North American Philips Corp. v. American Vending Sales, Inc., 94-1146

• Decision Date: 22 September 1994
• Docket Number: No. 94-1146,94-1146
• Citation: 35 F.3d 1576,32 USPQ2d 1203
• Parties: NORTH AMERICAN PHILIPS CORPORATION and Lockheed Sanders, Inc., Plaintiffs-Appellants, v. AMERICAN VENDING SALES, INC., Atlas Distributing, Inc., Capcom U.S.A. Inc., Coin Machine Corporation of America, Data East U.S.A., Inc., Konami (America) Inc., Leland Corporation, Romstar Inc., SNK Corporation of America, Temco, Inc., Tradewest Inc. and World Wide Distributors, Inc., Defendants-Appellees, and Taito America Corporation, Defendant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1576

35 F.3d 1576

32 U.S.P.Q.2d 1203

NORTH AMERICAN PHILIPS CORPORATION

and

Lockheed Sanders, Inc., Plaintiffs-Appellants, v. AMERICAN VENDING SALES, INC., Atlas Distributing, Inc.,

Capcom U.S.A. Inc., Coin Machine Corporation of America,

Data East U.S.A., Inc., Konami (America) Inc., Leland

Corporation, Romstar Inc., SNK Corporation of America,

Temco, Inc., Tradewest Inc. and World Wide Distributors,

Inc., Defendants-Appellees,

and

Taito America Corporation, Defendant.

No. 94-1146.

United States Court of Appeals, Federal Circuit.

Sept. 22, 1994.

Theodore W. Anderson, Leydig, Voit & Mayer, Ltd., of Chicago, IL, argued for plaintiffs-appellants. With him on the brief, were Steven P. Petersen and Wesley O. Mueller.

Henry S. Kaplan, Rockey, Rifkin & Ryther, of Chicago, IL, argued, for defendants-appellees.

Before MAYER, CLEVENGER, and SCHALL, Circuit Judges.

CLEVENGER, Circuit Judge.

North American Philips Corporation and Lockheed Sanders, Inc., appeal the December 13, 1993, final judgment of the United States District Court of the Northern District of Illinois dismissing their complaint against The Leland Corporation and Tradewest Inc. pursuant to Federal Rule of Civil Procedure 12(b)(2) for want of jurisdiction. North Am. Philips Corp. v. American Vending Sales Inc., 29 USPQ2d 1817, 1993 WL 473630 (N.D.Ill.1993) (Memorandum Opinion and Order). We reverse and remand for further proceedings.

I

This case involves the alleged infringement of a patent in the arcade video game art. North American Philips and Lockheed filed a complaint on June 1, 1993 against Leland, Tradewest and eleven other defendants. On September 1, 1993, Leland and Tradewest moved to dismiss on venue and personal jurisdiction grounds. ¹ They attached affidavits of the presidents of their respective corporations, Messrs. Rowe and Cook. Though admitting they had made sales "of products shipped to customers in Illinois," they characterized these sales in conclusory terms as "modest" and "negligible."

After allowing plaintiffs limited discovery on the jurisdictional question, the district court issued its ruling based on the following jurisdictional facts: Leland is incorporated in California and has its principal place of business in that state; Tradewest is incorporated in Texas and has its principal place of business in that state. Neither has an office, P.O. box, agents, employees, assets, or property in Illinois. Between 1987 and 1989, these two defendant manufacturers entered into contracts to sell video games with two distributors based in Illinois. Leland and Tradewest then had ongoing business relationships with their Illinois customers, including visits to Illinois by officers of Leland and Tradewest to promote sales of their products to those customers. Leland and Tradewest also participated in trade shows in Illinois to promote sales of their products. All the goods destined for Illinois were delivered "free on board" (f.o.b.) ² in Texas and California. Since 1991, Leland has had no contacts with Illinois.

The district court noted that the in personam jurisdictional reach of a federal district court in a patent case is coextensive with the in personam jurisdictional reach of the courts of the state in which the district court sits and thus turned to Illinois law. It then analyzed the facts under several jurisdictional heads, common law and statutory law. Since plaintiffs concede that the defendants lack the sort of substantial and continuing contacts that amount to physical presence in the forum and thus give rise to a general jurisdiction under common law principles, we discuss only the court's ruling that it lacked specific jurisdiction under the Illinois long-arm statute.

That statute vests Illinois courts with power over defendants "as to any cause of action arising from" the "transaction of business" in Illinois, the "commission of a tortious act" in Illinois, or any other contacts sufficiently weighty to satisfy constitutional requirements. See 735 ILCS 5/2-209(a)(1)-(2), (c) (West 1994).

Under the tort provision, the court held that patent infringement is a wrong whose legal situs is where the injury is felt, namely the residence of the patent holder, rather than where the offending act occurs. The plaintiffs are incorporated in Delaware and have their principal places of business in New York and New Hampshire, respectively. Therefore, reasoned the court, the tortious act alleged was not committed in Illinois.

Under the transacting business provision, the court held that since the suit was not upon the contracts pursuant to which the allegedly infringing products had been sold, the cause of action arose not out of the transactions between the parties to the contracts, but instead collaterally out of the tortious occurrence of alleged infringement against the third party plaintiffs. Even if defendants were wrong about the situs and the transactions must therefore be deemed to have occurred within the forum for purposes of a contacts analysis, jurisdiction still would not have attached under the transacting business provision. The court thus seemed to be construing the two provisions as creating two distinct categories, tort and contract, and to be concluding that this case sounds strictly in tort, which tort did not occur in Illinois.

Finally under the part of the Illinois long-arm statute that extends jurisdiction to the limits of the federal and Illinois constitutions, the district court reiterated its conclusion that since the action did not arise out of any tortious acts of infringement in Illinois or any transactions of business by plaintiffs with Leland and Tradewest in Illinois, the district court had no jurisdiction over Leland and Tradewest. Absent in personam jurisdiction over Leland and Tradewest, the district court also found venue wanting.

II

A district court's ultimate conclusion as to whether it has jurisdiction, and any subsidiary conclusions regarding the legal effect of particular jurisdictional facts, present questions of law subject to review de novo. See, e.g., Haisten v. Grass Valley Medical Reimbursement Fund, Ltd., 784 F.2d 1392, 1396 (9th Cir.1986).

In concluding that the situs of the putative "tort" of patent infringement is the domicile of the patentee, the district court relied on its reading of Honeywell, Inc. v. Metz Apparatewerke, 509 F.2d 1137, 1142, 184 USPQ 387, 390-91 (7th Cir.1975). Unfortunately, the district court did not have the benefit of this court's subsequent opinion in Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1570-71, 30 USPQ2d 1001, 1011-12 (Fed.Cir.1994), which disagreed that Honeywell stood for that proposition and instead held as a matter of uniform federal patent law that patent infringement occurs where allegedly infringing sales are made. Id. at 1570-71, 30 USPQ2d at 1011-12. In addition, while it may be appropriate to speak loosely of patent infringement as a tort, more accurately the cause of action for patent infringement is created and defined by statute. See 35 U.S.C. Sec. 271(a) (1988). The statute does not speak generally of the "tort of patent infringement," but specifically of a liability that arises upon the making, using, or selling of an infringing article. Thus, the statute on its face clearly suggests the conception that the "tort" of patent infringement occurs where the offending act is committed and not where the injury is felt. Id.

Our conclusion that the situs of the infringement is wherever an offending act is committed, however, does not end the inquiry in this case under the tort provision of the Illinois long-arm statute. We still must determine whether the "tortious act[s]" upon which this suit is based were "commi[tted]" in Illinois. We thus address the legal question, which the district court did not reach, of what relevance the delivery of the allegedly infringing articles f.o.b. in Texas and California has on the legal situs, for purposes of the tort provision of the Illinois long-arm statute, of the allegedly tortious sales at issue here.

We emphasize at the outset that we are deciding this point upon which the appeal turns purely as a matter of federal law. Our holding is therefore limited. The tort alleged in this case exists solely by virtue of federal statute, and defining its contours inevitably entails the construction of that statute--not the Illinois long-arm statute. The latter simply creates a general, procedural rule that torts committed in Illinois give rise to jurisdiction over potential defendants. It is not the source of the substantive right and does not purport to affect its scope or nature. So, while the federal choice of law rule concerning personal jurisdiction requires us to look to state law in the first instance, the character of the particular tort alleged here requires a look back to federal law on the conceptualization of the tort and its situs.

The difficulty in answering this question is that unlike the "making" and the "using" of an infringing article, which as purely physical occurrences are relatively straightforward to place, the "selling" of an infringing article has both a physical and a conceptual dimension to it. That is to say, it is possible to define the situs of the tort of infringement-by-sale either in real terms as including the location of the seller and the buyer and perhaps the points along the...