Federal Circuit summarizes personal jurisdiction standards

In Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories, Inc., the Federal Circuit provided a summary of its standard for personal jurisdiction in patent cases. In this instance, an accused infringer is seeking a declaration that they do not infringe or that the patent is invalid.Metabolite holds patents for a method of controlling hyperhomocysteinemia, a risk factor for heart and vascular disease that involves elevated serum metabolite levels. Metabolite's exclusive licensee, PamLab, manufactures and distributes a prescription vitamin product marketed as FOLTX, which it sells throughout the country. Breckenridge, a generic drug company based in Florida, sells a similar product, Folbee, to various pharmacies and retailers.In December, 2003, Metabolite and PamLab sued Breckenridge in Colorado, for infringement of Metabolite's patents, and seeking a temporary restraining order. The Colorado court denied this request, and Metabolite and PamLab voluntarily dismissed the suit. After dismissal, Metabolite sent letters to several of Breckenridge's customers informing them of Metabolite's patents and its exclusive license agreement with PamLab. Three of these letters went to businesses in Florida.Roughly a week after learning of the letters, Breckenridge brought suit against Metabolite and PamLab in federal court in Florida, seeking a declaration that Folbee did not infringe Metabolite's patents, as well as state law claims of unfair competition and tortious interference. The district court, after hearing evidence on personal jurisdiction, dismissed Metabolite from the case, finding that Metabolite did not have sufficient contact with Florida to permit it to be sued in that state.The Federal Circuit reversed. The court provided a summary of its cases since 2003 regarding personal jurisdiction over patent holders, including Silent Drive, Inc. v. Strong Industries, Inc., a case argued successfully by MVS. In essence, if the only contact the patent holder has with the forum state is sending cease and desist letters to infringers or attempting to license the patents there, personal jurisdiction will not be found. Jurisdiction will also not exist if the patentee has nonexclusive licensees in the state but has no dealings with those licensees other than to collect royalties. If, however, there are more substantial contacts, such as when the patent holder has an exclusive licensee that does business in the forum state and that licensee has the authority to bring infringement lawsuits, personal jurisdiction is appropriate. As stated by the court, \'the crux of the due process inquiry should focus first on whether the defendant has had contact with parties in the forum state beyond the sending of cease and desist letters or mere attempts to license the patent at issue there.\' If the patentee has an exclusive licensee who does business in the state, and the license agreement includes more than just payment of royalties, such as the granting the licensee the right to litigate infringement cases or granting the patent holder some type of control over the licensee, personal jurisdiction likely exists over the patent holder.In this case, the exclusive license agreement between Metabolite and PamLab provided to PamLab the right to bring infringement actions with Metabolite's consent, and also required the two companies to cooperate reasonably in any enforcement actions regarding the patent. Therefore, the license agreement resulted in an ongoing relationship between the companies beyond royalty payments, and as a result, personal jurisdiction over Metabolite was proper in Florida.This case provides important guidance for patent holders as to where they might be subjected to suit by those wishing to contest the validity of their patents. These considerations are important when drafting license agreements, and should provide more predictability in federal jurisdiction in patent declaratory judgment cases.For the complete decision, log on to http://fedcir.gov/opinions/05-1221.pdf.


Return to MVS News

Connect with MVS

Enter your name and email address to recieve the latest news and updates from us and our attorneys.

Subscribe to: MVS Newsletter

Subscribe to: Filewrapper® Blog Updates

  I have read and agree to the terms and conditions of McKee, Voorhees & Sease, P.L.C.