Argued In Camera April 9, 1980.
BOWNES, Circuit Judge.
This is a declaratory judgment action in which the plaintiff seeks a determination that a patent held by the defendant is invalid, unenforceable, and not infringed. The plaintiff, Nova Biomedical Corporation, is a Massachusetts corporation located in Newton and engaged in the manufacture and sale of medical instruments. The defendant, Willi Moller, is a citizen and resident of Switzerland and owner of a sole proprietorship in Zurich, formerly known as Gebruder Moller Glasblaserei. On November 28, 1979, the district court dismissed the complaint, ruling that Nova had failed to establish personal jurisdiction over Moller pursuant to Mass. Gen. Laws Ann. ch. 223A, § 3, the Massachusetts long arm statute. We reverse.
The facts are undisputed. The patent in suit, which Moller acquired in 1970 from the Swiss inventor, covers an electrode capable, inter alia, of measuring potassium levels in fluids such as blood. Nova manufactures and sells a device which employs a similar electrode to perform the same function. On May 31, 1978, and again on March 16, 1979, Moller's attorneys wrote to Nova charging it with patent infringement; the first letter demanded that Nova "cease and desist" from such infringement, while the second suggested that a "prompt response" would avoid the "need for instituting litigation." Rather than following up on this threat, however, Moller filed a patent infringement suit on June 14, 1979, in the District of Columbia against two hospitals who had purchased the disputed electrode system from Nova. Five weeks later, Nova filed the present action for declaratory relief and for an injunction against the customer suit.
Moller's principal contact with Massachusetts consists of a cross-licensing agreement with a Massachusetts corporation called Orion Research Incorporated, covering the patent in suit, another patent owned by Moller, and a patent owned by Orion. Although this agreement was formally consummated in March of 1979 at Orion's headquarters in Cambridge, Massachusetts, its basic terms had been settled upon by 1976, and Orion had commenced payment of royalties the following year. In addition to granting licensing rights and specifying the level of royalty payments for each of the three patents, the agreement, inter alia, requires an exchange of quarterly reports concerning worldwide sales of the covered electrodes, permits Moller to inspect Orion's books in Massachusetts, obligates each party to inform the other of any suspected infringement by third parties, and provides that the law of Switzerland will be controlling.
Through the first quarter of 1979, Orion had paid to Moller just under $50,000 in royalties under the second of the Moller patents covered by the agreement. By contrast, although Orion has manufactured "thousands" of the electrodes covered by the patent in suit, it has never paid any royalties to Moller therefor; the agreement provides that such electrodes are royalty-free to the extent they are sold by Orion to end users, as opposed to other manufacturers. Orion does, however, owe some royalties for its sale of these electrodes. It estimates that $10,000 is due, but the precise amount is disputed by the two parties. Orion's use of the patent in suit also confers upon Moller the secondary benefit of a substantially royalty-free use of Orion's patented device. The electrodes sold by Moller under the Orion cross-licensed patent — although ordinarily subject to a royalty — are royalty-free to the extent they do not exceed twenty percent of the number of electrodes
Of Moller's remaining contacts with Massachusetts, the most substantial has consisted of the sale to Orion of various products and chemicals. The largest of these transactions has been Orion's purchase in March of 1979 of over $110,000 worth of pH electrodes, approximately one-third of which had been shipped to Boston by the end of September. In addition, within the past two years, Moller has sold to Orion almost $19,000 worth of calcium ion exchanger and over $5,000 worth of sodium electrodes, connectors, and a chemical called valinomycin. All of these materials are unrelated to the electrodes covered by the patent in suit except for the chemical valinomycin, which is a component thereof. Moller and Orion have engaged in an extensive course of correspondence, devoted primarily to negotiation of the license agreement. Moller also has visited Massachusetts twice to confer with Orion personnel and to talk with another Massachusetts company concerning unrelated business. Finally, the defendant has negotiated in Switzerland with a third Massachusetts company regarding a license under the patent in suit. Moller maintains no office, representative, sales force, telephone, or bank account in Massachusetts and does not advertise in any publication distributed here.
A preliminary observation concerning the scope of the Massachusetts long arm statute is in order. In "Automatic" Sprinkler Corp. v. Seneca Foods Corp., 361 Mass. 441, 280 N.E.2d 423, 424 (1972), the Supreme Judicial Court described the function of this statute as "an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States." Yet even under this expansive view, all questions of long arm jurisdiction in Massachusetts do not collapse into a single constitutional inquiry. As the Court later explained:
Good Hope Indus., Inc. v. Ryder Scott Co., 79 Mass.Adv.Sh. 1155, ___ Mass. ___, 389 N.E.2d 76, 80 (1979); accord, Carlson Corp. v. University of Vermont, 80 Mass.Adv.Sh. 659, ___ Mass. ___, 402 N.E.2d 483, 485 (1980). Thus, rather than giving way entirely to constitutional considerations, the statutory language imposes an additional set of constraints on a court's assertion of in personam jurisdiction. See, e. g., Singer v. Piaggio & C., 420 F.2d 679, 681 (1st Cir. 1970); North American Video Corp. v. Leon, 480 F.Supp. 213, 216-18 (D.Mass. 1979).
In each of the cases decided by the Supreme Judicial Court under Mass.Gen.Laws Ann. ch. 223A, § 3, the applicability of one of the statute's literal requirements was not seriously in question and the Court's attention was devoted to the constitutional inquiry. See Carlson Corp. v. University of Vermont, 402 N.E.2d at 485; Good Hope Indus., Inc. v. Ryder Scott Co., 389 N.E.2d at 80; Droukas v. Divers Training Academy, Inc., 375 Mass. 149, 376 N.E.2d 548, 551-53 (1978);
Mass.Gen.Laws Ann. ch. 223A, § 3(a). Two questions are presented: (1) whether the mailing of two letters charging patent infringement and threatening litigation constitutes the "transacti[on]" of "business"; and (2) whether Nova's cause of action can be viewed as "arising from" Moller's licensing arrangement with Orion. An affirmative answer to either will suffice to support jurisdiction.
Despite the paucity of pertinent Massachusetts case law, there are several indications that the "transacting any business" clause should be construed broadly. First, the Supreme Judicial Court has ruled that the provision is not limited to commercial activity by the defendant, but rather "is general and applies to any purposeful acts by an individual, whether personal, private, or commercial." Ross v. Ross, 371 Mass. 439,
To support its contention that the mailing of two letters charging patent infringement and threatening litigation constituted the transaction of business, Nova relies principally on B & J Manuf. Co. v. Solar Indus., Inc., 483 F.2d 594 (8th Cir. 1973), cert. denied, 415 U.S. 918, 94 S.Ct. 1417, 39 L.Ed.2d 473 (1974). The plaintiff there brought suit in its home forum of Minnesota against an Illinois corporation, seeking a declaratory judgment that a patent owned by the defendant was invalid and not infringed. The plaintiff attempted to assert personal jurisdiction under the "transacting business" provision of the Minnesota long arm statute, a provision which corresponds closely to its counterpart in the Massachusetts statute. The defendant's contacts with the forum consisted principally of (1) its advertisement in various publications distributed there, (2) the sale of various products, other than that covered by the patent in suit, to independent distributors located in Minnesota, and (3) its maintenance of "trouble shooters" in or near the state to assist users of the company's products. In addition, the defendant had written several letters to the plaintiff, charging it with infringement and threatening suit if the plaintiff refused to discontinue the manufacture and sale of its competing product. The court concluded that the statutory requirements had been met:
Id. at 598. After determining that the defendant's various contacts with the forum, when viewed together, were sufficient to satisfy due process, the court sustained jurisdiction.
It is argued that any rule which automatically subjects a patentee to foreign jurisdiction whenever he demands recourse from an infringer would be both undesirable and unfair. The argument runs as follows. First, such a rule would discourage the giving of written notice of patent infringement and lead to the filing of suit without warning — "the blitzkreig nature of the attack being necessary to avoid vulnerability to foreign jurisdiction." Conwed Corp. v. Nortene, S. A., 404 F.Supp. 497, 506 n.8 (D.Minn.1975). Concomitantly, it would discourage the settlement of disputes. Alternatively, it is noted that a patentee is under some compulsion to provide written notice of infringement; not only do the patent laws anticipate that such notice "will be routinely sent prior to litigation," id., but a patentee's failure to do so may sharply limit his recoverable damages. See 35 U.S.C. § 287 (1970); Dunlap v. Schofield, 152 U.S. 244, 14 S.Ct. 576, 38 L.Ed. 426 (1894). See also Advanced Hydraulics, Inc. v. Otis Elevator Co., 525 F.2d 477, 480-82 (7th Cir.), cert. denied, 423 U.S. 869, 96 S.Ct. 132, 46 L.Ed.2d 99 (1975) (laches and estoppel). Thus, to subject a patentee to foreign jurisdiction on this basis is said to be unfair.
We do not dispute the force of these legitimate, albeit contradictory, concerns. For two reasons, however, we do not consider them seriously threatened by the conclusion reached here. First, mailing a letter charging infringement and threatening suit is already a two-edged sword; it is well-established that such conduct creates an "actual controversy" and thus gives rise to a cause of action under the Declaratory Judgments Act, 28 U.S.C. § 2201 (1970). E. g., Brisk Waterproofing Co. v. A. Belanger & Sons, Inc., 209 F.2d 169, 170 (1st Cir. 1954). The question of where a patentee can be sued — while admittedly important, see Codex Corp. v. Milgo Electronic Corp., 553 F.2d 735, 738 (1st Cir.), cert. denied, 434 U.S. 860, 98 S.Ct. 185, 54 L.Ed.2d 133 (1977) — would seem subordinate to that of whether it can be sued at all.
More importantly, we do not hold here — nor did the court in B & J Manufacturing — that "sending threatening infringement letters into the forum district suffices to succumb to that district's jurisdiction." Cascade Corp. v. Hiab-Foco AB,
In light of the facts described — and with particular reference to Moller's receipt of royalties from Orion's use of the patent in suit and the competitive positions of Nova and Orion — we conclude that Moller's threatening infringement notices to Nova constituted a transaction of business under section 3(a) giving rise to the present cause of action. With the requirements of both the long arm statute and due process satisfied, the district court can properly assert in personam jurisdiction over the defendant.
Nova has sought two additional forms of relief: an injunction against further proceedings in the District of Columbia action and a modification of a protective order issued by the district court. We prefer to let the lower court address these issues initially. Although, on the present record, this case would appear to invoke the "rebuttable presumption" recognized in Codex Corp. v. Milgo Electronic Corp., 553 F.2d at 738, we think any decision as to an injunction should be made after consideration of any recent developments. With respect to the scope of the protective order, the lower court expressly declined to reconsider this issue in the belief that it lacked jurisdiction. We think it should have a chance to do so, particularly because a question of mootness has subsequently emerged.
Reversed and remanded.
Other factors relevant to the constitutional inquiry, see, e. g., id. at 4081; Whittaker Corp. v. United Aircraft Corp., 482 F.2d 1079, 1083 (1st Cir. 1973), reinforce the propriety of asserting jurisdiction in the present case. First, Massachusetts has an undeniable interest in providing a forum for residents accused of patent infringement. See generally Carlson Corp. v. University of Vermont, 80 Mass.Adv.Sh. 659, ___ Mass. ___, 402 N.E.2d 483, 487 (1980). Second, considerations of convenience to the parties, as manifested by the applicable venue statutes, militate in favor of jurisdiction here; Massachusetts is both a permissible forum for suit against Moller, 28 U.S.C. § 1391(d) (1970), and a necessary forum for any patent infringement action against Nova, 28 U.S.C. § 1400(b) (1970). Also relevant in this regard is our recognition of a "rebuttable presumption that a manufacturer's declaratory judgment action, in its home forum, ... should take precedence over a mere customer action in a jurisdiction in which the manufacturer could not be sued." Codex Corp. v. Milgo Electronic Corp., 553 F.2d 735, 738 (1st Cir.), cert. denied, 434 U.S. 860, 98 S.Ct. 185, 54 L.Ed.2d 133 (1977) (footnotes omitted). Finally, whether or not Nova's suit can be said to "arise from" Moller's principal contacts with the forum, the two are connected at least in the sense that they involve the same patent. In any event, the fact that a controversy is unrelated to the defendant's activity in the forum is not necessarily fatal to the existence of jurisdiction there, so long as its forum-related business is substantial. Compare, Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 446-47, 72 S.Ct. 413, 418-419, 96 L.Ed. 485 (1952), and Garcia Pujol v. United States Life Ins. Co., 396 F.2d 430, 431-32 (1st Cir. 1968), with Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902 at 906 (1st Cir. 1980).