Federal Circuit Vacates District Court’s Determination on Personal Jurisdiction

cafc-federal-circuit-flag-window-335Polar Electro Oy v. Suunto Oy (Fed. Cir. July 20, 2016) (Before Newman, Lourie, and Chen, J.) (Opinion for the court, Lourie, J.)

Polar owns two patents directed to a method and apparatus for measuring heart rates during physical exercise. Suunto’s principal place of business is in Finland, and ASWO, its sister company, is a Delaware corporation with a principal place of business in Utah. ASWO distributes Suunto’s products in the United States. In practice, Suunto receives an order for a product and packages the product in Finland, then places the product on a shipping dock for a third party shipper, still in Finland. ASWO pays for shipping, and title passes from Suunto to ASWO at Suunto’s dock in Finland.   Polar sued Suunto in the District of Delaware for patent infringement. Suunto filed a motion to dismiss the district court case, for lack of personal jurisdiction. The district court granted the motion without an evidentiary hearing.

The district court concluded that Suunto did not have sufficient contacts with Delaware to support specific jurisdiction.  Specific jurisdiction is established under a three prong test: “(1)whether the defendant purposefully directed activities at residents of the forum; (2) whether the claim arises out of or relates to those activities; and (3) whether assertion of personal jurisdiction is reasonable and fair.” Nuance Commc’ns, Inc. v. ABBYY Software House, 626 F.3d 1222, 1231 (Fed. Cir. 2010). The district court ruled that Suunto sold its products through ASWO in this country, but the record only showed a general intent to serve the U.S. market at large, with no particular focus on Delaware. The court found there was not “something more” in Suunto’s activities directed specifically to Delaware beyond placing its products into the stream of commerce.   Although the long arm statute was satisfied, due process considerations prevented the district court from exercising jurisdiction over Suunto. The district court dismissed the complaint against Suunto, and Polar moved for entry of final judgment. The district court granted the motion and entered final judgment in favor of Suunto. Polar appealed.

The Federal Circuit noted that the district court determined there was no personal jurisdiction without an evidentiary hearing. Whether a district court has personal jurisdiction over an out-of-state defendant is a two-part question. First, the district court must assess whether the long arm statute can be applied. Second, the court must determines whether exercising jurisdiction over the defendant in the forum state is consistent with due process. Polar argued on appeal that the district court erred in finding that Suunto did not have sufficient contacts in Delaware. The Court agreed with Polar. The Court held that there were sufficient contacts, because there was evidence Suunto purposefully shipped at least ninety-four accused products to Delaware retailers and fully expected that its products would then be sold in Delaware. The record also showed that Suunto entered into a distribution agreement with ASWO to market and distribute its products in the United States. It was Suunto who physically fulfilled orders, packaged products, and prepared shipments intended for Delaware. Suunto did not simply leave the products on a dock in Finland. Because Suunto purposefully availed itself of the Delaware market, the Court concluded that Suunto had sufficient minimum contacts with Delaware.

Although the district court had determined that the Delaware long arm statute was satisfied under a “dual jurisdiction” theory (requiring an intent to serve the U.S. market was sufficient to establish an intent to serve the Delaware market), it held that exercising jurisdiction over Suunto did not comport with due process. The Federal Circuit agreed that the dual jurisdiction theory was applicable. It was undisputed that accused products were sold in Delaware as a result of Suunto’s intent to serve the Delaware market, and personal jurisdiction over Suunto was proper under the Delaware long arm statute. However, because the district court incorrectly held there were insufficient minimum contacts between Suunto and Delaware, the Court vacated the district court’s ruling that due process superseded personal jurisdiction. The case was remanded to determine whether exercising jurisdiction over Suunto would be reasonable and fair.

Under a “minimum contacts” analysis, personal jurisdiction is proper over a foreign defendant that packages products abroad for shipment to this country, if the defendant purposefully availed itself of the market in the forum state. This can be established if the defendant shipped products to retailers in the forum state, with the expectation they would be sold there. If such minimum contacts are established, the court must determine if exercising jurisdiction would otherwise be unfair.

Puja Dave also contributed to this summary.


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