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LLC v. Oxygen Frog, LLC

United States District Court, D. Nebraska

May 20, 2016

HVLPO2, LLC, Plaintiff,
v.
OXYGEN FROG, LLC, et al., Defendants.

          MEMORANDUM AND ORDER

          John M. Gerrard United States District Judge.

         This matter is before the Court on defendants Oxygen Frog, LLC, Stillwater Glass, LLC, and Scott D. Fleischman's motion to dismiss for lack of personal jurisdiction (filing 18). For the reasons explained below, the Court will grant the motion and dismiss this case.

         BACKGROUND

         The plaintiff's allegations are, briefly summarized, as follows. The plaintiff HVLPO2, LLC is a Nebraska limited liability company with its principal place of business in Nebraska. Filing 1 at 1. It alleges that it is the assignee of two patents that "cover methods for managing an oxygen generating system." Filing 1 at 4. Oxygen Frog is a Florida limited liability company. Filing 1 at 1. Fleischman is a Florida resident and is an owner, officer, agent, or employee of Oxygen Frog. Filing 1 at 2. Stillwater Glass is a now-inactive Florida limited liability company, of which Fleischman was also an owner, officer, agent, or employee. Filing 1 at 2. The plaintiff alleges that all three defendants have directly and indirectly infringed its patents. Filing 1 at 4. Additionally, the plaintiff alleges that the defendants have made false statements about the plaintiff amounting to defamation, commercial disparagement, and deceptive trade practices. Filing 1 at 5, 71-80.

         The plaintiff alleges specific facts that, it contends, support asserting personal jurisdiction over the defendants in this case. See filing 23 at 11-17. It has submitted affidavits in support of these allegations. See filing 25. To begin with, the plaintiff alleges that Oxygen Frog has engaged a national distributor, ABR Imagery, Inc. or ABR Images, Inc., to sell allegedly infringing products to customers across the nation on its website. Filing 23 at 14; filing 25-1 ¶ 82. In addition, the plaintiff alleges that Oxygen Frog has a website, which contains information about "Oxygen Frog's products, price details, contact information, and information on how to order infringing products from Oxygen Frog." Filing 23 at 14; see filing 25-1 ¶¶ 68-74.

         Next, the plaintiff alleges that the defendants have taken various actions on Facebook. Filing 23 at 14. First, the plaintiff alleges that Fleischman has a personal Facebook profile. See, filing 23 at 12-13; filing 25-1 ¶¶ 44, 57. A Facebook user with a personal profile may "friend" other users with personal profiles. See, filing 23 at 12; filing 25-1 ¶ 31. A user can make posts on his own profile, can view posts that his Facebook-friends have made on their profiles, can make posts on the profiles of his friends, can comment on posts friends have made, and can exchange messages with friends. See, filing 23 at 12; filing 25-1 ¶ 36. The plaintiff alleges that Fleischman-at times using the screen name "Scott Fleischman (Oxygen Frog)"-attempted to friend four Nebraska residents on Facebook. See, filing 23 at 12-13; filing 25-1 ¶¶ 59-63. Three of those individuals became Facebook friends with Fleischman. See, filing 23 at 12-13; filing 25-1 ¶ 59; filing 25-2 at 2; filing 25-3, filing 25-4. The plaintiff alleges that Fleischman made posts on his profile advertising Oxygen Frog's allegedly infringing products. See, filing 23 at 13; filing 25-1 ¶¶ 57-58. And at least two of the Nebraska residents he friended viewed the advertisements. See, filing 23 at 13; filing 25-3; filing 25-4.

         Additionally, the plaintiff alleges that Oxygen Frog and Stillwater Glass both maintain business pages on Facebook. See, filing 23 at 14; filing 25-1 ¶¶ 45, 52. A business can make posts on its business page. See, filing 23 at 12; filing 25-1 ¶ 37. A business page cannot friend users on Facebook. See, filing 23 at 12; filing 25-1 ¶ 31. However, users may "like" a business page. See, filing 23 at 12; filing 25-1 ¶ 32. And the plaintiff has produced evidence that Oxygen Frog invited at least one Nebraska resident to like the Oxygen Frog business page on April 12, 2016. Filing 32. The plaintiff alleges that Oxygen Frog and Stillwater Glass have both made posts advertising allegedly infringing products. Filing 23 at 14; filing 25-1 ¶ 51, 52.

         Next, the plaintiff alleges that on or about March 31, 2015, it sent cease-and-desist letters to Oxygen Frog and ABR Imagery. Filing 23 at 14; filing 25-1 ¶ 75. In response, the plaintiff alleges, Fleischman and Oxygen Frog posted statements about the dispute on Oxygen Frog's website, on Oxygen Frog's Facebook business page, and on a Facebook group page titled ">Glassifieds< Tools and Equipment, New and Used." Filing 23 at 14; filing 25-1 ¶¶ 76-80. A group page on Facebook is a page where any member of the group may make posts and view and comment on the posts of others. Filing 23 at 12; filing 25-1 ¶¶ 38-40. Some members of the group commented on the post, including at least one Nebraska resident, Matthew Losee. Filing 23 at 14-15; filing 25-1 ¶ 79. Fleischman responded to some of these comments, including Losee's. Filing 23 at 14; filing 25-1 ¶ 79.

         The plaintiff alleges that certain assertions in the defendants' posts constitute defamation, commercial disparagement, and deceptive trade practices. Filing 23 at 15-17. Specifically, the plaintiff points to each of the following sentences in the statement allegedly posted by Fleischman and Oxygen Frog:[1]

. . . . [HVLPO2] claim[s] to be the original inventor of the concept of storing oxygen generated by oxygen concentrators in a storage tank and delivering that oxygen to a torch. High Volume Oxygen holds several patents regarding this technology, and has demanded that OxygenFrog shut down all business operations related to oxygen. High Volume’s attorney also threatened our national distributor, and forced them to discontinue any association with OxygenFrog.
The concept of on-site, on-demand, oxygen generation has been around for decades, long before High Volume Oxygen filed its patents. There are dozens of companies that offer both larger and smaller versions of the systems that High Volume Oxygen claims as their own original technology.

Filing 23 at 15-17; filing 25-1 at 118.

         ANALYSIS

         The defendants have moved to dismiss the plaintiff's complaint, arguing that they are not subject to personal jurisdiction in Nebraska. Filing 18. The plaintiff, on the other hand, argues that this Court can assert specific personal jurisdiction over the defendants for each of the claims. Filing 23 at 21, 33. For the reasons explained below, the Court concludes that the defendants are not subject to personal jurisdiction in Nebraska.

         I. Applicable Law

         Before beginning its personal jurisdiction analysis, the Court must first determine what law controls. An assertion of personal jurisdiction over an out-of-state defendant is proper "if authorized by the forum state's long-arm statute and permitted by the Due Process Clause of the Fourteenth Amendment." Dairy Farmers of Am., Inc. v. Bassett & Walker Int'l, Inc., 702 F.3d 472, 475 (8th Cir. 2012) (quoting Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., KG, 646 F.3d 589, 593 (8th Cir. 2011)). Nebraska's Supreme Court has interpreted its state's long-arm statute as coextensive with the limits of due process. See Crystal Clear Optical, Inc. v. Silver, 531 N.W.2d 535, 539 (Neb. 1995). Thus, this Court's inquiry is whether the assertion of personal jurisdiction over the defendants comports with due process under the United States Constitution.

         Normally when analyzing whether an assertion of personal jurisdiction would comply with the requirements of due process, a district court is bound by the precedent of its regional circuit-in this case, the Eighth Circuit. But in a patent case, Federal Circuit precedent applies to "substantive and procedural issues 'intimately involved in the substance of enforcement of the patent right.'" Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 856 (Fed. Cir. 1999) (quoting Viam Corp. v. Iowa Export-Import Trading Co., 84 F.3d 424, 428 (Fed. Cir. 1996)).

         The plaintiff has brought various claims of patent infringement (counts 1-24 of its complaint), as well as state law tort claims of defamation (counts 25-26), commercial disparagement (counts 27-28), and deceptive trade practices (counts 29-30). Filing 1. For the patent infringement claims, the plaintiff argues that the Court should apply Federal Circuit precedent in determining whether it has personal jurisdiction over the defendants. Filing 23 at 1. With respect to the state law tort claims, the plaintiff argues that Federal Circuit precedent should apply to some, and Eighth Circuit precedent to others. Filing 23 at 1.

         The Court agrees that Federal Circuit precedent applies to the patent infringement claims. But the Court need not definitively resolve which circuit's precedent should apply to each state law claim, because under either circuit's precedent, the outcome is the same, and the Court lacks jurisdiction.

         II. Jurisdiction under Federal Circuit Precedent

         Under Federal Circuit law, at the motion stage, a plaintiff need only make a prima facie showing that personal jurisdiction over the defendants exists. Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343, 1347 (Fed. Cir. 2002). When a motion to dismiss for lack of jurisdiction is decided on the basis of affidavits or other documentary evidence, all factual disputes are resolved in the plaintiff's favor. Id.

         "[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Internat'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The "minimum contacts" necessary may be the basis for either general or specific jurisdiction. See Akro Corp. v. Luker, 45 F.3d 1541, 1545 (Fed. Cir. 1995) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-76 (1985)). In this case, the plaintiff argues that this Court can assert specific jurisdiction over the defendants. Filing 23 at 21, 33.

         The Federal Circuit has outlined a three-pronged test for determining whether specific jurisdiction exists: "(1) whether the defendant purposefully directs activities at the forum's residents; (2) whether the claim arises out of or relates to those activities; and (3) whether assertion of personal jurisdiction is reasonable and fair." AFTG-TG, LLC v. Nuvoton Tech. Corp., 689 F.3d 1358, 1361 (Fed. Cir. 2012). "The first two factors correspond to the 'minimum contacts' prong of the International Shoe analysis, and the third factor with the 'fair play and substantial justice' prong." Elecs. For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1350 (Fed. Cir. 2003).

         (a) Purposefully directed activities

         The first prong of the three-part test is whether the defendant purposefully directed its activities at residents of the forum state. AFTG-TG, 689 F.3d at 1361. The plaintiff contends that the defendants purposefully directed their activities toward Nebraska in several ways. Filing 23 at 21-25. First, it alleges that Oxygen Frog used a third-party national distributor, maintains a nationally accessible website, maintains a Facebook business page, invited a Nebraska resident to like its business page, and posted advertisements on its business page for products that allegedly infringe the plaintiff's patents. Filing 23 at 24-25; filing 32. Second, it alleges that Fleischman-using at times the screen name "Scott Fleischman (Oxygen Frog)"-Facebook-friended Nebraska residents and posted advertisements for Oxygen Frog's allegedly infringing products on his Facebook profile. Filing 23 at 22-23. Third, the plaintiff alleges, Stillwater Glass allegedly posted advertisements for infringing products on its Facebook business page. Filing 23 at 24. Finally, Oxygen Frog and Fleischman allegedly posted defamatory statements on the Oxygen Frog website, the Oxygen Frog Facebook business page, and the Glassifieds Facebook group page. Filing 23 at 14, 23. The Court shall consider each of these activities in turn.

         1. National distributor

         First, the plaintiff contends that Oxygen Frog's use of a national distributor amounts to activity purposefully directed at Nebraska. Filing 23 at 25. There is an unresolved question as to when placing a product in the stream of commerce can be sufficient to establish personal jurisdiction. Celgard, LLC v. SK Innovation Co., 792 F.3d 1373, 1381 (Fed. Cir. 2015). The question dates back to Asahi Metal Industry Co. v. Superior Court of California, Solano County, 480 U.S. 102 (1987). In that case, Justice O'Connor, joined by another three justices, concluded that personal jurisdiction does not exist over a defendant where that defendant merely places a product in the stream of commerce, even when it is foreseeable that the product will reach the forum state. Id. at 111-12. Rather, the defendant must take some action "indicat[ing] an intent or purpose to serve the market in the forum State" for jurisdiction to be appropriate. Id. at 112. Conversely, Justice Brennan, joined by three other justices, concluded that a defendant is subject to personal jurisdiction when the defendant places a product in the stream of commerce and it is foreseeable that the product will end up in the forum state-for instance, because the defendant is "aware that the final product is being marketed in the forum State." Id. at 117.

         The Supreme Court revisited the issue in J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873 (2011), but again failed to reach a consensus. Justice Kennedy, joined by three other justices, concluded that jurisdiction may be asserted over a defendant "only where the defendant can be said to have targeted the forum; as a general rule, it is not enough that the defendant might have predicted that its goods will reach the forum State." Nicastro, 564 U.S. at 882. Justice Breyer, joined by Justice Alito, concurred in the judgment, but on the grounds that the defendant in the case made only one sale in the forum state through its national distributor. Id. at 888-89. The concurrence suggested that either some activity specifically targeting the forum state, or a "regular flow" of sales in the forum state, is necessary to establish personal jurisdiction. Id.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Federal Circuit has concluded that McIntyre did not alter its existing precedent with respect to the stream-of-commerce theory in personal jurisdiction. AFTG-TG, LLC, 689 F.3d at 1363. The Federal Circuit has not taken a position on whether foreseeability or intent is the proper test. Id. at 1364-65. But it has concluded that, at the very least, personal jurisdiction is lacking where the plaintiff ...


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