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Seven Networks, LLC v. ZTE (USA), Inc.

United States District Court, N.D. Texas, Dallas Division

May 30, 2018

SEVEN NETWORKS, LLC, Plaintiff,
v.
ZTE (USA), INC. and ZTE CORPORATION, Defendants.

          MEMORANDUM OPINION AND ORDER

          BARBARA M. G. LYNN CHIEF JUDGE.

         Before the Court is Defendant ZTE Corp.'s Motion to Dismiss for Lack of Personal Jurisdiction. (ECF No. 30). For the reasons stated below, the Motion is DENIED.

         I. Factual and Procedural Background

         On June 6, 2017, Plaintiff filed a complaint alleging infringement of seven patents.[1](Compl., ECF No. 30). Plaintiff alleges that certain ZTE devices utilize patented software technologies for conserving battery usage and extending battery life. (Id. ¶¶ 11-18).

         Defendant ZTE Corp. is a Chinese corporation with its principal place of business in Shenzhen, China. (Compl. ¶ 3). Defendant ZTE (USA), Inc. is a wholly owned subsidiary of ZTE Corp. incorporated in New Jersey with its principal place of business in Richardson, TX. (Id. ¶ 2).

         ZTE Corp. is the fourth largest supplier of mobile devices in the United States, and ZTE (USA), Inc. is its exclusive distributor in the United States. (Resp. at 6, ECF. No. 40). ZTE devices are designed and manufactured by ZTE Corp. in Shenzhen, China. (Id. at 6). Title is transferred to ZTE (USA), Inc. in Hong Kong. (Id. at 10). Devices are then imported for sale in the United States, including in the Northern District of Texas. (Id.)

         On October 3, 2017, ZTE Corp. filed a Motion to Dismiss for Lack of Personal Jurisdiction. (ECF No. 30). On November 2, 2017, Plaintiff responded that personal jurisdiction over ZTE Corp. is proper under the stream of commerce theory. (ECF No. 40). On November 16, 2017, Defendant replied, challenging Plaintiff's formulation of the stream of commerce theory and reasserting that jurisdiction over it in this Court violates due process. (ECF No. 44). On January 16, 2018, the Court granted Plaintiff leave to file a surreply. (ECF No. 47).

         II. Legal Standard

         Federal Circuit law governs the law of personal jurisdiction in patent-related cases. Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d 1324, 1328 (Fed. Cir. 2008). When a defendant challenges personal jurisdiction, the plaintiff bears the burden of proof on the issue. Celgard, LLC v. SK Innovation Co., 792 F.3d 1373, 1378 (Fed. Cir. 2015). When a district court's determination of personal jurisdiction is based on affidavits and other written materials, and no jurisdictional hearing is conducted, the plaintiff need only establish a prima facie case for personal jurisdiction. Id. Under this standard, the court must accept the uncontroverted allegations in the plaintiff's complaint as true, and all factual disputes must be resolved in favor of the plaintiff. Id.

         Determining whether personal jurisdiction over an out-of-state defendant is proper is a two-part inquiry. Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003). First, a court must analyze and apply the long-arm statute of the state in which it sits. Id. Second, the court must determine whether exercising jurisdiction over the defendant in the forum comports with the Due Process Clause of the United States Constitution. Id. Because the Texas long-arm statute and the federal Constitution are co-extensive, the analysis in this case is reduced to a single inquiry: whether exercising jurisdiction over the nonresident defendant is consistent with the Due Process Clause. Stroman Realty, Inc. v. Antt, 528 F.3d 382, 385 (5th Cir. 2008).

         The due process issue requires a two-step inquiry. First, a defendant must have sufficient “minimum contacts” with the forum. International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Second, the requirement that a defendant litigate in the forum must not offend “traditional notions of fair play and substantial justice.” Id. The plaintiff bears the burden of establishing minimum contacts, and upon that showing, the burden shifts to the defendant to prove that the exercise of jurisdiction would offend traditional notions of fair play and substantial justice. Id.

         a. Minimum Contacts

         In World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), the Supreme Court first recognized the stream of commerce theory of specific jurisdiction as a proper basis for establishing minimum contacts. The Court held that a “forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.” Id. at 297-298.

         The exact requirements of the stream of commerce theory are unclear. In Asahi Metal Industry Co. v. Superior Court, the plurality opinion, authored by Justice O'Connor, declared that personal jurisdiction under the stream of commerce theory requires that the defendant purposefully avail itself of the privilege of conducting activities within the forum. 480 U.S. 102, 112 (1987). Justice O'Connor stated that, “[t]he ‘substantial connection' between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State.” Id. (emphasis in original). In contrast, Justice Brennan and three other Justices who concurred in the result concluded that a defendant who places goods in the stream of commerce ...


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