Nuance Commc'n, Inc. v. Abbyy Software House
| Citation | 626 F.3d 1222,97 U.S.P.Q.2d 1351 |
| Decision Date | 12 November 2010 |
| Docket Number | No. 2010-1100,2010-1100 |
| Parties | NUANCE COMMUNICATIONS, INC., Plaintiff-Appellant, v. ABBYY SOFTWARE HOUSE, Abbyy USA Software House, Lexmark International, Inc., Abbyy Production LLC, and Abbyy Software Ltd., Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals for the Federal Circuit |
M. Craig Tyler, Wilson Sonsini Goodrich & Rosati, of Austin, TX, argued for plaintiff-appellant. With him on the brief were Daisy S. Poon and Tung-On Kong, of Palo Alto, CA.
Matthew M. Wawrzyn, Wawrzyn LLC, of Chicago, IL, argued for defendants-appellees. Of counsel on the brief was Perry R. Clark, Law Offices of Perry R. Clark of Palo Alto, CA.
Before RADER, Chief Judge, and NEWMAN and PROST, Circuit Judges.
Nuance Communications, Inc. ("Nuance") filed this patent infringement action against Abbyy USA Software House ("Abbyy USA"). After obtaining discovery from Abbyy USA, Nuance filed an Amended Complaint naming as defendants Abbyy Production LLC ("Abbyy Production"), a corporation organized under the laws ofthe Russian Federation, and Abbyy Software, Ltd. ("Abbyy Software"), a corporation organized under the laws of the Republic of Cyprus. Abbyy Production and Abbyy Software (collectively, "the Abbyy defendants") thereafter filed a motion to dismiss for lack of personal jurisdiction and improper service of process, which was granted by the United States District Court for the Northern District of California without an evidentiary hearing or further discovery. Nuance Commc'ns Inc. v. Abbyy Software House, No. 08-02912, 2009 WL 2707390 (N.D.Cal. Aug.25, 2009).
Nuance appeals the dismissal of Abbyy Production and Abbyy Software. Because Abbyy Production purposefully directed activities at residents of California, because Nuance's claims for patent infringement arise out of those activities, and because the assertion of personal jurisdiction is reasonable and fair, this court reverses the district court's dismissal of Abbyy Production on personal jurisdiction grounds. Because the record calls for further discovery on these jurisdiction questions, this court vacates the dismissal of Abbyy Software and remands. This court also determines that the district court erred by dismissing the case for improper service of process.
Nuance owns by assignment U.S. Patent Nos. 5,131,053; 5,381,489; 5,436,983; 6,038,342; 5,261,009; 6,810,404; 6,820,094; and 6,742,161 (collectively, "the patents-in-suit"). These patents relate to methods and systems for performing optical character recognition, recognizing documents, and managing documents.
On February 19, 2008, Nuance filed suit in the United States District Court for the Central District of California against Abbyy USA and Lexmark International, Inc. ("Lexmark") alleging infringement of the patents-in-suit. The Central District later transferred the action to the Northern District of California. On November 17, 2008, Abbyy USA responded to interrogatories seeking the identity and location of related entities. Abbyy USA identified Abbyy Software, a corporation organized under the laws of the Republic of Cyprus, as its parent corporation. Abbyy USA is a wholly-owned subsidiary of Abbyy Software. Abbyy USA also identified Abbyy Production, a corporation organized under the laws of the Russian Federation, as another wholly-owned subsidiary of Abbyy Software.
Nuance thereafter filed an Amended Complaint adding Abbyy Production and Abbyy Software as defendants, and also served document requests on both companies. In the Amended Complaint, Nuance alleged that the Abbyy defendants infringe one or more claims of the patents-in-suit by "making, using, selling, and/or offering to sell in this country, and/or importing into this country" certain software products. On May 7, 2009, a local process server served Abbyy Production with the Amended Complaint, Amended Summons, and Standing Orders of the Court, as well as Russian translations of these documents. Abbyy Production received this service of process in Moscow. Specifically, Ms. Nadezhda Kolpakova, identified as the Manager of Abbyy Production, personally received the documents.
On June 25, 2009, the Abbyy defendants filed a motion to dismiss both companies for lack of personal jurisdiction and to dismiss Abbyy Production for improper service of process. The Abbyy defendants supported their motion with written declarations and previously unproduced documents. They also filed a motion for a protective order to preclude pending written discovery until the trial court resolved the motion to dismiss.
The district court dismissed both Abbyy Production and Abbyy Software. With respect to personal jurisdiction, the court provided a single paragraph of analysis, concluding that the record did not show that Abbyy Production and Abbyy Software purposefully directed any specific activity at residents of California or within the forum state, or that Nuance's claims arise out of or relate to those activities. Nuance Commc'ns, 2009 WL 2707390, at *3. The district court also found that Nuance did not properly serve Abbyy Production in accordance with the Hague Convention. Id. at *2. Although the Abbyy defendants had not moved to dismiss Abbyy Software for improper service of process, the district court sua sponte determined that Nuance improperly served Abbyy Software. See id. at *2.
Neither Abbyy Production nor Abbyy Software responded to Nuance's discovery requests. The district court conducted no evidentiary hearing on jurisdiction before dismissal. Although Nuance had requested a continuance pending limited jurisdictional discovery, the district court did not address this request in its order. The district court found the Abbyy defendants' motion for a protective order moot.
Both Nuance and the Abbyy family of companies develop and sell software products including optical character recognition ("OCR") software. According to Abbyy Software's website, "ABBYY is an international company with 9 offices in different countries, including Russia, Germany, the United States, Ukraine, the UK, Cyprus, Japan and Taiwan." J.A. 252. The website states that ABBYY was founded in 1989 by David Yang, currently "the chairman of ABBYY's board of directors." J.A. 252. The website describes a single "Global Management Team" for the Abbyy companies, which includes David Yang, the Chairman of the Global Management Team and the CEO of Abbyy Software; Sergey Andreyev, the CEO of Abbyy Production; and Dean Tang, the CEO of Abbyy USA.
A February 2008 article in Trade Secret Magazine states that "[i]n the opinion of the company's management, nothing is able to prevent the company now from conquering the U.S. market." J.A. 246. The article reports that David Yang, the CEO of Abbyy Software, previously "failed at the American market," but he is now "going to make his return with new solutions." J.A. 243.
The article features extensive quotes from Sergey Andreyev, the CEO of Abbyy Production, about U.S. activity. For example, he characterizes the launch of Abbyy's FineReader software in the United States as an act of revenge for this lawsuit, even though Abbyy Production and Abbyy Software had yet to be named as parties to the suit:
Nowadays ABBYY is actively getting ready for the issue of the FineReader software program to the American retail market. The company was forced to do so by its main American competitor—by the Nuance Communications Company, which in the end of last year filed a lawsuit against ABBYY claiming the latter used the company's developments in its work. Sergei Andre[y]ev explains the situation. In the past the company thought that retail sales were unprofitable due to a high entrance price and the need to conduct advertisement campaigns. Andreev puts on a brave face.
J.A. 245 (emphases added).1
Although the details of the Abbyy defendants' business arrangements have yet to be fully explored through discovery, the record shows that Abbyy Production develops software and provides Abbyy USA with master copies of that software. According to an agreement dated January 1, 2007, between Abbyy USA and Abbyy Production entitled Software License Agreement ("the Agreement"), Abbyy USA purports to nonexclusively license from Abbyy Production a proprietary right to use, sell, reproduce, distribute, and market software in the United States. The Agreement states that Abbyy Production shall provide master copies of computer software programs to Abbyy USA, including the FineReader product line, documentation for that software, including sale and service documentation, and technical support available by oral or written consultation. In exchange for these proprietary rights, Abbyy USA pays to Abbyy Production the net amount of sales, less costs, expenses, and an operating profit margin of 4.5%. The laws of the Russian Federation govern the Agreement.
On appeal, Nuance challenges the district court's determination that it cannot exercise personal jurisdiction over Abbyy Production and Abbyy Software. Nuance also challenges the district court's determination that these companies were served in a legally insufficient manner. This court has jurisdiction under 28 U.S.C. § 1295(a)(1).
The law of the Federal Circuit, rather than that of the regional circuit in which the case arose, applies to determine whether the district court properly declined to exercise personal jurisdiction over an out-of-state accused infringer. Akro Corp. v. Luker, 45...
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