Motorola, Inc. v. Pc-Tel, Inc.

• Decision Date: 12 July 1999
• Docket Number: Civil Action No. 98-598-GMS.
• Citation: 58 F.Supp.2d 349
• Parties: MOTOROLA INC., Plaintiff, v. PC-TEL, INC., and Altocom Inc., Defendants. Pc-Tel, Inc., Counter-Claimant, v. Motorola Inc., Counter-Defendant.
• Court: U.S. District Court — District of Delaware

58 F.Supp.2d 349

MOTOROLA INC., Plaintiff, v. PC-TEL, INC., and Altocom Inc., Defendants.

Pc-Tel, Inc., Counter-Claimant, v. Motorola Inc., Counter-Defendant.

Civil Action No. 98-598-GMS.

United States District Court, D. Delaware.

July 12, 1999.

Jack B. Blumenfeld of Morris, Nichols, Arsht & Tunnell, Wilmington, DE, of counsel: Herbert F. Schwartz, Robert C. Morgan, Mark H. Bloomberg and Eric D. Kirsch, of Fish & Neave, New York City; Thomas G. Berry, of Motorola, Inc., Schaumburg, IL; and Cynthia P. Abbott, of Motorola, Inc., Libertyville, IL, Attorneys for Plaintiff and Counter-Defendant Motorola, Inc.

Edward M. McNally, of Morris, James, Hitchens & Williams, Wilmington, DE, of counsel: Alan H. MacPherson, Edward V. Anderson, Edward C. Kwok, Steven M. Levitan and Craig J. Bristol, of Skjerven, Morrill, MacPherson, Franklin & Friel, San Jose, CA, Attorneys for Defendant and Counter-Claimant PC-Tel, Inc.

William J. Marsden, Jr. and Joanne Ceballos, of Potter, Anderson & Corroon, Wilmington, DE, of counsel: Stephen J. Rosenman, of Howrey & Simon, Menlo Park, CA; and Joseph P. Lavelle and Alan M. Fisch, of Howrey & Simon, Washington, DC, Attorneys for Defendant AltoCom, Inc.

MEMORANDUM OPINION

SLEET, District Judge.

I. INTRODUCTION.

On November 12, 1998, AltoCom, Inc. ("AltoCom"), one of the defendants in this patent infringement action, filed a motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer this case to the Northern District of California. See Fed.R.Civ.P. 12(b)(2) (1998); 28 U.S.C. § 1404(a) (1994). The bases for these motions are essentially that (1) AltoCom's purposeful contacts with the forum state, Delaware, are insufficient to subject it to the exercise of personal jurisdiction and (2) because Delaware is not the "home turf" of the plaintiff, Motorola, Inc. ("Motorola"), the provisions of the federal venue statute require the transfer of this matter to a more convenient forum — specifically, the Northern District of California.

Because the court concludes that exercising personal jurisdiction over the defendant in this instance comports with traditional notions of fair play and substantial justice as required by the Due Process Clause¹ and that AltoCom falls within the reach of Delaware's long-arm statute, Del. Code.Ann. tit. 10, § 3104(c) (1998), the court will deny AltoCom's motion to dismiss. Further, because the "balance of convenience" tips in favor of Motorola, the court will also deny AltoCom's motion to transfer.

II. BACKGROUND.

In an action filed in the District of Massachusetts in September 1998, Motorola accused AltoCom and PC-Tel, Inc. ("PC-Tel") of patent infringement. Twelve days after Motorola's Massachusetts filing, PC-Tel elected to file an infringement action against Motorola in the District of Delaware. Motorola then obtained a dismissal of the Massachusetts action and, about six weeks later, brought the instant lawsuit against PC-Tel and AltoCom here in Delaware.

Both Motorola and PC-Tel are Delaware corporations. The two cases which they filed here involve essentially the same software modem or "softmodem" technology. While neither company is headquartered here,² each has demonstrated a desire to litigate the disputes over this technology in this district.³ AltoCom, however, would prefer to be elsewhere. Portraying itself as a "very small software company" which is incorporated in California and headquartered in Silicon Valley,⁴ AltoCom emphasizes its ties to the Northern District of that state.

According to AltoCom, it has developed software which — when incorporated into computers, fax machines, video telephones, personal digital assistants, and a variety of other communication devices — reduces the "cost, size, power consumption and complexity" of these products, enabling them to run more efficiently. AltoCom says that it "licenses" and Motorola says that AltoCom "sells" these softmodems to the companies which manufacture these products. According to AltoCom, it offers no "products" for sale but merely licenses its softmodems and from that activity "it derives its revenues" in the form of "licensing fees and running royalties."

Whichever verb one adopts, AltoCom does not (and, it seems, cannot) contest the fact that its softmodems are integrated into a variety of consumer electronic products which are manufactured by well-known multi-national corporations like Compaq, Phillips, Samsung, Sharp, Sony, and the like. These goods are then put into world-wide distribution networks which place them for sale in equally well-known retail stores such as Caldor, Circuit City, CompUSA, Office-Max, Sears, Service Merchandise, and others — all which have outlets in Delaware.⁵ These products are advertised extensively nationwide and in Delaware through various sources such as newspapers of general circulation, magazines directed at retail consumers of electronic products, and other types of catalogs.

AltoCom, however, argues that it has never had any direct contact with Delaware. Specifically, it notes that since its licenses require shipment of the software code to its softmodems to the licensee's principal place of business and since none of its eleven U.S. based licensees are headquartered in Delaware, it has never shipped any its softmodems directly to Delaware.⁶ In addition, AltoCom claims that it has never advertised its softmodems here, conducted any of its business here, or maintained any of its assets here.

Nevertheless, AltoCom does maintain an interactive website from which end users may download certain modem control commands to their computers to enable them to perform various functions with their AltoCom softmodems. From this website, AltoCom customers may order a product which allows them to test AltoCom's softmodems. Also, those who purchase consumer products containing AltoCom's softmodems may obtain customer support directly from AltoCom over the telephone and the Internet. Delaware residents apparently have utilized these features of AltoCom's support network.

Mindful of these facts, the court will turn to a discussion of the law governing AltoCom's jurisdiction and venue challenges.

III. DISCUSSION.

A. Jurisdiction.

The essence of AltoCom's argument is that since it has not purposefully directed its activities at Delaware residents, the assertion of personal jurisdiction by the courts of this forum over AltoCom would violate the Due Process Clause. AltoCom further contends that its activities do not bring it within reach of Delaware's long-arm statute. While AltoCom correctly frames the inquiry the court must make, see, e.g., Intel Corp. v. Silicon Storage Tech., Inc., 20 F.Supp.2d 690, 694 (D.Del. 1998), the court reaches the exact opposite conclusion. Cf. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (Fed.Cir.1994) (finding that the exercise of personal jurisdiction was proper in a case where the "infringer's sole contact with the forum resulted from indirect shipments through the stream of commerce").

1. Due process.

The Due Process Clause requires that, in order to subject a defendant who is "not present within the territory of the forum" to personal jurisdiction, the court must first make sure that this party "ha[s] certain minimum contacts with [the forum] such that the maintenance of the suit does not offend `traditional notions of justice and fair play.'" See International Shoe, 326 U.S. at 316, 66 S.Ct. 154 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). In order to give non-residents "fair warning" that a particular activity may subject them to litigation within the forum, these "minimum contacts" must be purposeful. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). In other words, the defendant's contact must be of the nature that would cause it to reasonably foresee that it might be "haled before a court" in the forum as a result of its conduct. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Finally, "even if the requisite minimum contacts have been found through an application of the stream of commerce theory or otherwise, if it would be unreasonable for the forum to assert jurisdiction under all the facts and circumstances, then due process requires that jurisdiction be denied." See Beverly Hills Fan, 21 F.3d at 1568.

Seeking to distinguish itself from the defendants in Beverly Hills Fan, AltoCom argues that its contacts with Delaware have been insufficient to cause them to reasonably foresee that they would be "haled before a court" located here. In Beverly Hills Fan, one of the defendants, Ultec, was incorporated in the Peoples Republic of China and manufactured a fan which the plaintiff, the Beverly Hills Fan Company, claimed infringed its patent. Ultec's fans were imported from Taiwan where they were manufactured by the other defendant, Royal Sovereign, a New Jersey corporation. The Beverly Hills Fan Company filed suit in the Eastern District of Virginia where some of Ultec's fans had made their way to the Alexandria, Virginia outlet of a large retailer known as Builder's Square. The defendants moved to dismiss the complaint against them for lack of personal jurisdiction. The Federal Circuit reversed, stating, "The allegations are that defendants purposefully shipped the accused fan into Virginia through an established distribution channel. The cause of action for patent infringement is alleged to arise out of these activities. No more is usually required to establish specific jurisdiction." Id. at 1565.

Citing to the Beverly Hills Fan opinion, AltoCom argues that in order to find jurisdiction, the manufacturer and distributor must "act[ ] in consort [to] place[ ] the accused [product] in the stream of commerce." Thus, AltoCom contends that control over the chain of distribution by the defendants was the key to the decision in Beverly...