Before 2017

Comprehensive Ruling on Personal Jurisdiction and Transfer Issues Offers Cautions and Gems for In-house Counsel and Trial Lawyers

In a 46-page order, Judge Timothy Batten denied a motion to dismiss under FRCP 12(b)(2) and (3) for lack of personal jurisdiction and improper venue, or in the alternative to transfer venue brought by OMsignal, Inc. (“OMsignal”) filed in connection with the complaint of Sarvint Technologies, Inc. (“Sarvint”) in Case No. 1:15-cv-70-TCB in the United States District Court for the Northern District of Georgia, Atlanta Division.

Background Facts
Sarvint brought suit for infringement of U.S. Patent No. 6,970,731 (the ‘731 Patent) relating to a “smart shirt” that can unobtrusively measure a person’s vital signs without external wiring or electrode patches.  This “wearable motherboard” was developed at the Georgia Institute of Technology by Sarvint’s co-founders Dr. Sundaresan Jayaraman and Sungmee Park.  The ‘731 Patent was assigned by Sarvint’s cofounding inventors to Georgia Tech Research Corporation (“GTRC”) which then exclusively licensed it to Sarvint.  Sarvint accuses an OMsignal fitness shirt of infringing the ‘731 Patent.

The Court noted that Sarvint is headquartered in the district as is the owner GTRC.  OMsignal is based in and operated out of Montreal, Canada, with no “brick-and-mortar place of business” in Georgia.  OMsignal operates a standard e-commerce website and admits to selling accused products in Georgia.  OMsignal argued its contacts are minimal – no offices, places of business, employees, officers, directors, bank accounts, business records, real property, or registration in Georgia and that it has never traveled to the state.

Motion to Dismiss

Once personal jurisdiction is challenged, the plaintiff has the initial burden to “make out a prima facie case of jurisdiction.”  Order at 5.  “[T]he court must draw all reasonable inferences arising from the proof, and resolve all factual disputes, in the plaintiff’s favor.”  Id., citing Trintec Indus., Inc. v. Pedre Promotional Prods., Inc., 395 F.3d 1275, 1283 (Fed. Cir. 2005).  After stating this principle, the Court next turned to application of the two-part inquiry set forth in Sculptchair, Inc. v. Century Arts, Ltd., 94 F.3d 623, 626 (11th Cir. 1996) (noting that the issue of personal jurisdiction in a patent infringement action is governed by Federal Circuit law as explained in LSI Indus. Inc. v. Hubbell Lighting, Inc., 232 F.3d 1369, 1371 (Fed. Cir. 2000)).  The two-part inquiry is:
(1)  whether jurisdiction exists under Georgia’s long-arm statute; and
(2)  whether exercising such jurisdiction is consistent with federal due process.

Despite holdings that the Georgia long-arm statute is co-extensive with federal due process jurisdiction, the Eleventh Circuit requires a separate analysis.  Diamond Crystal Brands, Inc. v. Food Movers Int’l, Inc., 593 F.3d 1249, 1263 (11th Cir. 2010).  Although a purposeful act to transact business within the state is required, there is no requirement to be present – mail, telephone calls, and other “intangible” acts can suffice.”  Diamond Crystal at 1264. 
In considering Georgia’s long-arm statute the Court noted there are two kinds of personal jurisdiction — specific and general.  The Court found that general jurisdiction was not justified by OMsignal’s limited contacts and not argued by Sarvint.  For specific jurisdiction, isolated and sporadic contacts related to the cause of action can suffice.  See LSI Indus. Inc., 232 F.3d at 1375.  The Order states that OMsignal conceded that it has transacted “any business” under the Georgia long-arm statute and that the business related to the cause of action.  Order at 9.

In its separate analysis of federal due process, the Court applied the following three part test to determine if the minimal contacts of OMsignal allowed exercise of jurisdiction without offending “traditional notions of fair play and substantial justice”:[i]
(1)  whether the defendant ‘purposefully directed’ its activities at residents of the forum;  (2)  whether the claim ‘arises out of or relates to’ the defendant’s activities with the forum;  (3)  whether the assertion of personal jurisdiction is “reasonable and fair.’

Inamed v. Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir. 2001).  The Court held “Once minimum contacts are established, jurisdiction over a defendant is presumptively reasonable, and the burden then shifts to the defendant to demonstrate a ‘compelling case’ as to why the exercise of jurisdiction would be unreasonable.”  Order at 11, citing Burger King Corp. v. Rudzewiez, 471 U.S. 462, 476-77 (1985).  However, “’so long as [a defendant] creates a substantial connection with the forum, even a single act can support jurisdiction.’”  Id., quoting Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998).
Judge Batten next examined[ii] OMsignal’s website interaction in relation to the well-reasoned sliding scale employed a frequently cited case, Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997).  Order at 13.  This scale is a must-read for any party seeking or defending a motion to dismiss based on lack of personal jurisdiction where the key contact relates to a website.  The portion of the scale which applied to OMsignal reads as follows:
“At one end of the spectrum are situations where a defendant clearly does business over the Internet.  If the defendant enters into contracts with residents of a forum jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper.”  Id.

The Court went on to hold: “while OMsignal’s web presence suggests that the exercise of jurisdiction is proper, it is OMsignal’s direct sale and shipment of the product to Georgia residents, and its concomitant receipt of revenue from those transactions, that clearly establishes the key contact for purposes of the present analysis.”[iii]  Order at 16.  Judge Batten went on to note at page 18:
“While the Federal Circuit has not ruled directly on whether purposeful availment exists when a defendant’s only contacts with the forum state are sales made through an e-commerce website, the Court concludes that the contacts in this case are more than adequate to support the exercise of specific jurisdiction.”

The Court found the decision in WhatRU Holding, LLC v. Bouncing Angels, Inc., 2014 WL 641517 at *4 (D. Minn. Feb. 19, 2014),“most instructive.”  One defendant, EZ Inflatables, Inc., escaped jurisdiction based on no sales having been made by its interactive website, while one interactive sale by co-defendant Bouncing Angels conferred jurisdiction.
Determinative of the “fair warning” requirement was the fact that the accused products were themselves the products sold by the interactive website into Georgia.  Order at 23.   See Diamond Crystal, 593 F.3d at 1267.

In assessing the “fair and reasonable” requirement, the Court noted that, once minimum contacts have been shown, it is the defendant’s burden “to ‘present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.’”  Order at 24, citing Burger King Corp., 471 U.S. at 477.  The Court noted that OMsignal had also moved to transfer the case and had failed to establish that the relevant factors favored transfer, a less substantial burden to meet than the “compelling case” requirement for dismissal.  Order at 25.

Motion to Transfer
The Court next examined the Motion to Transfer using the factors set forth in detail in our recent post on July 14 in another Northern District of Georgia case.  This post will not repeat or provide a detailed reexamination of those factors other than to point out that this case reached a different result and, understandably, selected stronger case cites opposing transfers. 
The Court held that the defendant “must make ‘a strong case for transfer and if the transfer would merely shift inconvenience from one party to the other, or if the balance of all factors is but slightly in favor of the movant, plaintiff’s choice of forum should not be disturbed and transfer should be denied.’”  Order at 29, quoting Bell v. K-Mart Corp., 848 F. Supp. 996, 998 (N.D. Ga. 1994) (quoting Grey v. Cont’l Mktg. Assocs., Inc., 315 F. Supp. 826, 831 (N.D. Ga. 1970)).
The Court went on to note at page 29: 
Moreover, “federal courts traditionally have accorded a plaintiff’s choice of forum considerable deference.”  In re Ricoh Corp., 870 F.2d [570] at 573 [(11th Cir. 1989)].  “[U]nless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.”  Moore v. McKibbon Bros., Inc., 41 F. Supp. 2d 1350, 1356 (N.D. Ga. 1998) (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)).

In considering the transfer factors, Judge Batten began by noting that OMsignal’s argument that Sarvint does not have ties to Georgia was “patently false.” Order at 30.  In considering the second factor of the convenience of witnesses, the Court noted that OMsignal argued seven non-party witnesses were in Canada and not subject to a compulsion to testify in Georgia – “conveniently” failing to mention that five of those seven were representatives of a defendant in a parallel case brought by Sarvint in Georgia (the Court found them to be “effectively party-witnesses for purposes of this case” – at 32).  
On the trial efficiency and interest of justice factor, the Court noted that there are six cases brought on the ‘731 Patent by Sarvint in the Northern District of Georgia.  Judge Batten stated at page 40:
“The Federal Circuit has explained that “[t]he existence of multiple lawsuits involving the same issues is a paramount consideration in determining whether a transfer is in the interest of justice.”  In re Volkswagen of Am., Inc., 566 F.3d 1349, 1351 (Fed. Cir. 2009).”

It is worth noting that the Court also commented on the pendency of a motion for a preliminary injunction by Sarvint.  Foxworthy v. Custom Teeds, Inc., 879 F. Supp. 1200, 1208 (N.D. Ga. 1995), was cited for a principle worthy of an observer’s notation:  “[W]hile the Court recognizes that an injunction ought not issue from a court where venue is improper, where the primary concern is merely one of convenience, ‘the interests of justice surely would be disserved for forcing a plaintiff to await ruling on a motion for preliminary injunction until a more convenient court has time to receive, apprehend and consider the motion.”  Order at 45.  The Court referenced a stronger statement at page 1209 of Foxworthy, “In short, one significant factor that ought to be placed onto the § 1404(a) scales is the pendency of substantive motions requiring immediate attention.”  Id

This relatively lengthy opinion provides both great gems and strong cautions for corporate counsel and patent litigation practitioners.
The Order was issued in Sarvint Technologies, Inc. v. OMsignal, Inc., No. 1:15-cv-00070-TCB, in the U.S. District Court for the Northern District of Georgia, Atlanta Division, on June 2, 2015, by U.S. District Judge Timothy C. Batten, Sr. [Dkt. 30].                                       

[i] Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
[ii] Because the Federal Circuit has not yet adopted this scale, the Court only utilized it as a factor in the Court’s consideration of the issue.
[iii] Judge Batten notes at page 20 of the Order that there were seven sales made by OMsignal into Georgia using its website.

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