Jurisdiction over Foreign Entities and Foreign Sovereigns
Before Wallach, Hughes, and Stoll. Appeal from the Eastern District of Virginia.
Summary: (1) If a foreign entity is not subject to jurisdiction in any state’s courts of general jurisdiction, but the claims against the entity arise under federal law and the exercise of jurisdiction comports with due process then personal jurisdiction may exist over a foreign entity in any federal court in the U.S. (2) A foreign sovereign that obtains a U.S. patent, engages in licensing the patent and/or threatens enforcement of the patent may be subject to jurisdiction of U.S. courts under the “commercial activity” exception to the doctrine of sovereign immunity.
The University of Bern (“University”), a public university of the Swiss Confederation, is the owner of a U.S. patent. The University granted an exclusive license for the patent to German company Laboklin. The license agreement required Laboklin to commercialize the invention in North America. The agreement also required the University and Laboklin to work together to enforce the patent. Laboklin subsequently granted sub-licenses to the patent to entities in California and Michigan. With the University’s consent, Laboklin sent a cease and desist letter to Paw Prints Genetics (“PPG”), a Washington state corporation, alleging infringement of the U.S. patent and related German and European patents. PPG then brought suit against Laboklin and the University in the Eastern District of Virginia, requesting declaratory judgment of patent ineligibility under Section 101. Laboklin and the University moved to dismiss the complaint for lack of personal jurisdiction and subject matter jurisdiction. After an evidentiary hearing, the district court found that it could properly exercise personal and subject matter jurisdiction over the defendants. At the conclusion of trial, the court issued a judgment as a matter of law that the asserted claims in the patent were patent-ineligible under Section 101. Laboklin and the University appealed the district court’s findings on personal and subject matter jurisdiction.
The Federal Circuit first addressed Laboklin’s argument that the district court lacked personal jurisdiction over Laboklin because Laboklin lacks sufficient contacts with the forum. Courts may exercise personal jurisdiction pursuant to FRCP 4(k)(2) over a nonresident if (1) the claim arises under federal law, (2) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction, and (3) the exercise of jurisdiction comports with due process. In determining whether the exercise of jurisdiction comports with due process, the forum is the United States rather than just the state in which the district court sits. Here, the parties agreed that the present claim arises under federal patent law, and the nonresident company Laboklin is not subject to jurisdiction in any state’s courts of general jurisdiction. Thus, the only question is whether the exercise of jurisdiction comports with due process. The Federal Circuit found that the exercise of jurisdiction comports with due process because Laboklin directed its activities at residents of the U.S. by licensing the patent commercially in the U.S. and sending a cease and desist letter in the U.S. Laboklin availed itself of the benefits of U.S. laws through these licensing and enforcement activities. Therefore, the Federal Circuit affirmed the district court’s finding of personal jurisdiction over Laboklin.
Next, the Federal Circuit addressed the appellants’ argument that the district court lacks personal and subject matter jurisdiction over the University because it is a foreign sovereign. Although a foreign state is presumptively immune from the jurisdiction of U.S. courts, a foreign state is not immune if the foreign state engages in “commercial activity” in the U.S. Prior Federal Circuit precedent established that obtaining and enforcing a U.S. patent constitutes commercial activity. Thus, the University’s acts of obtaining a U.S. patent and enforcing the patent in collaboration with Laboklin constituted commercial activity, triggering the exception to the sovereign immunity doctrine. Therefore, the Federal Circuit affirmed the district court’s finding of personal and subject matter jurisdiction over the University.
Editor: Paul Stewart