Demand Letters Enough For Personal Jurisdiction & Venue

Last week, the United States Court of Appeals for the Federal Circuit issued an opinion in Jack Henry & Assocs., Inc. v. Plano Encryption Techs. LLC , 2016-2700 (December 7, 2018). Jack Henry brought a declaratory judgment action in the Northern District of Texas seeking a declaration that its software did not infringe patents owned by Plano Encryption Technologies (PET). PET—a Texas corporation with its registered address in the Eastern District of Texas—moved to dismiss the complaint for improper venue. PET argued that venue was not proper under 28 U.S.C. § 1391 because its actions in sending infringement letters to banks located in the Northern District of Texas were not sufficient to subject it to personal jurisdiction within that district. The district court agreed and granted PET’s motion to dismiss. The district court based its ruling on a prior Federal Circuit decision, Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324 (Fed. Cir. 2008), which the district court interpreted as holding that a letter charging infringement can never suffice to support specific personal jurisdiction over a party. The Federal Circuit reversed. The Court explained Avocent did not establish a general rule that infringement letters can never give rise to personal jurisdiction; rather, in each case, a fact-specific inquiry must be undertaken to determine whether assertion of personal jurisdiction comports with due process. The Court concluded that PET’s contacts with the Northern District of Texas were sufficient to give rise to personal jurisdiction. The Court gave particular weight to the fact that PET’s “sole business is to enforce its intellectual property,” which it did through a licensing program supported by threats of litigation. In the absence of “a ‘compelling case’ that the exercise of jurisdiction in the Northern District [of Texas] would be unreasonable and unfair,” PET’s threats of litigation directed to residents of the District were sufficient to support personal jurisdiction, and venue, in the District. The Court also rejected PET’s challenge to Jack Henry’s standing to participate in the case, explaining that as an indemnitor to the parties accused of infringement Jack Henry has standing to participate in any action that may determine its liability.