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Negotiations by a patentee that resulted in patent license agreements and a threat of an infringement suit are activities directed at a state resident sufficient to create personal jurisdiction there when the patentee lives in another state, the Federal Circuit held May 15. Inamed Corp., et al. v. Lubomyr I. Kuzmak, No. 00-1292. A panel of the court reversed the U.S. District Court for the Central District of California, which had dismissed an action for declaratory judgment by Inamed Corp., Inamed Development Co. and Bioenterics Corp. against Lubomyr I. Kuzmak, M.D., for lack of personal jurisdiction. Kuzmak is listed as co-inventor of two patents and as sole inventor of two others, all relating to devices and methods for the surgical treatment of obesity. Inamed and Kuzmak entered into four license agreements involving the patents, but Inamed terminated the last of the series after unsuccessfully attempting to renegotiate the license agreement, the court recounted. Kuzmak then sent a letter to Inamed stating his belief that Inamed was infringing three of the patents, two of them willfully. Inamed then brought a declaratory judgment of noninfringement action in California against Kuzmak, a New Jersey resident, also alleging that he did not have sufficient rights in two of the patents to grant an exclusive license. INSUFFICIENT CONTACTS The district court granted Kuzmak’s motion to dismiss for lack of personal jurisdiction, finding his contacts with California were not sufficient to support the exercise of either general or specific jurisdiction over him. The lower court stressed that the license agreements had already been terminated by the time of the declaratory judgment motion and that Kuzmak conducted all discussions concerning the agreements via telephone and mail from New Jersey. On appeal, the Federal Circuit said the factors to be considered were whether the party purposefully directed its activities at residents of the forum, whether the claim arises out of or relates to the defendant’s activities with the forum and whether assertion of personal jurisdiction would be reasonable and fair. CLEAR ASSERTION The court rejected Kuzmak’s argument that the letter should be ignored because it could not have created an objectively reasonable apprehension that suit would be brought against Inamed, saying the letter clearly asserts that Inamed willfully infringed at least two of the patents and alleges infringement of another. “The fact that Dr. Kuzmak chose to use the term ‘willful’ in conjunction with ‘infringement’ is significant,” said the opinion. “It indicates that he was aware — and perhaps intentionally communicating his awareness — of the treble damages and attorney fees to which he may be entitled in a successful infringement action against Inamed.” The court added that the sending of a letter alleging infringement alone is insufficient to satisfy the requirements of due process but noted that Kuzmak negotiated four license agreements with Inamed and that he received royalty payments from the company. PURPOSEFUL DIRECTION Kuzmak argued that his negotiation efforts and the ensuing agreements were not sufficient to show that he purposefully directed his activities at residents of California, noting that he negotiated all of the agreements from his home in New Jersey. But the court said jurisdiction cannot be avoided merely because a party did not physically enter the forum state and that the combination of the letter and the negotiations satisfied the “purposefully directed” prong of the test for jurisdiction. The court further found that Inamed’s claim relates to or arises out of Kuzmak’s activities directed at the forum, rejecting his argument that the claim did not relate to or arise out of his prior negotiations because the agreements had been terminated by the time he sent the infringement letter. “Although the nexus necessary to satisfy the ‘arise out of or relate to’ requirement of the due process inquiry has not been clearly delineated by the Supreme Court, we have stated that it is significant that the constitutional catch-phrase is disjunctive in nature, indicating an added flexibility and signaling a relaxation of the applicable standard from a pure ‘arise out of’ standard,” the panel said. “With this principle in mind, we conclude that Inamed’s misuse cause of action at least ‘relates to’ if not outright ‘arises out of’ Dr. Kuzmak’s prior negotiation efforts leading to the parties’ license agreements.” PATENT MISUSE ALLEGED The court noted that in its complaint, Inamed alleged that Kuzmak misused his patents by purporting to grant Inamed an exclusive license when he did not have all the rights in two of them. An inquiry into the factual circumstances surrounding the last agreement would be central to such a cause of action, it said. “Hence, despite the fact that Inamed terminated the agreement before it received an infringement letter from Dr. Kuzmak, its asserted misuse cause of action still arises out of or relates to Dr. Kuzmak’s prior negotiation efforts which ultimately culminated in the parties’ license agreement. The remaining causes of action seeking declaratory judgment of patent noninfringement sufficiently arise out of the same set of operative facts to vest the district court with pendent personal jurisdiction over those causes of action,” said the court. The opinion further found that Kuzmak failed to demonstrate why jurisdiction over him would be reasonable and fair, saying he didn’t show why the physical problems that he cited as preventing travel couldn’t be resolved through a motion for a change of venue. Kuzmak is represented by Christopher E. Chalsen of Milbank, Tweed, Hadley & McCloy in New York. Inamed is represented by Kevin R. Klein of Larson & Taylor in Alexandria, Va. �; Copyright 2001 Mealey Publications, Inc.

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