Fallon Lumin. Products v. Multi Media Electronics, C.A.6:04-2049-20.

• Decision Date: 04 November 2004
• Docket Number: No. C.A.6:04-2049-20.,C.A.6:04-2049-20.
• Citation: 343 F.Supp.2d 502
• Parties: FALLON LUMINOUS PRODUCTS CORP., Plaintiff, v. MULTI MEDIA ELECTRONICS, INC., Defendant.
• Court: U.S. District Court — District of South Carolina

343 F.Supp.2d 502

FALLON LUMINOUS PRODUCTS CORP., Plaintiff, v. MULTI MEDIA ELECTRONICS, INC., Defendant.

No. C.A.6:04-2049-20.

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

November 4, 2004.

John B Hardaway, III, Stephen J Shaw, Nexsen Pruet Jacobs and Pollard, Greenville, SC, for Plaintiff.

Donald A Harper, Harper Law Firm, Greenville, SC, R Patrick Smith, Harrison White Smith Hayes and Coggins, Spartanburg, SC, for Defendant.

ORDER

HERLONG, District Judge.

This matter is before the court on Multi Media Electronics, Inc.'s ("MME") motion to dismiss for lack of personal jurisdiction and improper venue pursuant to Rules 12(b)(2) and 12(b)(3) of the Federal Rules of Civil Procedure. For the reasons set forth below, the court denies MME's motion to dismiss for lack of personal jurisdiction and improper venue.

I. STATEMENT OF THE FACTS

Fallon Luminous Products Corp. ("Fallon") is a South Carolina corporation that "manufactures and sells illuminated and neon signs." (Compl. ¶¶ 1, 5.) MME is a Delaware corporation headquartered in Farmingdale, New York that "markets and sells a variety of novelty goods and lighting products." (Def.'s Mem. Supp. Mot. Dismiss at 1 (Decl. of Bernhardt ¶ 2).) Fallon alleges that MME has infringed its patent for a luminous electric sign ("neon sign"), U.S. Patent No. 5,533,286 ("286 patent"), by selling identical or substantially similar neon signs to Wal-Mart Stores, Inc. ("Wal-Mart") for distribution throughout the nation. (Compl.¶ 8.) Fallon purchased one of MME's allegedly infringing neon signs at a Wal-Mart store in Spartanburg, South Carolina. (Pl.'s Mem. Opp'n Mot. Dismiss (Aff. of Devin Hinson ¶¶ 2, 3, 4).) MME's trademark is located on five sides of the box containing the neon sign, and MME's company information and website address is next to the UPC code. (Id. (Aff. of Devin Hinson ¶¶ 5, 6).)

MME alleges that Fallon's complaint contains no allegations to support a finding of personal jurisdiction over MME in South Carolina. (Def.'s Mem. Supp. Mot. Dismiss at 2.) MME asserts that it does not own real property or have a place of business in South Carolina. (Id. (Decl. of Bernhardt ¶¶ 4, 5).) Further, MME does not pay South Carolina taxes and does not maintain a bank account in South Carolina. (Id. (Decl. of Bernhardt ¶¶ 6, 7).) MME does not have a registered agent for service of process in South Carolina. (Id. (Decl. of Bernhardt ¶ 8).) In addition, MME has not sold or delivered any allegedly infringing neon signs into South Carolina. (Def.'s Mem. Supp. Mot. Dismiss at 6 (Decl. of Bernhardt ¶¶ 24, 26).) According to MME, it sells the allegedly infringing neon signs to Wal-Mart, and Wal-Mart decides which stores will offer the allegedly infringing neon signs for sale. (Id. (Decl. of Bernhardt ¶¶ 19, 20, 21).) The neon signs are manufactured in China and shipped to the United States. (Id. (Decl. of Bernhardt ¶ 25).) MME asserts that Wal-Mart's sale of neon signs in South Carolina is insufficient to establish a basis for personal jurisdiction over MME.

II. DISCUSSION OF THE LAW

A. 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." ESAB Group, Inc. v. Centricut, LLC, 34 F.Supp.2d 323, 328 (D.S.C.1999). The plaintiff need only make a prima facie showing of jurisdiction where the court is addressing the jurisdictional question on the basis of a written motion of the parties. Id. Because this is a patent infringement case, Federal Circuit law, rather than Fourth Circuit law, controls the analysis of jurisdiction. Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed.Cir.1995). In determining whether personal jurisdiction exists over a defendant, the court must apply a two-step analysis. See Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed.Cir.1998). First, the court must determine whether the forum state's long-arm statute provides a basis for asserting jurisdiction over the defendant. Second, the court must determine if the assertion of such jurisdiction comports with due process. See id.

1. Long-Arm Statute

When a suit arises out of a defendant's activities within the forum state, a court may exercise specific jurisdiction.¹ See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 & 473 n. 15, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). The Federal Circuit defers to the forum state's highest court in interpreting the long-arm statute. See HollyAnne Corp. v. TFT, Inc., 199 F.3d 1304, 1307 (Fed.Cir.1999). South Carolina asserts specific jurisdiction over defendants pursuant to its long-arm statute. See Sheppard v. Jacksonville Marine Supply, Inc., 877 F.Supp. 260, 264 (D.S.C.1995). The South Carolina Supreme Court has interpreted South Carolina's long-arm statute to extend to the constitutional limits imposed by the due process clause. See id. at 265. Therefore, it follows that the two-step analysis collapses into due process. See id. Under this analysis, the plaintiff must show that the defendant had sufficient "minimum contacts" with South Carolina and that the exercise of jurisdiction would not offend "traditional notions of fair play and substantial justice." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291-92, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) (internal quotation omitted).

2. Due Process

The due process analysis consists of two branches: the "minimum contacts" branch and the "fair play and substantial justice branch." Id.

a. Minimum Contacts

In a patent infringement case, the Federal Circuit has established a three-prong test for determining whether minimum contacts exist: "(1) whether the defendant purposefully directed its activities at the residents of the forum; (2) whether the claim arises out of or is related to those activities, and (3) whether assertion of personal jurisdiction is reasonable and fair." HollyAnne Corp., 199 F.3d at 1307-08.

The first prong of the minimum contacts test is whether MME purposefully directed its activities at South Carolina. MME argues that it simply placed the neon signs into the stream of commerce and did not purposefully direct them at South Carolina. (Def.'s Mem. Supp. Mot. Dismiss at 6.) The court disagrees.

If the sale of a product of a manufacturer or a distributor... is not simply an isolated occurrence, but arises from the efforts of the [defendant] to serve, directly or indirectly, the market for its product ..., it is not unreasonable to subject it to suit.... [T]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.

Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1566 (Fed.Cir.1994) (quoting World-Wide Volkswagen Corp., 444 U.S. at 297-98, 100 S.Ct. 559). In Beverly Hills, the Federal Circuit found that the defendants, the manufacturer and distributor of the allegedly infringing fans, had purposefully directed their activities at the forum state in a similar case to the case at bar. 21 F.3d at 1566. The plaintiff alleged that the defendants were subject to jurisdiction because the defendants shipped allegedly infringing fans through an intermediary into Virginia through an established distribution channel. Id. The defendants argued there was no evidence that the shipments "into Virginia were purposeful or knowing." Id. at 1564. However, the court found the plaintiff had established that the "commercial relationship with Builder's Square was ongoing, and obviously intentional," because it was "undisputed that at least fifty-two ... fans were present in Virginia bearing [the distributor's] warranty, reflecting an ongoing relationship with the Virginia retailer and customers." Id. at 1564. Based on this and other evidence, the court concluded that "it can be presumed that the distribution channel formed by defendants and Builder's Square was intentionally established, and that defendants knew or reasonably could have foreseen, that a termination point of the channel was Virginia." Id. Specifically, the Federal Circuit held that exercising personal jurisdiction over the defendants was proper because the

necessary ingredients for an exercise of jurisdiction consonant with due process [were present]: defendants, acting in consort, placed the accused fan in the stream of commerce, they knew the likely destination of the products, and their conduct and connections with the forum state were such that they should reasonably have anticipated being brought into court there.

Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1566 (Fed.Cir.1994).

In another case, Kollmorgen Corp. v. Yaskawa Elec. Corp., the United States District Court for the Western District of Virginia found that a Japanese manufacturer of an allegedly infringing electrical device had purposefully directed its activities at Virginia by intentionally shipping its products through a wholly-owned American subsidiary into the state. 169 F.Supp.2d 530, 534-37 (W.D.Va.1999). The manufacturer argued that it did not know where its subsidiary shipped its allegedly infringing electrical device. Id. at 534. Finding the manufacturer's "ostrich-like stance ... untenable under the law," the court noted that a reasonable inference could be drawn "that the sale of a large number of devices to a firm with a nationwide distribution network will generally result in the sale — or at least the use — of one of those devices in the forum state." Id. (internal quotation omitted).

MME has purposefully directed its activities at South Carolina because it sold the allegedly infringing neon signs to Wal-Mart, which distributes products through an established nationwide distribution channel. Fallon alleges in its complaint that

[o]n or about April 2004, plaintiff...