District Court Finds Personal Jurisdiction Based on Sales on Products into Forum State

The World in U.S. Courts: Summer and Fall 2016 - Personal Jurisdiction/Forum Non Conveniens/ Foreign Sovereign Immunity Act (FSIA)

Godo Kaisha v. TCL Communication, U.S. District Court for the District of Delaware, August 17, 2016

Plaintiff Godo Kaisha (a Japanese corporation) sued Defendant TCL Holdings (a Chinese corporation) for patent infringement.  Godo Kaisha also sued TCL’s subsidiaries TCT Hong Kong (a Hong Kong corporation) and TCT U.S. (a Delaware Corporation). Defendants TCT Holdings and TCT Hong Kong moved to dismiss for lack of personal jurisdiction.

The District Court explained that to establish personal jurisdiction, Godo Kaisha must demonstrate facts sufficient to satisfy Delaware’s long arm statute and also the requirements of the Due Process Clause of the U.S. Constitution.  In Delaware, a single intentional shipment of an infringing product into the State, or to a Delaware customer, satisfies the long arm statute.  TCT Hong Kong made direct sales to Delaware customers via its website, and both companies intentionally shipped infringing products to Delaware retailers; thus, the long arm statute was satisfied.

In the alternative, the long arm statute was satisfied under a “stream of commerce” theory, which requires that Plaintiff show: (1) an intent to serve the Delaware market, and (2) that the introduction of the product to the market gave rise to Plaintiff’s injury. The Court explained that a defendant’s intent to serve the U.S. market as a whole is sufficient to establish an intent to serve the Delaware market, unless there is evidence that the defendant specifically intended to exclude Delaware.  Here, both Defendants actively marketed their infringing phones in the U.S. and distributed them via national retailers like Best Buy, and a U.S.-based multinational retail corporation.  Because there was no evidence that Defendants intended to exclude Delaware from their distribution chain, the stream of commerce theory was satisfied.

In order to satisfy Due Process requirements, a plaintiff must show that a defendant purposefully directed activity at the forum state.  For the constitutional test, however, the mere placement of a product into the stream of commerce, without more, does not qualify as “purposeful direction.” Here, the Court found that the defendants intentionally shipped the infringing products into Delaware, knowing that retailers would sell the products in the State, and this satisfied the constitutional requirement.

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