Silent Drive, Inc. v. Strong Industries, Inc.
| Decision Date | 16 April 2003 |
| Docket Number | No. 02-1329.,02-1329. |
| Citation | 326 F.3d 1194 |
| Parties | SILENT DRIVE, INC., Plaintiff-Appellant, v. STRONG INDUSTRIES, INC. and Brooks Strong, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Federal Circuit |
Christine Lebrón Dykeman, McKee, Voorhees & Sease, P.L.C., of Des Moines, Iowa, argued for plaintiff-appellant. With her on the brief were Edmund J. Sease and Jeffrey D. Harty. Of counsel was Ronald M. Sotak.
Roger T. Stetson, Belin Lamson McCormick Zumbach Flynn, A Professional Corporation, of Des Moines, Iowa, argued for defendants-appellees. With him on the brief was Margaret C. Callahan.
Before LINN, DYK, and PROST, Circuit Judges.
Silent Drive, Inc. ("plaintiff" or "Silent Drive") appeals the dismissal by the United States District Court for the Northern District of Iowa of the plaintiff's complaint against Strong Industries, Inc. and Brooks Strong (collectively "defendants") for lack of personal jurisdiction. Silent Drive, Inc. v. Strong Indus., Inc., No. C01-4015, 2002 WL 1712329 (N.D.Iowa Mar. 4, 2002). We reverse and remand.
The central question here is whether the Iowa federal district court had personal jurisdiction. Silent Drive and Strong Industries are competitors in the manufacture of trailing axles, which are auxiliary suspension systems attached to the backs of trucks to increase payload capacity. Silent Drive is an Iowa corporation whose principal place of business is in Orange City, Iowa. Strong Industries is a Texas corporation whose principal place of business is in Houston, Texas. Brooks Strong, the president of Strong Industries, is a resident of Texas.
Strong Industries has never specifically advertised in Iowa, nor has it ever had an office or place of business there. Strong Industries was a customer of Silent Drive in the late 1980's or early 1990's. Strong Industries also entered into one agreement with an Iowa dealer that was terminated in 1994 and another that was terminated in 1995. During that period, it demonstrated one of its axles in a trade show in Iowa, and Brooks Strong also visited there once. In 2000, Strong Industries sold a cylinder assembly to an Iowa dealer, F.O.B., and equipment for two dump trucks to another Iowa business, which picked the equipment up in Houston.
The present dispute does not relate directly to Strong Industries' limited business activities in Iowa. Rather, it concerns three other actions taken by the defendants outside of Iowa. The following is alleged:
First, Strong Industries and Brooks Strong obtained a Texas state court injunction enjoining Silent Drive (by name) and attempted to enforce that injunction. The background of the injunction is as follows.
Silent Drive and F.S. New Products, a Texas corporation, apparently collaborated in creating a trailing axle with the proprietary name MAXLE, to which Silent Drive contributed the air suspension system. (Compl. at 4-5.) In 1999 Strong Industries and Brooks Strong commenced litigation against F.S. New Products and others in the Texas state district court for Harris County, alleging that the defendants had misappropriated Strong Industries' trade secrets in creating the MAXLE. Silent Drive was not a party to the case, and no one employed by the company participated in it. On October 27, 2000, after a trial, the Texas court entered final judgment for Strong Industries and Brooks Strong, agreeing that their axle was subject to trade secret protection. However, the relief granted was not limited to the defendants in that action. The Texas court ordered transfer of ownership of all patents and patent applications associated with the MAXLE to Strong Industries and Brooks Strong and perpetually enjoined the defendants "and their officers, agents, servants and employees, and everyone in active concert or participation with either of them, including but not limited to SILENT DRIVE, INC. and SILENT DRIVE, INC. IOWA DIVISION each of Orange City, Iowa, who shall receive actual notice of the Order by personal service or otherwise," from
designing, manufacturing, testing, selling, offering to sell, distributing, installing, repairing, or altering (1) any trailing axle assembly whose design is based upon or derived from, in whole or in part, the Trade Secret Information of STRONG [Strong Industries and Brooks Strong], including but not limited to the "MAXLE" trailing axle; (2) any accessories for dump trucks compatible with such trailing axle assemblies or whose design is based upon or derived from, in whole or in part, the Trade Secret Information of STRONG; (3) any combination of such trailing axle assemblies and compatible dump trucks; and (4) from disclosing, publishing, or disseminating or using, in any manner, of the Trade Secret Information of STRONG.
Strong Indus., Inc. v. Tesco Am., Inc., No. 1999-00011, slip op. at 4 (11th Dist Ct. Harris County, Tex. Oct. 27, 1999) ("Final Order"). The defendants in this case have appealed, and Strong Industries brought a contempt action in state court against Silent Drive for alleged failure to comply with the injunction. Silent Drive removed the case to the District Court for the Southern District of Texas, which dismissed the case on March 13, 2002.
Second, Brooks Strong was the third named inventor of U.S. Patent No. 6,116,698 ("the `698 patent"), with an effective filing date of December 29, 1994, and an issue date of September 12, 2000. The `698 patent was assigned to Brooks Strong. The patent claims are directed to an improved design for a combination of a trailing axle and dump truck that does not attach to the tailgate and does not obstruct the load discharge area. The MAXLE is alleged to infringe the `698 patent.
Third, Strong Industries and Brooks Strong sent letters to Silent Drive and Silent Drive's customers outside Iowa concerning the Texas injunction and the `698 patent. On October 20, 2000, counsel for Strong Industries and Brooks Strong sent a letter to the president of Silent Drive to inform him of the `698 patent, which was enclosed. "I understand from trade sources that Silent Drive is not currently manufacturing any design of a trailing axle assembly, and has not manufactured any for quite some time now," the letter said. (J.A. at 105.) "Accordingly, the enclosed patent, which I obtained last month, might therefore be of academic interest only to your company." Id.
On December 5, 2000, counsel for Strong Industries and Brooks Strong sent a letter to the president of Silent Drive with which he enclosed a copy of the Texas final order. The letter explained that the final order "basically ... prohibits Silent Drive and its Iowa Division from having anything whatsoever to do with the MAXLE and any other trade secret information of Strong Industries or Brooks Strong." Id. at 72. It continued:
The purpose of this letter is, therefore, two-fold. The first purpose is to ensure that Silent Drive receives actual notice of the Final Judgment and injunction. The second is to inquire as to whether, having received actual notice, you intend to cause Silent Drive to abide by the terms of the injunction or to ignore the terms of the injunction. In reaching your decision, I would suggest that you consult your competent counsel as to the consequences of violating the terms of this injunction; I am confident he will advise you that the possible consequences include monetary fines and imprisonment for up to six months per occurrence, and compensatory damages to Strong Industries. I am also confident he will advise you that while corporations cannot serve jail sentences, their officers can, and that you personally are also included by the language of the injunction and personally subject to its terms and consequences for violation.
Id. at 73. Strong Industries and Brooks Strong sent substantively identical letters, each with a copy of the injunction, to customers of the plaintiff in Minnesota and Oregon. In November Strong Industries and Brooks Strong issued a news release in which they described the injunction and the and Brooks Strong's patent counsel, who said it was "`inconceivable' that someone could attach a trailing axle to the bed of a dump truck without infringing either this or another of the Strong stable of patents." Id. at 300. Among the recipients of the news release was an Iowa dealer of trailing axles, a potential customer of Silent Drive.
On February 14, 2001, following these three actions of Strong Industries and Brooks Strong, Silent Drive filed a complaint against Strong Industries and Brooks Strong in the United States District Court for the Northern District of Iowa containing three counts.1 The complaint stated that the jurisdictional bases were "the patent laws of the United States, more particularly, Title 35 U.S.C. § 1, et seq." and 28 U.S.C. § 2201, et seq. (Compl. at 3.) "There is an actual case or controversy between Plaintiff and Defendants, and jurisdiction of this Court arises under 28 U.S.C. § 1331 [] and § 1338(a) [], there being federal and patent questions at issue." Id.
Count I incorporated paragraphs 13 through 19 of the complaint, which described the actions of the defendants summarized above. Count I sought declaratory relief that "[p]laintiff, as a non-party to the Texas case, and a person who was not notified, on whom process was not served, and over whom jurisdiction was not present is not and cannot be bound by the injunction entered by the State Court in Texas." Id. at 7. Count II alleged that the letters the defendants had sent to Silent Drive's customers "deter[red] prospective customer relationships and interfere[d] with existing customer relationships in a manner that [wa]s improper, [and] cause[d] harm to Plaintiff ... Such...
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