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Kgm Industries Co., Inc., A California Corporation v. Yigal Cohen Harel

October 30, 2012

KGM INDUSTRIES CO., INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
YIGAL COHEN HAREL, AN INDIVIDUAL; INTEGRAL LOGISTICS, LLC, A FLORIDA LIMITED LIABILITY COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Dean D. Pregerson United States District Judge

O

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS [Dkt. No. 16]

Presently before the court is Defendant Yigal Cohen Harel ("Harel")'s Motion to Dismiss for Lack of Jurisdiction. Having considered the submissions of the parties, the court grants the motion and adopts the following order.

I. Background

Plaintiff manufactures and distributes lighters and related products. (Complaint ¶ 6.) Defendant Harel, a Florida resident, owns United States Design Patent numbers D498,328 and D501,274 (Compl. ¶ 7, Exs. 1-2; Declaration of Yigal Cohen Harel in Support of Motion ¶ 5.) Defendant Integral Logistics, LLC ("Integral") is a non-exclusive licensee of Harel's patents. (Harel Dec. ¶ 7.)

On March 30, 2012, Harel's counsel sent Plaintiff a letter claiming that Plaintiff sells lighter and lighter inserts that infringe upon Harel's patents. (Compl., Ex. 3.) Plaintiff filed this action on April 12, 2012, seeking a declaratory judgment that its products do not infringe upon Harel's patents and that Harel's patents are invalid. Harel now moves to dismiss the complaint for lack of personal jurisdiction.

II. Legal Standard

In a patent case, Federal Circuit law determines whether this court may exercise personal jurisdiction over a defendants. Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir. 1995). The personal jurisdiction analysis under California's long-arm statute, which applies here, and federal law are the same. Nuance Commc'ns, Inc. v. Abby Software House, 626 F.3d 1222, 1230 (Fed. Cir. 2010). A court may only exercise personal jurisdiction over a foreign defendant if the defendant has sufficient minimum contacts with the forum to satisfy due process concerns. Int'l Shoe v. Washington, 326 U.S. 310, 316 (1945). Jurisdiction may be general or specific. Avocent Huntsville Corp. v. Aten Int'l Co., Ltd., 552 F.3d 1324, 1330 (Fed. Cir. 2008). To show that general jurisdiction is proper, a plaintiff must demonstrate that the defendant maintains continuous and systematic contacts with the forum state. Id. To establish specific jurisdiction, a plaintiff need only show that a defendant has purposefully directed his activities at forum residents and that the injuries alleged arise from or relate to those activities. Id. Under Federal Circuit law, a defendant may then show some compelling reason why the exercise of personal jurisdiction would be unreasonable. Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d 1356, 1363 (Fed. Cir. 2006).

III. Discussion

A. General Jurisdiction KGM argues that this court has general jurisdiction over Harel under a "stream of commerce" theory. (Opp. at 8.) Stream of commerce theory jurisprudence is unsettled. AFTG-TG,LLC v. Nuvoton Tech. Corp., 689 F.3d 1358, 1362 (Fed. Cir. 2012). One strand of the theory posits that, in the jurisdictional context, due process is satisfied where a defendant places a product in the stream of commerce with the knowledge that the product is being marketed in the forum state. Id., (citing Asahi v. Metal Ind. Co. v. Superior Court of California, Solano County, 480 U.S. 102, 107 (1987)). A competing formulation of the theory counsels that placement of a product into the stream of commerce, without "something more," is insufficient to establish the minimum contacts necessary to satisfy due process. Id. Under Federal Circuit law, a court must decide whether the facts of a given case support the exercise of personal jurisdiction on a case-by-case basis, and should not specifically apply either of the competing formulations of the stream of commerce doctrine where the result is clear under either interpretation. Id. at 1364.

Under the facts of this case, there is no general jurisdiction over Harel. There is no allegation or evidence that Harel individually placed anything in the stream of commerce. Indeed, KGM acknowledges that only Integral, not Harel, markets and sells products in California.*fn1 (Opp. at 7.) To the extent KGM suggests that the licenses Harel granted to Integral are products in the stream of commerce, KGM is mistaken. At best, Harel's "product" is a covenant not to sue, which never itself enters the stream of commerce. Red Wing Shoe Co., Inc. V. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1362 (Fed. Cir. 1998).

KGM appears to suggest that Integral's activities should be imputed to Harel because Harel receives royalties from Integral's sales in California (Opp. at 7.) Nowhere does KGM cite any authority for this proposition. To the contrary, in the absence of any constitutionally cognizable contacts with California, Harel's "receipt of royalty income from [his] licensees . . . is . . . irrelevant." Red Wing Shoe, 148 F.3d at 1361.

KGM further asserts, without authority, that Harel is responsible for Integral's actions as Integral's majority owner and licensor of the patents-in-suit. KGM is mistaken. First, simply granting a license to an entity that does business in a particular forum is not equivalent to doing business in that forum, and is therefore insufficient to subject a licensor to personal jurisdiction. Id. Second, the "mere fact of sole ownership and control does not eviscerate the separate corporate identity that is the foundation of corporate law."*fn2 Katzir's Floor and Home Design, Inc. v. M-MLS.com, 394 F.3d 1143, 1149 (9th Cir. 2004).

Absent any indication that Harel had systematic contacts with California or placed any product in the stream of commerce with the knowledge that that product would be sold in ...


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