Trade Show Exhibit Subjects Foreign Businessman to Federal Jurisdiction

By Joel Leeman.

May 2009 IP Update

A Brazilian company that exhibited a handful of medical devices at a San Diego trade show can be sued in federal court for alleged patent infringement, says the Federal Circuit Court of Appeals.

The Brazilian business has no offices, employees or assets in the U.S. and has had only episodic contacts with this country. It has never sold–or tried to sell–in the U.S. any of the medical devices that attracted the scrutiny of the American company that brought the suit. None of its other contacts with the U.S. pertain to the asserted patent.

The decision last month in Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com. De Equip. Medico may embolden U.S. companies to sue in federal court based on their foreign rivals’ display of allegedly infringing products at trade shows.

Synthes is a Pennsylvania-based medical-device maker that owns a patent for a bone-plating system for fixing fractures. GMReis is in the same line of business in Brazil, and its CEO was attending the Orthopaedic Surgeons Annual Meeting in 2007 when he was served with Synthes’s lawsuit for patent infringement.

Synthes’s suit alleged that GMReis had imported into the U.S. infringing bone plates for purposes of marketing them. At the GMReis booth were, in fact, samples of five such plates.

GMReis took the precaution, however, of posting prominent signs that its products were not FDA-approved and were not for sale in the U.S. The CEO never discussed pricing at the trade show, and visited U.S. trade shows to show products to the many non-American surgeons who attend.

Other than attending the occasional trade show, GMReis’s only contact with the U.S. was purchasing merchandise for use or resale in Brazil and holding discussions with two American companies about possibly buying components for products unrelated to the accused bone plates.

The trial court judge in San Diego agreed with GMReis that its sporadic contacts did not justify the exercise of personal jurisdiction. But the Federal Circuit disagreed. The difference of opinion focused on questions of general jurisdiction and specific jurisdiction.

General jurisdiction exists when an out-of-state party has extensive and continuous dealings with the state in which the court sits, for example, by advertising and selling many products over many years. In that circumstance, the court has personal jurisdiction over any dispute involving the party, even if it stems from activity outside the state.

By contrast, a court has specific jurisdiction over a party when the party does not have systematic and continuous contacts with the state, but is involved in a dispute that arises from its contacts with the forum state.

In short, specific jurisdiction is dispute-specific, based on a connection between the claim and the forum, while general jurisdiction is based on all of the defendant’s contacts with the forum, regardless of the nature or source of the dispute.

Both the district court judge and the Federal Circuit agreed that GMReis’s isolated contacts with California and the U.S. did not support general jurisdiction, as they were not nearly continuous and systematic enough. However, the appellate court, applying Civil Procedure Rule 4(k)(2), said it was an error by the district court to conclude that it lacked specific jurisdiction[1].

Three factors must be met to find specific jurisdiction, and the Federal Circuit discerned all of them here. First, by bringing the bone plates to the trade show, GMReis had “purposefully directed its activities at residents of the forum,” namely, the U.S. Even though GMReis’s sales efforts were not directed at U.S. residents, merely displaying them in the U.S. to U.S. residents was enough to satisfy this factor.

Second, Synthes’s infringement claim “arises out of the defendant’s activities” in the United States. The patent statute imposes liability on anyone who “imports” or “offers to sell” an infringing product in the U.S., and GMReis arguably did both, even if it did not offer to sell to any U.S. residents.

Finally, the Federal Circuit said that asserting personal jurisdiction is reasonable because the traditional tokens of “fair play and substantial justice” are present. Specifically:

  • While being haled into a California court is burdensome, GMReis has shown itself capable of traveling to and from Brazil.
  • The U.S. has an interest in enforcing its patent laws and discouraging injuries caused within its borders, including injury from patent infringement.
  • Exercising personal jurisdiction will not hinder U.S. relations with Brazil.
  • Although the U.S. has an interest in encouraging trade show attendance by foreign entrepreneurs, this is not significant enough a consideration to preclude jurisdiction over someone who brings allegedly infringing products to such a show.

This decision may give pause to businesses seeking to gauge the market for their wares in the U.S.  Pure intentions and fastidious precautions by a foreign company may not be enough to stop a determined American competitor from dragging it into a courthouse far from home.

[1] Rule 4(k)(2) provides that, in cases arising under federal law, serving a summons establishes personal jurisdiction if the defendant is not subject to jurisdiction in the courts of any state, and the exercise of jurisdiction is consistent with due process.