The Court of Appeals for the Federal Circuit recently reversed and remanded a district court’s decision dismissing a complaint for declaratory judgment of noninfringement for lack of personal jurisdiction.  Apple Inc. v. Zipit Wireless, Inc., 30 F.4th 1368 (Fed. Cir. 2022).  According to the Federal Circuit, the district court wrongly concluded that patent-infringement notice letters and related communications can never form the basis for personal jurisdiction.  Patent owners and challengers should consider the extent to which their pre-suit communications can justify personal jurisdiction in a forum.

Background 

Zipit Wireless, Inc. is a Delaware corporation with a principal place of business in South Carolina and each of its fourteen employees located in South Carolina.  Zipit is the assignee of the two patents-in-suit, which are related to wireless instant messaging devices that send and receive instant messages via Wi-Fi.  Apple Inc. is headquartered in Cupertino, California, located in the Northern District of California.  Zipit, 30 F.4th at 1371–72.

Zipit first contacted Apple regarding the patents-in-suit in 2013.  Over the next three years, the parties continued to correspond about the patents-in-suit and met twice in person at Apple’s Cupertino headquarters.  From 2013 to 2016, the parties discussed a potential licensing agreement or sale of the patents-in-suit to Apple, as well as technical details regarding Apple’s potential infringement and allegations of willful infringement.  Zipit also provided status updates related to inter partes review proceedings involving the patents-in-suit during this time.  By 2016, the parties continued to disagree on whether Apple’s products fell within the scope of the patents-in-suit and the validity of the patents-in-suit.  Id. at 1372–73.

In June 2020, over four years after the parties last communicated regarding the patents-in-suit, Zipit sued Apple in the Northern District of Georgia, accusing Apple of infringing the patents-in-suit.  Two weeks later, Zipit voluntarily dismissed the case without prejudice.  In July 2020, Apple filed suit in the Northern District of California seeking a declaratory judgment of noninfringement of the patents-in-suit.  Id. at 1373.

Zipit filed a motion to dismiss Apple’s complaint for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2).  Id.  The district court granted Zipit’s motion, holding that it lacked specific personal jurisdiction over Zipit.  Although the district court determined that Apple had established Zipit’s minimum contacts with the forum and Zipit had not shown that personal jurisdiction would be unreasonable, the court concluded that Federal Circuit precedent prohibits an exercise of jurisdiction when all contacts with the forum were made for settlement purposes.  Apple Inc. v. Zipit Wireless, Inc., No. 5:20-cv-04448, 2021 533754 (N.D. Cal. Feb. 12, 2021).

Personal Jurisdiction Analysis

As the Federal Circuit explained, a court has specific personal jurisdiction over a defendant where the defendant has “minimum contacts” with the forum and where the assertion of personal jurisdiction is reasonable and fair.  Zipit, 30 F.4th at 1374–75.  If a court determines that minimum contacts are satisfied, then the burden is on the defendant to show that the exercise of jurisdiction would be unreasonable.  Id.  In determining whether jurisdiction would be unreasonable, the court must consider the Burger King factors: [1] “the burden on the defendant,” [2] “the forum State's interest in adjudicating the dispute,” [3] “the plaintiff's interest in obtaining convenient and effective relief,” [4] “the interstate judicial system's interest in obtaining the most efficient resolution of controversies,” and [5] the “shared interest of the several States in furthering fundamental substantive social policies.”  Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985).

Zipit Had Minimum Contacts with the Forum

The Federal Circuit agreed with the district court that Zipit’s contacts with California were sufficient to meet the minimum-contacts requirement.  Specifically, the Federal Circuit pointed to Zipit’s “multiple communications” with Apple in California and the two meetings in California to discuss allegations of infringement and potential licenses or sale of the patents-in-suit.  Zipit, 30 F.4th at 1375–76.  The court also distinguished the facts in this case from Autogenomics v. Oxford Gene Tech. Ltd., 566 F.3d 1012 (Fed. Cir. 2009), in which the court determined minimum contacts had not been met even though the defendant-patentee in that case sent a notice letter to the declaratory-judgment plaintiff and the patentee’s representatives met with the plaintiff’s representatives in the forum state.  The court notes several “material factual distinctions” in this case—including Zipit’s updates to Apple on the status of ongoing IPRs of the patents-in-suit and Zipit’s escalation of its allegations of infringement by describing Apple’s infringement as “willful” in later communications.  Zipit, 30 F.4th at 1376 & n.3.

The court rejected Zipit’s argument that Autogenomics created a bright-line rule that cease-and-desist letters and related in person discussions cannot support minimum contacts for personal jurisdiction.  In doing so, the court explained that its precedent supports its determination that minimum contacts were satisfied.  Id. at 1376–77; see also Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1360 (Fed. Cir. 1998) (acknowledging that “cease-and-desist letters alone are often substantially related to the cause of action (thus providing minimum contacts)”).

Zipit Failed to Present a Compelling Case that Exercise of Jurisdiction Would Be Unreasonable

The Federal Circuit concluded that Zipit had not shown that jurisdiction would be unreasonable.  It started its analysis with the district court’s error: Although the district court considered each of the Burger King factors, it then misconstrued Federal Circuit precedent when it held that jurisdiction would be unreasonable where Zipit’s contacts were made solely for the purpose of warning against infringement.  Zipit, 30 F.4th at 1377–79.  The Federal Circuit clarified that its recent Trimble opinion¹  makes clear that “there is no general rule that demand letters can never create specific personal jurisdiction.”  Id. at 1377 (quoting Trimble Inc. v. PerDiemCo LLC, 997 F.3d 1147, 1156 (Fed. Cir. 2021)).

Zipit argued that the Federal Circuit has, since Red Wing, permitted patent owners to send notice letters to a party in a forum without creating minimum contacts with that forum.  The Federal Circuit, however, framed Red Wing as endorsing a settlement-promoting policy that must be considered in determining whether the exercise of jurisdiction would be reasonable and fair—but not a consideration that can control the entire inquiry.  Instead, a district court is required to consider this settlement-promoting policy with the other Burger King factors.  Id. at 1379.

In applying the Burger King factors, the Federal Circuit first determined that Zipit may be inconvenienced by adjudicating in California, but the inconvenience is not so unreasonably burdensome as to be unconstitutional.  According to the court, this type of inconvenience is instead best addressed by challenging venue instead of jurisdiction.  The court also noted that Zipit sent representatives to California to meet with Apple in person, and this type of presence reinforces the reasonable foreseeability that a suit could be filed in the forum.  Even where several years passed since Zipit’s last contact with Apple in California, the court determined that Zipit could reasonably foresee Apple filing suit in California once Zipit filed and dismissed its suit without prejudice in Georgia.  Id. at 1379–80.

The second and third Burger King factors weighed in favor of jurisdiction.  For the second factor, the parties did not dispute that California has an interest in adjudicating the dispute based on its “interests in commerce and scientific development” and its “interest in protecting its residents from unwarranted claims of patent infringement.”  Id. at 1380 (quoting Xilinx, Inc. v. Papst Licensing GmbH & Co., 848 F.3d 1346, 1356 (Fed. Cir. 2017)).  For the third factor, Apple clearly has an interest in protecting itself from a patent infringement suit by obtaining convenient and effective relief from a federal court in its home forum.  Id. at 1380.

Under the fourth factor, the Federal Circuit considered policies that promote settlement to obtain efficient resolution of controversies.  The court found Zipit’s initial contacts with Apple as an attempt to settlement the dispute out of court, which it weighed in Zipit’s favor.  The court nonetheless refused to elevate this factor above all others and balanced it against the remaining factors.  Id. at 1380–81. 

Finally, Zipit did not dispute that there is a shared interest among the states in furthering fundamental substantive social policies.  In cases involving allegations of patent infringement, the same federal law governs the suit regardless of the forum.  Id at 1381. 

In weighing all the factors, the court concluded that Zipit’s initially attempts to resolve its dispute with Apple outside of court in addition to Zipit’s later escalation of its allegations by accusing Apple of willful infringement after Apple rejected licensing attempts and Zipit’s lawsuit against Apple for infringement were sufficient to find jurisdiction.  Therefore, the facts in this case do not qualify as a “rare” situation in which minimum contacts is met but exercise of jurisdiction would be unreasonable.

Implications for Patent Owners and Patent Challengers

Both patent owners and patent challengers should consider carefully their correspondence regarding alleged infringement.  Without a bright-line rule, patent owners may face uncertainty in how much contact with an accused infringer will be sufficient to pull the patent owner into a declaratory-judgment action outside their forum of choice.  It is clear after Zipit that cease-and-desist letters and in-person meetings can support the exercise of jurisdiction in that forum.  Patent challengers who would prefer to litigate in their home forum, however, now have a greater opportunity to do so based on a wholistic view of the circumstances without the jurisdictional bright line rules.

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