Dentsply Intern. Inc. v. Pentron Corp.

• Decision Date: 21 November 1986
• Docket Number: Civ. A. No. 86-174-JLL.
• Parties: DENTSPLY INTERNATIONAL INC., Plaintiff, v. PENTRON CORPORATION and Jeneric Industries, Inc., Defendants.
• Court: U.S. District Court — District of Delaware

648 F. Supp. 856

DENTSPLY INTERNATIONAL INC., Plaintiff, v. PENTRON CORPORATION and Jeneric Industries, Inc., Defendants.

Civ. A. No. 86-174-JLL.

United States District Court, D. Delaware.

November 21, 1986.

Edward B. Maxwell, II, and William D. Johnston of Young, Conaway, Stargatt & Taylor, Wilmington, Del., and J. Patrick Clark of Dentsply Intern. Inc., York, Pa., of counsel, for plaintiff.

F.L. Peter Stone and Collins J. Seitz, Jr., of Connolly, Bove, Lodge & Hutz, Wilmington, Del., and Robert S. Cooper of Zeldes, Needle & Cooper, Bridgeport, Conn., of counsel, for defendants.

MEMORANDUM OPINION

LATCHUM, Senior District Judge.

In this case, the plaintiff, Dentsply International Inc. ("Dentsply"), requests the Court to grant it injunctive and monetary relief against the defendants Pentron Corporation ("Pentron") and Jeneric Industries, Inc. ("Jeneric") (see Docket Item "D.I." 1), due to the defendants' failure to pay royalties specified in a patent sublicensing agreement executed between Dentsply and Pentron. (See id. at Ex. B.) On June 2, 1986, the defendants filed a motion to dismiss or transfer for lack of personal jurisdiction and proper venue. (D.I. 7.) At the oral argument on this motion, the defendants withdrew their alternative motion to transfer and their challenge to venue in this district. (D.I. 21 at 2.) Therefore, this opinion only addresses the question of whether this Court has personal jurisdiction over Pentron and Jeneric. For the reasons stated below, the defendants' motion to dismiss for lack of personal jurisdiction will be denied with respect to Pentron and judgment shall be reserved with respect to Jeneric until after an evidentiary hearing.

BACKGROUND

Dentsply is a Delaware corporation with its principal place of business in York, Pennsylvania. Dentsply manufactures and sells dental supplies and equipment in the United States and foreign countries. (D.I. 1 at ¶ 1.) Part of Dentsply's manufacturing and sales is handled by its L.D. Caulk Division plant located in Milford, Delaware. Both Pentron and Jeneric are Connecticut corporations which have their principal place of business in Connecticut. Each corporation manufactures and sells dental products. (Id. at ¶¶ 2, 3.) Just over 77% of Pentron's stock is owned by Gordon S. Cohen. Gordon S. Cohen owns or controls through a series of trusts all of the Jeneric stock. Martin L. Schulman ("Schulman"), the President of Pentron, owns the remainder of the Pentron stock. (D.I. 18 Pentron Corporation's Answers to Plaintiff's First Set of Interrogatories at ¶ 3.)

The present dispute is centered around a patent Sublicensing Agreement (the "Sublicensing Agreement") between Dentsply and Pentron. (See D.I. 1 at Ex. B.) Several years before entering into the Sublicensing Agreement, Dentsply executed a Licensing Agreement with Ernst Muhlbauer, K.G. ("Muhlbauer"), a German national who is not a party to this action. (See id. at Ex. A.) Muhlbauer owns the patent on a dental material capsule. The agreement between Muhlbauer and Dentsply, entered into on November 26, 1979, granted Dentsply certain exclusive and nonexclusive rights to make or have made, use and sell the patented dental capsules. (See id. at ¶ 9.)

The Sublicensing Agreement between Dentsply and Pentron was entered into on July 1, 1983. According to the affidavit of Joseph Swain, Director of Manufacturing of the L.D. Caulk Division of Dentsply ("Caulk"), Pentron had been purchasing Caulk manufactured dental material capsules for at least two years prior to the agreement between Dentsply and Pentron. (D.I. 22 Plaintiff's Answering Brief in Opposition to Defendants' Motion to Dismiss or Transfer at Ex. A.) Again, according to affidavits filed by Dentsply, John F. Boyle ("Boyle"), then Vice President of Sales for Pentron, contacted Donald A. LeRoy ("LeRoy"), then Vice President and General Manager of the L.D. Caulk Division of Dentsply, in late 1982 to express interest in obtaining a sublicense so Pentron could manufacture the patented dental material capsules. (Id. at Ex. B, ¶ 6 and Ex. D, ¶ 4.) Boyle met at least once with LeRoy at the Caulk facility in Milford, Delaware, for the purpose of negotiating an agreement and called LeRoy in Delaware on several occasions to further the negotiations. (Id. at Ex. B, ¶ 7 and Ex. D, ¶¶ 5-6.) At the conclusion of the negotiations, Boyle signed the Sublicensing Agreement on behalf of Pentron and mailed the Agreement to LeRoy in Delaware where he signed on behalf of Dentsply and obtained Muhlbauer's consent to the sublicense. (Id. at Ex. B, ¶ 9 and Ex. D, ¶ 7.) The defendants have yet to dispute any of these particular facts set forth by Dentsply.

The Sublicensing Agreement granted Pentron a nonexclusive license to make, have made, use and sell the patented dental material capsules. (D.I. 1 at ¶ 10.) The Sublicensing Agreement provides that Pentron pay a royalty to Dentsply of $0.02 for each patented capsule sold with a minimum of $20,000 in royalties to be paid each year. Additionally, Pentron is required to pay two one-hundredths of a deutsche mark (0.02 DM) for each capsule sold. (Id. at Ex. B, ¶ 3.) This additional amount equals the royalty Dentsply must pay to Muhlbauer pursuant to the original licensing agreement.

Dentsply, in its complaint, alleges that Pentron and Jeneric combined have sold over 2.5 million capsules covered by the Sublicensing Agreement without ever paying any royalties. (Id. at ¶ 12.) The defendants do not agree that they have sold this many capsules. Instead, Jeneric states in its answers to Dentsply's first set of interrogatories that it has manufactured and sold approximately 1,306,971 dental material capsules and that approximately 1,170,276 of these capsules were sold to Pentron. (D.I. 21 at ¶ 5.) Pentron claims that it has not manufactured any patented dental material capsules, but confirms the purchase of 1,170,276 capsules from Jeneric. (D.I. 18 at ¶¶ 5, 6.) Assuming for the sake of illustration that the defendants' figures are correct, Jeneric's sale of 1,170,276 capsules to Pentron was a permitted act under the terms of the Sublicensing Agreement which allows Pentron to have capsules made for it. Therefore, Dentsply's claims against Jeneric can only apply to capsules that Jeneric manufactured which were not sold to or through Pentron.¹

ANALYSIS

Both Pentron and Jeneric contend that this Court does not have personal jurisdiction over them and that even if this Court does have personal jurisdiction over them, assertion of such jurisdiction would violate the due process clause of the United States Constitution. Dentsply has the burden of proving that this Court can properly assert jurisdiction. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135 (1934); Simpson v. Thiele, 344 F.Supp. 7 (D.Del.1972). Dentsply has vigorously posited in its brief and at oral argument that the Delaware long-arm statute, 10 Del.C. § 3104(c)(1), provides the Court with personal jurisdiction over Pentron and Jeneric and that the due process clause will not be violated by exercising such jurisdiction. To properly resolve this motion, the Court must first determine whether the Delaware long-arm statute gives this Court jurisdiction over each of these defendants and if the Court does have jurisdiction, the Court must proceed to determine whether exercising its jurisdiction will violate the due process rights of either defendant. LaNuova D & B S.p.A. v. Bowe Co., 513 A.2d 764, 768 (Del.Supr.1986).

A. Jurisdiction Over Pentron

Dentsply contends that Pentron had sufficient contacts with the L.D. Caulk Division of Dentsply, located in Milford, Delaware, to subject Pentron to personal jurisdiction in Delaware under 10 Del.C. § 3104(c)(1). This subsection, part of Delaware's long-arm statute, states:

(c) As to a cause of action brought by any person arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or his personal representative, who in person or through an agent:

(1) Transacts any business or performs any character of work or service in the State.

Section 3104(c) has been liberally construed to confer jurisdiction to the greatest extent allowable under the due process clause. Speakman Co. v. Harper Buffing Machine Co., 583 F.Supp. 273 (D.Del.1984); Moore v. Little Giant Industries, Inc., 513 F.Supp. 1043, 1048 (D.Del.1981), aff'd, 681 F.2d 807 (3d Cir.1982); Waters v. Deutz Corp., 460 A.2d 1332, 1334-35 (Del.Super. 1983). The Delaware Supreme Court explained in LaNuova that "the conduct embraced in § 3104(c)(1) ... may supply the jurisdictional basis for suit only with respect to claims which have a nexus to the designated conduct." Id. at 708. The court went on to state, "where personal jurisdiction is asserted on a transactional basis, even a single transaction is sufficient if the claim has its origin in the asserted transaction. Id. (citing Speakman, 583 F.Supp. at 275; Wilmington Supply Co. v. Worth Plumbing & Heating, Inc., 505 F.Supp. 777, 780 (D.Del.1980)).

When the established interpretation of § 3104(c)(1) is applied to the facts of this case, this Court can conclude quickly that jurisdiction over Pentron is proper. Pentron has not disputed that John F. Boyle, Vice President of Sales for Pentron, visited the L.D. Caulk Division facility in Milford and called Dentsply employees at L.D. Caulk on several occasions for the purpose of negotiating the Sublicense Agreement. Boyle's conduct and contacts with Delaware have a strong nexus with the action brought by Dentsply. Therefore, the contacts which led up to the single transaction of entering into the Sublicensing Agreement are sufficient to establish the Court's jurisdiction over Pentron in an action arising directly out of the Sublicensing Agreement.

The defendants contend in their opening brief that jurisdiction cannot be had over Pentron, because Pentron has not sold any...