Authentify Patent Co., LLC v. StrikeForce Technologies, Inc., No. 2:2013cv00741 - Document 35 (W.D. Wash. 2014)

Court Description: ORDER denying 9 Motion to Dismiss and alternative request to transfer venue to the U.S. District Court for the District of New Jersey. by Judge Ricardo S Martinez.(MKB)

Download PDF

Authentify Patent Co., LLC v. StrikeForce Technologies, Inc. Doc. 35 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 AUTHENTIFY PATENT CO., LLC, Case No. C13-00741-RSM 9 Plaintiff, 10 11 12 13 14 15 v. ORDER DENYING MOTION TO DISMISS STRIKEFORCE TECHNOLOGIES, INC., Defendants. I. INTRODUCTION This matter comes before the Court upon Defendant’s Motion to Dismiss. Dkt. # 9. 16 Defendant, StrikeForce Technologies, Inc., moves to dismiss all claims in Plaintiff’s complaint 17 18 pursuant to Federal Rule of Civil Procedure 12(b)(2). The Court granted jurisdictional 19 discovery and oral argument to determine the nature and extent of Defendant’s connections to 20 the forum state. Having considered the parties’ briefing and the relevant record, the Court 21 denies Defendant’s motion for the reasons discussed herein. 22 23 II. BACKGROUND This is a patent infringement action arising under the Patent Act, 35 U.S.C. § 1, et seq., 24 and relating to out-of-band (“OOB”) customer authentication. The relevant factual background 25 26 has been previously discussed in the Court’s Order granting jurisdictional discovery. Dkt. # 23. ORDER DENYING MOTION TO DISMISS - 1 Dockets.Justia.com 1 Plaintiff Authentify Patent. Co. (“Authentify”), a Washington LLC, is the owner of U.S. Patent 2 No. 6,934,858, entitled “System and Method of Using the Public Switched Telephone Network 3 in Providing Authentication or Authorization for Online Transactions,” issued on August 23, 4 2005 (the “ ‘858 Patent”). The ‘858 Patent describes and claims a system for authenticating or 5 authorizing on-line transactions using simultaneous or substantially simultaneous 6 communication on two different networks to verify a user’s identity. Dkt. #1, Ex. A, p. 7. 7 StrikeForce Technologies, Inc. (“StrikeForce”), a Wyoming corporation headquartered in New 8 9 Jersey, makes and sells an OOB authentication software product known as ProtectID. See Dkt. 10 #9, pp. 6-7. StrikeForce is the owner of U.S. Patent No. 7,871,599 (the “’599 Patent”), which is 11 directed to a multichannel security system and method for authenticating a user seeking to gain 12 access to, for example, Internet websites and VPN networks. See Dkt. # 9, p. 6. On July 9, 13 2013, the U.S. Patent and Trademark Office issued to StrikeForce U.S. Patent No. 8,484,698 14 (the “ ’698 Patent”), a continuation of the ‘599 Patent. Authentify’s ‘858 Patent and 15 StrikeForce’s ‘599 and ‘698 Patents all relate to OOB authentication. 16 17 The instant action was filed by Authentify on April 26, 2013, and alleges that 18 StrikeForce’s activities in the United States relating to ProtectID infringe one or more claims 19 of Authentify’s ‘858 Patent. Dkt. #1, ¶ 15. On May 10, 2013, counsel for Authentify sent a 20 letter and copy of the Complaint to StrikeForce, notifying StrikeForce of the filing of litigation 21 22 and inquiring into StrikeForce’s amenability to settlement. See Dkt. # 12, Ex. 2. Authentify had not yet issued a summons when, on May 22, 2013, StrikeForce filed a complaint in the U.S. 23 24 25 District Court for the District of New Jersey, seeking declaratory judgment of noninfringement and invalidity of the ‘858 Patent. StrikeForce subsequently amended its 26 ORDER DENYING MOTION TO DISMISS - 2 1 2 3 complaint in the New Jersey litigation to include Authentify, Inc., Authentify Patent Co.’s sole and managing member, as a defendant. StrikeForce’s jurisdictional theory in the New Jersey litigation is that Authentify Patent 4 Co. is the alter-ego of Authentify, Inc., a company with undisputed “continuous and 5 systematic” contacts with New Jersey. StrikeForce Technologies, Inc. v. Authentify Patent Co., 6 No. 13-3242, Dkt. # 35, p. 7, (D. N.J. 2014). On January 16, 2014, the New Jersey court denied 7 motions to dismiss and to stay by defendants on the grounds that StrikeForce’s alter-ego 8 9 10 11 jurisdictional theory is appropriately decided on summary judgment, after the parties have engaged in discovery. Id. at ¶ 9. StrikeForce moves this Court to dismiss the present action for lack of personal 12 jurisdiction and improper venue under Federal Rule of Civil Procedure 12(b)(2). In the 13 alternative, StrikeForce requests transfer of this matter to the U.S. District Court for the 14 District of New Jersey. See Dkt. # 9. The Court found that a more satisfactory showing of the 15 facts was necessary in order to reach a determination on whether StrikeForce’s actions: (1) 16 17 were purposefully directed at Washington State residents, and (2) constituted offers to sell the 18 allegedly infringing product. See Dkt. # 23. Consequently, the Court continued Defendant’s 19 Motion to Dismiss (Dkt. # 9) for five weeks to allow Plaintiff to conduct limited jurisdictional 20 discovery. Id. 21 22 Each of the parties submitted a supplemental brief in opposition to or support of Defendant’s Motion to Dismiss based on the facts revealed during jurisdictional discovery. See 23 24 25 Dkt. # 24; Dkt. # 26. Plaintiff additionally moves to strike Defendant’s Supplemental Reply (Dkt. # 26) on account of its over-length. See Dkt. # 29. 26 ORDER DENYING MOTION TO DISMISS - 3 III. DISCUSSION 1 2 3 A. Standard for Rule 12(b)(2) Dismissal Plaintiff bears the burden to establish that personal jurisdiction exists. See Lee v. City of 4 5 6 Los Angles, 250 F.3d 668, 692 (9th Cir. 2001). Pursuant to Federal Rule of Civil Procedure 12(b)(2), a defendant may move to dismiss a complaint on the ground that the court lacks 7 personal jurisdiction over the defendant. The law of the Federal Circuit determines whether the 8 exercise of personal jurisdiction comports with the requirements of due process in patent 9 infringement actions. Deprenyl Animal Health, Inc. v. University of Toronto Innovation 10 11 Foundation, 297 F.3d 1343 (Fed. Cir. 2002). Where, as here, the district court has allowed the parties to conduct discovery on the jurisdictional issue and held an evidentiary hearing, the 12 13 14 15 16 17 18 plaintiff must prove that jurisdiction exists by a preponderance of the evidence. Data Disc, Inc. v. Sys. Tech. Associates, Inc., 557 F.2d 1280, 1285 (9th cir. 1977). B. Motion to Strike As a preliminary matter, the Court denies Plaintiff’s’s motion to strike. Plaintiff is correct that Defendant exceeded its allowed page limit pursuant to LCR 7(e). Nonetheless, the Court finds that any prejudice to Plaintiff has been offset by its opportunity to respond at oral 19 argument. The Court admonishes that should Defendant fail to comply with page limits in any 20 21 22 23 future filing in this matter, the Court will disregard any pages in excess of the applicable limit. C. Personal Jurisdiction Determining “whether jurisdiction exists over an out-of-state defendant involves two 24 inquiries: whether a forum state's long-arm statute permits service of process and whether 25 assertion of personal jurisdiction violates due process.” Genetic Implant Sys., Inc. v. Core-Vent 26 Corp. 123 F.3d 1455, 1458 (Fed. Cir. 1997) (citing Burger King Corp. v. Rudzewicz, 471 U.S. ORDER DENYING MOTION TO DISMISS - 4 1 462, 471–76 (1985)). Because Washington’s long-arm statute is coextensive with the limits of 2 due process, the two inquiries collapse into a single inquiry: whether jurisdiction comports 3 with due process. See, e.g., IP Innovation, L.L.C. v. RealNetworks, Inc., 310 F.Supp.2d 1209, 4 1212 (W.D. Wash. 2004); Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir. 2001). 5 6 International Shoe and its progeny establish a two-pronged test for whether the exercise of personal jurisdiction comports with due process. See Int’l Shoe Co. v. State of Washington, 7 326 U.S. 310 (1945); Deprenyl, 297 F.3d at 1350. First, the defendant must have “minimum 8 9 contacts” with the forum. Id. Second, the assertion of personal jurisdiction over the defendant 10 must comport with traditional notions of fair play and substantial justice. Id. Due process 11 permits the exercise of general jurisdiction where a defendant’s contacts are continuous and 12 systematic. See Helicopteros Nacionales de Colom., S.A. v. Hall, 466 U.S. 408, 415-416 13 (1984). Here, Plaintiff does not assert general jurisdiction over Defendant but rather asserts 14 that this Court may properly exercise specific jurisdiction over Defendant. See Dkt. #11, p. 5. 15 The Federal Circuit applies a three-prong test in determining whether the exercise of 16 17 specific jurisdiction over an out-of-state defendant comports with due process: (1) the 18 defendant must have “purposefully directed [its] activities at residents” of the forum state; (2) 19 the claim must arise out of or relate to the defendant’s activities in the forum state; and (3) the 20 assertion of personal jurisdiction over the defendant must comport with traditional notions of 21 22 fair play and substantial justice. Akro Corp. v. Luker, 45 F.3d 1541, 1545–46 (Fed.Cir. 1995), cert. denied, 515 U.S. 1122 (1995). “Under this test, a court may properly assert specific 23 24 25 26 jurisdiction, even if the contacts are isolated and sporadic, so long as the cause of action arises out of or relates to those contacts.” Silent Drive, Inc. v. Strong Industries, Inc., 326 F.3d 1194, 1200 (Fed. Cir. 2003). Thus, in “contrast to general, all-purpose jurisdiction, specific ORDER DENYING MOTION TO DISMISS - 5 1 jurisdiction is confined to adjudication of issues deriving from, or connected with, the very 2 controversy that establishes jurisdiction.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 3 131 S.Ct. 2846, 2851 (2011). The plaintiff bears the burden of establishing that the first two 4 factors have been met. Inamed Corp., 249 F.3d at 1360. With regard to the third factor, the 5 burden of proof is on the defendant to make a convincing case that other considerations render 6 the exercise of jurisdiction constitutionally unreasonable. Id. 7 In the present case, the satisfaction of the first and second prongs of the minimum 8 9 10 contacts test turns on the character and extent of Defendant’s solicitation of Washington-based companies with regards to its ProtectID product. 11 a. Purposeful Direction. 12 The first prong of the minimum contacts test assesses whether a defendant has 13 14 “deliberately … engaged in significant activities within a [forum] State” and has thereby “availed himself of the privilege of conducting business there” and acquired the protection of 15 the forum’s laws. Burger King, 471 U.S. at 475-76. A single act is sufficient to support 16 17 personal jurisdiction where it establishes a “substantial connection” to the forum state. Id. at 18 475 n. 18. See also, Nuance Communications, Inc. v. Abbyy Software House, 626 F.3d 1222, 19 1232-33 (Fed. Cir. 2010). 20 21 22 In granting jurisdictional discovery, the Court explained that Plaintiff had not yet met its burden of showing that Defendant had purposefully directed activities into Washington. See Dkt. # 23, p. 7. In 3D Systems Inc. v. Aarotech Laboratories, the Federal Circuit rested its 23 purposeful direction analysis on a number of activities by the defendant beyond sending 24 25 26 promotional letters, including sending videos and sample parts and issuing price quotations to residents of the forum state. 160 F.3d 1373, 1378 (Fed. Cir. 1998). Prior to jurisdictional ORDER DENYING MOTION TO DISMISS - 6 1 discovery, Authentify relied on consecutive Declarations of StrikeForce’s Executive Director, 2 George Waller, to make a similar showing as to StrikeForce’s activities in Washington. 3 However, there were no actions analogous to those discussed in 3D Systems mentioned in the 4 Waller Declarations or alleged by Authentify in its complaint or via affidavit. See, e.g., Dkt. # 5 11, p. 7 n.3; Dkt. # 23, pp. 7-8. Plaintiff now contends that emails acquired during 6 jurisdictional discovery are illustrative of Defendant’s purposeful direction of activities at 7 Washington-based residents. 8 9 Plaintiff argues that the purposeful availment prong is satisfied where Defendant sent 10 promotional material, offered to set up trial periods, conducted an online demonstration of the 11 product, and sent ProtectID pricing information to Washington-based entities or individuals. 12 See Dkt. #24, p. 8. Plaintiff asserts that StrikeForce has provided technical data and pricing 13 information to at least two different entities in Washington in an attempt to sell its ProtectID 14 product. See Dkt. # 24, p. 7. The email communications at issue involve correspondence with 15 three Washington-based residents: Jordan Lee of Compushare Management Systems, Inc.; 16 17 18 19 Mark Grindstaff, an employee of Pierce County; and Microsoft Corporation. i. Jordan Lee. Plaintiff asserts that Defendant’s communications with Jordan Lee were made in 20 furtherance of the formation of a business relationship, with Mr. Lee as a prospective reseller 21 of StrikeForce’s ProtectID product in Washington State. See Dkt. # 24, p. 4. As part of Mr. 22 Waller’s attempt to enlist Mr. Lee as a reseller of ProtectID, Mr. Waller provided 23 informational brochures to Mr. Lee regarding the ProtectID product, including a white paper 24 25 that described how the ProtectID system operated. See Dkt. #25, Exh. B, pp. 8-9. Mr. Waller’s 26 ORDER DENYING MOTION TO DISMISS - 7 1 2 3 communications with Mr. Lee also included specific pricing information on two separate occasions. See Dkt. #25, Exh. B, pp. 7-8. Defendant attempts to draw a distinction between Mr. Lee, as one interested in reselling 4 StrikeForce products, and one who simply purchases such products without intending to resell 5 them. See Dkt. # 26, p. 12. However, this distinction is one without a difference because Mr. 6 Waller’s attempt to sell the ProtectID product to Mr. Lee is the act at issue in the Court’s 7 jurisdictional inquiry, not Mr. Lee’s subsequent intention to resell the product. This act of 8 9 attempted sale is evidenced by Mr. Waller’s communications with Mr. Lee, which included 10 more than mere promotional materials, namely detailed pricing information and an offer to set 11 up a test of the ProtectID system. The Court accordingly agrees with Plaintiff that Mr. Waller’s 12 communications with Mr. Lee therefore exemplify the purposeful direction of activities by 13 StrikeForce at a resident of Washington. See 3D Systems 160 F.3d at 1378 (concluding that 14 Aarotech purposefully directed activities at residents of California when it “sent promotional 15 letters, solicited orders for models, sent videos and sample parts, and issued price quotations to 16 17 18 19 residents of California.”). ii. Mark Grindstaff. Taken together with Mr. Waller’s correspondence with Mr. Lee, the additional efforts 20 of StrikeForce to direct commercial efforts at Mark Grindstaff, an employee of Pierce County, 21 provide sufficient evidence of purposeful direction to satisfy the first prong of the specific 22 jurisdiction analysis. Mr. Grindstaff received promotional materials from Defendant similar to 23 those received by Mr. Lee. See Dkt. #25, Exh. E, p. 144. In addition, Mr. Waller conducted a 24 25 26 remote demonstration of the ProtectID product for Mr. Grindstaff through an online conferencing site, which allowed Mr. Grindstaff to view the ProtectID product on his own ORDER DENYING MOTION TO DISMISS - 8 1 computer screen. Id. Mr. Waller also sent Mr. Grindstaff detailed pricing information regarding 2 the ProtectID product. Id. Under Federal Circuit precedent, Mr. Waller’s communications with 3 Mr. Grindstaff therefore satisfy the purposeful direction prong of the specific personal 4 jurisdiction test. 5 6 7 iii. Microsoft Letter of Infringement. StrikeForce sent letters to Microsoft’s former CEO, Steve Ballmer, and a Microsoft patent attorney informing them that Microsoft was infringing StrikeForce’s ‘599 patent. Dkt. 8 9 10 #25, Exh. F. Under Federal Circuit law, “the sending of an infringement letter, without more, is insufficient to satisfy the requirements of due process when exercising jurisdiction over an out- 11 of-state patentee.” Inamed Corp. 249 F.3d at 1361. As the Federal Circuit explained, “[a]s a 12 matter of patent law policy, ... ‘principles of fair play and substantial justice afford a patentee 13 sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in 14 a foreign forum.’ ” Radio Sys. Corp. v. Accession, Inc., 638 F.3d 785, 789 (Fed. Cir. 2011). 15 Because StrikeForce’s communication with Microsoft was not an offer to sell its ProtectID 16 17 product but rather a notice of infringement, it is insufficient, on its own, to confer personal 18 jurisdiction. See Dkt. # 25, Exh. F. The Court therefore declines to consider the 19 communications between StrikeForce and Microsoft in its specific personal jurisdiction 20 analysis. 21 22 Even so, on the basis of StrikeForce’s communications with Messrs. Lee and Grindstaff, the Court finds that a preponderance of the evidence establishes that StrikeForce 23 purposefully directed its commercial efforts at Washington State residents, establishing 24 25 26 through them a sufficiently substantial connection with the forum state to satisfy the first prong of the specific jurisdiction analysis. ORDER DENYING MOTION TO DISMISS - 9 1 2 b. Arising out of Activity in the Forum State. The second prong of the minimum contacts test asks whether the cause of action arises 3 out of or directly relates to the purposefully directed activities. Plaintiff must demonstrate by a 4 preponderance of the evidence that its claim for patent infringement is connected to 5 StrikeForce’s activity within the State of Washington related to its ’858 Patent. See, e.g., 6 7 Burger King, 471 U.S. at 472-73; Data Disc, 557 F.2d at 1285. Patent infringement occurs when someone “without authority makes, uses, offers to sell, or sells any patented invention.” 8 9 10 35 U.S.C. § 271(a) (1994). In the instant matter, the central question for the Court under the second prong of the minimum contacts test is consequently whether or not StrikeForce’s 11 solicitations constitute offers to sell under U.S.C. § 271(a). Case law from the Federal Circuit 12 is instructive in this analysis. In 3D Systems, the court concluded that “[a]s a matter of federal 13 statutory construction, the price quotation letters can be regarded as ‘offer[s] to sell’ under § 14 271 based on the substance conveyed in the letters, i.e., a description of the allegedly 15 infringing merchandise and the price at which it can be purchased.” 160 F.3d at 1379. Based 16 17 on this interpretation of § 271(a), the court concluded that the plaintiff’s claim for patent 18 infringement arose out of the defendant’s “actions of sending price quotation letters to 19 California residents,” and that the second prong of the specific jurisdiction test had therefore 20 been met. Id. 21 22 In Rotec Industries, Inc. v. Mitsubishi Corp, the Federal Circuit provided additional guidance to assist in interpretation of the statutory “offers to sell” language in § 271(a). In 23 Rotec, the court determined that liability for § 271(a) “offers to sell” should be defined 24 25 26 according to “the norms of traditional contractual analysis.” 215 F.3d 1246, 1255 (Fed. Cir. 2000). An offer to sell arises where a defendant “communicate[s] a ‘manifestation of ORDER DENYING MOTION TO DISMISS - 10 1 willingness to enter into a bargain, so made as to justify another person in understanding that 2 his assent to that bargain is invited and will conclude it.” Id. at 1257 (quoting Restatement 3 (Second) of Contracts § 24 (1979)); see also MEMC Electronic Materials, Inc., v. Mitsubishi 4 Materials Silicon Corp., 420 F.3d 1369, 1376 (Fed. Cir. 2005). A solicitation may be 5 considered an offer to sell where it contains features such as price quotations and terms, which 6 could “make it into a binding contract by simple acceptance.” MEMC Electronic Materials, 7 Inc., 420 F.3d at 1376 (relying on 3D Systems to hold that the defendant had not offered to sell 8 9 its products where there was no evidence that its emails included price terms). 10 Plaintiff relies on several sets of communications between StrikeForce and two 11 Washington State residents, Grindstaff and Lee, for its argument that Defendant offered to sell 12 its allegedly infringing OOB authentication product. Defendant, by contrast, denies that these 13 communications related to the patented technology at issue in this case. StrikeForce contends 14 that its ProtectID product contains twelve possible components, with only some of those 15 components relating to OOB authentication. Additional components of ProtectID that do not 16 17 involve OOB authentication allegedly include in-band technology, such as SMS and soft or 18 hard tokens. See Dkt. # 26, p 8. Defendant argues that the email communications between Mr. 19 Waller and Messr. Lee and Grindstaff involve components of ProtectID unrelated to OOB 20 authentication technology. 21 22 The Court is not convinced that the pricing information relayed by Mr. Waller to Mr. Grindstaff relates specifically to OOB technology, as it appears to reference parts of the 23 24 25 26 ProtectID product that are not related to the patents at issue in this case. See Dkt. # 25, Exh. E, pp. 140-41. The Court accordingly declines to find personal jurisdiction on the basis of the Waller-Grindstaff communications alone. However, the Court finds that Defendant’s ORDER DENYING MOTION TO DISMISS - 11 1 communications with Mr. Lee constitute offers to sell the allegedly infringing product under 2 the norms of traditional contract analysis. In an email dated September 5, 2012, Mr. Waller 3 sent Mr. Lee specific pricing and product information that involved the patented OOB 4 technology. See Dkt. # 25, Exh. B, pp. 7-9. The pricing information included the hosted per- 5 transaction fee based on the transaction bucket size selected by the offeree. Id. Under the 6 standards established by the Federal Circuit in Rotec and 3D Systems, these communications 7 constitute “offer[s] to sell” under § 271(a) as they contain specific pricing terms and detailed 8 9 product information regarding the patented OOB technology. See id. at pp. 7-9. Mr. Lee could 10 have accepted the offer by merely indicating to Mr. Waller that he would purchase buckets of 11 one of the specified transaction sizes at the proposed hosted per-transaction fee. See id. 12 Because Mr. Lee could have accepted the proposed terms offered by Mr. Waller, thereby 13 creating a binding contract, the Court finds that Plaintiff has demonstrated by a preponderance 14 of the evidence that Defendant’s interactions with Mr. Lee satisfy the second prong of the 15 specific personal jurisdiction test. 16 17 18 c. Fair Play and Substantial Justice. Once it has been decided that a defendant purposefully established minimum contacts 19 within the forum state, these contacts may be “considered in light of other factors to determine 20 whether the assertion of personal jurisdiction would comport with fair play and substantial 21 justice”— that is, whether the exercise of jurisdiction is reasonable under the circumstances of 22 the particular case. See Burger King, 471 U.S. at 476 (quoting International Shoe Co., 326 23 U.S. at 320 (1945)). When a defendant seeks to rely on the “fair play and substantial justice” 24 25 26 factor to avoid the exercise of jurisdiction by a court that otherwise would have personal jurisdiction over the defendant, “[it] must present a compelling case that the presence of some ORDER DENYING MOTION TO DISMISS - 12 1 other considerations would render jurisdiction unreasonable.” Burger King, 471 U.S. at 477. 2 Instances in which a defendant may successfully invoke “fair play and substantial justice” to 3 defeat an otherwise constitutional exercise of personal jurisdiction “are limited to the rare 4 situation in which the plaintiff's interest and the state's interest in adjudicating the dispute in the 5 forum are so attenuated that they are clearly outweighed by the burden of subjecting the 6 defendant to litigation within the forum.” Akro Corp., 45 F.3d at 1549, quoting Beverly Hills 7 Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1568 (Fed.Cir.1994). 8 9 In Electronics for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1351–52 (Fed.Cir.2003), the 10 Federal Circuit provided five factors for courts to apply in determining whether the exercise of 11 personal jurisdiction is reasonable: (1) the burden on the defendant, (2) the interests of the 12 forum state, (3) the plaintiff's interest in obtaining relief, (4) the interstate judicial system's 13 interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of 14 the several states in furthering fundamental substantive social policies. The defendant bears the 15 burden to present “a compelling case that the presence of some other considerations would 16 17 18 render jurisdiction unreasonable. Burger King, 471 U.S. at 476-77. In the instant case, Defendant does not cite any of these factors in its argument but 19 instead focuses on the attenuated nature of its contacts with the forum state. See Dkt. # 26, p. 20 24. Defendant relies on Hockerson-Halberstadt, Inc., v. Propet USA, Inc., 62 Fed. App’x 322 21 22 (Fed. Cir. 2003), wherein the court held that conferring personal jurisdiction would offend traditional notions of fair play and substantial justice where the defendant’s contacts with the 23 24 25 26 forum state were miniscule and unrelated to the cause of the plaintiff’s alleged injury. The Court finds Hockerson inapposite, as it concerned the exercise of general, rather than specific jurisdiction. The defendant in Hockerson operated an online retailer which sold shoes around ORDER DENYING MOTION TO DISMISS - 13 1 the country, with only a small portion of sales – unrelated to the plaintiff’s alleged injury – 2 occurring in the forum state. Id. at 337. Because the retailer did not purposefully direct its 3 commercial efforts to sell the allegedly infringing product towards residents of the forum state, 4 the court considered whether the defendant’s contacts with the forum state were such that the 5 court could have exercised general personal jurisdiction over the defendant. Id. Here, the 6 Court’s inquiry is whether specific personal jurisdiction is proper, and it is appropriate to focus 7 on a small number of, or even singular acts to make that determination. Further, the Hockerson 8 9 10 11 court determined that the defendant’s activities failed to meet the minimum contacts test, while this Court has already reached a contrary finding in the instant matter. There is no reason why conferring personal jurisdiction would offend traditional 12 notions of fair play and justice in this case. An assessment of the factors from Electronics for 13 Imaging shows that the exercise of personal jurisdiction in this forum is reasonable. First, 14 requiring a New Jersey-based defendant to litigate in Washington would not impose on it an 15 excessive geographic burden. Second, Washington has a substantial interest in protecting its 16 17 residents from the sale of allegedly infringing patents. See Deprenyl, 297 F.3d at 1356. Third, 18 Authentify also has an acknowledged interest in protecting itself from patent infringement. 19 Fourth, with regard to the interstate judicial system’s interest in obtaining efficient resolution 20 of this dispute, the Court recognizes that StrikeForce has filed a declaratory judgment action in 21 22 the U.S. District Court for the District of New Jersey. However, the pending New Jersey case, still at an early stage of litigation, could be efficiently consolidated with this case if it is 23 24 25 26 determined that they are sufficiently related. Finally, the Court does not see any conflict between the interests of Washington and New Jersey in furthering their own respective substantive laws, as the same body of federal patent law would govern the patent infringement ORDER DENYING MOTION TO DISMISS - 14 1 claim irrespective of the forum. In light of this analysis, the Court finds that it is not 2 unreasonable to exercise personal jurisdiction in this instance. 3 D. Venue 4 A motion to transfer an action pursuant to 28 U.S.C. § 1404(a) presents two basic 5 questions: (1) whether the action sought to be transferred might have been brought in the 6 7 proposed transferee district; and (2) whether the transfer would be for the convenience of parties and witnesses, in the interest of justice. Int'l Patent Dev. Corp. v. Wyomont Partners, 8 9 10 489 F.Supp. 226, 228 (D.Nev.1980) (internal citation omitted). The court then balances the competing public and private interest factors to determine if transfer is appropriate, 11 recognizing that “[section] 1404(a) provides for transfer to a more convenient forum, not to a 12 forum likely to prove equally convenient or inconvenient.” Van Dusen v. Barrack, 376 U.S. 13 612, 645–46 (1964). Also, “transfer should not be granted if the effect is simply to shift the 14 inconvenience to the party resisting the transfer.” Id. at 646. Nor is the court required to 15 determine the best venue for the action. Gherebi v. Bush, 352 F.3d 1278, 1303 (9th Cir.2003) 16 17 (internal quotations omitted), vacated on other grounds, 542 U.S. 952 (2004). There is a strong 18 presumption in favor of the plaintiff's choice of forum which must be taken into account when 19 deciding whether transfer is warranted. Id. at 1303. 20 21 22 The Ninth Circuit has identified a number of public and private factors that a district court may consider on a case-by-case basis in deciding whether an action should be transferred. See Jones v. GNC Franchising, Inc., 211 F.3d 495, 498–99 (9th Cir.2000). These 23 factors include: (1) the location where the relevant agreements were negotiated and executed, 24 25 26 (2) the state that is most familiar with the governing law, (3) the plaintiff's choice of forum, (4) the respective parties' contacts with the forum, (5) the contacts relating to the plaintiff's cause ORDER DENYING MOTION TO DISMISS - 15 1 of action in the chosen forum, (6) differences in the costs of litigation in the two forums, (7) 2 the availability of compulsory process to compel attendance of unwilling non-party witnesses, 3 and (8) ease of access to sources of proof. Id. Among the aforementioned factors, Defendant 4 relies on the following to buttress its argument to transfer the present action to New Jersey: the 5 relative ease of accessing records and witnesses in New Jersey, its lack of contacts in 6 Washington, and the pending ligation in New Jersey. See Dkt. # 9, p. 19. Defendant’s 7 arguments to this effect are unpersuasive and do not justify a change in venue, particularly in 8 9 10 11 light of the first to file rule, as well as the strong presumption in favor of Plaintiff’s choice of forum. When, as here, two actions that sufficiently overlap are filed in different federal district 12 courts, one for infringement and the other for declaratory relief, the declaratory judgment 13 action, if filed later, generally is to be stayed, dismissed, or transferred to the forum of the 14 infringement action. See Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1299 (Fed.Cir.2012). This 15 “first-to-file” rule exists to “avoid conflicting decisions and promote judicial efficiency.” Id. 16 17 The rule is not absolute; exceptions may be made if justified by “considerations of judicial and 18 litigant economy, and the just and effective disposition of disputes.” Elecs. for Imaging, Inc. v. 19 Coyle, 394 F.3d 1341, 1347 (Fed.Cir.2005) (internal quotation marks omitted). Justification for 20 an exception may be found in “the convenience and availability of witnesses, [the] absence of 21 22 jurisdiction over all necessary or desirable parties, ... the possibility of consolidation with related litigation, or considerations relating to the real party in interest.” Genentech, Inc. v. Eli 23 24 25 26 Lilly & Co., 998 F.2d 931, 938 (Fed. Cir. 1993). Resolution of whether the second-filed action should proceed presents a question sufficiently tied to patent law that the question is governed by Federal Circuit law. Elecs. for Imaging, 394 F.3d at 1345–46. Application of the first-to-file ORDER DENYING MOTION TO DISMISS - 16 1 rule is generally a matter for a district court's discretion, exercised within governing legal 2 constraints. See Martin v. Franklin Capital Corp., 546 U.S. 132, 139 (2005); Merial, 681 F.3d 3 at 1299. 4 5 6 There is no dispute that the instant infringement action was filed prior to the declaratory judgment action in New Jersey. StrikeForce has not shown that interests in litigant or judicial economy favor transferring the present action to the U.S. District Court for the District of New 7 Jersey. Rather, the factors to be considered by the Court to determine if transfer is appropriate 8 9 on balance point towards retaining the action in this forum. For example, StrikeForce’s 10 contacts with Messrs. Lee and Grindstaff relate to the Plaintiff’s cause of action in the chosen 11 forum. Second, the differences in the costs of litigation in the two forums are not so significant 12 as to be onerous to Defendant. Third, the ease of access to sources of proof is not significantly 13 impacted by the chosen forum. Lastly, StrikeForce does not make a compelling argument to 14 transfer the present action to New Jersey based on the fair play and substantial justice analysis 15 outlined above. 16 CONCLUSION 17 18 For the foregoing reasons, the Court hereby ORDERS that Defendant’s Motion to 19 Dismiss for Lack of Jurisdiction and Improper Venue (Dkt. # 9) is DENIED. Defendant’s 20 alternative request to transfer venue to the U.S. District Court for the District of New Jersey is 21 also DENIED. 22 23 24 25 26 Dated this 31st day of July 2014. A RICARDO S. MARTINEZ UNITED STATES DISTRICT JUDGE ORDER DENYING MOTION TO DISMISS - 17

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.