Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories, Inc.

United States Court of Appeals for the Federal Circuit

05-1221, -1428

BRECKENRIDGE PHARMACEUTICAL, INC.,

Plaintiff-Appellant,

v.

METABOLITE LABORATORIES, INC.,
and PAMLAB, L.L.C.,

Defendants-Appellees.

Robert E. Pershes, Buckingham, Doolittle & Burroughs, L.L.P., of Boca Raton, Florida,
argued for plaintiff-appellant. With him on the brief were L.A. Perkins and H. Michael Muñiz.

Glenn K. Beaton, Gibson, Dunn & Crutcher, LLP, of Denver, Colorado, argued for
defendants-appellees. With him on the brief was Amanda Tessar.

Appealed from: United States District Court for the Southern District of Florida

Judge James I. Cohn
 United States Court of Appeals for the Federal Circuit

05-1221, -1428

BRECKENRIDGE PHARMACEUTICAL, INC.,

Plaintiff-Appellant,

v.

METABOLITE LABORATORIES, INC. and PAMLAB, L.L.C.,

Defendants-Appellees.

_________________________

DECIDED: April 7, 2006
_________________________

Before MICHEL, Chief Judge, FRIEDMAN, Senior Judge, and LINN, Circuit Judge.

MICHEL, Chief Judge.

Breckenridge Pharmaceutical, Inc. (“Breckenridge”) appeals the decision of the

United States District Court for the Southern District of Florida dismissing for lack of

personal jurisdiction its claims of tortious interference, unfair competition, and

declaratory judgment of non-infringement against patent holder, Metabolite

Laboratories, Inc. (“Metabolite”). Breckenridge Pharm., Inc. v. Metabolite Labs., Inc.,

348 F. Supp. 2d 1335 (S.D. Fla. 2004) (Breckenridge). Breckenridge also appeals the

district court’s subsequent grant of summary judgment on all claims to PamLab, L.L.C.

(“PamLab”), the exclusive licensee of the patents at issue. Breckenridge Pharm., Inc. v.

Metabolite Labs., Inc., No. 04-80090-CIV-COHN (S.D. Fla. May 17, 2005) (PamLab).

The district court held that the patent-related claims could not proceed without
Metabolite, an indispensable party, and that the state law claims were preempted under

Federal Circuit law. Id. Because the district court erroneously concluded that it lacked

personal jurisdiction over Metabolite, and because there are genuine disputes of

material fact with respect to the state law claims, the district court incorrectly dismissed

Metabolite and granted summary judgment to PamLab. Therefore, we reverse the

dismissal of Metabolite, vacate the grant of summary judgment to PamLab, and

remand.

I

Metabolite, a Colorado corporation, is the holder of patents for a method of

controlling hyperhomocysteinemia, a condition involving elevated serum metabolite

levels, which is an emerging risk factor for heart and vascular disease, and its principal

business involves licensing its patents to pharmaceutical manufacturing companies.

Through an exclusive license of the Metabolite patents, co-defendant PamLab, a

Louisiana corporation, manufactures and distributes a prescription-only vitamin product

containing a specific formulation of B12, folic acid and B6 marketed as FOLTX, which it

promotes to doctors and clinicians throughout the country. Breckenridge, a generic

drug company headquartered in Florida, manufactures a similar product, marketed as

“Folbee”, which it sells to large pharmacies and retailers—including Walgreens, Eckerd,

and Rite Aid—as a substitute for FOLTX.

On December 18, 2003, Metabolite and PamLab filed suit in the United States

District Court for the District of Colorado alleging that Breckenridge had infringed the

Metabolite patents by offering to sell Folbee to drug wholesalers and retailers as a

generic equivalent to FOLTX. Following the district court’s denial of the plaintiffs’

05-1221, -1428 2
motion for a temporary restraining order (“TRO”) on December 23, 2003, the plaintiffs

voluntarily dismissed the suit.

Several weeks later, Metabolite, in cooperation with PamLab,1 sent between ten

and twenty letters to vitamin distributors and retailers informing them of the Metabolite

patents and PamLab’s exclusive license. Three letters were sent to customers of

Breckenridge in Florida: Publix Super Markets, Eckerd, and Winn-Dixie. The letters did

not name Breckenridge or threaten a lawsuit for infringement. The letters stated in

relevant part:

[O]ne or more small generic drug companies are offering generic
equivalents to FOLTX. As the patent owner, Metabolite wanted to
alert you to the patent coverage on FOLTX. We would urge you to
consult with your patent attorney before entering into any
arrangements for the distribution, dispensing or substitution of
these generic equivalents in place of a legitimate prescription or
order for FOLTX.

Metabolite enclosed a PamLab brochure that contained PamLab’s contact information

but did not contain pricing or order forms.

On January 29, 2004, about eight days after learning of the letters, Breckenridge

filed suit against Metabolite and PamLab in the United States District Court for the

Southern District of Florida, seeking declaratory judgment of non-infringement and

alleging state law claims of tortious interference and unfair competition. Metabolite

moved to dismiss the complaint for lack of personal jurisdiction and, on December 3,

1
PamLab argues that the letters to Breckenridge’s customers were sent by
Metabolite alone. This argument is unavailing. Although it is true that the letters were
“sent by” Metabolite in that Metabolite’s counsel was the only signatory, Metabolite co-
owner Dr. Robert H. Allen conceded in his deposition that PamLab Vice President Barry
LeBlanc supplied the names and addresses of Breckenridge’s customers in Florida for
the purpose of sending the letters. “But for” PamLab’s cooperation, the letters might not
have been sent.

05-1221, -1428 3
2004, following jurisdictional discovery, the district court granted the motion. On May

17, 2005, the district court granted summary judgment in favor of PamLab on all claims.

Breckenridge challenges both rulings in separate appeals, which we have consolidated.

We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

II

Where a defendant is not subject to general jurisdiction in the forum state, a

district court may nonetheless exercise specific jurisdiction over the defendant if the

cause of action “arises out of” or “relates to” the defendant’s in-state activity. Burger

King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985). In determining whether specific

jurisdiction may be exercised over a non-consenting out-of-state defendant, a district

court must undertake a two-part inquiry. First, the state long-arm statute must permit

service of process on the defendant. See Fed. R. Civ. P. 4(e), 4(k)(1)(A). Second, the

exercise of personal jurisdiction must satisfy due process requirements. Burger King,

471 U.S. at 474-76. The Due Process Clause requires that there exist sufficient

“minimum contacts” such that maintenance of the suit does not offend “traditional

notions of fair play and substantial justice”. Id. at 476-78.

A

On appeal, Breckenridge asserts that two subsections of the Florida long-arm

statute permit the exercise of personal jurisdiction over Metabolite.2 Subsection 1(b)

authorizes jurisdiction over a party that “[c]ommit[s] a tortious act within this state”, and

subsection 1(f) authorizes jurisdiction over a party that “[c]aus[es] injury to persons or

2
PamLab states that it “sells products throughout the country, including into
Florida” and “does not contest personal jurisdiction” in Florida. Thus, the question of
personal jurisdiction is relevant only with respect to Metabolite.

05-1221, -1428 4
property within this state arising out of an act or omission by the defendant outside this

state, if, at or about the time of the injury [ ]: 1. The defendant was engaged in

solicitation or service activities within this state.” Fla. Stat. § 48.193(1)(b), (f).

The district court held that Metabolite’s contacts with Florida satisfied subsection

(1)(f) of the Florida long-arm statute. We agree. The district court correctly concluded

that there was no jurisdiction under (1)(b) because Metabolite’s letters into Florida may

qualify as protected communications under federal patent law and thus may not be

tortious. See Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367,

1377 (Fed. Cir. 2004) (“The federal patent laws preempt state laws that impose tort

liability for a patentholder’s good faith conduct in communications asserting infringement

of its patent and warning about potential litigation.”). With respect to subsection (1)(f),

the court correctly concluded that the letters could be construed as solicitations,

because they described the FOLTX product and PamLab’s exclusive license, and

enclosed PamLab’s promotional materials. Because Breckenridge alleges that the

letters caused injury in Florida, the requirements of subsection (1)(f) are met.

Accordingly, the district court correctly determined that Metabolite would be subject to

personal jurisdiction if consistent with due process.

B

The issue of personal jurisdiction in a declaratory action for non-infringement is

“intimately related to patent law” and thus governed by Federal Circuit law regarding

due process. Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1201 (Fed. Cir.

2003). Where a suit involves both patent and non-patent claims, Federal Circuit law

regarding due process also applies to the question of personal jurisdiction on non-

05-1221, -1428 5
patent claims if “the resolution of the patent infringement issue will be a significant

factor” in determining liability under the non-patent claims. 3D Sys., Inc. v. Aarotech

Labs., Inc., 160 F.3d 1373, 1377 (Fed. Cir. 1998). A court must inquire whether the

defendant has “purposefully directed his activities” at the forum state and, if so, whether

“the litigation results from alleged injuries that arise out of or relate to those activities.”

Burger King, 471 U.S. at 472. Then, to defeat jurisdiction, the burden of proof shifts to

the defendant, which must “present a compelling case that the presence of some other

considerations would render jurisdiction unreasonable.” Id. at 476-77.

1

Breckenridge argues that the district court erred by applying Federal Circuit law

rather than Eleventh Circuit law to the question of personal jurisdiction with respect to

the state law tort claims, and argues that this choice of law question is important.

Whereas the Federal Circuit provides that a patent owner may, without more, send

cease and desist letters to a suspected infringer, or its customers, without being

subjected to personal jurisdiction in the suspected infringer’s home state, see, e.g., Akro

Corp. v. Luker, 45 F.3d 1541, 1548-49 (Fed. Cir. 1995) (citing various district court

cases), the Eleventh Circuit does not appear to have a similar carve-out.3

3
The district court determined that it was unclear whether personal
jurisdiction would attach under the Eleventh Circuit Cronin factors, which govern the
“traditional notions of fair play and substantial justice” inquiry, but concluded that
because Federal Circuit precedent “clearly precludes personal jurisdiction”, it would be
“unfair” to exercise personal jurisdiction over Metabolite. Breckenridge, 348 F. Supp. 2d
at 1341 n.5 (citing Cronin v. Wash. Nat’l Ins. Co., 980 F.2d 663, 670 (11th Cir. 1993)).
Breckenridge argues that, given the inconclusive result under Cronin, the
“reasonableness” standard under Int’l Shoe Co. v. Washington, 326 U.S. 310, 317
(1945), requires the district court to exercise jurisdiction over Metabolite.

05-1221, -1428 6
 Here, the district court correctly applied Federal Circuit law governing personal

jurisdiction to all claims because the question of infringement is a critical factor in

determining liability under the non-patent claims. 3D Sys., 160 F.3d at 1377. See also

Silent Drive, 326 F.3d at 1201 (applying regional circuit law to non-patent claims where

analysis “with respect to non-patent counts is not intimately linked to patent law”); Elecs.

for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348 (Fed. Cir. 2003) (applying regional

circuit law where facts underlying non-patent claims were not “intimately involved with”

facts relating to declaratory action of non-infringement).

To establish a claim of tortious interference under Florida law, Breckenridge must

prove: (1) the existence of business relationships between Breckenridge and the letter

recipients; (2) defendants’ knowledge of those business relationships; (3) defendants’

intentional and unjustified interference with those business relationships; and (4)

damages because of defendants’ interference. Gossard v. Adia Servs., Inc., 723 So. 2d

182, 184 (Fla. 1998). A claim of unfair competition in Florida arises under the common

law and, while elusive of precise definition, requires a plaintiff to prove, at minimum,

competition and unfairness. Practice Mgmt. Assoc., Inc. v. Old Dominion Ins. Co., 601

So. 2d 587, 587-88 (Fla. App. Ct. 1992). As the district court correctly noted,

Metabolite’s letters would neither be unjustifiable nor unfair if the implication of

infringement contained therein is true. Accordingly, because the non-patent issues in

this case are “intimately linked to patent law”, Federal Circuit law regarding due process

must be applied to the question of personal jurisdiction over Metabolite with respect to

all claims.

05-1221, -1428 7
 2

The next question, then, is whether, under Federal Circuit law, the exercise of

personal jurisdiction over Metabolite satisfies the requirements of due process. This

court employs a three-prong test, in which we determine whether: (1) the defendant

purposefully directed its activities at residents of the forum, (2) the claim arises out of or

relates to those activities, and (3) assertion of personal jurisdiction is reasonable and

fair. Akro, 45 F.3d at 1545-46. With respect to the last prong, the burden of proof is on

the defendant, which must “present a compelling case that the presence of some other

considerations would render jurisdiction unreasonable” under the five-factor test

articulated by the Supreme Court in Burger King. Id. (quoting Burger King, 471 U.S. at

476-77).

The district court held that “quite clear” Federal Circuit precedent established

that, where a letter makes only a cursory attempt at soliciting business, “principles of fair

play and substantial justice defeat the reasonableness of jurisdiction” in a declaratory

action for non-infringement.4 Breckenridge, 348 F. Supp. 2d at 1341 (citing Silent Drive,

326 F.3d at 1202; Hildebrand v. Steck Mfg. Co., 279 F.3d 1351, 1356 (Fed. Cir. 2002);

Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1360 (Fed. Cir.

1998)). The district court found that because “[i]n this case, Metabolite has no other

contacts with Florida, other than its three Attorney Letters”, the court could not exercise

personal jurisdiction over Metabolite. Id.

4
The district court failed to discuss two Federal Circuit decisions which
involve fact patterns highly relevant to the present case, likely because counsel did not
cite those cases to the district court, just as they did not to us.

05-1221, -1428 8
 The district court correctly stated this court’s law that personal jurisdiction may

not be exercised constitutionally when the defendant’s contact with the forum state is

limited to cease and desist letters, “without more.” Red Wing Shoe, 148 F.3d at 1360.

However, the district court erred in concluding that Metabolite’s attorney letters

represented the extent of its contacts with Florida. In several prior decisions, we have

attempted to clarify what “other activities” permit a district court to exercise personal

jurisdiction over a out-of-state defendant in compliance with due process, but cases like

the present indicate that there is a need in the district courts for clearer guidance on this

issue.

In Silent Drive, plaintiff Silent Drive, an Iowa corporation, sought jurisdiction over

the defendant, a Texas corporation with its principal place of business in Texas, in Iowa

federal district court in a declaratory action for non-infringement. 326 F.3d at 1197. The

defendant sent two letters to Silent Drive informing it of an injunction obtained in Texas

and enclosed a copy of its patent for “academic purposes only”. Id. at 1198-99. There

was no license agreement at issue in Silent Drive. In addition to the cease and desist

letters, the defendant’s only contact with Iowa was that it had issued a news release

describing the injunction and patent and sent a copy of the news release to a potential

customer of Silent Drive in Iowa. Id. at 1199. We concluded that due process

requirements were not satisfied because the letters primarily were related to the

injunction, which was obtained for misappropriation of trade secrets and was unrelated

to the patent at issue.5 Id. at 1202.

5
We ultimately found personal jurisdiction proper in Silent Drive on other
grounds. See 326 F.3d at 1204-05.

05-1221, -1428 9
 In Hildebrand, the plaintiff, a Colorado resident, filed a patent infringement suit

against the defendants, all Ohio corporations, in Colorado federal district court. 279

F.3d at 1353. Because one week earlier, one of the defendants had filed an action for

declaratory judgment of non-infringement, invalidity, and tortious interference in Ohio

federal district court, the Colorado district court granted that defendant’s motion to

dismiss in Colorado and transfer the case to Ohio. Id. The Ohio district court

determined that it had personal jurisdiction over Hildebrand, and we reversed. Id. at

1354. There was no license agreement at issue in Hildebrand. Hildebrand’s contacts

with Ohio, in addition to the cease and desist letters, were that he had attempted to

negotiate license agreements with two of the Ohio-based defendants.6 Id. at 1353-54.

We held that the exercise of personal jurisdiction over Hildebrand would be

unconstitutional because “[a]ll of the contacts were for the purpose of warning against

infringement or negotiating license agreements, and he lacked a binding obligation in

the forum.”7 Id. at 1356.

In Red Wing Shoe, the plaintiff, a Minnesota corporation, sought jurisdiction over

defendant Louisiana corporation in Minnesota federal district court in an action for

declaratory judgment of non-infringement, invalidity, and unenforceability. 148 F.3d at

1357. The defendant sent Red Wing Shoe a series of letters alleging infringement and

6
One of the letters was accompanied by a set of tools, but we did not
consider that fact relevant to our personal jurisdiction inquiry because the defendant
had indicated clearly in the letter that the tools were a sample set, not for sale. 279
F.3d at 1353-54.
7
In addition, the portion of the opinion discussing the constitutionality of the
exercise of personal jurisdiction over Hildebrand may be dicta, as we had already
determined that Hildebrand could not be reached by the Ohio long-arm statute, which
does not grant jurisdiction to the limits of due process. See id. at 1354-56.

05-1221, -1428 10
offering a non-exclusive license. Id. In addition, the defendant had thirty-four non-

exclusive licensees, all of which sold products in Minnesota and six of which maintained

retail stores in Minnesota or possessed a Minnesota business registration. Id. at 1357-

58. The defendant received royalty income from its licensees for sales made in

Minnesota, but “exercise[d] no control over the sales activities of its licensees” and,

indeed “had no dealings with its licensees in [Minnesota]”. Id. at 1358, 1361-62. We

held that the mere receipt of royalty income from sales in the forum state was

insufficient to ground personal jurisdiction. Id. at 1358; World-Wide Volkswagen v.

Woodson, 444 U.S. 286, 299 (1980) (“[F]inancial benefits accruing to the defendant

from a collateral relation to the forum State will not support jurisdiction if they do not

stem from a constitutionally cognizable contact with that State.”). We explained that,

because the defendant had no relationship with its licensees beyond the receipt of

royalty income, the Minnesota activities of the defendant’s licensees were essentially

“unilateral” and could not be attributed to the defendant. Id. at 1360. We concluded

that the exercise of personal jurisdiction over the defendant in Red Wing Shoe “would

not comport with principles of fairness.” Id. at 1361.

In contrast, we found due process requirements to be satisfied in Akro. Over a

course of three years, the defendant, a California resident, sent cease and desist letters

to Akro in Ohio, the forum state, which indicated that the defendant had entered into an

exclusive license agreement with one of Akro’s competitors, also an Ohio corporation.

45 F.3d at 1542-43. The license agreement, in addition to specifying royalty payment

terms, granted the licensee the power to litigate infringement suits on the defendant’s

behalf and also required the defendant to “defend and pursue any infringements against

05-1221, -1428 11
his patent”. Id. at 1543. In explaining why personal jurisdiction was proper, we first

reasoned that, in determining the scope of the defendant’s contacts with the forum

state, “the plaintiff need not be the forum resident toward whom any, much less all, of

the defendant’s relevant activities were purposefully directed.” Id. at 1547 (citing Calder

v. Jones, 465 U.S. 783 (1984); Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984)).

Thus, we looked to the defendant’s relationship with its exclusive licensee to determine

the extent of the defendant’s forum state contacts. We found that, by virtue of the

license agreement terms regarding infringement litigation, the defendant in Akro had—

by the license agreement itself—created “continuing obligations” in the forum state. Id.

at 1546. Because the license agreement in Akro obligated the defendant beyond the

mere receipt of royalty income, we found Akro distinguishable from Red Wing Shoe.

Indeed, given those facts, we held that “it could scarcely be more clear that [the

defendant] purposefully directed activities at residents of Ohio within the meaning of the

due process inquiry.” Id.

In Genetic Implant Systems v. Core-Vent Corp., 123 F.3d 1455 (Fed. Cir. 1997),

we clarified the holding in Akro and explained that a defendant’s obligations under an

exclusive license agreement may subject it to personal jurisdiction in the forum state

even if the licensee is not incorporated or headquartered in the forum state, so long as

the exclusive licensee conducts business there. The defendant in Genetic Implant had

sold the patented product directly in the state of Washington until the issuance of its

patent, at which time it entered into an exclusive distribution and marketing agreement

with a Delaware corporation that continued to sell the patented product in Washington.

Id. at 1457. The defendant sent three letters to an accused infringer in Washington, and

05-1221, -1428 12
the accused infringer sought a declaratory judgment of non-infringement in Washington

federal district court. Id.

As in Akro, we concluded that personal jurisdiction over the defendant was

proper. Id. First, we stated that, although the defendant’s relationship was with an

exclusive distributor rather than an exclusive licensee, “[t]he appointment of a distributor

to sell a product covered by a patent is analogous to a grant of a patent license” in that

the agreement “surrender[s] the patentee’s right to exclude the distributor under the

patent.” Id. at 1458. Then, in analyzing the defendant’s contacts with Washington, we

emphasized as “most significant” the defendant’s arrangement with its distributor and

the distributor’s product sales in the state. Id. at 1457. We noted that, as in Akro, the

agreement between the patentee and distributor in Genetic Implant created a

relationship beyond the payment of royalties. Although the defendant retained the sole

right to pursue patent infringement claims, the defendant agreed to indemnify the

distributor for liability arising from any third party patent infringement action related to

the distributor’s sale, use, or making of the covered products, and authorized the

distributor to use its trademarks in marketing and distribution. Id. at 1459. In addition,

we noted that the defendant had itself conducted business in the forum state prior to

entering into the exclusive distributorship agreement, and had developed a valuable

customer base and generated goodwill through advertising and educational initiatives

that potentially enhanced the future sales of its exclusive distributor. Id. at 1458.

Finally, we acknowledged that the case differed from Akro in that the distributor

in Genetic Implant was not headquartered in the forum state. Id. at 1459. However, we

explained that the “distinction between in-state and out-of-state distributors is not

05-1221, -1428 13
tenable . . . [The distributor] is present in Washington in the sense that it promotes and

sells [the] patented products in the state; thus, it is transacting business ‘in-state’.” Id.

As such, we concluded that the exercise of personal jurisdiction over the defendant

comported with due process requirements.

In sum, our case law has held as follows: where a defendant has sent cease and

desist letters into a forum state that primarily involve a legal dispute unrelated to the

patent at issue, such as an injunction obtained for misappropriation of trade secrets, the

exercise of personal jurisdiction is improper. Silent Drive, 326 F.3d at 1202. Likewise,

a defendant may not be subjected to personal jurisdiction if its only additional activities

in the forum state involve unsuccessful attempts to license the patent there.

Hildebrand, 279 F.3d at 1356. The same is true where the defendant has successfully

licensed the patent in the forum state, even to multiple non-exclusive licensees, but

does not, for example, exercise control over the licensees’ sales activities and, instead,

has no dealings with those licensees beyond the receipt of royalty income. Red Wing

Shoe, 148 F.3d at 1357-58.

In contrast, the defendant is subject to personal jurisdiction in the forum state by

virtue of its relationship with its exclusive forum state licensee if the license agreement,

for example, requires the defendant-licensor, and grants the licensee the right, to litigate

infringement claims. Akro, 45 F.3d at 1546. Finally, the defendant will also be subject

to personal jurisdiction in the forum state if the exclusive licensee (or licensee

equivalent) with which it has established a relationship is not headquartered in the

forum state, but nonetheless conducts business there. Genetic Implant, 123 F.3d at

1457-59.

05-1221, -1428 14
 Thus, the crux of the due process inquiry should focus first on whether the

defendant has had contact with parties in the forum state beyond the sending of cease

and desist letters or mere attempts to license the patent at issue there. Where a

defendant-licensor has a relationship with an exclusive licensee headquartered or doing

business in the forum state, the inquiry requires close examination of the license

agreement. In particular, our case law requires that the license agreement contemplate

a relationship beyond royalty or cross-licensing payment, such as granting both parties

the right to litigate infringement cases or granting the licensor the right to exercise

control over the licensee’s sales or marketing activities.

Here, in addition to sending letters into the forum state, which we presume

qualify as “cease and desist” letters,8 Metabolite has entered into an exclusive license

with PamLab, a company that, while not headquartered or incorporated in Florida,

conducts business in Florida. As part of the license agreement, Metabolite granted

PamLab the right to sue for patent infringement with Metabolite’s written consent, and

the parties agreed to “discuss in good faith the appropriate action, if any, with respect to

third party infringers of the Licensed Patents, and to cooperate reasonably in any

enforcement actions”. Metabolite granted PamLab “full control of the prosecution or

maintenance” of any patent or application that Metabolite abandons or permits to lapse

8
The district court referred to the letters as “cease and desist letters” and
categorized the letters as containing an “implication of infringement” despite the fact that
the letters did not expressly accuse Breckenridge or the recipient drug store chains of
patent infringement. As a practical matter, patentees and patent counsel today often
write such accusatory letters artfully, and the type of implicit accusation of infringement
contained in the Metabolite attorney letters has become the norm for what we
traditionally refer to as “cease and desist” letters. In any event, Metabolite concedes
that, if its attorney letters qualify as tortious, it is because they are “effectively ‘cease
and desist’ letters.”

05-1221, -1428 15
and agreed to provide PamLab with an executed power of attorney for that purpose.

Metabolite further agreed to “provide consultation to PamLab in the science, medicine

and marketing of vitamins and related products, from time to time”.

That this exclusive license agreement not only contemplated an ongoing

relationship between PamLab and Metabolite beyond royalty payments but has actually

resulted in such a relationship is obvious from the facts of this case. Metabolite

coordinates with PamLab in sending cease and desist letters and in litigating

infringement claims in Florida and elsewhere and, as is the case here, licensor and

licensee are often represented jointly by counsel. As such, we hold that, through its

relationship with PamLab, which sells products in Florida, Metabolite has purposefully

availed itself to the privilege of conducting activities within Florida.

3

Finally, we turn to the third prong of the Akro test: whether Metabolite has

provided a “compelling case” that the exercise of jurisdiction over it would offend

principles of fair play and substantial justice. See Akro, 45 F.3d at 1545-46. The

Supreme Court has provided a list of five factors to consider in determining the fairness

of asserting personal jurisdiction over a defendant, consisting of: “the burden on the

defendant,” “the forum State's interest in adjudicating the dispute,” “the plaintiff's interest

in obtaining convenient and effective relief,” “the interstate judicial system's interest in

obtaining the most efficient resolution of controversies,” and the “shared interest of the

several States in furthering fundamental substantive social policies.” Burger King, 471

U.S. at 477.

05-1221, -1428 16
 The only argument made by Metabolite regarding the first factor, raised below

and reargued here, is its assertion that as a “small company” that “does not have a

sales force”, defending this suit in Florida would place it under a “significant” burden. It

states that litigation in Florida would disrupt the “active research laboratory and other

personal and professional commitments” of Dr. Allen in Colorado. This argument is

unconvincing, as litigation in Florida will not prevent Dr. Allen himself from remaining in

Colorado, at least for the vast majority of the time. We also view Metabolite’s general

assertion of hardship, without supporting evidence, as unpersuasive.

Second, Florida has an interest in adjudicating this dispute greater than the

“partial[ ]” interest recognized by the district court. Although, as the district court noted,

“the principal dispute between the parties is one of federal patent law”, that does not

diminish Florida’s interest in protecting its companies and residents. Here, resolution of

the dispute will affect not only Florida-based Breckenridge and the Florida branches of

the retailers that received the letters, which Florida has an interest in protecting from

unfair competition and tortious interference, but also Florida residents, who have an

interest in legally obtaining a generic equivalent to FOLTX.

Third, the district court correctly recognized that plaintiff Breckenridge, a

company incorporated in Florida with its principal operations in Florida, has an interest

in obtaining “convenient and effective” relief from a nearby federal court. Id. The district

court minimized this factor, however, by stating that “Plaintiff could have brought this

suit in federal court in Colorado, and thus a dismissal on personal jurisdiction grounds

does not prejudice the ability of the Plaintiff to obtain full and effective relief.” Id. We do

not agree that the option to sue in Colorado supports the district court’s conclusion.

05-1221, -1428 17
This inquiry requires the court to focus on the convenience and effectiveness of relief

from the plaintiff’s perspective, as generally the first party to file suit chooses the forum,9

and it is clearly more convenient for a Florida corporation with its base of operations in

Florida to obtain relief in Florida.

The district court found that the fourth factor, “the interstate judicial system's

interest in obtaining the most efficient resolution of controversies,” “tips slightly” toward

Metabolite, as it surmised that the District of Colorado has “presumably a much smaller

case load” than does the Southern District of Florida. Metabolite argues on appeal that,

in fact, the fourth factors tips heavily in favor of Metabolite because “the main witnesses

and evidence will be in Colorado”, and “the Colorado courts are familiar with

Metabolite’s patents”. As the Supreme Court stated in Burger King, however,

considerations regarding witnesses and evidence “most frequently can be

accommodated through a change of venue” and are unlikely to “become so substantial

as to achieve constitutional magnitude.” 471 U.S. at 483 (emphasis in original).

The district court concluded that the fifth factor, the “shared interest of the several

States in furthering fundamental substantive social policies”, plays “little role in this

patent dispute”, and Metabolite does not argue otherwise on appeal.

In sum, the first three factors favor Breckenridge, and the final factor is minimally

relevant. Even assuming that the fourth factor favors Metabolite, Metabolite has not

met its burden of showing a “compelling case” that the exercise of personal jurisdiction

would be unfair under Burger King. As such, we hold that the Southern District of

9
Here, Metabolite and PamLab were technically the first to file suit in this
matter, and did so in Colorado, but dismissed voluntarily after the district court denied
their request for a TRO.

05-1221, -1428 18
Florida may exercise personal jurisdiction over defendant Metabolite in accordance with

due process.10

III

Finally, we turn to the district court’s grant of summary judgment to PamLab.

The district court based its grant of summary judgment as to the declaratory action of

non-infringement on the absence of patent owner Metabolite, which it concluded was a

necessary party under Federal Rule of Civil Procedure 19. PamLab, slip. op. at 7-10.

Because we hold that the district court has personal jurisdiction over Metabolite, we

vacate the court’s grant of summary judgment as to the declaratory action.

With respect to the state law claims, the district court held that summary

judgment was proper because Breckenridge failed to raise a genuine issue of material

fact as to whether the content of the letters was “objectively baseless”, as is required to

avoid preemption by the federal patent laws. Id., slip. op. at 10 (quoting Globetrotter,

362 F.3d at 1377). The trial court explained that the letters were not sent on behalf of

PamLab, do not allege infringement, and do not mention Breckenridge by name. Id.

The court characterized the letters as “exactly the type of innocuous patent publication

communications that the Federal Circuit has decided are immune from state tort law.”

Id.

10
Metabolite argued in its Motion to Dismiss before the district court that
dismissal was warranted because under “[t]he fact pattern present here”, the United
States District Court for the District of Minnesota dismissed Metabolite for lack of
personal jurisdiction. See Upsher-Smith Labs., Inc. v. Pan Am. Labs., Inc., No. 01-352
ADM/AJB (D. Minn. Sept. 4, 2002). That matter is not before us. Thus, we do not
express an opinion as to the propriety of that dismissal. We hold only that, on the facts
before the Florida district court, the exercise of personal jurisdiction over Metabolite is
proper.

05-1221, -1428 19
 Breckenridge asserts that the district court erred in reaching this conclusion. In

particular, Breckenridge argues that a material fact dispute exists as to whether

Metabolite’s statement in the letters that it has exclusively licensed “certain

formulations” of the vitamin to PamLab misrepresents the patents at issue, which

contain only method claims involving oral administration of the vitamin formulations. We

agree. Because the question of whether any statements in the letters were “objectively

baseless” is genuinely disputed and integrally related to the question of infringement,

we vacate the grant of summary judgment to PamLab as to the state law claims as well.

IV

As the district court correctly concluded, the Florida long-arm statute permits the

exercise of jurisdiction over Metabolite. In its due process analysis, the district court

correctly applied Federal Circuit law governing personal jurisdiction to non-patent claims

that we agree are intimately linked to the patent law. Because Metabolite has

established a relationship with PamLab, its exclusive licensee, which promotes,

advertises and sells FOLTX in Florida, and with which Metabolite coordinates cease

and desist letters and infringement litigation, Metabolite has purposefully availed itself of

the benefits and protections of Florida law. Because Metabolite has not presented a

compelling case that the exercise of personal jurisdiction would be unreasonable or

unfair, the Florida federal district court may exercise personal jurisdiction over

Metabolite in accordance with due process. As such, the district court’s dismissal of

Metabolite for lack of personal jurisdiction was erroneous and is reversed.

Because the district court granted summary judgment to PamLab on the

declaratory judgment action based on its erroneous determination that it lacked

05-1221, -1428 20
personal jurisdiction over Metabolite, and because a material fact dispute exists in the

state law claims regarding whether any statements in the Metabolite letters were

“objectively baseless”, the grant of summary judgment in favor of PamLab is vacated.

The case is remanded for further proceedings.

REVERSED, VACATED and REMANDED

05-1221, -1428 21