IP Law Daily, TRADE SECRETS—N.D. Ohio: Canadian manufacturer was not subject to personal jurisdiction based on its work for an American company, (Sep 19, 2022)

By Kevin M. Finson, J.D.

Personal jurisdiction did not exist over a Canadian manufacturer that merely sold design and manufacturing services to a party that allegedly had misappropriated the trade secrets of an Ohio company.

A designer of dust collectors did not establish personal jurisdiction in Ohio over a Canadian competitor for misappropriation of the plaintiff’s trade secrets, the federal district court in Cleveland has held. The foreign company, which allegedly had received trade secrets from the plaintiff’s former business partner, essentially had no contacts with the forum state and did not direct any activity toward the state. The Canadian company merely sold design and manufacturing services to the former business partner (Aerodyne Environmental, Inc. v. Keirton, Inc., September 15, 2022, Calabrese, J.).

Aerodyne Environmental, Inc. (Aerodyne) was in the business of designing and manufacturing cyclone dust collectors. Aerodyne collaborated with Keirton, Inc. (Keirton) to design a dust collector that Keirton could integrate into its cannabis and hemp trimmer products. Aerodyne and Keirton executed several non-disclosure agreements over the course of this relationship, and Aerodyne shared confidential designs with Keirton. Keirton eventually became dissatisfied with Aerodyne’s unwillingness to make certain changes to the design. It contracted with SIDMAC Engineering and Manufacturing, Inc. (SIDMAC), a Canadian corporation, to manufacture modified cyclones reverse-engineered from one of Aerodyne’s samples, which Keirton provided to SIDMAC. After filing suit against Keirton for breach of contract and learning of the relationship with SIDMAC in discovery, Aerodyne amended its complaint to add a claim against SIDMAC for misappropriation of trade secrets and related claims. SIDMAC moved to dismiss for lack of personal jurisdiction.

Ohio long-arm statute. Under the Ohio long-arm statute as it existed at the time of the actions in question, jurisdiction extended to out of state parties that “purposely” caused harm and had reason to “reasonably expect” that such harm would occur in Ohio. This provision had since been amended to expand jurisdiction to the limits of the Constitution, but the court applied the earlier version because there was no indication the statute was intended to apply retroactively.

The court found that the record did not show any intention on the part of SIDMAC to cause harm, only to gain Keirton’s business. Aerodyne argued that Keirton’s lack of knowledge about the prototype provided to SIDMAC and the name and address affixed to each prototype put SIDMAC on notice that the design belonged to someone other than Keirton, but the court held that a failure to inquire under those circumstances did not rise to the level of intentionally causing harm. Even after Aerodyne sent a cease-and-desist letter, the knowledge that there was an ongoing dispute about the ownership of the design did not show intent to harm on the part of SIDMAC. The court held that this was sufficient ground to grant the motion to dismiss.

Due Process. The court addressed the due process considerations out of an abundance of caution and in case its decision to apply the earlier version of the Ohio long-arm statute was overturned. SIDMAC’s sole contact with Ohio (except for a single sale of an unrelated product to an Ohio resident where the transaction occurred in Canada, which the court disregarded) was the harm allegedly caused to Aerodyne in this case. The court found that this was extremely attenuated. There was no direction of activity by SIDMAC at the forum state, but it was rather Keirton’s decision to do business with Aerodyne that caused any connection with Ohio at all. In addition, the interest of fair play and substantial justice weighed in favor of not haling a foreign defendant into federal court in a place where that defendant had never done business. The court held that this was a separate and sufficient ground to grant the motion to dismiss.

The case is No. 1:22-cv-00118-JPC.

Attorneys: Eleina K. Thomas (Gertsburg Licata) for Aerodyne Environmental, Inc. Cassandra Spector (Buchalter Law Firm) for Keirton, Inc., Keirton, USA Inc. and SidMac Engineering & Manufacturing, Inc.

Companies: Aerodyne Environmental, Inc.; Keirton, Inc.; Keirton, USA Inc.; SidMac Engineering & Manufacturing, Inc.

Cases: TradeSecrets OhioNews