Esab Group, Inc. v. Centricut, LLC

• Decision Date: 15 January 1999
• Docket Number: No. Civ.A. 4:98-1654-22.,Civ.A. 4:98-1654-22.
• Court: U.S. District Court — District of South Carolina
• Parties: ESAB GROUP, INC., Plaintiff, v. CENTRICUT, LLC, Defendant.

34 F.Supp.2d 323

ESAB GROUP, INC., Plaintiff, v. CENTRICUT, LLC, Defendant.

No. Civ.A. 4:98-1654-22.

United States District Court, D. South Carolina, Florence Division.

January 15, 1999.

COPYRIGHT MATERIAL OMITTED

Mark W Buyck, III, Willcox Buyck and Williams PA, Florence, SC, for plaintiff.

Manton McCutchen Grier, Columbia, SC, for defendant.

ORDER

CURRIE, District Judge.

This is an action for patent infringement under 35 U.S.C. § 281. Plaintiff alleges that Defendant Centricut infringed a patent owned by Plaintiff relating to an improved electrode for use in connection with plasma arc torches. The court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1338. The matter is before the court on Defendant's Motion to Dismiss for Lack of Personal Jurisdiction. Defendant also filed a Motion to Dismiss for Improper Venue and, in the alternative, a Motion to Transfer the action to the United States District Court for the District of New Hampshire pursuant to 28 U.S.C. § 1404(a).

The court has reviewed the complete record in this matter, including the pleadings, briefs, affidavits and exhibits submitted by both parties. In addition, the court has studied the applicable law. For the reasons given below, the court finds that it lacks personal jurisdiction over Defendant Centricut. Accordingly, Centricut's Motion to Dismiss for Lack of Personal Jurisdiction is GRANTED.

I. Factual Background

The court finds the following jurisdictional facts likely to exist. Plaintiff, a Delaware corporation with its principal place of business in Florence, South Carolina, develops, manufactures and sells welding and cutting systems. Defendant, a New Hampshire Corporation with its principal place of business in West Lebanon, New Hampshire, is engaged in the business of manufacturing and selling replacement parts for welding and cutting machines, including parts for products manufactured by Plaintiff.

Plaintiff is the owner of United States Patent No. 5,023,425 ("the '425 patent"), which issued on June 11, 1991. This patent covers an improved electrode for use in connection with plasma arc torches. Plasma arc torches are commonly utilized for cutting, welding and surface treatment of metals. Such torches incorporate an electrode that supports an arc from the electrode to the workpiece and is often surrounded by a layer of oxidizing gas. Plaintiff manufactures a variety of plasma arc torches and electrodes. Electrodes employing Plaintiff's patented design provide an enhanced service life over the prior art by preventing the typical rapid oxidation of a particular copper component of the electrode.

Defendant sells, among other products, electrodes for use in plasma arc torches. Plaintiff alleges that Defendant's electrodes designated as Centricut Part No. C10-963 and Centricut Part No. C10-966 infringe the '425 patent. These products are specifically designed to be compatible with certain ESAB torches. The C10-963 electrode was first sold in October 1997. The nationwide sales of this product totaled $21,496.10 in 1997 and $144,707.02 as of August 1998. Defendant claims that the C10-966 electrode has not yet been sold or offered for sale, though the court notes that this product is now listed in Centricut's on-line catalogue.

There has been only one sale of the allegedly infringing electrodes to a customer in South Carolina. In July 1998, Centricut sold ten of the C10-963 electrodes to Superior Machine Company, a company located in Florence, South Carolina. The sale arose from an unsolicited phone call by Superior to Centricut on July 14, 1998, in which Superior ordered the C10-963 electrodes for a total cost of $219.10. Superior had never before transacted any business with Centricut. Centricut shipped the order to Superior in South Carolina on the same day that the order was placed. No other contact between Centricut and Superior has occurred, although entries in Centricut's data system indicate an intention to pursue further potential sales opportunities with this company in the future. Notably, this transaction did not occur until more than a month after Plaintiff filed the Summons and Complaint with the court in this action. Moreover, two days after Superior placed the order, Plaintiff served Defendant with the Complaint.

Centricut conducts its business entirely through mail order whereby customers mail, phone or fax orders to Centricut in New Hampshire. Less than one percent of Centricut's customers are located in South Carolina. In 1997, Centricut grossed approximately $80,000 from the sale of its products in South Carolina. As of September, Centricut's sales in South Carolina totaled over $65,000 for 1998.

Centricut engages in various marketing and sales techniques to service existing customers and develop new accounts throughout the United States. Centricut uses account managers, sales personnel, outside regional representatives and telemarketers to contact customers and potential customers for the purpose of establishing and maintaining customer relations. In furtherance of its sales efforts, Centricut maintains information in various databases relating to the types of torches owned by its existing or potential customers and uses this information to target certain customers when new products relating to a particular torch enter the market. The database is also used to record any contact with present and prospective customers. Entries from this database reveal numerous contacts between Centricut's sales force and its customers in South Carolina. In one instance, the record reveals that sales calls were placed by Centricut to a customer in South Carolina several times a month for over a year.

Additionally, Defendant maintains a web site on the Internet. The web page, accessible in all fifty states and internationally, provides information about Centricut and its products and allows parties visiting the site to request literature, obtain samples, or place actual orders for Centricut products on-line. The on-line catalogue includes listings for the allegedly infringing C10-963 and C10-966 electrodes. Free samples of its products may be acquired by simply filling out the request form provided on the web page. To place an order on-line, however, the customer must first call a toll free "800" number to set up an on-line ordering account. This process requires the customer to provide some basic information before obtaining the customer ID and password necessary to access the system. Once an account is established, the customer can place orders for all Centricut products directly from the web site using this customer ID and password. According to the affidavit of Centricut employee Barton S. MacDonald, only six customers have registered for on-line ordering from Centricut, none of whom are located in South Carolina. Moreover, Centricut has made only one sale over the Internet, and that sale did not involve a South Carolina resident. Mr. MacDonald further states that Centricut specifically devised its on-line ordering system in this manner as part of a corporate policy against doing business in South Carolina. The system allegedly permits Centricut to screen out South Carolina customers and thereby avoid selling or offering to sell the accused products in South Carolina.¹

Apart from the above referenced sales, Centricut contends that it has no other contacts with South Carolina or its residents. According to the affidavits submitted by Centricut in support of its motion to dismiss, Centricut has never owned property, real or personal, in South Carolina; never held a meeting in South Carolina; never maintained a telephone listing or bank account in South Carolina; never registered to do business in South Carolina; and never paid South Carolina taxes. In addition, none of Centricut's sales representatives, employees, directors, shareholders or officers are located or reside in South Carolina. The only time Centricut employees have even traveled to South Carolina occurred in connection with a previous lawsuit between these same parties.²

After Plaintiff's attempt to secure Defendant's voluntary agreement to discontinue sales of the allegedly infringing products failed, Plaintiff filed this action against Centricut for infringement of the '425 patent on June 8, 1998. Centricut subsequently filed a motion to dismiss for lack of personal jurisdiction, a motion to dismiss for improper venue and a motion to transfer, on August 25, 1998. Plaintiff filed a brief in opposition to the two motions to dismiss on October 28, 1998.

II. Personal Jurisdiction

Defendant has moved to dismiss this action pursuant to FedR.Civ.P. 12(b)(2) for lack of personal jurisdiction. When a court's personal jurisdiction over a defendant is contested, the burden is on the plaintiff to establish the existence of a ground for exercising such jurisdiction. See Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989); Sheppard v. Jacksonville Marine Supply, Inc., 877 F.Supp. 260, 264 (D.S.C.1995). Where, as here, the court addresses the jurisdictional question on the basis of the written materials submitted by the parties, plaintiff need only make a prima facie showing of a sufficient jurisdictional basis. In considering a challenge on such a record, "the court must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Combs, 886 F.2d at 676.

Evaluating the propriety of asserting personal jurisdiction over a nonresident defendant is generally a two-step process. See Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed.Cir. 1998); ESAB I, 126 F.3d at 622. First, the court must determine whether the forum state's long-arm statute provides a basis for exercising jurisdiction. Second, the court must consider whether assertion of personal jurisdiction comports with the constitutional...