United States District Court, S.D. New York
July 21, 2004.
WAFIOS MACHINERY CORPORATION; and WAFIOS AG, Plaintiffs,
NUCOIL INDUSTRIES CO., LTD.; NUCOIL INDUSTRIES, INC.; and OTHER UN-NAMED PARTIES, Defendants.
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge
Defendant Nucoil Industries, Inc. ("Nucoil USA") has moved to
dismiss the complaint filed against it by plaintiffs Wafios
Machinery Corporation and Wafios AG (collectively, "Wafios")
pursuant to Fed.R.Civ.P. 12(b)(2) and (3). Defendant Nucoil
Industries Co. Ltd. ("Nucoil Taiwan" has moved separately to
dismiss the claims against it pursuant to Rule 12(b)(2), (3) and
(5). For the reasons stated below, both motions are denied with
leave to renew following limited jurisdictional discovery.
Wafios filed the complaint in this action on December 11, 2003,
alleging patent infringement by both Nucoil USA and Nucoil
Taiwan. An answer was filed by Nucoil USA on March 31, 2004, and
an amended answer including counterclaims was filed on April 5,
2004. Nucoil USA's motion was filed on April 1, 2004. Following
the exchange of briefs, oral argument was heard on the motion on
April 21, 2004, at which time the motion was deemed fully
Nucoil Taiwan's motion was filed on April 22, 2004. Following the
exchange of briefs, oral argument was heard on the motion on May 19,
2004, at which time the motion was deemed fully submitted. Discussion
Both Nucoil USA and Nucoil Taiwan argue that personal
jurisdiction is lacking and that venue is improper, and the
complaint should accordingly be dismissed. Nucoil Taiwan also
argues that service of process on it in Taiwan was improper.
Nucoil USA Has Not Waived Its Jurisdictional Defenses
Wafios argues that Nucoil USA's counterclaims for defamation,
tortious interference with prospective economic advantage and
violation of the Connecticut Unfair Trade Practices Act, Conn.
Gen. Stat. § 42-110b ("CUTPA") are permissive, and therefore that
Nucoil USA has waived the defenses of lack of personal
jurisdiction and improper venue.*fn1
Although Nucoil USA has not contested the issue, the premise of
Wafios's argument is incorrect. Although the Second Circuit has
not ruled on the question of whether the assertion of a
counterclaim, whether permissive or compulsory, waives the
defense of personal jurisdiction, and has observed that "federal
law on this issue appears to be in disarray," Cargill, Inc. v.
Sabine Trading & Shipping Co., 756 F.2d 224, 229 (2d Cir. 1985);
see also PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1111
n. 4 (2d Cir. 1997); Matter of Arbitration between InterCarbon Bermuda,
Ltd. and Caltex Trading and Transport Corp., 146 F.R.D. 64,
69-70 (S.D.N.Y. 1993) (collecting caselaw demonstrating opposing
views on the issue), a finding of waiver would "exalt form over
substance in a way that the adoption of the Federal Rules of
Civil Procedure rendered obsolete." Local Union No. 38, Sheet
Metal Workers' Int'l Ass'n, AFL-CIO v. A & M Heating, Air
Conditioning, Ventilation & Sheet Metal, Inc., 314 F. Supp.2d 332,
352 (S.D.N.Y. 2004).
The rationale for finding that a permissive counterclaim waives
the defenses of lack of personal jurisdiction is that the
defendant has affirmatively sought the aid of the court. See
Beaunit Mills, Inc. v. Industrias Renidas F. Matarazzo,
23 F.R.D. 654, 656-57 (S.D.N.Y. 1959). However, when both
jurisdictional defenses and counterclaims are included in a
single responsive pleading, it is appropriate to treat the
counterclaim "as conditional: its assertion being hypothecated
upon an adverse ruling on Defendant's jurisdictional defenses."
Queen Noor, Inc. v. McGinn, 578 F.Supp. 218, 220 (S.D.Tex.1984)
(citing Lomanco, Inc. v. Missouri Pacific Railroad Company,
566 F.Supp. 846 (E.D.Ark.1983) and In Re Arthur Treacher's Franchisee
Litigation, 92 F.R.D. 398 (E.D.Pa.1981)). Such an approach best serves
both the language of Rule 12(b) and the policy behind it, as articulated
by the Third Circuit over thirty years ago:
Rule 12(b) provides a defendant with the option of raising
jurisdictional defenses by motion or by answer. If we were to take the position that a defendant, by
raising his jurisdictional defenses in the same
pleading in which he asserted a counterclaim, waived
his jurisdictional defenses, we would in effect be
engrafting a judicial exception to Rule 12(b). We
would be requiring a defendant to raise his
jurisdictional defenses by motion when he intends to
file a counterclaim in his responsive pleading. This
requirement would be contrary to the option provided
to the defendant in Rule 12(b).
Furthermore, the policy behind Rule 12(b) militates
against our finding a waiver where a defendant files
a counterclaim in the same pleading in which he
asserts jurisdictional defenses. The purpose behind
Rule 12(b) is to avoid the delay occasioned by
successive motions and pleadings and to reverse the
prior practice of asserting jurisdictional defenses
by `special appearance.'
Neifeld v. Steinberg, 438 F.2d 423
, 428-29 (3d Cir. 1971)
(citing 5 C. Wright and A. Miller, Federal Practice and
Procedure: Civil § 1362, at 647-48 (1969)). Since the Neifeld
decision, at least three other Circuits have also held that the
filing of a counter-claim, whether permissive or compulsory, does
not operate as a waiver of an objection either to personal
jurisdiction or to venue, "whether the objection is raised by
motion or answer, provided that the objection is not otherwise
waived in the course of the litigation." Bayou Steel Corp. v.
M/V Amstelvoorn, 809 F.2d 1147
, 1149 (5th Cir. 1987); see
also Chase v. Pan-Pacific Broadcasting, Inc., 750 F.2d 131,
132 (D.C. Cir. 1984) (Ginsburg, J.); Gates Learjet Corp. v.
Jensen, 743 F.2d 1325
, 1330 n. 1 (9th Cir. 1984); and
generally Wright & Miller, supra, § 1397 (1990) (stating view
that the "trend in more recent cases is to hold that no
Rule 12(b) defense is waived by the assertion of a counterclaim,
whether permissive or compulsory"). Accordingly, Nucoil USA has
not waived its right to assert its jurisdictional defenses, and it is not
necessary to decide whether its counterclaims are permissive or
Personal Jurisdiction Over Nucoil USA
Nucoil USA argues that Wafios' complaint should be dismissed
for lack of personal jurisdiction pursuant to Rule 12(b)(2),
arguing that Wafios has not shown that Nucoil USA has sufficient
contacts to the forum to subject it to jurisdiction. Wafios
conversely argues that specific jurisdiction may be exercised
over Nucoil USA because of its internet website through which
potential customers may request sales literature.
Plaintiffs bear the burden of establishing that the court has
jurisdiction over a defendant when served with Rule 12(b)(2)
motion to dismiss. DiStefano v. Carozzi North American Inc.,
286 F.3d 81, 84 (2d Cir. 2001); Robinson v. Overseas Military
Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994). Because an
evidentiary hearing has not been held, the plaintiffs need only
make a prima facie showing of jurisdiction through the
complaint's allegations and affidavits in order to defeat the
motion to dismiss. CutCo Indus., Inc. v. Naughton, 806 F.2d 361,
363 (2d Cir. 1986); Network Interprises, Inc. v. APBA Offshore Prods.,
Inc., 01 Civ. 11765, 2002 WL 31050846, at *8 (S.D.N.Y. Sept. 12,
2002). The facts must be construed in the light most favorable to
plaintiffs. Cooper, Robertson & Partners L.L.P. v. Vail,
143 F. Supp.2d 367, 370 (S.D.N.Y. 2001) (citing Hoffritz for Cutlery
Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985)). In
assessing whether personal jurisdiction is authorized, the court
must look first to the long-arm statute of the forum state.
Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997).
If the exercise of jurisdiction is appropriate under that
statute, the court must decide whether such exercise comports
with the requisites of due process. Id. In patent infringement
cases, "when analyzing personal jurisdiction for the purposes of
compliance with federal due process, Federal Circuit law, rather
than regional circuit law, applies." 3D Systems, Inc. v.
Aarotech Laboratories, Inc., 160 F.3d 1373, 1377 (Fed. Cir.
New York's long-arm statute allows for personal jurisdiction
over a non-domiciliary when that person or his or her agent:
(2) commits a tortious act within the state . . .; or
(3) commits a tortious act without the state causing
injury to person or property within the state . . .,
if he [or she] (i) regularly does or solicits
business, or engages in any other persistent course
of conduct, or derives substantial revenue from goods
used or consumed or services rendered, in the state,
or (ii) expects or should reasonably expect the act
to have consequences in the state and derives
substantial revenue from interstate or international
commerce . . .
N.Y.C.P.L.R. § 302(a)(2)-(3) (McKinney 2001). The tortious act
alleged by Wafios is the violation of 35 U.S.C. § 271(a), which provides that "whoever without authority . . . offers to sell
. . . any patented invention, within the United States . . .
during the term of the patent therefor, infringes the patent."
Wafios argues that by publishing on its internet website a
detailed catalogue of its machines, including the allegedly
infringing machines, Nucoil USA has thereby offered to sell its
products in New York. The website also includes an option to fill
out forms which a potential customer may access from New York,
and which can be used to request written materials and videotapes
promoting Nucoil USA's machines. The website also includes a
"button" on which a potential customer can click to have
information sent to New York.
Wafios is apparently not alleging that personal jurisdiction
may be exercised over Nucoil USA based on §§ 302(a)(2) or
(a)(3)(i). Section 302(a)(2) "reaches only tortious acts
performed by a defendant who was physically present in New York
when he performed the wrongful act." Bensusan, 126 F.3d at 28;
Telebyte, Inc. v. Kendaco, Inc., 105 F. Supp.2d 131, 134
(E.D.N.Y. 2000) ("The existence of a website outside New York,
even one that offers a product for sale, cannot alone confer
jurisdiction over the defendant under CPLR § 302(a)(2)).").
Wafios has only alleged that Nucoil USA has sold or offered to
sell its products to customers in New York. Wafios has not
alleged that Nucoil USA regularly does or solicits business in
New York. Nucoil USA has stated that since 2001, before the date the allegedly infringing patent issued,
Nucoil USA has made only eight sales of "component related
products, and no machines, to just one customer in Freeport, New
York." Affidavit of Yin Wang, ¶ 15.
Wafios instead argues that jurisdiction is proper under §
302(a)(2)(ii) because through its offer of an infringing product
for sale to New York consumers through the internet, Nucoil USA
has committed a tortious act outside of New York that it should
have expected to have consequences within the state.*fn2 The
tortious act alleged by Wafios to have occurred outside the state
causing injury to it within New York is the "offer to sell" the
allegedly infringing products in violation of § 271(a). In
support of its argument, Wafios cites Int'l Truck Engine Corp.
v. Dawson Int'l Inc., 216. F. Supp.2d 754 (N.D. Ind. 2002), for
the proposition that an offer to sell can be found from conduct
which "generates interest in a potential infringing product to
the commercial detriment of the rightful patentee." 116 F. Supp.2d
at 761 quoting 3D Systems, Inc. v. Aarotech Labs. Inc.,
160 F.3d 1373, 1379 (Fed. Cir. 1998)). By this
standard, the publication of Nucoil USA's website would constitute
an offer to sell wherever internet users could access it. However, 3D Systems, on which Int'l Truck Engine relies,
"is not the Federal Circuit's final word on the subject" of
offers to sell. Moldflow Corp. v. Simcon, Inc., 296 F. Supp.2d 34,
42 (D. Mass. 2003). In a later case, Rotec Indus., Inc. v.
Mitsubishi Corp., 215 F.3d 1246 (Fed. Cir. 2000), the Federal
Circuit held that the meaning of the phrase "offer to sell," as
it is used in § 271(a), "is to be interpreted according to its
ordinary meaning in contract law, as revealed by traditional
sources of authority." 215 F.3d at 1255.
Although Rotec purports to affirm 3D Systems, see 215
F.2d at 1254, at least two district courts have recognized a
conflict between the two opinions. See Moldflow, 296 F. Supp.2d
at 42-43; Elan Corp., PLC v. Andrx Pharmaceuticals, Inc.,
272 F. Supp.2d 1325, 1339 n. 2 (S.D. Fla. 2002), rev'd on other
grounds, 366 F.3d 1336 (Fed. Cir. 2004). A subsequent Federal
Circuit decision reiterated "that the question whether an
invention is the subject of a commercial offer for sale is a
matter of Federal Circuit law, to be analyzed under the law of
contracts as generally understood." Group One, Ltd. v. Hallmark
Cards, Inc., 254 F.3d 1041, 1047 (Fed. Cir. 2001).
Following the Federal Circuit's direction, the Moldflow court
reviewed traditional sources of authority on contract law and
sensibly concluded that "an offer creates the power of acceptance
in the offeree." 296 F. Supp.2d at 344 (citing Restatement Second) of Contracts § 24 (1981); Arthur Corbin, Corbin on
Contracts, § 1.11 (1964)).
The product information contained on Nucoil USA's website is
insufficient to create an offer to sell according to traditional
contract law principles. No pricing information is given and no
order forms are available even to print out and mail.
Accordingly, Wafios has not shown that Nucoil USA has committed a
"tortious act without the state" for purposes of § 302(a)(3),
solely on the basis of Nucoil USA's website. Because long-arm
jurisdiction cannot be shown on the basis of the website, a
federal due process analysis is unnecessary. Nor is it necessary
to consider Nucoil USA's motion to dismiss pursuant to Rule 12(b)(3).
Personal Jurisdiction over Nucoil Taiwan
Wafios's arguments in support of personal jurisdiction over Nucoil
Taiwan are also based on its website. The arguments are essentially
identical, as Nucoil Taiwan's website is only alleged to give rise to
jurisdiction insofar as it contains a link to the same Nucoil USA website
that Wafios argued created jurisdiction over Nucoil USA. Because Nucoil
USA's website does not constitute an offer to sell pursuant to § 271(a),
nor does Nucoil Taiwan's. Accordingly, Wafios has not yet carried its
burden of establishing that personal jurisdiction may be exercised over
Nucoil Taiwan. Limited Jurisdictional Discovery is Granted
Wafios has requested jurisdictional discovery in the event that
specific personal jurisdiction is not found over either Nucoil
USA or Nucoil Taiwan on the basis of their websites alone.
"Pre-motion discovery should be permitted where the facts
necessary to establish personal jurisdiction and propriety of
venue lie exclusively within the defendant's knowledge." Winston
& Strawn v. Dong Won Securities Co., Ltd., 02 Civ. 0183, 2002 WL
31444625, at *5 (S.D.N.Y. Nov. 1, 2002) (citing Wells Fargo &
Co. v. Wells Fargo Express Co., 556 F.2d 406, 430 n. 4 (2d Cir.
Nucoil USA has submitted an affidavit which provides several
facts alleged by Wafios to be within Nucoil USA's exclusive
knowledge. In particular, Nucoil USA states that it has sold no
machines in New York, does not advertise in media which
originates or which targets New York or which have a national
circulation, and does not "target" the New York market. Wang
Affidavit, ¶¶ 9-11, 15. However, there are further questions
which are not answered by the affidavit, and which may be
necessary to establish either personal jurisdiction or venue.
Nucoil USA has acknowledged receiving four requests for product
information from New York (although at least one of those
requests appears to be from counsel for Wafios), but has not
stated what materials were sent in response to those requests.
Nor has Nucoil USA indicated whether other sales materials had been sent
to its single existing customer in New York.
Accordingly, Nucoil USA's motion to dismiss is denied and
Wafios' request for discovery is granted limited to the question
whether Nucoil USA has "offered to sell" its allegedly infringing
machines in New York, as that phrase is interpreted in this
Opinion. Limited and expedited discovery proceedings will include
service of document requests and one deposition of a witness to
be designated by defendant to answer questions regarding
jurisdictional issues. This discovery is to be completed no later
than thirty 30) days from the entry of this order.
The affidavits submitted by counsel for Nucoil Taiwan and from
a Nucoil Taiwan sales representative are more categorical than
those of Nucoil USA, and call for a different result. According
to the affidavits, Nucoil Taiwan has no offices or employees in
New York, and has sold no products and derives no revenue from
any activity in New York, and does not market products or attend
trade knows in New York. In addition, Nucoil Taiwan has received
no requests for information from the United States. Finally,
Nucoil Taiwan has no common ownership with Nucoil USA, and
derives no revenue from any sales or business by Nucoil USA.
Because Wafios has not shown that it is entitled to any
jurisdictional discovery with respect to Nucoil Taiwan that is
not contained in the affidavits submitted with Nucoil Taiwan's
briefs, the motion to dismiss Nucoil Taiwan is granted. It is
therefore not necessary to consider Nucoil Taiwan's motion to
dismiss for improper service of process pursuant to Rule 12(b)
Because Nucoil USA's motion to dismiss for lack of personal
jurisdiction and for improper venue cannot be resolved until
after jurisdictional discovery has been conducted, it is denied
at this time. Leave is granted to refile any and all of the
motions pending closure of the limited discovery ordered above.
Wafios has not carried its burden of showing that personal
jurisdiction may be exercised over Nucoil Taiwan. Because Wafios
has also not shown that jurisdictional discovery could establish
facts necessary to establish jurisdiction, Nucoil Taiwan's motion
to dismiss the complaint against it is granted.
It is so ordered.