Radio Systems Corp. v. Accession, Inc.

The Federal Circuit issued an opinion in Radio Systems Corp. v. Accession, Inc. on Monday, April 25, affirming a district court decision to dismiss a declaratory judgment action for lack of personal jurisdiction over the patentee.

In this case, Thomas Sullivan, president and sole employee of New Jersey corporation Accession, attempted to market his “Wedgit” portable pet access door to Radio Systems beginning in 2006. He continued doing so in 2007, notifying Radio Systems that the USPTO had sent him a notice of allowance for a patent on his Wedgit door. After continued attempts to market his Wedgit door to Radio Systems, Sullivan met with a Radio Systems representative in 2009. The parties signed a nondisclosure agreement prior to this meeting. Later that same year, the USPTO issued a notice of allowance to Radio Systems for its SmartDoor. Accession’s New Jersey counsel called the USPTO examiner for Radio Systems’ SmartDoor soon afterward, notifying the examiner of Accession’s Wedgit door patent. The examiner returned the call, and “[a]s a result of that conversation” (in the words of the Federal Circuit opinion), the USPTO withdrew Radio Systems’ notice of allowance. Counsel for Accession also contacted Radio Systems’ counsel, stating that Sullivan should be named as an inventor on Radio Systems’ SmartDoor patent asking whether Radio Systems had disclosed Accession’s Wedgit patent to the USPTO during prosecution, and later proposing settlement through a licensing agreement.

Radio Systems filed a declaratory judgment action for noninfringement and invalidity against Accession in November 2009 in the Eastern District of Tennessee, justifying suit in this forum based on specific jurisdiction (arising from related events), not on general jurisdiction (arising from continuous and systematic business contacts). Accession moved for dismissal for lack of personal jurisdiction, or in the alternative, a transfer to the District of New Jersey, in which Accession is based. The Eastern District of Tennessee dismissed the case. Accession subsequently filed a patent infringement suit in the District of New Jersey, where the suit was stayed pending the Federal Circuit appeal.

Federal Circuit precedent allows for a patentee to send cease-and-desist notices without becoming subject to jurisdiction in every forum where it sends such a notice. Declaratory judgment jurisdiction “arises out of or relates to the activities of the defendant patentee in enforcing the patent or patents in suit.” Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1332 (Fed. Cir. 2008). The Federal Circuit has interpreted Avocent, both here in Radio Systems and earlier in Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012 (Fed. Cir. 2009), to mean that a patentee must engage in “enforcement or defense efforts” within a district in order for the district court there to establish specific personal jurisdiction over the patentee.

Radio Systems argued that personal jurisdiction in Tennessee for Accession arises from Accession’s pre-adversarial marketing activities, from interactions between Accession’s counsel and the USPTO, and from the 2009 nondisclosure agreement. The Federal Circuit first found that Accession’s attempts to market the Wedgit door to Radio Systems did not subject Accession to personal jurisdiction in Tennessee because these attempts were not enforcement or defense efforts. Regarding counsel for Accession contacting the USPTO, the Federal Circuit cited Avocent and found that enforcement activities at the USPTO (in Alexandria, Virginia) do not give rise to personal jurisdiction in Tennessee. Though the 2009 nondisclosure agreement between Radio Systems and Accession included a forum selection clause naming the Eastern District of Tennessee, the agreement only pertained to confidential information. In patenting its Wedgit door, Accession disclosed it to the public, so the Federal Circuit ruled that the nondisclosure agreement had no bearing on personal jurisdiction in this action for declaratory judgment of patent noninfringement and invalidity.

Parties feeling threatened with the possibility of a patent infringement suit can file an action for declaratory judgment, but they may have limited choices about where to file. Particularly where the patentee is a small company like Accession, the patentee may not have the continuous and systematic business contacts to support general personal jurisdiction in a wide selection of judicial districts. If a party wants to file a declaratory judgment action against such a small company in a district without general personal jurisdiction, the party must show specific personal jurisdiction, which under Federal Circuit precedent in patent cases involves the patentee’s enforcement or defense measures in that district.