Coolpo Licensing LLC v. Festa

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Coolpo Licensing LLC, No. CV-19-05473-PHX-DWL 10 Plaintiff, ORDER 11 v. 12 Maurizio Sole Festa, et al., 13 Defendants. [14] 15 Pending before the Court is a motion to dismiss by Defendants Maurizio Sole Festa, 16 Alexis Fernandez, and VYU 360, LLC (collectively, “Defendants”). (Doc. 22.) For the 17 following reasons, the motion will be granted and this action will be terminated. 18 BACKGROUND 19 I. Factual Background 20 A. Summary Of Parties And Claims 21 In this action, Plaintiff Coolpo Licensing LLC (“CLL”), an Arizona limited liability 22 company, seeks a declaratory judgment of invalidity and non-infringement concerning [23] U.S. Patent No. 10,122,918 (“the ‘918 patent”). (Doc. 1 ¶ 1, 3.) The ‘918 patent is a 24 “system for producing 360 degree media.” (Doc. 1-2 at 2.) Festa and Fernandez, both 25 Florida residents, are the inventors of the ‘918 patent, and Fernandez owns the ‘918 patent. 26 (Doc. 1 ¶¶ 11, 13, 15-17.)1 VYU 360 is a Florida limited liability company whose 27 1 On June 16, 2016, Festa and Fernandez filed an application for the ‘918 patent. (Doc. 1-2 at 2.) On November 6, 2018, the ‘918 patent was issued. (Id.) [28] 1 registered agent is Festa and one of whose managers is Fernandez. (Id. ¶¶ 12, 18-19.) 2 B. Defendants’ Takedown Request To Apple 3 On December 12, 2018, Festa contacted Apple to accuse Shanghai Zhuang Sheng 4 Xiao Meng InfoTech Co., Ltd. (“Shanghai Zhuang”), a nonparty Chinese company, of 5 infringing the ‘918 patent. (Doc. 22 at 2; Doc. 22-3 ¶¶ 45-48; Doc. 22-5 at 143.) At the 6 time, Shanghai Zhuang was offering an app called “Coolpo” through Apple’s App Store. 7 (Id.) 8 On February 6, 2019, Apple removed the Coolpo app from the App Store. (Doc. 1 9 ¶ 37.) 10 Notably, at the time of all of these events, CLL did not yet exist. 11 C. CLL’s Formation And Correspondence With Defendants 12 On February 11, 2019, Nathan Brown, who is CLL’s counsel of record in this action, 13 sent an email to Festa requesting that he “reinstate the Coolpo software immediately” and 14 threatening a lawsuit for “false claims of patent infringement.” (Doc. 22-5 at 155.) This 15 email was vague as to who, exactly, Brown was representing—it contained a reference to 16 the “charges against Coolpo software” and suggested the email was being sent by “Coolpo, 17 through their attorney.” (Id.) It did not mention CLL by name, nor did it mention the name 18 of Shanghai Zhuang, the Chinese company that had been identified in the takedown notice 19 to Apple. (Id.) 20 Festa responded the same day, disputing the claim of non-infringement and 21 questioning whether Brown’s client could file suit in the United States based on his 22 “understanding your customer does not have an established business in the US.” (Id. at 23 154-55.) 24 On February 18, 2019—that is, one week after this email exchange—CLL filed 25 articles of incorporation with the Arizona Corporation Commission. (Id. at 158.) 26 On March 7, 2019, Brown sent an email to Festa informing him that CLL would be 27 filing a lawsuit against Defendants in the District of Arizona. (Id. at 162.) 28 … 1 II. Procedural Background 2 On October 22, 2019, CLL filed the complaint that initiated this lawsuit. (Doc. 1.) 3 On November 25, 2019, Defendants filed a motion to dismiss. (Doc. 22.) 4 On January 27, 2020, CLL filed a response. (Doc. 27.) 5 On February 5, 2020, Defendants filed a reply. (Doc. 28.) 6 DISCUSSION 7 Defendants move to dismiss due to the absence of (1) subject matter jurisdiction and 8 (2) personal jurisdiction. The Court finds the second argument dispositive and therefore 9 will not address the first argument.2 10 I. Legal Standard 11 “Federal Circuit law governs the issue of personal jurisdiction in . . . patent-related 12 case[s].” Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 13 1343, 1348 (Fed. Cir. 2002). See also Hildebrand v. Steck Mfg. Co., Inc., 279 F.3d 1351 , 14 1354 (Fed. Cir. 2002) (“[W]e apply Federal Circuit law to personal jurisdiction inquiries 15 over out-of-state patentees as declaratory judgment defendants.”).3 16 Under Federal Circuit law, “[p]ersonal jurisdiction over an out-of-state defendant is 17 appropriate if the relevant state’s long-arm statute permits the assertion of jurisdiction 18 without violating federal due process.” 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 19 1373, 1376-77 (Fed. Cir. 1998). In Arizona, the jurisdictional limit of the state long-arm 20 statute is coextensive with that of the United States Constitution. Ariz. R. Civ. P. 4.2(a). 21 Thus, “only inquiry is whether or not exercising personal jurisdiction over the defendants 22 . . . comports with federal due process.” 3D Systems, 160 F.3d at 1377 . 23 “[D]ue process requires only that in order to subject a defendant to a judgment in 24 personam, if he be not present within the territory of the forum, he have certain minimum 25 2 See, e.g., Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 431 (2007) (“[A] federal court has leeway to choose among threshold grounds for denying 26 audience to a case on the merits.”) (quotation omitted); Rurhgas AG v. Marathon Oil Co., 526 U.S. 574, 583-85 (1999) (rejecting argument that district courts must address subject 27 matter jurisdiction before personal jurisdiction). 28 3 Thus, CLL is incorrect that the Court must apply Ninth Circuit law on this issue. (Doc. 27 at 12 n.4.) 1 contacts with it such that the maintenance of the suit does not offend traditional notions of 2 fair play and substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) 3 (internal quotation marks omitted). In line with International Shoe, the Federal Circuit 4 applies a “two-pronged test for whether the exercise of jurisdiction comports with due 5 process.” Deprenyl Animal Health, 297 F.3d at 1350. “First, the defendant must have 6 ‘minimum contacts’ with the forum.” Id. A defendant has minimum contacts with a forum 7 either when its contacts are “continuous and systematic,” permitting the exercise of general 8 jurisdiction, or when specific personal jurisdiction exists. Id. (quotation omitted). Second, 9 if minimum contacts are present, the defendant may still defeat jurisdiction “by presenting 10 a compelling case that other considerations render the exercise of jurisdiction so 11 unreasonable as to violate ‘fair play and substantial justice.’” Id. at 1351 (quotation 12 omitted). 13 CLL does not contend that Defendants are subject to general jurisdiction in Arizona. 14 (Doc. 27 at 11-14 [only discussing specific personal jurisdiction].) To determine whether 15 specific personal jurisdiction is present, the Federal Circuit looks to whether “(1) the 16 defendant purposefully directed its activities at residents of the forum, (2) the claim arises 17 out of or relates to those activities, and (3) assertion of personal jurisdiction is reasonable 18 and fair.” Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d 1356, 1363 (Fed. 19 Cir. 2006). “The first two factors correspond with the ‘minimum contacts’ prong of the 20 International Shoe analysis, and the third factor corresponds with the ‘fair play and 21 substantial justice’ prong of the analysis.” Inamed Corp. v. Kuzmak, 249 F.3d 1356 , 1360 22 (Fed. Cir. 2001). 23 When personal jurisdiction is disputed, it is permissible for the defendant to submit 24 evidence in support of its position. “[The Federal C]ircuit and the Ninth Circuit . . . agree 25 that where the district court’s disposition as to the personal jurisdictional question is based 26 on affidavits and other written materials in the absence of an evidentiary hearing, a plaintiff 27 need only to make a prima facie showing that defendants are subject to personal 28 jurisdiction.” Elecs. For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003). 1 “[T]he district court must accept uncontroverted allegations in plaintiff’s complaint as true 2 and resolve any factual conflicts in plaintiff’s favor.” Grober v. Mako P’od., Inc., 686 F.3d 3 1335, 1345 (Fed. Cir. 2012). 4 II. Personal Jurisdiction 5 “[T]he claim in a [patent-related] declaratory judgment action . . . neither directly 6 arises out of nor relates to the making, using, offering to sell, selling, or importing of 7 arguably infringing products in the forum, but instead arises out of or relates to the activities 8 of the defendant patentee in enforcing the patent . . . in suit.” Avocent Huntsville Corp. v. 9 Aten Int’l Co., 552 F.3d 1324, 1332 (Fed. Cir. 2008). So, “[t]he relevant inquiry for specific 10 personal jurisdiction purposes [is] to what extent has the defendant patentee purposefully 11 directed such enforcement activities at residents of the forum, and the extent to which the 12 declaratory judgment claim arises out of or relates to those activities.” Id. (internal brackets 13 and quotations omitted). 14 A defendant in a patent-related declaratory judgment action does not “subject itself 15 to personal jurisdiction in a forum solely by informing a party who happens to be located 16 there of suspected infringement.” Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 17 F.3d 1355 , 1361 (Fed. Cir. 1998). Nor do “a defendant patentee’s sales, even of products 18 covered by its own patents in the forum state . . . necessarily relate to the patentee’s 19 amenability to specific personal jurisdiction in actions for declaratory judgment of non20 infringement and invalidity of those patents.” Avocent, 552 F.3d at 1335 . Instead, the 21 Federal Circuit requires the defendant “to have engaged in ‘other activities’ that relate to 22 the enforcement or the defense of the validity of the relevant patents.” Id. at 1334 23 (emphases omitted). “Examples of these ‘other activities’ include initiating judicial or 24 extra-judicial patent enforcement within the forum, or entering into an exclusive license 25 agreement or other undertaking which imposes enforcement obligations with a party 26 residing or regularly doing business in the forum.” Id. 27 Here, Defendants have not purposefully directed any activities relating to the 28 enforcement or defense of the ‘918 patent toward Arizona. The sole instance of 1 enforcement-related activity occurred in December 2018, when Defendants (in Florida) 2 sent an email to Apple (in California) concerning alleged infringement by Shanghai 3 Zhuang (a Chinese company). At the time this email was sent, CLL did not even exist and 4 Defendants’ understanding—which CLL has not attempted to controvert—was that 5 Shanghai Zhuang did not engage in any business activity in the United States. It is difficult 6 to see how this communication could be deemed an intentional effort by Defendants to 7 engage in patent enforcement activity in Arizona. 8 The subsequent email correspondence between Brown and Defendants doesn’t 9 affect this conclusion. This correspondence was initiated by Brown, CLL still didn’t exist 10 at the time the correspondence began, and Brown didn’t suggest in his initial email that his 11 client was based in Arizona. Moreover, Defendants didn’t include, in their response to 12 Brown’s email, any threat to pursue an enforcement action. Nor would it have made sense 13 to include such a threat—the Chinese company’s product had already been removed from 14 the App Store. In any event, even if the email correspondence had discussed ongoing 15 infringement, and even if the email correspondence had also placed Defendants on notice 16 that Brown’s client was based in Arizona, Federal Circuit law is clear that communication 17 about infringement without enforcement activity is insufficient to support specific personal 18 jurisdiction. Cf. Red Wing Shoe, 148 F.3d at 1361 (a defendant patentee does not “subject 19 itself to personal jurisdiction in a forum solely by informing a party who happens to be 20 located there of suspected infringement” because “grounding personal jurisdiction on such 21 contacts alone would not comport with principles of fairness”). 22 CLL’s counterarguments are unavailing. First, CLL appears to argue that because 23 it is the exclusive licensee of the Chinese company against whom enforcement was 24 originally sought, this status alone makes jurisdiction in Arizona proper. (Doc. 27 at 13 25 [underlining the phrase “an exclusive licensee headquartered or doing business in the 26 forum state”].) CLL fails to grapple with the fact that it didn’t even exist at the time 27 Defendants made the threat of enforcement concerning Shanghai Zhuang. CLL’s position 28 thus seems to be that if a patent holder makes a threat of enforcement against a foreign 1 company that does not engage in any business in the United States, the patent holder has 2 nevertheless exposed itself to litigation in all 50 states because the foreign company could 3 subsequently enter into a licensing agreement with another company located in the United 4 States and that licensee would then be entitled to sue the patent holder in whatever state it 5 happens to be based. This is not the law and would hardly “comport with principles of 6 fairness.” Red Wing Shoe, 148 F.3d at 1361. 7 Second, CLL argues that because Defendants’ actions have blocked it from selling 8 its products in the United States, which includes Arizona, specific personal jurisdiction lies 9 in Arizona. (Doc. 27 at 13-14.) CLL conspicuously fails to identify any case law 10 supporting this proposition, which other courts have rejected. See, e.g., Tube-Mac Indus., 11 Inc. v. Campbell, 2020 WL 1911464 , *5 (W.D. Pa. 2020) (“Plaintiffs assert that Campbell, 12 in obtaining a United States patent, received the right to prevent others from making, using, 13 or selling the system set forth in the ‘049 Patent in Pennsylvania, as well as in all other 14 states. This action alone does not constitute sufficient contact with this Commonwealth 15 such that this Court can exercise jurisdiction over Campbell.”). CLL’s proposed rule, taken 16 to its logical conclusion, would automatically subject patentees to jurisdiction in all 50 17 states by reason of their patent’s nationwide effect. Federal Circuit law governing specific 18 personal jurisdiction is far more demanding than that. 19 III. Request For Jurisdictional Discovery 20 CLL argues the Court should, at a minimum, authorize jurisdictional discovery. 21 (Doc. 27 at 14.) In support of this request, CLL suggests that “most of the evidence, 22 supporting the Plaintiff’s position that the Defendants allude to, could be in China” and 23 that “[u]nfortunately, due to a series of events, obtaining information from China is difficult 24 at this time.” (Id.) 25 When reviewing a district court’s refusal to grant jurisdictional discovery, the 26 Federal Circuit applies the law of the regional circuit. Nuance Comms., Inc. v. Abbyy 27 Software House, 626 F.3d 1222, 1235 (Fed. Cir. 2010). Under Ninth Circuit law, 28 jurisdictional discovery “may be appropriately granted where pertinent facts bearing on the || question of jurisdiction are controverted or where a more satisfactory showing of the facts 2|| is necessary.” Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008) (citation 3|| omitted). A district court does not abuse its discretion in denying such discovery where the request is “based on little more than a hunch that it might yield jurisdictionally relevant || facts.” Id. 6 Although the Court is sympathetic to and cognizant of the obstacles to litigation posed by the ongoing COVID-19 pandemic, CLL’s request is based on nothing more than 8 || a hunch that it might, if allowed to pursue discovery in China, locate information relevant to the question of jurisdiction. This is a particularly speculative hunch—CLL has not || identified any reason to believe this hypothetical information would concern enforcement activities by Defendants directed at the state of Arizona or would otherwise be relevant to □□ the question of specific personal jurisdiction. Accordingly, CLL’s request will be denied. 13 Accordingly, IT IS ORDERED that Defendants’ motion to dismiss (Doc. 22) is 14|| granted. The Clerk of Court is instructed to enter judgment accordingly and terminate this 15 || action. 16 Dated this 15th day of June, 2020. [17] 18 Lom ee” 19 f CC —— Dominic W. Lanza 20 United States District Judge [28] -8-