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From Intellectual Property Law Daily, February 15, 2017

German non-practicing entity subject to personal jurisdiction in California

By Thomas Long, J.D.

Personal jurisdiction over German non-practicing entity Papst Licensing GmbH & Co. KG was proper in California, and a federal district court in San Jose should not have dismissed an action brought against Papst by Xilinx, Inc., seeking a declaratory judgment of noninfringement of two Papst patents related to electronics memory tests, the U.S. Court of Appeals for the Federal Circuit has held. By sending multiple infringement notice letters to Xilinx and by sending representatives to California to negotiate a potential license with Xilinx, Papst engaged in sufficient contacts with California for the exercise of specific jurisdiction. Papst failed to demonstrate that it would sustain undue burden from having to litigate in California (Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, February 15, 2017, Dyk, T.).

Xilinx, headquartered in San Jose, designed, developed, and marketed programmable logic devices for electronics systems. Papst was the assignee of U.S. Patent Nos. 6,574,759 and 6,704,891, which were directed to methods for generating and verifying memory tests in electronics. Papst—which was organized under the laws of Germany and had its principal place of business there—was a non-practicing entity that was solely in the business of monetizing and licensing IP rights. Papst did not make or sell any consumer products; its business model involved performing due diligence by investigating potential infringers and targets for licensing, acquiring patent rights, contacting alleged infringers, and then enforcing the patents either by negotiating licenses or bringing infringement suits. Papst had repeatedly filed patent infringement suits in California federal courts, the Federal Circuit noted.

Before acquiring the patents-in-suit in October 2012, Papst, consistent with its business model, performed its due diligence by investigating 29 companies, 28 of which were based in or had significant presence in California. One of the companies Papst investigated was Xilinx. In January 2014, Papst sent Xilinx a patent-infringement notice letter regarding the patents-in-suit. After additional correspondence, Papst representatives traveled to California and met with Xilinx personnel regarding a potential license agreement. No agreement resulted, and in November 2014, Xilinx filed this declaratory judgment action in the Northern District of California seeking a declaration of noninfringement and invalidity. Papst moved to dismiss the suit for lack of personal jurisdiction; the district court granted the motion, and Xilinx appealed to the Federal Circuit.

Papst did not argue that its activities directed to Xilinx in California did not satisfy the "minimum contacts" prong of the test for specific jurisdiction. There was no question, in the court’s opinion, that Papst had the required minimum contacts with California; Papst purposefully directed its activities to California when it sent multiple notice letters to Xilinx and traveled there to discuss Xilinx’s alleged infringement and potential licensing arrangements. Xilinx’s declaratory judgment action related to these contacts, the court said.

Papst argued, rather, that exercising personal jurisdiction against it would be unreasonable and unfair. The court disagreed. The reasonableness inquiry was typically satisfied by a showing of minimum contacts. Therefore, exercising jurisdiction against Papst was presumptively reasonable. Papst failed to identify any other considerations to rebut this presumption. Xilinx indisputably had an interest in protecting itself against liability for infringement by obtaining relief from a nearby federal court in its home forum. Jurisdiction over Xilinx’s declaratory judgment claims in California would result in an efficient resolution of the controversy, and there was no apparent conflict between the interests of California and any other state. Given that Papst had made in-person contact with Xilinx in California, the court was not persuaded that Papst would sustain an undue burden if it was required to litigate there. Moreover, by the very nature of its business, Papst had to litigate its patents in the United States in courts far from its home office. Papst had repeatedly brought lawsuits in California, which further evidenced the lack of a significant burden, the court said.

The district court’s dismissal of Xilinx’s declaratory judgment complaint was reversed, and the case was remanded.

The case is No. 2015-1919.

Attorneys: Patrick Thomas Michael (Jones Day) for Xilinx, Inc. Nicole E. Glauser (DiNovo Price Ellwanger & Hardy LLP) for Papst Licensing GmbH & Co. KG.

Companies: Xilinx, Inc.; Papst Licensing GmbH & Co. KG

MainStory: TopStory Patent FedCirNews

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