VDI TECHNOLOGIES v. Price

• Citation: 781 F. Supp. 85
• Decision Date: 19 December 1991
• Docket Number: Civ. No. 90-341-D.
• Parties: VDI TECHNOLOGIES v. James PRICE, d/b/a PDM Business Products, Sudbury Systems, Inc. v. Stephen DUNKLE.
• Court: U.S. District Court — District of New Hampshire

781 F. Supp. 85

VDI TECHNOLOGIES v. James PRICE, d/b/a PDM Business Products, Sudbury Systems, Inc. v. Stephen DUNKLE.

Civ. No. 90-341-D.

United States District Court, D. New Hampshire.

December 19, 1991.

Steven J. Grossman, Manchester, N.H., Gary W. Holmes, Hampton, N.H., for plaintiff and Stephen Dunkle.

E. Donald Dufresne, Manchester, N.H., Thomas C. O'Konski, David J. Thibodeau, Boston, Mass., for defendant.

ORDER

DEVINE, Chief Judge.

In this action plaintiff seeks declaratory judgment and damages on claims of patent invalidity and non-infringement. Additionally, plaintiff seeks damages on a state claim of unfair competition and for violations of federal antitrust laws. Jurisdiction is grounded on the jurisdictional statute relating to patents, 28 U.S.C. § 1338; the doctrine of pendent jurisdiction; and 28 U.S.C. § 1332.

Plaintiff VDI Technologies, a New Hampshire corporation with its principal place of business in Hampton, New Hampshire, manufactures and sells random access digital dictation systems. Defendant Sudbury Systems, Inc., a Massachusetts corporation, is the owner of U.S. Letters Patent No. 4,260,854 (" '854 patent"), which is central to this dispute. Defendant James Price,¹ an Arizona resident, is president of Phoenix Dictating Machine Company, Inc., an Arizona corporation which also does business as PDM Business Products. PDM sells digital dictating equipment manufactured, inter alia, by co-defendant Sudbury. Counterclaim defendant Stephen Dunkle is president of VDI.

Presently before the court is defendant's motion to dismiss as to defendants Price and PDM (hereinafter "defendant's motion")² pursuant to Rules 12(b)(2) (lack of personal jurisdiction) and 12(b)(3) (improper venue), Fed.R.Civ.P. Also before the court is VDI's Motion for Allowance of Attorneys' Fees and Expenses Pursuant to Rule 11 (hereinafter "sanction motion").

I. Background

Review of the facts in this case will be limited to those necessary to properly illuminate the relevant issues to be decided herein.³ Involved in this controversy are the conduct and claims of two competitors in the field of random access digital dictation systems: VDI and Sudbury. Plaintiff VDI characterizes itself as a small start-up company, commencing business only about two years ago, and portrays Sudbury as a ten-year-old business with $7-9 million in annual revenue. Also embroiled in the conflict are Price and PDM as manufacturing representatives and sales agents for Sudbury.

The crux of this case is an ongoing dispute with regard to the validity and scope of defendant Sudbury's '854 patent and whether a VDI product infringes any valid claim of this patent. VDI's position is that the '854 patent is invalid, unenforceable, and/or void for a variety of reasons;⁴ that VDI has not infringed any claim of the '854 patent; and that if valid at all, the patent is so limited that its "claims ... as finally allowed cannot be interpreted to read upon or include any product ... made, used ... or sold ... by VDI." Complaint at 3-4, ¶ 11. Defendant Sudbury counterclaims for patent infringement and for common law and statutory unfair competition. Answer and Counterclaims of Defendant Sudbury Systems, Inc., at 3-7, ¶¶ 24, 41, 44. Price seeks dismissal, challenging personal jurisdiction and venue in this district. Accordingly, as is typical when both of these personal privileges are raised by a defendant, the court turns to the question of personal jurisdiction in advance of venue. Leroy v. Great Western United Corp., 443 U.S. 173, 180, 99 S.Ct. 2710, 2714-15, 61 L.Ed.2d 464 (1979) (citations omitted).

II. Personal Jurisdiction

It is settled law that when a court's personal jurisdiction over a defendant is contested, plaintiff has the burden of showing that such jurisdiction exists. Ealing Corp. v. Harrods, Ltd., 790 F.2d 978, 979 (1st Cir.1986) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936)); Delta Educ., Inc. v. Langlois, 719 F.Supp. 42, 47 (D.N.H.1989) (and cases therein cited); Lex Computer & Management Corp. v. Eslinger & Pelton, P.C., 676 F.Supp. 399, 402 (D.N.H.1987). Where, as here, there has been no evidentiary hearing and the court proceeds upon the written submissions, plaintiff must make only a prima facie showing that jurisdiction exists. Kowalski v. Doherty, Wallace, Pillsbury & Murphy, 787 F.2d 7, 8 (1st Cir.1986) (citing 2A J. Moore & J. Lucas, Moore's Federal Practice ¶ 12.072.-2 (2d ed. 1985); 2 J. Moore, J. Lucas, H. Fink & C. Thompson, Moore's Federal Practice ¶ 4.41-13 (2d ed. 1985)). While a plaintiff's written allegations of jurisdictional facts are construed in its favor, Kowalski, supra, 787 F.2d at 9, its showing of personal jurisdiction must be based on specific facts set forth in the record in order to defeat a defendant's motion to dismiss. Id. In reviewing the record before it, a court "may consider pleadings, affidavits, and other evidentiary materials without converting the motion to dismiss to a motion for summary judgment." Lex Computer, supra, 676 F.Supp. at 402 (citation omitted); Omni Hotels Mgmt. Corp. v. Round Hill Dev. Ltd., 675 F.Supp. 745, 748 (D.N.H.1987) (and cases therein cited). See also C. Wright & A. Miller, 5A Federal Practice and Procedure: Civil 2d § 1364 (1990). Thus, the relevant facts derived from the pleadings and affidavits as to defendant Price are as follows.

The gravamen of VDI's conflict with Price is conduct by Price, acting through PDM, whereby "on several occasions ... in 1990" Price forwarded a copy of a May 12, 1990, letter by one Robert M. Hart, president of defendant Sudbury, together with his own cover letter on PDM letterhead, to plaintiff's customers or prospective customers. Plaintiff's Memorandum in Opposition to Motion to Dismiss as to Defendants James Price and PDM Business Products ("Plaintiff's Opp. Memo.") at 2. See also Affidavit of James Price ("Price Affidavit"), Exhibit A (copy of Hart's letter) and Exhibit B (an example of Price's forwarding letter) which accompany defendant's motion. VDI alleges that Price not only sent these letters, but also specifically emphasized, by underlining, that portion of the Hart letter intended to threaten "purchasers of an infringing product" with a patent infringement suit. Plaintiff's Opp. Memo at 2. See also Price Affidavit, Exhibit A. Moreover, plaintiff alleges that the characterization in Price's cover letter of VDI's product as a "BETA installation" was made in an attempt to suggest to VDI's customers that its product was an experimental one, Plaintiff's Opp.Memo at 2; see also Price Affidavit, Exhibit B, "thereby further dissuading Plaintiff's customers from purchasing Plaintiff's products."⁵ Plaintiff's Memo re Injunction at 1.

VDI claims that this "tortious conduct was aimed solely at a New Hampshire corporation," Plaintiff's Surreply in Opposition to Defendant's Motion to Dismiss (hereinafter "Plaintiff's Surreply") at 6-7 (emphasis in original), and that "it is impossible for ... James Price not to have known that the letters sent to VDI's customers and prospective customers would have had a direct and deliberate effect on VDI's business in New Hampshire." Id. at 6 (emphasis in original). As a result of this alleged tortious conduct, plaintiff claims injury to its business and property in New Hampshire. Complaint at 5-6, ¶¶ 14, 18. Price admits sending the "complained-of letter to certain persons in California," along with the cover letter containing the remark about a "Beta installation by VDI." Second Price Declaration at 4, ¶¶ 23-26. However, Price argues that "any alleged injury to VDI occurred in California, to its potential market there, and not in New Hampshire." Defendant's Reply Memorandum in Support of Their Motion to Dismiss (hereinafter Defendants' Reply Memo) at 13.

When determining whether jurisdictional requirements have been met, the court must look to state law. Ealing Corp., supra, 790 F.2d at 981 (citations omitted). Thus, in New Hampshire the court must engage in a two-part inquiry and may assert in personam jurisdiction over defendant only if plaintiff shows that defendant is subject to the applicable New Hampshire long-arm statute and that assertion of jurisdiction is consistent with the due process mandate of the United States Constitution. Hugel v. McNell, 886 F.2d 1, 3 (1st Cir. 1989), cert. denied, 494 U.S. 1079, 110 S.Ct. 1808, 108 L.Ed.2d 939 (1990); Kowalski, supra, 787 F.2d at 9-10; Lex Computer, supra, 676 F.Supp. at 402 (citations omitted); Phelps v. Kingston, 130 N.H. 166, 170, 536 A.2d 740, 741-42 (1987) (and cases therein cited). If personal jurisdiction under the applicable statute cannot be asserted over defendant, the inquiry need go no further. Hugel, supra, 886 F.2d at 3; Kowalski, supra, 787 F.2d at 10 (quoting Cove-Craft Indus., Inc. v. B.L. Armstrong Co., 120 N.H. 195, 198, 412 A.2d 1028, 1030 (1980)); Lex Computer, supra, 676 F.Supp. at 402.

A. Under the Statute

When considering the assertion of long-arm jurisdiction over a nonresident individual in New Hampshire, the applicable statutory authority is found in RSA 510:4 I, which provides in pertinent part that

any person who is not an inhabitant of this state and who, in person or through an agent, transacts any business within this state, commits a tortious act within this state, or has the ownership, use, or possession of any real or personal property situated in this state submits himself, or his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from or growing out of the acts enumerated above.

This statute has been construed by the New Hampshire Supreme Court "to provide jurisdiction over foreign defendants to the full extent that the statutory language and due process will allow." Phelps, supra, 130 N.H. at 171, 536 A.2d at 742 (and cases therein cited). As the claims in this case are confined to the...