Interface Biomedical Laboratories v. Axiom Medical

• Decision Date: 11 January 1985
• Docket Number: No. 84 Civ. 3447.,84 Civ. 3447.
• Citation: 600 F. Supp. 731
• Parties: INTERFACE BIOMEDICAL LABORATORIES CORP., Plaintiff, v. AXIOM MEDICAL, INC., Defendant.
• Court: U.S. District Court — Eastern District of New York

600 F. Supp. 731

INTERFACE BIOMEDICAL LABORATORIES CORP., Plaintiff, v. AXIOM MEDICAL, INC., Defendant.

No. 84 Civ. 3447.

United States District Court, E.D. New York.

January 11, 1985.

Pennie & Edmonds, New York City, for plaintiff.

Davis, Hoxie, Faithfull & Hapgood, New York City, for defendant.

MEMORANDUM AND ORDER

GLASSER, District Judge:

Plaintiff in this action seeks injunctive and declaratory relief, and damages, for defendant's activities in connection with the manufacture and marketing of a medical product known as SUPERSTAT.¹ Plaintiff's complaint alleges four claims for relief: (1) for a declaratory judgment that the parties have not entered a joint venture agreement and defendant is not plaintiff's exclusive distributor and licensee ("Count 1"); (2) for injunctive relief restraining defendant from engaging in trade secret misappropriation ("Count 2"); (3) for injunctive relief restraining defendant from engaging in unfair competition ("Count 3"); and (4) for damages for unjust enrichment ("Count 4").

Defendant has moved under Rule 12(b)(2) of the Federal Rules of Civil Procedure for an order dismissing the complaint for lack of personal jurisdiction, and under Rule 12(b)(3) for an order dismissing the complaint for improper venue insofar as Counts 3 and 4 allege patent infringement. For the reasons that follow, defendant's motion is denied with respect to Count 1, and granted with respect to Count 2, 3 and 4. I find it unnecessary to decide defendant's motion with respect to venue.

Background

Plaintiff is a New York corporation, with its principal place of business in Brooklyn, New York, engaged in the research and development of medical products. Plaintiff maintains that it is in the business of licensing patents and associated trade secrets to responsible organizations, but that it is not presently engaged in the sale of medical products. Defendant is a California corporation, with its principal place of business in California, engaged in the manufacture and sale of medical products. Plaintiff has developed a medical product called SUPERSTAT, for which it claims to have acquired various trademarks, patents, trade secrets and other confidential proprietary information. Prior to the events that gave rise to the present action, SUPERSTAT was manufactured by Smith Laboratories Company and marketed by Superstat Corporation, a corporation which was jointly formed by plaintiff and Orange Medical for the purpose of marketing SUPERSTAT. In early 1983, both Smith and Orange withdrew from the manufacture and sale of SUPERSTAT, and plaintiff acquired the rights to manufacture and market SUPERSTAT.

Byron Economidy, the president of defendant, and Philip Sawyer, the president of plaintiff, initially met at a medical convention in San Francisco during June of 1983. Defendant claims that the parties entered into an oral joint venture agreement at that meeting, under which defendant was to manufacture and market SUPERSTAT under an exclusive licensing and distributorship arrangement with plaintiff. Plaintiff claims that the parties merely discussed the "possibility" of such an agreement. Letters exchanged by the parties after the meeting tend to confirm plaintiff's contention. In defendant's June 20, 1983 letter to plaintiff, Economidy stated that he was "excited about the opportunity to possibly work with you." Exhibit 1 to Sawyer Affidavit (emphasis added). Plaintiff's responsive letter, dated July 12, 1983, stated: "This letter is sent to you to produce a formal relationship between plaintiff and defendant assuming that an attempt will be made by the co-joint companies to market SUPERSTAT.... I would be willing to consider placing the current manufacturing and marketing of SUPERSTAT in Axiom's hands on the presumption that Impra and Mr. Boyd Baker do not pick up their option on SUPERSTAT." Exhibit 2 to Sawyer Affidavit.

During the following year, Sawyer and Economidy met three times in New York. Plaintiff claims that the parties negotiated the terms of a potential joint venture agreement at all three meetings. Defendant claims that no negotiations with regard to a joint venture agreement occurred at any of the three meetings. The parties agree that at the first meeting, in July 1983, Sawyer demonstrated the use of SUPERSTAT in surgery; at the second meeting in October 1983, the parties discussed certain matters unrelated to the SUPERSTAT agreement; and the third meeting in May 1984 occurred at a trade convention. During the same time period, the parties and their attorneys engaged in numerous written and telephonic communications with regard to the negotiation of a written joint venture agreement. Also during this period, plaintiff sent defendant various trademarks, existing inventories of SUPERSTAT, and information on trade secrets and processes involved in the manufacture of SUPERSTAT. Defendant subsequently contracted for the manufacture of SUPERSTAT by a third party, and began selling the product.

On July 20, 1984, plaintiff sent the defendant a letter withdrawing "all offers and proposals" and demanding that defendant cease and desist from making, using, selling, or offering for sale any products involving plaintiff's patents, trademarks and know-how. Exhibit 5 to the Sawyer Affidavit. Defendant responded in a letter dated July 27, 1984, asserting that the parties had entered into a joint venture agreement regarding the manufacture and marketing of SUPERSTAT, advising plaintiff that defendant intended to continue its marketing of SUPERSTAT, and formally refusing to comply with the demands expressed in the July 20, 1984 letter.²

In a letter to the Food & Drug Administration dated July 30, 1984, defendant stated:

Axiom Medical, Inc., as exclusive distributor and licensee under Interface Biomedical Laboratories Corp., for the manufacture of SUPERSTAT, is requesting permission to have a new additional manufacturing site for our SUPERSTAT Hemostatic Collagen Sponge.

Exhibit 6 to the Sawyer Affidavit. Plaintiff's attorney admitted at oral argument that defendant has not manufactured SUPERSTAT since it received plaintiff's July 20, 1984 letter, but states that he has reason to believe that defendant is seeking to manufacture SUPERSTAT outside the United States. Transcript of Oral Argument held on October 26, 1984, at 28-29.

Discussion

In determining the amenability of a foreign corporation to a suit in federal district court, the court must apply the standards for personal jurisdiction of the state in which it sits. Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir.1963); Round One Productions Inc. v. Greg Page Enterprises, Inc., 566 F.Supp. 934, 935-36 (E.D.N.Y.1982). Defendant has conceded that the assertion of jurisdiction in this case would be constitutional. Therefore, the only question remaining for determination is whether "longarm" jurisdiction can be asserted in this case under § 302 of the New York Civil Practice Law and Rules ("CPLR").³ The court must "determine the issue of personal jurisdiction separately for each cause of action asserted in the plaintiff's complaint." Sterling Television Presentations v. Shintron, 454 F.Supp. 183 (S.D.N. Y.1978). Cf. Darby Drug Company, Inc. v. Zlotnick, 573 F.Supp. 661 (E.D.N.Y.1983) (finding personal jurisdiction for causes of action for misappropriation of corporate opportunity and breach of fiduciary duty, but no personal jurisdiction for causes of action for misappropriation of trade secrets); R.F.D. Group Limited v. Rubber Fabricators, Inc., 323 F.Supp. 521 (S.D.N.Y.1971) (finding personal jurisdiction with respect to causes of action for copyright violations, trademark violations and unfair competition through the sale of products in New York, but no personal jurisdiction with respect to causes of action for breach of contract and unfair competition by the wrongful appropriation of trade secrets).

A. Count 1

C.P.L.R. § 302(a) provides:

Acts Which Are the Basis of Jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:

(1) transacts any business within the state or contracts anywhere to supply goods or services in the state; or

* * * * * *

(3) commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act if he

(i) regularly does or solicits business or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in the state, or

(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.

Plaintiff claims that the three meetings between the parties which took place in New York constitute a transaction of business in New York sufficient to establish personal jurisdiction with regard to Count 1 — the cause of action for declaratory judgment. The defendant contends that a joint venture agreement was created when the parties met in San Francisco, no negotiations occurred at the later three meetings in New York, and therefore, there was no transaction of business sufficient to establish jurisdiction.

The Second Circuit has stated:

In deciding a pretrial motion to dismiss for lack of personal jurisdiction, a district court has considerable leeway. It may determine the motion on the basis of affidavits alone, or it may permit discovery in aid of the motion, or it may conduct an evidentiary hearing on the merits of the motion.... If the court chooses not to conduct a full-blown evidentiary hearing on the motion, the plaintiff need make only a prima facie showing of jurisdiction through its own affidavits and supporting materials. Eventually, of course, the plaintiff must

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