This case involves a patent infringement lawsuit, but this decision isn’t really about patent law. Legally, it’s about personal jurisdiction. But it’s also an interesting example of how appellate judges interpret sometimes-murky Supreme Court precedent. Personal jurisdiction gets into the thick of legal theory, folks, but I’ll guide you through it.
AFTG-TG v. Nuvoton Technology Corp., No. 2011-1306 (Fed. Cir. Aug. 24, 2012) (Chief Judge Rader, Circuit Judges Newman and O’Malley) (per curiam)
AFTG filed two patent infringement lawsuits in the District of Wyoming—one against ASUSTeK and ASUS, and one against Pegatron, PTS, and Unihan—concerning AFTG’s patents for computers and computer parts. In both cases, the defendants filed motions to dismiss for lack of personal jurisdiction. Although none of the parties had clear ties to Wisconsin, AFTG argued the “stream-of-commerce” theory of jurisdiction, claiming that the defendants sold their infringing products to various companies, who in turn sold those products to consumers in Wyoming. AFTG, however, “simply parroted” the language of the statute, and didn’t point to any specific sales to establish jurisdiction. Although ASUS admitted that it had made drop shipments in Wyoming, AFTG didn’t provide any facts to show that those shipments contained the infringing products.
The trial court said that AFTG’s claims were “mere conjecture,” and that AFTG hadn’t cited any facts to support the theory for any defendant. Consequently, the trial court concluded that AFTG hadn’t established personal jurisdiction and dismissed both complaints. AFTG appealed the dismissals to the Federal Circuit.
Looking Backwards to Look Forwards
The meat of this opinion is about the correct legal test for the “stream-of-commerce” theory of personal jurisdiction. This is a hard question—even the Supreme Court justices can’t agree on how to measure it. And that makes appellate judges’ task in interpreting the Supreme Court opinions on this subject hard too.
To understand why the Federal Circuit panel split in this case, first we have to look at the Supreme Court precedent on personal jurisdiction. The struggle here is over “foreseeability.” If you start selling your products in one state, can you reasonably expect that they will end up in another state—the state in which the lawsuit was brought—and that you’d be subject to that state’s laws? And what does a plaintiff have to show to prove that a defendant could expect to be sued in a particular state? In short, is a single sale enough?
Whose Rules Are We Playing By?
The Federal Circuit’s divide results from different interpretations of fractured Supreme Court opinions. Here’s a summary of the two main cases the Federal Circuit panel wrestled with.
- Asahi Metal – A Tale of Tied Concurrences
In a 1987 case, Asahi Metal Industry Co. v. Superior Court of California, Solano County, Justice Brennan and Justice O’Connor wrote competing concurrences about foreseeability and the stream-of-commerce. Justice Brennan espoused the position that “as long as a participant in this process is aware that the final product is being marketed in the forum State, the possibility of a lawsuit there cannot come as a surprise.” In other words, advertising your product across state lines might be enough to establish jurisdiction.
Justice O’Connor’s test (if you can call it that) contends that mere awareness that a product could reach a state isn’t enough; there must be “something more” to show that the defendant “purposefully availed” itself of the benefits of selling or operating in the forum state (although what that “something more” is isn’t clear).
Trouble is, neither test got the requisite 5 votes to decide whether foreseeability or foreseeability-plus prevails. The Supreme Court revisited the issue in 2011.
- McIntyre – Wrong Case, Wrong Time
The Supreme Court’s most recent personal jurisdiction decision is J. McIntyre Machinery, Ltd. v. Nicastro, which involved a tort claim brought by a worker who was injured in New Jersey while working on a British-manufactured machine. The British manufacturer (McIntyre) had sold the machine to a U.S. distributor, who had sold the machine to the New Jersey firm. The Supreme Court ruled 6-3 to reverse the New Jersey court’s finding of personal jurisdiction over McIntyre. The Supreme Court broke into 3 factions in this ruling: 4 votes for the plurality opinion (Kennedy, joined by Roberts, Scalia, and Thomas), 2 votes for the concurrence (Breyer, joined by Alito), and 3 votes in dissent (Ginsberg, joined by Kagan and Sotomayor).
Justice Kennedy’s plurality opinion and Justice Breyer’s concurrence agreed that that, in this instance, the New Jersey court didn’t have personal jurisdiction, but they disagreed about how to get there. Justice Kennedy followed Justice O’Connor’s “foreseeability plus” test, stating that “[t]he defendant’s transmission of goods permits the exercise of jurisdiction only where the defendant can be said to have targeted the forum; as a general rule, it is not enough that the defendant might have predicted that its goods will reach the forum State.”
Justice Breyer wasn’t willing to use the facts of McIntyre to set new precedent concerning stream of commerce. He was concerned about the impact of globalization, e-commerce, and new methods of communication on personal jurisdiction—issues that didn’t exist in the 1987 Asahi case. Since these concerns weren’t raised in McIntyre, he called it “an unsuitable vehicle for making broad pronouncements that refashion jurisdictional rules.” So Justice Breyer relied on existing precedent to conclude that no personal jurisdiction existed in McIntyre.
Interpreting the Word from Above
Now, we’re finally back to the Federal Circuit’s AFTG case. In AFTG, the Federal Circuit panel was tasked with figuring out how the McIntyre opinions influenced its own personal jurisdiction precedents.
The majority determined that things remained status quo. In the majority’s reading, the court should follow the narrowest holding in McIntyre, which, it concluded, was distilled from Justice Breyer’s concurrence—the stream-of-commerce tests are the same as they were under Asahi.
In that light, the court applied its prevailing precedential case, Beverly Hills Fan, which takes an “if it ain’t broke, don’t fix it” approach. Beverly Hills Fan states that, if the case can be decided without taking a stance on the proper articulation of the stream-of-commerce theory (i.e., foreseeability v. foreseeability-plus), then the court should simply decide the case on the facts. The Federal Circuit determined that the facts here clearly didn’t demonstrate that AFTG had established a prima facie case of personal jurisdiction, so there’s no reason to make new law.
Should We Keep Going?
Chief Judge Rader concurred in the result, but had a different take on Justice Breyer’s McIntyre musings. He wanted the court to go further and state, definitively, that a single sale in a forum state is never sufficient to establish personal jurisdiction. Judge Rader read Justice Breyer’s concurrence as adopting the “foreseeability-plus” test because that opinion, in Judge Rader’s view, emphasized that the McIntyre plaintiff lacked “something more” than “aware[ness] and hop[e].” This is important because if Judge Rader’s reading is correct, then the foreseeability-plus test has 6 votes—a majority of the Supreme Court.
Judge Rader interpreted the Breyer concurrence as a basis for a per se rule that one sale won’t cut it. Beverly Hills Fan (which involved a single sale of an accused product) was now, he said, on “shaky ground” as precedent. Chief Judge Rader would have required that the court examine the pleadings and record for “something more.”
The majority opinion commented that Chief Judge Rader’s approach is “unwise” at this juncture since there actually is Supreme Court precedent for a finding of jurisdiction where there was a single transaction. (It involved an insurance contract, and, if I recall correctly from first-year Civil Procedure, the fact that regular premium payments were made added some heft to the stream-of-commerce theory.) The majority cited several law review articles that pointed out this potential inconsistency. The majority also noted that district courts have also concluded that McIntyre didn’t change existing stream-of-commerce precedent. Ultimately, the court said, “[w]e are not in a position to offer the correct formulation of the stream-of-commerce theory.”
Personal jurisdiction has been a murky question for decades, and globalization hasn’t made things any clearer. This case shows how hard a job appellate judges have when the Supreme Court doesn’t agree on the right approach. Perhaps that perfect case that brings up e-commerce, virtual transactions and other “modern concerns” will arise, and we’ll get some clearer instruction from the highest court. Until then, courts will just have to keep working through these issues on a case-by-case basis.
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