United States Court of Appeals for the Federal Circuit
04-1139
COMMISSARIAT A L’ENERGIE ATOMIQUE,
Plaintiff-Appellant,
v.
CHI MEI OPTOELECTRONICS CORPORATION,
Defendant-Appellee,
and
DELL COMPUTER CORPORATION, SAMSUNG ELECTRONICS CO., LTD.,
SAMSUNG ELECTRONICS AMERICA, INC.,
SAMSUNG ELECTRONICS CANADA, INC., SAMSUNG INTERNATIONAL, INC.,
SUN MICROSYSTEMS, INC., and VIEWSONIC CORPORATION,
Defendants.
Gaspare J. Bono, McKenna Long & Aldridge LLP, of Washington, DC, argued for
plaintiff-appellant. With him on the brief were Song K. Jung, Matthew T. Bailey and
Lora A. Brzezynski.
William J. Marsden, Jr., Fish & Richardson P.C., of Wilmington, Delaware,
argued for defendant-appellee. With him on the brief was Eugene B. Joswick. Of
counsel on the brief was Michael J. McKeon, of Washington, DC. Also of counsel were
Brian T. Racilla, of Washington, DC, and Rex Huang, of Boston, Massachusetts.
Appealed from: United States District Court for the District of Delaware
Judge Kent A. Jordan
United States Court of Appeals for the Federal Circuit
04-1139
COMMISSARIAT A L’ENERGIE ATOMIQUE,
Plaintiff-Appellant,
v.
CHI MEI OPTOELECTRONICS CORPORATION,
Defendant-Appellee,
and
DELL COMPUTER CORPORATION, SAMSUNG ELECTRONICS CO., LTD.,
SAMSUNG ELECTRONICS AMERICA, INC.,
SAMSUNG ELECTRONICS CANADA, INC., SAMSUNG INTERNATIONAL, INC.,
SUN MICROSYSTEMS, INC., and VIEWSONIC CORPORATION,
Defendants.
___________________________
DECIDED: January 19, 2005
___________________________
Before RADER, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and DYK, Circuit
Judge.
DYK, Circuit Judge.
Plaintiff-Appellant Commissariat à l’Energie Atomique (“CEA”) appeals the district
court judgment dismissing its patent infringement action against Defendant-Appellee
Chi Mei Optoelectronics Corporation (“CMO”) for lack of jurisdiction. We hold that the
district court erred in denying CEA’s request for jurisdictional discovery, and therefore
vacate the judgment of dismissal and remand for limited jurisdictional discovery and for
further consideration of the district court’s jurisdiction based on that discovery.
BACKGROUND
Plaintiff-Appellant CEA is a French government research agency that develops
new technologies for sale and license to the private sector for commercial use. CEA
owns U.S. Patent Nos. 4,701,028, and 4,889,412, directed to technology for the design
and manufacture of liquid crystal displays (“LCDs”) and related products. An LCD is a
type of flat panel display that is used in products such as computer monitors and
television screens.
Defendant-Appellee CMO is a Taiwanese manufacturer of LCD products,
including LCD modules that are alleged by CEA to infringe their patents. CMO is the
third largest LCD module maker in the world. The company generally sells its modules
directly to original equipment manufacturers (“OEM’s”) that subsequently incorporate
the CMO modules into computer monitors. The computer monitors, in turn, are shipped
to major brand name computer manufacturers, which then ship their products to a
myriad of large retailers in the United States for sale to consumers, both online via the
Internet, and in stores. CMO makes no direct sales to retailers.
CEA instituted this action in the United States District Court for the District of
Delaware on May 19, 2003, against CMO and other companies, alleging infringement of
the two patents. The action is still pending against the other parties and has been
consolidated with additional actions brought by CEA against other LCD manufacturers,
OEMs, name-brand computer manufacturers, and retailers. See, e.g., Commissariat à
l’Energie Atomique v. Fujitsu Ltd., Civ. No. 03-1036 (D. Del. Nov. 13, 2003);
Commissariat à l’Energie Atomique v. Best Buy Co. of Minn., Civ. No. 03-931 (D. Del.
Oct. 6, 2003).
04-1139 2
On July 15, 2003, CMO moved to dismiss CEA’s complaint for lack of personal
jurisdiction. At that time, the court had not yet set a discovery timetable for the case.
CEA did not seek to conduct formal discovery before responding to the motion. CEA
did submit documentary evidence with its response, and argued that the existing record
was sufficient to deny the motion. CEA also argued that, if the record was not sufficient,
it should be allowed to conduct discovery.
CEA presented industry data demonstrating that CMO sells over $1 billion of its
products worldwide, including in the United States; that CMO supplies roughly 12% of
the LCD market; that CMO is the number one supplier of 19” LCD monitors; and that
North America accounts for approximately 30% of all computer monitor purchases.
Industry data also indicate that CMO shipped approximately 2,950,000 LCD modules in
the first five months of 2003. CEA further documented the existence of an established
distribution network for LCD products, with published industry data on actual and
forecasted sales that document the flow of displays from LCD suppliers such as CMO,
through to OEMs, and on to name-brand computer manufacturers. Evidence was also
presented of orders for devices incorporating CMO products placed, in Delaware, prior
to the date CEA filed its complaint, and evidence of post-filing sales of such devices in
Delaware. CEA did not produce any direct evidence of pre-filing sales of devices
incorporating CMO products in Delaware. However, CEA alleged in its complaint that
CMO derived “substantial revenue from services or things used or consumed within
[Delaware].” (J.A. at 43.)
CMO submitted evidence that it had not transacted business itself, nor performed
any type of work in Delaware, and that it had no operations in Delaware, no employees
04-1139 3
who work or reside in Delaware, held no license to do business in Delaware, and did not
own, lease, use or otherwise possess any property in Delaware. However, CMO did
not submit any evidence to contradict CEA’s allegation that CMO derived substantial
revenue from sales of its products to Delaware. Nor did CMO submit evidence to
contradict CEA’s assertion that its products, as incorporated by OEMs into computer
monitors, were likely to reach Delaware. Instead, CMO argued that mere introduction of
its products into the “stream of commerce,” standing on its own, was not sufficient to
establish personal jurisdiction under the Delaware long arm statute.1
On September 22, 2003, the district court dismissed the action against CMO for
lack of personal jurisdiction, pursuant to Rule 12(b)(2) of the Federal Rules of Civil
Procedure. Commissariat à l’Energie Atomique v. Chi Mei Optoelectronics Corp., 293
F. Supp. 2d 423 (D. Del. 2003). The court rejected arguments that sections 3104(c)(1),
(3), and (4) of the Delaware long arm statute conferred jurisdiction.
1
The Delaware long arm statute, provides, in pertinent part:
As to a cause of action brought by any person arising from any of
the acts enumerated in this section, a court may exercise personal
jurisdiction over any nonresident, or a personal representative, who
in person or through an agent:
(1) Transacts any business or performs any character of work or
service in the State;
...
(3) Causes tortious injury in the State by an act or omission in this
State;
(4) Causes tortious injury in the State or outside of the State by an act
or omission outside the State if the person regularly does or solicits
business, engages in any other persistent course of conduct in the
State or derives substantial revenue from services, or things used
or consumed in the State.
Del. Code Ann. tit. 10, § 3104(c)(1), (c)(3) and (c)(4) (2003).
04-1139 4
CEA relied particularly on section 3104(c)(4), which establishes personal
jurisdiction over a defendant that “[c]auses tortious injury in the State or outside of the
State by an act or omission outside of the State if the person regularly does or solicits
business, engages in any other persistent course of conduct in the State or derives
substantial revenue from services, or things used or consumed in the State.” Del. Code
Ann. tit. 10, § 3104(c)(4) (2003). Our cases make clear that the tortious injury caused
by patent infringement occurs within the state where the allegedly infringing sales are
made. N. Am. Phillips Corp. v. Am. Vending Sales, Inc., 35 F.3d 1576, 1579 (Fed. Cir.
1994); Beverly Hills Fan Co. v. Royal Sovereign Corp, 21 F.3d 1558, 1571 (Fed. Cir.
1994).
CEA maintained that section 3104(c)(4) was applicable because CMO “derives
substantial revenue” from its sales of LCD panels in the United States, including
Delaware. The court found the record insufficient to satisfy the requirements of the long
arm statute, because although CEA had demonstrated that CMO derived substantial
revenue from its sales to North America, it had failed to demonstrate that it derived
substantial revenue specifically from Delaware. 293 F. Supp. 2d at 429. The court also
found that under Delaware law, in order to maintain jurisdiction under a “stream of
commerce theory . . . the defendant must have an ‘intent or purpose to serve the
Delaware market with their [sic] product.’” Id. (quoting Boone v. Oy Partek Ab, 724 A.2d
1150, 1158 (Del. Super. Ct. 1997)). Finding that CEA had failed to produce sufficient
evidence to satisfy any of the possible provisions of the long arm statute that might
authorize personal jurisdiction over CMO in Delaware, the district court declined to
04-1139 5
reach the issue of whether the requirements of the due process clause had been
satisfied. 2 Id. at 430.
On October 6, 2003, CEA filed a motion for reconsideration, reiterating its
request for jurisdictional discovery that had first been made in response to the
defendant’s motion to dismiss. Specifically, CEA requested jurisdictional discovery to
“conclusively establish that CMO derives substantial revenue from Delaware and is
subject to . . . jurisdiction” with “critical information” available from CMO including, “inter
alia, sales of LCD monitors in Delaware, and the types and number of infringing
modules sold in Delaware, both prior to and following the filing of the Complaint [and]
competent evidence of pre-filing sales in Delaware, ongoing relationships with retailers
in Delaware, and substantial revenues derived by CMO from Delaware.” (J.A. at 831
(internal citations and quotations omitted).) CEA also sought jurisdictional discovery to
determine whether or not CMO’s website, proposing an “e-solution platform for
customers and suppliers” would satisfy the “purposeful minimal contact” requirement as
interpreted under Delaware law. (Id. at 832.) In the alternative, CEA requested entry of
final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure or
certification under 28 U.S.C. 1292(b).
On November 21, 2003, the district court declined to grant jurisdictional
discovery; denied CEA’s motion for reconsideration; and entered final judgment in favor
of CMO pursuant to Fed. R. Civ. P. 54(b). Commissariat à l’Energie Atomique v. Chi
2
The district court also rejected CEA’s argument for jurisdiction under Rule
4(k)(2) of the Federal Rules of Civil Procedure. This argument has been abandoned by
CEA on appeal.
04-1139 6
Mei Optoelectronics Corp., 293 F. Supp. 2d 430 (D. Del. 2003). This appeal followed.
We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
DISCUSSION
We review the district court’s decision regarding whether it has personal
jurisdiction over a defendant without deference. Graphic Controls Corp. v. Utah Med.
Prods., Inc., 149 F. 3d. 1382, 1384 (Fed. Cir. 1998); Viam Corp. v. Iowa Export-Import
Trading Co., 84 F. 3d 424, 427 (Fed. Cir. 1996). The district court’s discovery ruling is
reviewed for abuse of discretion. Katz v. Batavia Marine & Sporting Supplies, Inc., 984
F. 2d 422, 424 (Fed. Cir. 1993); Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 455
(3rd Cir. 2003).
CEA first seeks a reversal of the judgment, arguing that the evidence presented
was more than sufficient to establish jurisdiction under section 3104(c)(4) of the
Delaware long arm statute, and that the exercise of personal jurisdiction is proper under
this court’s due process analysis in Beverly Hills Fan, 21 F.3d at 1565-69.3 As an
alternative to reversal, CEA urges this court to vacate the judgment below and remand
to allow CEA to take jurisdictional discovery.
I
In order to establish personal jurisdiction in a patent infringement case over a
non-resident defendant whose products are sold in the forum state, a plaintiff must
3
In its brief, CEA also relied on section 3104(c)(3), the “transacting
business” provision. Our review of the Delaware case law indicates that this provision is
not a valid basis for assertion of jurisdiction under the stream of commerce theory, and
we therefore focus our inquiry on section 3104(c)(4). See, e.g., Boone, 724 A.2d at
1157-58; see also In re Elonex Phase II Power Mgmt. Litig., 2003 WL 21026758 (D.
Del., May 6, 2003); Intel Corp. v. Broadcom Corp., 167 F. Supp. 2d 692 (D. Del. 2001).
04-1139 7
show both that the state long arm statute applies and that the requirements of due
process are satisfied. Viam, 84 F.3d at 427; Beverly Hills Fan, 21 F.3d at 1569.4
Contrary to the district court’s holding, the evidence already presented by plaintiff
is sufficient to demonstrate that CMO sells a very large volume of LCDs to companies
which incorporate these displays into their final product and that these products are
likely sold in Delaware in substantial quantities. The district court found that because
CEA failed to present evidence of pre-filing sales of CMO products in Delaware
(although evidence was presented on pre-filing orders and post-filing sales), and only
submitted nationwide data on CMO sales, as opposed to CMO sales specifically in
Delaware, that CEA failed to demonstrate that CMO products entered the state, or that
the company derived substantial revenue from the sale of its products in Delaware.
Commissariat, 293 F. Supp. 2d at 428 & n.1, 429.
The district court imposed too high a burden of proof on CEA. Based on the
allegations in the complaint, the evidence submitted by CEA, and CMO’s failure to rebut
the factual inference that devices incorporating its LCDs were sold in Delaware, the
district court should have found CEA’s showing sufficient to establish that substantial
revenues could be derived by CMO from the sales of products in Delaware
incorporating CMO’s LCDs. See, e.g., Beverly Hills Fan, 21 F.3d at 1563. However,
4
In this connection, CEA improperly relies on our non-precedential
affirmance of the district court’s ruling in In re Elonex Phase II Power Mgmt. Litig., 2003
WL 21026758 (D. Del. May 6, 2003), in violation of Federal Circuit Rule 47.6 which
prohibits the citation of nonprecedential opinions. (Reply Br. at 2, citing In re Elonex
Phase II Power Management Litigation, 97 Fed. Appx. 329 (Fed. Cir. 2004) as
“requir[ing] reversal of this case.”).
04-1139 8
the question of whether that showing is sufficient for personal jurisdiction presents
difficult questions under both Delaware law and the due process clause.
The scope of the stream of commerce theory under Delaware law is not clear,
and the issue has yet to be directly addressed by the Delaware Supreme Court. In
Boone, the Delaware Superior Court held that the stream of commerce theory is
available under section 3104(c)(4). 724 A.2d at 1158; see also Siemens
Aktiengesellschaft v. LG Semicon Co., 69 F. Supp. 2d 622, 626-27 (D. Del. 1999).
However, it is not clear 1) whether proof of an “intent or purpose to serve the Delaware
market” is required, see Boone, 724 A.2d at 1158; and 2) whether the Delaware long
arm statute extends to the full extent that the due process clause would permit.5
As to the due process question, the Supreme Court has been less than clear as
to whether a showing such as that made by the plaintiff here is sufficient to satisfy the
purposeful minimum contacts required to exercise personal jurisdiction. We have
elsewhere reviewed the evolution of Supreme Court precedent in this area, as well as
the debate between the regional circuits, as to the proper interpretation of the due
process limits of the “stream of commerce” theory. See, e.g., Beverly Hills Fan, 21 F.
3d at 1565-66; Viam, 84 F.3d at 427-28. The exercise of personal jurisdiction
5
Compare LaNuova v. Bowe Co., 513 A.2d 764, 768 (Del. 1986) (stating
that the Delaware long arm statute “has been broadly construed to confer jurisdiction to
the maximum extent possible under the due process clause”); Jeffreys v. Exten, 784 F.
Supp. 146, 151 (D. Del. 1992) (“Delaware courts have construed the [long arm] statute
as conferring jurisdiction to the maximum parameters of the due process clause.”), with
Hercules Inc. v. Leu Trust & Banking, 611 A.2d 476, 483 (Del. 1992) (holding that the
two jurisdictional inquiries are separate, and that satisfaction of the state long arm
statute must be established prior to consideration of due process); Intel Corp. v. Silicon
Storage Tech. Inc., 20 F. Supp. 2d 690, 695 (D. Del. 1998) (holding that the mandatory
two-step inquiry should not be ignored out of a desire to afford maximum jurisdictional
coverage).
04-1139 9
consistent with due process requires “certain minimum contacts . . . such that the
maintenance of the suit does not offend ‘traditional notions of fair play and substantial
justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v.
Meyer, 311 U.S. 457, 463 (1940)). Minimum contacts, in turn, are established by “some
act by which the defendant purposefully avails itself of the privilege of conducting
activities within the forum State.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475
(1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
In World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), the Court
first touched on the stream of commerce question and distinguished between “isolated
occurrence[s],” where a product finds its way into the forum State; and sales that “arise[]
from the efforts of the manufacturer or distributor to serve, directly or indirectly, the
market for its product” in that state. Id. at 297. A majority of the Court indicated that the
purposeful availment requirement of minimum contacts could be satisfied when the
defendant “should reasonably anticipate being haled into court.” Id. However, the Court
did not specify in any detail the contours of what would constitute a “reasonable
anticipat[ion of] being haled into court,” and did not need to resolve the issue, given the
absence of any “showing that any automobile [sold by defendants] has ever entered
[the forum state] with the single exception of the vehicle involved in the present case.”
Id. at 289.
It was not until the case of Asahi Metal Indus. Co. v. Superior Court, 480 U.S.
102 (1987), that the Court was squarely confronted with facts involving the assertion of
personal jurisdiction over a foreign defendant in a stream of commerce case involving
the use of established distribution networks, where the defendant itself had no direct
04-1139 10
contacts with the forum state. There, the Court was split as to what would constitute
sufficient minimum contacts with the forum state under the stream of commerce theory.
The case was ultimately decided on the “fairness prong” of the due process inquiry. Id.
at 114-15.
On the question of minimum contacts, Justice O’Connor, writing for four
members of the Court, urged that more than a “mere act of placing the product into the
stream [of commerce]” is required, and that due process also demands “an act of the
defendant purposefully directed toward the forum State.” Id. at 112. Justice Brennan’s
position, adopted by three others, was that such “additional conduct” is not needed
when the defendant places goods in a stream of commerce defined as “the regular and
anticipated flow of products from manufacture to distribution to retail sale.” Id. at 117.6
Like Asahi itself, this case involves a component of a final product—in Asahi, the
component was tire valve assemblies that were subsequently incorporated by tire
manufacturers into tire tubes, 480 U.S. at 106; here the component is an LCD display
which is subsequently incorporated by OEMs into computer monitors. The evidence on
the established distribution channels presented by CEA suggests that the flow of CMO
products to Delaware is “regular and anticipated,” and more than “unpredictable
currents or eddies,” thus likely satisfying Justice Brennan’s version of the stream of
commerce theory. Id. at 117. However, evidence has not yet been presented that
6
Justice Stevens wrote separately, joined by two Justices, stating that it
was not necessary to reach the minimum contacts issue. 480 U.S. at 121. He went on
to observe that, at least in the context of product liability actions, whether or not conduct
with a foreign state “rises to the level of purposeful availment requires a constitutional
determination that is affected by the volume, the value, and the hazardous character of
the components.” Id. at 122. That test, designed for products liability cases, is
inapplicable to actions for patent infringement.
04-1139 11
would satisfy Justice O’Connor’s standard for “[a]dditional conduct of the defendant [to]
indicate an intent or purpose to serve the market in the forum State, [such as] . . .
advertising in the forum State, establishing channels for providing regular advice to
customers in the forum State, or marketing the product through a distributor who has
agreed to serve as the sales agent in the forum state.” Id. at 112.
On the existing record, this case thus presents a factual scenario which would
require us to determine whether or not additional conduct, beyond a showing of use of
established distribution channels, is required to meet the demands of due process
under the stream of commerce theory of personal jurisdiction. We have not had
occasion to resolve that question,7 and we conclude that we should not do so on the
inadequate record presented here.
Delaware law is unclear as to whether the proper interpretation of the long arm
statute accords with Justice O’Connor’s or Justice Brennan’s view as expressed in
Asahi. Delaware law is also unclear as to whether or not the long arm statute is
coextensive with the due process clause. The regional circuits, as well, remain divided
on the proper due process standard. Compare Bridgeport Music, Inc. v. Still N the
Water Publ’g, 327 F.3d 472, 479-80, (6th Cir. 2003) (adopting Justice O’Connor’s
“stream of commerce ‘plus’” theory), with Dehmlow v. Austin Fireworks, 963 F.2d 941,
947 (7th Cir. 1992) (“Because the Supreme Court established the stream of commerce
theory [in World Wide Volkswagon], and a majority of the Court has not yet rejected it,
7
We have yet to decide whether Justice Brennan’s standard is sufficient to
satisfy due process, because we have yet to be presented with facts that do not meet
the more rigorous standard adopted by Justice O’Connor. Beverly Hills Fan, 21 F. 3d
at 1566; Viam, 84 F.3d at 428.
04-1139 12
we consider that theory to be determinative.”) and Barone v. Rich Bros. Interstate
Display Fireworks Co., 25 F.3d 610, 614 (8th Cir. 1994) (same). We conclude that
there is substantial uncertainty concerning both the scope of the Delaware law and that
of the due process clause, and that these issues should not be resolved on the present
record because the district court declined to order jurisdictional discovery.
II
The district court denied plaintiff’s discovery request as untimely, rather than as
irrelevant. In denying the request, the court held CEA “did not adequately preserve its
position that jurisdictional discovery was necessary” because CEA did not fully brief or
argue the issue prior to his ruling on the motion to dismiss. 293 F. Supp. 2d at 434. The
court found that it was “simply too late in the day for CEA to request jurisdictional
discovery.” Id.
On procedural issues such as the timeliness of discovery requests, we are
guided by the law of the regional circuit in which the district court sits. See, e.g., Biotec
Biologische Naturverpackungen v. Biocorp Inc., 249 F.3d 1341, 1355 n.4 (Fed. Cir.
2001), (discovery under FRCP 56(f) is governed by regional circuit law); Beverly Hills
Fan, 21 F.3d at 1561 (relying on regional circuit law to determine if the appellant had
procedurally waived the right to have certain evidence considered part of the record on
appeal); Truswal Sys. Corp. v. Hydro-Air Eng’g, Inc., 813 F.2d 1207, 1209 (Fed. Cir.
1987) (determining that motion to quash a subpoena requesting discovery from non-
party is governed by regional circuit law).
Plaintiffs adequately preserved their discovery request under Third Circuit law,
which does not require the formal filing of a request for discovery in order to preserve
04-1139 13
the issue. In Renner v. Lanard Toys Ltd., 33 F.3d 277, 283 (3d Cir. 1994), the Third
Circuit reversed a district court’s dismissal of a product liability action for lack of
personal jurisdiction, holding that jurisdictional discovery was required, and that
“[a]lthough the [plaintiffs] failed to make formal discovery requests, they preserved their
position that discovery was needed in their Memorandum of Law in opposition to [the
defendant’s] motion to dismiss for lack of personal jurisdiction.” Here, plaintiffs did not
waive their right to discovery, but preserved the issue by initially requesting discovery in
their opposition to the motion to dismiss, a request which was reiterated during oral
argument, and reasserted and elaborated in greater detail in their motion for
reconsideration. The mere fact that they also argued that the record was sufficient to
establish jurisdiction without discovery was not a waiver of the right to the discovery in
the event the district court disagreed.
Nor is there doubt that plaintiff’s discovery request was highly relevant and that
additional facts are likely available to assist the court in making the jurisdictional
determination. Toys “R” Us, 318 F.3d at 456. In determining the relevance of a request
for jurisdictional discovery, we apply Federal Circuit law. See, e.g., Truswal, 813 F.2d
at 1212 (holding that Federal Circuit law governs the relevance of discovery requests in
patent cases when substantive patent law is implicated); see also Beverly Hills Fan, 21
F.3d at 1564 (Federal Circuit law governs determination of personal jurisdiction in
patent actions because jurisdiction is “intimately involved in the substance of
enforcement of the patent right.”).
In this case, jurisdictional discovery is of particular relevance, and CEA has
clearly made a sufficient threshold showing to merit jurisdictional discovery. See, e.g.,
04-1139 14
Mellon Bank (East) PSFS, Nat’l Ass’n v. Farino, 960 F.2d 1217, 1223 (3rd Cir. 1992)
(holding that plaintiff’s right to conduct jurisdictional discovery should be sustained when
factual allegations suggest the possible existence of requisite contacts between the
defendant and the forum state with “reasonable particularity”). Indeed, CEA has gone
beyond factual allegations, and has already made a prima facie case for CMO’s use of
an established distribution network that likely results in substantial sales of its products
in Delaware. As we have discussed, this showing likely satisfies the standard set forth
by Justice Brennan in Asahi, of the “regular and anticipated flow of products from
manufacture to distribution to retail sale.” 480 U.S. at 117. However, CEA is entitled to
jurisdictional discovery to determine whether it can satisfy Justice O’Connor’s more
restrictive version of the stream of commerce theory.
Discovery may provide pertinent evidence to establish the defendant’s intent and
purpose to serve the Delaware market, including demonstration of CMO’s “ongoing
relationships with retailers in Delaware,” (J.A. at 831); CMO’s knowledge that its
products were being shipped to Delaware; its design and marketing efforts directed to
the U.S. market (including Delaware); and more information on the defendant’s e-
solution platform. (Id. at 832) In particular, further discovery may yield evidence of the
“additional conduct,” beyond the “mere act of placing a product in the stream of
commerce,” required by Justice O’Connor to establish minimum contacts, such as the
existence of marketing arrangements and demonstration that the website serves as a
“channel[] for providing regular advice to customers in the forum State.” 8 480 U.S. at
8
The website defines CMO’s service strategy “[t]o provide real time solution
to supplier chain and customer chain after goods exit of CMO [sic].” (J.A. at 319.) The
04-1139 15
112. If CEA is able to satisfy Justice O’Connor’s test, there will be no need to address
whether the less restrictive test proposed by Justice Brennan should be the standard
under Delaware law and under the due process clause.
Accordingly, we hold that the district court abused its discretion in denying CEA’s
discovery request.
CONCLUSION
For the foregoing reasons, we vacate the district court’s decision and remand for
further proceedings in accordance with this opinion.
VACATED AND REMANDED
COSTS
No costs.
question for discovery is whether this service strategy has in fact been implemented,
and whether it reaches customers in Delaware.
04-1139 16