Articles

Trintec Industries v. Pedre Promotional Products, Inc. And The Still-Evolving Rules For Establishing Personal Jurisdiction In Patent Cases Based On Website “Presence” In A Forum

Thomas Frame

On January 19, 2005 the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”) decided the case of Trintec Industries, Inc. v. Pedre Promotional Products, Inc., No. 04-1293, slip op. at 1 (Fed. Cir. Jan. 19, 2005),1 which dealt with an interesting issue of personal jurisdiction. The case began when Trintec sued Pedre for patent infringement in the District of Columbia. Trintec accused Pedre of infringing two of Trintec’s patents that relate to an automation technique for making printed faces used in clocks and watches. Pedre responded to the complaint by moving to dismiss for lack of personal jurisdiction. Pedre also asserted that venue was improper in the District of Columbia. In support of its defense, Pedre provided a declaration that attested to the fact that its sole office and place of business was in New York and, further, that it had no facilities or representatives in Washington D.C. The district court granted Pedre’s motion and dismissed the complaint based on a lack of personal jurisdiction. See Trintec Indus., Inc. v. Pedre Promotional Prods., Inc., No. 1:03-CV-01267-RCL (D.D.C. Mar. 25, 2004). Trintec appealed to the Federal Circuit.

In a closely-reasoned decision, the Federal Circuit vacated and remanded the case for purposes of jurisdictional discovery (if appropriate) in order to determine whether Pedre’s website establishes that it is conducting business in the District of Columbia for purposes of the applicable long-arm jurisdictional provisions. Trintec Indus., No. 04-1293, slip op. at 13. In making its determination, the Federal Circuit reviewed the tenets of general and specific jurisdiction, especially as they may apply in the modern economy, in which most significant industrial concerns will maintain significant presences on the Internet or through other online systems accessible from anywhere in the world.

These issues, and the Federal Circuit’s decision to remand for further jurisdictional discovery, present several intriguing questions, if for no other reason than because the business model of Pedre is akin to that of many modern companies, who elect to supplement their exposure and opportunities to increase revenues by providing online advertisements, product information, and ordering capability to potential customers -- even when the online portion of the company’s actual sales is comparatively minimal. In this case, as is likely true for many companies having some online presence, Pedre’s involvement in actual online sales was paltry, accounting for only four out of as many as 5720 total active accounts of Pedre. Id. at 3. Yet, should the District Court resolve this issue in favor of Trintec (as the Federal Circuit’s remand suggests it might properly do), Pedre’s alleged infringing activities, originating and centered in New York, could be adjudged by a court in Washington D.C.

In the context of jurisdictional issues and online sales and promotional activity, any further guidance in this area proffered by the district court (or by the Federal Circuit on a subsequent appeal) would be gratefully received by the legal community. As the Trintec opinion itself makes clear, appellate courts are also sometimes frustrated and driven to chastise lower courts, albeit politely, for failing to aid in the formulation of predictable, fact-based standards for what quantum of online contacts will be the touchstone for imposing personal jurisdiction.

Consider the following two passages, which were lifted from the Trintec opinion:

Unfortunately, we cannot tell from the district court’s brief order the grounds or factual basis upon which that court might have concluded that the long-arm statute did not authorize jurisdiction, or whether its decision rested upon that provision or due process requirements . . .. We are left totally in the dark about the reason for the district court’s action.

Id. at 7.

Once the record is complete, the district court will be able to make an informed judgment on the issue. We assume that in making that decision, the district court will set forth the facts upon which it relies and explain its legal reasoning.

Id. at 13 (emphasis added).

The appeals court’s above language can be taken as dry banter or as exasperated chastisement, but in either case, it clearly amounts to scolding the district court for not providing enough factual basis to permit the Federal Circuit to analyze the circumstances and provide a “rule” (other than an advisory opinion divorced from any factual standard) for the sufficiency of online contacts to support personal jurisdiction.

Turning to the legal theories underlying the Trintec case, most of the principles enunciated in the Federal Circuit’s opinion harken back to the early weeks of Civil Procedure 101 (which are graven, or perhaps not, on the memory of every legal practitioner). See id. at 5-8. Revisiting jurisdictional issues provides a good refresher course on what warrants the exercise of a long-arm statute. The Federal Circuit laid the foundation for its analysis by explaining that the determination of whether a district court has personal jurisdiction over the defendants in a patent infringement case generally involves two inquiries. First, does jurisdiction exist under the state long-arm statute?2 Second, if such jurisdiction exists, would its exercise be consistent with the limitations of the due process clause?3

These two inquiries often (though not always) coalesce into one because the reach of the state long-arm statute is frequently defined by a given state as being the same as the limits of the due process clause, so that the state limitation “collapses into” the due process requirement.4 Here, Trintec and Pedre disagree upon whether the limitations of the District of Columbia’s long-arm statute are the same as those of the federal due process clause.

Recall that there are two kinds of personal jurisdiction -- specific and general. Specific jurisdiction may ‘arise out of’ or ‘relate to’ the contacts and circumstances that gave rise to the alleged cause of action, even if those contacts are ‘isolated and sporadic.’ General jurisdiction, on the other hand, arises when a defendant maintains ‘continuous and systematic’ contacts with the forum state, even when the cause of action has no relation to those contacts.5 The District of Columbia permits courts to exercise general jurisdiction over a foreign corporation for claims that do not arise from the corporation’s conduct within the District, if the corporation is “doing business” in the District and its business contacts are “continuous and systematic.”6 The reach of general jurisdiction in the District of Columbia under section 13-334(a) is “coextensive with the reach of constitutional due process.”7

Specific personal jurisdiction, on the other hand, depends upon the District of Columbia long-arm statute, the relevant sections of which provide that:

(a) A District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person’s—
(1) transacting any business in the District of Columbia;
. . .

(3) causing tortious injury in the District of Columbia by an act or omission in the District of Columbia;
(4) causing tortious injury in the District of Columbia by an act or omission outside the District of Columbia if he regularly does or solicits business, engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed, or services rendered, in the District of Columbia; . . .8

To establish specific personal jurisdiction under the District long-arm statute, Trintec would thus have to demonstrate either: (1) that its claims arose from Pedre’s transacting business in the District of Columbia; or (2) that Pedre caused it tortious injury in the District by its conduct in the District; or (3) that Pedre caused it tortious injury in the District by its conduct outside the District and that Pedre “regularly does or solicits business” in the District, “engages in any other persistent course of conduct” there, or “derives substantial revenue” from goods used or services rendered there. Trintec Indus., No. 04-1293, slip op. at 8.

The difficulty in this case was that Pedre’s website was not directed at customers in the District of Columbia, but instead is available to all customers throughout the country who have access to the Internet. Thus, the ability of District residents to gain access to the defendant’s websites does not by itself show any persistent course of conduct by the defendants in the District.

Some cases have suggested that the availability and use of a highly interactive, transaction-oriented website (as opposed to an “essentially passive” website) by itself may support long-arm jurisdiction in any forum in which the site is available to potential customers for the purpose of doing business.9 Although Trintec has shown that Pedre’s websites contain some interactive features aimed at transacting business, it was unclear from the district court opinion how frequently those features were actually utilized or, indeed, whether any District residents had ever actually used Pedre’s website to transact business. Trintec Indus. No. 04-1293, slip op. at 9-10. Other cases have indicated that something additional beyond maintenance of a website is required to establish personal jurisdiction.

The Federal Circuit concluded, based on the sparse record before it, that it could not make a proper determination, or pronounce a workable rule, as to whether, under the District of Columbia long-arm statute, Pedre was ‘transacting business’ in the District of Columbia. Trintec Indus., No. 04-1293, slip op. at 12. Nor could the court use the record to ascertain whether Pedre is causing others injury in the District by its conduct outside the District, while regularly doing or soliciting business, engaging in any persistent course of conduct, or deriving substantial revenue from goods used or consumed in the District. Id. Hence, no determination could be made whether specific personal jurisdiction exists over Pedre.

Additionally, based on this record, the court was unable to determine whether Pedre had continuous and systematic contacts with the District sufficient to give rise to general personal jurisdiction under D.C. Code § 13-334(a), which provides for jurisdiction over corporations doing business in the District even if the claim at issue does not arise from a corporation’s conduct in the District. Id.

In remanding the case, the Federal Circuit instructed the district court to take all necessary action, including ordering whatever discovery appears appropriate, to ensure that the eventual record would be adequate to determine whether it has personal jurisdiction over Pedre. Id. at 13. Unfortunately, from a practitioner’s standpoint, little can be gleaned from these general recommendations. The Federal Circuit seemed to identify all of the errors made by the lower court, but failed to spell out what types of evidence would be most relevant, or what quantum of such evidence would most likely be found to satisfy the applicable requirements for establishing jurisdiction. The Federal Circuit’s abstention from what would only be speculation or advisory opinion-giving in the absence of any useful factual record is understandable and probably represents the proper jurisprudential approach. But it also means that companies who maintain online operations of various degrees of complexity and commercial significance will have to wait a little longer for further evolution and fleshing-out of the law on personal jurisdiction as established by (in part) online contact. A consensus on the proper standard to apply to online contacts could come through gradual accretion of more published opinions, and discernible trends, in district court handling of these jurisdictional issues. It could also be accelerated if the Trintec case returns to the Federal Circuit on further appeal (and with a better record), and the Federal Circuit takes the opportunity to fashion a comprehensive rule as to online contacts and when they may serve to establish (or help establish) personal jurisdiction.

Until then, companies and practitioners should simply be aware that any Internet presence will likely be invoked by adversaries in litigation as a predicate in favor of establishing proper forum and venue anywhere the companies’ websites are available or used -- which is to say, in almost any forum of the adversary’s choice, given the ubiquitous availability of Internet-based content.

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1Case to be published at 395 F.3d 1275.
2See, e.g., Silent Drive. Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1200 (Fed. Cir. 2003); Deprenyl Animal Health. Inc. v. U. of Toronto Innovations, 297 F.3d 1343, 1349-50 (Fed. Cir. 2002); Hildebrand v. Steck Mfg. Co., 279 F.3d 1351, 1354 (Fed. Cir. 2002); Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1359 (Fed. Cir. 2001).
3See, e.g., Silent Drive, 326 F.3d at 1201; Inamed, 249 F.3d at 1359-60.
4Inamed, 249 F.3d at 1360 (noting that California’s long-arm statute is coextensive with limits of due process); see also Deprenyl, 297 F.3d at 1350 (discussing Kansas’s long-arm statute, to the same effect); HollyAnne Corp. v. TFT, Inc., 199 F.3d 1304, 1307 (Fed. Cir. 1999) (discussing Nebraska’s similar long-arm statute).
5LSI Indus. v. Hubbell Lighting, Inc., 232 F.3d 1369, 1375 (Fed. Cir. 2000) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985), and Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984)).
6Gorman v. Ameritrade Holding Corp., 293 F.3d 506, 509-10 (D.C. Cir. 2002) (internal citations omitted); see D.C. Code § 13-334(a) (2004) (governing service of process on foreign corporations in the District).
7Gorman, 293 F.3d at 510 (citing Hughes v. A.H. Robins Co., 490 A.2d 1140, 1148 (D.C. 1985)).
8D.C. Code §13-423(a)(204).
9See, e.g., Gorman, 293 F.3d at 510-13 (discussing general personal jurisdiction based on interactive financial brokerage website); Zippo Mfg. Co. v. Zippo Dot Com. Inc., 952 F. Supp. 1119, 1125-26 (W.D. Pa. 1997) (basing personal jurisdiction under Pennsylvania’s long-arm statute on subscription news service website).