Fed. Cir. Steers Clear of ‘Talismanic’ Patent Jurisdiction Rule

A Federal Circuit decision on personal jurisdiction will make it harder for patent owners to keep infringement suits in friendly—or at least more convenient—courts, attorneys say.

The U.S. Court of Appeals for the Federal Circuit ruled April 18 that Zipit Wireless Inc.’s visits to Apple Inc.’s headquarters in Cupertino, Calif., and letters about a possible licensing deal were enough to give Apple a home court advantage in the U.S. District Court for the Northern District of California.

The ruling aligns the Federal Circuit with U.S. Supreme Court precedent, while clarifying its own precedent that some interpreted as a “bright-line rule” and confused district courts.

“The biggest clarification perhaps is that all of these cases are going to be fact-dependent, which I think is the right standard,” said Stephanie Sivinski, a patent attorney at Haynes and Boone LLP, noting that the district court tried to impose a bright line rule about negotiation-related correspondence or connections and said that was insufficient. “The Federal Circuit has backed off that a little.”

A bright-line rule would be easier for patent owners to follow and know definitively if their actions would create jurisdiction in a particular forum, attorneys said. With the Federal Circuit confirming that such a rule doesn’t exist, judges will have to consider multiple factors and the case-specific circumstances to decide whether they have jurisdiction.

Minimum Contacts

The California federal court wrongly found that the contact between South Carolina-based Zipit and Apple wasn’t enough to create jurisdiction in the district, citing a 1998 holding in Red Wing Shoe Co. v. Hockerson-Halberstadt Inc., the appeals court said. In Red Wing Shoe, the Federal Circuit ruled that cease-and-desist letters and unsuccessful licensing negotiations on their own can’t establish “minimum contacts” required for courts to exercise personal jurisdiction over a patent holder.

Red Wing Shoe should be considered as a factor when deciding if a court has jurisdiction over the case, but other fairness considerations also should be weighed, the Federal Circuit ruled.

“Specifically, the district court erred in reading our precedent as creating a bright-line rule that communications directed to ‘the attempted resolution’ of the parties’ dispute regarding the patents-in-suit trumps all other considerations of fairness and reasonableness,” Judge Kara F. Stoll wrote in the Federal Circuit’s precedential opinion.

Stoll added that while cases like Red Wing Shoe could suggest there is a rule, “Supreme Court precedent has made clear that jurisdictional inquiries cannot rest on such bright-line rules— there are no ‘talismanic jurisdictional formulas.’”

Location ‘Gamesmanship’

The added guidance means that patent holders need to be cautious in negotiations because their correspondence could invite a lawsuit in an accused infringer’s territory, said Jonas Anderson, a professor at the American University College of Law.

Patent owners often reach out to companies whose products they believe infringe their patents to start a licensing negotiation, rather than immediately filing a lawsuit.

Because it’s “crystal clear” there’s no hard rule about such correspondence, accused infringers can more easily run into a friendlier court and file a declaratory judgment action, said patent lawyer Kevin Noonan, a partner at McDonnell Boehnen Hulbert & Berghoff LLP in Chicago.

“There’s a certain amount of gamesmanship here,” Noonan said. “Apple wants to be sitting in the Northern District of California and the defendant wants to be sitting in South Carolina. I don’t think it’s the case that there’s that much prejudice, there’s just this belief that you want home-court advantage.”

Patent owners will likely be more cautious before sending out correspondence like cease-and-desist letters, or file a patent infringement suit in their home district before starting contact, Anderson said. Many patentees want to avoid the Northern District of California in particular, Anderson added, because with Google LLC and Apple headquartered there, juries and judges can be “less forgiving” than those in patent-owner friendly courts in Texas.

“In general this does affect patentees, the behavior they’re going to have, to some extent. You have to be more careful,” Anderson said. “It complicates the strategy.”

Focus on Facts

The Federal Circuit noted that the California court ruled before the appeals court handed down its 2021 decision in Trimble Inc. v. PerDiemCo LLC, which said Red Wing Shoe isn’t decisive. Some attorneys raised the concern that the Trimble ruling would complicate patent licensing negotiations and that it conflicted with Red Wing Shoe.

District courts who were accustomed to the perceived rule in Red Wing Shoe now have more guidance on how to interpret the case law in light of Trimble.

While there’s more clarity in terms of whether or not there’s a rule, these cases now will be all about the specific circumstances, attorneys said. There won’t be as much clarity going forward because the inquiries on each case will be fact-based, Sivinski said.

“This opinion does give clarity on how the pieces of case law fit together,” Sivinski said, “but on a case-by-case basis it’s going to be facts.”