Personal Jurisdiction in Trade Secret Cases
Addressing the proper application of the due process clause, the U.S. Court of Appeals for the Eighth Circuit revived the plaintiff’s case for trade secret misappropriation, finding that a Spanish company’s contacts with Missouri were such that it should have reasonably anticipated being sued in Missouri. K-V Pharma. Co. v. J. Uriach & CIA, S.A., Case No. 10-3403 (8th Cir., August 3, 2011) (Gilman, J.) (sitting by designation).
K-V is a Delaware corporation with its principle place of business in St. Louis, Missouri. Uriach is a Spanish corporation with its principle place of business in Barcelona, Spain. In 1993, K-V and Uriach entered into a contract to develop, manufacture and sell an antifungal cream with an ingredient developed by Uriach and a drug-delivery system developed by K-V. Pursuant to the contract, Uriach was to sell the antifungal cream throughout the world, except for the United States, Canada and Mexico. K-V and Uriach amended the contract twice—in 1998 and again in 2002. In 2005, K-V terminated the contract. After the termination, Uriach allegedly failed to return certain trade secrets and confidential information to K-V and later began marketing and selling a cream that allegedly used K-V’s drug delivery system. K-V sued Uriach in Missouri for breach of contract and misappropriation of trade secrets, seeking damages and an injunction to prevent Uriach from selling the antifungal cream.
Uriach filed a motion to dismiss for lack of personal jurisdiction. In granting the motion, the district court found that Uriach’s only contact with Missouri were letters, telephone calls, one meeting and a Missouri choice of law provision in the contract. The court held that these contacts were insufficient to establish personal jurisdiction. The district court also noted that the contract’s contemplated future consequences would not occur in Missouri because Uriach agreed to do tasks that excluded the United States, Canada and Mexico. K-V appealed.
That issue on appeal centered on whether the district court has personal jurisdiction over Uriach. Reviewing the jurisdictional issue de novo, the 8th Circuit noted that Missouri’s long-arm statute authorizes personal jurisdiction to the full extent permitted by the due-process clause. The due-process clause requires that a defendant purposefully establish “minimum contacts” in the forum state, such that asserting personal jurisdiction and maintaining a lawsuit against a defendant does not offend “traditional conceptions of fair play and substantial justice.” Based on these principles, the court identified five factors that must be considered in determining whether sufficient minimum contacts exist: the nature and quality of contacts with the forum state; the quantity of contacts; the relationship of the cause of action to the contacts; the interest of the forum state in providing forum for its residents; the convenience or inconvenience to the parties. After noting that the first three factors are primary factors and the remaining two factors are secondary, the court addressed each factor in turn.
With regard to the first and second factors, the Court noted that Uriach had actual contacts with Missouri, including its officials coming to Missouri in 2001 to renegotiate the contract with K-V, paying money to K-V as agreed to in the contract and exchanging many letters, emails and telephone calls with K-V throughout the 12 years that the contract was in existence. In addition, Uriach anticipated having even more extensive contacts with Missouri, including selling and shipping the antifungal agent to Missouri so K-V could make the cream and sell it, as well as receiving payment from K-V within 30 days. The court concluded that these considerations tip the scales in favor of the forum state. The court also held that the third factor (relationship between the cause of action and the contacts) favors finding jurisdiction because K-V’s breach of contract and misappropriation claims are related to the contacts Uriach had with Missouri. If the companies had not been involved in a long-term contractual relationship with one another, Uriach would not have had access to the trade secrets. Regarding the fourth factor, the court held that Missouri has an interest in providing a forum for its resident corporations. Finally, addressing the fifth factor, the court concluded that this factor largely balances out because a trial in Spain would be just as inconvenient for K-V as a trial in Missouri would be for Uriach. In sum, the court concluded that proper application of the five-factor test supports hearing the case in Missouri.
The Court also rejected Uriach alternative argument that K-V’s complaint should be dismissed based on forum non conveniens. Under the doctrine of forum non conveniens, a court may decline to exercise jurisdiction and dismiss a case where that case would be more appropriately brought in a foreign jurisdiction. Such a determination is made based on the private interest of the litigants and the public interest. In connection with the private interest, Uriach argued factors such as location of evidence, including witnesses and documents in Spain, favors litigating in Spain. However, the court noted that part of K-V’s claims will require it to establish that its delivery system includes protectable trade secrets and that will require evidence from Missouri. Thus, the court concluded that these private-interest factors were neutral. Uriach also argued that the public-interest factor favors litigating in Spain because K-V is seeking an injunction that, if granted would deprive Spanish women of an important medical treatment. Uriach argued that Spanish courts are better equipped to address such sensitive health-policy related issues. The Court rejected Uriach’s argument and concluded that, if such evidence existed, a U.S. court could consider such evidence just as well as a Spanish court. As a result, because there were no exceptional circumstances necessary to invoke forum non conveniens, the Court denied Uriach’s motion to dismiss.