In Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories, Inc., the Federal Circuit summarized the standard for personal jurisdiction in patent cases.

Metabolite holds patents for a method of controlling hyperhomocysteinemia, a condition involving elevated serum metabolite levels, which is an emerging risk factor for heart and vascular disease, and its principal business involves licensing its patents to pharmaceutical manufacturing companies. PamLab has an exclusive license of the Metabolite patents and manufactures and distributes a prescription-only vitamin product containing a specific formulation of B12, folic acid and B6 marketed as FOLTX. Breckenridge, a generic drug company headquartered in Florida, manufactures a similar product, marketed as “Folbee”, which it sells as a substitute for FOLTX.

Metabolite and PamLab filed suit in District Court alleging that Breckenridge had infringed the Metabolite patents by offering to sell Folbee to drug wholesalers and retailers as a generic equivalent to FOLTX. Following the district court’s denial of the plaintiffs’ motion for a temporary restraining order, the plaintiffs voluntarily dismissed the suit.
Several weeks later, Metabolite sent letters to vitamin distributors and retailers informing them of the Metabolite patents and PamLab’s exclusive license. Three letters were sent to customers of Breckenridge in Florida: Publix Super Markets, Eckerd, and Winn-Dixie. The letters did not name Breckenridge or threaten a lawsuit for infringement.

The letters stated in relevant part:

[O]ne or more small generic drug companies are offering generic equivalents to FOLTX. As the patent owner, Metabolite wanted to alert you to the patent coverage on FOLTX. We would urge you to consult with your patent attorney before entering into any arrangements for the distribution, dispensing or substitution of these generic equivalents in place of a legitimate prescription or order for FOLTX.

Metabolite enclosed a PamLab brochure that contained PamLab’s contact information but did not contain pricing or order forms.

Breckenridge filed suit against Metabolite and PamLab seeking declaratory judgment of non-infringement and alleging state law claims of tortious interference and unfair competition. Metabolite moved to dismiss the complaint for lack of personal jurisdiction and the district court granted the motion. The Federal Circuit has now reversed.

Where a defendant is not subject to general jurisdiction in the forum state, a district court may nonetheless exercise specific jurisdiction over the defendant if the cause of action “arises out of” or “relates to” the defendant’s in-state activity. The issue of personal jurisdiction in a declaratory action for non-infringement is “intimately related to patent law” and thus governed by Federal Circuit law regarding due process.

Where a suit involves both patent and non-patent claims, Federal Circuit law regarding due process also applies to the question of personal jurisdiction on non-patent claims if “the resolution of the patent infringement issue will be a significant factor” in determining liability under the non-patent claims. A court must inquire whether the defendant has “purposefully directed his activities” at the forum state and, if so, whether “the litigation results from alleged injuries that arise out of or relate to those activities.” Then, to defeat jurisdiction, the burden of proof shifts to the defendant, which must “present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.”

The court held that:

Thus, the crux of the due process inquiry should focus first on whether the defendant has had contact with parties in the forum state beyond the sending of cease and desist letters or mere attempts to license the patent at issue there. Where a defendant-licensor has a relationship with an exclusive licensee headquartered or doing business in the forum state, the inquiry requires close examination of the license agreement. In particular, our case law requires that the license agreement contemplate a relationship beyond royalty or cross-licensing payment, such as granting both parties the right to litigate infringement cases or granting the licensor the right to exercise control over the licensee’s sales or marketing activities.

Here, the court felt that jurisdiction arose by sending letters into the forum state, which it presumed qualify as cease and desist” letters, stating that Metabolite had entered into an exclusive license with PamLab, a company that conducts business in Florida.

Interestingly, the court noted that as a practical matter, patentees and patent counsel today often write accusatory letters artfully, and the type of implicit accusation of infringement contained in the Metabolite attorney letters has become the norm for what is traditionally refer to as “cease and desist” letters without using those magic words.

In sum, the court felt that Metabolite had not met its burden of showing a “compelling case” that the exercise of personal jurisdiction would be unfair under Burger King (Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73, 1985).

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