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Judge Burke recommends denial of motion to dismiss for lack of personal jurisdiction and motion to transfer venue

In Kraft Foods Group Brands LLC v. TC Heartland, LLC d/b/a Heartland Food Products Group, et al., C.A. No. 14-28-LPS (D. Del. Aug. 13, 2015), Magistrate Judge Christopher J. Burke recommended denial of Defendants’ motion to dismiss for lack of personal jurisdiction, as well as their motion to transfer venue to the Southern District of Indiana.  One Defendant was an Indiana LLC with headquarters in Indiana, was not registered to do business in Delaware, had no offices or any other local presence there, and had no supply contracts in Delaware.  The entity did ship orders of the accused products directly to Delaware via “contracts with ‘two national accounts’ that are headquartered outside of Delaware.”  Id. at 2.  The other Defendant was an Indiana corporation and it was disputed as to whether it was still doing business.  Id. at 2-3.

As to personal jurisdiction, Defendants contended that, under the Due Process Clause, there was no specific jurisdiction under the stream-of-commerce theory, under the above facts and where approximately 2% of the accused products were shipped for sale in Delaware.  Id. at 5-6, 8.  Defendants argued that while they were aware of these shipments to Delaware, the shipments “were ‘initiated’ by their customers – not by them.”  Id. at 8.  The Court distinguished the Supreme Court and Federal Circuit cases Defendants relied on, see id. at 8-9, and concluded that Plaintiff had established a prima facie case of stream-of-commerce specific jurisdiction, finding that “Defendants themselves knowingly and intentionally shipped a significant number of products directly to Delaware.  As such, they ‘purposefully avail[ed themselves] of the privilege of conducting activities within [Delaware].”  Id. at 9-10 (edits in original).

Defendants also presented “a novel jurisdictional theory” regarding the other 98% of sales of the accused products.  They contended that Plaintiff could not seek redress for those sales outside Delaware, as each act of patent infringement is a separate cause of action and thus Delaware did not have jurisdiction over the non-Delaware sales.  See id. at 10.  The Court rejected this theory, and affirmed that this Court could assert jurisdiction over out-of-state infringement activities.  Id. at 12-14.  Accordingly, the Court recommended that the motion to dismiss be denied.

As to transfer, Defendants moved under both 28 U.S.C. §§ 1406(a) (based on improper venue) and 1404(a) (based on Jumara factors).  As to Section 1406, they pointed to changes in the general venue statute, 28 U.S.C. § 1391, to contend that a “major change” in the law regarding venue had occurred, and that “venue in a patent action is now appropriate only in a defendant’s state of incorporation, or ‘where the defendant has committed acts of infringement and has a regular and established place of business.’”  Id. at 15.  The Court had allowed additional briefing on this question, id. at 3, and now rejected Defendants’ arguments, see id. at 18-20, and recommended denial of the motion to transfer under Section 1406.

Defendants had addressd the grounds for transfer under Section 1404(a) and the Jumara factors “in a cursory fashion.”  Id. at 21.  The Court found that Defendants’ forum preference, where the claim arose, and convenience of the parties weighed in favor of transfer, albeit only slightly as to convenience of the parties.  All other factors weighed in favor of transfer or were neutral, often because the parties had simply not addressed the factor in briefing.  See id. at 27-28.  The Court concluded that “a balancing of the Jumara factors produces a result that is not ‘strongly in favor of’ transfer,” and accordingly recommended denial of the motion.  Id. at 29.

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