iAddressing a district court's exercise of jurisdiction over an out-of-state defendant, the U.S. Court of Appeals for the Federal Circuit held that courts cannot decline to exercise jurisdiction over a defendant "solely on the ground that to do so [is] unreasonable." Patent Rights Protection Group, LLC v. Video Gaming Technologies, Inc., Case No. 09-1391 (Fed. Cir., May 10, 2010) (Linn, J.).
Patent Rights Protection Group (PRPG) filed suit in the U.S. District Court for the District of Nevada against Video Gaming Technologies (VGT) and SPEC International, Inc. (SPEC). PRPG alleged that VGT and SPEC infringed its patents by displaying, using and offering for sale gaming machine cabinets at a trade show in Las Vegas, Nevada. Both VGT and SPEC moved to dismiss PRPG's complaint for lack of personal jurisdiction.
VGT and SPEC argued that they do not have the necessary "minimum contacts" with Nevada for the district court to exercise jurisdiction over them. Neither VGT nor SPEC is a Nevada corporation, neither is registered to do business in Nevada and neither has sales agents, employees, facilities, bank accounts or telephone listings in Nevada. However, both SPEC and VGT have attended gaming trade shows in Nevada.
The district court granted the defendants' motions and dismissed the action without prejudice, concluding that exercising personal jurisdiction over the defendants would be unreasonable under Ninth Circuit precedent. The district court also denied PRPG's request for jurisdictional discovery because the court found that jurisdictional discovery would not affect its reasonableness analysis. Notably, the district court did not analyze the defendants' contacts with Nevada.
On appeal, the Federal Circuit applied Federal Circuit (not 9th Circuit) precedent and held that the district court erred in declining to exercising jurisdiction over the defendants "solely on the ground that do so was unreasonable." The Court explained that a district court may exercise jurisdiction over an out-of-state defendant if the defendant is amenable to service of process and if exercising jurisdiction over the defendant comports with due process (i.e., whether the defendant "purposefully established minimum contacts in the forum State"). But even if a party has minimum contacts with the forum state, a court can decline to exercise jurisdiction if exercising jurisdiction would not comport with "fair play and substantial justice" (i.e., if exercising jurisdiction would be unreasonable). The Court explained, however, that if a defendant has purposefully directed its activities at forum residents, exercising jurisdiction is unreasonable only in the "rare situation in which the plaintiff's interest and the state's interest in adjudicating the dispute in the forum are so attenuated that they are clearly outweighed by the burden of subjecting the defendant to litigation within the forum."
The Court found that PRPG's and Nevada's interests in adjudicating the action in Nevada, where PRPG is located, were not clearly outweighed by any burden on the defendants in litigating in Nevada. The Court noted that the defendants' presence at several trade shows in Nevada indicated that "neither [defendant] faces a particularly onerous burden in defending itself in Nevada.: The defendants' presence at trade shows in Nevada also suggested that additional discovery might unearth facts sufficient to support the exercise of jurisdiction over them. The Court concluded that it is "simply unrealistic" to contend that the defendants exhibited their products at a gaming trade show in Nevada "without some prospect of commercial benefit." It was therefore an abuse of discretion under 9th Circuit (not Federal Circuit) precedent for the district court to deny PRPG's request for jurisdictional discovery.
