The Federal Circuit Rules That Displaying Allegedly Infringing Products At A Trade Show May Subject A Foreign Company To U.S. Jurisdiction

    28 April 2009

    In an April 17, 2009 decision, the U.S. Court of Appeals for the Federal Circuit adopted an expansion definition of systemic personal jurisdiction over a foreign medical manufacturer that displayed products that infringe a U.S. patent at a trade show in the United States. Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com. de Equipo. Medico, No. 2008-1279, 2009 U.S. App. Lexis 8081 (Fed. Cir. Apr. 17, 2009). The appellate court ruled that the District Court’s erroneously dismissed a patent infringement action for lack of personal jurisdiction.

    Synthes is a Pennsylvania medical-device company that makes instruments and implants, including bone plates, used to immobilize bones or bone fragments to promote healing of fractures. It is the assignee of a patent directed to “a bone plating system and method for fracture fixation of bone.”

    GMReis is a Brazilian corporation, with its headquarters in that country. It designs, manufactures, and markets orthopedic and neurological medical devices, including bone plates. In 2007, GMReis’ CEO and an employee spent three days at the American Association of Orthopedic Surgeons (AAOS) Annual Meeting in San Diego. GMReis’ booth displayed, among other things, samples of five locking bone plates.

    While at the trade show, Synthes served GMReis with a summons and complaint for patent infringement. Synthes pleaded that GMReis was subject to personal jurisdiction in the Southern District of California because it had “imported into the United States and/or offered to sell locking plates that infringe Synthes’ patent rights [and had] displayed said locking plates at the 2007 [AAOS] Annual Meeting in San Diego, California for the purpose of generating interest in infringing products to the commercial detriment of [Synthes].” GMReis moved to dismiss Synthes’ complaint for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). GMReis admitted that it attended the 2007 AAOS Meeting as part of its international sales effort but argued that it was not subject to jurisdiction because it had not performed any act that would constitute patent infringement. GMReis asserted that it had made only one sale of its products in the United States to a veterinary medical supply company. GMReis claimed that it attended the AAOS meeting because many non-U.S. surgeons attend the annual trade show, and GMReis wanted to show its products to those non-U.S. surgeons. GMReis products are not approved by the Food and Drug Administration (“FDA”) for use in humans in the United States.

    The record showed that GMReis had exhibited its products at a minimum of seven trade shows in the United States since 2003, including the 2006 North American Spine Society (AAOS) trade show, the 2003 World Spine II trade show, and the 2003–2007 AAOS annual meetings. In addition, Mr. dos Reis admitted that he attended at least two other trade shows in the United States. Synthes also learned about GMReis’ product acquisition and development in the United States. In the past, GMReis has purchased in the United States parts and a manufacturing machine for use in Brazil. In addition, it regularly purchases a product in the United States for resale in Brazil, and its representatives have met and consulted with two American companies regarding potential purchase and development of components for non-accused products.

    Synthes also learned through discovery that, following the 2007 AAOS Meeting, GMReis’ website received two inquiries from U.S. entities, asking whether certain GMReis products would be available for sale or would be the subject of clinical trials for FDA approval in the United States in the future. GMReis responded by email that its products were neither approved by the FDA nor available to the U.S. market, and that it did not intend to launch its products in the United States in the future.

    The Federal Circuit noted that because the District Court resolved the personal jurisdictional question based on the submission of papers, Synthes bore the burden of making a prima facie showing that the court had personal jurisdiction over GMReis. Synthes invoked Fed. R. Civ. P. 4(k)(2), which provides that in federal question cases involving a foreign defendant, contacts with the United States as a whole may be analyzed under the Due Process Clause of the Fifth Amendment to determine if personal jurisdiction in a U.S. federal court is proper. Rule 4(k)(2) reads:

    For a claim that arises under federal law, serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant if:

    (A) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction; and

    (B) exercising jurisdiction is consistent with the United States Constitution and laws.

    The Federal Circuit, which had not previously considered the scope of the rule, ruled that “we read Rule 4(k)(2) to allow a court to exercise personal jurisdiction over a defendant if (1) the plaintiff’s claim arises under federal law, (2) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction, and (3) the exercise of jurisdiction comports with due process.” Id. at *18.

    Determining whether a plaintiff’s claim arises under federal law generally presents a relatively straightforward analysis, and in this case it is undisputed that Synthes’ patent infringement claim arises under federal law. See 28 U.S.C. § 1338.

    However, determining the second Rule 4(k)(2) requirement – that the defendant not be subject to personal jurisdiction in any state’s courts of general jurisdiction (the “negation requirement”) – could pose practical difficulties because the plaintiff’s burden would be to prove that the defendant is not subject to jurisdiction in any of the 50 states. Here, however, GMReis itself asserted that it was not subject to the jurisdiction of any U.S. forum. Under these circumstances, the Court of Appeals applied a due process analysis under Rule 4(k)(2) and considered GMReis’ contacts with the nation as a whole. “We leave for another day a determination as to (i) whether the plaintiff or defendant bears the burden of fulfilling the second requirement of Rule 4(k)(2), (ii) what sort of showing satisfies that burden, and (iii) whether the district court, in the first instance, must undergo a Rule 4(k)(1) analysis before engaging in a Rule 4(k)(2) analysis.” 2009 U.S. App. Lexis 8081 at *26-27.

    The Federal Circuit then went on to find that the District Court was correct in ruling that it did not have general jurisdiction over GMReis. Its these contacts with the United States do not constitute “continuous and systematic general business contacts” which would confer a court with general jurisdiction. However, it found that the District Court erred in ruling that it lacked specific jurisdiction over GMReis. GMReis purposefully directed its activities at parties in the United States. The company brought locking bone plates into the United States from Brazil and purposefully displayed those items at the GMReis booth at the 2007 AAOS Meeting as part of its international sales effort. “Together, these deliberate contacts support a finding that GMReis purposefully availed itself of the United States.” Id. at *30.

    In addition, Synthes’ claim of patent infringement arises out of GMReis’ activities in the United States. The Court found that:

    Synthes’ complaint alleges that GMReis has been, and still is, making, using, offering for sale, selling, and/or importing into the United States products, systems, and/or apparatuses that infringe the ’744 patent, all in violation of 35 U.S.C. § 271(a). Synthes states in the complaint that GMReis is subject to personal jurisdiction because GMReis directly and through agents imported into the United States, and/or offered to sell, locking plates that infringe Synthes’ ’744 patent. Synthes also states that GMReis displayed the locking plates at the 2007 AAOS Meeting for the purpose of generating interest in infringing products, to the commercial detriment of Synthes. Synthes’ claim of patent infringement, therefore, arises directly out of GMReis’ bringing the locking bone plates into the United States, displaying them at the 2007 AAOS Meeting in San Diego, and trying to generate interest in GMReis products among attendees of the trade show.

    Id. at *30-31. Therefore, GMReis’ activities within the United States were sufficient to establish minimum contacts.

    The Court then held that exercising jurisdiction over GMReis was reasonable and fair. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980). While GMReis will be required to traverse the distance between its headquarters in Brazil and the district court in California, and will be required to submit itself to a foreign nation’s judicial system, “progress in communications and transportation has made the defense of a lawsuit in a foreign tribunal less burdensome.” World-Wide Volkswagen, 444 U.S. at 294 (quoting Hanson v. Denckla, 357 U.S. 235, 251 (1958) (quotation marks omitted). In addition, for at least the last five years, GMReis representatives have traveled to the United States for, among other things, trade shows, which suggests that, as far as GMReis is concerned, travel itself is not unduly burdensome. Moreover, the United States has a strong interest in adjudicating the infringement dispute and Synthes has an interest in seeking to obtain a judgment of infringement and injunctive relief.

    The Federal Circuit did note that it did not intend to chill foreign trade:

    We agree that the United States has an interest in not chilling trade show attendance by foreign inventors, entrepreneurs, and customers. However, we do not view our decision as barring convention center doors to foreign entities. Interested parties, foreign and domestic, are welcome to attend trade shows in the United States, set up booths, and discuss their products. If, however, as in this case, a party brings allegedly infringing products to a trade show, we do not see the Due Process Clause of the Fifth Amendment standing in the way of a district court’s exercise of jurisdiction over the party.

    2009 U.S. App. Lexis 8081 at *37-38.

    Thus, subjecting GMReis to the jurisdiction of the district court is both reasonable and fair and it reversed the judgment of the District Court dismissing Synthes’ complaint for lack of personal jurisdiction.

    In this case of first impression under Rule 4(k)(2), the Federal Circuit has opened the door for U.S. companies to sue foreign defendants in U.S. courts based on the display of allegedly infringing products at trade shows. Moreover, the Synthes decision is implicitly retroactive and damages and injunctive relief could be sought for displays that occurred several years ago. Foreign defendants that are located in countries that are signatories to the Hague Convention on the Service Abroad of Judicial and Extra-Judicial Documents in Civil or Commercial Matters or the Inter-American Convention on Letters Rogatory and Additional Protocol (Inter-American Service Convention) would be particularly vulnerable to suits in the United States.

    Written by Richard Oparil