MAGICorp. v. Kinetic Presentations, Inc.

• Decision Date: 10 May 1989
• Docket Number: Civ. A. No. 88-2582.
• Citation: 718 F. Supp. 334
• Parties: MAGICorp., a New York Corporation, Plaintiff, v. KINETIC PRESENTATIONS, INCORPORATED, a Delaware Corp., Defendant.
• Court: U.S. District Court — District of New Jersey

718 F. Supp. 334

MAGICorp., a New York Corporation, Plaintiff, v. KINETIC PRESENTATIONS, INCORPORATED, a Delaware Corp., Defendant.

Civ. A. No. 88-2582.

United States District Court, D. New Jersey.

May 10, 1989.

David A. Jackson, Klauber & Jackson, Hackensack, N.J., Myron Greenspan, Lilling & Greenspan, White Plains, N.Y., for plaintiff.

John N. Bain, Carella, Byrne, Bain & Gilfillan, Roseland, N.J., Robert T. Edell, Michael D. Schumann, Merchant, Gould, Smith, Edell, Welter & Schmidt P.A., Minneapolis, Minn., for defendant.

OPINION

HAROLD A. ACKERMAN, District Judge.

On June 14, 1988, MAGICorp brought this action alleging that Kinetic Presentations, Inc. ("Kinetic" or "KPI") infringed MAGICorp's United States Patent No. 4,181,955, and seeking permanent injunctive relief, compensatory and treble damages, and attorney's fees. On July 11, 1988, Kinetic moved to dismiss the action for improper venue under 28 U.S.C. § 1400(b) or, in the alternative, to transfer the action to a district where there was proper venue. I referred this motion to United States Magistrate Stanley R. Chesler for his report and recommendation ("R & R"). In his R & R, filed on December 27, 1988, Magistrate Chesler recommended dismissal of this action, finding insufficient contacts in the district to constitute a "regular and established place of business" here and finding that the defendant did not commit acts of infringement in the district—the two requisites for establishing venue under 28 U.S.C. § 1400(b).

Before me now are MAGICorp's objections to Magistrate Chesler's R & R, which I will assess without oral argument (on the papers) as contemplated by Rule 40(D)(5) of the General Rules of the United States District Court for the District of New Jersey. Before reaching the substance of MAGICorp's objections, let me lay out the procedural framework for assessing a magistrate's R & R pertaining to a dispositive matter. The Federal Magistrate's Act of 1968, as amended, 28 U.S.C. § 636(b)(1)(B), and General Rule 40(D)(5) of this District provide that this court can refer certain dispositive motions to the magistrate for a report and recommendation. This delegation of judicial power does not violate Article III of the United States Constitution so long as this court ultimately decides the referred matter. See United States v. Raddatz, 447 U.S. 667, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980). The standard of review for such a report and recommendation is de novo — that is, analyzing the objected to portions of the report as if the magistrate had not previously rendered a report in this matter. See, e.g., United Steelworkers of Am., AFL-CIO v. New Jersey Zinc Co., 828 F.2d 1001 (3d Cir.1987).

FACTS

On January 1, 1980, the United States Patent Office issued United States Letters Patent No. 4,181,955 (the "Patent") to MAGICorp's predecessor in interest. On or about September 20, 1985, MAGICorp was assigned ownership of the patent — an assignment which the United States Patent and Trademark Office recorded.

The patent's abstract described the system patented:

Apparatus for automatically generating photographic pictures, such as 35 mm slides, includes a number of microcomputer terminals at scattered locations, a central computer at a location remote from these terminals and a picture producing device for creating photographic pictures from computer generated data. The microcomputer terminals are each provided with a color display and input keyboards for enabling the user to enter data. The terminals are programmed to generate and display in color a number of standard graphical representations having certain variable characteristics. A particular representation and its characteristics are entered by users through the terminal input as answers to questions presented by the terminal. The terminals are capable of modifying the display of a graphical representation in response to user entries which change the answers to the questions so as to create a final set of answers. When a graphical representation is complete, to the satisfaction of the user, data representing the user's final answers are transmitted from the terminal to the central computer. The central computer is programmed to generate data defining the raster points for the standard graphical representations based on the data representing the user's final answer. These raster points define a graphical representation with enhanced resolution over that generated and displayed by the terminal. Finally, the picture producing device creates photographic pictures (slides) from the higher resolution raster point data generated by the central computer.

It came to the plaintiff's attention that Kinetic had developed a presentation graphics software system which was personal-computer based. The system featured, among other things, a method to create business presentation slides — a feature which the plaintiff's patented system contained. The plaintiff averred that the defendant's system operated in an analogous manner to the plaintiff's system because the defendant's system included "a software module for transmission of images to other systems at locations remote from the personal computer which the original graphics created for the purpose of production of high quality slides, transparencies, or other media." (See Complaint ¶ 12). The defendant established certain service bureaus (none in New Jersey) which received the data from the computers, either by mail or by telephonic-computer interface, and then produced the above-mentioned graphic products. The plaintiff charged in its complaint that the defendant was making, selling, and/or offering its allegedly infringing product for sale since as early as January, 1987.

To aid in the sale of its product, the defendant employs Mr. John Scott Carothers as a sales executive (Vice-President of the North Atlantic region). In the ten states comprising what the defendant labels its "North Atlantic region," Mr. Carothers is the defendant's sole representative (Carothers Dep. at 14). Kinetic started leasing office space for Mr. Carothers at One Madison Street, East Rutherford, New Jersey on November 1, 1986,¹ about an hour's one-way commute from Mr. Carothers' residence in Mt. Tabor, New Jersey. Previously, from August, 1986 to February, 1987, Mr. Carothers operated out of his Mt. Tabor home. Mr. Carothers now spends about two days a week in the New Jersey office, but the lion's share of his time is spent on the road, traveling from state to state in his region to promote and to solicit on behalf of the defendant's products (Carothers Dept. at 10).²

Mr. Carothers' duties and functions are generally in the area of solicitation or promotion. Although Mr. Carothers holds a vice-president's title with Kinetic, he is not vested with signatory authority (Carothers Dep. at 10). In fact, there is no company checkbook at the New Jersey location (Id. at 43). Mr. Carothers' duties are "to promote the product, support the product and establish name recognition for the product" (Id.). In addition, Mr. Carothers promotes a different product for another division of the Kinetic. At the time of his deposition, Mr. Carothers was spending 85% of his time promoting the other product. A secretary in the corporate office in Louisville, Kentucky provides Mr. Carothers with office support (see Carothers Dep. at 18). He has no secretarial support in New Jersey, but for the occasional use of a "temp" (see Schuhmann Aff. ¶ 9). Mr. Carothers has no authority to sell the allegedly infringing product; as Mr. Carothers noted, "sales are consummated or transacted or takes place at the corporate offices in Louisville. They authorize the sale." (Carothers Dep. at 31; see also Schuhmann Aff. ¶ 14, stating that, "every order for KPI products must be accepted and approved by the KPI home office in Louisville, Kentucky office"). Mr. Carothers also has no responsibility for collection of receipts or purchase payments. Mr. Carothers drives a company car registered in Kentucky with Kentucky license plates (Carothers Dep. at 19).

It is apparent that little corporate activity occurs in the New Jersey offices. Mr. Carothers occupies the New Jersey office, on average, about 2 days a week. The office's telephone number is listed in 2 New Jersey directories. When Mr. Carothers is not present to answer the telephone, the calls are forwarded for reception at the Kentucky office (see Schuhmann Aff. ¶ 12). When Mr. Carothers is not in the office (over 50% of the time), he locks the office (Carothers Dep. at 15). The defendant makes no sales from its New Jersey office (Carothers Dep. at 31). The defendant receives all purchase orders from its customers at its home office in Louisville, Kentucky (Schuhmann Aff. ¶ 24). The defendant ships its orders from its Louisville, Kentucky office. Customers make payments to the Louisville, Kentucky office (Schuhmann Aff. ¶ 16). If customers need assistance or service, then they call the defendant's Louisville, Kentucky office. The Kentucky office, not the New Jersey office, processes all warranty work. All packaging, invoicing, and shipping notices do not carry the New Jersey address, although certain promotional brochures do (Id. at 20). Moreover, the defendant does not display any products in the New Jersey office, nor has the defendant used the office for any demonstrations or other sales promotions. In fact, no customers come to the office (Carothers Dep. at 24-25).

Further, the defendant does not use its New Jersey location for storage. The defendant does not have any inventory in the New Jersey office (Schuhmann Aff. ¶ 13 and Carothers Dep. at 24). The defendant files only correspondence and prospective sales information in New Jersey. The defendant keeps its customer master files, purchase orders, invoices, and shipping documents in Louisville, Kentucky (Schuhmann Aff. ¶ 15). Also, the bulk of the defendant's sales literature is in Louisville, Kentucky,...