Med-Tec, Inc. v. Kostich

Decision Date28 October 1997
Docket NumberNo. C 97-4047-MWB.,C 97-4047-MWB.
Citation980 F.Supp. 1315
PartiesMED-TEC, INC., an Iowa Corporation, Plaintiff, v. Jeffrey V. KOSTICH, an individual, and Smithers Medical Products, Inc., an Ohio Corporation, Defendants.
CourtU.S. District Court — Northern District of Iowa

Kirk M. Hartung, Jeffrey D. Zarley, McKee, Thomte, Voorhees & Sease, Des Moines, IA, for Plaintiff.

Kenneth A. Godlewski of Oldham & Oldham Co., L.P.A., Akron, OH, for Defendants.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANTS' MOTION TO DISMISS

BENNETT, District Judge.

                                       TABLE OF CONTENTS
                  I.  INTRODUCTION ............................................................1318
                 II.  FACTUAL BACKGROUND ......................................................1318
                      A. Facts Drawn From The Complaint .......................................1318
                      B. Facts Related Solely To Question Of Personal Jurisdiction ............1319
                III.  LEGAL ANALYSIS ..........................................................1320
                      A. Standards For Defendants' Motion To Dismiss ..........................1320
                      B. Challenges To The Declaratory Judgment Claim .........................1322
                      C. Challenge To Personal Jurisdiction ...................................1325
                         1. Analytical process ................................................1326
                         2. Long-arm authority ................................................1327
                         3. Minimum Contacts ..................................................1327
                
                            a. Specific vs. general jurisdiction ..............................1328
                            b. The five-factor test ...........................................1328
                            c. Quantity, quality, and relatedness of contacts .................1329
                      D. Transfer Of Case .....................................................1331
                 IV.  CONCLUSION ..............................................................1332
                

Defendants' motion to dismiss in this patent litigation raises threshold questions of both subject matter and personal jurisdiction. Plaintiff, an Iowa corporation which sells medical related products, including an "overhead arm positioner," brought this declaratory judgment action against defendants, the owner and exclusive licensee of two United States Patents, seeking a declaration of noninfringement, invalidity, and unenforceability of United States Patent Numbers 5,433,220 and 5,623,949. Defendants have moved to dismiss the complaint on the grounds of lack of subject matter jurisdiction and lack of personal jurisdiction. Resolution of this motion requires the court to evaluate and assess whether an actual controversy existed between the parties at the time of the filing of the lawsuit, and whether defendants have sufficient contacts with the State of Iowa to maintain personal jurisdiction over them.

I. INTRODUCTION

On June 6, 1997, plaintiff Med-Tec, Inc. ("Med-Tec") filed its complaint in this case seeking a declaratory judgment that United States Patent Nos. 5,433,220 and 5,623,949 are invalid, unenforceable, and are not infringed by Med-Tec. On July 22, 1997, defendants Jeffrey V. Kostich and Smithers Medical Products, Inc. ("Smithers") filed a motion to dismiss. In their motion to dismiss, defendants seek dismissal of the declaratory judgment complaint, pursuant to Federal Rule of Civil Procedure 12(b)(1), on the ground that an actual case or controversy as required by 28 U.S.C. § 2201 is lacking in this case. Defendants alternatively moved to dismiss the complaint on the ground of lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2). As an alternative to dismissal, defendants move to transfer the case to the Northern District of Ohio. Med-Tec filed a timely resistance to defendants' motion to dismiss. Med-Tec contends that an actual case and controversy exist here as a result of correspondence it received from defendants' counsel. Similarly, Med-Tec asserts that as a result of receiving correspondence from defendants' counsel threatening litigation, defendants have sufficient minimum contacts with the State of Iowa for this court to assume personal jurisdiction over them.

Med-Tec requested oral argument on the motion to dismiss. The court granted that request and held telephonic arguments on defendants' motion on October 22, 1997. At the hearing, plaintiff Med-Tec was represented by Kirk M. Hartung and Jeffrey D. Harry of Zarley, McKee, Thomte, Voorhees & Sease, Des Moines, Iowa. Defendants were represented by Kenneth A. Godlewski of Oldham & Oldham Co., L.P.A., Akron, Ohio.

II. FACTUAL BACKGROUND
A. Facts Drawn From The Complaint

Because defendants' motion to dismiss will be considered on the basis of the face of the complaint, the court looks to the factual allegations found in the complaint and attached documents for the necessary factual background to the present dispute.

Plaintiff Med-Tec is a corporation organized and existing under the laws of Iowa, with its principal place of business located in Orange City, Iowa. Defendant Jeffrey V. Kostich is an individual who resides in North Canton, Ohio. He is the inventor and owner of United States Patent Numbers 5,433,220 and 5,623,949 (the '220 and '949 patents respectively). Defendant Smithers is a corporation organized under the laws of the State of Ohio, with its principal place of business in North Canton, Ohio. Smithers holds an exclusive license for the '220 and '949 patents.

On May 15, 1997, defendants' counsel, Mark A. Watkins, sent a letter to Med-Tec's counsel, Kirk M. Hartung, concerning the '220 and '949 patents. Watkins' May 15, 1997, states in full:

As you are well aware, our firm represents Jeffrey V. Kostich and Smithers Medical Products Inc. on intellectual property matters. This letter is intended to serve express notice to your client, Med-Tec, Inc. concerning two Kostich patents (U.S. Patent Nos. 5,433,220 and 5,633,949) relating to arms-over-head positioning devices. Patent No. 5,633,949 just issued on April 29, 1997. Copies of both patents are enclosed for your convenience.

It has come to our attention that your client Med-Tec, sells a product referred to as an "overhead arm positioner" and identified as Model Nos. MT-450 and MT-455 in its most recent catalog. From a review of the literature and photographs of the product, it would appear that this product infringes one or more claims in one or both of the aforementioned patents.

In light of the foregoing and on behalf of Smithers and Mr. Kostich, we must request that Med-Tec immediately CEASE AND DESIST all further sales of the referenced Med-Tec products. Further, no later than June 6, 1997, we request a complete accounting as to the number of these units manufactured, used, sold or offered for sale by Med-Tec since the issuance of the '220 patent on July 18, 1995, coupled with a proposal of compensation for past infringement.

Although Mr. Kostich has clear standing to initiate legal action in federal courts having jurisdiction over this matter, he has requested that I make an effort to resolve this matter before initiating any legal action. I think that it would be in the best interest for all concerned to attempt at avoiding a repeat of the previous litigation. At this time, I cannot rule out the possibility of a license agreement as a means of resolving this matter. I look forward to receiving Med-Tec's response at your earliest convenience, but certainly no later than June 6, 1997. Please feel free to contact me with any questions.

Compl., Exhibit D. Following receipt of the May 15, 1997, letter Med-Tec initiated this lawsuit.

B. Facts Related Solely To Question Of Personal Jurisdiction

Defendants have supplied affidavits in support of their request to dismiss the complaint on the ground of lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2). The court has extracted the following facts, all uncontroverted, from those affidavits which relate to defendants' contacts with the State of Iowa.

Kostich has no interest in, use, or possession of any real estate, bank accounts, or personal property in the State of Iowa. He has never availed himself of the courts of the State of Iowa by filing suit here. Kostich has never visited the State of Iowa. He does not maintain an office, manufacturing facility, telephone, agents, salespersons or distributors in the State of Iowa.

Smithers is in the business of manufacturing and selling various medical products, including patient positioning devices. Smithers does not maintain any offices, manufacturing facilities, telephones, agents, salespersons, or distributors in the State of Iowa. Smithers does not have any interest in, use, or possession of any real estate, bank accounts, or personal property in the State of Iowa. No Smithers' personnel has visited Iowa for conventions or any other business related reason. Smithers has never sold any products covered by either the '220 and '949 patents in the State of Iowa. Smithers does not directly advertise within Iowa. Smithers has advertised its products in national medical magazines and journals. Smithers' sales, advertising, billing, and record keeping are all conducted from a facility in North Canton, Ohio. All shipping is done from North Canton, Ohio. Smithers, however, has made sold products in Iowa. In 1995, Smithers had total sales of $207.20 in Iowa, representing 0.019 percent of its total sales for the year. In 1996, Smithers had total sales of $250.00 in Iowa, representing 0.023 percent of its total sales for the year. As of July 14, 1997, Smithers has sold $230.00 in products in Iowa. Smithers considers orders from customers to be "offers to buy" that are accepted at Smithers' offices in North Canton, Ohio. Smithers has never availed itself of the courts of the State of Iowa by filing suit here.

III. LEGAL ANALYSIS
A. Standards For Defendants' Motion To Dismiss

Defendants claim...

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