PATENT RIGHTS PROTECTION v. VIDEO GAMING TECHS.

Decision Date10 May 2010
Docket NumberNo. 2009-1391.,2009-1391.
PartiesPATENT RIGHTS PROTECTION GROUP, LLC, Plaintiff-Appellant, v. VIDEO GAMING TECHNOLOGIES, INC., Defendant-Appellee, and Spec International, Inc., Defendant-Appellee.
CourtU.S. Court of Appeals — Federal Circuit

COPYRIGHT MATERIAL OMITTED

Mark Borghese, Weide & Miller, Ltd., of Las Vegas, NV, argued for plaintiff-appellant. With him on the brief was R. Scott Weide.

James D. Boyle, Santoro, Driggs, Walch, Kearney, Holley & Thompson, of Las Vegas, NV, argued for defendant-appellee Video Gaming Technologies, Inc.

Steven L. Underwood, Price, Heneveld, Cooper, DeWitt & Litton, LLP, of Grand Rapids, MI, argued for defendant-appellee Spec International, Inc. With him on the brief was Jason L. Budd.

Before RADER, ARCHER, and LINN, Circuit Judges.

LINN, Circuit Judge.

Patent Rights Protection Group, LLC ("Patent Rights") appeals an order of the United States District Court for the District of Nevada granting SPEC International, Inc.'s ("SPEC") and Video Gaming Technologies, Inc.'s ("VGT") motions to dismiss for lack of personal jurisdiction and denying Patent Rights' request for jurisdictional discovery. Because the district court erred in concluding that exercising personal jurisdiction over SPEC and VGT would be unreasonable and abused its discretion in denying jurisdictional discovery on this basis, we vacate and remand.

I. Background

Patent Rights is a Nevada intellectual property holding company and the owner of U.S. Patents No. 6,475,087 and No. 6,860,814 ("the Gaming Patents"), which relate to various types of casino-style gaming machines. Patent Rights initiated separate lawsuits in the District of Nevada against out-of-state gaming companies Nova Gaming, LLC; Cadillac Jack, Inc.; and VGT, a Tennessee corporation. Patent Rights asserted in each suit that the respective company had infringed the Gaming Patents by displaying, using, and offering for sale gaming machines at trade shows in Nevada. See Complaint at 2, Patent Rights Prot. Group, LLC v. Nova Gaming LLC ("Nova Gaming"), No. 2:08-cv-00663-PMP-LRL (D.Nev. Dec. 30, 2008); Complaint at 2, Patent Rights Prot. Group, LLC v. Video Gaming Techs., Inc. ("Video Gaming Techs."), No. 2:08-cv-00662-JCMLRL (D. Nev. April 29, 2009); Complaint at 2, Patent Rights Prot. Group, LLC v. Cadillac Jack, Inc. ("Cadillac Jack"), No. 2:08-cv-00660-KJD-RJJ, 2009 WL 2242674 (D.Nev. July 27, 2009). Each suit was assigned to a different judge in the District of Nevada. Patent Rights later added SPEC, a Michigan company, to each suit, asserting that SPEC had also infringed the Gaming Patents by displaying, using, and offering for sale cabinets that house gaming machines at trade shows in Nevada. See Amended Complaint at 2, Nova Gaming; Amended Complaint at 2, Video Gaming Techs.; Amended Complaint at 2, Cadillac Jack.

SPEC and VGT separately moved to dismiss the lawsuit underlying this appeal. Despite SPEC admitting that it had attended trade shows in Nevada "in the late 1990's" and both companies conceding that they had attended trade shows in Nevada in the "early 2000's, and more recently in 2007 and 2008," each company argued that its contacts with Nevada were insufficient for the court to exercise personal jurisdiction. SPEC and VGT each stated that it was not registered to do business in Nevada and did not have sales agents, employees, manufacturing facilities, bank accounts, or telephone listings in Nevada. Each company further asserted that it did not manufacture any products in Nevada and that its respective website was not specifically targeted to residents of Nevada. VGT stated that it did not direct marketing efforts at Nevada nor generate any revenue from Nevada, while SPEC alleged that it had mailed brochures to eight potential customers in Nevada and had generated only de minimis sales in the state. SPEC also alleged that nearly all of its officers, employees, and records associated with the accused products were located in Michigan.

SPEC and VGT also argued that the venue selected by Patent Rights was improper, alleging that the District of Nevada does not satisfy the requirements of 28 U.S.C. § 1400(b). Alternatively, both companies asked the district court to either transfer the suit or stay it pending the outcome of a related declaratory judgment action filed by SPEC against Patent Rights in Michigan. Patent Rights submitted an opposition contesting the motions to dismiss and requesting jurisdictional discovery.

Before the district court decided the parties' respective motions, the district judge handling the Nova Gaming case dismissed that action, finding that Patent Rights had failed to establish that the court had personal jurisdiction over SPEC or Nova Gaming, LLC and that venue was improper. Nova Gaming, No. 2:08-cv-00663-PMP-LRL, slip op. at 2-3 (D.Nev. Dec. 30, 2008). SPEC informed the district court of the decision in Nova Gaming and the court ordered the parties to submit supplemental briefing on the preclusive effect of the decision.

After hearing oral argument regarding the parties' submissions, the district court dismissed the action without prejudice. The court concluded that exercising personal jurisdiction over SPEC or VGT would be unreasonable under Ninth Circuit precedent, finding that the relevant factors either weighed in favor of a finding of unreasonableness or were neutral. The court denied Patent Rights' request for jurisdictional discovery because, in the court's view, jurisdictional discovery would not affect the court's reasonableness analysis. The court determined that the alternative grounds for dismissal—issue preclusion and venue—were moot in light of the court's reasonableness determination. The court also found that SPEC's and VGT's requests to transfer or stay the action were moot because the declaratory judgment action that SPEC initiated in Michigan had been transferred to Nevada and dismissed.

Patent Rights filed a timely appeal. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

II. Discussion

On appeal, Patent Rights argues that the district court erred by applying Ninth Circuit law instead of Federal Circuit law in determining whether exercising personal jurisdiction would be reasonable. Both SPEC and VGT acknowledge that the district court erred by applying Ninth Circuit law but believe that this was harmless error because, in their view, application of our precedent leads to the same conclusion.

SPEC and VGT defend the district court's decision by arguing that they have not made the necessary "minimum contacts" with Nevada for the court to exercise personal jurisdiction and that the District of Nevada is an improper venue for this action. SPEC also renews its argument that the decision of the Nova Gaming court precludes the district court from considering whether exercising personal jurisdiction over SPEC is proper. Although these issues were raised below, the district court declined to address them because the court's determination that exercising personal jurisdiction was unreasonable rendered the issues moot. As a general rule, "a federal appellate court does not consider an issue not passed upon below." Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976). We see no reason to depart from that rule here. Therefore, we address only the matters decided by the court— the reasonableness of exercising personal jurisdiction, and Patent Rights' request for jurisdictional discovery. We address each issue in turn. Although we consider the merits of the arguments raised by SPEC and VGT individually, we refer to them collectively, as the arguments are similar and complementary.

A. Reasonableness of Exercising Personal Jurisdiction

We apply Federal Circuit precedent when considering whether the district court properly declined to exercise personal jurisdiction. Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed.Cir.1995) (citing Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (Fed.Cir.1994)). Because personal jurisdiction is a question of law, we review de novo whether exercising personal jurisdiction over either SPEC or VGT would be unreasonable. 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1376 (Fed.Cir.1998).

In general, a federal district court may exercise personal jurisdiction over a non-consenting out-of-state defendant if two requirements are satisfied. First, the defendant must be amenable to service of process. See Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987) ("Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied."); Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed.Cir.1998) (explaining that usually the first step in a personal jurisdiction analysis is "determining whether a provision makes the defendant amenable to process."). Determining whether a defendant is amenable to service of process often entails considering whether the defendant "is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located," Fed.R.Civ.P. 4(k)(1)(A). This, in turn, involves examining the state's long-arm statute. See, e.g., Red Wing Shoe Co., 148 F.3d at 1358. Second, exercising jurisdiction over the defendant must comport with due process. See Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d 1324, 1329 (Fed.Cir.2008) ("Determining whether personal jurisdiction exists over an out-of-state defendant involves ... considering whether the assertion of personal jurisdiction would violate due process." (quoting Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1359 (Fed.Cir.2001))). The "constitutional touchstone" of the due process inquiry "remains whether the defendant purposefully established `minimum contacts' in the forum State." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 85 L.Ed.2d 528...

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