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Attending Trade Shows Leads to Personal Jurisdiction

Patent Rights Protection Group, LLC ("PRPG"), a patent-holding company, previously filed suits in the District of Nevada accusing various organizations of allegedly infringing U.S. Patents No. 6,475,087 (?the ?087 patent) and No. 6,860,814 (the ?814 patent). The related patents disclose video gaming machines with a video display mounted to a door. Claim 1 of the ?087 patent is provided below.

1. A gaming apparatus comprising
a cabinet, a door moveable between a first position and a second position, said door in said first position cooperating with said cabinet to define a generally closed interior space, said door in said second position permitting access to said interior space, said door having an opening therein;
at least one support mounted to said cabinet for configuring said gaming apparatus as a reel-type game when said support supports a reel mechanism in said open space, at least one mount for mounting a display element to said door for viewing through said opening, said display element comprising either reel-screening glass or a video display, said opening aligned with a reel mechanism when said reel mechanism is mounted to said at least one support and said reel-screening glass is mounted to said door, whereby reels of said reel mechanism are viewable through said reel-screening glass when said door is in said closed position, and
whereby said gaming apparatus is configured as a video type game when a video display is mounted to said door said video display is viewable through said opening.

PRPG accused the various organizations, including out-of-state companies SPEC and ("SPEC") and Video Gaming Technologies, Inc.'s ("VGT?), of infringing the patents by ?displaying, using, and offering for sale cabinets that house gaming machines at trade shows in Nevada.? SPEC and VGT each separately filed motions to dismiss PRPG?s relevant suits in Nevada, arguing that their contacts with Nevada were insufficient for the court to exercise personal jurisdiction. Specifically, SPEC and VGT each argued that they:

were not registered to do business in Nevada;
did not manufacture any products in Nevada;
their websites were not specifically targeted to Nevada residents;
did not have sales agents, employees, manufacturing facilities, bank accounts, or telephone listings in Nevada.

VGT further asserted that it did not directly market or derive revenue from Nevada. Similarly, SPEC acknowledged mailing brochures to eight potential customers within Nevada, but only generated de minimis sales in the state. Dismissal was also sought on the grounds of improper venue and issue preclusion.

Applying 9th Circuit law, the court held that Nevada did not have personal jurisdiction over SPEC and VGT. The court also denied jurisdictional discovery, however, did not specifically address improper venue or issue preclusion, as dismissal of the suits rendered those issues moot.

PRPG appealed the dismissal of the suits and denial of jurisdictional venue to the Federal Circuit. Citing Supreme Court precedent, the Federal Circuit noted that the determination of whether personal jurisdiction may be exercised ?remains whether the defendant purposefully established minimum contacts? in the relevant state and whether ?personal jurisdiction would comport with 'fair play and substantial justice.? i.e., whether exercising jurisdiction would be reasonable.? The court found that each SPEC and VGT had minimal contacts, specifically each attended trade shows in Nevada through the 1990s, 2000s, and even as recently as 2008. The court then focused on whether exercising personal jurisdictions over SPEC and VGT would be reasonable. In answering in the affirmative, the Federal Circuit held that SPEC?s and VGT?s ?admitted presence at numerous trade shows in Nevada indicates that, despite their arguments to the contrary, neither company faces a particularly onerous burden in defending itself in Nevada.?

The court further addressed arguments relating to the economic hardship (or lack thereof) upon PRPG if forced to litigate the suits outside of Nevada. ?Nevada has an interest in providing a convenient forum for all Nevada citizens, not just those who might face severe economic hardship if forced to litigate outside Nevada.? The decision continued to note that ?[b]y providing a forum for [PRPG?s] claims against SPEC and VGT, Nevada spares [other states] the burden of providing a forum for [PRPG].? The decision also found that the district court abused its discretion when denying PRPG?s request for jurisdictional discovery. The case, therefore, was remanded back to the District of Nevada. Its case number is: 2:08-CV-00662 (D. NV).

Full post as published by Patent Arcade on May 24, 2010 (boomark / email).