Brookstone v. Bai

• Court: District Court, D. New Hampshire
• Decided: May 27, 1997
• Docket: CV-96-327-B
• Status: Published

Opinion

Brookstone v. Bai CV-96-327-B 05/27/97

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Brookstone, Inc.

v. Civil No. 96-327-B

Carl B. Bai f/k/a Henry S . Bai

O R D E R

Brookstone, Inc. filed this declaratory judgment action

against Carl B. Bai after Bai and his counsel sent several

letters charging patent infringement to Brookstone's New

Hampshire home office. Bai, who has had no other direct contacts

with New Hampshire, moves to dismiss for lack of personal juris­

diction. For the reasons that follow, I grant Bai's motion.

BACKGROUND

In April, 1977, Bai obtained a patent (the '076 patent) for

a target game in which the players toss a Velcro-covered ball

back and forth.1 The ball is designed to adhere to a dish-shaped

fabric-covered mitt or glove.

Bai initially distributed toys protected by the '076 patent

through Koram Corporation, an Illinois corporation he then

headed. Koram sold the protected toys to J.C. Penney's western

region buying office and several Sears stores in the San

1 The patent has since expired. 1 Francisco area. Koram also distributed toys through a sales

representative in Massachusetts and several other states and a

distributor in southern Connecticut. He also marketed products

protected by the '076 patent by distributing catalogs at national

trade shows in New York and Illinois. Bai later licensed games

covered by the patent to several other companies, including

Herman's World of Sporting Goods, which conducts business in New

Hampshire. However, Brookstone has not identified any evidence

suggesting that any of the protected products ever found their

way to New Hampshire.

From July 1993 until February 1996, Bai and his counsel sent

a total of five letters to Brookstone's New Hampshire home office

alleging that Brookstone was selling a game that infringed the

'076 patent. After receiving the fifth letter, Brookstone agreed

to consider Bai's claim. It filed this action after settlement

efforts proved unsuccessful

I. DISCUSSION

Brookstone, as the party seeking to invoke the court's

jurisdiction, bears the burden of proving the existence of

personal jurisdiction. Sawtelle v. Farrell, 70 F.3d 1381, 1387

(1st Cir. 1995); Ticketmaster v. Alioto, 26 F.3d 201, 207 n.9 (1st Cir. 1994)2. Personal jurisdiction must exist under both

the applicable state long-arm statute and the Constitution's Due

Process Clause. Viam Corp. v. Iowa Export-Import Trading Co., 84

F .3d 424, 427 (Fed. Cir. 1996).

To carry the burden of proof when there has been no eviden­

tiary hearing, the plaintiff must make a prima facie showing of

personal jurisdiction by offering "evidence that, if credited, is

enough to support findings of all facts essential to personal

jurisdiction." Bolt v. Gar-Tec Products, Inc., 967 F.2d 671, 675

(1st Cir. 1992); accord Spectronics Corp. v. H.B. Fuller Co.,

940 F.2d 631, 635 (Fed. Cir. 1991) . The plaintiff "ordinarily

cannot rest upon the pleadings, but is obliged to adduce evidence

of specific facts," and the court "must accept the plaintiff's

(properly documented) evidentiary proffers as true" and make its

ruling as a matter of law. Foster-Miller, Inc. v. Babcock &

Wilcox Canada, 46 F.3d 138, 145 (1st Cir. 1995); United Elec.

Workers v. 163 Pleasant St. Corp., 987 F.2d 39, 44 (1st Cir.

1993). An evidentiary hearing will be reguired only if the court

2 The Federal Circuit follows its own law on personal jurisdiction where a conflict exists with law of another circuit. Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir.); cert. denied, 115 S. C t . 2277 (1995). Therefore, I refer to the law of the Federal Circuit, to the extent that it exists, but rely on the law of the First Circuit to fill any gaps in the developing body of Federal Circuit law.

3 determines that it would be unfair to the defendant to resolve

the issue without requiring more than a prima facie showing of

jurisdiction by the plaintiff. Foster-Miller, 46 F.3d at 146.

A. New Hampshire Long-Arm Statute

Because the applicable federal patent laws do not provide

for personal jurisdiction or nationwide service of process, I

look to New Hampshire's long-arm statute to provide the appli­

cable standard. Fed. R. Civ. P. 4 (k)(1); Omni Capital Int'l

Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 108 (1987); Beverly

Hills Fan Co. v. Roval Sovereign Corp., 21 F.3d 1558, 1569 (Fed.

Cir. 1994). New Hampshire's long-arm statute for non-resident

individuals provides:

Any person who is not an inhabitant of this state and who, in person or through an agent, transacts any business within this state, commits a tortious act within this state, or has the ownership, use, or possession of any real or personal property situated in this state submits himself, or his personal represen­ tative, to the jurisdiction of the courts of this state as to any cause of action arising from or growing out of the acts enumerated above.

N.H. Rev. St. Ann. 510:4, I (1983). The New Hampshire Supreme

Court construes the statute "to provide jurisdiction over foreign

defendants to the full extent that the statutory language and due

process will allow." Phelps v. Kingston, 130 N.H. 166, 171

(1987). Therefore, I need only address the constitutional

4 requirements of due process.

B. Due Process

The Due Process Clause limits a state's power to assert

personal jurisdiction over nonresident defendants.3 Helicopteros

Nacionales De Colombia, S.A. v. Hall, 466 U.S. 408, 413-14 (1984)

(citing Pennover v. Neff, 95 U.S. 714 (1877)). For the court to

properly assert personal jurisdiction over an absent non-resident

defendant, the defendant must have had "certain minimum contacts

with [the forum] such that the maintenance of the suit does not

offend 'traditional notions of fair play and substantial

justice.'" Helicopteros, 466 U.S. at 414 (quoting International

Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); see also Viam,

84 F.3d at 428-429. To satisfy this requirement, the defendant's

conduct should bear such a "substantial connection with the forum

[s]tate" that the defendant "should reasonably anticipate being

haled into court there." Burger King Corp. v. Rudzewicz, 471

3 The circuits disagree whether the due process analysis for personal jurisdiction in federal question cases relying on a state long-arm statute is controlled by the Fifth or Fourteenth Amendments. Compare Akro, 45 F.3d at 1544-45 (5th Amendment) with United Elec. Workers, 960 F.2d at 1085-86 (14th Amendment). This amounts to a distinction without a difference, however, as the jurisdictions that follow a Fifth Amendment analysis apply the same "minimum contacts" standard stemming from International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) as those using a Fourteenth Amendment analysis. See Akro, 45 F.3d at 1545.

5 U.S. 462, 473-75 (1985) (internal quotations omitted).

Courts traditionally analyze personal jurisdiction questions

by attemptinq to determine whether the court has qeneral or

specific jurisdiction. See Foster-Miller, 46 F.3d at 144.

However, when jurisdiction is founded exclusively on a

"defendant's contacts [which] are the result of establishinq a

distribution network in the forum State for the sale of the

defendant's products," the federal circuit has determined that

qeneral and specific jurisdiction analysis is not useful and

courts should instead determine whether jurisdiction can be based

on a "stream of commerce" theory. Viam, 84 F.3d at 427. This

approach must be used reqardless of whether the defendant is an

alleqed infrinqer or a patentee claiminq infrinqement. Id. at

428. Since Brookstone claims that the court has jurisdiction

over Bai both because he sent infrinqement letters to

Brookstone's New Hampshire office and because he established a

distribution network in the state, I analyze its claim usinq both

analytical models.

1. The general/specific jurisdiction model

If a defendant's activities within the forum state are

unrelated to the litigation but are "continuous and systematic"

or "substantial," the defendant has a sufficient relationship

6 with the forum to support general jurisdiction. Helicopteros,

466 U.S. at 413-14. To the extent that Brookstone alleges that

the court has general jurisdiction over Bai, its argument fails.

Bai has never lived in or even visited New Hampshire. He has

never conducted any business here, nor has he possessed any

property, paid any taxes, obtained a license to do business or

had a bank account in New Hampshire. His contacts are neither

substantial, continuous, nor systematic. In short, Bai's

contacts with the state are too few to support a finding of

general jurisdiction.

A court may exert specific jurisdiction even though it lacks

general jurisdiction if the plaintiff can show that the defen­

dant's contact with the forum state meets three reguirements.

Foster-Miller, 46 F.3d at 144. First, the claim underlying the

litigation must "arise[] directly out of, or relate[] to, the

defendant's forum-state activities." United Elec. Workers, 960

F.2d at 1088-89. Second, the plaintiff must show that the

defendant's in-state contacts represent purposeful availment of

the privilege of conducting activities in the forum state

invoking the benefits and protection of the state's laws and

making the defendant's involuntary presence before the state

courts foreseeable. Id.; Ticketmaster, 26 F.3d at 206. Finally,

7 the defendant's contacts with the forum state must be analyzed in

light of certain other factors to determine whether the assertion

of personal jurisdiction would comport with "fair play and sub­

stantial justice." Akro, 45 F.3d at 1545; see also Burger King,

471 U.S. at 477.

The court lacks specific jurisdiction over Bai because

Brookstone cannot show that he purposefully availed himself

of the privilege of conducting business in New Hampshire.

Brookstone bases its claim primarily on Bai's infringement

letters. However, such letters, standing alone, do not fulfill

the purposeful availment reguirement. Beacon Enter., Inc. v.

Menzies, 715 F.2d 757, 766 (2d Cir. 1983) ("It is diffcult to

characterize [defendant's] letter alleging infringement in an

unspecified location and threatening litigation in an unspecified

forum as invoking the 'benefits and protections' of [the forum

state's] law."); Nova Biomedical Corp. v. Holler, 629 F.2d 190,

197 (1st Cir. 1980) ("the mailing of an infringement notice --

standing alone -- has rarely been deemed sufficient to satisfy

the constitutional standard"); C f . Akro, 45 F.3d at 1546-49

(infringement letters met due process reguirement only in

combination with defendant's exclusive licensing agreement

with a competitor in the forum state). As I explain below, the

8 only additional evidence Brookstone can marshal to support its

claim -- evidence that Bai sold or licensed for sale games

protected by the '076 patent in states other than New Hampshire

-- does nothing to support its claim that Bai purposefully

availed himself of the privilege of conducting business here.

Accordingly, Bai's infringement letters will not be sufficient

to support Brookstone's specific jurisdiction claim because the

company has failed to identify any other evidence suggesting that

Bai purposely availed himself of the privilege of conducting

business in this state.

2. The Stream of Commerce Model

Brookstone alternatively argues that Bai's placement of his

products into the "stream of commerce" subjects him to juris­

diction in this state. The Federal Circuit has identified two

versions of the stream of commerce theory. Beverly Hills Fan, 21

F.3d at 1566. The narrow version, based on Justice O'Connor's

plurality opinion in Asahi Metal Indus, v. Superior Court, 480

U.S. 102 (1987), reguires a showing that the defendant that

placed its products into the stream of commerce also took some

additional step that evidences a purpose to serve the forum state

market. Id. at 112. The broader version, proposed by Justice

Brennan in his plurality opinion in Asahi, considered such an

9 additional step unnecessary. Id. at 117. The Federal Circuit

has not yet determined which version of the stream of commerce

theory should prevail. See Beverly Hills Fan, 21 F.3d at 1566;

Viam, 84 F.3d at 428; compare Bolt, 967 F.2d at 682-83 (rejecting

broad version of stream of commerce theory). However, I need not

resolve this issue here because Brookstone cannot satisfy either

version's requirements.

Brookstone asserts that Bai's placement of his patented

products with national retailers such as J.C. Penney and Sears

made it reasonably foreseeable that his products would be sold in

this state. However, Brookstone has not offered evidence of a

single sale of a patented product in New Hampshire by those

companies. While J.C. Penney and Sears undoubtedly sell many of

their products nationwide, Bai asserts that he sold his patented

products only to J.C. Penney's western region buying office and a

few isolated Sears stores on the west coast. There is no evi­

dence in the record to suggest that either retailer ever sold

Bai's patented products in other parts of the country.

Next, Brookstone points out that Bai distributed catalogs

listing products protected by the '076 patent at national trade

shows in New York and Illinois, and Koram distributed patented

products through a sales representative in Massachusetts and

10 through a distributor in southern Connecticut. However,

Brookstone has not identified any evidence demonstrating that

any patented product reached New Hampshire, was sold in New

Hampshire or was purchased from New Hampshire. As even Justice

Brennan acknowledged, "the stream of commerce refers not to

unpredictable currents or eddies . . . a participant in this

process [must be] aware that the final product is being marketed

in the forum State" to satisfy due process. Ashai, 480 U.S. at

117. Brookstone has failed to identify any evidence that would

warrant such a conclusion in this case.

Finally, Brookstone argues that Bai's license to Herman's,

which does business in New Hampshire, is additional evidence

supporting its stream of commerce argument. I disagree. Unlike

an exclusive licensing arrangement, this type of non-exclusive

license should not subject Bai to jurisdiction in the forum

merely because a licensed company does business there. At the

time he granted Herman's a license, Bai may or may not have known

that Herman's conducted business in New Hampshire, and Brookstone

has offered no evidence to suggest that Bai had any control over

whether Herman's sold the licensed products. See Burger King,

471 U.S. at 475 (defendant's contacts must be voluntary rather

than unilateral activity of third party). Therefore, Herman's

11 subsequent sales of Bai's licensed product, without more, is more

properly seen as a business effort by that company, and not Bai,

and cannot support jurisdiction.

CONCLUSION

For the foregoing reasons, defendant's motion to dismiss

(document no. 9) is granted.

SO ORDERED. _____________________________ Paul Barbadoro United States District Judge

May 27, 1997

cc: Donald A. Burns, Esq. Neil G. Cohen, Esq. Christopher Gagne, Esq. Jeffrey N. Danis, Esq.