Touchcom Inc. v. Bereskin & Parr __ F.3d __ (Fed. Cir.
2009)(Lourie, J.), C.A.F.C.
(2008-1229 - Decision Aug. 3, 2009)
10/14/2009
1

Touchcom – Background
•
Hollidge (Canadian) invented aspects of a pump system that allows users to control the system via a central processing unit.
(Invention later assigned to Touchcom.)
•
Sam Frost of Bereskin & Parr (B&P-Canadian firm) retained to file and prosecute patent applications. Frost filed PCT in Canada in 1987. The application contained the complete source code for the invention.
•
US National Phase application in 1989 contained only part of the source code for the invention - patent issued 1991.
•
Touchcom sued for infringement on the patent and a District
Court held that the patent was invalid for indefiniteness, mainly due to the absence of portions of the source code.
Touchcom – District Court decision
•
In 2006, Touchcom filed a malpractice action against Frost and
B&P.
•
The District Court found that it possessed subject matter jurisdiction over Touchcom‟s claim against Frost and B&P.
•
The Court dismissed the claim for lack of personal jurisdiction, finding that Touchcom had failed to plead facts sufficient to satisfy the requirements for specific jurisdiction under the
Virginia long-arm statute.
10/14/2009
2

Touchcom – Appeal to C.A.F.C.
• Touchcom did not appeal the District Court‟s decision that it lacked general jurisdiction
•
General jurisdiction at state level: requires that the defendant have continuous and systematic contacts with the forum state and confers personal jurisdiction even when the cause of action has no relationship with those contacts.
•
CAFC restricted its analysis to jurisdiction in the federal court under Federal Rules of Civil Procedure (FRCP) 4(k)(1)(A) and 4(k)(2).
Touchcom – FRCP 4(k)(1)
FRCP 4(k)(1)(A) states:
(k) Territorial Limits of Effective Service.
(1) In General,
Serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant:
(A) who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located;
10/14/2009
3

Touchcom – FRCP 4(k)(1)
•
The Court cited jurisprudence stating that the inquiry into personal jurisdiction under Rule 4(k)(1)(A) involves two steps,
1.
Decide whether the forum‟s long-arm statute permits service on appellees, and
2.
Determine whether the assertion of personal jurisdiction violates the U.S Constitution‟s guarantee of due process;
•
The Court noted that the Supreme Court of Virginia has determined that Virginia‟s requirement for service is satisfied when due process is satisfied, so it‟s really a one-part inquiry, which in turn is a 3-prong test.
Touchcom – FRCP 4(k)(1)
The US Supreme Court determined the three-part test for determining whether the exercise of jurisdiction comports with due process in International Shoe Co. v. Washington, 326
U.S. 310 (1945):
1. The defendant must have „minimum contacts‟ with the forum state.
2. The Claim arises out of or relates to the defendant‟s activities with the forum.
3. An assertion of jurisdiction is reasonable and fair.
10/14/2009
4

Touchcom – FRCP 4(k)(1)
•
The Court held that the Appellees were not subject to jurisdiction in Virginia‟s Courts of general jurisdiction under
Rule 4(k)(1) because they did not have minimum contacts as required by the first part of the test:
• The Appellees‟ (Frost and B&P) contacts are limited to longdistance communications with a federal agency that happens to be located in Virginia.
•
The Appellees have not directed any of their activities toward residents of Virginia, nor have they engaged in business negotiations with any Virginia residents.
10/14/2009
Touchcom – FRCP 4(k)(2)
Rule 4(k)(2) states:
(2) Federal Claim Outside State-Court Jurisdiction.
For a claim that arises under federal law, serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant if:
(A) the defendant is not subject to jurisdiction in any state‟s courts of general jurisdiction; and
(B) exercising jurisdiction is consistent with the United States
Constitution and laws.
5

Touchcom – FRCP 4(k)(2)
The Court noted that jurisprudence has determined that finding jurisdiction under Rule 4(k)(2) thus requires:
(i) The claim arises under Federal law,
(ii) The Defendant is not subject to jurisdiction in any state‟s courts of general jurisdiction, and
(iii) The exercise of jurisdiction comports with due process.
Synthes (USA) v. G.M. dos Reis Jr. Ind. Com de Equip. Medico ,
563 F.3d 1285, 1297 (Fed. Cir. 2009).
Touchcom – FRCP 4(k)(2)
(i) The claim arises under Federal law:
The CAFC found that, since the malpractice action involved a substantial question of patent law, part (i) of the test is satisfied by 28 U.S.C. § 1338, s.(a):
(a) The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents , plant variety protection, copyrights and trademarks . Such jurisdiction shall be exclusive of the courts of the states in patent , plant variety protection and copyright cases.
10/14/2009
6

Touchcom – FRCP 4(k)(2)
(ii)
The Defendant is not subject to jurisdiction in any state‟s courts of general jurisdiction:
The Court canvassed Federal Circuit jurisprudence dealing with the second requirement of Rule 4(k)(2) and determined that if the Defendant contends that he cannot be sued in the forum state and refuses to identify any other state where suit is possible, then the federal court is entitled to use Rule
4(k)(2).
The Appellees are not subject to Virginia‟s courts of general jurisdiction, and they had not named another state in which they would be subject to jurisdiction.
Touchcom – FRCP 4(k)(2)
(iii) The exercise of jurisdiction comports with due process:
Similar test to 4(k)(1), however, consideration is given to the
Appellees‟ contacts with the nation as a whole :
1. The defendant must have „minimum contacts‟ with the forum,
2. The Claim arises out of or relates to the defendant‟s activities within the forum,
3. An assertion of jurisdiction is reasonable and fair.
10/14/2009
7

Touchcom – FRCP 4(k)(2)
(iii)(1) „Minimum Contacts‟ with the forum:
•
The Appellees directed their activities at parties in the United
States.
•
The contract entered into was to obtain a US patent.
• Appellees were required to be US registered patent agents.
•
Appellees submitted documents to the USPTO.
The Court concluded:
“It stands to reason that one who has sought and obtained a property interest from a U.S. agency has purposely availed itself of the laws of the United States.”
Touchcom – FRCP 4(k)(2)
(iii)(2) The Claim arises out of or relates to the defendant‟s activities with the forum:
• The malpractice claims arise out of the Appellee‟s activities within an agency of the U.S.
•
Had the Appellees not filed a national phase entry in the U.S., there would be no claim.
10/14/2009
8

Touchcom – FRCP 4(k)(2)
(iii)(3) An assertion of jurisdiction is reasonable and fair:
The Court determined that it must consider five factors*:
(a) The burden on the defendant,
(b) The forum‟s interest in adjudicating the dispute,
(c) The plaintiff‟s interest in obtaining convenient and effective relief,
(d) The interstate judicial system‟s interest in obtaining the most efficient resolution of the controversies, and
(e) The shared interest of the states in furthering fundamental substantive policies.
*Burger King Corp v. Rudzewicz, 471 U.S. 462 (1985).
Touchcom – FRCP 4(k)(2)
(iii)(3)(a) The burden on the defendant:
The Court found that the burden on the Appellees is not unduly burdensome due to the short travel time required and the Appellees‟ seeming familiarity with the US legal system.
•
Flights from Toronto to Washington are frequent and routine.
•
The Appellees are registered US patent agents.
•
The Appellees might well have other business in the US.
10/14/2009
9

Touchcom – FRCP 4(k)(2)
(iii)(3)(b) The forum‟s interest in adjudicating the dispute:
While the dispute is between two Canadians, the Court found that the US has an interest in regulating malpractice occurring at the USPTO.
•
The US also has a legitimate interest in providing adjudicatory forum for claims of malpractice occurring before its federal agencies.
10/14/2009
Touchcom – FRCP 4(k)(2)
(iii)(3)(c) Plaintiff‟s interest in obtaining convenient and effective relief:
The Court found that this factor was neutral, since both US and Canadian courts could equally provide the relief that
Touchcom sought.
10

Touchcom – FRCP 4(k)(2)
(iii)(3)(d) and (e):
The Court held that, to the extent these parts applied, exercising jurisdiction over the Appellees would not violate notions of fair play and substantial justice.
The US is no less an efficient forum to adjudicate the dispute, and the US has an interest in regulating the practice of foreign attorneys that appear before the USPTO.
10/14/2009
Touchcom – Dissent
Dissent (re Due Process):
• Burden on the Appellees is onerous:
- travel time & expense,
- eligibility to appear before USPTO does not confer familiarity with US law
• US interest in the dispute is minimal
- neither party is a resident of the United States
11

Summary:
“The question presented in this case is one of first impression, viz., whether the act of filing an application for a U.S. patent at the USPTO is sufficient to subject the filing attorney to personal jurisdiction in a malpractice claim that is based upon that filing and is brought in federal court. . . we conclude that it is.”
Touchcom Inc. v. Bereskin & Parr (2008-1229) C.A.F.C.
CFA Institute v. ICFAI
CFA Institute v. Institute of Chartered Financial Analysts of India , 551 F.3d 285 (C.A. 4, Jan. 9, 2009)
10/14/2009
12

CFA Institute v. ICFAI - Background
• In 1984, the founder of India‟s Institute of Certified Financial
Analysts traveled to Charlottesville and approached CFA
Institute officials about establishing a CFA program in India.
•
CFA Institute representatives traveled to India in August 1985 and a business agreement was reached that authorized the
Indian organization to establish a CFA program in India.
•
The Indian organization changed its corporate name from the
Institute of Certified Financial Analysts of India to the
Institute of Chartered Financial Analysts of India (ICFAI).
10/14/2009
CFA Institute v. ICFAI - Background
•
In 1995, the relationship between the parties deteriorated when the CFA Institute learned that ICFAI was violating its license agreement by marketing its version of the CFA program in the U.S. and Canada.
•
The parties entered into a settlement agreement that survived less than two years.
•
In January 1997, the CFA Institute terminated the license agreement, and in January 1998 ICFAI informed the CFA
Institute that it would no longer abide by the settlement agreement.
13

CFA Institute v. ICFAI – District Court
•
The CFA Institute filed its complaint against ICFAI in the
Eastern District of Virginia in 1998, alleging trademark infringement and unfair competition under the Lanham Act.
•
ICFAI did not appear in the proceedings, and the District
Court entered a default judgment against ICFAI enjoining it from using the CFA mark, promoting employment opportunities for ICFAI charter-holders in the U.S. and
Canada, and holding itself out as in any way affiliated with the CFA Institute.
• The Court identified several of the ICFAI‟s contacts with the
CFA Institute that supported the exercise of personal jurisdiction.
CFA Institute v. ICFAI – District Court
•
The District Court vacated the order eight years later in 2006 when the ICFAI asked that the proceedings be reopened and argued that the default judgment was void because the Court lacked personal jurisdiction when it was entered.
•
The CFA Institute requested reinstatement of the order, arguing that the ICFAI had waived its objection to personal jurisdiction and, even if ICFAI‟s contacts failed to satisfy the long-arm statute, its contacts warranted the exercise of jurisdiction under Rule 4(k)(2).
•
The District Court reinstated the order, agreeing with the CFA
Institute‟s Rule 4(k)(2) contention.
10/14/2009
14

CFA Institute v. ICFAI – Appeal
The CAFC began its analysis by determining whether the
District Court had personal jurisdiction over ICFAI under
Virginia‟s long-arm statute.
The Court noted that 2 requirements must be met:
1. The forum state‟s long-arm statute must authorize the exercise of such personal jurisdiction, and
2. The Due Process clause of the Fourteenth Amendment requires that the defendant have minimum contacts with the forum state.
CFA Institute v. ICFAI – Appeal
• The Court noted that Virginia‟s code provided multiple bases for the exercise of personal jurisdiction.
• The Court also noted that state and federal courts have construed Virginia‟s long-arm statute as extending personal jurisdiction over non-resident defendants to the full extent permitted by the Due Process Clause of the Fourteenth
Amendment.
• Therefore, the two-step personal jurisdiction inquiry coalesces into a single inquiry in Virginia:
Whether due process is satisfied by the court‟s exercise of personal jurisdiction.
10/14/2009
15

CFA Institute v. ICFAI – Appeal
In deciding whether the exercise of jurisdiction satisfied Due
Process, the Court considered:
1.
The extent to which ICFAI availed itself of the privilege of conducting activity in Virginia,
2. Whether the CFA Institute‟s claims arose out of ICFAI‟s
Virginia-related activities, and
3. Whether exercising personal jurisdiction would be constitutionally reasonable.
10/14/2009
CFA Institute v. ICFAI – Appeal
1. The extent to which ICFAI availed itself of the privilege of conducting activity in Virginia:
The Court found that the first prong of the test is met because:
•
ICFAI purposely transacted business in Virginia.
•
ICFAI invoked the benefits and protections of Virginia law in its agreement with the CFA Institute.
16

CFA Institute v. ICFAI – Appeal
2.
Whether the CFA Institute‟s claims arose out of ICFAI‟s
Virginia-related activities:
The Court found this prong met since the ICFAI‟s 1984 visit to the CFA Institute was the genesis of the dispute and there had been a seamless series of business transactions arising from the visit to the filing of the Complaint.
10/14/2009
CFA Institute v. ICFAI – Appeal
3.
Whether exercising personal jurisdiction would be constitutionally reasonable:
The Court considered:
(a) The disadvantage of the defendant in comparison to the plaintiff/the burden on the ICFAI,
(b) The interest of Virginia,
(c) The CFA Institute‟s interest in obtaining relief.
17

CFA Institute v. ICFAI – Appeal
3 (a) The disadvantage of the defendant in comparison to the plaintiff:
The Court held that litigation in Virginia was not excessively burdensome.
•
ICFAI had traveled to and/or reached into Virginia on several occasions to transact business, and
•
ICFAI had been able to secure counsel to represent its interests.
10/14/2009
CFA Institute v. ICFAI – Appeal
3(b) The interest of Virginia:
The Court held that Virginia had an interest in the resolution of grievances of its citizens and businesses, particularly when they potentially involve issues of Virginia law.
18

CFA Institute v. ICFAI – Appeal
3(c) The CFA Institute‟s interest in obtaining relief:
•
The Court held simply that the CFA Institute had a valid and substantial interest in having its legal rights recognized and vindicated.
•
The CFA had, since 1959, carved out a market niche by cultivating the CFA mark and its products.
•
The CFA was entitled to use the Virginia judicial system to protect its intellectual property and other legal rights.
CFA Institute v. ICFAI – Appeal
• The Court found the District Court‟s exercise of personal jurisdiction over the ICFAI was constitutionally reasonable.
•
In so finding, the Court held that it was unnecessary to address the application of Rule 4(k)(2), as the District Court possessed personal jurisdiction under Virginia‟s long-arm statute.
10/14/2009
19

Conclusion
•
International Forum Shopping?
•
Some courts more and more interested in taking jurisdiction
• Some courts more and more willing to interpret laws of other countries
•
Cross border enforcability of judgments increasing
•
Economic impact?
10/14/2009
nhenderson@blgcanada.com
Assisted by Sean Van Helden, BLG
20