Apple v. Zipit – A Patentee’s Right to Notify Without Being Dragged into an Undesirable Jurisdiction
Patentees have a property interest in their patents; one of the important aspects of owning a patent is being able to exclude others. Practically speaking, that is done by first notifying infringers of their violation of the patent. Offenders may be located in any of the 50 states and it can be burdensome upon a patent owner to be hauled into an undesirable jurisdiction for simply trying to inform infringers of their exclusionary rights. The Court of Appeals has decided that the principles of fair play and substantial justice afford patentees some latitude to inform others of its patent privileges without subjecting itself to authority in a foreign forum. These principles originate in the Due Process provision of the Fourteenth Amendment and include a stake in obtaining the most efficient resolution of a controversy, i.e., the policy favors settlement negotiations. Up until recently, there was a perceived bright-line rule that patent infringement notice letters and related communications alone can never form the basis for personal jurisdiction. See e.g., Red Wing Shoe Co. This misunderstanding has since been corrected, calling into question what kinds of notice activities a patent owner can engage in without triggering an obligation to litigate in a remote location? See e.g., Trimble v. PerDiemCo, 997 F.3d 1147, 1154-59 (Fed. Cir. 2021)(reversing the NDCA’s dismissal order for lack of personal jurisdiction, finding continued proceedings reasonable where the patentee made an excessive number of forum contacts over a short period of time, issued increasing threats of infringement, identified local counsel and informed the DJ plaintiff of planned suit with venue specificity).
The law of personal jurisdiction for a DJ action involves two initial inquiries: (1) whether a state’s long-arm statute permits service of process and (2) whether assertion of personal jurisdiction comports with due process? Where a state’s long-arm statute permits service of process to the full extent allowed by due process (like California’s does) the two questions become one and courts only consider whether jurisdiction comports with due process. The due process analysis is focused on foreseeability and whether a DJ defendant’s “conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there[?]” Id. (quoting Burger King).
There are three relevant factors to assessing specific in personam jurisdiction: “(1) whether the defendant ‘purposefully directed’ its activities at residents of the forum; and (2) whether the claim ‘arise[s] out of or relate[s] to’ the defendant’s activities within the forum… [and] (3) whether assertion of personal jurisdiction is reasonable and fair.” Id. The first two inquiries—constituting a “purposeful availment” or “minimum contacts” test—relate to the number and nature of a defendant’s contacts with the forum. The final query includes a five-factor test that assesses the reasonableness of suit in the subject situs.
Another recent case out of the CAFC examines the boundaries of patentee notification. Apple v. Zipit Wireless, Case No.: 2021-1760 (Fed. Cir. April 18, 2022)(reversing the NDCA’s Rule 12(b)(2) dismissal of Apple’s declaratory judgement complaint of noninfringement for lack of personal jurisdiction). As background, Zipit, a South-Carolina-based, 14-employee entity, owned two patents to wireless instant messaging technology. Zipit corresponded with Apple regarding infringing its patents as early as 2013. During several years of negotiations, the parties discussed purchasing or licensing the patents, the status of inter partes review proceedings at the PTO and the technical details of infringement and willful infringement. These discussions occurred during two in-person meetings as well as a variety of phone calls and emails. Nevertheless, the negotiations were unsuccessful and Zipit eventually filed an infringement action against Apple in the ND of Georgia in 2020. For some reason, however, Zipit voluntarily dismissed the action without prejudice two weeks later. Shortly thereafter, Apple filed a declaratory judgement action in the ND of California for noninfringement. But the NDCA granted Zipit’s Rule 12(b)(2) motion for dismissal for lack of personal jurisdiction. As to the minimum contacts test, the district court reasoned that Zipit’s letters, claim charts and travel to California satisfied the requisite minimum contacts for personal jurisdiction. The district court, however, determined that Zipit had not demonstrated that the exercise of power would be unreasonable; still the court dismissed the suit, applying the aforementioned bright-line rule that warning communications alone are never satisfactory to establish jurisdiction.
The CAFC panel reversed the district court’s dismissal, the group reviewed the question of personal jurisdiction, a legal question, de novo. First, as to purposeful availment, the panel endorsed the district court’s view that Zipit’s letters and travel were directed to California and that the claim arose out of Zipit’s contacts since Apple’s DJ action stemmed from Zipit’s activities. Zipit unsuccessfully argued against the minimum contacts being established, citing Autogenomics, where letters and travel were determined to be insufficient to establish the minimum contacts prong. However, Zipit’s communications were seen as more intense than those of Autogenomics given Zipit’s status updates to Apple during its IPRs and description of the infringement as willful.
Second, Zipit had the burden of demonstrating that there were other considerations that would render jurisdiction in California “unreasonable.” The panel balanced settlement-promoting matters disfavoring jurisdiction against the five Burger King factors:
[1] “the burden on the defendant,” [2] “the forum State’s interest in adjudicating the dispute,” [3] “the plaintiff’s interest in obtaining convenient and effective relief,” [4] “the interstate judicial system’s interest in obtaining the most efficient resolution of controversies,” and [5] the “shared interest of the several States in furthering fundamental substantive social policies.”
As to the first factor, Zipit’s inventors and VP only provided general allegations of inconvenience; moreover, their visits to California to discuss a license reinforced the foreseeability of process there. Secondly, California undisputedly has a substantial interest in protecting its residents from unwarranted claims of infringement; this factor also favored California authority. Third, Apple’s established interest in obtaining convenient and effective relief in its home forum encouraged jurisdiction as well. Fourth, though settlement discussions are the most efficient mode of resolution, such negotiations had not succeeded and Zipit’s dialog exceeded settlement through a license, Zipit even offering to sell their patents. (Not to mention Zipit must not have had much confidence in its diplomacy because it also recently sued Apple in Georgia). Fifth, jurisdiction is likewise preferred under this factor since there is no conflict between the competing forums—the dispute would be covered by federal law in either case and social interests in resolution were a nonfactor given that related discussions had already broken down. Accordingly, Zipit had not met its burden of demonstrating that proceedings in California would be unreasonable, the dismissal was reversed and the case remanded for further proceedings.
Words to the wise: notifying others of patent rights comes with a great deal of responsibility. The Court of Appeals has discouraged any bright-line standards with respect to personal jurisdiction. As it relates to this case, however, factors like travel to the foreign jurisdiction, lawsuits initiated by the patentee elsewhere and nondescript inconvenience allegations will likely support the reasonableness of jurisdiction. For other examples of authority-promoting activities see Trimble at 1155-56.
