United States District Court, D. Minnesota
Scott J. Pivnick, Esq., Adam D. Swain, Esq., Benn Wilson, Esq., Patrick Flinn, Esq., and David Kuklewicz, Esq., Alston & Bird LLP, Washington, DC, and Atlanta, GA; and Eric H. Chadwick, Esq., Patterson Thuente Pederson, PA, Minneapolis, MN, on behalf of Plaintiff.
Kevin P. Hickey, Esq., Carrie L. Hund, Esq., and Steven P. Aggergaard, Esq., Bassford Remele, PA, Minneapolis, MN, on behalf of Defendants.
MEMORANDUM OPINION AND ORDER
ANN D. MONTGOMERY, District Judge.
On December 3, 2013, the undersigned United States District Judge heard oral argument on Defendants Dynamic Air Inc. and Dynamic Air Ltda.'s Motion to Dismiss [Docket No. 22]. Plaintiff M-I Drilling Fluids UK Ltd. ("M-I") opposes the motion. For the reasons set forth below, Defendants' motion is granted and this action is dismissed without prejudice.
M-I is a private limited company organized under the laws of the United Kingdom, with its principal place of business in the United Kingdom. Compl. [Docket No. 1] ¶ 2. M-I designs and sells equipment used in the process of drilling oil wells, including on the sea floor. The process for drilling such wells brings "subterranean formation cuttings, " including rock, sand, and other materials to the drilling rig on the water's surface. See id. ¶ 13. When first brought up, drill cuttings are in a slurry with drilling fluid. This slurry then goes through a separation process removing some of the drilling fluid, leaving the cuttings with the consistency of a "very thick heavy paste." Id . The cuttings must be disposed of safely, typically by transporting them from the drilling rig onto a ship, and then from the ship onto shore for processing and disposal. M-I supplies drilling fluid systems and other equipment designed to improve drilling performance, maximize productivity, and manage the waste generated through the drilling process. Id . ¶¶ 12-13.
Defendant Dynamic Air Ltda. is a corporation organized under the laws of Brazil, with its principal place of business in Brazil. Dynamic Air Ltda. is a subsidiary of Defendant Dynamic Air Inc., a corporation organized under the laws of Minnesota, with its principal place of business in St. Paul, Minnesota. Id . ¶¶ 3-4. In late 2011 or early 2012, non-party Petróleo Brasileiro ("Petrobras") initiated a request for proposal (RFP) process, seeking a pneumatic conveyance system to transport drill cuttings from an oil rig onto a ship. M-I's "sister company and customer" M-I Swaco do Brasil - Comerico, Servicos E Mineracao Ltda. ("M-I Brazil") submitted a bid to provide the equipment, as did Dynamic Air Ltda. Id . ¶ 24.
Dynamic Air Ltda. won the bidding process, and thereafter designed, sold, and operated at least three pneumatic conveyance systems for Petrobras. In February 2013, Dynamic Air Ltda. installed a system that pneumatically conveys drill cuttings from "P-59, " a drilling rig in Brazilian waters, onto the HOS Resolution, a United States flagged ship. In August 2013, Dynamic Air Ltda. installed a similar system on board the HOS Pinnacle, another United States flagged ship, to remove drill cuttings from "P-III, " another oil rig in Brazilian waters. Id . ¶¶ 24-26. Both ships transport drill cuttings to shore for further processing and disposal. M-I alleges both systems are currently operating. It also alleges Dynamic Air Ltda. installed and is operating a third system on board the P-III rig itself. Id.
At issue in this case are five United States patents M-I holds for methods, systems, and apparatuses used in the collection, conveyance, transportation, and/or storage of drilling waste, including the paste-like drill cuttings. The patents are numbered: (1) 6, 702, 539 (the "'539 Patent); (2) 6, 709, 217 (the "'217 Patent"); (3) 7, 033, 124 (the "'124 Patent"); (4) 7, 186, 062 (the "'062 Patent"); and (5) 7, 544, 018 (the "'018 Patent"). Sometime before the Petrobras RFP, M-I alleges as many as eight M-I Brazil employees who had worked on pneumatic conveyance technology left M-I Brazil to work for Dynamic Air Ltda. Id . ¶ 24. M-I alleges Defendants had never previously designed or sold such systems, and Defendants obtained knowledge of these systems through M-I's former employees and from closely competing against M-I in past RFPs. M-I claims Defendants have directly infringed and contributed to the infringement of the five patents at issue by making, selling, and using pneumatic conveyance systems such as those on the HOS Resolution and the HOS Pinnacle. Id . ¶¶ 31-85.
A. Applicable Standards
Rule 12(b)(6) of the Federal Rules of Civil Procedure states that a party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. In evaluating such a motion, the court construes the pleadings in the light most favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true. Hamm v. Groose , 15 F.3d 110, 112 (8th Cir. 1994) (citation omitted). The court may not consider matters outside the pleadings in connection with a Rule 12(b)(6) motion, but "documents necessarily embraced by the complaint are not matters outside the pleading[s]." Ashanti v. City of Golden Valley , 666 F.3d 1148, 1151 (8th Cir. 2012) (citation omitted). When considering dismissal based on a lack of personal jurisdiction under Rule 12(b)(2), the ruling court may consider materials outside the pleadings. See, e.g., Dakota Indus., Inc. v. Dakota Sportswear, Inc. , 946 F.2d 1384, 1387 (8th Cir. 1991).
Defendants move to dismiss the Complaint on three grounds. First, Defendants argue United States patent law does not extend to ships sailing on the high seas or in foreign waters, essentially meaning the Court lacks subject matter jurisdiction. Second, Defendants argue M-I has not demonstrated why personal jurisdiction should attach to Dynamic Air Ltda., a Brazilian subsidiary, because Dynamic Air Ltda. has had limited or no contact with Minnesota. Third, Defendants argue M-I has failed to state a ...