Genetic Implant Systems, Inc. v. Core-Vent Corp.
| Decision Date | 19 August 1997 |
| Docket Number | CORE-VENT,No. 97-1010,97-1010 |
| Citation | 43 USPQ2d 1786,123 F.3d 1455 |
| Parties | GENETIC IMPLANT SYSTEMS, INC., Plaintiff-Appellant, v.CORPORATION and Gerald A. Niznick, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Federal Circuit |
Robert E. Rohde, Bogle & Gates, P.L.L.C., Seattle, WA, argued for plaintiff-appellant.
Sidford Lewis Brown, Bright & Lorig, P.C., Los Angeles, CA, argued for defendants-appellees.
Before PLAGER, Circuit Judge, SMITH, Senior Circuit Judge, and LOURIE, Circuit Judge.
Genetic Implant Systems, Inc. appeals from the decision of the United States District Court for the Western District of Washington dismissing its complaint on the ground of lack of personal jurisdiction over defendants Core-Vent Corporation and Gerald A. Niznick. Genetic Implant Sys., Inc. v. Core-Vent
Corp., No. C95-0709Z (W.D.Wash. Apr. 23, 1996). Because the district court erred in determining that it lacked jurisdiction over Core-Vent, but did not err in determining that it lacked jurisdiction over Niznick, we reverse-in-part and affirm-in-part.
This appeal is from an action involving U.S. Patent 4,960,381, which issued on October 2, 1990 and claims dental implants. Niznick is the sole inventor named on the patent and he assigned the patent to Core-Vent, which is a Nevada corporation with its principal place of business in California. Niznick is the president, chief executive officer, sole shareholder, and sole board member of Core-Vent.
Core-Vent directly sold its dental implant products in the state of Washington until the issuance of the '381 patent in 1990. In April 1991, it entered into an exclusive worldwide marketing and distribution agreement with Dentsply International, Inc., a Delaware corporation with its principal place of business in Pennsylvania. Since 1991, Dentsply has made substantial sales of Core-Vent products in Washington, a significant portion of which are attributable to products covered by the '381 patent.
Genetic, a Washington corporation, alleges that after the patent issued, Niznick repeatedly and publicly threatened to sue Genetic and Stanley W. Sapkos, Genetic's chief executive officer, for infringement. In 1994-95, Core-Vent sent Genetic three letters accusing it of infringing the '381 patent and, in the third letter, it refused an offer of settlement by Genetic. Genetic alleges that Core-Vent also communicated its threats of infringement to others in the industry. According to Genetic, these threats have had a detrimental effect on its ability to market and sell its implants, in that potential customers have refused to purchase the implants due to fear of litigation. It also alleges that the threats successfully discouraged investment in Genetic. Accordingly, Genetic sued Core-Vent and Niznick on May 5, 1995, in the United States District Court for the Western District of Washington, requesting a declaratory judgment of noninfringement and invalidity of the '381 patent. Core-Vent and Niznick moved to dismiss on the ground of lack of personal jurisdiction.
The district court granted the motion. The court found that Core-Vent's threats of infringement, in view of the fact that Core-Vent had only a distributorship agreement with an out-of-state company, were insufficient to establish purposeful availment of the privileges and benefits of the state of Washington. It found that, even if Core-Vent's activities did constitute purposeful availment, it would be unreasonable to force Core-Vent to defend itself in the state of Washington. The court thus dismissed the action against Core-Vent. It also dismissed the action against Niznick, concluding that, under Washington law, Genetic had not pleaded facts sufficient to disregard the corporate form in order to assert jurisdiction over Niznick as an individual. Genetic now appeals to this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1) (1994).
Whether a court has personal jurisdiction over a defendant is a question of law that we review de novo. Viam Corp. v. Iowa Export-Import Trading Co., 84 F.3d 424, 427, 38 USPQ2d 1833, 1834 (Fed.Cir.1996).
Genetic argues that Core-Vent initiated and maintained sufficient minimum contacts with the state of Washington to subject itself to personal jurisdiction. Genetic asserts that Core-Vent purposefully directed its sales and marketing activities to residents of the state, and that the present declaratory judgment action arises out of or relates to those activities. Core-Vent responds that it does not maintain contacts with and does not direct sufficient commerce into Washington to justify assertion of personal jurisdiction over the company. It argues that sending cease-and-desist letters into the forum is not sufficient to establish personal jurisdiction. It asserts that the combination of sales of its products in Washington and the warning letters still do not establish personal jurisdiction, as the sales occurred prior to issuance of the patent and thus are irrelevant to a determination of jurisdiction.
Determining whether jurisdiction exists over an out-of-state defendant involves two inquiries: whether a forum state's long-arm statute permits service of process and whether assertion of personal jurisdiction violates due process. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-76, 105 S.Ct. 2174, 2181-84, 85 L.Ed.2d 528 (1985). The relevant provision of the Washington long-arm statute identifying acts that may subject a defendant to jurisdiction reads as follows:
4.28.185. Personal service out of state--Acts submitting person to jurisdiction of courts--Saving
(1) Any person, whether or not a citizen or resident of this state, who in person or through an agent does any of the acts in this section enumerated, thereby submits said person, and, if an individual, his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of said acts:
(a) The transaction of any business within this state;
....
Wash. Rev.Code § 4.28.185 (1996). The scope of the "transaction of any business" criterion set forth in the statute is co-extensive with the limits of due process. See Quigley v. Spano Crane Sales & Serv., Inc., 70 Wash.2d 198, 422 P.2d 512, 514 (1967); Tyee Constr. Co. v. Dulien Steel Prods., Inc., 62 Wash.2d 106, 381 P.2d 245, 251 (1963). The focus of the inquiry in this case is therefore whether assertion of jurisdiction over Core-Vent in Washington comports with due process. That inquiry involves consideration of three factors: whether the defendant purposefully directed its activities at residents of the forum, whether the claim arises out of or relates to the defendant's activities with the forum, and whether assertion of personal jurisdiction is reasonable and fair. Akro Corp. v. Luker, 45 F.3d 1541, 1545-46, 33 USPQ2d 1505, 1508-09 (Fed.Cir.1995) (citing Burger King, 471 U.S. at 471-76, 105 S.Ct. at 2181-84).
We agree with Genetic that Core-Vent has had sufficient minimum contacts with the state of Washington. We have held that sending infringement letters, without more activity in a forum state, is not sufficient to satisfy the requirements of due process. Other activities are required in order for a patentee to be subject to personal jurisdiction in the forum. See id. at 1548-49, 33 USPQ2d at 1511. Here, however, Core-Vent did more than send cease-and-desist letters to Genetic in Washington. In particular, it engaged in a program to develop a market in Washington, including founding teaching centers in Seattle staffed by local periodontists, developing Washington customer lists through the teaching centers, and advertising in publications distributed to potential Washington customers. These pre-1991 activities resulted in substantial revenue from sales in Washington and contributed to Core-Vent's presence in Washington by producing a customer base in the state that may result in or enhance future sales. The fact that they may have occurred before the grant of the patent is irrelevant since they do show that Core-Vent engaged in substantial activities in the state. It is jurisdiction that is at issue, not liability for patent infringement. In addition, and most significant, since 1991, Core-Vent and Niznick have contracted with Dentsply to sell Core-Vent's patented products in Washington. Dentsply has two sales representatives in Washington and, since 1991, has sold in the state a substantial dollar amount of Core-Vent products covered by the '381 patent.
We concluded in Akro that infringement letters sent into a forum state accompanied by the grant of a license to an in-state competitor doing business in the state were sufficient to justify assertion of personal jurisdiction against an out-of-state patentee. Id. The appointment of a distributor to sell a product...
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