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Federal Circuit Broadens Personal Jurisdiction Based on Patent Infringement Letters

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By Daniel S. Ivie and David G. Barker

A recent decision by the Federal Circuit has broadened the potential for declaratory judgment personal jurisdiction to exist based on letters sent to accused patent infringers in a foreign forum. In Jack Henry & Associates, Inc. v. Plano Encryption Technologies, LLC, the Federal Circuit appears to now require that a patentee make a “compelling case” that the exercise of jurisdiction in the foreign forum “would be unreasonable and unfair.”

For years, the Federal Circuit has held that infringement letters, without more, “are not sufficient to satisfy the requirements of Due Process in declaratory judgment actions.” Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1360 (Fed. Cir. 1998). In Red Wing, the court reasoned that a “patentee should not subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement,” and it held that “[g]rounding personal jurisdiction on such contacts alone would not comport with principles of fairness.” The court has also required “other activities” related to the patentee’s defense or enforcement of its patents in order to find personal jurisdiction.

In Jack Henry, the Federal Circuit moved away from what appeared to be a bright-line personal jurisdiction rule established in Red Wing and subsequent cases. Plano Encryption Technologies (“PET”), based in the Eastern District of Texas, sent infringement letters to a group of Texas banks located in the Northern District of Texas. The banks brought a declaratory judgment action of noninfringement against PET in the Northern District. PET argued, consistent with Red Wing, that venue in the Northern District was improper because infringement letters were insufficient to establish personal jurisdiction. The district court dismissed the case, relying on Red Wing. Reversing the district court’s dismissal and holding venue appropriate, the Federal Circuit noted PET’s letters to the banks were made in furtherance of PET’s “sole business,” which “is to enforce its intellectual property.” The court further held that the burden rested upon PET, as the source of the letters, “to make a compelling case that the exercise of jurisdiction in the Northern District would be unreasonable and unfair.”

The Federal Circuit’s more expansive personal jurisdiction analysis comes during a proliferation of entities that do not practice the patented inventions they seek to enforce. Declaratory judgment plaintiffs now have additional tools to argue for personal jurisdiction in their home forums, such as by addressing the detail of the infringement letters as well as the nature of the patentee’s business. Under Jack Henry, the burden is then shifted to the patentee to prove that the exercise of personal jurisdiction is inconvenient, unreasonable, or unfair.