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District court erred in dismissing patent suit for lack of Personal Jurisdiction

On Tuesday  in an opinion by Judge HUGHES in the case M-I Drilling Fluids UK Ltd. v. Dynamic Air Ltda, the Federal Circuit overturned a district court’s dismissal of M-I Drilling’s suit. The patents claimed “methods, systems, and apparatuses used in the collection, conveyance, transportation, and storage of drilling waste created around undersea oil wells.” The district court found that DAL’s contract with a Brazilian company to install and operate pneumatic conveyance systems aboard ships was insufficient to show that it had “purposefully avail[ed] itself of the privilege of conducting activities within the United States” to establish personal jurisdiction under the federal long-arm statute.

The Federal Circuit said the district court erred by focusing on the contract rather than on the “nature and extent of the commercialization of the accused products or services.” DAL had installed and continued to operate its systems on U.S.-flagged ships after M-I Drilling had notified it about the alleged infringement. This was sufficient to establish that DAL had “purposefully directed its activities at the United States,” and DAL had failed to show that subjecting it to personal jurisdiction would offend due process considerations.

Specific personal jurisdiction over a foreign corporation is proper when the foreign corporation allegedly commits acts that infringe a U.S. patent on a U.S.-flagged ship regardless of whether the contract from which those acts arose specifies where the acts should take place.

M-I Drilling and M-I LLC (together, “M-I”) sued Dynamic Air Ltda. (DAL) for patent infringement in the District of Minnesota based on allegedly infringing acts committed on U.S.-flagged ships in international waters.  DAL is a Brazilian corporation with its principal place of business in Brazil.  DAL is a subsidiary of Dynamic Air Inc. (DAI), a Minnesota corporation with its principal place of business in Minnesota.  The allegedly infringing acts arose out of a contract for DAL to perform work for another Brazilian company, wherein the contract did not provide the location of the work to be performed.  DAL moved to dismiss, arguing that the court lacked specific personal jurisdiction over DAL under Federal Rule of Civil Procedure 4(k)(2).  The district court found that because the contract did not specify the location of the work being performed, DAL did not purposefully avail itself of the privilege of conducting activities within the U.S. and therefore dismissed the case for lack of specific personal jurisdiction.

The Federal Circuit found that the district court erroneously focused on the contract, rather than the allegedly infringing acts.  Because DAL installed allegedly infringing systems on U.S.-flagged ships and continued to maintain those systems, the Federal Circuit found that specific personal jurisdiction over DAL comports with due process and reversed the district court’s dismissal.  The Federal Circuit assumed for purposes of this appeal only that U.S. – flagged ships constitute U.S. territory because DAL had assumed this fact in its motion in the district court.

Source: Intellectual Property Owner Association (IPO)

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