Personal Jurisdiction Proper Over East Texas Company in the Northern District of Texas Based on Company’s Letters Alleging Infringement; Two Judges Suggest Red Wing Shoe and Its Progeny May Be Contrary to Supreme Court Precedent

Jack Henry & Associates Inc., v. Plano Encryption Technologies, No. 2016-2700 (Fed. Cir. Dec. 7, 2018)

A patentee sent letters to banks operating in the Northern District of Texas alleging that those banks were infringing patents and needed a license to continue operating their mobile apps and online banking features. The patentee was a Texas corporation with a principal place of business in Plano, Texas (in the Eastern District of Texas). At least some of the letters touted the successful enforcement of patents in the Eastern District of Texas for other clients. 

The banks and the banks’ indemnitor filed a declaratory judgment action in the Northern District of Texas. The district court dismissed the suit based on its conclusion that the Federal Circuit had held that sending letters into a forum is insufficient to trigger personal jurisdiction in a declaratory judgment action. The banks and their vendor appealed the dismissal.

The Federal Circuit reversed. The letters were sent in furtherance of the patentee’s only business--patent licensing. The letters laid out broad allegations of infringement against banks in the Northern District of Texas; the district, therefore, had an interest in resolving the dispute. The court also rejected the notion that its prior decisions in Red Wing Shoe and Avocent established a rule that sending patent enforcement letters cannot give rise to personal jurisdiction in a declaratory judgment action in the forum into which such letters are sent. Considering the various factors for determining whether minimum contacts existed, the Federal Circuit held that in this case, the patentee needed to face suit in the Northern District of Texas.

In a somewhat unusual move, Judge Stoll, joined by Judge Wallach, provided additional views. Those additional views note that cases interpreting Red Wing Shoe have created special rules for patent enforcement letters which may be directly contrary to Supreme Court precedent. In light of this seeming contradiction in the law, the judges suggested that the court may want to reconsider Red Wing and its progeny.