[00:00:00] Speaker 03:
Cases number 19, 2164, Trimble Incorporated against Per Diem Company, LLC.

[00:00:08] Speaker 03:
Mr. Bagatell.

[00:00:11] Speaker 01:
May it please the Court, Dan Bagatell, on behalf of the Declaratory Judgment Plaintiffs and Appellants, Trimble and ISE.

[00:00:18] Speaker 01:
This appeal raises a personal jurisdiction issue that boils down to a due process clause issue, and that's because Per Diem Co.

[00:00:25] Speaker 01:
undisputedly had the minimum contact necessary

[00:00:29] Speaker 00:
Mr. Bagatelli, I understand your argument about overruling Red Wing, but I'd like to start out by asking you if you think Red Wing is distinguishable from this case on the reasonableness prong.

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And if I read your brief correctly, your distinction appears to be that here there was a threat of suit, whereas that threat of suit did not exist in Red Wing.

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Am I correct in understanding your position?

[00:01:02] Speaker 01:
In part.

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I think there are a couple of distinctions.

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First of all, we know for sure that the contacts here were more extensive than in Red Wing Shoe.

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There were 22 over three and a half months.

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And we know that we have expressed threats to suit here.

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It's not clear to me exactly what the facts were in Red Wing Shoe.

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The court described them in several different ways.

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But we know that here we have more than simply a patent owner that's saying, here I am, and wouldn't you like to license my patent?

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They deliberately threatened two different related companies, and they specifically accused them of infringement and said they were going to take them to court.

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We think the facts here are actually more similar, or at least are similar, to Jack Henry, because there were broad infringement allegations against multiple targets and repeated specific threats to sue.

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Why in the Red Wing should the number of communications or the threat to suit make a difference?

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Well, first of all, I mean, it's true that the Red Wing held that there were minimum contacts there.

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But if you look at Burger King, Burger King calls for a balancing of the minimum contacts.

[00:02:17] Speaker 00:
I don't understand what you're saying.

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We're not talking about minimum contacts, which

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I understand where it was conceded here, but about the reasonableness prong.

[00:02:27] Speaker 00:
Correct.

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But the reasonableness prong should those facts, in other words, the multiple contacts and the threat of suit make a difference.

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Yes.

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And I think my point is not that there's a dispute over minimum contacts, but that the minimum contacts under Burger King are weighed against the reasonableness factors.

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And so you look at all of that together and determine whether it would be reasonable and fair to subject the declaratory judgment defendant in this case to suit.

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And we think in this case it is.

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And this is not a simple case, quite like Red Wing Shoe.

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It's more complicated.

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There are multiple defendants.

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As I said, I think this is really more similar to Jack Henry.

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And Jack Henry and

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and Genetic Veterinary Services have both held that there is no bright line rule, which is consistent with the Burger King case itself.

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There's no talismanic considerations as Red Wing Shoe might be read to suggest.

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Well, I think Red Wing Shoe did relate it to the facts.

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And I thought Jack Henry fairly clearly said that the facts need to be considered that, of course, supports your argument.

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But it doesn't really look as if this is a matter of bright lines, but rather reasonableness.

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I fully agree with that, Your Honor.

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And in fact, Per Diemco agrees that there's no bright line rule.

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They're trying to say that Jack Henry was a good faith case, or a bad faith case, I should say, but I don't read Jack Henry to turn on the bad faith of the declaratory judgment defendant.

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Certainly, a bad faith would undermine any claim of unfairness or unreasonableness, but good faith doesn't confer immunity.

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And again, Per Diemcoe's behavior here wasn't significantly different than the patent owner's behavior was in Jack Henry.

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Per Diemco tries to argue that there's some sort of a Hobson's choice that they must either forego relief, be hailed into a far-fung forum, or sue immediately.

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We're not suggesting that.

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If all you do is tell somebody that you own patent rights and you're offering those patent rights, you're not going to have either subject matter or personal jurisdiction, because first of all, there's no case in controversy.

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And second of all, there wouldn't be purposeful direction towards

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the form, which you need for minimum contacts and personal jurisdiction.

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And second of all, they're not being forced into an inconvenient form because they're entitled to and did here move to transfer under Section 1404.

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The problem was that they moved to transfer to the Eastern District of Texas, with which they had no real connection.

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They're arguing essentially that they can only be sued in the Eastern District of Texas, which is untenable.

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They operate out of D.C.

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and they have no constitutional right to be sued in their own favorite form.

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I thought they were incorporated in Texas.

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They are, but nobody ever goes there.

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It's a one-man company.

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He's never been there.

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The office is locked and unused.

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All his activities towards the plaintiffs in this case were by telephone from Washington, D.C.

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and by letter from Washington, D.C.

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So this is a company that basically chooses to litigate away.

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They don't want to litigate in DC.

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In fact, when, after this case, uh, was dismissed, we filed a declaratory judgment action in the district of the district of Columbia.

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And they said, there's no personal jurisdiction in DC, which is just incredible to me, but more important for present purposes.

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We know that per DMCO prefers to litigate away from home.

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They,

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threatened to sue in both Iowa and Texas.

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And there's not much difference between Texas or Iowa and the Northern District of California.

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At most, it's an issue of degree which could be dealt with by a motion to transfer, which again, they filed.

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And the motion was denied because their presence there was in the district court's ward.

[00:06:51] Speaker 03:
I'm sorry, Your Honor?

[00:06:58] Speaker 01:
Yes.

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Originally, they were dealing with ISE, the subsidiary, and they threatened to sue ISE in the Northern District of Iowa.

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They attached a draft complaint.

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Then in discussions with Trimble's counsel, they threatened to sue Trimble, the parent company, a larger company, in the Eastern District of Texas.

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So they wanted to be away from home.

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This is a little bit unusual, I think, that you're not dealing with a patent owner that basically says,

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It's inconvenient for me to go away from home.

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They're saying it's inconvenient for me to be away from the Eastern District of Texas with which they have no real connection.

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At the end of the day, the District Court erred by dismissing the case basically under a single consideration, the supposed privilege to threaten an infringement suit without subjecting yourself to jurisdiction where your target resides.

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We just think that's contrary to Burger King.

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Once you have minimum contacts that are established, you weigh those factors against the minimum contacts.

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You don't look at one particular mechanical test or talismanic consideration.

[00:08:13] Speaker 01:
The other side has argued that, well, you can look at, for example, whether you have a contract and if you don't have a, a contract is not enough to establish minimum contacts.

[00:08:24] Speaker 01:
That may be, but we're not dealing with the minimum contacts prong as Judge Teig pointed out.

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We're dealing with reasonableness.

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And in reasonableness, you can't just look at one factor.

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You have to look at all of them.

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The only factor where they have a significant argument is burden, and that argument is weak and was taken care of by their motion to transfer.

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So we would ask the court to reverse and remand for further proceedings in the Northern District of California.

[00:08:49] Speaker 03:
All right.

[00:08:50] Speaker 03:
Any questions for Mr. Bagatell?

[00:08:55] Speaker 03:
All right.

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And we'll hear from Mr. Sandel.

[00:08:59] Speaker 02:
Good morning.

[00:09:00] Speaker 02:
May it please the court.

[00:09:03] Speaker 02:
Brilliant contacts with the Northern District of California were indirect, limited, and closely mapped to those of Red Wing Shoe.

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And despite our express challenge to do so, the appellants have been unable to find any case where personal jurisdiction was found based on a similar level of form contacts.

[00:09:21] Speaker 00:
Wait, Mr. Sandel, I'm confused.

[00:09:23] Speaker 00:
I thought you were not disputing that there were minimum contacts here, but that the argument was

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that the reasonableness problem wasn't satisfied.

[00:09:32] Speaker 02:
I'm sorry, ma'am.

[00:09:33] Speaker 02:
There are a similar level of forum contacts.

[00:09:36] Speaker 00:
Excuse me.

[00:09:37] Speaker 00:
You agree that the minimum contacts part of the test is satisfied here, correct?

[00:09:43] Speaker 02:
Well, we don't.

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Well, it's our position that Trimble has not established them.

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But assuming that they are established, Per Diem has clearly met its burden to show that personal jurisdiction is constitutionally unreasonable.

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Well, let's put it this way.

[00:10:01] Speaker 00:
On appeal, you're not disputing the existence of minimum contacts.

[00:10:06] Speaker 02:
It's, at most, a very minor portion of our appeal.

[00:10:10] Speaker 00:
We don't concede that.

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We're not disputing it at all.

[00:10:14] Speaker 02:
Well, we pointed to a number of cases where that's found in other conservative courts that found demand letters insufficient to satisfy minimum contacts.

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And we think those are relevant.

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Where do you argue in your brief that minimum contacts are lacking here?

[00:10:30] Speaker 02:
Nowhere specifically, Your Honor.

[00:10:33] Speaker 00:
Pardon me?

[00:10:34] Speaker 02:
Nowhere specifically, Your Honor.

[00:10:36] Speaker 00:
OK.

[00:10:36] Speaker 00:
So on appeal, you're not disputing minimum contacts.

[00:10:40] Speaker 02:
OK.

[00:10:40] Speaker 02:
Yeah, we don't dispute them.

[00:10:42] Speaker 00:
OK.

[00:10:43] Speaker 00:
So let me ask, why should we not, as an in-bank court, overrule Red Wing?

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How is Red Wing consistent?

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with the Supreme Court law on the reasonableness problem?

[00:10:58] Speaker 02:
Well, so the Supreme Court mandates a flexible inquiry into whether personal jurisdiction would offend traditional notions of fair play and substantial justice.

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And the precedent and policy of Red Wing Shoe can guide this court in its assessment of constitutional reasonableness.

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You know, Red Wing Shoe points out that traditional notions of

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Fair Play and substantial justice afford sufficient latitude for a patentee to inform an accuser of his alleged injury, infringement, and to attempt to compromise the claim without risking being held into a far-flung jurisdiction.

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And so based on that policy, actually Red Wing Hsu held specifically that that policy squarely invokes the fourth fairness factor.

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It goes right in to the Supreme Court's four factors.

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And the other thing that really should be talked about is, what is this sufficient latitude?

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What sufficient latitude is, that in and of itself is a flexible inquiry.

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So what this court is tasked with doing, tasked with doing is really determining whether or not red, whether or not Trimble's actions are within the scope of that sufficient latitude.

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And, in effect, what Red Wing True does is it takes that flexible analysis and it looks at some of the factors that are already there and it says, hey, we're in this very unique situation of a declaratory judgment action.

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Some of these factors counsel against constitutional reasonableness.

[00:12:44] Speaker 03:
Well, why doesn't it depend just as in the Harvey case after Red Wing?

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said that you look at the factors.

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And certainly one has to agree there's a difference between a letter or a phone call and four months of negotiations for a license.

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And isn't the entire thrust of precedent that these are not bright lines, but you look at the facts

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and decide what's reasonable?

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And why should this be any different?

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Well, we certainly do not think that there is a bright line rule.

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We are not asking that at all.

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That's a bit of a straw man argument that I believe has been painted on us.

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We believe we do have to look at the facts.

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And when you look at the facts here, they very closely align with Red Wing Shoe.

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And they're very different from Jack Henry.

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And we specifically challenged

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We physically challenged the appellants to find a case that are anything close to us.

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You know, appellants have painted the facts here as, oh, we have been, you know, quote, unquote, harassing, at least, quote, unquote, hassled Trimble for months.

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But the record simply does not support the spin that Trimble was hassled at all.

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In the very beginning, Trimble's Colorado counsel said, quote, Trimble is willing to keep negotiating for as long as the talks are productive.

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And then the very last correspondence before we were blindsided with the DJ action in California suggested that the party's negotiations were continuing and actually included an apology for not getting back to Per Diem soon enough.

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And that's on page 1328 of the appendix.

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So really all of Per Diem's contacts were part of reciprocal negotiation to compromise the disputed legal claim of patent infringement.

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Nobody was hassled here.

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And, you know, Red Wing does stand for the proposition, I mean, perhaps there were more negotiations here, but it stands for the proposition that negotiations to settle claims outside of court is a compelling interest, you know, that very much fits into the fourth factor of the Supreme Court's test.

[00:15:03] Speaker 02:
So once we dispense with Trimble's notion that Red Wing shoe is a bright line, wouldn't move privileging assertions, it becomes very easy to reconcile Red Wing shoe with the Supreme Court precedent by just considering its policies as some of the, quote, variety of interest in asserting whether jurisdiction would be fair.

[00:15:24] Speaker 02:
Red Wing shoe.

[00:15:24] Speaker 00:
Is your position that Red Wing then could be distinguished here, or is Red Wing in your view in point?

[00:15:30] Speaker 02:
Red Wing is directly on point with our case.

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The facts are very, very closely matched.

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And so, you know, while perhaps Red Wing Sue could have addressed the other factors as well, you know, Red Wing Sue took a flexible analysis at the end of the day.

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It put its policy into the Supreme Court precedent.

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It actually already reconciled itself with Supreme Court precedent here.

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You know, when we talk about the differences in the cases and the facts, I think it's very, I mean, Jack Henry is very stark.

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The appellants try to say, oh, there are multiple targets in Jack Henry.

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Yes, there are multiple targets here, only one of which is in California, whereas in Jack Henry, went after 11 targets in this single district.

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And the other very important thing about Jack Henry is that, you know, Jack, the defendant in Jack Henry

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really wasn't trying to settle the case in a way.

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When he heard back from Jack Jenner, who attempted to identify these 11 banks in Texas, he ignored that response and he sent a letter to all 11 banks and actually lied and said that, hey, only your bank is being accused of infringement here.

[00:16:49] Speaker 02:
And that is actually sort of where the bad faith comes in.

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And, you know, contrary to symbols assertion, we're not suggesting a rule that good faith comes all or that, quote, in absence of bad faith, patent enforcement activities preclude personal jurisdiction.

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No one's suggesting that good faith is a mechanical test for constitutional reasonableness.

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Good faith is not the low star, but it is one of the variety of interests that should be considered.

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And so a patentee is good favor, lack thereof, may help inform whether his actions exceed the sufficient latitude that Red Wing talks about.

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And in Jack Henry, the patentee's actions in line to 11 banks in the same district, that certainly exceeds the sufficient latitude, in my opinion.

[00:17:39] Speaker 02:
The other things about Jack Henry, when we talk about the questions of burden, in Jack Henry, the defendant

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lived domiciled in the next district over.

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So the state's interest was enormous and covered everybody.

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And when it talks about Burton, we're right next door.

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That's very close from being literally across the country.

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So this lack of good faith was exemplified in Good Henry, and it should be considered as part of the flexible analysis.

[00:18:08] Speaker 02:
And Amici also talked about these bulk mail situations where certain NPEs would

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litter many, many, many potential defendants in patent lawsuits, you know, just trying to extract some sort of payment for licenses and they send it to thousands of people.

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But that is not a good-face situation either.

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You know, in that situation, the patentee claimant has not done the analysis

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to determine that he is making a good faith accusation.

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That is not even being alleged here.

[00:18:47] Speaker 02:
You know, when we talk about the facts of this case, you know, there is no credible allegation of bad faith regarding Per Diem's notifications and negotiations.

[00:18:57] Speaker 02:
Trimble lobs the charge of bad faith in its reply brief at page 13 and also page 15, but only on the grounds that, quote, Per Diem threatened litigation.

[00:19:07] Speaker 02:
But there's no basis for the incorrect proposition that litigation threats are evidence of bad faith.

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Indeed, at least an implicit threat of litigation is needed to establish subject matter jurisdiction.

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And accordingly, a litigation threat is baked into every single declaratory judgment action.

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And so in all brief, we also highlighted, again,

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Appellants were unable to identify any authority or personal jurisdiction was found based on a similar level of forum content.

[00:19:46] Speaker 02:
So in doing that, I'd also like to point out that this court also linked red-winged shoes holding to the first fairness factor, the burden on the defendant, which the Supreme Court has also held to be the most, one of the most important or the most important.

[00:20:00] Speaker 02:
It said, quote, to require a defendant to answer in a distant forum when it's only contact with that forum where efforts to get proper notice of his patent rights would place an undue burden on the defendant.

[00:20:14] Speaker 02:
And, you know, as Bristol Myers-Gribb explained, the primary focus of our personal jurisdiction inquiry is the defendant's relationship to the forum state.

[00:20:23] Speaker 02:
And here, there is no legitimate dispute that purdeems only contact with the forum

[00:20:28] Speaker 02:
or attempts to give proper notice of its patent rights and negotiate a compromise of those rights.

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I mean, simply put, there's nothing else.

[00:20:36] Speaker 02:
There's nothing else here.

[00:20:37] Speaker 02:
Thus, under Billings's interpretation of Red Wing Shoe, and actually all interpretations of Red Wing Shoe, the factor counseled that personal jurisdiction would be unreasonable.

[00:20:59] Speaker 02:
So I'd also like to point out that when Red Wing Shue noted that its policy squarely invokes the fourth factor, it also relied on Eighth Circuit Law for the proposition that, quote, courts have hesitated to use unsuccessful settlement discussions as contacts for jurisdictional purposes.

[00:21:20] Speaker 00:
Why is the burden on the defendant here greater to litigate in Northern District, California,

[00:21:27] Speaker 00:
rather than in Iowa or Texas?

[00:21:33] Speaker 02:
Well, it's... Well, first of all, for, I guess, there's sort of the general burden argument, which I've already mentioned, that it's a burden to be taken further away.

[00:21:43] Speaker 02:
But it's also, on that note, looking at the specifics of it, it's because it is a further away jurisdiction, in short.

[00:21:52] Speaker 00:
And the other thing, I guess... It depends solely on distance?

[00:21:57] Speaker 02:
It's not based solely on distance.

[00:21:59] Speaker 02:
I believe that the distance and the convenience factor is there while incredibly important to the venue decision, which is no longer part of this appeal.

[00:22:11] Speaker 02:
Those factors, I believe, are relevant to this.

[00:22:16] Speaker 02:
But compared with the general finding of undue burden that is quoted from Zillings, I think it pales in comparison to that.

[00:22:26] Speaker 00:
I don't think you really answered my question.

[00:22:28] Speaker 00:
Why is there a more burdensome for your client to litigate in Iowa, in the Northern District of California, as opposed to Iowa or Texas?

[00:22:40] Speaker 02:
So the distance would be one reason for it.

[00:22:46] Speaker 02:
And the distance would probably be the main reason there, actually, Your Honor.

[00:22:55] Speaker 02:
So we're talking about our burden there.

[00:22:57] Speaker 02:
It's further away, longer trips.

[00:22:59] Speaker 02:
Of course, all of this came down before the COVID-19 crisis happened.

[00:23:03] Speaker 02:
But that may kind of add to the burden for as well there.

[00:23:08] Speaker 02:
But it's mostly distance, I would say.

[00:23:12] Speaker 02:
And in Texas, that is our home district.

[00:23:16] Speaker 02:
And there really is no burden argument to be made.

[00:23:20] Speaker 02:
I also want to point out on this point, I hope I answered your question, Your Honor.

[00:23:24] Speaker 02:
That Trimble's replying, Trimble's replying correctly implies that Per Diem argued to the DC District Court that litigating a related declaratory judgment action of DC would be inconvenient and burdensome to Per Diem.

[00:23:37] Speaker 02:
And we didn't make that argument.

[00:23:39] Speaker 02:
We chiefly argued that the DC suit was duplicitous to this one and that it was anticipatory given how Trimble filed suit in the middle of continuing negotiations.

[00:23:48] Speaker 02:
But, I mean, I admit that we did make a perfunctory argument that DC lacked personal jurisdiction, but that was just based on its corporate home being in Texas with respect to general jurisdiction and because with respect to specific jurisdiction, because Per Diem did not direct patent enforcement efforts at the DC forum.

[00:24:08] Speaker 02:
But the relevant point about Per Diem's jurisdiction argument was not what it omitted, was actually what it omitted.

[00:24:16] Speaker 02:
I mean, Per Diem specifically did not argue that DC would be inconvenient or burdensome.

[00:24:21] Speaker 02:
I mean, Per Diem's sole employee lives and works out of DC, so we're not going to make that argument.

[00:24:29] Speaker 02:
So unless there are any other questions from the court, in conclusion, appellee Per Diem requests that this panel affirm the district court's dismissal of appellants' declaratory judgment action for lack of personal jurisdiction.

[00:24:43] Speaker 03:
Are there any more questions for Mr. Sandel?

[00:24:46] Speaker 03:
I hear none.

[00:24:47] Speaker 03:
All right.

[00:24:48] Speaker 03:
Mr. Bagatell.

[00:24:51] Speaker 01:
Thank you, Judge Newman.

[00:24:53] Speaker 01:
I'll just make a few quick points in rebuttal.

[00:24:58] Speaker 01:
The first point is that Mr. Sandel repeatedly discussed flexibility, but the reality is the district court didn't exercise any flexibility.

[00:25:10] Speaker 01:
It simply addressed one factor, not all factors.

[00:25:13] Speaker 01:
And the reality is this court has referred to the Red Wing shoe as an inflexible patent specific rule.

[00:25:19] Speaker 01:
Basically, it's turning all in one factor and everything else gets trumped.

[00:25:23] Speaker 01:
That is inconsistent with the Supreme Court's jurisprudence as the district court, in fact, recognizing a footnote in his opinion.

[00:25:30] Speaker 01:
Second of all, Mr. Sandel says we didn't identify any cases and we've specifically discussed Jack Henry.

[00:25:39] Speaker 01:
And I think we've explained why this case is very similar to Jack Henry.

[00:25:42] Speaker 01:
Jack Henry was not a bad faith.

[00:25:44] Speaker 01:
The court did not find that there was any lying going on.

[00:25:48] Speaker 01:
The only thing it said was that only your bank is being sued, not Jack Henry, which was true.

[00:25:53] Speaker 01:
It's also true that Jack Henry didn't have much of a burden argument, but that's also true here.

[00:25:59] Speaker 01:
They don't have a significant burden argument because they themselves want to litigate away from home.

[00:26:08] Speaker 01:
As I said, that can easily be dealt with via a 1404 motion.

[00:26:11] Speaker 01:
There's only a marginal difference between California and Iowa and Texas when you're flying from Washington, DC.

[00:26:17] Speaker 01:
And the end of the day, the burden was on per diem code to make a compelling case that it was unreasonable or unfair to adjudicate Northern California.

[00:26:24] Speaker 01:
And they just didn't do it.

[00:26:26] Speaker 01:
And the reality is they do say that they can only be sued in the Eastern District of Texas.

[00:26:30] Speaker 01:
They moved to dismiss in DC for lack of personal jurisdiction.

[00:26:34] Speaker 01:
Their position is they can only be sued where they want to be sued.

[00:26:37] Speaker 01:
There's no constitutional right to be sued only in your favorite form.

[00:26:42] Speaker 01:
So we ask the court to reverse.

[00:26:43] Speaker 01:
Thank you.

[00:26:45] Speaker 03:
Any more questions, Mr. Bagatello?

[00:26:47] Speaker 03:
All right.

[00:26:49] Speaker 03:
Thanks to both counsels.

[00:26:51] Speaker 03:
The case is taken under submission.