No Specific Personal Jurisdiction Over Italian Patentholder That Sent Cease-and-Desist Letters to Plaintiffs and Engaged in Sales Activities in Forum State

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P.I.C. International Inc. d/b/a H2Odyssey v. Miflex 2 S.p.A., US District Court for the Southern District of California, August 17, 2017

The plaintiffs—one US and one Taiwanese corporation—sued an Italian corporation (Miflex 2) and its Italian CEO for a declaration that their products do not infringe patents held by the Italian company. Miflex 2 sought to dismiss the case, arguing that its contacts with the California were not substantial enough to support the assertion of jurisdiction.

The plaintiffs limited their argument to specific personal jurisdiction. The Court began its analysis by noting that a plaintiff’s burden in such case is to demonstrate that the defendant has “purposefully directed” its activities at residents of the forum state and the claim “arises out of or relates to” those contacts. The assertion of jurisdiction must also be “reasonable and fair” under the circumstances. The Court surveyed the governing law specific to patent cases describing the kinds of conduct that could or could not support the assertion of jurisdiction. Examples of activities not relevant to the jurisdictional question include:

• The sending of cease-and-desist letters;
• Unsuccessful efforts to license the patents at issue; and
• Successful efforts to license the patents at issue, even to multiple non-exclusive licensees, so long as the patentholder’s only dealings with the licensees involve the collection of royalties.

Rather, the Court stated that “other activities” directed at the forum and related to the claim must be shown for specific personal jurisdiction to exist. It identified the following as examples of such conduct:

• Initiation of “judicial or extra-judicial patent enforcement” within the forum;
• Entering into an exclusive license or “other undertaking” that imposes enforcement obligations on a party “residing in or regularly doing business in” the forum; and
• Entering into a license, exclusive or non-exclusive, that allows the patentholder to “exercise control over the licensee’s sales activities.”

In the case at bar, the plaintiff based its claim of jurisdiction on the following alleged activities of Miflex 2:

• The sale of patented hoses in California “through” its California-based North American distributor;
• The direction of product recall and service issues to that distributor;
• Threats to sue both of the plaintiffs over the subject patent, and earlier threats to sue a third party over the same patent, and one meeting in California to try to resolve the dispute; and
• Threats to sue one of the plaintiff’s customers.

Miflex 2 responded that it had no corporate offices or contacts with California other than sales to its distributor and the sending of two cease-and-desist letters (with no enforcement litigation following those letters). It also noted that it had not advertised its products through media outlets in California or otherwise targeted California residents. The Miflex 2 website does not accept orders or otherwise sell products. Miflex 2 added that it sells its products both to its distributor and to four original equipment manufacturers in California, and in every case title is transferred to the purchasers in Italy.

The Court found it had no jurisdiction over Miflex 2.  It dismissed as irrelevant the cease-and-desist letters;  gave credence to a declaration submitted by Miflex 2’s CEO that his meeting in California cited by the plaintiffs was not for the purpose of settling a patent dispute;  distinguished a recent appellate case in which jurisdiction was based, in part, on the conduct of a “frequent patent-infringement suit filer who regularly traveled to the forum of accused infringers to hold extensive, in-person patent licensing negotiations before filing a suit”;  and stated that Miflex 2’s “commercialization activity” in California could not form the basis for personal jurisdiction.

[Editor’s note: The P.I.C. International case is also discussed in the Intellectual Property-Patents section of this report.]

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