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IP Alert: Federal Circuit Holds Sending Patent Enforcement Letters May Establish Personal Jurisdiction in Recipient's Forum

December 17, 2018

On December 7, in Jack Henry & Associates, Inc. v. Plano Encryption Technologies, the Federal Circuit held that a patent owner may be subjected to personal jurisdiction in a forum where it is not present by virtue of sending patent enforcement letters to alleged infringers in that forum.

Plano Encryption Technologies (“PET”) sent patent enforcement letters to 11 banks doing business in the Northern District of Texas. PET asserted that the banks’ mobile phone applications infringed several of PET’s patents directed toward secure authentication and distribution of data. Each bank’s application used technology provided by Jack Henry & Associates. Upon receipt of the patent enforcement letters, Jack Henry and the banks filed a declaratory judgment action in the District Court for the Northern District of Texas. 

PET argued that venue was improper since it did business solely in the Eastern District of Texas and its letters were insufficient to create personal jurisdiction. The district court agreed and dismissed the case, finding that the Federal Circuit had established “unique” rules for patent cases based on policy considerations such that “letters threatening suit for patent infringement sent to the alleged infringer by themselves do not suffice to create personal jurisdiction.” 

On appeal, the Federal Circuit quickly disposed of the view held by both the district court and PET that its precedent created a general rule that letters charging infringement could never provide specific jurisdiction. Instead, the court held that courts must undertake a traditional due process inquiry to comply with the Supreme Court’s directive in Bristol-Myers Squibb Co. v. Superior Court of California to “consider a variety of interests” in assessing whether jurisdiction would be fair. Thus, the court examined whether (1) PET “purposefully directed” its activities at residents of the forum, (2) the claim “arises out of or relates to” the defendants’ activities within the forum, and (3) the assertion of personal jurisdiction is reasonable and fair. The first two factors comprise the “minimum contacts” requirement of the jurisdictional framework set forth long ago by the Supreme Court. 

In 2017, in New World International, Inc. v. Ford Global Technologies, LLC, the Federal Circuit held that the sending of an enforcement letter might be sufficient to establish minimum contacts. Here, PET conceded during oral argument that the first two factors were met. As such, PET was left to make a “compelling case” that the exercise of jurisdiction in the Northern District of Texas would be “unreasonable and unfair.” The Federal Circuit found that PET did not make any such argument and that the minimum contacts requirement was met without offense to due process. For this reason, the court held that PET was subject to personal jurisdiction in the Northern District of Texas.

Judge Stoll (joined by Judge Wallach) wrote additional views to address a statement from Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., a 1998 case that had held that “fair play and substantial justice afford a patentee sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum.” She noted that subsequent Federal Circuit decisions have interpreted that statement as creating an exception based upon policy considerations unique to patent law. Disagreeing that there exists such exception, Judge Stoll criticized the Red Wing Shoe decision for not adequately assessing the fairness factors mandated by Supreme Court precedent and called for Red Wing Shoe and its progeny to “be reconsidered as directly contrary to established Supreme Court precedent.” 

The Jack Henry case is relevant for anyone sending patent enforcement letters to suspected infringers located in other judicial districts. Even when an enforcement letter is the only contact with a foreign forum, courts may nonetheless find that fairness dictates exercising personal jurisdiction over the sender in that forum. The court did not weigh in on whether the sending of letters would meet the minimum contacts test in light of PET’s concession, and it is not certain how the court would have analyzed this question had PET not conceded. 

For more information on this decision, please contact Fitch Even partner Nicole L. Little, author of this alert.  

Fitch Even associate Evan Kline-Wedeen contributed to this alert. 

 

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