 2012); State Indus. v. Beckett Gas, Inc., 200 F.R.D. 392, 396 n.3 (M.D. Tenn. 2001)(holding that the exercise of jurisdiction was improper where five water heaters ended up in Tennessee).

Analysis Under Federal Rule of Civil Procedure 4(k)(2)

Even if a court finds that a defendant has insufficient contacts with a particular forum, jurisdiction may still be appropriate under FRCP 4(k)(2) "as long as (1) the plaintiff's claim arises under federal law, (2) the defendant is not subject to personal jurisdiction in the courts of any state, and (3) the exercise of jurisdiction satisfies due process requirements."¹ Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1294 (Fed. Cir. 2012). The Federal Circuit has held that a federal court is entitled to use FRCP 4(k)(2) where a defendant contends that it cannot be sued in the forum state but also fails to concede jurisdiction in another state. Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1414-15 (Fed. Cir. 2009) ("A defendant who wants to preclude the use of Rule 4(k)(2) has only to name some other state in which the suit could proceed.").

Here, NRC agreed that it could be subject to personal jurisdiction in New Jersey. In response to this argument, Miller asserted that, under Merial, NRC must also show that every requirement of jurisdiction in New Jersey has been satisfied. The district court disagreed, stating that Miller misreads Merial, a case where a defaulting party attempted to assert consent in another jurisdiction to undo an adverse judgment against it. Merial Ltd., 681 F.3d at 1295. The district court found that a similar attempt at "gamesmanship" was not present here, thereby allowing NRC to name an alternate state in which the suit could proceed and precluding the Tennessee district court from exercising personal jurisdiction over Defendant.

Other Issues Resolved

Miller moved for leave to conduct jurisdictional discovery to determine whether the Court could exercise jurisdiction over NRC. The Sixth Circuit has recognized that if a trial court rules on a FRCP 12(b)(2) motion prior to trial "it has the discretion to adopt any of the following courses of action: (1) determine the motions based on affidavits alone; (2) permit discovery, which would aid in resolution of the motion; or (3) conduct an evidentiary hearing on the merits of the motion." Intera Corp. v. Henderson, 428 F.3d 605, 614 n.7 (6th Cir. 2005).

The district court determined that, because Miller's request for jurisdictional discovery was based only on speculative allegations regarding all sales and offers made by NRC, the district court was within its discretion to deny jurisdictional discovery. Swagelok Co. v. Dansk Ventil & Fittings ApS, No. 1:05 CV2322, 2006 WL 8454625, at *1 (N.D. Ohio Mar. 9, 2006). Miller's request for jurisdictional discovery was denied.

Conclusion

Accordingly, NRC's motion to dismiss for lack of personal jurisdiction was granted, rendering NRC's motion to dismiss for failure to state a claim moot. Miller's motion for jurisdictional discovery under FRCP 39 and motion for leave to file a sur-reply under FRCP 42 were both denied.

Footnote

1 With regard to the first requirement, the Court determined that where federal patent law creates the cause of action, the claims arise under federal law for purposes of FRCP 4(k)(2). Touchcom, 574 F.3d at 1410.

Originally published May 8, 2020.

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