The World in U.S. Courts: September 2017 - Special Issue | September.27.2017
The World in U.S. Courts was launched as a quarterly publication almost five years ago to catalogue new U.S. court decisions discussing some of the unique risks and opportunities for parties based in other countries. A few doctrines of special importance to non-U.S. parties are on display in the recent case of Polar Electro Oy v. Suunto Oy, (2017 WL 3713396 (D. Del. August 29, 2017)) a patent infringement case brought by one Finnish company against another. We have prepared this brief summary as an introduction to this complicated field.
Plaintiff Polar Electro Oy (“Polar”), based in Kempele, Finland, holds U.S. patents relating to heart-rate monitoring for athletic purposes. It believed that products made by a competitor, Vaanta, Finland-based Suunto Oy (“Suunto”) infringed these patents, and Polar sued Vaanta in federal district court in Delaware. Suunto distributed its products to brick-and-mortar retailers through two U.S. companies, and both were also sued. The larger distributor, a company referred to as “ASWO,” took title in Finland to all products sold in the U.S. ASWO also fulfilled orders placed by consumers through its own e-commerce platform on the Suunto website.
The Court first addressed whether it could assert personal jurisdiction over Suunto, applying precedent from the U.S. Court of Appeals for the Federal Circuit which is applicable to patent infringement cases. That precedent first looks to the law of the forum State of Delaware, whose jurisdictional provisions extend to the full extent permitted under the U.S. Constitution. Thus, the Court stated, Polar was required to show that Suunto had “purposeful minimum contacts” with Delaware and that asserting jurisdiction was otherwise “reasonable and fair.” (Id. at *3 (quotation marks and citation omitted).) In an earlier phase of the litigation, the Federal Circuit (reversing the district court’s decision) had found the requisite “purposeful minimum contacts” to exist in the form of the shipment of at least ninety-four relevant Suunto products to Delaware retailers. Notably, Suunto neither directed nor even knew where its products would be distributed in the U.S., as those tasks had been assumed by ASWO. Nonetheless, the Court of Appeals found that Suunto and ASWO had “act[ed] in consort” with one another, attributing ASWO’s knowledge and intentions to the manufacturer in order to satisfy the constitutional requirement. (Id. at *5 (quotation marks and citations omitted). The District Court expressly disagreed with the Court of Appeals’ conclusion, characterizing it as a “foray into factfinding,” id. n.3, but acknowledged that it was bound by the ruling nevertheless.)
The Court of Appeals did not address whether asserting jurisdiction over Suunto was “reasonable and fair,” and this was the issue addressed by the District Court. The Court noted that a five-factor test was used to make the decision, and its discussion of the five factors may be summarized as follows:
The Court thus concluded that this was a “rare situation” where minimum contacts existed but the assertion of personal jurisdiction over the defendant nevertheless would be unfair, and thus prohibited by the U.S. Constitution. (Id. at *9.) The Court recognized, however, that dismissing Suunto alone, leaving the two U.S.-based distributors as defendants, would create the potential for duplicative litigation if Polar were to sue Suunto in Utah. Accordingly, it decided on its own motion to transfer the entire case to Utah, where, presumably, the matter could be resolved in a single forum.
The Polar litigation illustrates a number of issues, principles and possibilities that run through litigation involving non-U.S. entities.
While the Polar decision provides a useful survey of certain issues facing non-U.S. litigants, it by no means is an exhaustive one. Typically, the question of a defendant’s “minimum contacts” with a forum will be the most important inquiry in assessing personal jurisdiction, with different tests to be applied depending on the nature of the claims and the court where a dispute has been brought. Additionally, defendants often argue that the “forum non conveniens” doctrine requires dismissal even where jurisdiction exists, based upon an argument that compelling reasons exist for a dispute to be resolved elsewhere.