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Southco, Inc. v. Fivetech Technology Inc.

January 10, 2011

SOUTHCO, INC.
v.
FIVETECH TECHNOLOGY INC.



The opinion of the court was delivered by: McLaughlin, J.

MEMORANDUM

This dispute concerns the exercise of personal jurisdiction over defendant Fivetech Technology Inc., a Taiwanese corporation with its principal place of business in Taipei, Taiwan. In the underlying action, plaintiff Southco, Inc., asserts claims for patent and trademark infringement against the defendant. The plaintiff contends that the defendant sold infringing panel fasteners (screws) in Pennsylvania and the United States. The defendant moves to dismiss for lack of personal jurisdiction, contending that it does not conduct regular business with the United States and does not have "minimum contacts" sufficient to warrant personal jurisdiction. For the reasons that follow, the Court will deny the motion to dismiss.

I. Jurisdictional Facts

The plaintiff, Southco, Inc. ("Southco"), is a Delaware corporation with its principal place of business in Pennsylvania. Defendant Fivetech Technology, Inc. ("Fivetech") is a Taiwanese corporation with its principal place of business in Taipei, Taiwan. Decl. of Jessie P. Wang ("J. Wang Decl.") ¶ 4, Ex. to Def.'s Mot. to Dismiss ("Def.'s Mot."). Both companies manufacture mechanical parts, including "panel fasteners," which are a type of screw. Compl. ¶ 6; J. Wang. Decl. ¶ 5. Of relevance to this action is the defendant's 46 Series of panel fasteners, which is the subject matter of the underlying infringement suit. Compl. ¶¶ 8-10; Decl. of Helen H. Wang ("H. Wang Decl.") ¶ 3, Ex. to Def.'s Mot.

The plaintiff is the assignee of three patents covering the inventions used in its panel fasteners, and it has two registered trademarks for the "Segmented Circle" design that appears on its metal goods.*fn1 Since 2007, the defendant has filed two trademark applications and eleven patent applications in the United States Patent and Trademark Office. Decl. of Antranig Baronian ("Baronian Decl.") passim, Ex. to Pl.'s Opp'n. However, the parties dispute the extent to which these applications relate to the 46 Series screws at issue in the underlying suit.*fn2

Notwithstanding its patent and trademark applications, the defendant neither conducts regular business nor maintains any offices, employees, or agents in the United States. J. Wang Suppl. Decl. ¶ 6. The defendant has never sold its products to any person or company in the United States, except for one transaction involving the sale of screws to a Pennsylvania-based corporation in 2009, which is not a party to the present action. Id.; G. Wang Decl. ¶¶ 5-6.

The defendant's sale to a Pennsylvania-based customer arose out of the defendant's website. In 2006, the defendant launched an English website that is accessible world-wide. J. Wang. Decl. ¶ 11. The website does not permit users to purchase products online or to engage in transactions, but it features a "Contact Us" function by which users can submit a form requesting information. Decl. of Stephanie M. Byerly ("Byerly Decl.") ¶ 5, Ex. to Def.'s Mot. On November 13, 2009, Specialty Resources, Inc. ("SRI"), a Pennsylvania corporation, employed the "Contact Us" feature to request a quote for 500 pieces of the defendant's 46 Series screws. H. Wang Decl. ¶ 3. After several e-mail exchanges between SRI and a representative of the defendant, SRI wired $384.50 to the defendant's bank account located in Taiwan. Id. ¶ 10. The defendant subsequently shipped 500 46 Series screws to SRI, using SRI's international shipping account. Id. ¶

11. The defendant did not enter into a warranty or ongoing purchase agreement with SRI, and did not respond to numerous future requests for information and quotes by SRI. Id. ¶¶ 12-17.

Apart from the one sale to SRI, the majority of the defendant's customers are in Taiwan and China. J. Wang. Decl. ¶ 5. One such customer is Inventec, an original design manufacturer ("ODM")*fn3 for notebooks. G. Wang Decl. ¶ 13. Inventec manufactures and sells computer servers to its customers, including Hewlett-Packard ("HP"). Inventec incorporates the defendant's 46 Series screws into some of its computer servers, and purchases the screws either directly from the defendant's catalog or provides the defendant with specifications based on customer requests. Id. ¶¶ 14-15. For instance, Inventec has requested that the defendant provide screws with knobs that are colored "HP Blue," for use in servers sold to HP. Id. ¶¶ 14-15, 18. One such server incorporating the defendant's 46 Series screws is the HP ML350 G6 server, a sample of which the plaintiff purchased in the United States. Decl. of Alex R. Sluzas ("Sluzas Decl.") ¶ 17, Ex. to Pl.'s Opp'n; see also J. Wang Suppl. Decl. ¶ 14.

Beyond these uncontroverted facts, the parties dispute the extent of the defendant's involvement in the arrangements between Inventec and HP. The defendant maintains via declarations that HP is not its customer, and that the defendant has no involvement in the sales or distribution arrangements between Inventec and HP. G. Wang. Decl. ¶ 16. The defendant further contends that it has no control over the distribution of its screws once they are sold to Inventec, and has no knowledge with respect to where the screws will end up. Id. ¶¶ 17-18.

In contrast, the plaintiff contends by way of declarations that HP is, in fact, the defendant's "customer," even if the defendant has no formal contract with HP. Decl. of Loic Cloarec ("Cloarec Decl.") ¶ 8, Ex. to Pl.'s Reply to Def.'s Supplemental Br. Specifically, the defendant participates in the construction of the HP server by providing screws that cannot be used in any other product in view of their distinctive "HP Blue" color. Therefore, the defendant has a "business relationship" with HP. Id. Moreover, the plaintiff contends that because HP is Inventec's only customer for the aforementioned server, and the defendant is Inventec's only supplier of screws for said server, then all of the HP ML350 G6 servers sold in the United States contain the defendant's screws. Id. ¶ 12. Finally, the plaintiff points out that thirty-seven percent of HP's quarterly revenue in 2010 was attributable to sales in the United States, and therefore the defendant must be aware that its products will end up in the United States. Id. ¶¶ 15-16; see also "HP Q3 FY10 Earnings Announcement," Ex. G to Cloarec Decl.

The plaintiff filed a complaint on March 10, 2010, alleging patent and trademark infringement based on the defendant's sales of the 46 Series screws. The plaintiff claims that the 46 Series screws embody the inventions covered by the plaintiff's patents. In addition, the plaintiff argues that the defendant employs a mark similar to the plaintiff's "Segmented Circle" design, which is a registered trademark. The defendant moved to dismiss the complaint for lack of personal jurisdiction. The Court held oral argument on September 9, 2010, and invited supplemental briefing on the jurisdictional inquiry, with particular regard to the defendant's relationship with Inventec and HP. For the reasons that follow, the Court will deny the motion to dismiss.

II. Lack of Personal Jurisdiction

The defendant has moved to dismiss the complaint for lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2). The defendant submitted declarations to establish that it does not conduct business or have assets, offices, or employees in the United States. It further argues that the jurisdictional contacts on which the plaintiff relies are insufficiently substantial to establish jurisdiction.*fn4

A. Standard of Review

Questions of personal jurisdiction in patent actions are governed by Federal Circuit law, rather than the law of the regional circuit in which this Court sits. Synthes (U.S.A.) v. G.M. dos Reis Jr. Ind. Com. de Equip. Medico, 563 F.3d 1285, 1292 (Fed. Cir. 2009). When a court must decide a motion to dismiss for lack of personal jurisdiction on the basis of affidavits and written materials alone, in the absence of an evidentiary hearing, a plaintiff need only make a prima facie showing that a defendant is subject to personal jurisdiction. Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003). In deciding the motion, the Court must "accept the uncontroverted allegations in the plaintiff's complaint as true and resolve any factual conflicts in the affidavits in the plaintiff's favor." Id.

B. Analysis

Federal Rule of Civil Procedure 4 is the starting point for any personal jurisdiction analysis in federal court. Synthes, 563 F.3d at 1293. Under Rule 4(k)(1)(A), service of process establishes personal jurisdiction over a defendant "who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located." Fed. R. Civ. P. 4(k)(1)(A). In conducting the personal jurisdiction inquiry under Rule 4(k)(1), a federal court analyzes the long-arm statute and governing principles of the forum state to determine whether jurisdiction has been established. Id.; see also Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1410 (Fed. Cir. 2009). This generally encompasses two steps. The court must first determine whether the forum state's ...


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