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Declaratory Judgments in Patent Cases; Test to Resolve the
Issue of Personal Jurisdiction Continues to Evolve
MONDAY, JULY 9, 2001
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the law of personal jurisdiction has
deep roots, yet is constantly growing
due largely to improved transportation,
faster communication and the Internet.
Recognizing that technology has made the
world a smaller place, courts continually
revisit notions of minimum contacts
and constitutional reasonableness. One
particularly dynamic area is that of patent law,
where patentees reach out across geographical
boundaries to threaten accused infringers in
another state. These threats are often met
with declaratory judgment actions within
that state, asserting patent non-infringement,
invalidity and/or unenforceability.
Declaratory judgment patent cases present
unique circumstances that have significantly
contributed to the development of personal
jurisdiction law.
Because Congress created the U.S.
Court of Appeals for the Federal Circuit to
unify patent law, the court applies its own
precedent to resolve patent-specific issues,
including personal jurisdiction, in patent
cases.1
This article therefore examines the
legal framework by which the Federal Circuit
performs its personal jurisdiction analysis.
It is also worthwhile to consider what types
of contacts will support personal jurisdiction
over a patentee when an accused infringer
sues for declaratory judgment. Letters alleging
infringement sent to a party that resides in
the forum state are appropriately accorded
some weight. However, the Federal Circuit
has also held that an accusatory letter alone is
insufficient.
Developing Precedent
In diversity and state law cases, the
U.S. Supreme Court has interpreted the
Fourteenth Amendment’s due process
clause as permitting the exercise of personal
jurisdiction over an out-of-state defendant
having sufficient minimum contacts with the
forum state such that subjecting the defendant
to suit there does not offend traditional
notions of fair play and substantial justice.2
There are two recognized bases for
asserting personal jurisdiction, general and
specific. General jurisdiction arises where a
defendant’s activities in the forum state are
sufficiently substantial or continuous and
systematic to support the exercise of personal
jurisdiction.3
The cause of action need not be
related to the contacts themselves.4
Specific jurisdiction is satisfied by fewer
contacts with the forum state, but is proper
only where a cause of action is related to or
arises out of those contacts.5
Isolated and
sporadic contacts, and even a single contact
with the forum state can support specific
jurisdiction, so long as it creates a substantial
connection with, and is purposefully directed
at the forum state or its residents.6
Specific
jurisdiction is the most common basis upon
which courts exercise personal jurisdiction
over patentees in declaratory judgment
actions.
To promote its mandate of achieving
national uniformity in patent law, the Federal
Circuit began establishing its own personal
jurisdiction precedent in the 1994 case of
Beverly Hills Fan Co. v. Royal Sovereign
Corp.7
The following year in Akro Corp.
v. Luker,8
the court extended its holding to
declaratory judgment cases.
In considering the standards to apply, the
Federal Circuit observed that the Supreme
Court’s jurisprudence addresses personal
jurisdiction only in diversity and state
cases under the Fourteenth Amendment.
The court stated that it nonetheless would
apply the minimum contacts standard of
International Shoe and its progeny to
patent cases, which are federal questions
governed by the due process clause of the
Fifth Amendment.9
Applying the Supreme Court precedent,
the Federal Circuit held that due process
requires a court to determine whether (1) the
defendant purposefully directed activities
at forum residents, and (2) if so, whether
the alleged injuries arise out of or relate to
those activities. In addition, (3) where the
defendant argues that, quite apart from the
minimum contacts’ inquiry, the assertion of
jurisdiction ... fails to comport with notions
of fair play and substantial justice, we must
satisfy ourselves that the defendant has not
presented a compelling case that jurisdiction
would be constitutionally unreasonable. But
the burden of proof is his.10
The court thereby
appeared to establish a three-part test for
personal jurisdiction.
In Akro, the contacts included a
patentee’s warning letters and an exclusive
patent license with a forum resident. In
the letters, the patentee gave notice that
the exclusive license required the patentee
to pursue infringers. The court observed
that the patentee had initiated each of
these contacts, and that the license created
continuing in state obligations. Although
the patentee argued that its letters were to
plaintiff’s counsel, who resided outside the
forum, thecourt rejected this argument as
ignoring agency law and exalt[ing] form over
substance.11
The court therefore concluded
that the patentee purposefully directed its
activities at residents of the forum.
Turning to the question of whether the
contacts arose out of or related to the cause
of action, the court stated that a plaintiff
need not be the forum resident toward whom
the patentee’s activities were purposefully
directed. The phrase arise out of or relate
to is disjunctive, the court noted, indicating
flexibility and relaxation of a pure arise out of
standard. The court found that the exclusive
license with the plaintiff’s local competitor
undoubtedly relates to [plaintiff’s] challenge
to the validity and enforceability of the
[[] patent. Indeed, the agreement obliges
[the patentee] to defend and pursue any
infringement.12
Finally, the court observed that the
patentee had identified no considerations
to suggest that jurisdiction would be
unreasonable.13
The court therefore concluded
that the exercise of personal jurisdiction
satisfied constitutional due process.
Federal Circuit Framework
In Genetic Implant Systems Inc.
v. Core-Vent Corp.,14
the Federal Circuit
Intellectual Property Law
By LawrenceT. Kass

2. reversed a decision declining jurisdiction.
The patentee had sent several cease-and-
desist infringement letters to the plaintiff
and had marketed its patented product in
the forum state. The patentee argued that
this was insufficient contact because the
marketing occurred before the patent issued.
Nevertheless, the panel considered those
contacts significant because they evinced
substantial activities in the state. In addition,
the court found significant that after the
patent issued, the patentee contracted
with a distributor to exclusively sell the
patented goods within the forum state, and
the agreement contained provisions for
maintaining and enforcing relevant patents.
The panel acknowledged that sending
infringement letters, without more, is
insufficient to establish personal jurisdiction.
However, the court also considered the
patentee’s other forum activities. It concluded
that the patentee had purposefully availed
itself of the state’s facilities, and that the cause
of action clearly related to or arose out of
such activities. Finally, the court rejected the
argument that asserting jurisdiction would
be unreasonable and unfair, because the
patentee had failed to present a compelling
case that the forum state was inconvenient or
possessed insufficient interest to resolve the
dispute. Accordingly, the court concluded that
personal jurisdiction was proper.15
The Federal Circuit also found
sufficient contacts in Dainippon Screen
Manufacturing Co. v. CFMT Inc.16
In
that case, the patentee was a non-resident
subsidiary created to hold patents for its
parent, which maintained offices within the
state. Through its agents, the patentee made
threats of infringement by telephone. The
patentee also exclusively licensed the parent,
while maintaining the power to negotiate a
sublicense or instigate litigation, and derived
substantial licensing revenues from the
parent’s in-state sales. Finally, the patentee
attempted to negotiate a sublicense with the
resident plaintiff. The court concluded that
these contacts warranted exercising personal
jurisdiction.17
The court also concluded that exercising
jurisdiction would be reasonable and fair.
In fact, the panel stated that the patentee’s
argument to the contrary qualified for a
chutzpah award because a patent holding
subsidiary ... cannot fairly be used to insulate
patent owners from defending declaratory
judgment actions in those fora where its
parent company operates under the patent.18
The court therefore concluded that personal
jurisdiction over the patentee satisfied due
process.
Apparent Modifications
The Federal Circuit appeared to shift
its framework in Red Wing Shoe Co. v.
Hockerson-Halberstadt Inc.,19
where
it found insufficient contacts to support
personal jurisdiction. In that case, the
patentee sent three cease-and-desist letters
to the resident plaintiff, which sought
declaratory judgment and asserted personal
jurisdiction based on the letters and
numerous non-exclusive licenses between the
patentee and third parties who made in-state
sales.
The court began by apparently modifying
the framework introduced in Akro. The panel
described a two-part inquiry: (1) whether the
patentee had established minimum contacts,
and (2) whether assertion of personal
jurisdiction would comport with fair play
and substantial justice. The court thereby
combined the first two steps of its previous
framework into one minimum contacts
inquiry.
In addition, while confirming that cease-
and-desist letters alone are insufficient to
create personal jurisdiction, the court stated
that such letters are often substantially
related to the cause of action, thus providing
minimum contacts. The panel relied only
on the reasonableness factor to explain why
letters are insufficient to support jurisdiction:
Principles of fair play and substantial justice
afford a patentee sufficient latitude to inform
others of its patent rights without subjecting
itself to jurisdiction in a foreign forum.20
The court then turned to the patentee’s
non-exclusive licenses, and found that
they were insufficient to establish personal
jurisdiction. Doing business with a company
that does in-state business, the court noted, is
different from directly doing business in the
state. Unlike Akro, the patentee in Red Wing
had no continuing obligations to a resident
exclusive licensee and no obligations to
defend and pursue infringement. The license
also had no exclusivity precluding a license
to the plaintiff.21
Accordingly, the court found
personal jurisdiction lacking.
Resolving Ambiguity
In a May 15 decision in Inamed Corp. v.
Kuzmak,22
in which the authors represented
Inamed, the Federal Circuit appears to have
conclusively established that the framework
to be applied would be its three-factor test.
That test requires that: (1) the defendant
patentee purposefully directed its activities at
residents of the forum; (2) the claim arises out
of or relates to the patentee’s activities with
the forum; and (3) the patentee has not made
a compelling case that exercising personal
jurisdiction would be unreasonable or unfair.
(It is still possible that a petition for certiorari
will be filed.)
The Inamed court noted that the first two
factors correspond to the minimum contacts
prong of International Shoe, and that the
third factor corresponds to the fair play and
substantial justice prong. The court confirmed
MONDAY, JULY 9, 2001
that the burden of proof is on the plaintiff to
establish that the patentee’s activities were
purposefully directed at the forum state and
that the claim arises out of or relates to those
activities. On the other hand, the burden is
on the defendant patentee to establish that
the exercise of personal jurisdiction would be
unreasonable or unfair.23
Applying the three-factor test, the panel
held that a patentee’s warning letter sent to a
state resident and grant of an exclusive license
to that resident constituted sufficient contacts
to support jurisdiction.
With respect to the first, purposeful
direction factor, the court implicitly addressed
its earlier suggestion in Red Wing that
warning letters alone might be sufficient to
satisfy minimum contacts. Here, the court’s
analysis made clear that a warning letter
alone would not be sufficient to satisfy the
purposeful direction factor, which is one
aspect of minimum contacts. The factor
was satisfied, however, when the panel also
considered the patentee’s negotiation efforts
with the resident plaintiff which culminated in
exclusive license agreements.
The court rejected the patentee’s argument
that, because these activities took place by
telephone or mail from outside the state,
the negotiation efforts and ensuing license
agreements should not be considered
purposefully directed at a forum resident. The
court confirmed that lack of physical presence
alone cannot defeat personal jurisdiction.24
With regard to the second, arising out of
or relating to factor, the panel noted that a
central purpose of a declaratory judgment
action is often to clear the air of infringement
charges. Accordingly, there could be no
dispute that the warning letter directly gave
rise to the cause of action.
Finally, the court held that the patentee’s
assertions of inability to travel from his home
state due to illness were, by themselves,
insufficient to render the exercise of
jurisdiction unreasonable or unfair as
a constitutional matter. This is because
alternative means were available to challenge
venue, such as filing a motion alleging
improper venue or forum non conveniens.
Because the patentee had thus failed to make
a compelling case that exercise of jurisdiction
would be unreasonable, and because the other
two factors were satisfied, the Federal Circuit
held that the exercise of jurisdiction was
appropriate.25
Conclusion
After the Inamed ruling, personal
jurisdiction in declaratory judgment
actions is analyzed under a three-factor test.
This test requires purposeful contacts with
the forum state, a claim that arises out of
or relates to those contacts and the absence

3. of a compelling case by the patentee that the
exercise of jurisdiction would be constitutionally
unreasonable. An infringement warning
letter sent by a patentee to a forum resident
is a sufficient contact to give rise or relate to
a declaratory judgment claim, but requires
additional purposefully directed contact with the
forum state. This additional contact need not be
physically with the forum state; the existence
of an exclusive license with a forum resident
suffices.
1
The court has held that personal jurisdiction is
intimately involved with substantive patent law. See
Akro Corp. v. Luker, 45 F3d 1541, 1543 (Fed. Cir. 1995).
2
International Shoe Co. v. Washington, 326 U.S.
310, 316 (1945).
3
Helicopteros Nacionales de Colombia, S.A. v.
Hall, 466 U.S. 408, 414-15 (1984).
4
Id.
5
Id. (citing Shaffer v. Heitner, 433 US 186, 204
(1977)); see also Burger King Corp. v. Rudzewicz, 471
U.S. 462, 463 (1985).
6
Id., 471 U.S. at 472-75.
7
21 F3d 1558, 1564-65 (Fed. Cir. 1994).
8
45 F3d 1541 (Fed. Cir. 1995).
9
Id. at 1544-45.
10
Id. at 1546.
11
Id.
12
Id. at 1548.
13
Id. at 1549.
14
123 F3d 1455 (Fed. Cir. 1997).
15
Id. at 1458-59.
16
142 F3d 1266 (Fed. Cir. 1998).
17
Id. at 1270.
18
Id. at 1271.
19
148 F3d 1355 (Fed. Cir. 1998).
20
Id. at 1358-61. Although the cease-and-desist
letters offered a license, the court found it more like a
settlement offer than a license negotiation that would
render jurisdiction reasonable.
21
Id. at 1362.
22
2001 U.S. App. LEXIS 9255 (Fed. Cir. May 15, 2001).
23
Id. at *6-*7.
24
Id. at *8-*12.
25
Id. at *12-*16.
MONDAY, JULY 9, 2001
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