M-I Drilling Fluids Uk Ltd. v. Dynamic Air Ltda.
Opinion of the Court
Hughes, Circuit Judge.
M-I Drilling Fluids U.K. Ltd. and M-I LLC sued Dynamic Air Ltda. in the U.S. District Court for the District of Minnesota, alleging infringement of five U.S. patents. The district court dismissed the case for lack of personal jurisdiction. Because Rule 4(k)(2) of the Federal Rules of Civil Procedure supports the exercise of specific personal jurisdiction over Dynamic Air Ltda., we reverse and remand for further proceedings.
I
M-I Drilling is a private limited company organized under the laws of the United Kingdom and has its principal place of business in the United Kingdom. M-I LLC (together with M-I Drilling, M-I) is a U.S. company incorporated in Delaware with its principal place of business in Texas. M-I supplies systems and equipment used in handling drilling waste created, for instance, around oil rigs in offshore oil exploration platforms.
Relevant here, M-I Drilling owns five U.S. patents- U.S. Patent Nos. 6,702,539 B2, 6,709,217 B1, 7,033,124 B2, 7,186,062 B2, and 7,544,018 B2 (the asserted patents). M-I LLC is an exclusive licensee of the asserted patents. The patents are generally directed to methods, systems, and apparatuses used in the collection, conveyance, transportation, and storage of drilling waste created around undersea oil wells. The patents are claimed to cover, among other things, pneumatic conveyance systems installed around oil drilling rigs and used to transfer drill cuttings from the oil rigs to receiving ships.
Dynamic Air Ltda. (DAL) is a corporation organized under the laws of Brazil and has its principal place of business in Brazil. DAL is a subsidiary of Dynamic Air Inc. (DAI), a Minnesota corporation with its principal place of business in Minnesota.
Between October 2011 and January 2012, the Brazilian state-owned oil company Petróleo Brasileiro S.A. (Petrobras) requested proposals for the installation of pneumatic conveyance systems on ships to assist in the removal of waste created by drilling undersea oil wells. M-I Swaco do Brasil-Comércio Serviços e Mineração Ltda., M-I Drilling's "sister company and customer" in Brazil, and DAL both submitted their proposals. J.A. 13. DAL won the bid and thereafter designed, manufactured, and operated at least three pneumatic conveyance systems. In February 2013, DAL installed a conveyance system *999that pneumatically conveyed drill cuttings from "P-59," an offshore oil drilling rig, onto the HOS Resolution , a U.S.-flagged ship. In August 2013, DAL installed a similar conveyance system on board the HOS Pinnacle , another U.S.-flagged ship, to remove drill cuttings from "P-III," another offshore oil drilling rig.
M-I then sued DAL in the U.S. District Court for the District of Minnesota, alleging that DAL infringed the asserted patents by making, selling, and operating pneumatic conveyance systems such as those on the HOS Pinnacle and the HOS Resolution . DAL moved to dismiss for lack of personal jurisdiction under Rule 12(b)(2), arguing that the district court could not exercise specific personal jurisdiction over it under Rule 4(k)(2) consistent with due process. The district court granted that motion and dismissed the case after finding that, although the alleged infringing activities took place on U.S.-flagged ships that are themselves U.S. territory, the contract between Petrobras and DAL did not identify the ships on which DAL would be required to make installations. As such, in the district court's view, DAL did not purposefully avail itself of the privilege of conducting activities within the United States because its contacts with the HOS Pinnacle and the HOS Resolution were exclusively due to the unilateral activity of Petrobras. J.A. 19-20. The court also concluded that the exercise of specific personal jurisdiction over DAL would neither be reasonable nor fair. J.A. 22-25.
M-I appeals. We have jurisdiction under
II
Personal jurisdictional issues in patent infringement cases are reviewed de novo and under our precedent. Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com de Equip. Medico ,
Where, as here, a "district court's disposition as to the personal jurisdictional question is based on affidavits and other written materials in the absence of an evidentiary hearing, a plaintiff need only to make a prima facie showing that defendants are subject to personal jurisdiction." Elecs. for Imaging, Inc. v. Coyle ,
Rule 4(k)(2) allows "a court to exercise personal jurisdiction over a defendant if (1) the plaintiff's 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." Synthes ,
*1000Here, the parties only dispute the third requirement-whether exercise of personal jurisdiction over DAL comports with due process. "[D]ue process requires only that in order to subject a defendant to a judgment in personam, [the defendant must] have certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " Int'l Shoe Co. v. Washington ,
The district court found here that DAL's contacts with the HOS Pinnacle and the HOS Resolution were "due to the unilateral activity of [Petrobras] and random insofar as [they were] completely dependent on Petrobras's direction."
Our subject matter jurisdiction over this appeal is grounded in the commercial tort of patent infringement, not a contract dispute between the parties. In patent infringement disputes, our precedent *1001makes clear that "the jurisdictional inquiry is relatively easily discerned from the nature and extent of the commercialization of the accused products or services by the defendant in the forum." Avocent Huntsville Corp. v. Aten Int'l Co. ,
The district court erroneously focused on the contract between Petrobras and DAL. Even if the contract directed where the accused systems were installed and operated, DAL controlled the specifics of its own continued performance under the contract. There is no evidence, for instance, that Petrobras contractually required DAL to use allegedly infringing components when the latter fabricated the pneumatic conveyance systems on the U.S.-flagged ships. Moreover, DAL, not Petrobras, kept the systems operating on the HOS Resolution through September 2015, and on the HOS Pinnacle through August 2015. J.A. 1341 ¶¶ 23-24. Such deliberate presence of DAL and its systems in the United States enhance its affiliation with the forum and "reinforce the reasonable foreseeability of suit there." Burger King ,
Although the district court did not address the issue, it is undisputed that M-I's claims for patent infringement arise from or relate to DAL's accused infringing activities in the United States. Accordingly, M-I has met its burden to make a prima facie showing that DAL is subject to specific personal jurisdiction in a U.S. court.
Because DAL's activities were purposefully directed at the United States and the claim of patent infringement arises out of those contacts, the burden now shifts to DAL to present a "compelling case that the presence of some other considerations *1002would render jurisdiction unreasonable." Id . at 477,
Synthes involved a patent infringement suit filed by a U.S. plaintiff against a Brazilian company ( GMReis).
The fourth and the fifth due process factors "are concerned with the potential clash of substantive social policies between competing fora and the efficiency of a resolution to the controversy." Synthes ,
On balance, this is not one of those "rare cases" in which fair play and substantial justice defeat the reasonableness of a U.S. court exercising personal jurisdiction over a defendant.
III
For the foregoing reasons, we conclude that exercising specific personal jurisdiction over DAL under Rule 4(k)(2) comports with due process. We thus reverse the district court's dismissal for lack of personal jurisdiction and remand for further proceedings.
REVERSED AND REMANDED
Costs to appellants.
The district court decided in a related action between M-I and DAI (DAL's parent entity) that U.S. territory extends to the HOS Pinnacle and the HOS Resolution . DAL did not dispute that issue in its Rule 12(b)(2) motion. J.A. 18 n.14; see also J.A. 421. "It is the general rule ... that a federal appellate court does not consider an issue not passed upon below." Singleton v. Wulff ,
As noted in footnote 1, DAL waived its argument that the alleged infringing activity occurred outside the United States.
Concurring Opinion
I join the majority and agree that Rule 4(k)(2) supports finding that the district court can exercise specific personal jurisdiction over Dynamic Air Ltda. ("DAL") in this case. Fed. R. Civ. P. 4(k)(2). I also agree that DAL has waived the issue of whether U.S. patent laws extend to U.S.-flagged ships on the high seas, but find that the broader issue of territoriality still weighs heavily in this case. I write to provide additional reasoning why the exercise of personal jurisdiction here does not offend traditional notions of fair play and substantial justice. See Burger King Corp. v. Rudzewicz ,
"The unique burdens placed upon one who must defend oneself in a foreign legal system should have significant weight in assessing the reasonableness of stretching the long arm of personal jurisdiction over national borders ." Asahi Metal Ind. Co. , v. Superior Court of Cal., Solano Cty. ,
U.S. PATENT LAW ON THE HIGH SEAS
The crux of DAL's position that U.S. patent laws do not extend to U.S.-flagged *1004ships in international waters rests on the notion that "the law of the flag doctrine 'is a figure of speech, a metaphor,' " and therefore a merchant ship is not part of the territory of the country whose flag she flies.
There is no dispute that a ship's flag does not transform a ship into terra firma of the country whose flag she flies. That this "floating island" metaphor was once used does not displace the law of the flag's well-settled role in determining what nation's law applies to disputes aboard a ship. See William Tetley, Q.C., The Law of the Flag, "Flag Shopping," and Choice of Law , 17 Tul. Mar. L.J. 139, 140-47 (1993). Accordingly, the Supreme Court has recognized that the "well-established rule of international law that the law of the flag state ordinarily governs the internal affairs of a ship." McCulloch v. Sociedad Nacional de Marineros de Honduras ,
In the seminal maritime case Lauritzen v. Larsen , the Supreme Court identified the law of the flag as one of seven factors for a court to consider in choosing which law governs aboard a ship, stating:
This Court has said that the law of the flag supersedes the territorial principle, even for purposes of criminal jurisdiction of personnel of a merchant ship, because it "is deemed to be a part of the territory of that sovereignty (whose flag *1005it flies), and not to lose that character when in navigable waters within the territorial limits of another sovereignty." On this principle, we concede a territorial government involved only concurrent jurisdiction of offenses aboard our ships. Some authorities reject, as a rather mischievous fiction, the doctrine that a ship is constructively a floating part of the flagstate, but apply the law of the flag on the pragmatic basis that there must be some law on shipboard, and it cannot change at every change of waters, and no experience shows a better rule than that of the state that owns her.
International and maritime law also provide support for using the law of the flag as a dispositive factor in deciding whether a ship constitutes "territory" for purposes of jurisdiction. While the United States is not a party to the United Nations Convention on the Law of the Sea, the document is nevertheless informative. Article 92 provides that "[s]hips shall sail under the flag of one State only and save, in exceptional cases expressly provided for in international treaties or in this Convention, shall be subject to its exclusive jurisdiction on the high seas." Dec. 10, 1982, 1833 U.N.T.S. 397, 433 (emphasis added). In that same current, U.S. vessel registration requirements to obtain that flag amplify the law of the flag's importance in determining a merchant ship's nationality. See Lauritzen ,
*1006Turning to the Patent Act itself,
Nothing in the legislative history of the 1952 Patent Act evidences congressional intent to narrow the territorial scope of the patent laws from that articulated in Gardiner . See S. Rep. 101-266 (1990), as reprinted in 1990 U.S.C.C.A.N. 4058, 4060 (noting that the language of § 100(c) was "intended to be descriptive rather than limiting"). Rather, the sole justification given for including § 100(c) was "to avoid the use of long expressions in various parts of the revised title." S. Rep. 82-1979 (1952), as reprinted in 1952 U.S.C.C.A.N. 2394, 2409. To that point, when Congress considered the 1952 Act, Senator Pat McCarran explained that the legislation was not intended to change existing law in any way, but to "codif[y] the present patent laws." 98 Cong. Rec. 9323 (daily ed. July 4, 1952). Absent evidence that Congress intended the 1952 Act to alter the territorial reach of the U.S. patent laws, Gardiner remains persuasive. Midlantic Nat. Bank v. N.J. Dep't of Environ. Prot. ,
In 1990, Congress applied the logic expressed by the Gardiner court in drafting legislation to extend U.S. patent law to U.S. spaceships. 1990 U.S.C.C.A.N. 4058, 4060-62. Specifically, in passing the Inventions in Outer Space Act, Congress recognized that absent language extending U.S. patent laws to U.S. spaceships, patent owners would be "unable to enjoin or collect damages for infringing activities in outer space," which "may chill prospects for commercial investment in outer space research and manufacturing." Id. at 4062. Section 105 of Title 35 thus provides that "[a]ny invention made, used or sold in outer space on a space object or component thereof under the jurisdiction or control of the United States shall be considered to be made, used or sold within the United States for the purposes of this title *1007...." Congress's logic in extending U.S. patent laws to U.S.-spaceships in outer space lends strong support for finding U.S. patent laws extend to U.S.-flagged ship on the high seas.
DAL may view that any holding on this issue is compelled by the traditional understanding that U.S. patent laws do not apply to foreign activities. See Microsoft Corp. v. AT&T Corp. ,
Here, DAL seeks to convert the principle that patent laws do not apply to foreign activities into the categorical rule that U.S.-patent laws can never extend to U.S.-flagged ships in international water. DAL's argument fails to consider the possibility for extraterritorial applications or for applications involving the internal affairs of a U.S.-flagged ship. Case law shows that these possibilities are not so remote. For example, in Brown v. Duchesne , the Court held that U.S. patent laws did not apply to a French-flagged ship in the port of Boston. 60 U.S. (19 How.) 183, 198-99,
Lastly, it is worth recognizing the Supreme Court's increasing interest in international activity that bears on U.S. patent laws, indicating that we should cautiously consider cases presenting extraterritoriality questions. In Impression Products Inc. v. Lexmark International, Inc. , the Court held that a patent owner's exclusive rights in its invention or improvement can be exhausted through its international sales and recognized that U.S. patent laws do not traditionally apply abroad. --- U.S. ----,
What is particularly troubling in this case is that if U.S. law does not apply to infringing activity on a U.S.-flagged ship in international water, then it is possible no law applies. DAL seeks to promote the exploitation of this loophole by instructing potential infringers to take to the high seas, modern day privateers armed with letters of marque from the U.S. government. That view is distinctly harmful where, as here, the patented invention operates exclusively on the high seas. With continuing advances in deep sea technology and the increasing accessibility of international waters, and the far reaches of outer space, we should consider the scope and protections of U.S. patent law without resorting to categorical rules.
The alleged infringement in this case occurred in the exclusive economic zone ("EEZ") of Brazil. The EEZ is " 'an area beyond and adjacent to the territorial sea' which 'shall not extend beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured.' " Elizabeth I. Winston, Patent Boundaries ,
Reference
- Full Case Name
- M-I DRILLING FLUIDS UK LTD., M-I LLC, Plaintiffs-Appellants v. DYNAMIC AIR LTDA., Defendant-Appellee
- Cited By
- 36 cases
- Status
- Published