IP Law Daily, PATENT—Fed. Cir.: Manufacturer could not foresee sale of batteries in North Carolina, (Jul 6, 2015)

By Jody Coultas, J.D.

SK Innovation Co., Ltd. (SKI) was not subject to jurisdiction in North Carolina based on either a purposeful availment or stream-of-commerce theory, according to the U.S. Court of Appeals for the Federal Circuit (Celgard, LLC v. SK Innovation Co., Ltd., July 6, 2015, Reyna, J.).

Celgard, LLC manufactures battery membranes that separate chemical cell components in lithium-ion batteries, preventing contact between the positive and negative electrodes. Celgard developed a separator technology that uses a ceramic composite coating that helps prevent electrical shorting covered by United States Patent No. 6,432,586 (the ’586 patent”). SKI manufactures separators for use in lithium-ion batteries and batteries that include the separators it produces.

The Western District of North Carolina dismissed Celgard’s allegations that SKI infringed the ’586 patent based on a lack of personal jurisdiction over SKI. Specifically, the court found “little, if any contacts between SKI and North Carolina.” There was no evidence that SKI made any sales or offers to sell in North Carolina.

Whether a defendant is subject to specific personal jurisdiction in the forum state involves two inquiries: first, whether the forum state’s long-arm statute permits service of process and, second, whether the assertion of jurisdiction is consistent with due process. Due process requires that the defendant have sufficient minimum contacts with the forum state.

Evidence standard. The court found that that the district court applied the proper prima facie standard. The parties disputed whether Celgard must prove the existence of personal jurisdiction under a prima facie standard or a preponderance of the evidence standard. The preponderance standard applies where the parties conduct jurisdictional discovery but no jurisdictional hearing was necessary because the parties indicated to the district court that the jurisdictional facts were not in dispute. In this case, the parties did not agree that the jurisdictional facts were not in dispute. Therefore, Celgard must make a prima facie showing of jurisdiction.

Purposeful availment. Celgard failed to allege facts that allow it to meet its burden under a purposeful-availment theory of jurisdiction, according to the court. Celgard argued SKI purposefully directed its activities to North Carolina residents through a joint venture to develop batteries for the 2015 Kia Soul EV. However, there was no evidence that SKI purposefully directed its activities, related to the Kia Soul EV or otherwise, toward North Carolina. Celgard also failed to establish that the dealers advertising the Kia Soul EV in North Carolina were operating either as SKI’s agents or alter egos. The joint venture agreement was between SKI and the parent company of Kia Motors of America, a company based in Korea. There was no evidence that Kia Motors of America or the two Kia dealers were aware of the joint venture agreement, or that the advertisements were in any way related to the joint venture. Jurisdiction over a defendant cannot be based on the basis of unilateral acts of third-parties.

Stream-of-commerce theory. The district court correctly declined to exercise jurisdiction under a stream-of-commerce theory, according to the court. Celgard alleged that jurisdiction was proper based on SKI’s participation with consumer electronics manufacturers to use their established distribution channels to avail SKI of the North Carolina market. The precise requirements of the stream-of-commerce theory of jurisdiction remain unsettled. The Supreme Court has not decided whether stream-of-commerce jurisdiction requires merely placing goods into the stream of commerce with the expectation that they would be purchased in the forum state, or if “something more” is required, i.e., the purposeful direction of activities toward the forum. Under either formulation of the stream-of-commerce theory, Celgard was unable to show that jurisdiction over SKI was proper. SKI was not aware that its accused separators were marketed in North Carolina. Celgard was unable to show that SKI’s separators were in North Carolina, or that SKI could foresee that its separators would make their way there.

The case is No. 2014-1807.

Attorneys: Martin Richard Lueck (Robins, Kaplan, Miller & Ciresi, LLP) for Celgard, LLC. J. Michael Jakes (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP) for SK Innovation Co., Ltd.

Companies: Celgard, LLC; SK Innovation Co., Ltd.; KMC; Kia Motors of America

Cases: Patent FedCirNews