MPHJ’s Motion to Dismiss for Lack of Personal Jurisdiction

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MPHJ filed a motion to dismiss yesterday (filing is below).  Nothing surprising here – MPHJ asks the court to review issues of personal jurisdiction first before ruling on remand issue then claims that no personal jurisdiction exists under general or specific jurisdictional principles.

A few interesting aspects after my quick read of the paper:

  1. MPHJ attempts to minimize its contacts within the state, claiming that the state’s basis is THREE letters sent to entities in Vermont.
  2. MPHJ focuses almost exclusively on Federal Circuit precedent which isn’t controlling on this issue and suggests that Second Circuit law is in lock-step with the Federal Circuit’s opinions.

In regards to the letters, if true, MPHJ can win on this argument.  However, my understanding is that MPHJ (or its subsidiaries) has sent hundreds of letters and has made phone contact with individuals in VT.  In fact, it would seem odd for the state of VT to take such a strong position against MPHJ if it was a mere three letters that were sent to businesses in the state.  Thus, I would imagine that the state will be able to show that MPHJ has made a substantial number of contacts within VT.

As to the specific jurisdiction caselaw, I’m not sure this is as clear as MPHJ makes it out to be. One of the cases cited by MPHJ in support of their position is Fiedler v. First City Nat. Bank of Houston, 807 F. 2d 315 (2nd Cir. 1986) where the court did not find personal jurisdiction over defendants due to minimal contacts within the state of NY.  Interestingly, the court looked at other cases Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 (1970) (jurisdiction proper over a California resident who participated in a New York art auction via a telephone link with an agent of the auctioneer who then relayed defendant’s bids) and CT Chemical (USA), Inc. v. Horizons International, Inc., 106 F.R.D. 518 (S.D.N.Y.1985) (defendant established a telephonic course of dealing with the plaintiff-seller and travelled to New York to have lunch with the seller in order to discuss and negotiate the contract) where the court did find PJ.  The Court cited with approval the reasoning of Judge Sweet who stated with regards to these cases “the defendants had established a pattern of commercial dealings with each plaintiff centered in New York and used the telephonic link to this state as a means of projecting themselves into local commerce.”  Depending on what evidence the state can produce, it may be able to show that MPHJ was projecting itself into local commerce and thus satisfy personal jurisdiction in the 2nd circuit.

Other interesting aspects of note – MPHJ has yet to answer the complaint and MPHJ responded to the State’s Motion for Remand today (more on that later).

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Controlling the Trolls (Part 3)

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Previous posts (found here and here) described some of federal, state, and private activities that are being implemented or discussed in order to curb patent troll activities.  I have a few additional thoughts that I believe would contribute to this effort and would likely improve the patent system as a whole.

Other Options

One of the main issues with patent trolls, and broad patents in general, is that there are few efficient and economical ways to challenge a patent’s validity.  The only option currently proposed that addresses this to some extent is Sen. Schumer’s idea, but even that is suspect because the USPTO is not necessarily the most effective arbiter of invalidity determinations (if they were, no one would use inter partes examination to make their own case before the Patent Trial and Appeals Board).  Importantly, making the process of challenging patents more efficient is beneficial to all who participate in the patent marketplace and to the public (which shouldn’t give monopolies to non-innovative ideas).

Changes to the process of patent proceedings in federal court could go a long way toward addressing this problem and improve the patent system as a whole.

  • Patentee Statement Regarding Meaning of Claim
    • Shortly after the start of the litigation (as part of the required disclosure process?), the patentee should be required to provide a detailed statement regarding the meaning of its asserted claims and how the claim relates to the infringing product/process.  This statement should be in sufficient detail so as to determine possible infringement by the potential infringer and supported by references to the patent.
    • Pros
      • Provides further detail regarding the basis of the claim against the potential infringer
      • Places the patentee in a position to make definitive statements about its patent without the aid of possible invalidating references or the patentees technology (neither of which are inherently relevant to the determination of a claim’s meaning)
    • Cons
      • May not provide enough detail to settle the suit
  • Accelerated claim construction
    • Claim construction should be held prior to any discovery, and the patentee should be required to provide its brief first.
      • Pros
        • Lower cost to parties
        • Presents potential infringer with a first cut as to whether it has valid non-infringement and/or invalidity arguments
      • Cons
        • Parties may not be fully aware of potential claim terms that will need to be construed (but, court can always subsequently construe if necessary)
  • Unless a preliminary injunction is awarded, invalidity of the patent should be determined first.
    • Pros
      • Places discovery further down the road
      • May allow for joint defense agreements between multiple interested parties – collective action against a patent troll
      • May change tactic of defendant to not use reexamination process at USPTO
    • Cons
      • If patentee is being squeezed from market by competitor who is infringing, this process may delay an award of infringement

Patent trolls will typically go after smaller companies in order to a) raise money for future litigation against bigger companies and to b) avoid litigation.  Thus, if there were a scheme by which smaller companies could thwart these initial advances by patent trolls, trolls may be less effective overall at extracting licensing fees.  In this regard, the state or private companies could establish a fund for invalidity challenges to patents.  The fund could finance, for example, the commissioning of an invalidity analysis, a challenge at the USPTO (reexamination), or even portions of the litigation (especially if the process above was adopted).

  • Pros
    • By allowing small companies to challenge patents this should cut off a significant funding source for trolls
    • Smaller companies would have a better opportunity to compete in the marketplace as they would not be readily extorted (assumption being that smaller companies have less ability to absorb unnecessary license fees)
    • Any company that contributes could be allowed access to the fund
  • Cons
    • There will need to be factors regarding contribution to the fund, access to the fund, and what the fund will pay for.  These factors are likely to exclude some and not others.

The State Fights Back – Motion to Remand Filed

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Vermont AG files Motion to Remand - Trying to Get Back to State Court

Vermont AG files Motion to Remand – Trying to Get Back to State Court

The State of Vermont has filed a Motion to Remand, asking the Federal Court to send the case back to State Court.  The full motion can be found here.

The crux of the State’s argument is summarized nicely in the following paragraph from the motion:

This is a state-law case and it belongs in state court. True, the letters sent by MPHJ alleged patent infringement. But the State’s consumer fraud claims have nothing to do with the validity of MPHJ’s patents. Nor does the State’s complaint address whether, in fact, any Vermont businesses are infringing the patents. Even assuming the patents may be valid, and some Vermont businesses may have infringed those patents, the letters sent to Vermont consumers were unfair and deceptive. Although federal jurisdiction over patent law is broad, it does not stretch this far. This Court lacks jurisdiction and the case should be remanded to state court.

Although I’ll provide more detail later – the two prongs of this analysis address the two means for the Federal Court to have jurisdiction, i.e., federal question jurisdiction and diversity jurisdiction.  Addressing the later, there is little doubt based on current case law that the State’s participation as a party does not give rise to diversity jurisdiction.  MPJH will likely argue that the State is merely representing the interest of infringing parties that could have defended the infringement claims, but haven’t.  Of course, the State is always representing the interest of a myriad of parties that could otherwise defend themselves.  If the Federal Court allowed this theory to proceed, it would open up a pandora’s box of questions for future State enforcement actions.

Federal question jurisdiction is more appropriate, but likely isn’t available here.  There will not be a claim construction; there will not be any analysis of validity of the patents; there will be no infringement analysis.  In short, many of the patent specific questions are simply not going to be an issue in this case.

What remains, of course, is the preemption issue – but this issue does not require resolution by a federal court.

Being in State Court doesn’t mean that the AG is going to win this case.  As I discuss here, there are significant hurdles it needs to overcome.  However, if the AG wins at the trial court, one would expect, based upon the past history of the Vermont Supreme Court, that it would likely uphold a finding of no preemption.