Cognitronics Imaging Sys. v. Recognition Research

• Citation: 83 F.Supp.2d 689
• Decision Date: 08 February 2000
• Docket Number: No. Civ.A. 99CV1320.,Civ.A. 99CV1320.
• Parties: COGNITRONICS IMAGING SYSTEMS, INC., Plaintiff, v. RECOGNITION RESEARCH INCORPORATED, Captiva Software Corporation, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

83 F.Supp.2d 689

COGNITRONICS IMAGING SYSTEMS, INC., Plaintiff, v. RECOGNITION RESEARCH INCORPORATED, Captiva Software Corporation, Defendants.

No. Civ.A. 99CV1320.

United States District Court, E.D. Virginia, Norfolk Division.

February 8, 2000.

Andrew David Skale, Baker & Botts, LLP, Washington, DC, Thomas J. Harlan, Jr., Harlan & Flora, P.C., Norfolk, VA, for plaintiff.

Charles D. Ossola, Arnold & Porter, Washington, DC, for defendant Cognitronics.

Terence Murphy, Kaufman & Canoles, Norfolk, VA, Charles Roberts, C.J. Veverka, Workman, Nydegger & Seeley, Salt Lake City, UT, for defendant Captiva.

MEMORANDUM OPINION AND ORDER

REBECCA BEACH SMITH, District Judge.

This matter is before the court on Captiva Software Corporation's motion to transfer venue to the Southern District of California, pursuant to 28 U.S.C. § 1404(a). For the reasons set forth below, the motion is GRANTED.

I. FACTUAL AND PROCEDURAL HISTORY

Plaintiff, Cognitronics Imaging Systems, Inc. ("Cognitronics"), filed a complaint in the Eastern District of Virginia, on August 18, 1999, seeking relief from defendants, Recognition Research Incorporated ("RRI") and Captiva Software Corporation ("Captiva"), for their alleged infringement of Patent No. 5,526,447 ("'447 patent"). On June 11, 1996, Cognitronics was issued the '447 patent for Batched Character Image Processing, a product invented by David H. Shepard, Chief Executive Officer of Cognitronics, and thereafter assigned by Shepard to Cognitronics. RRI and Captiva have utilized Batched Character Image Processing in the sale and distribution of their own software, FormWorks/ClaimWorks and FormWare/Genesis, respectively. Cognitronics asserted a cause of action for willful infringement, inducing infringement, and contributory infringement of the '447 patent, in violation of 35 U.S.C. § 271. Cognitronics also asserted state law claims against both RRI and Captiva for combining and conspiring to injure the business of Cognitronics by willfully infringing the '447 patent, in violation of Va.Code § 18.2-499 and the common law prohibition against civil conspiracy.

Cognitronics is a California corporation with its principal place of business in San Diego. Captiva is also a California corporation with its corporate headquarters and principal place of business in San Diego. Similarly, the inventor of the patented product at issue in this case, David H. Sheppard, is a resident and domiciliary of Coronado, California, an oceanfront suburb of San Diego. Defendant RRI is a Virginia corporation with its principal place of business in Blacksburg, in the Western District of Virginia.

Based upon the foregoing, Captiva moved to transfer venue from the Eastern District of Virginia to the Southern District of California, pursuant to 28 U.S.C. § 1404(a). Defendant RRI filed a memorandum in support of the motion to transfer. A hearing on defendant's motion was held before this court on November 17, 1999, at which time counsel for Cognitronics challenged whether venue in the Southern District of California would be proper as to all defendants. Cognitronics asserted for the first time at oral argument that venue would not have been proper as to RRI in the Southern District of California at the time the suit was initiated. Accordingly, Cognitronics asserted that the Southern District of California would not be a proper forum for this case. The court granted the parties time to file supplemental briefs on this narrow issue and took the matter under advisement. The matter is now ripe for decision.

II. ANALYSIS

Title 28 U.S.C. § 1404(a) provides that "[f]or the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." After thorough review of the record in this case, the court finds that this case could, indeed, have been initiated in the Southern District of California and, therefore, may be transferred to that district in accordance with 28 U.S.C. § 1404(a).

A. Proper Venue

Venue as to patent infringement claims is governed by 28 U.S.C. § 1400(b), which states in relevant part, "[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides." For venue purposes, a corporate defendant "shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. In a state which has more than one judicial district and in which a defendant that is a corporation is subject to personal jurisdiction at the time an action is commenced, such corporation is deemed to reside in any district within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State." 28 U.S.C. § 1391(c). See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed.Cir.1990). California's long-arm statute, which governs the exercise of personal jurisdiction in the federal courts of that state, authorizes a court to exercise personal jurisdiction to the full extent permitted by the Due Process Clause of the United States Constitution. See Cal.Civ. Proc. § 410.10; see also, Figi Graphics, Inc. v. Dollar General Corp., 33 F.Supp.2d 1263, 1265 (S.D.Cal.1998). Provided, therefore, that the defendants' contacts with the Southern District of California are such that the exercise of personal jurisdiction over them by that district would not violate due process if the Southern District of California were its own independent state, venue would be proper as to all defendants in the Southern District of California, and the case could be transferred pursuant to 28 U.S.C. § 1404(a).

As a California corporation, with its principal place of business in San Diego, Captiva would clearly be subject to personal jurisdiction in a Southern District of California court. Moreover, based upon the affidavits and exhibits submitted by RRI in support of the motion to transfer, it is apparent that RRI's contacts with the Southern District of California are such that RRI would also be subject to personal jurisdiction in that district.

"In order to satisfy due process, a defendant must have `minimum contacts' with the forum state such that the maintenance of the suit `does not offend the traditional notions of fair play and substantial justice.'" Figi Graphics, Inc., 33 F.Supp.2d at 1265 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). The requisite minimum contacts necessary to establish general jurisdiction exist when a defendant is domiciled in the forum or conducts activities in the forum that are "substantial" or "continuous and systematic." See Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414-16, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). RRI and Captiva apparently do not dispute that RRI's business activities in the Southern District of California are not so extensive or "substantial" as to subject RRI to general personal jurisdiction in that district.

Captiva, however, argues that RRI may nonetheless be subject to general personal jurisdiction in the Southern District of California. The Supreme Court's decision in Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 95, 37 S.Ct. 344, 61 L.Ed. 610 (1917), is frequently cited for the proposition that a state may exercise general jurisdiction over any foreign corporation that registers to do business in that state and thereby consents to service of process upon a designated agent within the state, even where the cause of action arises outside the forum.¹ Although the Supreme Court affirmed this principle in 1939, see Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 170-71, 60 S.Ct. 153, 84 L.Ed. 167 (1939), the Court's decision in International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), cast doubt on the continued viability of these cases. After International Shoe, the focus shifted from whether the defendant had been served within the state to whether the defendant's contacts with the state justified the state's assertion of jurisdiction. Compare Pennoyer v. Neff, 95 U.S. 714, 722, 5 Otto 714, 24 L.Ed. 565 (1877), with International Shoe, 326 U.S. at 316, 66 S.Ct. 154.

The Supreme Court has not yet addressed whether registration alone would be sufficient to confer general personal jurisdiction in light of its holding in International Shoe, and lower courts confronting the issue have taken widely divergent approaches to resolving the issue. A number of courts have held that, in light of the sweeping language in Shaffer v. Heitner, 433 U.S. 186, 212, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977) ("[A]ll assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny"),² a complete "minimum contacts" analysis must be undertaken, even where the corporation has registered to conduct business in the state, before jurisdiction may be asserted over a foreign corporation for a cause of action arising outside the forum. See, e.g., Leonard v. USA Petroleum Corp., 829 F.Supp. 882, 889 (S.D.Tex.1993); Wenche Siemer v. Learjet Acquisition Corp., 966 F.2d 179, 182 (5th Cir.1992); In re Mid-Atlantic Toyota Antitrust Litig., 525 F.Supp. 1265, 1278 (D.Md.1981); Schreiber v. Allis-Chalmers Corp., 611 F.2d 790, 793-94 (10th Cir.1979); Ratliff v. Cooper Laboratories, Inc., 444 F.2d 745, 748 (4th Cir.1971) ("The principles of due process require a firmer foundation than mere compliance with state domestication statutes.").

Other courts, however, have exercised general jurisdiction on the basis that a registered corporation consents to jurisdiction, obviating the need for due process analysis, or that registration to do business is per se sufficient evidence upon which to conclude that the corporation has the necessary "minimum contacts" to satisfy due...