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VP Intellectual Properties, LLC v. Imtec Corp.

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY


December 10, 1999

VP INTELLECTUAL PROPERTIES, LLC
PLAINTIFF,
V.
IMTEC CORPORATION, ET AL.
DEFENDANTS.

The opinion of the court was delivered by: William H. Walls, U.S.D.J.

OPINION

Walls, District Judge

Defendant Imtec Corporation ("Imtec") moves to dismiss plaintiff VP Intellectual Properties' ("VP") complaint for lack of personal jurisdiction and improper venue. In the alternative, Imtec requests severance and the transfer of this case to the District of Oklahoma. Imtec's motion to dismiss for lack of jurisdiction and improper venue is granted in part; its request to sever is placed before the magistrate judge for consideration.

FACTS

Defendant Imtec is an Oklahoma corporation with its principal place of business in Ardmore, Oklahoma. VP is a limited liability company with its headquarters at Fort Lee, New Jersey. VP filed the present complaint against four defendants, including Imtec, for patent infringement. VP claims that Imtec sold a number of dental implant devices, including "threaded" implants, "angled abutment" implants, and "push-in" implants, which infringed various patents held by VP.

Imtec moves to dismiss for lack of personal jurisdiction and improper venue. As evidence that jurisdiction is absent, Imtec states that: (1) it does not have a "regular and established" place of business in New Jersey; (2) it does not have an office or any employees in the state; (3) it has no authorized dealers, manufacturers or distributors in the state; (4) it has no sales agents, salesperson, wholesaler, broker or other type of sales representative in the state; (5) between 1994 and August 1999, it never attended a trade show or other conference in the state; and (6) it has never maintained a New Jersey telephone listing. Def. Brf. at 3. It asserts that the only link it has to the state are "minimal" sales of the threaded and angled abutment implants to New Jersey dentists. Imtec argues that these unsolicited, isolated sales, typically for less than $400, are insufficient to grant either general or specific personal jurisdiction.

VP responds that Imtec's repeated sales to New Jersey dentists, combined with Imtec's commercial Internet site which can be accessed from the state, constitute "continuous, substantial and systematic" contacts with the forum that give rise to general personal jurisdiction. Plaintiff adds that Imtec's actual sales of allegedly infringing products in the forum state are also sufficient to grant this Court specific jurisdiction over Counts I, II, & IV. As for the "push-in" implants, which were never sold in-state, VP argues that Imtec has sent at least one catalog advertising this product to New Jersey. Plaintiff asserts that this offer to sell an allegedly infringing product in the forum state gives the Court specific jurisdiction over this type of implant (Count III).

LEGAL DISCUSSION

Personal Jurisdiction.

If a defendant challenges an action for lack of personal jurisdiction, the burden is on the plaintiff to prove, by a preponderance of the evidence, facts sufficient to establish personal jurisdiction. Carteret Savings Bank, FA v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992). Moreover, the plaintiff must sustain its burden of proof "through sworn affidavits or other competent evidence," and not on bare pleadings alone. Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n.9 (3d Cir. 1984). The plaintiff must show that this Court can maintain jurisdiction over the defendant consistent with due process. DeJames v. Magnificence Carriers, Inc., 654 F.2d 280, 284 (3d Cir.), cert. denied, 454 U.S. 1085 (1981). In deciding a motion to dismiss for lack of personal jurisdiction, the Court must construe disputed facts in favor of the plaintiff and accept them as true. Shushan, 954 F.2d at 142.

A federal court assessing whether jurisdiction may be exercised over a defendant must look to the long-arm statute of the state in which it sits. Fed. R. Civ. P. 4; Mellon Bank (East) PSFS, National Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). Rule 4:4-4 of the New Jersey Court Rules grants jurisdiction to the courts of this state "to the uttermost limits permitted by the United States Constitution," Avdel Corp. v. Mecure, 58 N.J. 264, 268 (1971), "limited only by the due process constraints of the Fourteenth Amendment." DeJames, 654 F.2d at 284.

In New Jersey, to subject a nonresident party to personal jurisdiction, due process requires that party "have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310 (1945). In this regard, the plaintiff must demonstrate "with reasonable particularity" that the Court has either specific jurisdiction, where the cause of action arises from or relates to the defendant's activities in the forum state, or general jurisdiction, where the defendant has continuous and systematic conduct in the forum state. Dollar Savings Bank v. First Security Bank of Utah, 746 F.2d 208, 211 (3d Cir. 1984); Giangola v. Walt Disney World Co., 753 F. Supp. 148, 154 (D.N.J. 1990).

Once a court has found that a defendant's contacts with the forum state are sufficiently significant to confer jurisdiction to the forum, "in appropriate cases" the court may evaluate other facts. Burger King, 471 U.S. 462, 476-77 (1985). These factors include "the burden on the defendant, the forum State's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and the shared interest of the several States in furthering fundamental substantive social policies." Id. General Jurisdiction

As said, to assert general jurisdiction, a plaintiff must demonstrate that the defendant's contacts with the forum are so "continuous and substantial" that the defendant should "expect to be haled into court on any cause of action." See Weber v. Jolly Hotels, 977 F. Supp. 327 (D.N.J. 1997) (citing Helicopteros Nationales de Columbia S.A. v. Hall, 466 U.S. 408 (1984)). Here, the issue is whether the sale of approximately $9,500 in dental implants to New Jersey dentists and an Internet site accessible from New Jersey are enough connection to support general jurisdiction.

A. Sales

Imtec argues that the sales were "isolated," "unsolicited" and "irregular;" that the orders were filled in and shipped from Oklahoma "without the assistance of a network of distribution and in-state promotional efforts;" that the customers paid by credit card and had no ongoing accounts with the company; and that the orders were always shipped "F.O.B." Def. Brf. at 9. Consequently, it asserts that these sales cannot support the exercise of general jurisdiction over the company. VP counters that "over a period of years, [Imtec] has solicited and accepted direct orders from New Jersey and shipped the accused product directly to New Jersey." VP avers that Imtec made approximately "23 sales of accused products directly to customers in New Jersey" and shipped at least one catalog to the state. Pl. Brf. at 4 n.2.

As noted, the exercise of general jurisdiction "is consistent with due process only when the plaintiff has satisfied the `rigorous' burden of establishing that the defendant's contacts are continuous and substantial." Osteotech, Inc. v. Gensci Regeneration Sciences, Inc., 6 F. Supp. 2d 349, 353 (D.N.J. 1998). Defendant's small sales and its demonstrated lack of any sales structure--offices or agents--within the forum state do not satisfy this "rigorous" burden and indicate that the exercise of general jurisdiction is improper. The Court finds that plaintiff has failed to demonstrate the continuity of contact necessary to exercise general personal jurisdiction over Imtec on the basis of $9,500 in sales to New Jersey dentists over a five-year period.

B. Internet

"There are three areas into which Internet use can be categorized" for the purpose of determining whether the exercise of personal jurisdiction is permitted. Mieczkowski v. Masco Corp., 997 F Supp. 782, 786 (E.D. Tex. 1998) (citing Zippo Mfg. Co. v. Zippo Dot Com, Inc. 952 F. Supp. 1119 (W.D. Pa. 1997)). At one end of the spectrum are cases where individuals can directly interact with a company over their Internet site, download, transmit, or exchange information with the company, and enter into contracts with the company via computer. In such cases, the exercise of personal jurisdiction is appropriate. See CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996); Decker v. Circus Circus Hotel, 49 F. Supp. 2d 743, 748 (D.N.J. 1999); Weber v. Jolly Hotels, 977 F. Supp. 327 (D.N.J. 1997). At the other end of the continuum are cases in which the defendant "has done nothing more than advertise on the Internet." Mieczkowski, 997 F. Supp. at 786; Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996), aff'd, 126 F.3d 25 (2d Cir. 1997). Such sites are called "passive" sites and personal jurisdiction is generally not found. Mieczkowski, 997 F. Supp. at 786. In the middle are cases where parties can interact with the defendant company but may not be able to contract with it over the Internet site. Id. In these cases, whether jurisdiction can be found is determined by "examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site." Zippo, 952 F.Supp. at 1124 (citing Maritz Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996)); see also Decker, 49 F. Supp. 2d at 748.

Imtec's Internet site, http://www.imtec.com/imtec, contains: (1) company and product descriptions; (2) distributor information; (3) ordering information; and (4) a catalog request form that can be filled out and electronically transmitted to the company. A customer, then, may browse the products and order a catalog but cannot purchase implants from the company over the Internet. The site, therefore, falls into the middle category. After reviewing the company's level of involvement with its customers via the computer, the Court determines that this site will not support the exercise of general personal jurisdiction over the defendant. Potential customers can send e-mail to customer support personnel but cannot place orders via the computer. They must instead either contact an authorized sales representative or call the company at a local (Oklahoma) or "800" number. The only "active" connection that a potential customer has with the company via computer is a form to order a catalog. This level of interaction, simply put, is not "continuous" or "systematic" enough to find general personal jurisdiction on the basis of the Internet site. See generally Smith v. Hobby Lobby Stores, Inc., 968 F. Supp. 1356 (W.D. Ark 1997) (computer advertisement where defendant did not "contract to sell any goods or services" insufficient to confer jurisdiction). Specific Jurisdiction

Specific jurisdiction over defendant Imtec is appropriate if VP's cause of action arises directly from defendant's actions in the forum state. See Osteotech, 6 F. Supp. 2d at 354; Giangiola v. Walt Disney World, 753 F. Supp. 148, 154 (D.N.J. 1990). The Court "must examine the relationship among the defendant, the forum and the cause of action to determine whether the defendant had `fair warning' that it could be brought to suit here." Osteotech, 6 F. Supp. 2d at 354 (citing Schaffer v. Heitner, 433 U.S. 186 (1977)). Further, "forum-related conduct must form the basis of the alleged injuries and resulting litigation." Id. (citing Helicopteros Nationales de Columbia S.A. v. Hall, 466 U.S. 408 (1984)). The Federal Circuit has adopted this test for determining jurisdiction in patent cases. See Akro Co. v. Luker, 45 F.3d 1541, 1545-46 (Fed. Cir. 1995). *fn1

Imtec argues that its limited sales in New Jersey "have not been so deliberate and purposeful so as to provide a basis for the exercise of personal jurisdiction." Def. Brf. at 7 (citing Asahi Metals Indus. Co. v. Superior Court of Ca., 480 U.S. 102 (1987)). Imtec relies on the absence of a sales structure and advertising within the state and its method of shipping F.O.B. in support of its contention that the sales were "random or fortuitous acts." Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)). VP answers that Imtec "acted purposefully and directed its activities into New Jersey by consummating the sales and shipping products directly to New Jersey dentists." Pl. Brf. at 4. VP estimates that at least 23 sales of allegedly infringing products to New Jersey dentists occurred. VP adds that Imtec has solicited additional sales within the forum; the company sent at least one catalog to the state and maintains a catalog order form on its Internet site. Id.

In patent cases, "the law is clear that, where a defendant infringer is shown to have sold the allegedly infringing product in the forum state, the forum may exercise [specific] personal jurisdiction over the the defendant." See Osteotech, 6 F. Supp. 2d at 354 (citing Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558 (Fed. Cir. 1994)). Regardless of the quantity of products sold or the shipping method used, the sale of patented products to buyers in the forum state creates specific personal jurisdiction over an out-of-state seller. See generally North Am. Philips Corp. v. American Vending Sales, Inc., 35 F.3d 1576, 1579-80 (Fed. Cir. 1994) (finding that goods shipped to sellers f.o.b. were sold in the purchaser's state); Beverly Hills Fan Co., 21 F.3d at 1570 (finding jurisdiction over patent case where sales made to customers in the forum state). Here, Imtec sold two of the three allegedly infringing products to New Jersey purchasers. The Court finds that it can exercise specific personal jurisdiction over Imtec for these sales (Counts I, II & IV of VP's complaint).

Imtec argues and VP concedes, however, that one type of implant, the "push-in" implant was never sold to New Jersey dentists. In support of specific personal jurisdiction over the patent dispute for this product, VP alleges that the company "offered to sell" the "push-in" product within the state in violation of 35 U.S.C. §271(a).

The Court may exercise specific jurisdiction over Imtec for the "push-in" count of the complaint, Count III, if it offered to sell the allegedly infringing product in the forum state. See 3D Sys., Inc. v, Aarotech Labs., Inc., 160 F.3d 1373, 1378-79 (Fed. Cir. 1998). Offers to sell may be formal or they may consist of "generating interest in a potential infringing product to the commercial detriment of the rightful patentee." Id. at 1379 (finding that price quotes were offers to sell despite disclaimers). The 3D court found that because defendant's price quote letters contained "a description of the allegedly infringing merchandise and the price at which it can be purchased," the letters were offers to sell. Id. Mere advertisements directed to a national audience, however, are not "offers to sell" within a particular forum. See ESAB Group, Inc. v. Centricut, LLC, 34 F. Supp. 2d 323, 333 (D.S.C. 1999); see, e.g., Intel Corp. v. Silicon Storage Tech., Inc., 20 F. Supp. 2d 690 (D. Del. 1998). Rather, specific product descriptions and pricing information must be "purposefully circulated" to residents of the forum state. See ESAB, 34 F. Supp. at 333; Lifting Tech., Inc. v. Dixon Indus., Inc., No. 96-68, 1996 WL 653391, at *5 (D. Mont. Aug. 27, 1996) (national magazine advertisements sent to forum state combined with price quote letters sent to resident constituted an "offer to sell" in forum state); see also Decker, 49 F. Supp. 2d at 750.

Here, Imtec may have sent one catalog to a New Jersey dentist. MacDonald Aff. at ¶ 4. Plaintiff, however, does not describe the specific catalog sent to New Jersey nor state whether this catalog contains a description of and pricing information for the "push-in" implant. The company's Internet site which does contain specific product descriptions of "push-in" implants with their catalog order numbers does not contain pricing information. Thus, the Internet site is not an "offer to sell." See 3D, 160 F.3d at 1379 ("offer to sell" must contain "a description of the allegedly infringing merchandise and the price at which it can be purchased").

Plaintiff has the burden to prove, by a preponderance of the evidence, facts sufficient to establish personal jurisdiction. Carteret Savings Bank, FA v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992); see also Stranahan Gear Co. v. NL Indus., Inc., 800 F.2d 53, 58 (3d Cir.1986) (cursory allegation in affidavit does not satisfy burden of proof). Plaintiff has failed to meet this burden for Count III of VP's complaint. Because the Court cannot conclude that Imtec ever offered to sell the allegedly infringing "push-in" implant within this state, it may not exercise specific personal jurisdiction over an infringement suit for this product. See Osteotech, 6 F. Supp. 2d at 354 ("forum- related conduct must form the basis of the alleged injuries and resulting litigation"). Plaintiff's motion to dismiss for lack of personal jurisdiction over a conflict involving the "push-in" implants is granted.

Venue

Venue is governed by 28 U.S.C. § 1400(b):

Any civil action for patent infringement may be brought in the judicial district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business.

In 1988, Congress broadened the corporate residence standard under the general venue statute, 28 U.S.C. § 1391(c), to state that a corporate defendant resides in any judicial district where it is subject to personal jurisdiction. This residence standard applies to the patent venue statute. See V.E. Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578 (Fed. Cir. 1990). Accordingly, venue is proper here for those Counts over which this Court can exercise personal jurisdiction (Counts I, II, & IV).

Request to Sever Under Fed. R. Civ. P. 21

Imtec requests severance in this case. Because a number of parties in this action have recently moved before the magistrate judge for bifurcation (defendant Nobel Biocare, Docket #48; defendant Implant Innov., Docket # 51), and/or consolidation (plaintiff VP against all defendants, Docket #s 42 & 49), the Court places Imtec's request before the magistrate judge for resolution.

CONCLUSION

Imtec's motion to dismiss for lack of personal jurisdiction is denied for Counts I, II, & IV and is granted for Count III. Consequently, venue is proper in this judicial district for the Counts over which the Court has jurisdiction. Imtec's request to sever is placed before the magistrate judge.

ORDER

This matter is before the Court on the motion of defendant Imtec Corporation ("Imtec") to dismiss plaintiff VP Intellectual Properties's ("VP") complaint for lack of personal jurisdiction and improper venue. In the alternative, Imtec requests severance and the transfer of this case to the District of Oklahoma. Upon consideration of the submissions of the parties and for the reasons stated in the accompanying opinion,

It is on this 10th day of December, 1999:

ORDERED that Imtec's motion to dismiss for lack of jurisdiction and improper venue is granted for Count III of VP's complaint and its request to sever is placed before the magistrate judge for consideration.

William H. Walls, U.S.D.J.


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