Opinion
Case No. SA CV 02-0291-GLT (MLGx)
May 6, 2002
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS PURSUANT TO 12(b)(2)
Defendant's Motion to Dismiss the Complaint for lack of personal jurisdiction is GRANTED.
I. BACKGROUND
Defendant, a Maryland intellectual property holding company, holds title to intellectual property it licenses to its parent and sister companies, which sell products and provide services for wireless communication systems. Defendant does not receive royalty income from its licenses or have California property, offices, business contacts, mailing addresses, accounts, or advertisements. Defendant's representatives have not been in California on its behalf. Defendant's trademarks, "wireless solutions" and "delivering what you need . . . when and where you need it" are at issue before this Court.
Defendant sent Plaintiff, a California company involved in services similar to Defendant's parent and sister companies, a cease and desist letter concerning these trademarks in February 2002. Plaintiff claims it did not actually review the letter until its ten-day window to respond to Defendant had almost closed. Defendant agreed to allow Plaintiff an additional ten days to consider the demand letter. On the tenth day, Plaintiff sought a declaratory judgment against Defendant. A couple of weeks later, Defendant brought claims for infringement, unfair competition, dilution and unjust enrichment in Maryland. Defendant brings a Motion to Dismiss this action for lack of personal jurisdiction.
II. DISCUSSION
A. Personal Jurisdiction Standard
The function of a Rule 12(b)(2) motion is to test the court's exercise of personal jurisdiction. See Fed.R.Civ.Proc. 12(b)(2). Unless defendant is domiciled in the state, consents to jurisdiction, or is in the state at the time of service of process, due process and California state law require sufficient minimum contacts between defendant and the forum state to establish personal jurisdiction; See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (holding "traditional notions of fair play and substantial justice" influence personal jurisdiction determinations); Cal. Code Civ. Pro. 410.10 (explaining the long arm statute limits jurisdiction according to the Constitution). Plaintiff bears the burden of proof to show jurisdiction by the pleadings. See Data Disc. Inc. v. Sys. Tech. Assoc., Inc., 557 F.2d 1280, 1285 (9th Cir. 1977).
General jurisdiction exists if a non-resident defendant has substantial or continuous and systematic activities with the state even if those activities are unrelated to the cause of action. See Davis, 855 F.2d at 520; see also Perkins v. Benguet Consol. Mining, Co., 342 U.S. 437, 445 (1952). Specific jurisdiction exists if (1) defendant "purposefully directed" activities at the forum state; (2) plaintiff's claim "arises out of the [defendant's] forum related activities;" and (3) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. See Davis, 855 F.2d at 520.
B. General Jurisdiction Over Defendant
Plaintiff claims Defendant's parent and sister corporations' systematic and continuous contacts with the state subject Defendant to general personal jurisdiction in California. Plaintiff's claim is unsupported. Plaintiff has not shown Defendant's parent or sister companies' actions within California subject Defendant to California jurisdiction. Plaintiff relies on two cases, which are factually-distinct from Plaintiff's circumstances, to show general jurisdiction. In both cases, a defendant intellectual property holding company was subject to jurisdiction based on several factors in addition to its related companies' using the intellectual property in the forum. See Dainippon Screen Mfg., Co. v. CEMT, Inc., 142 F.3d 1266 (Fed. Cir. 1998) (finding jurisdiction over parent and subsidiary based on many relevant factors where both parties were named defendants, the parent and subsidiary had contacts in the forum in addition to the demand letter, the subsidiary benefitted financially from the parent company's business, and the parent company's acts were indistinguishable from the subsidiary's act because it was licensed to act on defendant company's behalf); Solar Gear, Inc. v. Sunglass Hut Int'l, 32 U.S.P.Q.2d 1355, 1357-58 (N.D. Cal. 1994) (finding jurisdiction over both defendants, the holding company and its wholly-owned subsidiary, where the subsidiary represented it owned the trademark, which was the subsidiary's initials, and the holding company benefitted financially from the subsidiary's forum-related business). Defendant does not have contacts with California or receive financial benefits from its parent or sister companies' businesses. Defendant's parent and sister companies are not Defendant's agents and have not acted on behalf of Defendant. Defendant is a separate subsidiary, independent from its parent and sister companies' contacts. See Keeton v. Hustler Magazine, Inc., 465 U.S. 770,781 (1984). Defendant is not subject to general jurisdiction in California.
C. Specific Jurisdiction Over Defendant
1. Purposeful Contacts
Sufficient minimum contacts for specific jurisdiction exist if the nonresident "deliberately" engaged in activities within, or purposefully availed itself of the state. See Burner Kinq, Corp. v. Rudzewicz, 471 U.S. 462, 475-76 (1985). A defendant's contacts with the forum state can be limited to foreign acts with an effect in the forum state to establish minimum contact. See Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1486 (9th Cir. 1993); Haisten v. Grass Valley Med. Reimbursement Fund, Ltd., 784 F.2d 1392, 1397 (9th Cir. 1986). Such acts may include a few instances of correspondence or telephone contact. See Brainerd v. Governors of the Univ. of Alberta, 873 F.2d 1257, 1259 (9th Cir. 1989) (explaining the nature and quality of the contact is an important consideration); see also Meade Instruments Corp. v. Reddwarf Starwater, LLC, 47 U.S.P.Q.2d 1157 (C.D. Cal. 1998) (finding the controversy related to and arose from Defendant's two cease and desist letters because Defendant's intentional contacts have an effect on California residents and businesses). The delivery of a cease and desist or demand letter to the forum state establishes purposeful contacts with that state. See Bancroft Masters, Inc. v. Augusta Nat'l, Inc., 223 F.3d 1082 (9th Cir. 2000) (demand letter targeted plaintiff, a known California company); Red Wing Shoe, Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358-61 (Fed. Cir. 1998) (finding defendant's demand letter established necessary contact); Cognex Corp. v. Lemelson Med. Educ. and Research Found., 67 F. Supp.2d 5 (D. Mass. 1999) (finding demand letters established necessary contact). Defendant purposefully directed its acts to this forum. The demand letters are directed at Plaintiff and its California business relations.
The Court declines to follow other courts' findings that demand letters alone are not evidence of purposeful availment. See Gator.Com Corp. v. LL Bean Co., 2001 WL 1528393 (N.D. Cal. 2001); Oacis Health Care Sys., Inc. v. Alicare Health Mngt. Svs., Inc., 2000 WL 550040 (N.D. Cal. 2000).
2. Claim Arising Out of Defendant's Forum-Related Activities
To establish the second specific jurisdiction requirement, Plaintiff must show the contacts constituting purposeful availment "give rise" to the current suit. The Ninth Circuit "measure[s] this requirement in terms of `but for' causation." Bancroft, 223 F.3d at 1088. Plaintiff brought suit for declaratory judgement due to Defendant's demand letters requiring Plaintiff to discontinue use of the trademark phrases. Plaintiff would not have standing to seek declaratory relief if Defendant had not sent that letter. The instant declaratory judgment action arises out of and relates to that letter.
3. Reasonableness of Jurisdiction
The Court presumes jurisdiction is reasonable "upon a showing that the defendant purposefully directed its activities at forum residents, which the defendant bears the burden of overcoming by presenting a compelling case that jurisdiction would be unreasonable." Haisten, 784 F.2d at 1397; see also, Burger King, 471 U.S. at 477. Generally, the Court considers seven main factors to determine the reasonableness of jurisdiction, including: (a) defendant's purposeful interjection, (b) defendant's burden to defend in the forum, (c) conflict with defendant's state's sovereignty, (d) the forum state's interest in adjudicating the dispute, (e) the most efficient forum, (f) the forum's interest in convenient and effective relief, and (g) the existence of an alternative forum. See Core-Vent, Corp., 11 F.3d at 1486-87; Burger King, 471 U.S. at 476-77.
This Court accepts the concept that jurisdiction over Defendant based on demand letters alone is unreasonable because it imposes an extreme burden on Defendant, requiring Defendant to accept the jurisdiction of any to-be-noticed party or to sue that party immediately. See e.g., Red Wing Shoe, Co., 148 F.3d at 1358-61 (finding the court did not have jurisdiction over defendant due to demand letter alone because it was unreasonable); Douglas Furniture Co. of Cal. v. Wood Dimensions, Inc., 963 F. Supp. 899, 902-03 (C.D. Cal. 1997) (explaining jurisdiction over defendant based on demand letter alone is unreasonable because it would subject defendant to the jurisdiction of anyone it needed to notify and would discourage defendant from trying to notify and settle with such parties before bringing suit); Gator.Com Corp., 2001 WL 1528393 (finding jurisdiction based on letter alone was unreasonable and would discourage defendant from pursuing settlement before bringing suit); Cognex Corp., 67 F. Supp.2d at 7 (same).
The outcome might be different if the contact were more than simply a demand letter. Bancroft, 223 F.3d at 1088 (finding jurisdiction was reasonable where claims arose from more than simply a cease and desist letter); Meade Instruments, Corp., 1998 WL 377041 (finding jurisdiction was reasonable where defendant sent demand letter to plaintiff and also plaintiff's customer, and threatened immediate 10 litigation ).
The Court does not attribute the contacts of Defendant's parent and sister corporations to Defendant to establish additional forum-related contacts. It is not reasonable to subject Defendant to this jurisdiction based on its parent and sister corporations' actions where the companies are not authorized to act on Defendant's behalf and Defendant does not benefit from their activities.
Fair play and substantial justice principles permit Defendant to inform others of its rights "without subjecting itself to jurisdiction in a foreign forum." Red Wing Shoe, Co., 148 F.3d at 1358-61 (finding the court did not have jurisdiction over defendant based on demand letter alone because it would be unreasonable to require defendant to defend in every forum where a suspected infringer resides and would discourage settlement); see also Burger King, 471 U.S. at 476 (emphasizing jurisdiction must be reasonable and fair). Also, Defendant and similarly situated parties would be discouraged from avoiding litigation by first communicating with residents of other forums if such communication alone established jurisdiction. See Red Wing Shoe, Co., 148 F.3d at 1358-61. Jurisdiction over Defendant based only on its demand letter to Plaintiff would be unreasonable.
Defendant's Motion to Dismiss Plaintiff's action for lack of personal jurisdiction is GRANTED.
The Court does not reach the merits of Defendant's Motion to Stay.