Breckenridge Pharmaceutical v. Metabolite

• Decision Date: 07 April 2006
• Docket Number: No. 05-1221.,No. 05-1428.,05-1221.,05-1428.
• Citation: 444 F.3d 1356
• Parties: BRECKENRIDGE PHARMACEUTICAL, INC., Plaintiff-Appellant, v. METABOLITE LABORATORIES, INC. and PAMLAB, L.L.C., Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

444 F.3d 1356

BRECKENRIDGE PHARMACEUTICAL, INC., Plaintiff-Appellant, v. METABOLITE LABORATORIES, INC. and PAMLAB, L.L.C., Defendants-Appellees.

No. 05-1221.

No. 05-1428.

United States Court of Appeals, Federal Circuit.

April 7, 2006.

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Robert E. Pershes, Buckingham, Doolittle & Burroughs, L.L.P., of Boca Raton, Florida, argued for plaintiff-appellant. With him on the brief were L.A. Perkins and H. Michael Muñiz.

Glenn K. Beaton, Gibson, Dunn & Crutcher, LLP, of Denver, Colorado, argued for defendants-appellees. With him on the brief was Amanda Tessar.

Before MICHEL, Chief Judge, FRIEDMAN, Senior Judge, and LINN, Circuit Judge.

MICHEL, Chief Judge.

Breckenridge Pharmaceutical, Inc. ("Breckenridge") appeals the decision of the United States District Court for the Southern District of Florida dismissing for lack of personal jurisdiction its claims of tortious interference, unfair competition, and declaratory judgment of non-infringement against patent holder, Metabolite Laboratories, Inc. ("Metabolite"). Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 348 F.Supp.2d 1335 (S.D.Fla.2004) (Breckenridge). Breckenridge also appeals the district court's subsequent grant of summary judgment on all claims to PamLab, L.L.C. ("PamLab"), the exclusive licensee of the patents at issue. Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., No. 04-80090-CIV-COHN (S.D.Fla. May 17, 2005) (PamLab). The district court held that the patent-related claims could not proceed without Metabolite, an indispensable party, and that the state law claims were preempted under Federal Circuit law. Id. Because the district court erroneously concluded that it lacked personal jurisdiction over Metabolite, and because there are genuine disputes of material fact with respect to the state law claims, the district court incorrectly dismissed Metabolite and granted summary judgment to PamLab. Therefore, we reverse the dismissal of Metabolite, vacate the grant of summary judgment to PamLab, and remand.

I

Metabolite, a Colorado corporation, is the holder of patents for a method of controlling hyperhomocysteinemia, a condition involving elevated serum metabolite levels, which is an emerging risk factor for heart and vascular disease, and its principal business involves licensing its patents to pharmaceutical manufacturing companies. Through an exclusive license of the Metabolite patents, co-defendant PamLab, a Louisiana corporation, manufactures and distributes a prescription-only vitamin product containing a specific formulation of B₁₂, folic acid and B₆ marketed as FOLTX, which it promotes to doctors and clinicians throughout the country. Breckenridge, a generic drug company headquartered in Florida, manufactures a similar product, marketed as "Folbee", which it sells to large pharmacies and retailers — including Walgreens, Eckerd, and Rite Aid — as a substitute for FOLTX.

On December 18, 2003, Metabolite and PamLab filed suit in the United States District Court for the District of Colorado alleging that Breckenridge had infringed the Metabolite patents by offering to sell Folbee to drug wholesalers and retailers as a generic equivalent to FOLTX. Following the district court's denial of the plaintiffs' motion for a temporary restraining order ("TRO") on December 23, 2003, the plaintiffs voluntarily dismissed the suit.

Several weeks later, Metabolite, in cooperation with PamLab,¹ sent between ten and twenty letters to vitamin distributors and retailers informing them of the Metabolite patents and PamLab's exclusive license. Three letters were sent to customers of Breckenridge in Florida: Publix Super Markets, Eckerd, and Winn-Dixie. The letters did not name Breckenridge or threaten a lawsuit for infringement. The letters stated in relevant part:

[O]ne or more small generic drug companies are offering generic equivalents to FOLTX. As the patent owner, Metabolite wanted to alert you to the patent coverage on FOLTX. We would urge you to consult with your patent attorney before entering into any arrangements for the distribution, dispensing or substitution of these generic equivalents in place of a legitimate prescription or order for FOLTX.

Metabolite enclosed a PamLab brochure that contained PamLab's contact information but did not contain pricing or order forms.

On January 29, 2004, about eight days after learning of the letters, Breckenridge filed suit against Metabolite and PamLab in the United States District Court for the Southern District of Florida, seeking declaratory judgment of non-infringement and alleging state law claims of tortious interference and unfair competition. Metabolite moved to dismiss the complaint for lack of personal jurisdiction and, on December 3, 2004, following jurisdictional discovery, the district court granted the motion. On May 17, 2005, the district court granted summary judgment in favor of PamLab on all claims. Breckenridge challenges both rulings in separate appeals, which we have consolidated. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

II

Where a defendant is not subject to general jurisdiction in the forum state, a district court may nonetheless exercise specific jurisdiction over the defendant if the cause of action "arises out of" or "relates to" the defendant's in-state activity. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). In determining whether specific jurisdiction may be exercised over a non-consenting out-of-state defendant, a district court must undertake a two-part inquiry. First, the state long-arm statute must permit service of process on the defendant. See Fed.R.Civ.P. 4(e), 4(k)(1)(A). Second, the exercise of personal jurisdiction must satisfy due process requirements. Burger King, 471 U.S. at 474-76, 105 S.Ct. 2174. The Due Process Clause requires that there exist sufficient "minimum contacts" such that maintenance of the suit does not offend "traditional notions of fair play and substantial justice". Id. at 476-78, 105 S.Ct. 2174.

A

On appeal, Breckenridge asserts that two subsections of the Florida long-arm statute permit the exercise of personal jurisdiction over Metabolite.² Subsection 1(b) authorizes jurisdiction over a party that "[c]ommit[s] a tortious act within this state", and subsection 1(f) authorizes jurisdiction over a party that "[c]aus[es] injury to persons or property within this state arising out of an act or omission by the defendant outside this state, if, at or about the time of the injury [ ]: 1. The defendant was engaged in solicitation or service activities within this state." Fla. Stat. § 48.193(1)(b), (f).

The district court held that Metabolite's contacts with Florida satisfied subsection (1)(f) of the Florida long-arm statute. We agree. The district court correctly concluded that there was no jurisdiction under (1)(b) because Metabolite's letters into Florida may qualify as protected communications under federal patent law and thus may not be tortious. See Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1377 (Fed.Cir.2004) ("The federal patent laws preempt state laws that impose tort liability for a patentholder's good faith conduct in communications asserting infringement of its patent and warning about potential litigation."). With respect to subsection (1)(f), the court correctly concluded that the letters could be construed as solicitations, because they described the FOLTX product and PamLab's exclusive license, and enclosed PamLab's promotional materials. Because Breckenridge alleges that the letters caused injury in Florida, the requirements of subsection (1)(f) are met. Accordingly, the district court correctly determined that Metabolite would be subject to personal jurisdiction if consistent with due process.

B

The issue of personal jurisdiction in a declaratory action for non-infringement is "intimately related to patent law" and thus governed by Federal Circuit law regarding due process. Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1201 (Fed.Cir.2003). Where a suit involves both patent and non-patent claims, Federal Circuit law regarding due process also applies to the question of personal jurisdiction on non-patent claims if "the resolution of the patent infringement issue will be a significant factor" in determining liability under the non-patent claims. 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1377 (Fed.Cir.1998). A court must inquire whether the defendant has "purposefully directed his activities" at the forum state and, if so, whether "the litigation results from alleged injuries that arise out of or relate to those activities." Burger King, 471 U.S. at 472, 105 S.Ct. 2174. Then, to defeat jurisdiction, the burden of proof shifts to the defendant, which must "present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Id. at 476-77, 105 S.Ct. 2174.

Breckenridge argues that the district court erred by applying Federal Circuit law rather than Eleventh Circuit law to the question of personal jurisdiction with respect to the state law tort claims, and argues that this choice of law question is important. Whereas the Federal Circuit provides that a patent owner may, without more, send cease and desist letters to a suspected infringer, or its customers, without being subjected to personal jurisdiction in the suspected infringer's home state, see, e.g., Akro Corp. v. Luker, 45 F.3d 1541, 1548-49 (Fed.Cir.1995) (citing various district court cases), the Eleventh Circuit does not appear to have a similar carve-out.³

Here, the district court correctly applied Federal Circuit law governing personal jurisdiction to all claims because the question of infringement is a critical factor in determining liability under the non-patent claims. 3D Sys., 160 F.3d at 1377. See also Silent Drive, 326 F.3d at 1201 (applying regional...