December 7, 2018

C&D Letters Sufficient to Establish Personal Jurisdiction

By Bryan K. Wheelock, Principal

In Jack Henry & Associates, Inc. v. Plano Encryption Technologies LLC, [2016-2700] (December 7, 2018), the Federal Circuit reversed the dismissal of the action for lack of personal jurisdiction, and remanded for further proceedings.

PET is a Limited Liability Company established in the State of Texas, and is registered to do business throughout Texas, with its registered address in Plano, Texas, in the Eastern District of Texas. PET’s sole business is to enforce its intellectual property.

After receiving letters alleging infringement, Jack Henry and its customers brought the declaratory judgment action in the Northern District of Texas.

The district court granted PET’s motion for dismissal, stating that PET’s actions do not subject it to personal jurisdiction in the Northern District of Texas, noting that while such letters might be expected to support an assertion of specific jurisdiction over the patentee because the letters are purposefully directed at the forum and the declaratory judgment action arises out of the letters, the Federal Circuit has held that, based on policy considerations unique to the patent context, letters threatening suit for patent infringement sent to the alleged infringer by themselves do not suffice to create personal jurisdiction.

The Federal Circuit identified three relevant factors:

  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 within the forum.
  3. Whether assertion of personal jurisdiction is “reasonable and fair.”

It said that the first two factors comprise the “minimum contacts” portion of the jurisdictional framework, and that it has held that the sending of a letter that forms the basis for the claim may be sufficient to establish minimum contacts, and PET’s counsel conceded as much at oral argument.

The analysis then turned to whether assertion of personal jurisdiction is “reasonable and fair.” The Federal Circuit noted that PET is subject to general jurisdiction in the state of Texas and is registered to do business throughout the state, and that it has not asserted that jurisdiction in the Northern District is inconvenient or unreasonable or unfair.

The Federal Circuit said that the burden befalls PET, as the source of the minimum contacts, to make a “compelling case” that the exercise of jurisdiction in the Northern District would be unreasonable and unfair. However, PET did not argue that litigating in the Northern District would be unduly burdensome, or that any of the other factors supports a finding that jurisdiction would be unfair.

The Federal Circuit concluded that PET has met the minimum contacts requirement without offense to due process.

The takeaway here is short and sweet: sending a cease and desist letter into a jurisdiction can get you sued in that jurisdiction. As always, sender beware.