to Dillard on the status of litigation brought by the 891 Patent's inventor to declare the invalidity of the patent, for example, Randolph-Rand has referred to "our campaign to enforce our rights" under the patent and noted the legal victories which "our company has won" without even mentioning Application Art's role, if any, in the litigation.
In addition to its contacts with this state through its agent Randolph-Rand, Application Art also ships magnetic labels directly into the state of New York.
It sum it appears that Dillard's assertions concerning Randolph-Rand's role as the long time sole licensee and distributor for the 891 Patent and as the entity responsible for policing the use of this patent in the United States are sufficient to establish, prima facie, that Randolph-Rand is Application Art's "agent" for purposes of the New York long-arm statute.
In order to satisfy the requirements of the long-arm statute, it must also be shown that there is an "articulable nexus" or "substantial relationship" between the transaction of business in New York and the cause of action in which jurisdiction is alleged. Beacon Enterprises Inc. v. Menzies 715 F.2d 757, 764 (1983). Randolph-Rand, a company with its only place of business in New York which has instituted a number of actions in this state, is clearly transacting business here. Its activities in New York as the licensee, distributor and enforcer of the 891 patent are directly related to the dispute in the instant action.
I hold that this court has personal jurisdiction over Application Art in this suit by virtue of the transaction of business by Application-Art's agent in this state pursuant to CPLR § 302(a)(1).
Randolph-Rand argues that even if this court has personal jurisdiction over Application Art in this action, plaintiff should be estopped from challenging the validity of the 891 Patent by virtue of the Settlement Agreement and subsequent actions by Dillard in agreeing to pay Randolph-Rand for patent labels it has affixed to its products using the magnetic locking devices. In making this argument, defendant primarily relies upon the doctrine of assignor estoppel. See Diamond Scientific Co. v. Ambico Inc. 848 F.2d 1220 (Fed Cir. 1988). Under the assignor estoppel doctrine, a party who has held and assigned the rights to a patent may be estopped from later contesting the validity of the patent if unfairness or injustice to the assignee would result. Diamond Scientific Co. supra 848 F.2d at 1224-1225. Defendant alternatively argues that the Settlement Agreement and Dillard's later actions are the equivalent of a consent decree by Dillard in which Dillard acknowledged the validity of the 891 Patent. Relying upon the doctrine of res judicata, defendant apparently argues that the issue of the 891 Patent's validity was determined in the Settlement Agreement and affirmed by Dillard's later actions and that Dillard should therefore be foreclosed from contesting the validity of the 891 Patent here. See Epic Metals Corp. v. H.H. Robertson Co. 870 F.2d 1574 (Fed Cir. 1989).
Neither of these arguments is persuasive. Dillard is not an assignor of the 891 Patent, nor a party to whom the doctrine of assignor estoppel is applicable. In Lear v. Adkins, 395 U.S. 653, 23 L. Ed. 2d 610, 89 S. Ct. 1902 (1968), moreover, the Supreme Court abolished the doctrine of licensee estoppel under which previous case law had held that licensees were generally estopped from contesting the validity of patents they were licensed to use. Reasoning that "the equities of the licensor do not weigh very heavily when they are balanced against the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain" the court held that in the usual case, the doctrine of estoppel could not be utilized to bar a patent validity challenge by a patent licensee. Lear supra 395 U.S. at 670.
In the instant action, plaintiff is not a licensee of the 891 Patent. Nevertheless, the reasoning of Lear and the case law holding that assignor estoppel is not applicable in every instance are instructive here. If an assignor of a patent may in appropriate cases contest its validity, and a licensee may normally do so, surely plaintiff here, a purchaser of patent labels whose status did not rise to the level of either of a patent assignor or patent licensee is not barred from challenging the 891 Patent's validity under the doctrines of assignor or licensee estoppel.
The Settlement Agreement and subsequent actions by Dillard, moreover, do not estop Dillard from challenging the 891 Patent's validity. Dillard asserts that it paid Randolph-Rand the sums it demanded to settle its infringement actions because the cost of settlement was less than the amount it would have cost Dillard even to begin an investigation of the 891 Patent's validity. Dillard has never acknowledged the validity of the 891 Patent, nor has it, in settling any of Randolph-Rand's previous actions, consented to refrain from challenging the patent's validity. Indeed it is not clear that the New York state courts in which Randolph-Rand brought its previous suits against Dillard had jurisdiction to determine the patent's validity. See 28 U.S.C. § 1338 (United States district courts are vested with exclusive original jurisdiction to determine actions "arising under" the patent laws.)
Dated: White Plains, New York
January 14, 1992
VINCENT L. BRODERICK, U.S.D.J.