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A patent owner’s cease-and-desist letter to an alleged infringer isn’t enough to subject it to a lawsuit in the alleged infringer’s state, the U.S. Court of Appeals for the Federal Circuit has ruled. On April 25, a unanimous Federal Circuit panel in Radio Systems Corp. v. Accession Inc. sustained a dismissal by Eastern District of Tennessee Judge Thomas Varlan of Radio Systems’ declaratory judgment suit against Accession about its patent. Varlan ruled that “the contacts between Accession and the State of Tennessee were insufficient to give the court personal jurisdiction over Accession.” The underlying litigation involves Accession’s patent for a portable pet access door that can be used in sliding glass doors. The Hamilton, N.J.-based Accession’s sole employee is the inventor, Thomas Sullivan. Between November 2006 and June 2007, Sullivan wrote, called and e-mailed Radio Systems several times to see if the Knoxville, Tenn.-based pet-product maker wanted to license its invention. The companies corresponded for several months starting in June 2007, but did not reach an agreement. Radio Systems applied for a patent on its SmartDoor pet door device in August 2007, and the U.S. Patent and Trademark Office issued a notice of allowance in June 2009. In August 2009, Accession’s counsel contacted the PTO examiner for Radio Systems’ patent application to inform the agency of Accession’s patent. The same month, the PTO withdrew the notice of allowance for Radio Systems’ SmartDoor patent application. That September, Accession’s counsel asked Radio Systems to sign a licensing agreement. Radio Systems responded by filing its Tennessee lawsuit in November 2009. Radio Systems sought a declaratory judgment of noninfringement and a ruling that Accession’s patent was invalid. Accession asked the court to dismiss the case or transfer it to the District of New Jersey. The Tennessee court dismissed the case in May 2010. The same month, Accession filed a patent infringement lawsuit in the District of New Jersey, Accession Inc. v. Radio Systems Corp. The New Jersey federal case was stayed during the Federal Circuit appeal of the Tennessee case. Judge William Bryson wrote the Federal Circuit opinion, joined by judges Timothy Dyk and Richard Linn. In order for a district court to establish jurisdiction over a defendant, “the plaintiff must show that the defendant purposely directed its activities at residents of the forum and that the plaintiff’s claim arises from or relates to those activities,” Bryson wrote. The plaintiff must also convince the court that “jurisdiction under the circumstances is reasonable and fair.” As the Tennessee court explained, Bryson wrote, the only activities relating to the enforcement of Accession’s patent “directed at Tennessee consisted of Accession’s counsel’s cease-and-desist correspondence with Radio Systems in August and September 2009.” Radio Systems argued that the lower court erred by not considering Accession’s contacts with Tennessee, including a visit to demo his product, before its relationship with Radio Systems turned adversarial in August 2009. Radio Systems also argued that its situation differed from the one in a 2008 Federal Circuit case, Avocent Huntsville Corp. v. Aten Int’l Co., because the patent owner in Avocent “did not directly contact and visit the declaratory judgment plaintiff in the forum state in an effort to market the patentee’s invention,” Bryson wrote. Although the facts of Radio Systems and Avocent differ, the Avocent rule applies to Radio Systems, Bryson wrote: “[O]nly enforcement or defense efforts related to the patent rather than the patentee’s own commercialization efforts are to be considered for establishing specific personal jurisdiction in a declaratory judgment action against the patentee.” Bryson wrote that “Sullivan’s correspondence with Radio Systems was focused on generating a market” for his product, not enforcing or defending his patent. “The fact that Mr. Sullivan focused on Radio Systems in his effort to commercialize his invention therefore does not render his activities in Tennessee sufficient for the exercise of specific personal jurisdiction.” The Federal Circuit also rejected Radio Systems’ argument that Accession agreed to jurisdiction in Tennessee in a nondisclosure agreement pertaining to Sullivan’s April 2009 meeting in Tennessee. Although Radio Systems conceded that its declaratory judgment action does not spring from the nondisclosure agreement, it claimed that its case arises from “subject matter relating to” the agreement. Bryson wrote that the agreement did not pertain to Accession’s patent, or to Radio Systems’ potentially infringing SmartDoor product, which was already in the market. “The record does not reveal that Accession made any disclosures relating to matters other than [its own product], which is not directly at issue in Radio Systems’ action,” Bryson wrote. “Because this action did not arise out of the subject matter of the confidential disclosure agreement, the forum selection clause of that agreement has no effect on the question of personal jurisdiction.” Neither Radio Systems nor its lawyers at Knoxville’s Pitts & Brittian responded to requests for comment. Bob Basil of Princeton, N.J.’s Collier & Basil, who represented Accession, said that the Radio Systems ruling strengthens the Federal Circuit’s earlier Avocent decision. “It moves the needle further away from the pre- Avocent situation where it was relatively easy to get personal jurisdiction,” Basil said. The ruling is also a victory for small inventors like Sullivan, who run a one-person company and lack the resources necessary to fight a lawsuit filed in an out-of-state federal court, Basil said. “This decision protects people like my client who are not freely able to litigate around the county where [an adversary] happens to be located.” Erik Belt, a Boston intellectual property and information technology partner at McCarter & English, said the ruling will cause litigants on both sides of patent litigation “to think more carefully about how and when and where they file these declaratory judgment actions.” Belt isn’t involved in the case. Belt also said that it’s not uncommon for an accused infringer who gets a cease-and-desist letter to file a declaratory judgment action in federal court in its headquarters state. “For a patent owner who does not have contacts in the state where the accused infringer lives [or runs a company, this] makes it less risky to send a cease and desist letter,” Belt said. “Nowadays when you send a cease-and-desist, it’s easy to get sued for declaratory judgment, but with this ruling…you’re not necessarily subjecting yourself to a lawsuit in that jurisdiction.” Sheri Qualters can be contacted at [email protected].

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