United States: No Personal Jurisdiction In Declaratory Patent Action Without Sufficient Enforcement Activity

Order Granting Defendant's Motion to Dismiss for Lack of Personal Jurisdiction, Petzilla, Inc. v. Anser Innovation LLC, Case No. C-14-1354 EMC

Every dog owner knows that the single word "treat" can unleash canine ecstasy in their favorite pet. As a result, if you haven't had "sufficient contacts" with your dog lately, then the "greet-and-treat" pet products offered by the parties involved in Petzilla, Inc. v. Anser Innovation LLC may be of great help. On the other hand, if you are accused of infringing a patent directed to such canine delights and want to bring a declaratory judgment action arguing that the underlying patent claims are not infringed and are invalid, then you better be prepared to show that the patentee has "sufficient contacts" with your forum state. Otherwise, your declaratory judgment action may end up being a dog.

The plaintiff in Petzilla recently learned that harsh lesson when Judge Edward Chen employed the special "specific jurisdiction" standard for declaratory patent actions created by the Federal Circuit, and sent the case before him out on a walk. Unlike the "general jurisdiction" test, under which personal jurisdiction arises where a company generally avails itself of particular forum through, e.g., continuous and systematic business activities, "specific jurisdiction" looks to the forum-specific facts related to the specific claim at issue. Here, Petzilla had sued Anser seeking a declaratory judgment that its remote pet-interaction device called "PetziConnect" did not infringe Anser's patent entitled "Domestic Animal Telephone," which is employed in a "greet & treat" device called "PetChatz." Basically, both products are allegedly devices that a pet owner can affix to a wall at pet height, which facilitate either two-way video chat (PetChatz) or two-way audio one-way video chat (PetziConnect). Both products also allow the pet owner to remotely signal the device to dispense a dog treat.

Petzilla is headquartered in San Jose, California, while Anser is located in Burnsville, Minnesota. Anser sent a cease and desist letter to Petzilla in California, prompting Petzilla to file a declaratory judgment action, which Anser then moved to dismiss for lack of personal jurisdiction. Petzilla focused on two Northern California contacts to establish personal jurisdiction: (1) the cease and desist letter and (2) an agreement Anser signed with a pet food producer and distributor, Tuffy's, to produce co-branded "Treat Packs" for use with the PetChatz device ("the Agreement").

Judge Chen initially took note of Federal Circuit precedent holding that, in a declaratory patent action, the claim does not arise from the making, use, or sale of an allegedly infringing product; rather, the claim arises out of activities of the defendant patentee in enforcing the patents in suit. Thus, the relevant inquiry is whether the defendant "engaged in 'other activities' that relate to the enforcement or the defense of the validity of the relevant patents." Under this standard, enforcement activity such as exclusive licensing agreements and other undertakings that impose enforcement obligations on patentees or licensees support specific personal jurisdiction in a declaratory judgment action.

Turning to the arguments, Petzilla conceded the cease and desist letter alone was insufficient to create personal jurisdiction, but argued the letter and Agreement combined constituted sufficient enforcement activity to establish personal jurisdiction because the Agreement "had aspects" of a patent license. Namely, Petzilla argued that the Agreement involved the dog treats within the "Treat Packs" distributed by Tuffy's, and treats were mentioned in a dependent claim of the challenged patent (through the language "food that is dispensed"). Therefore, Petzilla argued that the Agreement governing distribution of treats governed an essential element of the challenged patent.

Judge Chen disagreed, finding that the patent did not teach pet food or its packaging, but only the food dispenser. He found Petzilla's reliance on the "food that is dispensed" language in the dependent claim misplaced because the treats and treat pack did not read on the claim limitations of the independent claim necessarily incorporated by reference into the dependent claim.

Further, Judge Chen found that the Agreement did not confer any rights in the dispenser to Tuffy's or impose any enforcement obligations on Tuffy's. Rather, Tuffy's merely received nonexclusive rights with respect to selling and manufacturing co-branded treats. Judge Chen relied upon Anser's representation that it maintained the responsibility for selling the devices, and the language in the Agreement stating that Anser would sell the device through multiple channels. Since the Agreement did not support specific personal jurisdiction, all that was left was the cease and desist letter. Finding the letter alone insufficient, Judge Chen granted Anser's motion to dismiss for lack of personal jurisdiction. Obviously, that result was not a treat to Petzilla.

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