Wednesday, December 02, 2009

Patent plaintiffs can win the declaratory judgment forum battle far from home

Normally patent holders like to sue their victims in one of two places -- (1) their home town; or (2) beautiful downtown Marshall or Tyler, Texas. They like to pick their forum for either their own convenience or to benefit from the plaintiff friendly (or so it is thought) wilds of East Texas.

Accused infringers, obviously take the other tack -- if they know they are going to be sued anyway, they will often bring a DJ (declaratory judgment) action in their own home district before they can get sued in a place the plaintiff has picked.

This conflict can often result in quite a battle, but in a recent district court decisions from the Northern District of California, the patentholder was able to successfully move the case out of the defendant's chosen forum by proving that there was simply no jurisdiction over them in that district.

In Smugmug, Inc. v. Virtual Photo Store LLC, 2009 WL 3833969 (N.D. Cal. Nov. 16, 2009), before Judge Wilkin, the plaintiff, a resident of the Northern District, brought a declaratory relief action with respect to the patent owned by the defendant (a resident of Chicago) for digital image management.

In response to the defendant's claim that there was, in fact, no jurisdiction over it in the Northern District, Smugmug claimed that there was general jurisdiction over Virtual Photo in California based on (1) Virtual Photo's solicitation of business in California through its website; and (2) because it was the alter ego of its law firm, which allegedly had contacts in California

Smugmug also claimed that there was specific jurisdiction over Virtual Photo because of its extensive patent licensing program in California -- 20 solicitations and 5 licenses, one of which required the licensee to pay ongoing royalties. Indeed, a substantial portion of the defendant's revenue was earned from these California licensees.

The court rejected these arguments, even given the Federal Circuit's decision in Autogenomics, Inc. v. Oxford Gene Tech Ltd., 566 F.3d 1012 (Fed. Cir. 2009) that enforcement activities related to the patent could subject a patentholder to jurisdiction. The court noted that (1) cease and desist letters, by themselves, cannot subject a patentholder to specific jurisdiction; (2) the letters sent to prospective patent licensees were not even cease and desist letters but, rather, "invitations to license."

Surprisingly (at least to me) the court rejected the plaintiff's argument that the defendant's licenses with California companies and its earning of substantial revenue from these licenses on the very patent which was the subject of the lawsuit would not justify jurisdiction. As the court noted, such non-exclusive licenses constituted "commercialization" of the patents, rather than "enforcement activities," which, according to the court, were not sufficient under Autogenomics to justify jurisdiction.

So if you're a defendant who feels threatened by a patent plaintiff and you want to avoid being either home-towned on the other guy's turf or eating lunch at Porky's Smokehouse in Marshall, make sure you check out where you can actually get jurisdiction over your opponent.

No comments: