Canatelo, LLC v. Nuvico, Inc.
| Decision Date | 27 August 2013 |
| Docket Number | CIVIL NO. 12-1430 (JAG) |
| Parties | CANATELO, LLC, Plaintiff v. NUVICO, INC., Defendant |
| Court | U.S. District Court — District of Puerto Rico |
GARCIA-GREGORY, D.J.
Before the Court is a motion to dismiss filed by defendant NUVICO, Inc. ("Nuvico"). (Docket No. 12). Plaintiff Canatelo, LLC ("Canatelo") timely filed a response. For the reasons set forth, the Court GRANTS the motion to dismiss under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction.
On June 4, 2012, Canatelo filed a patent infringement action against Nuvico alleging that Nuvico's products, specifically the EasyNet DVRs, infringe upon Canatelo's U.S. Patent Nos. 7,310,111 (hereinafter the "111 patent") and 6,476,858 (hereinafter the "858 patent"). Canatelo seeks to recover damages, legal fees, and costs pursuant to the Patent Laws contained in 35 U.S.C. § 271 et seq.
Nuvico, a corporation incorporated in the State of Delaware with its principal place of business in New Jersey, moves to dismiss the present action for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). Nuvico resells and services electronic video surveillance and security products, devices, and related equipment that is manufactured by others. Furthermore, with the exception of some sales to businesses located in Puerto Rico, NUVICO does not have any meaningful ties with the island. Nuvico argues that personal jurisdiction is absent because it lacks sufficient minimum contacts with Puerto Rico, and as such the continuation of this action would offend the traditional notions of fair play and susbtantial justice.
Alternatively, Nuvico moves to dismiss or transfer the instant action for improper venue pursuant to Fed. R. Civ. P. 12(b)(3) and 28 U.S.C. § 1400(b). Finally, Nuvico argues that in the event that this court finds that sufficient contacts exist to establish personal jurisdiction, Canatelo's claims for induced and contributory patent infringement should be dismissed for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6).
In order for a court to be able to adjudicate a case, the plaintiff must be able to show, by a preponderance of the evidence, that the court has personal jurisdiction over theparties.1 M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323, 1327 (Fed. Cir. 2010); see also Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 50 (1st Cir. 2002). Whenever the plaintiff fails to meet the burden of establishing a prima facie case of personal jurisdiction, a defendant can move to dismiss the action pursuant to Fed.R.Civ.P. 12(b)(2).
The burden of establishing a prima facie case of personal jurisdiction is predicated upon a showing that the forum's long-arm statute grants jurisdiction and that its assertion is consistent with the Due Process Clause of the Constitution. Dainippon Screen Mfg. Co., Ltd. v. CFMT, Inc., 142 F.3d 1266, 1269-70 (Fed. Cir. 1998) (citations omitted). Since Puerto Rico's long-arm statute is coextensive with the limits of due process, we will compress it with constitutional inquiry of whether the exercise of jurisdiction in this case comports with due process. See Hannon v. Beard, 524 F.3d 275, 280 (1st Cir. 2008); see also Dainippon Screen, 142 F.3d at 1270 (citations omitted).
The constitutional test for personal jurisdiction consists of a "minimum contacts inquiry" and a "fairness inquiry." Marcinkowska v. IMG Worldwide, Inc., 342 Fed. App'x 632, 635(Fed. Cir. 2009) (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980)). Specifically, the Due Process Clause of the Constitution requires a court to first determine whether an out-of-state defendant has sufficient "minimum contacts" with the forum, and second, whether the exercise of jurisdiction offends the "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The exercise of personal jurisdiction comports with due process "if the defendant purposely avails itself of the privilege of conducting activities within the forum state, such that the defendant should reasonably anticipate being haled into court there." Marcinkowska, 342 Fed. App'x at 635 (internal citation and quotation marks omitted) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958); World-Wide Volkswagen, 444 U.S. at 297)).
Moreover, a court may assert either general or specific jurisdiction over an out-of-state defendant. General jurisdiction exists when the defendant's contacts with the forum state are "substantial" or "continuous and systematic," even if said contacts are unrelated to the cause of action. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984); see also United States v. Swiss Am. Bank, Ltd., 274 F.3d 610, 623 (1st Cir. 2001). This is a quite stringent and exacting standard, "as it permits a defendant to be hauled into court inthe forum state to answer for any of its activities anywhere in the world." Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004) (citation omitted); see also Harlow v. Children's Hosp., 432 F.3d 50, 57 (1st Cir. 2005).
In the absence of general jurisdiction, a court may still exercise specific jurisdiction over the defendant if the plaintiff's cause of action arises from, or relates sufficiently to, the defendant's contacts with the forum. Helicopteros, 466 U.S. at 414; Swiss Am. Bank, 274 F.3d at 623. Courts must determine if specific jurisdiction exists by applying a three prong test, assessing "(1) whether the defendant purposefully directed activities at residents of the forum; (2) whether the claim arises out or relates to those activities; and (3) whether assertion of personal jurisdiction is reasonable and fair." Nuance Commc'ns, Inc. v. Abby Software House, 626 F.3d 1222, 1231 (Fed. Cir. 2010) (citing Akro Corp. v. Luker, 45 F.3d 1541, 1545-46 (Fed. Cir. 1995)).
General jurisdiction is not an issue in this case. Canatelo does not dispute that general jurisdiction over Nuvico is lacking. Whether this omission was by inadvertence or conscious realization that Nuvico lacks "continuous and systematic" contacts with Puerto Rico, the argument is waived. See Local Rule 7 of the District of Puerto Rico. With respect to specific jurisdiction, Canatelo has failed to meet its burden toestablish a prima facie case of personal jurisdiction. An application of the three prong test requires us to conclude that an assertion of specific jurisdiction over Nuvico would be inconsistent with constitutional due process.
With respect to the first prong of the specific jurisdiction analysis, Canatelo's main argument is that Nuvico purposefully conducted business in the forum through an established distribution channel with the expectation that its products would be sold in Puerto Rico. According to Canatelo, this distribution channel included an authorized dealer that sold Nuvico's products in Puerto Rico. Canatelo argues that even though Nuvico did not engage in direct sales in Puerto Rico, it sold its products to various businesses, which in turn sold them to consumers in the forum. These arguments are unavailing and fall short from demonstrating that Nuvico purposefully directed activities at residents of the forum.
First, it cannot be said that Nuvico has purposefully directed its sales to this forum so as to avail itself of the benefits and protections of Puerto Rico law. Nuvico, for example, has not engaged in marketing and advertising activities in the forum and has neither targeted nor solicited sales in Puerto Rico. Furthermore, contrary to Canatelo's assertions,Nuvico does not have and has never had any contractual relation with Security System Solutions, the alleged authorized dealer. (Docket No. 26 Exhibit B). As evidenced in the declaration of Joel Ocasio, President of Security System Solutions, Nuvico has never contractually designated Ocasio's company as an "authorized, exclusive or otherwise, reseller" of Nuvico's products. Id. It follows that Nuvico has not demonstrated an "intent or purpose to serve the residents of this forum" by engaging in direct sales and making its products readily accessible to consumers. See Commissariat A L'Energie Atomique v. Chi Mei Optoelectronics Corp., 395 F.3d 1315, 1323 (Fed. Cir. 2005).
Nuvico's only contact with Puerto Rico has been the sale and shipment of some products to a few independent vendors since 2005. While it is true that Nuvico's volume of sales in Puerto Rico since 2005 amounts to less than 1% of its total sales, Canatelo is right in pointing out that Nuvico's sales is not a dispositive factor under the first prong of the specific jurisdiction analysis. See Ajax Realty Corp. v. J.F. Zook, Inc., 493 F.2d 818, 821-22 (4th Cir. 1972) (). Regardless of how substantial were Nuvico's revenuesin Puerto Rico, Nuvico's shipments to two businesses in this forum were at best isolated and sporadic.
In Beverly Hills Fan Co. v. Royal Sovereign Co., the court exercised personal jurisdiction over two defendants on the basis that defendants had placed the accused product in the stream of commerce, which resulted in the presence of fifty-two fans in the forum state, and had provided a warranty to those residents that purchased the product. 21 F.3d 1558, 1563-65 (Fed. Cir. 1994). Unlike the ongoing relationship that existed between defendants and the forum in Beverly Hills Fan Co., there is no evidence in this case that Nuvico has targeted Puerto Rico residents or that it has served consumers through established distribution channels. See Id. at 1566 n. 15 (...
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