DNA Genotek Inc. v. Spectrum DNA

• Decision Date: 14 December 2016
• Docket Number: Civ. No. 15–661–SLR
• Parties: DNA GENOTEK INC., Plaintiff, v. SPECTRUM DNA, Spectrum Solutions L.L.C., and Spectrum Packaging L.L.C., Defendants.
• Court: U.S. District Court — District of Delaware

224 F.Supp.3d 359

DNA GENOTEK INC., Plaintiff,

v.SPECTRUM DNA, Spectrum Solutions L.L.C., and Spectrum Packaging L.L.C., Defendants.

Civ. No. 15–661–SLR

United States District Court, D. Delaware.

Signed December 14, 2016

John W. Shaw, Esquire, and Karen E. Keller, Esquire of Shaw Keller LLP, Wilmington, Delaware. Counsel for Plaintiff. Of Counsel: David C. Doyle, Esquire, Brian M. Kramer, Esquire, John R. Lanham, Esquire, and Dean S. Atyia, Esquire of Morrison Foerster LLP San Diego, California.

David E. Moore, Esquire, Bindu A. Palapura, Esquire, and Stephanie E. O'Byrne, Esquire of Potter Anderson & Corroon LLP, Wilmington, Delaware. Counsel for Defendants. Of Counsel: Jeffrey E. Ostro, Esquire, Jonathan C. Sanders, Esquire, and JaeWon Lee, Esquire of Simpson Thacher Bartlett LLP, Palo Alto, California.

MEMORANDUM OPINION

ROBINSON, District Judge

I. INTRODUCTION

Plaintiff DNA Genotek Inc. ("Genotek") sued defendants Spectrum DNA, Spectrum Solutions L.L.C., and Spectrum Packaging L.L.C. (collectively, "Spectrum") for patent infringement. (D.I. 1) Spectrum moved to dismiss for lack of personal jurisdiction. (D.I. 19) Although the court did not find persuasive Genotek's argument that the record supported statutory jurisdiction under Delaware's "dual jurisdiction" theory, the court denied the motion and ordered jurisdictional discovery. DNA Genotek Inc. v. Spectrum DNA , 159 F.Supp.3d 477, 483 (D. Del. 2016). The parties have completed discovery, and Spectrum renewed its motion to dismiss for lack of personal jurisdiction. (D.I. 87) The court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1338(a). For the reasons discussed below, Spectrum's motion to dismiss is granted.

II. BACKGROUND

Genotek is a leading provider of products for biological sample collection, and the owner by assignment of United States Patent No. 8,221,381 B2 (the " '381 patent"). (D.I. 70 ¶¶ 8, 10) Spectrum manufactures a saliva collection device ("the accused product") that, according to Genotek, infringes on the '381 patent. (Id. at ¶ 6) Spectrum's principal place of business is in Utah, and it manufactures the accused product in Utah and Malaysia. (Id. ; D.I. 88 at 3) Spectrum does not have any offices, employees, or other physical presence in Delaware. (Id. ) It does not own any property (real or personal) in Delaware, and it does not maintain any facilities or equipment in Delaware. (Id. ) Spectrum is not registered to do business in Delaware. (D.I. 88 at 8) Spectrum owns three websites, none of which contain any pricing information or allow for direct purchases of the accused product.

Spectrum manufactures the saliva collection device for Ancestry.com DNA LLC ("Ancestry") pursuant to an October 2012 manufacturing agreement, as amended in September 2014. (D.I. 88 at 4) Ancestry sells a DNA testing service. (Id. ) When a customer signs up for the service, Ancestry sends the customer a kit with the saliva collection device. (Id. ) The customer deposits a saliva sample in the device and returns it for testing. (Id. ) Spectrum and Ancestry operate independently and keep separate finances. (Id. at 4–5) Spectrum does not share any officers or directors with Ancestry. (Id. at 4) Neither company has an ownership interest in the other. (Id. at 5)

Under the manufacturing agreement, Ancestry owns the intellectual property rights to the accused product. (D.I. 88 at 4; D.I. 99, Ex. 6 §§ 1.17, 2.6, 13.2) Spectrum or its affiliates must manufacture, package, and label the accused products in accordance with Ancestry's specifications. (D.I. 99, Ex. 6 §§ 1.13, 2.3) Ancestry is obligated to indemnify Spectrum for "[a]ny claim that the manufacture, use, sale, offer for sale, import, or other distribution of the Product infringes a patent...." (Id. at § 10.1 (b)) Spectrum must indemnify Ancestry for any product liability claims. (Id. at § 10.2) Ancestry pays for and owns any custom tooling Spectrum uses to manufacture the accused product. (Id. at § 2.10) Spectrum must manufacture enough accused products to meet Ancestry's product forecasts. (Id. at § 2.2) In January 2016, Ancestry's Global Operations Manager sent an email with a draft forecast predicting the sale of approximately 1,500,000 units of the accused product in the United States for year 2016.¹ (D.I. 99, Ex. 12)

Finally, the manufacturing agreement requires Spectrum to ship the accused products F.O.B. either to Ancestry's location in Utah or another location designated by Ancestry. (D.I. 99, Ex. 6 § 3) Genotek does not dispute Spectrum's assertion that it has not shipped any accused products to Delaware. (D.I. 88 at 3) Ancestry admits that it has sent "one or more" of the accused product to customers with addresses in Delaware. (D.I. 99, Ex. 22 at 3–4) In addition, two of Spectrum's counsel ordered Ancestry's genetic testing kit, which includes the accused product, from a storefront Ancestry maintains on the Amazon.com website.² (D.I. 100; D.I. 101) Thus, Genotek has presented evidence that at least three of the accused products have reached Delaware.

Ancestry and Spectrum are parties to a separate Purchase and Sales Commission Agreement, dated December 31, 2014, that permits Spectrum to buy some of the kits it manufactures for Ancestry and resell them to third parties. (D.I. 99, Ex. 10) Under that agreement, Spectrum pays Ancestry a fixed price per kit, plus a percentage of the net price to the end customer. (Id. ) Spectrum has sold the accused product to five third-party customers, none in Delaware. (D.I. 88 at 5) At least ninety-nine percent of Spectrum's sales are to Ancestry. (D.I. 106 at 5; D.I. 98 at 4)

III. STANDARD OF REVIEW

Rule 12(b)(2) of the Federal Rules of Civil Procedure directs the court to dismiss a case when the court lacks personal jurisdiction over the defendant. Fed. R. Civ. P. 12(b)(2). Plaintiff bears the burden of establishing that sufficient minimum contacts have occurred between the defendant and the forum to support jurisdiction. See Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Ass'n , 819 F.2d 434, 437 (3d Cir. 1987). To meet this burden, the plaintiff cannot "rely on the bare pleadings alone," Quantum Loyalty Sys., Inc. v. TPG Rewards, Inc. , 2009 WL 5184350, at *2 (D. Del. Dec. 23, 2009), but must produce "sworn affidavits or other competent evidence," Time Share Vacation Club v. Atl. Resorts, Ltd. , 735 F.2d 61, 67 n.9 (3d Cir. 1984). In reviewing the evidence, the court must accept as true all allegations of jurisdictional fact made by the plaintiff and resolve all factual disputes in the plaintiff's favor. Miller Yacht Sales, Inc. v. Smith , 384 F.3d 93, 97 (3d Cir. 2004) ; Traynor v. Liu , 495 F.Supp.2d 444, 448 (D. Del. 2007). A plaintiff "need only establish a prima facie case of personal jurisdiction" when the court has not held an evidentiary hearing. O'Connor v. Sandy Lane Hotel Co. , 496 F.3d 312, 316 (3d Cir. 2007).

IV. DISCUSSION

There are two requirements to exercising personal jurisdiction over a defendant, one statutory and the other constitutional. Plaintiff must show that: (1) "there is a statutory basis for jurisdiction under the forum state's long arm statute;" and (2) "the exercise of jurisdiction comports with the defendant's right to due process." L'Athene, Inc. v. EarthSpring LLC , 570 F.Supp.2d 588, 590 (D. Del. 2008) ; Max Daetwyler Corp. v. R. Meyer , 762 F.2d 290, 293 (3d Cir. 1985). Although Delaware's long-arm statute is "construed to the maximum extent possible under the due process clause," LaNuova D & B S.p.A. v. Bowe Co. , 513 A.2d 764, 768 (Del. 1986), these two tests are "independent," Wright v. Am. Home Prod. Corp. , 768 A.2d 518, 527 (Del. Super. 2000), and cannot be "collapsed into a single constitutional inquiry," Tell v. Roman Catholic Bishops of Diocese of Allentown , 2010 WL 1691199, at *8 (Del. Super. Apr. 26, 2010).

Delaware's long arm statute allows a court to exercise personal jurisdiction over a defendant when the defendant or its agent:

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

(2) Contracts to supply services or things in this State;

(3) Causes tortious injury in the State by an act or omission in this State; or

(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State.

10 Del. C. § 3104(c)(1)–(4). Subsections (c)(1) through (c)(3) are specific jurisdiction provisions, where there must be a nexus between the cause of action and the conduct of the defendant. Quantum Loyalty , 2009 WL 5184350, at *3. Subsection (c)(4) is a general jurisdiction provision, which requires a greater extent of contacts, but applies when the claim is unrelated to forum contacts. Id.

Genotek does not argue that Spectrum fits under any one specific prong of the long arm statute. Instead, Genotek asserts that the court has personal jurisdiction over Spectrum based on either Delaware's "dual jurisdiction" theory or Spectrum's agency relationship with Ancestry. (D.I. 98 at 8–12) Each of these theories are addressed in turn.

A. Dual Jurisdiction Theory

Dual jurisdiction is a theory unique to Delaware that applies stream-of-commerce jurisprudence to Delaware's long arm statute. Eastman Chem. Co. v. AlphaPet Inc. , 2011 WL 6004079, at *15 (D. Del. Nov. 4, 2011). The central premise is that a non-resident may have sufficient contacts for the purposes of Delaware's long arm statute where, through the stream of commerce, its products have been introduced into the forum state. Id. The dual jurisdiction theory relies on partial satisfaction of subsections (c)(1) and (c)(4). Belden Techs., Inc. v. LS Corp. , 829 F.Supp.2d 260, 267 (D. Del. 2010). Under this theory, plaintiff has the burden of demonstrating that: (1) defendant has an intent to serve the...