McKenzie v. Hero Industries et al, No. 4:2009cv00094 - Document 31 (D. Ariz. 2009)
Court Description: ORDER denying 5 Motion to Dismiss Case for Lack of Jurisdiction; denying as moot 12 Motion for Service by US Marshal; denying 19 Motion to Dismiss Case for Lack of Jurisdiction; denying 28 Motion to StrikePlaintiff's Response ; denying 29 Motion for Extension of Time for Plaintiff to Respond to Dfts' Motion to Strike. ***SEE ATTACHED PDF FOR COMPLETE INFORMATION***. Signed by Judge David C Bury on 7/29/09.(LSI, )
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McKenzie v. Hero Industries et al 1 Doc. 31 WO 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF ARIZONA 8 9 10 11 12 13 Thomas McKenzie, ) ) Plaintiff, ) ) v. ) ) Hero Industries; Hero Products Group; ) I.C.T.C. Holdings Corporation (WA); I.C.T.C. ) Holdings Corporation (Canada), ) ) Defendants. ) ) CV 09-94 TUC DCB ORDER 14 15 Plaintiff filed his Complaint on February 19, 2009. He appears pro se. On March 16 23, 2009, Defendants filed a motion to dismiss. The Court held the motion in abeyance and 17 ordered Defendant I.C.T.C. Holdings Corporation (WA) to show cause why default should 18 not be entered against it for failing to file an Answer and ordered Plaintiff to file a Response 19 to the Motion to Dismiss. Both parties followed the directives of the Court, and on April 11, 20 2009, Defendants supplemented the Motion to Dismiss by filing a second Motion to Dismiss. 21 All issues have been fully briefed. The Court denies the Application for Entry of Default 22 against I.C.T.C. Holdings Corporation (WA) and the Motion to Dismiss for the reasons 23 explained below. 24 Introduction 25 Thomas J. McKenzie (“Plaintiff”) is a resident of Arizona and the legal owner of all 26 rights and interests in United States Patent No. 5,468,383, “Fluid Filter Holder”(“the 383 27 patent”). I.C.T.C. Holdings Corporation (WA) is a corporation located in Snohomish, WA 28 and is a wholly owned subsidiary of I.C.T.C. Holdings Corporation (Can), which is a Dockets.Justia.com 1 Canadian corporation whose principle place of business is Delta, British Columbia, Canada. 2 HERO Products Group is a working group of I.C.T.C. (Can) and is not an independent 3 business entity. HERO Industries does not exist as an entity. 4 Plaintiff claims Defendants negotiated for and received from Plaintiff twelve free 5 Fluid Filter Holders manufactured under the 383 patent in compliance with the notice 6 provisions of 35 U.S.C. §287. Plaintiff further claims that Defendants directly and 7 deliberately infringed on the 383 patent by the production and sale of the “Intake Syphon 8 Cage.” Plaintiff seeks injunctive relief under 35 U.S.C. § 283 and monetary damages under 9 35 U.S.C. § 284. 10 The Defendants ask the court for dismissal under Rules 12(b)(2), (3), (4) and (5) for 11 lack of personal jurisdiction, improper venue, insufficient process, insufficient service of 12 process, or alternatively to transfer venue to the United States District Court for the Western 13 District of Washington. Defendants admit I.C.T.C. (WA) was properly served under Fed. 14 R. Civ. P. 4. However, Defendants contend that service of process was insufficient for 15 I.C.T.C. (Can). 16 The Court finds that it has personal jurisdiction over both the Canadian and 17 Washington Defendants and that both have been properly served. This Court is a proper 18 venue for the action. The Court denies the Defendants’ Motion to Dismiss, except as to the 19 non-entity HERO Industries. All other pending motions are denied as moot. The case will 20 be set for a Rule 16, case management scheduling conference. Fed. R. Civ. P. 16. Discussion 21 22 23 I. Personal Jurisdiction The Court denies Defendants’ 12(b)(2) motion to dismiss for lack of personal 24 jurisdiction. The Court finds that it has general and specific personal jurisdiction over the 25 Defendants. 26 It is the burden of the Plaintiff to demonstrate personal jurisdiction. Shute v. 27 Carnival Cruise Lines, 897 F.2d 377, 379 (9th Cir. 1990), rev’d on other grounds, 499 U.S. 28 2 1 585 (1991). When a jurisdictional ruling is based solely on affidavits, dismissal is 2 appropriate only when a plaintiff has failed to make a prima facie showing of personal 3 jurisdiction. Amoco Egypt Oil Co. v. Leonis Nav. Co., Inc., 1 F.3d 848, 850 (9th Cir. 1993). 4 “[T]he plaintiff need only demonstrate facts that if true would support jurisdiction over the 5 defendant.” Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001). 6 To determine whether personal jurisdiction exists, the court must ask whether the 7 forum state’s long arm statute permits service of process and whether the assertion of 8 personal jurisdiction would violate due process. Inamed Corp. v. Kuzmak, 249 F.3d 1356, 9 1359 (Fed. Cir. 2001)(citing Genetic Implant Sys., Inc. v. Core-Vent Corp., 123 F.3d 1455, 10 1458 (Fed. Cir. 1997)). 11 Arizona’s long arm statute reads as follows: 12 A court of this state may exercise personal jurisdiction over parties, whether found within or without the state, to the maximum extent permitted by the Constitution of this state and the Constitution of the United States. . . 13 14 Ariz. R. Civ. P. 4.2(a). Because Arizona’s long arm statute is coextensive with constitutional 15 due process limits, the inquiry collapses into the single question of whether finding 16 jurisdiction over the defendant is consistent with due process. Inamed, 249 F.3d at 1360. 17 To satisfy the due process clause of the Constitution, the Defendant must have 18 “certain minimum contacts such that the maintenance of the suit does not offend ‘traditional 19 notions of fair play and substantial justice.’” International Shoe v. Washington, 326 U.S. 20 310, 316 (1945). International Shoe and its progeny created a two-part test: 1) courts must 21 look to see if there are sufficient contacts to establish that a defendant could “reasonably 22 anticipate being haled into court” in the forum state, and 2) courts must determine if the 23 exercise of jurisdiction by the forum state would offend “traditional notions of fair play and 24 substantial justice.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474- 476 (1985). To 25 have personal jurisdiction over a defendant, the Court must find it has either general or 26 specific jurisdiction. 27 28 3 1 A. Specific Jurisdiction 2 Specific personal jurisdiction arises when a defendant has sufficient “minimum 3 contacts” with the forum state arising from, or related to the cause of action for which the 4 plaintiff brings suit. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 5 2004). The court uses a three-pronged test to find specific jurisdiction: (1) whether the 6 defendant "purposefully directed" its activities to residents of the forum; (2) whether the 7 claim "arises out of or relates to" the defendant's activities with the forum; and (3) whether 8 assertion of personal jurisdiction is "reasonable and fair." Id. at 802 (citing Lake v. Lake, 817 9 F.2d 1416, 1421 (9th Cir. 1987)). If the plaintiff can satisfy the first two prongs, the defendant 10 must then “‘present a compelling case’ that the exercise of jurisdiction would not be 11 reasonable. ” Id. (citing Burger King, 471 U.S. at 476-78). "[J]urisdiction may not be 12 avoided merely because the defendant did not physically enter the forum state." Burger 13 King, 471 U.S. at 476 (emphasis in original). The inquiry focuses on the commercial actor's 14 efforts and whether or not they are "purposefully directed toward residents of another state.” 15 Id. 16 For example, in Burger King the Court found personal jurisdiction existed because 17 the defendant "reached out beyond" the borders of its state and negotiated a franchise 18 agreement with a Florida corporation. Id. The Court held that the "quality and nature" of the 19 relationship to the company in Florida could in no sense be viewed as "random," "fortuitous," 20 or "attenuated," and that the franchise agreement created a substantial connection with 21 Florida. Id. at 479-80. 22 Specific jurisdiction can be found when a defendant knowingly and deliberately 23 makes contacts with the plaintiff in the forum state. Brainerd v. Governors of the University 24 of Alberta, 873 F.2d 1257, 1259 (9th Cir. 1989). In Brainerd, the court found that defendant 25 purposefully directed its activities at the forum state when it received two phone calls and 26 responded to a letter from the plaintiff. Id. Because the cause of action stemmed from those 27 contacts, the Court found specific jurisdiction over a foreign defendant. Id. The Court in 28 4 1 Brainerd recognized a need to protect citizens of Arizona from injury caused within the state. 2 Id.; Akro Corp. v. Luker, 45 F.3d 1541, 1547 (Fed. Cir. 1995) (finding specific jurisdiction 3 over a non-resident in a patent violation suit based on correspondence between both parties). 4 A foreign act that is both aimed at and has an effect in the forum state satisfies the 5 purposefully directed portion of the specific jurisdiction test. Bancroft & Masters, Inc. v. 6 Augusta Nat’l Inc., 223 F.3d 1082, 1087 (9th Cir. 2000). To meet the effects test, the 7 defendant must have committed an act that was expressly aimed at the forum state. Id. 8 Though some harm must occur in that state, it does not necessarily have to be the brunt of 9 the harm. Yahoo! Inc. v. La Ligue Contre Le Racisme et L’Antisemitisme, 433 F.3d 1199, 10 1207 (9th cir. 2006). Conduct is expressly aimed at a forum state when a defendant is alleged 11 to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be 12 a resident of the forum state. Bancroft, 223 F.3d at 1087. 13 In the case at hand, the Defendant has sold only twenty of the alleged infringing 14 products in Arizona in the last six years. Customers can either place an order through an 15 independent sales representative who then places the order with I.C.T.C. (WA), or customers 16 can directly order the product from I.C.T.C. (Can). The presence of independent sales 17 representatives in Arizona suggests Defendants purposefully direct this product into Arizona. 18 However, the small number of the “Intake Syphon Cage” kits sold in Arizona suggests the 19 product may not be purposefully directed into Arizona, but is instead only sold here in 20 response to unsolicited requests from Arizona residents. 21 Plaintiff claims that the Defendants1 “negotiated for” twelve free versions of his 22 Fluid Filter Holder. The word “negotiate” is defined as: “to communicate with another party 23 for the purpose of reaching an understanding.” Blacks Law Dictionary (8th ed. 2004). Acts 24 25 1 27 This allegation must be against Defendant I.C.T.C. Holdings Corporation (Can) because Defendants admit that I.C.T.C. (WA) consists of a registered agent and an independent contractor who is hired to pick up I.C.T.C. Can. mail at a post office in Washington and deliver it to the Canadian office. (Response to OSC (doc. 13) at 2-3.) 28 5 26 1 of negotiation demonstrate purposeful direction of meaningful activities toward the Plaintiff, 2 a resident in the forum state, Arizona. The quality and nature of acts involving patent 3 negotiations culminating in Plaintiff sending 12 prototypes to Canada cannot be characterized 4 as fortuitous or random. 5 The cause of action clearly “arises out of” purposefully directed activities. The 6 Plaintiff alleges that after negotiating for and receiving his product, Defendants violated his 7 patent rights by the production and sale of the Intake Syphon Cage, some of the sales 8 occurring in Arizona. 9 The final prong of the test for exercising specific personal jurisdiction asks whether 10 it is reasonable and fair. In other words, would the Defendants reasonably expect to be haled 11 to court in Arizona? Defendants answer, no because fewer than one percent of sales of the 12 Intake Syphon Cage in the United States occurs in Arizona, with only 31 units being sold in 13 the last three years for a total of $79.19. However, the Defendants deliberately entered into 14 negotiations with an Arizona resident regarding a patent that is now the subject of this 15 lawsuit. Defendants purposefully directed contacts to a resident of this state, they would 16 reasonably expect to face suit in Arizona especially one related to the subject of their 17 contacts. 18 Additionally, the contacts involved business transactions that have financially 19 benefitted Defendants and disadvantaged the Plaintiff, and indirectly the state economy 20 where Plaintiff resides. It is fair to exercise personal jurisdiction over Defendants because 21 Arizona has a strong interest in providing a forum to address economic injury to its residents. 22 Akro, 45 F.3d at 1547 (explaining Minnesota had interest in providing forum for resident 23 claiming foreign corporation was preventing it from manufacturing and marketing its 24 product); Graham Engineering Corp. V. Kempt Products Ltd., 418 F. Supp. 915, 921-22 25 (Ohio 1976) (discussing economic consequences on the state as a basis for exercising 26 jurisdiction in the Ohio courts). 27 28 The Court finds there is specific jurisdiction over the Defendants. 6 1 2 B. General Jurisdiction In a controversy unrelated to defendant’s contacts with the forum state, general 3 personal jurisdiction arises over a non-resident defendant when the defendant engages in 4 “continuous and systematic general business contacts” in the forum state. Tuazon v. R.J. 5 Reynolds Tobacco Co., 433 F.3d 1163, 1169 (9th Cir. 2006); Schwarzenegger, 374 F.3d at 6 801 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 7 (1984)). The test for general jurisdiction has been expressed many times as a 8 determination of whether the defendant has a continuous and substantial presence in the 9 forum state so that being haled to appear in the state would not offend traditional notions 10 of fair play and substantial justice. Best Lock Corp. v. Ilco Unican Corp., 32 U.S.P.Q.2d 11 1223 (S.D. Ind. 1994). General jurisdiction should be an exacting standard as it permits a 12 defendant to be haled into court in the forum state to answer for any of its activities 13 anywhere in the world. See Brand v. Menlove Dodge, 796 F.2d 1070, 1073 (9th Cir. 14 1986) (collecting cases where general jurisdiction was denied despite defendant’s 15 significant contacts with the forum state). “The standard for general jurisdiction is high; 16 contacts with a state must ‘approximate physical presence’” Tuazon, 433 F.3d at 1169 17 (citing Bancroft, 223 F.3d at 1086). 18 In Schwarzenegger, the California court failed to find general jurisdiction over a 19 car dealership in Ohio whose contacts included purchasing automobiles from a California 20 importer, retaining the services of California-based training and direct mail marketing 21 companies, and maintaining a website accessible by California residents. 374 F.3d at 22 801. In Best Lock Corp., a patent infringement case, the defendant sold over $500,000 23 worth of products through the efforts of independent sales representatives to 37 customers 24 in Indiana. 32 U.S.P.Q.2d at 1223. Despite this resulting in less than 1% of the 25 defendant’s total sales, the court found general jurisdiction. Id. “With that much activity 26 it cannot be said that Ilco would not fairly expect to be haled into court in Indiana” Id. In 27 Tuazon, the court found general jurisdiction over the defendant when it derived $145-240 28 7 1 million in annual revenues from that state and maintained an office and staff of permanent 2 employees. 433 F.3d at 1169. 3 Here, the Plaintiff has provided sworn affidavits stating that Defendants sell their 4 products in multiple locations throughout Arizona, including the big-box retailer Home 5 Depot. If this is true, the Defendants have a continuous and systematic presence in the 6 forum state. With sales activity in such multiple retail outlets, Defendants can be 7 expected to face suit in Arizona. Defendants admit that all sales of products in the United 8 States are made through I.C.T.C. (WA). (Motion to Dismiss (doc. 19) at 3.) Therefore, 9 the Court finds general personal jurisdiction over both I.C.T.C. Defendants. 10 The Court denies Defendants’ 12(b)(2) motion to dismiss for lack of personal 11 jurisdiction. 12 II. Proper Venue 13 14 15 The Court finds venue is proper. The Defendants’ 12(b)(3) motion to dismiss for improper venue and their motion to transfer venue are denied. In a patent case, venue is proper if the forum state can find personal jurisdiction 16 over the defendant. Trintec Industries, Inc. V. Pedre Promotional Prod. Inc, 395 F.3d 17 1275, 1280 (Fed. Cir. 2005); see Walter Kidde Portable Equipment v. Universal Security 18 Instruments, 304 F. Supp. 2d 769, 770 (N. Carolina 2004) (finding venue was proper in a 19 patent case when the court had personal jurisdiction over defendant for selling the 20 infringing product through distributors in that forum state). “Unless the balance is 21 strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be 22 disturbed.” Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947). 23 A district court can transfer any civil action to any other district court in the 24 interest of justice. 28 U.S.C.A. §1404 (2006). For patent cases, 28 U.S.C.A. §1400 25 provides: 26 27 28 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 8 1 infringement and has a regular and established place of business. 2 28 U.S.C.A. § 1400(b) (2006). Congress further stated that a defendant “resides” in a 3 forum state where “it is subject to personal jurisdiction at the time the action is 4 commenced.” 28 U.S.C. § 1391(c) (2006). The language in § 1391(c) reveals a “clear 5 intention” to supplement § 1400(b). VE Holding Corp. v. Johnson Gas Appliance Co. 6 917 F.2d 1574, 1580 (Fed. Cir. 1990). In VE Holding, the court performed a detailed 7 analysis of historical interpretations of both §1400 (b) and § 1391(c). Id. It concluded 8 that in the 1988 amendment to §1391(c), Congress intended to apply the definition in 9 §1391 of “resides” to § 1400(b). Id. at 1577-1581. 10 11 12 In this case, the Court finds personal jurisdiction exist over the Defendants, therefore, venue is proper in this Court. The 12(b)(3) motion to dismiss for improper venue and the motion to transfer venue are denied. 13 14 15 III. Sufficient Service of Process The Court finds service of process to be sufficient and denies Defendants’ 16 12(b)(4) and (5) motions to dismiss for insufficient process and insufficient service of 17 process. Defendants admit that I.C.T.C. (WA) was properly served. (Motion to Dismiss 18 (doc. 19) at 8.) The dispute arises over proper service of I.C.T.C. (Can). 19 To properly serve a corporation beyond any judicial district in the United States, 20 the plaintiff must do so in accordance with the Hague Convention if service is done 21 within a country that abides by the Convention. Fed R. Civ. P. 4(f)(1). Canada is such a 22 country. Although the Hague Convention does not expressly provide for service by mail, 23 the Ninth Circuit has concluded that service by certified mail is not excluded by the 24 Convention. Brockmeyer v. May, 383 F.3d 798, 802 (9th Cir. 2004). The Hague 25 Convention states that a person may send judicial documents by mail directly to persons 26 abroad unless the country of origin objects to such method. Service of Process Abroad, 27 122 F.R.D. 63, 70 (West 1989). Canadian law defers to the province when determining 28 9 1 proper service of a corporation. Service of Documents SOR/1998-106, §130(1)(c). British 2 Columbia law allows for service on a corporation by personal service or in any manner 3 provided by the Business Corporations Act. British Columbia Rule of Court 11(2)(b) 4 (2009). The Business Corporations Act allows for service to a corporation by “registered 5 mail to the registered office of the corporation”. Canada Business Corporations Act, R.S., 6 ch C-44 (1985). Therefore, neither Canadian nor British Columbia law directly objects 7 to service by mail. Instead, service by registered mail is allowed. 8 9 Therefore, I.C.T.C. (Can) has been properly served under the Laws of the United States, Canadian Law, and British Columbia Law. The Court denies Defendant’s 10 12(b)(4) and (5) Motion to Dismiss for insufficient service and insufficient service of 11 process. 12 Conclusion 13 14 15 The Court denies Defendants’ motions to dismiss under Rules 12(b)(2), (3), (4), and (5), except for dismissing non-entities HERO Industries and HERO Products Group. The Court denies Defendants’ motion to transfer venue under 28 U.S.C. 1404 (a). 16 Accordingly, 17 18 IT IS ORDERED that the Application for Entry of Default (document 2) is DENIED. 19 20 21 IT IS FURTHER ORDERED that Motions to Dismiss (documents 5 and 19) are DENIED, except for dismissal of non-entities Defendants HERO Industries and HERO Products. 22 23 24 25 26 IT IS FURTHER ORDERED that the Motion to Transfer Venue (document 19) is DENIED. ///// ///// ///// 27 28 10 1 2 3 IT IS FURTHER ORDERED that all other pending motions (documents 12, 28, and 29) are DENIED AS MOOT. DATED this 29th day of July, 2009. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11
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