The US Court of Appeals for the Federal Circuit concluded that an alleged infringer was subject to personal jurisdiction where it deliberately and continuously engaged in allegedly infringing activities on US-flagged ships. M-I Drilling Fluids UK Ltd. v. Dynamic Air Ltda., Case No. 16-1772 (Fed. Cir., May 14, 2018) (Hughes, J) (Reyna, J, concurring).
M-I Drilling Fluids and its US affiliate sued Dynamic Air, a Brazilian subsidiary of a US company, in US district court alleging that Dynamic Air infringed on five US patents when it installed and maintained a pneumatic conveyance system to transfer drill cuttings on two US-flagged ships. Dynamic Air installed the systems after winning a bid from a Brazilian state-owned oil company, Petróleo Brasileiro (Petrobras).
Although the district court found that the US-flagged ships were US territory, it reasoned that because Dynamic Air's contract did not specify on which ships it would install the systems, its contacts with the United States were due to the unilateral activity of Petrobras. Thus, the exercise of specific jurisdiction was neither reasonable nor fair. M-I appealed.
The Federal Circuit reviews personal jurisdiction issues in patent infringement cases de novo using its own precedent. For the exercise of personal jurisdiction to be appropriate, three factors must be met: (1) the plaintiff's claim must arise under federal law, (2) the defendant must not be subject to jurisdiction in any state courts of general jurisdiction, and (3) the exercise of jurisdiction must comport with due process. Only the third factor was at issue on appeal.
In assessing whether M-I's assertion of specific personal jurisdiction comported with due process, the Federal Circuit considered a three-part test: (1) whether the defendant purposefully directed its activities at the residents of the forum, (2) whether the claim arose out of or related to the defendant's activities within the forum, and (3) whether the assertion of personal jurisdiction was reasonable and fair.
The Federal Circuit reasoned that "the jurisdictional inquiry is relatively easily discerned from the nature and extent of the commercialization of the accused products by the defendant in the forum" (emphasis in original). The Court explained that the district court erroneously focused on the contract rather than on the conduct of the defendant. As the court further explained, it was undisputed that Dynamic Air controlled its own specific performance under the Petrobras contract. For example, the contract did not require Dynamic Air to use infringing components when it installed the systems on the US flagged ships. Further, it was Dynamic Air, not Petrobras, that continued to operate the systems even after it received notice from M-I of the alleged infringement. Therefore, the totality of Dynamic Air's contacts showed it purposefully directed its activities at the United States.
The Federal Circuit further reasoned that the case was not one of the "rare cases in which fair play and substantial justice defeat the reasonableness of a U.S. court exercising personal jurisdiction . . . ." The exercise of personal jurisdiction was reasonable and fair because a US plaintiff sought to enforce US patents for allegedly infringing activity in US territory.
Judge Reyna, in a concurring opinion, agreed that under Fed. R. Civ. P. 4(k)(2), the district court was entitled to exercise specific personal jurisdiction. However, he wrote separately to provide his reasoning as to why the exercise of personal jurisdiction here did not offend traditional notions of fair play and substantial justice, and to emphasize the importance of territoriality in the due process analysis as applied to enforcement of US patent law on US-flagged ships.
That Ship Has Sailed: Continued Infringing Activities Confer Personal Jurisdiction
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