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OSTEOTECH, INC. v. GENSCI REGENERATION SCIS.

May 4, 1998

OSTEOTECH, INC., Plaintiff,
v.
GENSCI REGENERATION SCIENCES, INC. and GENSCI LABORATORIES, INC., Defendants.



The opinion of the court was delivered by: BISSELL

OPINION

 BISSELL, District Judge

 This matter comes before the Court on plaintiff's motion for a preliminary injunction, against a similar action in the Central District of California, and defendants' motion to dismiss, transfer or stay the case at bar. Plaintiff Osteotech, Inc. ("Osteotech") alleges here that by making, using and selling two products called DynaGraft Gel and DynaGraft Putty, defendants GenSci Regeneration Sciences, Inc. ("GenSci Canada") and GenSci Laboratories, Inc. (GenSci Labs") are infringing its U.S. Patent, No. 5,290,558 ("'558 Patent"). The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. ยง 1331.

 STATEMENT OF THE CASE

 I. Procedural History

 This action ("New Jersey Action") is one of two related actions, the other having been filed in California ("California Action"). Although both actions involve the infringement of Osteotech's '558 Patent, the California Action is broader. In the California Action, GenSci Labs seeks a declaratory judgment that it is not infringing Osteotech's '558 Patent, and it also claims that Osteotech is infringing its U.S. Patent Nos. 4,394,370 ("'370 Patent"), 4,472,840 ("'840 Patent"), and 5,707,962 ("'962 Patent") by making, using and selling its Grafton FLEX product. As well, the California Action involves three state law claims by GenSci Labs alleging that Osteotech (1) intentionally interfered with a business relationship between GenSci Labs and the American National Red Cross Tissue Service ("ARC"); (2) negligently interfered with GenSci Labs' prospective economic advantage with ARC; and (3) induced ARC to breach a contract that it had with GenSci Labs. GenSci Canada, however, is not a party in the California action.

 Osteotech filed the New Jersey Action on January 16, 1998, and GenSci Labs filed the California Action on January 28, 1998. Although this action was first filed, the complaint was first served in the California Action. On April 8, 1998, Judge Stotler entered an Order in the California Action granting in part and denying in part Osteotech's (the defendant in that action) motion to dismiss, transfer or stay that action. In essence, Judge Stotler determined that a stay of the California Action, pending this Court's resolution of GenSci Labs' and GenSci Canada's motion to dismiss the New Jersey Action for lack of personal jurisdiction, best served the interests of justice.

 II. Jurisdictional Facts

 GenSci Labs is incorporated in the State of Washington and has its principal place of business and corporate headquarters in Irvine, California. It is a biomedical company engaged in the development and manufacture and sale of products utilizing bone and tissue regeneration technology for use in the periodontal and orthopedic industries. These products include the DynaGraft Gel and DynaGraft Putty products alleged to infringe Osteotech's '558 Patent. (DeMesa Decl., PP 3-4). GenSci Labs asserts that it does not do business in New Jersey but, rather, conducts all of its business activities involving DynaGraft Gel and DynaGraft Putty at its facilities in Irvine, California. (Id., P 3).

 GenSci Labs is a relatively small company. It currently has only 22 full-time employees, 18 of whom live and work in Orange County, California. Five of GenSci Labs' six senior officers live and work in California. (Id., PP 5-6). GenSci Labs is wholly owned by its parent, Gen Sci Canada, which has its corporate offices in Vancouver, British Columbia. GenSci Labs asserts that it maintains a separate existence from GenSci Canada. Its business activities are separate and distinct. (Trotman Decl., PP 3-4; DeMesa Decl., PP 7-8).

 GenSci Canada asserts that it does not manufacture, use or sell its DynaGraft products in the United States, let alone in New Jersey. (Id.) Neither company has any facilities, employees, registered agents or real property in New Jersey, and neither has a regular or established place of business or maintains an office, telephone listing, bank account or manufacturing facilities in New Jersey. (Trotman Decl., PP 3-4; DeMesa Decl., PP 3, 6, 8, 12).

 Osteotech alleges that GenSci Canada has had repeated business contacts with Osteotech in New Jersey relating to the subject matter of the present action. In support of these allegations, Osteotech proffers letters written to it by officers of GenSci Canada, namely Dr. Jim Trotman, President and Chief Executive Officer of GenSci Canada, indicating an interest in possible business dealings and visitations with Oteotech. (Jeffries Decl., PP 4-5). Osteotech alleges that two meetings were held at its Shrewsbury, New Jersey facilities in 1993-94 to discuss the possibility of collaborating on a project called the HCMB Sponge and that present at those meetings from GenSci Canada were Trotman; Ray Cottrel, GenSci Canada's Chief Operating and Financial Officer; and representatives of GenSci Canada's predecessor, Biocoll Medical Group ("Biocoll"). Additionally, similar inconclusive negotiations resumed in 1996 and early 1997; however, the meetings between the parties were conducted in Chicago, Illinois and the correspondence regarding those negotiations does not specifically relate to the '558 Patent. (Exhs. C-1 through C-9 at Apr. 20, 1998 oral argument).

 In addition, Osteotech alleges that GenSci Labs placed in the stream of commerce in New Jersey the precise products that Osteotech alleges are infringing its '558 Patent. (Jeffries Decl., P 6). For example, GenSci Labs allegedly sold products infringing the '558 patent to a hospital in Toms River, New Jersey on November 26, 1997. (Id., P 5). Osteotech indicates, as well, that both GenSci Labs and GenSci Canada have advertised the products at issue in this lawsuit in publications circulated in New Jersey. (Id., P 7 and Exh. 6). Osteotech also proffers an Internet advertisement allegedly utilized by both defendants (with the alleged infringing products listed thereupon), which is easily accessed from computers everywhere, including New Jersey. (Id., Exh. 7).

 ANALYSIS

 I. Motion to Dismiss for Lack of Personal Jurisdiction

 A. Standard Pursuant to Fed. R. Civ. P. 12(b)(2)

 The rules of the state in which the district court sits will determine whether it may assert personal jurisdiction over a non-resident defendant. Fed. R. Civ. P. 4(e). New Jersey Court Rule 4:4-4(e) functions as the State's long-arm statute and extends New Jersey's jurisdictional reach to the fullest limits permitted by the U.S. Constitution, subject only to due process of law. Charles Gendler & Co. v. Telecom Equipment Corp., 102 N.J. 460, 469, 508 A.2d 1127 (1986). Pursuant to the fourteenth amendment's Due Process Clause, a nonresident defendant is amendable to suit in a particular forum when she has "certain minimum contacts with [the forum state] such that maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 85 L. Ed. 278, 61 S. Ct. 339 (1940)). The nature of contacts must be such as to provide the defendant with "fair warning" that it could be "haled into court in the forum state." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 62 L. Ed. 2d 490, 100 S. Ct. 559 (1980); McGee v. International Life Ins. Co., 355 U.S. 220, 225, 2 L. Ed. 2d 223, 78 S. Ct. 199 (1957).

 Because both GenSci Canada and GenSci Labs have raised a jurisdictional objection, Osteotech bears the burden of demonstrating that each company's contacts with New Jersey are sufficient to support an exercise of personal jurisdiction. Mellon Bank (East) PSFS Nat. Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). Although Osteotech will ultimately have to establish jurisdiction by a preponderance of the evidence, see Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992), at this juncture it need only make a prima facie showing that the Court has personal jurisdiction over defendants. A plaintiff makes a prima facie showing if he establishes, "with reasonable particularity, sufficient contacts between the defendant and the forum state." Mellon Bank, 960 F.2d at 1223.

 A plaintiff may establish jurisdiction in a forum either by showing that the defendant has continuous and systematic contacts with the forum (general jurisdiction) or that the cause of action arose out of defendant's activities within the forum state (specific jurisdiction). Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 416, 80 L. Ed. 2d 404, 104 S. Ct. 1868 (1984). To establish either general or specific jurisdiction, Osteotech must show that each of defendant's contacts with New Jersey are shaped by purposeful conduct making it reasonable for it to anticipate being haled into court here. Worldwide Volkswagen, 444 U.S. at 297. A single, unsolicited contact, random or fortuitous acts or the unilateral acts of others (including the plaintiff) do not constitute a purposeful connection between the defendant and the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 85 L. Ed. 2d 528, 105 S. Ct. 2174 (1985); Covenant Bank for Savings v. Cohen, 806 F. Supp. 52, 55 (D.N.J. 1992). Rather, "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefit of the protection of its laws." ( Id. at 56, quoting Hanson v. Denckla, 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 78 S. Ct. 1228 ...


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