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Xilinx Inc. v. Papst Licensing Gmbh & Co. KG

United States Court of Appeals, Federal Circuit

February 15, 2017

XILINX, INC., Plaintiff-Appellant
v.
PAPST LICENSING GMBH & CO. KG, Defendant-Appellee

         Appeal from the United States District Court for the Northern District of California in No. 5:14-cv-04963-LHK, Judge Lucy H. Koh.

          Matthew J. Silveira, Jones Day, San Francisco, CA, argued for plaintiff-appellant. Also represented by Patrick Thomas Michael.

          Nicole E. Glauser, DiNovo, Price, Ellwanger & Hardy LLP, Austin, TX, argued for defendant-appellee. Also represented by Andrew DiNovo, Jay D. Ellwanger.

          Charles Duan, Public Knowledge, Washington, DC, for amici curiae Public Knowledge, Electronic Frontier Foundation. Also represented by Vera Ranieri, Electronic Frontier Foundation, San Francisco, CA.

          Steven Moore, Kilpatrick Townsend & Stockton LLP, San Francisco, CA, for amici curiae for AO Kaspersky Lab, Limelight Networks, Inc., QVC, Inc., SAS Institute Inc., Symmetry LLC, Vizio, Inc.

          Harrison J. Frahn, IV, Simpson Thacher & Bartlett, LLP, Palo Alto, CA, for amici curiae Thirty-Four Law Professors.

          Before Prost, Chief Judge, Newman, and Dyk, Circuit Judges.

          Dyk, Circuit Judge.

         Xilinx, Inc., ("Xilinx") appeals from a judgment of the United States District Court for the Northern District of California dismissing Xilinx's declaratory judgment action against Papst Licensing GmbH & Co. KG ("Papst") for lack of personal jurisdiction. Because we hold that the district court has specific personal jurisdiction over Papst with respect to Xilinx's declaratory judgment action, we reverse and remand.

         Background

         Xilinx is a Delaware corporation that is headquartered in San Jose, California. Xilinx designs, develops, and markets programmable logic devices for use in electronics systems. Papst is the assignee of U.S. Patent Nos. 6, 574, 759 and 6, 704, 891 (collectively, "the patents-in-suit"), which are directed to methods for generating and verifying memory tests in electronics.

         Papst is organized under the laws of Germany and has its principal place of business there. Papst is a non-practicing entity that is solely in the business of monetizing and licensing intellectual property rights. According to Papst, it "has always been in the business of obtaining and licensing patents, it does not manufacture or sell any consumer products, and it has always had fewer than 30 employees." J.A. 1133. Xilinx points to various Papst marketing materials and its website in which Papst describes itself as "a global patent licensing and monetization firm specialized in enforcing infringed patents with the goal to conclude a license agreement with the infringer." Exhibit 9 at 1, Declaration of Jason M. Gonder, Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, No. 5:14-cv-04963-LHK (N.D. Cal. Apr. 15, 2015), ECF No. 53-9 ("Exhibit 9").

         These materials explain the business model by which Papst acquires and then asserts patent rights. "Before agreeing to purchase a patent, " Papst performs "due diligence" to "identify patent infringement by comparing the patent claims against the potentially infringing products." J.A. 1733. Papst's due diligence involves "identify[ing] the companies potentially involved in infringements, and the markets they are selling their product in-where they are located, and how large they are, including where the product is made as well as where it is sold." Id.

         When Papst identifies infringers, it "notif[ies] them that [Papst] believe[s] they are infringing." Id. Papst "then travel[s] extensively to visit the infringers." Id. "After technical discussions confirming the infringement, the conversation moves towards licensing the patents through an agreement." Id. "If negotiations fail, [Papst] is prepared to effectively enforce the respective patents in courts. Especially in the United States, Germany, and the Netherlands [Papst has] years and years of experience in patent litigation." Exhibit 9 at 1. Papst's marketing materials explain that Papst has "been very successful with legal actions. With [Papst's] outside partners including attorneys, [Papst has] been very successful and won many high-profile patent cases." J.A. 1733.

         Papst has repeatedly filed patent infringement suits in California federal courts. The record shows that Papst has filed patent infringement lawsuits in California at least seven times between 1994 and 2007 based on other patents in Papst's portfolio.

         Papst's actions leading up to the filing of this declaratory judgment action are consistent with Papst's business model. Before acquiring the patents-in-suit in October 2012, Papst performed its due diligence by investigating potential infringers and targets for licensing of those patents. Xilinx describes the investigation as involving twenty-nine target companies, twenty-eight of which are based, or have significant presence, in California. One of the companies that Papst investigated was Xilinx.

         In January 2014, Papst sent a patent-infringement notice letter to Xilinx. In the letter, Papst identified several of Xilinx's products that allegedly infringed the patents-in-suit, and stated that "Papst proposes commencing discussions with Xilinx so that Xilinx can consider taking a license to the Papst Patents." J.A. 1053. After Xilinx did not respond to Papst's first set of letters, in April 2014, Papst sent a second letter, "again encourag[ing] Xilinx to participate in a dialogue regarding taking a license to the" patents-in-suit. J.A. 1056. On October 16, 2014, three representatives of Papst, including Papst's managing director, its senior counsel, and its Texas-based outside counsel, traveled to California to meet with Xilinx. The purpose of the meeting was to discuss Papst's allegations of infringement of the patents-in-suit and Xilinx's potential licensing of these patents. No agreement resulted from these contacts.

         On November 7, 2014, Xilinx filed this declaratory judgment action in the Northern District of California seeking a declaration that Xilinx's products do not infringe the patents-in-suit and that the patents are invalid. On the same day that Xilinx filed its declaratory judgment action in California, Papst filed an infringement suit against Xilinx in the District of Delaware asserting the same patents-in-suit. Papst moved to dismiss the California declaratory judgment action for lack of personal jurisdiction, or in the alternative, transfer the action to the District of Delaware.

         On July 9, 2015, the court granted Papst's motion and dismissed the declaratory judgment action for lack of personal jurisdiction. The court first determined that it lacked general jurisdiction over Papst because it "is not at home in California, " recognizing that "Papst is not incorporated in California, nor does it have its principal place of business" there. J.A. 8-10.

         The court also held that it lacked specific personal jurisdiction over Papst. The court observed that "Papst certainly has many connections to the state of California." J.A. 22-23. However, relying principally on our decisions in Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), and its progeny, the court recognized that "even if the 'purposefully directed' and 'arises out of' prongs are satisfied by the defendant's enforcement activities" in the forum, "[n]ot all assertions of jurisdiction based on enforcement activities comport with 'fair play and substantial justice.'" J.A. 11 (citing Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d 1324, 1333 (Fed. Cir. 2008)). The court determined that Papst's California contacts were "either related solely to Papst's attempts to license the patents, which the Federal Circuit has held insufficient, or according to Federal Circuit law are irrelevant to the parties' instant dispute." J.A. 23. With respect to Papst's prior litigation in California, the court explained that these "enforcement activities regarding other patents are irrelevant to the question at hand: whether this Court can assert specific jurisdiction over Papst based on its efforts to enforce the patents-in-suit." J.A. 22. "The Federal Circuit has 'consistently' made clear that the 'other ...


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