Court Rules Brazilian Company Exhibiting Allegedly Infringing Products for Sale Abroad Can Be Sued in the United States

21 April 2009 Publication

Legal News Alert: IP Litigation

On April 17, 2009, the U.S. Court of Appeals for the Federal Circuit (Court) explored the limits of when a foreign company can be forced to come to the United States to defend itself against patent infringement allegations. In Synthes (U.S.A.) v. G.M. dos Reis Jr. Ind. Com. De Equip. Medico, No. 2008-1279 (Fed. Cir. April 17, 2009) (Synthes), the Court held that a Brazilian company that exhibited allegedly infringing products at a trade show that were not available for sale in the United States could be sued for infringement here, even though its other contacts with the United States were minimal.

Applying the Federal Rules’ notion of due process, the Court held that the exercise of jurisdiction over the foreign company was “reasonable and fair” given the company’s attendance at prior trade shows and the Court’s interest in protecting against patent infringement. This ruling has implications for companies that are trying to test their products’ market potential in the United States at a point in time when full-blown sales and marketing efforts may not have begun. Unless these efforts are carefully structured, they may subject the foreign company to a preemptive suit in the United States.

The Synthes case concerned GMReis, a Brazilian corporation that manufactures orthopedic and other medical devices. GMReis sells its products in Brazil, South America, Europe, and Asia. It does not have any offices, employees, or assets in the United States. Because its products are not approved by the U.S. Food and Drug Administration (FDA), GMReis does not sell its products for use in treating humans in the United States. It has, however, completed a single sale to a veterinary supply company in Massachusetts.

In 2007, GMReis purchased a booth at the Annual Meeting of the American Association of Orthopaedic Surgeons in San Diego, California. The booth was staffed by GMReis’s chief executive officer and an employee, who displayed a variety of products, including samples of five different metal “bone plates,” which are used to repair fractured bones. Because GMReis’s bone plates are not FDA-approved, the signs and product literature at the booth stated that the GMReis products were not for sale in the United States.

Synthes, a Pennsylvania-based company, sued GMReis in federal court in San Diego, claiming that GMReis’s bone plates infringed one of Synthes’ patents, and served the complaint at the trade show. GMReis moved to dismiss the suit, arguing that it was not subject to personal jurisdiction in the U.S. federal court system. It contended that it was not subject to general jurisdiction in California because it did not have “continuous and systematic” contacts with the state and that it was not subject to specific jurisdiction because it had not performed any act that would constitute patent infringement.

The district court granted GMReis’s motion, finding that GMReis was not subject to U.S. court jurisdiction because it had specifically discouraged U.S. residents from purchasing its non-FDA-approved products.

On appeal, the Court reversed, finding that the U.S. federal court’s exercise of jurisdiction over GMReis was consistent with due process. In reaching this determination, the Court applied Federal Rule of Civil Procedure 4(k)(2). This rule provides that, in cases arising under federal law, an exercise of jurisdiction is proper if the defendant is not subject to jurisdiction under in the courts of any state and the exercise of jurisdiction is consistent with due process.

In this case, the only issue was whether exercising jurisdiction over GMReis was consistent with due process. The Court uses three-pronged test: (1) Has the defendant purposefully directed its activities at the residents of the forum? (2) Does the claim arise out of or relate to those activities? (3) Is the assertion of jurisdiction reasonable and fair?

In answering each of these questions in the affirmative, the Court determined that the act of bringing the accused bone plates to the trade show from Brazil for the purpose of exhibiting them there was sufficient to satisfy the first two prongs of the test. The Court noted that the complaint alleged that GMReis had infringed Synthes’ patent by importing infringing products. Thus, the fact that GMReis did not try to sell the bone plates to U.S. residents was not enough to escape federal jurisdiction.

The Court determined that forcing GMReis to defend itself in San Diego was reasonable and fair. GMReis had attended at least seven trade shows in the United States in the preceding four years, which suggested that travel from Brazil to the United States was not unduly burdensome. Furthermore, the U.S. court system has a “substantial interest” in enforcing federal patent laws and discouraging patent infringement. The Court did note that the United States has an interest in encouraging trade show attendance and discussion of products, even products that might infringe a U.S. patent if sold here. If, however, a party actually brings an allegedly infringing product into the United States, the Due Process Clause of the Fifth Amendment does not stand in the way of a district court’s exercise of jurisdiction over the party.

Because the appeal only presented jurisdictional issues, the Court expressly declined to address GMReis’s argument that bringing samples to a trade show was not an infringing importation of the accused products. That issue remains to be addressed on remand. If Synthes prevails on that issue, the monetary damages likely would be minimal, but GMReis could be subject to an injunction limiting its marketing activities in the United States, even if they are not directed to U.S. residents.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues.

If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following:

George C. Best
Palo Alto, California