Troutman Sanders LLP: Patent Court Takes the Unusual Step of Considering Personal Jurisdiction Sua Sponte

WDVA Court Declines to Enter Default Judgment and Dismisses Patent Infringement Suit for Lack of Personal Jurisdiction Sua Sponte

By Stan Hammer

In a December 14 Memorandum Opinion, Judge Samuel G. Wilson declined to enter a default judgment and dismissed a patent infringement action against a Chinese corporation for lack of personal jurisdiction sua sponteFreedom Hawk Kayak, LLC v. Ya Tai Elec. Appliances Co., No. 7:12-CV-305, 2012 U.S. Dist. LEXIS 177685 (W.D. Va. Dec. 14, 2012) [enhanced version available to lexis.com subscribers]. Freedom Hawk arose out of the parties' attendance of an industry trade show in Orlando, Florida. Plaintiff Freedom Hawk, the owner of two patents for a fishing kayak with a "deployable fan-tail designed to promote stability while fishing from a standing position," id. at *2, noticed Defendant Ya Tai's booth display of a kayak featuring a similar design. Freedom Hawk hand-delivered a cease-and-desist letter to Ya Tai's representatives at the show, and Ya Tai responded that it would continue promoting its product. Freedom Hawk promptly filed its complaint for patent infringement in the Western District of Virginia the very next day, and served process on Ya Tai's general manager at the show in Florida.

After Ya Tai successfully negotiated for an extension of time to file a responsive pleading, the district court entered the parties' agreed order granting Ya Tai a thirty day extension. Freedom Hawk refused to agree to a second request for additional time by Ya Tai, however, and when Ya Tai's deadline to respond passed, Freedom Hawk moved for a default judgment.

Four days later, Ya Tai's "sole owner" filed a pro se motion to dismiss for lack of personal jurisdiction. The district court "disregarded" the motion in light of well-established precedent holding that corporations cannot appear pro se, but nevertheless brought up the personal jurisdiction issue sua sponte at a hearing on Freedom Hawk's motion for default judgment, and "permitted Freedom Hawk to engage in discovery and marshal any evidence it had of Ya Tai's contact with or presence in Virginia." Id. at *5. According to the court,

[t]he sum total of that evidence [wa]s essentially this: in order to attend the ICAST trade show in Orlando, Florida, Ya Tai entered a contract for membership with the ASA, which has its principal place of business in Alexandria, Virginia. Ya Tai, a Chinese corporation, signed and e-mailed the contract to the ASA. . . . Ya Tai then wired the required membership and exhibition fee to the ASA. A number of Virginia entities and residents attended the show in Florida. However, Freedom Hawk conceded that it had no evidence that Ya Tai maintained an office or had any employees, agents, or sales representatives in Virginia; conducted any business activities in Virginia, apart from the single contract with the ASA permitting it to exhibit at the Orlando, Florida, tradeshow; sold or distributed the allegedly infringing kayak, or for that matter any product here; or had any plans to distribute the allegedly infringing kayak or any other product here.

Id. at *6-7. Under those facts, the district court considered whether it should decline to enter the default judgment and instead dismiss Freedom Hawk's case for lack of personal jurisdiction.

Freedom Hawk argued default should be entered for two reasons. First, Freedom Hawk argued Ya Tai had appeared by virtue of seeking an extension of time to respond to the complaint, thereby waiving its right to contest personal jurisdiction, and failed to timely file a responsive pleading. Second, Freedom Hawk argued that even if Ya Tai had not waived its right to contest personal jurisdiction, Freedom Hawk still set forth sufficient facts to establish the court's power over Ya Tai.

The district court first considered the propriety of considering the personal jurisdiction question sua sponte. Noting that Federal Circuit law, rather than Fourth Circuit law, applied to questions of personal jurisdiction in patent infringement cases, Judge Wilson noted that default judgments entered by courts lacking jurisdiction are void and subject to collateral attack. "Consequently, some courts have held that a district court may (and others have held that it must) assure itself that it has personal jurisdiction." Id. at *8-9. In light of these cases, the court found it "efficient and appropriate" to consider personal jurisdiction.

The district court next addressed waiver, holding that Ya Tai's endorsement of an order extending the time to file a responsive pleading neither gave Freedom Hawk a reasonable expectation that Ya Tai "would defend the suit on the merits nor caused the court to go to some effort that would be wasted if personal jurisdiction were later found lacking." Id.at *11.

Finally, the district court reached the substantive personal jurisdiction analysis. Freedom Hawk contended, among other things, that Ya Tai reached into Virginia by completing the exhibition contract with ASA, and stressed that Virginia citizens and entities were present at the Orlando trade show. The district court found neither issue weighed in favor of personal jurisdiction. It was Ya Tai's alleged patent infringement in Florida, and not an isolated contact with Virginia, that gave rise to Freedom Hawk's suit. Further, "targeting attendees at a trade show in Florida weighs in favor of Florida, not Virginia, as an appropriate forum, irrespective of the citizenship of the attendees." Id. at *19 n.6.

Freedom Hawk is primarily noteworthy because the district court took the unusual step of considering personal jurisdiction sua sponte. The default judgment context should be the only time courts take this step, though, as it is the only circumstance in which a court conceivably has an affirmative duty to inquire into its power over the defendant. In all other circumstances, lack of personal jurisdiction is a defense that can be raised by a party or waived forever.

© Troutman Sanders LLP.  ADVERTISING MATERIAL. These materials are intended to inform you of developments that may impact your business and are not to be considered legal advice or legal opinion, nor do they create a lawyer-client relationship. Information included about previous case results does not assure a similar future result.

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