Deprenyl Animal Health v. University of Toronto

• Decision Date: 23 July 2002
• Docket Number: No. 01-1648.,01-1648.
• Citation: 297 F.3d 1343
• Parties: DEPRENYL ANIMAL HEALTH, INC., Plaintiff-Appellant, v. The UNIVERSITY OF TORONTO INNOVATIONS FOUNDATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

297 F.3d 1343

DEPRENYL ANIMAL HEALTH, INC., Plaintiff-Appellant, v. The UNIVERSITY OF TORONTO INNOVATIONS FOUNDATION, Defendant-Appellee.

No. 01-1648.

United States Court of Appeals, Federal Circuit.

July 23, 2002.

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Edmund J. Sease, McKee, Voorhees & Sease, P.L.C., of Des Moines, IA, argued for plaintiff-appellant. With him on the brief were Jeffrey D. Harty and Ronald M. Sotak.

J. Michael Jakes, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., of Washington, DC, argued for defendant-appellee. With him on the brief was Michael A. Morin. Of counsel were Robert F. Shaffer and Dennis P. O'Reilley.

Before GAJARSA, LINN, and DYK, Circuit Judges.

GAJARSA, Circuit Judge.

The plaintiff-appellant, Deprenyl Animal Health, Inc. ("DAHI"), seeks review of the final judgment of the United States District Court for the District of Kansas dismissing the case in its entirety. The district court held that the exercise of jurisdiction over the defendant-appellee, the University of Toronto Innovations Foundation ("UTIF"), would violate due process. Consequently, the district court granted UTIF's motion to dismiss for lack of personal jurisdiction or, in the alternative, to dismiss pending binding arbitration. For the reasons explained below, we hold that the exercise of personal jurisdiction over UTIF is consistent with the requirements of due process. We therefore reverse the dismissal and remand with instructions to stay proceedings in the district court pending the outcome of the arbitration proceedings.

I. BACKGROUND

The plaintiff, DAHI, is a corporation organized under Louisiana law that maintains its principal place of business in Overland Park, Kansas. DAHI is a subsidiary of a Canadian corporation, Draxis Health Inc. ("Draxis"), which is headquartered in Ontario.

The defendant, UTIF, is a corporation organized under Canadian law that maintains its offices in Toronto, Canada. UTIF is a technical licensing company that assists the University of Toronto with commercialization of the inventions developed by its academics. UTIF neither owns nor operates any Kansas facilities. It employs no one in Kansas and has neither sold nor advertised any products there.

In 1991, DAHI approached UTIF seeking a license under certain of UTIF's patent applications. In 1992, DAHI and UTIF entered into a license agreement for technology that matured into UTIF's United States Patent No. 5,767,164 ("the '164 patent"). UTIF's president negotiated the essential terms of the license agreement with the president of Draxis (then known as Deprenyl Research Limited), in Toronto. Although Draxis is now DAHI's parent, at the time of the negotiations, Draxis was only a minority shareholder. Nevertheless, the president of Draxis negotiated on behalf of DAHI. DAHI alleges that Draxis itself had no involvement in the negotiations.

After the parties signed a letter of intent, DAHI and UTIF entered into a course of dealings during which UTIF's president regularly made telephone and mail contact with DAHI's president in Kansas. DAHI alleges that UTIF's president traveled to Kansas once in 1991 to negotiate the license agreement and again in 1994 to resolve a dispute that resulted in an amendment to the agreement. UTIF asserts that its president does not recall the 1991 visit. The district court, however, did not hold an evidentiary hearing regarding jurisdiction. Therefore the court properly noted that all factual disputes must be resolved in DAHI's favor in order to evaluate its prima facie showing of jurisdiction. Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 161 F.Supp.2d 1272, 1277 n. 2 (D.Kan.2001) ("DAHI") (citing Behagen v. Amateur Basketball Ass'n of the United States, 744 F.2d 731, 733 (10th Cir.1984)). In Behagen, the Tenth Circuit explained that: "[w]hen a motion to dismiss for lack of jurisdiction is decided on the basis of affidavits and other written materials, the plaintiff need only make a prima facie showing," and that "[I]f the parties present conflicting affidavits, all factual disputes are resolved in the plaintiff's favor...." 744 F.2d at 733.

Federal Circuit law governs the resolution of this jurisdictional dispute, but it accords with Tenth Circuit law on this issue. See Graphic Controls Corp. v. Utah Med. Prods., Inc., 149 F.3d 1382, 1383 n. 1, 47 USPQ2d 1622, 1623 n. 1 (Fed.Cir.1998) (noting that the district court's task in evaluating whether the plaintiff has made a prima facie showing of personal jurisdiction over the defendant requires construing the pleadings and affidavits in the light most favorable to the plaintiff).

The parties entered into the license agreement on May 21 and 22, 1992, by signing separate copies of the agreement in Toronto, and Overland Park, respectively. As the agreement required, UTIF kept DAHI informed of the status of prosecution of the application that matured into the '164 patent. This included sending copies of patent applications and PTO correspondence to DAHI in Kansas. DAHI paid licensing fees to UTIF from Kansas, but in Canadian dollars.

The license agreement contains two clauses that are implicated by the present appeal: an arbitration clause and a choice of law clause. The arbitration clause provides:

16. ARBITRATION

16.1 In the event that any disagreement shall, from time to time, arise between the parties in connection with the interpretation, application or effect of this Agreement, then such disagreement shall be settled and determined by arbitration in accordance with the procedure agreed to by the parties within a period of fifteen (15) days following notice of such dispute to both parties and filing such agreement, in accordance with the provisions of the Arbitrations Act (Ontario).

The choice of law clause provides:

19. GOVERNING LAWS

19.1 This Agreement shall be interpreted and construed, and the legal relation contained therein shall be determined, in accordance with the laws of the Province of Ontario, Canada.

The present dispute began in December 1998, when DAHI's parent, the Canadian corporation, Draxis, issued a press release announcing FDA approval of a drug called Anipryl, which is used to treat canine cognitive dysfunction. In February 1999, UTIF sent a notice to DAHI contending that sales of Anipryl would be subject to the royalty provisions of the license agreement. UTIF sent the notice letter to DAHI at the Kansas address stated in the license agreement. DAHI's president responded in a letter written with Ontario letterhead. All subsequent communications between UTIF and DAHI were sent to the parties' Canadian offices.

On May 25, 2000, DAHI filed the complaint in the present action in the district of Kansas, seeking a declaratory judgment that the license agreement is inapplicable to the sale of Anipryl and that the '164 patent is invalid and not infringed by the sale of Anipryl. On July 26, 2000, UTIF initiated arbitration in Canada. On July 28, 2000, DAHI filed an application in Canadian Superior Court, seeking a declaration that the dispute is incapable of being the subject of arbitration in Ontario. The district court took note

that on July 28, 2000, plaintiff filed a lawsuit against defendant in the Superior Court of Justice in Ontario, Canada, seeking inter alia a declaration that the license agreement does not apply to plaintiff, that plaintiff's product is not covered by the agreement, and that plaintiff's product is not covered by the licensed patent.

DAHI at 1278. On March 4, 2002, the Ontario Superior Court of Justice ordered the Canadian court and arbitration proceedings stayed pending the determination of the present appeal before this court.

UTIF filed a motion to dismiss the district court case for lack of personal jurisdiction or, in the alternative, to dismiss pending binding arbitration. The district court granted UTIF's motion in its entirety without reaching the arbitration issue. See generally DAHI; see also Deprenyl Animal Health, Inc. v. Univ. of Toronto Inoovations [sic.] Found., No. 00-2234 CM, (D.Kan. Aug.20, 2001) (entry of judgment dismissing case in its entirety). The court held that it lacked personal jurisdiction over UTIF. DAHI at 1278-79. After noting that the Kansas long arm statute authorizes the exercise of jurisdiction to the full extent permitted by the constitution, the district court analyzed whether the exercise of jurisdiction over UTIF would comport with due process. Id. at 1275. According to the district court, it would not. Although UTIF had sufficient minimum contacts with Kansas, the exercise of jurisdiction would nevertheless violate due process; it would be so unreasonable as to violate fair play and substantial justice. Id. at 1278.

DAHI appeals. This court has jurisdiction pursuant to 28 U.S.C. § 1295(a)(1) because the district court's jurisdiction was based, in part, on 28 U.S.C. § 1338.

II. STANDARD OF REVIEW

Federal Circuit law governs the issue of personal jurisdiction in this patent-related case. See Hildebrand v. Steck Mfg. Co., Inc., 279 F.3d 1351, 1354, 61 USPQ2d 1696, 1698-99 (Fed.Cir.2002) (stating that Federal Circuit law applies to determinations of personal jurisdiction over out-of-state defendants in patent infringement cases and declaratory judgment cases in which the defendant is a patentee); 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1377-78, 48 USPQ2d 1773, 1776 (Fed.Cir.1998) (applying Federal Circuit law to determine that district court had personal jurisdiction over out-of-state corporation where plaintiff asserted patent and related state law claims); Akro Corp. v. Luker, 45 F.3d 1541, 1543, 33 USPQ2d 1505, 1506-07 (Fed.Cir.1995); but cf. Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 857, 50 USPQ2d 1304, 1307 (Fed.Cir.1999) (applying regional circuit law where the determination of personal jurisdiction was no longer "intimately involved in the substance of enforcement of...