Nova Biomedical Corp. v. Moller, s. 80-1083

• Decision Date: 08 August 1980
• Docket Number: 80-1106,Nos. 80-1083,s. 80-1083
• Citation: 629 F.2d 190,207 U.S.P.Q. 713
• Parties: NOVA BIOMEDICAL CORPORATION, Plaintiff-Appellant, v. Willi MOLLER, d/b/a/ Gebruder Moller Glasblaserei, Defendant-Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 190

629 F.2d 190

207 U.S.P.Q. 713

NOVA BIOMEDICAL CORPORATION, Plaintiff-Appellant, v. Willi MOLLER, d/b/a/ Gebruder Moller Glasblaserei, Defendant-Appellee.

Nos. 80-1083, 80-1106.

United States Court of Appeals First Circuit.

Argued In Camera April 9, 1980.

Decided Aug. 8, 1980.

Charles C. Winchester, Boston, Mass., with whom Fish & Richardson and John M. Skenyon, Boston, Mass., were on brief, for plaintiff-appellant.

William J. Cheeseman, Boston, Mass., with whom Foley, Hoag & Eliot, Boston, Mass., was on brief, for intervenor, Orion Research Incorporated.

John T. Roberts, Washington, D. C., with whom Irons & Sears, P. C., Washington, D. C., Ira K. Gross, and Sullivan & Worcester, Boston, Mass., were on brief, for defendant-appellee.

Before CAMPBELL and BOWNES, Circuit Judges, LOUGHLIN, ^* U. S. District Judge.

BOWNES, Circuit Judge.

This is a declaratory judgment action in which the plaintiff seeks a determination that a patent held by the defendant is invalid, unenforceable, and not infringed. The plaintiff, Nova Biomedical Corporation, is a Massachusetts corporation located in Newton and engaged in the manufacture and sale of medical instruments. The defendant, Willi Moller, is a citizen and resident of Switzerland and owner of a sole proprietorship in Zurich, formerly known as Gebruder Moller Glasblaserei. On November 28, 1979, the district court dismissed the complaint, ruling that Nova had failed to establish personal jurisdiction over Moller pursuant to Mass. Gen. Laws Ann. ch. 223A, § 3, the Massachusetts long arm statute. We reverse.

I.

The facts are undisputed. The patent in suit, which Moller acquired in 1970 from the Swiss inventor, covers an electrode capable, inter alia, of measuring potassium levels in fluids such as blood. Nova manufactures and sells a device which employs a similar electrode to perform the same function. On May 31, 1978, and again on March 16, 1979, Moller's attorneys wrote to Nova charging it with patent infringement; the first letter demanded that Nova "cease and desist" from such infringement, while the second suggested that a "prompt response" would avoid the "need for instituting litigation." Rather than following up on this threat, however, Moller filed a patent infringement suit on June 14, 1979, in the District of Columbia against two hospitals who had purchased the disputed electrode system from Nova. Five weeks later, Nova filed the present action for declaratory relief and for an injunction against the customer suit.

Moller's principal contact with Massachusetts consists of a cross-licensing agreement with a Massachusetts corporation called Orion Research Incorporated, covering the patent in suit, another patent owned by Moller, and a patent owned by Orion. Although this agreement was formally consummated in March of 1979 at Orion's headquarters in Cambridge, Massachusetts, its basic terms had been settled upon by 1976, and Orion had commenced payment of royalties the following year. In addition to granting licensing rights and specifying the level of royalty payments for each of the three patents, the agreement, inter alia, requires an exchange of quarterly reports concerning worldwide sales of the covered electrodes, permits Moller to inspect Orion's books in Massachusetts, obligates each party to inform the other of any suspected infringement by third parties, and provides that the law of Switzerland will be controlling.

Through the first quarter of 1979, Orion had paid to Moller just under $50,000 in royalties under the second of the Moller patents covered by the agreement. By contrast, although Orion has manufactured "thousands" of the electrodes covered by the patent in suit, it has never paid any royalties to Moller therefor; the agreement provides that such electrodes are royalty-free to the extent they are sold by Orion to end users, as opposed to other manufacturers. Orion does, however, owe some royalties for its sale of these electrodes. It estimates that $10,000 is due, but the precise amount is disputed by the two parties. Orion's use of the patent in suit also confers upon Moller the secondary benefit of a substantially royalty-free use of Orion's patented device. The electrodes sold by Moller under the Orion cross-licensed patent although ordinarily subject to a royalty are royalty-free to the extent they do not exceed twenty percent of the number of electrodes sold by Orion under the patent in suit during the same accounting period. By means of this reciprocal arrangement, therefore, even those electrodes sold by Orion under the patent in suit that are nominally royalty-free provide a monetary benefit to Moller.

Of Moller's remaining contacts with Massachusetts, the most substantial has consisted of the sale to Orion of various products and chemicals. The largest of these transactions has been Orion's purchase in March of 1979 of over $110,000 worth of pH electrodes, approximately one-third of which had been shipped to Boston by the end of September. In addition, within the past two years, Moller has sold to Orion almost.$19,000 worth of calcium ion exchanger and over $5,000 worth of sodium electrodes, connectors, and a chemical called valinomycin. All of these materials are unrelated to the electrodes covered by the patent in suit except for the chemical valinomycin, which is a component thereof. Moller and Orion have engaged in an extensive course of correspondence, devoted primarily to negotiation of the license agreement. Moller also has visited Massachusetts twice to confer with Orion personnel and to talk with another Massachusetts company concerning unrelated business. Finally, the defendant has negotiated in Switzerland with a third Massachusetts company regarding a license under the patent in suit. Moller maintains no office, representative, sales force, telephone, or bank account in Massachusetts and does not advertise in any publication distributed here.

II.

A preliminary observation concerning the scope of the Massachusetts long arm statute is in order. In "Automatic" Sprinkler Corp. v. Seneca Foods Corp., 361 Mass. 441, 280 N.E.2d 423, 424 (1972), the Supreme Judicial Court described the function of this statute as "an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States." Yet even under this expansive view, all questions of long arm jurisdiction in Massachusetts do not collapse into a single constitutional inquiry. As the Court later explained:

G.L. c. 223A, § 3, asserts jurisdiction over the person to the constitutional limit only when some basis for jurisdiction enumerated in the statute has been established. Although presented with jurisdictional facts sufficient to survive due process scrutiny, a judge would be required to decline to exercise jurisdiction if the plaintiff was unable to satisfy at least one of the statutory prerequisites.

Good Hope Indus., Inc. v. Ryder Scott Co., 79 Mass.Adv.Sh. 1155, --- Mass. ---, 389 N.E.2d 76, 80 (1979); accord, Carlson Corp. v. University of Vermont, 80 Mass.Adv.Sh. 659, --- Mass. ---, 402 N.E.2d 483, 485 (1980). Thus, rather than giving way entirely to constitutional considerations, the statutory language imposes an additional set of constraints on a court's assertion of in personam jurisdiction. See, e. g., Singer v. Piaggio & C., 420 F.2d 679, 681 (1st Cir. 1970); North American Video Corp. v. Leon, 480 F.Supp. 213, 216-18 (D.Mass.1979). ¹

In each of the cases decided by the Supreme Judicial Court under Mass.Gen.Laws Ann. ch. 223A, § 3, the applicability of one of the statute's literal requirements was not seriously in question and the Court's attention was devoted to the constitutional inquiry. See Carlson Corp. v. University of Vermont, 402 N.E.2d at 485; Good Hope Indus., Inc. v. Ryder Scott Co., 389 N.E.2d at 80; Droukas v. Divers Training Academy, Inc., 375 Mass. 149, 376 N.E.2d 548, 551-53 (1978); ² "Automatic" Sprinkler Corp. v. Seneca Foods Corp., 280 N.E.2d at 425-26. The instant case presents the converse situation. There is little dispute that the assertion of jurisdiction would comport with due process, given Moller's extensive and ongoing contacts with the forum. ³ See, e. g., Japan Gas Lighter Assoc. v. Ronson Corp., 257 F.Supp. 219, 233-36 (D.N.J.1966). At issue, instead, is whether the statutory prerequisite upon which Nova exclusively relies the "transacting business" provision has been satisfied. That section of the statute provides:

A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person's

(a) transacting any business in this commonwealth . . . .

Mass.Gen.Laws Ann. ch. 223A, § 3(a). Two questions are presented: (1) whether the mailing of two letters charging patent infringement and threatening litigation constitutes the "transacti(on)" of "business"; and (2) whether Nova's cause of action can be viewed as "arising from" Moller's licensing arrangement with Orion. An affirmative answer to either will suffice to support jurisdiction.

III.

Despite the paucity of pertinent Massachusetts case law, there are several indications that the "transacting any business" clause should be construed broadly. First, the Supreme Judicial Court has ruled that the provision is not limited to commercial activity by the defendant, but rather "is general and applies to any purposeful acts by an individual, whether personal, private, or commercial." Ross v. Ross, 371 Mass. 439, 358 N.E.2d 437, 439 (1976). ⁴ Second, a liberal reading of section 3(a) is suggested by the Court's decision in Droukas, where the nonresident defendant's sale of two marine engines to the plaintiff, even though constituting "an isolated transaction" with "slight effect on the commerce of the Commonwealth," ⁵ 376 N.E.2d at 551, apparently ⁶ satisfied the "transacting business" requirement. Finally, as a general matter, the remedial nature...