Ryobi America Corp. v. Peters

• Citation: 815 F. Supp. 172
• Decision Date: 10 March 1993
• Docket Number: Civ. A. No. 8:92-2468-3.
• Parties: RYOBI AMERICA CORPORATION v. Jerry M. PETERS.
• Court: U.S. District Court — District of South Carolina

815 F. Supp. 172

RYOBI AMERICA CORPORATION v. Jerry M. PETERS.

Civ. A. No. 8:92-2468-3.

United States District Court, D. South Carolina, Anderson Division.

March 10, 1993.

Robert Bugos, Easley, SC, Ernie L. Brooks, John E. Nemazi, John M. Halan, Brooks & Kushman, Southfield, MI, for plaintiff.

Jefferson V. Smith, Jr., Carter, Smith, Merriam, Rogers & Traxler, Greer, SC, Hubert E. Dubb, Jill L. Robinson, Fliesler, Dubb, Meyer & Lovejoy, San Francisco, CA, for defendant.

ORDER

GEORGE ROSS ANDERSON, Jr., District Judge.

This lawsuit is a declaratory judgment action in which the plaintiff, Ryobi, seeks a determination that the defendant's patent, U.S. Patent No. 4,445,412 (the '412 patent), is invalid, unenforceable, or that Ryobi has not infringed on the patent. The defendant Peters has filed a motion to dismiss under Fed.R.Civ.P. 12(b). Peters asserts that no justiciable controversy exists, that this Court lacks personal jurisdiction over Peters, and that venue in the District of South Carolina is improper.

The court agrees with Peters that the controversy is not ripe for adjudication and that the court does not have in personam jurisdiction over the defendant. The court does not reach the issue of whether venue is proper.

I. Existence of Actual Controversy

As with any lawsuit, an actual controversy between the parties must exist before a declaratory judgment is ripe for adjudication. See Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-41, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937). In a declaratory judgment action "the plaintiff has the burden of establishing by a preponderance of the evidence, inter alia, that it has a reasonable apprehension that it will be sued." Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 887 (Fed.Cir.1992). In a case involving the non-infringement or invalidity of a patent, a two pronged test determines whether an actual controversy exists. "First, the accused infringer must have actually produced or prepared to produce an allegedly infringing product." Spectronics Corp. v. H.B. Fuller Co., Inc., 940 F.2d 631, 634 (Fed.Cir.1991). "Second, the patent holder's conduct must create an objectively reasonable apprehension on the part of the accused infringer that the patent holder will initiate suit if the allegedly infringing activity continues." Id. However, this test, like others, "must be read, applied, and perhaps modified in light of the facts of subsequent cases." Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 736 (Fed.Cir.1988).

The parties agree that the first prong of the test is satisfied. Ryobi's manufacture of the BT3000 product aroused Peters' interest as a possible infringement of the '412 patent. Therefore, the focus of the inquiry is on the second prong of the test.

In determining whether Ryobi was under a reasonable apprehension of suit, the court "must first look for any express charges of infringement, and if none, then to the `totality of the circumstances'". Shell Oil, 970 F.2d at 888 (quoting Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 736 (Fed.Cir.1988)). Ryobi claims that the January 21, 1992 letter to Ryobi from Peter's attorney, coupled with subsequent oral representations by the attorney, constituted an express charge of infringement. Ryobi also claims that a reasonable apprehension of suit follows from the totality of the circumstances.

As to the letter, Ryobi's argument is that the last sentence of the third paragraph, standing alone, is an express charge of infringement. That sentence reads: "Thus, it appears to us that your product falls literally within the language of at least claim 1 of the '412 patent whereby some type of licensing arrangement would be desirable for both parties." But this sentence must be read in the context of the entire letter to properly ascertain its meaning. The letter states that the defendant retained counsel to "investigate the Ryobi product and to initiate negotiations" with Ryobi with a view toward a license agreement. The letter recites a description of Ryobi's product based on two Ryobi product information fliers. The letter is clear that the this description is derived from the fliers and that Peters "would prefer to have more detailed information." The letter does not describe Peters' product or make any reference to details of the '412 patent.¹ Peters' letter merely attempts to open legitimate business negotiations. Peters included sufficient detail about the basis for the proposed negotiations in order to demonstrate that his inquiry was not frivolous or specious. This letter did not raise an express claim of infringement. This letter "merely constitutes a statement of Peters' position in negotiations relative to Ryobi's activities." Shell Oil, 970 F.2d at 888.

Ryobi further argues that certain oral representations allegedly made by Peters' attorney during the course of negotiations are sufficient to constitute an express claim of infringement. The parties apparently began negotiations as contemplated in Peters' letter of January 21. Clearly, as in all negotiations, there are statements made by all sides as the parties seek to discover the relative strengths and weaknesses of their claim. The court is of the opinion that representations of counsel as to the strength of Peters position were designed to demonstrate that Peters, an individual who developed his product as a side line business, had a credible business position. The court finds that Peters' counsel made no express claim of infringement.

As noted earlier, "when the defendant's conduct, including its statements, falls short of an express charge, one must consider the `totality of the circumstances.'" Arrowhead, 846 F.2d at 736. Ryobi makes two arguments that the circumstances support the existence of a reasonable apprehension of suit. The first argument is that Peters refused to admit, in response to Ryobi's Request for Admission, that he would never sue Ryobi. Apparently, Ryobi's argument is that Peters refusal, during the discovery phase of a declaratory action, to grant Ryobi a general release as to the subject matter of the action somehow constitutes an eminent threat to sue. Even if the premise is true, which the court doubts, this argument must fail because "later events may not create jurisdiction where none existed at the time of filing." Spectronics Corp. v. H.B. Fuller Co., Inc., 940 F.2d 631, 635 (Fed.Cir.1991). That is, "the presence or absence of jurisdiction must be determined on the facts existing at the time the complaint under consideration was filed." Arrowhead, 846 F.2d at 734, n. 2. Clearly, Ryobi can not "bootstrap" jurisdiction by relying on statements that were made during post filing discovery.

Ryobi's second argument is that "Peters' demands for royalty payments from Ryobi constitute yet another factor in favor of Ryobi's reasonable apprehension of an infringement suit." Plaintiff's Memorandum in Opposition at 11. Ryobi cites C.R. Bard, Inc. v. Schwartz, 716 F.2d 874 (Fed.Cir.1983) as authority for a per se rule, applicable to these facts, that a demand for royalty payment must indicate a reasonable apprehension of suit. However, in that case, Bard had previously entered into a licensing agreement with Schwartz and had paid royalties under that agreement. Furthermore, when Bard stopped making the royalty payments, Schwartz sued to recover under the licensing agreement. The court found that the fact that Schwartz had sued to enforce the license created a reasonable apprehension of suit regarding the underlying patent. However, the relationships of the parties and the factual background in Bard are significantly different than those in the instant case. Here, the parties had no prior relationship. Furthermore, at no point did Peters put Ryobi to the choice of paying royalties or suffering the consequences. As noted above, Peters' communication to Ryobi was merely a statement of his negotiation position.

The overall thrust of Ryobi's argument seems to be that whenever a patent holder attempts to open business negotiations concerning the patent, a reasonable apprehension of suit on the part of the alleged infringer necessarily follows. It may be that businesses such as Ryobi routinely assume that all proposed negotiations either resolve by contract or by lawsuit. However, Jerry Peters is not a large business with ample resources to support a major litigation effort. Peters is an individual who has created a small side line business in his home workshop. He is employed on a full time basis in a position not relevant to this discussion. Peters sells his product to Robert Bosch Power Tool Corporation who sells the product under Bosch's name. It would be unfair to apply any assumption regarding the decision to bring complicated litigation to such an individual. The court finds that the "totality of the circumstances" does not support a reasonable apprehension of suit by Ryobi.

For the above reasons, the court finds that no justiciable controversy exists in this case.

II. Personal Jurisdiction

Peters further argues that this court does not have personal jurisdiction over him. When the court's personal jurisdiction over the defendant is challenged, the plaintiff has the burden of showing that such jurisdiction exists. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936). However, where, as here, the court is proceeding on the basis of the motion, memoranda, and affidavits, the plaintiff must simply make out a prima facie showing that jurisdiction exists. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989). This court has jurisdiction over the subject matter of this declaratory judgment case under 28 U.S.C. §§ 2201 and 2202. The court also has jurisdiction under 28 U.S.C. § 1338 and under the patent laws of the United States, Title 35 of the United States Code. However, because the applicable statutes do not provide for nationwide service and...