483 F. 2d 594 - Manufacturing Company v. Solar Industries Inc

Solar Industries, Inc., sought a declaratory judgment under 28 U.S.C. Sec. 2201, that a patent owned by the defendant for a "tire bead seater" was invalid and/or was not infringed by the plaintiff. Service of process on the defendant was obtained pursuant to Minnesota's "longarm" statutes, M.S.A. Secs. 303.131 and 543.19,2 as permitted by Rule 4(e), Fed. R.Civ.P. The defendant, appearing specially, moved to dismiss the action or, alternatively, to quash the return of service on the ground, inter alia, that the court was without personal jurisdiction over the defendant. The District Court ruled that it had personal jurisdiction over the defendant, and certified the issue for an interlocutory appeal to this Court.

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The pertinent facts, for the most part, are the following which were found by the trial court:3

"1. Plaintiff, Solar Industries, Inc., is a Minnesota corporation having its principal place of business at * * * Osseo, Minnesota 55369.

"2. Defendant, B & J Manufacturing Co., is an Illinois corporation having its principal place of business at Glenwood, Illinois.

"3. On September 15, 1971, process was served on the Minnesota Secretary of State, pursuant to M.S.A. Sec. 303.13, who thereafter mailed a copy of the process to the defendant at Glenwood, Illinois.

"4. On September 27, 1971, personal service was made on Mr. W. E. Jensen, Executive Vice President of defendant, by a United States Marshal for the Northern District of Illinois pursuant to M.S.A. Sec. 543.19.

"5. Defendant is not licensed to do business in Minnesota, and does not maintain a bank account or inventory here, or own, use or possess any real property located here.

"6. Defendant has not and does not maintain any offices or place of business in Minnesota, and does not have any employees in Minnesota. Defendant does have 'sales service personnel' which travel all over the country (presumably including Minnesota) visiting retread shops to make sure defendant's products are performing properly. The last employee to be in Minnesota was such a technical representative who was here in August, 1970.

"7. Defendant has sold its line of Rocket rasps, its line of carbide wheels and tools, and its pollution control equipment in Minnesota. Defendant has made such sales to * * * [six] Minnesota companies in the last two years:

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"In addition to the above, drop shipments were made in the State of Minnesota for the accommodation of buyers outside of Minnesota.

"8. These sales totaled $15,903.09 from July 19, 1969 to December 31, 1969, $50,549.85 in 1970, and $41,287.03 from January 1, 1971 to November 19, 1971.

"9. The vast majority of the sales were made to N. R. Hansemann Co. which is defendant's distributor in Minnesota.

"10. Defendant advertises in various national publications which are distributed in Minnesota, and Minnesota readers of these publications who make inquiry are sent informative literature by defendant's sales department and advised to contact defendant's local distributor. In some cases, N. R. Hansemann Co. is directly informed of the inquiry. Defendant is certain that some sales have resulted from this process.

"11. Defendant's products sold in Minnesota are sent to defendant's plant in Glenwood, Illinois for any needed repairs.

"12. N. R. Hansemann Co. was provided with certain of defendant's catalogs, imprinted with defendant's name, address and various trademarks and tradenames, to be used in making sales of defendant's products in Minnesota.

"13. N. R. Hansemann Co. carries a complete line of defendant's products except the tire bead seater of the type disclosed by Patent Number 3,552,469, the subject of this suit. The reasons for this are that N. R. Hansemann Co. has not ordered any such tire bead seaters and that defendant does not want plaintiff to be able to establish jurisdiction over defendant in this action.

"14. Defendant purchased the patent in question from Bruce Caulkins, Inc. of Harper Woods, Michigan in July 1971. Prior to such purchase, Bruce Caulkins, Inc. manufactured the tire bead seater in question and distributed it in Minnesota through a distributor. Defendant began to market the tire bead seater on October 4, 1971.

"15. Defendant has instituted a patent infringement action involving Patent Number 3,552,469 in the Northern District of Ohio against one of the plaintiff's distributors who handles plaintiff's tire bead seaters. In addition, defendant has threatened such actions against other distributors of plaintiff's tire bead seater.

"16. Plaintiff and defendant have had no direct business or contractual relationships in Minnesota."

The District Court found personal jurisdiction under both of the cited statutes. Initially, it indicated that the Minnesota Supreme Court has interpreted these statutes to extend the extraterritorial jurisdiction of the Minnesota courts to its maximum reach consistent with the constitutional limitations of due process. Next, it reviewed Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); and International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and concluded that the defendant had sufficient contacts with Minnesota in the instant case so that personal jurisdiction could be obtained over it without offending "traditional notions of fair play and substantial justice."

The plaintiff makes alternative arguments for jurisdiction. First, the plaintiff contends that service of process was made consistent with due process and that it is not necessary to tie the grounds of jurisdiction to specific provisions in the "long-arm" statutes.4 See, Japan Gas Lighter Association v. Ronson Corp., 257 F.Supp. 219, 231-232 (D.N.J.1966). Plaintiff maintains this approach is proper because the Minnesota Supreme Court specifically stated that the legislature by enacting the "long-arm" statutes intended "to extend jurisdiction of [the state's] courts to the maximum limits consistent with constitutional limitations." Hunt v. Nevada State Bank, 285 Minn. 77, 172 N.W.2d 292, 304 (1969), cert. denied, 397 U.S. 1010, 90 S.Ct. 1239, 25 L.Ed.2d 423 (1970). See also, Ellwein v. Sun-Rise, Inc., 295 Minn. 109, 203 N.W.2d 403 (1972); Mid-Continent Freight L. v. Highway Trailer Indus., 291 Minn. 251, 190 N.W.2d 670, 673 (1971). Defendant, in turn, strenuously argues that the language of statutes must be closely adhered to and that in every instance where the Minnesota court has found personal jurisdiction, one of the statutory elements relating to the acts enumerated in the statute has been found to exist by the court.

Plaintiff, in the alternative, argues that the defendant performed acts in Minnesota which make jurisdiction proper under two of the instances enumerated in M.S.A. Sec. 543.19. First, relying on an unpublished opinion of Judge Larson, the plaintiff contends that the threat of enforcement of a United States patent against a Minnesota resident was the use of personal property within Minnesota and, thus, satisfied M.S.A. Sec. 543.19, subd. 1(a). See, Imperial Products Inc. v. Zuro, et al., No. 4-70-Civ. 471 (D.Minn. July 1, 1971). The defendant, on the other hand, reasons that the situs of a patent is limited to the residence of its holder-here, Illinois-and that, therefore, there was no ownership, use or possession of the patent in Minnesota. Second, the plaintiff contends that the defendant transacted business in Minnesota by charging the plaintiff with patent infringement and demanding that it cease manufacturing its product. This act, of course, is that enumerated in M.S.A. Sec. 543.19, subd. 1(b). See, n. 2, supra. The defendant, however, without further reasoning, maintains that this did not constitute the transaction of business in the forum.

We do not find it necessary here to rule on each of the possible grounds for jurisdiction which are asserted by the plaintiff. Rather, we are convinced the plaintiff's cause of action arose from the defendant's transaction of business in Minnesota and, therefore, personal jurisdiction was properly obtained in accordance with M.S.A. Sec. 543.19, subd. 1(b). Our review is accordingly limited, and we express no opinion as to the validity of the other grounds asserted by the plaintiff.

In view of the fact that the Minnesota Supreme Court has indicated that M.S.A. Sec. 543.19 should be interpreted broadly to "afford maximum protection to [the] state's residents injured by acts of nonresidents," Hunt v. Nevada State Bank, supra, 172 N.W.2d at 304, it is proper to employ a liberal construction in determining whether the cause of action has arisen from the transaction of business in Minnesota.

It is undisputed that the plaintiff's action arose directly from the fact that through their attorneys, the defendant and the assignor of its patent advised the plaintiff, by letters received in Minnesota, to refrain from infringing on the "tire bead seater" patent and, further, threatened that a suit for infringement would be brought against the plaintiff if it refused to discontinue the manufacture and sale of its competing product. Regardless of the validity of the defendant's patent, there is no doubt but that the requests and threats were designed to reduce competition and thereby improve defendant's marketing and economic position. As such, we are convinced that the sending of these letters did, in a very real sense, constitute a transaction of business in Minnesota. Moreover, we note that the defendant is no stranger to Minnesota, and that it had a number of related contacts in the forum. The defendant advertised its products in national publications which were distributed in Minnesota, and it sold a number of its other products to independent distributors located in the state. It maintained "trouble shooters" who were available to visit the state when necessary to aid users of the firm's products, and the firm also repaired its products, though these had to be shipped to the firm's Illinois office for such service. Furthermore, it is significant that prior to the defendant's acquisition of the patent, its assignor had threatened the plaintiff with an infringement suit; that the assignor had sold the disputed product in Minnesota; and that the assignor and the defendant, as well, had discussed the question of licensing the patent with the plaintiff.

The fact that the defendant has, itself, not directly or indirectly5 sold the "tire bead seater" in the state because it did not wish the plaintiff to be able to obtain jurisdiction over it in this action hardly defeats jurisdiction here. Rather, the extensive contacts, taken together with the admonition of the Minnesota court in Hunt, compel the conclusion that service of process was properly made and jurisdiction over the defendant was obtained pursuant to M.S.A. Sec. 543.19, subd. 1(b).

We are also satisfied that the District Court's assumption of personal jursdiction over the defendant did not violate the defendant's right to due process. See, Aftanase v. Economy Baler Company, 343 F.2d 187 (8th Cir. 1965). It is evident from the trial court's findings of fact that the quantity, quality and nature of the defendant's contacts with the jurisdiction are substantial. The defendant has voluntarily entered into a number of business transactions, including the acquisition of the patent and attempts at enforcement, which it knew would have consequences in the state. Moreover, in view of the defendant's extensive contacts with the forum, we believe that the contacts are sufficiently connected with the cause of action to satisfy due process. See, Id., at 196; 2 J. Moore, Federal Practice p 4.25 (2d ed.1970). Furthermore, Minnesota most certainly has an interest in providing a forum for a resident who claims that a foreign corporation is attempting to prevent it from manufacturing and marketing its product. This is especially true in the instant case as the defendant has threatened and brought independent actions against a number of the plaintiff's customers and distributors in other states. And finally, while it may be more convenient for the defendant to litigate in Illinois, the convenience of all parties must be considered. No exceptional hardship is suffered by the defendant having to litigate in Minnesota, and we are satisfied that it is in the best interests of all to have the case heard in Minnesota. Thus, we are convinced that the subjection of the defendant to in personam jurisdiction comports with due process.

Affirmed.