By David Wille

BAKER & BOTTS, L.L.P.
Dallas, Texas

Part II. Situs of the Tort

 An issue that previously divided courts, particularly in the patent area, was the location of an intellectual property tort. Because the case law in the patent area demonstrated the sharpest division, patent cases will be used to illustrate the problem. The issue of where the tort was located arose most frequently in cases where the plaintiff sued the defendant in a state where the defendant had not sold products, usually the plaintiff's state of residence. Some courts viewed a patent infringement tort as occurring at the location where the patent owner resides (see endnote 22). These courts reasoned that a patent is an intangible property interest with a necessarily fictional situs and determined that the most appropriate situs was the state of residence of the patent owner. Thus, a patent owner suffered harm to its intangible property interest as well as economic injury at his residence (see endnote 23). On the other hand, some courts viewed a patent infringement tort as occurring at the location where the infringing sale was made (see endnote 24). These courts reasoned that economic injury occurs where the infringing sale is made and refused to ascribe jurisdictional significance to the plaintiff's intangible property interest (see endnote 25).

Fortunately, the Federal Circuit resolved this split of authority in Beverly Hills Fan Co. v. Royal Sovereign Corp (see endnote 26). That case established that the tortious injury from patent infringement occurs where infringing sales are made. The most important right in the bundle of rights owned by a patent holder is the right to exclude and that right is lost where the infringing sale is made. The right to exclude exists anywhere that the patent is recognized so it is wrong to attributea single situs to that patent (see endnote 27). Similarly, the economic loss to the patent owner occurs where the infringing sale is made (see endnote 28). Thus, tortious injury occurs where infringing sales are made.

Courts in trademark and copyright cases have adopted similar reasoning. The issue is seemingly more straightforward in trademark cases. There, the law seeks to protect both the public and the trademark owner from confusion, so it is only natural that the tort is deemed to occur where any confusion would occur. Thus, trademark infringement is deemed to occur where the defendant has offered an infringing product for sale or solicited sales through advertising (see endnote 29). In copyright cases, courts have followed similar reasoning to that of the Federal Circuit, holding that the distribution of infringing works in a state constitutes a tort committed in that state (see endnote 30).

Although one sale of an infringing product may be enough to establish jurisdiction in the state, the identity of the buyer may make a difference. One sale may be enough because that sale amounts to the commission of a tort in the state. However, at least one court has denied personal jurisdiction where the only infringing sale in the state was made to an employee of the lawfirm representing the plaintiff (see endnote 31). The court felt that to hold otherwise would grant plaintiffs the power to manufacture jurisdiction. The unaddressed counterargument is that the defendant always has the option as to whether or not to make the infringing sale. Although plaintiffs should realize the riskiness of basing jurisdiction on such a sale, other courts may view the issue differently.

The Federal Circuit has also addressed an interesting issue that arises because of the rule that the patent infringement tort occurs where infringing sales are made. Where buyer and seller are in different states, the contract for sale of the allegedly infringing item may establish the location where title passes from the seller to the buyer. Such considerations are important when determining who is responsible for damage to the product, should such damage occur after the product leaves the seller's place of business.

In North American Philips Corp. v. American Vending Sales, Inc., (see endnote 32) the Federal Circuit considered the jurisdictional significance of the location of title transfer. In Philips, legal title was transferred outside of the state where the buyer of the product was located. The Federal Circuit held that jurisdiction was nevertheless proper in the state of the buyer's residence. The location of the tort of patent infringement is strictly a matter of federal law. That location is more difficult to pinpoint when the alleged infringement is a sale, as opposed to manufacturing or use. A sale has both a physical and conceptual dimension, the conceptual dimension referring to where title transfer occurs. The Federal Circuit decided that the physical dimension of the transaction was more important, holding that infringement occurred where the goods were received by the buyer (see endnote 33). Presumably, jurisdiction would also be proper in the state from which the goods were shipped. Selling a product requires both shipping and receiving so both states are potential forums for a patent infringement lawsuit.

Although the Supreme Court is unlikely to address this issue in the future, one could contend that jurisdiction is only proper where title changed hands. A defendant may have been deliberately trying to structure his conduct with some assurance as to where he would be hailed into court. Other courts, however, have adopted reasoning similar to that of the Federal Circuit and defendants have little hope of prevailing on this position. The emphasis on the substance, rather than the form, of the transaction is particularly helpful in obtaining jurisdiction over foreign companies that ship their goods to the forum state but structure the transaction such that title transfer occurs overseas (see endnote 34).

Overall, then, tortious injury from infringement occurs wherever the infringing acts are committed. In the case of patents, the injury occurs whereever the infringing product is made, used, sold, or offered for sale, potentially including the state where a product was shipped and the state in which it was received. For trademarks, the injury occurs whereever infringing products are offered for sale or advertised. In the case of copyrights, the injury occurs wherever infringing works are copied, distributed, performed, displayed, or wherever derivative works are prepared. If even one infringing act occurs in the state, jurisdiction should be appropriate (see endnote 35).

More difficult issues will arise in some cases, however. Infringement of a patented process, for example, may occur in several states if various steps in the process take place in different states. Digital audio transmissions may be sent in one state and received in another state. Similarly, products infringing a patent, trademark, or copyright may be shipped from one state to another state. Where the tortious act really is made up of several acts, the tort should be deemed to occur in a state where any event necessary to establish the defendant's liability took place (see endnote 36). The defendant has established minimum contacts related to the litigation with each of these states. With the increasing potential for copyright and trademark infringement on the Internet, cases where multiple states are appropriate forums based upon a single act of infringement will become more common.

ENDNOTES

 22. David Wille, Note, Personal Jurisdiction over Aliens in Patent Infringement Actions: A Uniform Approach Toward the Situs of the Tort, 90 Mich. L. Rev. 658, 666-67 (1991).
23. Id. at 667.
24. Id. at 667-68.
25. Id. at 667.
26. 30 U.S.P.Q.2d 1001 (Fed. Cir. 1994).
27. Id. at 1011; Wille, supra note 23 at 673.
28. 30 U.S.P.Q.2d at 1011; Wille, supra note 23 at 673-75.
29. E.g. Garner v. Sawgrass Mills Ltd. Partnership, 35 U.S.P.Q.2d 1396 (D. Minn. 1994); G. H. Bass & Co. v. Wakefern Foor Corp., 21 U.S.P.Q.2d 1862 (S.D.N.Y. 1991); Dave Guardala Mouthpieces Inc. v. Sugal Mouthpieces Inc., 22 U.S.P.Q.2d 1149 (S.D.N.Y. 1991); Keds Corp. v. Renee Intl. Trading Corp., 12 U.S.P.Q.2d 1808, 1810 (1st Cir. 1989); Schieffelin & Co. v. The Jack Co. of Boca Inc., 13 U.S.P.Q.2d 1704, 1706 (S.D.N.Y. 1989) (citing cases); Levi Strauss & Co. v. Textiles Y Confecciones Europeas, S.A., 222 U.S.P.Q. 971 (S.D.N.Y. 1983); German Educational Television Network v. Oregon Public Broadcasting Co., 223 U.S.P.Q. 446 (S.D.N.Y. 1983); Ragold Inc. v. Ferrero, U.S.A., Inc., 209 U.S.P.Q. 835 (N.D. Ill. 1980); see also 2 Casad, supra note 12, at § 9.09 [5], p. 9-90--9-91 (citing numerous cases); 3 Jerome Gilson & Jeffrey M Samuels, Trademark Protection and Practice, § 8.04 at 8-86--8-87 (1997); 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 32:39 at 32-49--32-51 (1997).
30. Editorial Musical Latino Americana, S.A. v. Mar Int'l Records, 829 F. Supp. 62 (S.D.N.Y. 1993); Lipton v. The Nature Co., 21 U.S.P.Q.2d 1944 (S.D.N.Y. 1992); Arbitron Co. v. E.W. Scripss, Inc., 559 F. Supp. 400, 404 (S.D.N.Y. 1983); Martin Luther King, Jr. Ctr. for Social Change, Inc. v. American Heritage Prods., Inc., 213 U.S.P.Q. 540, 543-44 (N.D. Ga. 1981), rev'd. on other grounds, 694 F.2d 674 (11th Cir. 1983); Original Appalachian Artworks, v. Wormser, 212 U.S.P.Q. 218 (N.D. Ga. 1980); but see Store Decor Division of JAS Int'l. Inc. v. Stylex Worldwide Industries Ltd., 20 U.S.P.Q.2d 1536 (N.D. Ill. 1991) (copyright infringement injury occurs where owner resides but this conclusion is based upon now discredited analysis from a patent case).
31. DeSantis v. Hafner Creations Inc., 41 U.S.P.Q.2d 1931, 1934 (E.D. Va. 1996).
32. 32 U.S.P.Q.2d 1203 (Fed. Cir. 1994).
33. 32 U.S.P.Q.2d at 1205; see also International Pizza Co. v. C&F Packing Co., 30 U.S.P.Q.2d 1876 (S.D. Ohio 1994); Wilden Pump & Engineering Co. v. Versa-Matic Tool Inc., 20 U.S.P.Q.2d 1788 (C.D. Cal. 1991); Keds Corp. v. Renee Intl. Trading Corp., 12 U.S.P.Q.2d 1808, 1810 (1st Cir. 1989); but see DeSantis v. Hafner Creations Inc., 41 U.S.P.Q.2d 1931, 1935 n. 17 (E.D. Va. 1996) (noting that the location of title transfer may sometimes have jurisdictional significance).
34. See Meyers v. ASICS Corp., 11 U.S.P.Q.2d 1777, 1780 n.3 (C.D. Cal. 1989); The Ensign-Bickford Co. v. ICI Explosives USA, Inc., 27 U.S.P.Q.2d 1825 (D. Conn. 1993); GB Marketing USA, Inc. v. Gerolsteiner Brunnen GmbH & Co., 21 U.S.P.Q.2d 1982, 1985 (W.D.N.Y. 1991); Blaese v. Alliance Research Corp., 10 U.S.P.Q.2d 1873 (C.D. Cal. 1989); Honeywell v. Metz Apparatewerke, 184 U.S.P.Q. 387 (7th Cir. 1975)..
35. Hubbell Inc. v. Pass & Seymour, Inc., 35 U.S.P.Q.2d 1760 (S.D.N.Y. 1995); The Laitram Corp. v. Morehouse Indus. Inc., 31 U.S.P.Q.2d 1697 (E.D. La. 1994).
36. See e.g., German Educational Television Network v. Oregon Public Broadcasting Co., 223 U.S.P.Q. 446 (S.D.N.Y. 1983) (finding jurisdiction proper in state where defendant's satellite broadcast containing an offer for sale with allegedly infringing trademark was received).

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