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Eastman Kodak Company v. Asia Optical Co.

June 13, 2012

EASTMAN KODAK COMPANY, PLAINTIFF,
v.
ASIA OPTICAL CO., INC., DEFENDANT.



The opinion of the court was delivered by: Denise Cote, District Judge:

OPINION & ORDER

On December 7, 2011, defendant Asia Optical, Inc. ("AO"), filed a third-party complaint ("the AO Complaint") against Fujifilm Holdings Corporation ("FH"), Fujifilm Corporation ("FC"), and Fujifilm North America Corporation ("FNAC"). FH and FC are Japanese corporations; FNAC is a New York corporation.

The AO Complaint seeks a declaratory judgment that the third-party defendants are obligated to indemnify AO for any damages awarded plaintiff Eastman Kodak Company ("Kodak") in this action, and seeks damages based on breach of contract, or in the alternative unjust enrichment. The third-party defendants moved to dismiss the AO Complaint on February 17. The February 17 motion is granted. A New York court has already concluded that there is no personal jurisdiction over the two Japanese defendants and AO is collaterally stopped from relitigating that determination. The remaining claim against the New York defendant must be dismissed for failure to state a claim.

BACKGROUND

I. The AO Complaint

The following facts are taken from the AO Complaint, and assumed to be true for the purposes of this Opinion. AO is a Taiwanese corporation. FH and FC (collectively "Fuji") are Japanese corporations with their principal places of business in Japan, and successors-in-interest to Fuji Photo Film Co., Ltd. ("Fuji Photo Film"), a Japanese corporation with its principal place of business in Japan. FNAC is a Fuji subsidiary organized as a New York corporation with its principal place of business in New York.

AO designs and manufactures digital still cameras ("DSCs") and their component parts. In April 2004, AO entered into a patent license agreement (the "2004 PLA") with Kodak.*fn1

AO manufactured DSCs for Fuji Photo Film (the "Fuji DSCs"), based upon designs and specifications provided by Fuji Photo Film. The Fuji DSCs manufactured by AO were destined for sale primarily in the United States. The DSCs were distributed in the United States, including New York, through FNAC.

AO alleges that Fuji Photo Film agreed that it would indemnify and hold AO harmless from any claims of patent infringement or claims for royalties relating to the Fuji DSCs. Kodak subsequently made a demand for payment of royalties by AO for the manufacture of the Fuji DSCs, pursuant to the 2004 PLA. AO then requested that Fuji Photo Film assume responsibility for and resolve Kodak's royalty demand. Fuji repeated its promise to indemnify and hold AO harmless from Kodak's claims, and represented that it would resolve the royalty demand directly with Kodak.

AO attaches two documents to its third-party complaint bearing on Fuji Photo Film's alleged agreement to indemnify AO. On September 9, 2005, a Fuji Photo Film employee in Tokyo wrote a letter ("the September 9 Letter") to Alan Steves, a Kodak employee in Rochester, New York, acknowledging Kodak's royalty demand to AO and requesting that "further communication from Kodak regarding this matter . . . be directed to Fuji's attention directly, not to" AO. On May 2, 2006, another Fuji Photo Film employee in Tokyo e-mailed (the "May 2 E-mail") Robert Lai, AO's Chairman, stating that Fuji Photo Film had begun negotiations with Kodak. According to the May 2 E-mail, Kodak had agreed to enter a "standstill agreement" with AO. The e-mail noted that although Fuji Photo Film had "no say in the content of this agreement, we believe it will eliminate the pressure put on Asia Optical by Kodak." The e-mail also stated that Fuji Photo Film had "re-communicated to [Kodak] that [Fuji Photo Film] will fulfill its promise to handle the Kodak patent pertaining to the DSC supplied by Asia Optical to [Fuji Photo Film]."

As a result of these representations, AO entered into a standstill agreement with Kodak. Under the standstill agreement, AO paid $1,500,000 to Kodak in New York as consideration for Kodak forbearing on pursuing its royalty claims against AO while Fuji Photo Film attempted to resolve the royalty claims with Kodak. Neither Fuji Photo Film nor Fuji as its successor-in-interest resolved the royalty dispute with Kodak.

II. AO's Prior Lawsuit in New York State Supreme Court On October 2, 2009, AO brought suit against Fuji and three

Fuji American subsidiaries, including FNAC, in New York State Supreme Court, Westchester County, alleging that Fuji had breached an agreement with AO to indemnify AO from Kodak's royalty demands. AO discontinued the Westchester County action on March 1, 2010.

On February 10, 2010, AO filed a second lawsuit against Fuji in New York State Supreme Court, this time in New York County (the "February 2010 Complaint"). The February 2010 Complaint is virtually identical to the AO Complaint in this suit. Fuji moved to dismiss the February 2010 Complaint for lack of personal jurisdiction on September 30. In its opposition, AO relied solely upon N.Y. C.P.L.R. § 302(a)(1) for personal jurisdiction under New York's long-arm statute.*fn2 AO's opposition brief discussed both the September 9 Letter and the May 2 E-mail.

After the personal jurisdiction issue was briefed, Justice Jeffrey K. Oing listened to oral argument by the parties at a hearing on June 3, 2011. Counsel for AO argued that the court could exercise personal jurisdiction over Fuji because Fuji "projected itself into New York by undertaking to resolve the dispute in New York between Kodak and AO." AO's counsel further stated that "we're aware of . . . at least five instances of communications between Fuji and between Kodak directly addressing this issue of resolving the dispute. And . . . Fuji purposefully projected itself in New York by faxes, by telephone conversations, by communications." Justice Oing, however, expressed skepticism that the nature of the forum state contacts implicated by AO's claim were sufficient to create personal jurisdiction: "You're telling me that it went from Fuji to [AO], saying: Don't worry; we're going to resolve all this. We're in contact with Kodak right now. We're taking care of all the business that we're doing in New York. . . . But how does . . . trying to get involved in trying to resolve the dispute . . . result in them consenting to jurisdiction[?]" Justice Oing then granted Fuji's motion to dismiss: "My problem here is that [AO] is attempting to take [negotiations between Fuji and Kodak in New York] and try to bootstrap or piggyback on that to get a jurisdictional basis over Fuji defendants using the 302(a)(1), the single-transaction situation. I don't find that that is the appropriate means to get jurisdiction in this case." A written order followed on June 7.

Justice Oing allowed AO to make an application for jurisdictional discovery, which the parties briefed in advance of a July 6 hearing. At that hearing, Justice Oing denied AO's request for jurisdictional discovery, characterizing AO's arguments as a "rehashing" of its June 3 arguments.*fn3 A written order ...


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