Zumbro, Inc. v. California Natural Products

• Decision Date: 08 August 1994
• Docket Number: Civ. No. 3-93-715.
• Parties: ZUMBRO, INC., Plaintiff, v. CALIFORNIA NATURAL PRODUCTS, and Imagine Foods, Inc., Defendants.
• Court: U.S. District Court — District of Minnesota

861 F. Supp. 773

ZUMBRO, INC., Plaintiff, v. CALIFORNIA NATURAL PRODUCTS, and Imagine Foods, Inc., Defendants.

Civ. No. 3-93-715.

United States District Court, D. Minnesota, Third Division.

August 8, 1994.

COPYRIGHT MATERIAL OMITTED

Robert T. Edell, Alan W. Kowalchyk, and David K. Tellekson, Merchant, Gould, Edell, Welter & Schmidt, Minneapolis, MN, for plaintiff.

Charlene M. Morrow and David W. Slaby, Fenwick & West, Palo Alto, CA, and Stephen J. Davidson, Leonard, Street & Deinard, Minneapolis, MN, for defendants.

MEMORANDUM OPINION AND ORDER

KYLE, District Judge.

Introduction

Plaintiff Zumbro, Inc. ("Zumbro") commenced this declaratory judgment, interference with business relationships, and trademark infringement action against defendants California Natural Products ("CNP") and Imagine Foods, Inc. ("Imagine"); it seeks, inter alia, a declaration of noninfringement, invalidity, and unenforceability of United States Patent Numbers 4,894,242 ("242 Patent"), 4,744,992 ("992 Patent"), and 4,876,096 ("096 Patent"). Before the Court is the Defendants' Motion, pursuant to Fed.R.Civ.P. 12(b)(2) and (3), and 19, to Dismiss Zumbro's claims against (a) CNP for lack of personal jurisdiction and improper venue, (b) Imagine for improper venue and failure to join an indispensable party.

Background

The Parties

The Defendants are both California corporations that have their principal places of business in California; CNP's is located in Lathrop, California, and Imagine's is located in the San Francisco Bay Area.

Zumbro is a Minnesota corporation; its principal place of business is in Hayfield, Minnesota. Zumbro is principally engaged in manufacturing food ingredient products and selling them to food manufacturers. Its products include rice-based ingredients such as Rice Trin 30 ("Rice Trin") which is a food additive and Rice Beverage Base Dry Mix ("Rice Mix") which is a beverage ingredient.

The Patents

The patents at issue in this litigation are (a) the 242 Patent, which describes a "Nutritional Rice Beverage Product," (b) the 992 Patent, which describes the process for manufacturing the products covered by the 242 Patent, and (c) the 096 Patent, which describes rice syrup solids products.¹ CNP and Imagine are co-owners of the 242 Patent and the 992 Patent, whereas CNP is the sole owner of the 096 Patent.

All of the rice beverage bases and premixes CNP makes are covered by the 242 Patent and 992 Patent. Morrow Dec., ¶ 6. All of the rice syrup products CNP promotes and sells are covered by the 096 Patent. Id. ¶ 5.

CNP's Contacts with Minnesota

CNP is not licensed to do business in Minnesota. It has no employees or agents in this state and neither owns nor leases any real or personal property here. It does not advertise in publications that are published in Minnesota; however, it does advertise in nationally distributed food industry journals² that are distributed in Minnesota.³ In addition, CNP's computerized mailing list includes the names of over seventy-five persons and businesses located in Minnesota.⁴

CNP has not sold any rice beverage products covered by the 242 Patent and 992 Patent in Minnesota; however, it does supply rice beverage pre-mix to Imagine, which sells a rice beverage containing that pre-mix in Minnesota. In contrast, CNP has sold products covered by the 096 Patent to seven customers located in Minnesota; two of those customers made one-time-only purchases, and two others purchased on only two occasions. The sales totalled .7% of CNP's total sales revenues. None of those products competes with the rice syrup products Zumbro manufactures and about which CNP and Imagine have been concerned. CNP has also sold products in Minnesota that are not covered by any of the patents at issue.⁵

In addition, CNP has, on two occasions — one in 1991, the other in 1992 — sent partially polished brown rice syrup solids (products covered by the 096 Patent) to Marshall Labs in Hopkins, Minnesota, for spray drying and packaging. CNP engaged Marshall Labs' services as a part of selling those rice syrup products to an entity located in New Hampshire. On another occasion, CNP sent Marshall Labs a sample of ultra-high maltose rice syrup (another 096 Patent-related product) in order that Marshall Labs could test its ability to spray dry that product. Hall Dep., at 133.

Finally, CNP has sent to Minnesota literature about, and samples of, products covered by the 096 Patent. In addition, representatives of CNP attended an industry trade convention in Minnesota in the fall of 1992, at which they (a) displayed samples of products covered by the 096 Patent, (b) offered literature concerning those products, and (c) met with representatives of companies located in Minnesota. Hall Dep., at 47-50.

Letters Concerning the Patents

On May 21, 1991, counsel for CNP sent a letter to IHP, Inc.⁶ stating that it believed that certain of the products and production methods IHP, Inc. was utilizing on Zumbro's behalf violated specific patents CNP owned, including the 096 patent. On June 4, 1991, counsel for Zumbro transmitted a response, denying that its manufacturing processes violated any of CNP's patents.

Two years later, on June 11, 1993, counsel for CNP and Imagine sent Zumbro a letter stating that they believed that Zumbro's Rice Trin and Rice Mix, as well as the methods used to produce them, infringed on the 242 Patent, the 992 Patent, and the 096 Patent. The letter demanded that Zumbro respond by June 25, 1993 with written notice that it had "ceased and desisted" from making, using, or selling the allegedly infringing products.

On June 29, 1993, counsel for CNP and Imagine sent letters to two of Zumbro's customers, Healthco International, located in Bloomingdale, Illinois, and Lipscomb Chemical, located in Long Beach, California. The letters (a) notified the customers of the 242 Patent, 992 Patent, and 096 Patent, (b) stated that CNP and Imagine had informed Zumbro that it likely was infringing the patents, (c) stated that they intended to "aggressively" pursue any infringement of its patents, and (d) informed the customers that federal "patent laws make liable for patent infringement those who make, use or sell a patented invention, practice a patented process, or either induce or contribute to infringement."

The Litigation

Count I of the Complaint is brought under the Federal Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202 (1988); Zumbro seeks an order declaring that (a) the 242 Patent, 992 Patent, and 096 Patent are invalid, or (b) Zumbro's manufacture of Rice Trin and Rice Mix has not infringed any of those patents. In Count II, Zumbro contends that the letters CNP and Imagine sent to its customers in Illinois and California contained false statements that the Defendants knew were false and were sent for the purpose of interfering with Zumbro's business relationships and prospective business advantage. In Count III, Zumbro alleges that the acts alleged in Count II did, or were likely to, deceive its customers about the fact of patent infringement and violated the Lanham Act, 15 U.S.C. § 1125(a) (1988).

Discussion

I. Standards Governing Personal Jurisdiction

Ordinarily, a two-step test is used to determine whether personal jurisdiction may properly be exercised over a non-resident defendant:⁷ (1) is the exercise of jurisdiction permitted by the forum state's longarm statute; and (2) would the exercise of jurisdiction by the courts of the forum state comport with constitutional due process. Morris v. Barkbuster, Inc., 923 F.2d 1277, 1280 (8th Cir.1991). However, because Minnesota interprets its long-arm statute, Minn.Stat. § 543.19 subd. 1(b) (1992), to extend personal jurisdiction to the fullest extent permitted by due process,⁸ see Valspar Corp. v. Lukken Color Corp., 495 N.W.2d 408, 411 (Minn.1992), "the inquiry collapses into a single question of whether exercising personal jurisdiction in this case comports with due process." Bell Paper Box, Inc., v. U.S. Kids, Inc., 22 F.3d 816, 818 (8th Cir. 1994); see Sybaritic, Inc. v. Interport Int'l, Inc., 957 F.2d 522, 524 (8th Cir.1992).⁹

The Due Process Clause requires that a nonresident defendant have sufficient "minimum contacts" with the forum state before the latter may exercise jurisdiction over the former. Bell Paper, 22 F.3d at 818. Sufficient contacts exist when "the defendant's conduct and connection with the forum State are such that it should reasonably anticipate being haled into court there," World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980), and the "reasonable anticipation" requirement is satisfied if the defendant has engaged in "`some act by which it purposefully avails itself of the privilege of conducting activities with the forum State, thus invoking the benefits and protections of its laws.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 2182, 85 L.Ed.2d 528 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239-40, 2 L.Ed.2d 1283 (1958)); see Soo Line R. Co. v. Hawker Siddeley Canada, Inc., 950 F.2d 526, 528-29 (8th Cir.1991). Even where sufficient contacts exist, however, due process still requires that "maintenance of the suit ... not offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 320, 66 S.Ct. 154, 160, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940)); see Burger King, 471 U.S. at 476, 105 S.Ct. at 2184.

"Specific jurisdiction" over a nonresident defendant is exercised where a court premises jurisdiction over a defendant upon the relationship between the plaintiff's claims and the defendant's forum state activities. Barkbuster, 923 F.2d at 1280. Where the plaintiff's claims "arise out of or are connected with the defendant's activities within the forum state," International Shoe, 326 U.S. at 319, 66 S.Ct. at 160, the...