In SnapRays, d/b/a SnapPower v. Lighting Defense Group, the Federal Circuit found that a district court could exercise personal jurisdiction over a declaratory judgment defendant based on the defendant’s sending an Amazon Patent Evaluation Express (APEX) agreement to the declaratory judgment plaintiff alleging that the plaintiff infringed the defendant’s patents by selling products through Amazon into the state.

Background

Lighting Defense Group (LDG), a Delaware company with its principal place of business in Arizona, owns a patent that it believed was infringed by SnapRays dba SnapPower, a Utah company with its principal business in Utah, through the sales of certain products on Amazon storefront. Amazon offers a procedure to resolve patent claims on third-party product listings, called Amazon Patent Evaluation Express (APEX). Under APEX, a patent owner submits an APEX Agreement to Amazon to allege patent infringement. Amazon then sends the APEX Agreement to identified sellers. Each seller may 1) opt into the APEX program and proceed with third-party Agreement evaluation; 2) resolve the claim directly with the patent owner; or 3) file a lawsuit for declaratory judgment of non-infringement. If the seller takes no action in response to the APEX Agreement, the listings are removed from Amazon.com after three weeks.

In accordance with the APEX procedure, LDG sent an APEX Agreement to SnapPower alleging patent infringement. In response to receiving the APEX Agreement, SnapPower sued LDG, seeking a declaratory judgment from the Utah district court that SnapPower did not infringe LDG’s patent. This case turns on whether LDG’s submission of the APEX Agreement regarding SnapPower’s alleged infringing product sales in Utah, which, unlike a standard cease and desist letter, would cause the listings to be removed from Amazon absent SnapPower’s actions, was sufficient to give rise to personal jurisdiction in Utah. LDG moved to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). The district court granted LDG’s motion, holding it lacked personal jurisdiction over LDG. SnapPower appealed.

Issue

Does a district court have specific personal jurisdiction over an out-of-state declaratory judgment defendant where the defendant notifies the declaratory judgment plaintiff that its e-commerce sales into the district allegedly infringe the defendant’s patents and requires certain actions from the plaintiff (i.e., by invoking Amazon’s APEX Agreement process)?

Holding(s)

Yes. The district court of Utah has specific personal jurisdiction over LDG because LDG’s actions satisfy the three-factor test for specific personal jurisdiction, as set forth in Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, 848 F.3d 1346, 1353 (Fed. Cir. 2017), given that LDG purposefully directed extra-judicial patent enforcement activities at SnapPower in Utah.

Reasoning

Noting that the parties agreed that there is no general jurisdiction over LDG, the Federal Circuit applied the traditional three-factor test as explained in Xilinx to determine whether specific personal jurisdiction comports with due process: “(1) whether the defendant ‘purposefully directed’ its activities at residents of the forum; (2) whether the claim ‘arises out of or relates to’ the defendant’s activities with the forum; and (3) whether assertion of personal jurisdiction is ‘reasonable and fair.’”

 “Purposefully directed.” The Federal Circuit found that LDG intentionally submitted the APEX statement to Amazon, knowing that Amazon would notify SnapPower of the APEX Agreement and that, if SnapPower took no action, its listings would be removed, adversely affecting its sales and activities in Utah. Therefore, the Federal Circuit found that LDG purposefully directed its activities at SnapPower in Utah, intending effects that would be felt in Utah.[1]

The Federal Circuit rejected LDG’s argument that several precedential cases require a different outcome. Most notably, LDG argued that in Avocent Huntsville Corp. v. Aten Intern. Co., Ltd., the Federal Circuit held that sending letters did not constitute purposefully directed activities because “a patent owner may, without more, send cease and desist letters to a suspected infringer, or its customers, without being subjected to personal jurisdiction in the suspected infringer’s home state.” 552 F.3d 1324, 1340 (Fed. Cir. 2008). However, here, the Federal Circuit noted that the cease and desist letters in Avocent could be ignored without automatic consequences. In contrast, if SnapPower took no action based on the APEX policy, its listings would have been automatically removed and its sales in Utah would have been affected, which is the “more” that Avocent envisioned.

“Arises out of or relates to.” The Federal Circuit found this factor to be satisfied because LDG’s action of submitting the APEX Agreement was directed towards SnapPower in Utah and aimed to affect marketing, sales, and other activities in Utah.

“Reasonable and fair.” Satisfying the first two factors makes specific jurisdiction “presumptively reasonable.” The Federal Circuit further found LDG did not meet its burden to present a compelling case that other considerations would render jurisdiction unreasonable. The Federal Circuit did not agree that such a holding would open the floodgates of personal jurisdiction. Parties who submit an APEX agreement will only be subject to specific personal jurisdiction of a forum state when they identify listings that, if removed, affect the sales or other activities in that state. Also, LDG initiated a process that, if SnapPower took no action, would result in SnapPower’s listings being removed from Amazon.com, necessarily affecting sales activities in Utah. Therefore, the Federal Circuit did not find specific personal jurisdiction to be unfair or unreasonable.

FOOTNOTES

[1] The district court found that, while the Patent Act’s venue provisions appear to favor SnapPower, because LDG had not filed a lawsuit against SnapPower under the Patent Act, those venue provisions did not apply to the court’s determination of jurisdiction. The Federal Circuit did not address venue in its decision.