[00:00:01] Speaker 02: Our next case is Digital Alley versus Utility Associates. [00:00:44] Speaker 02: Mr. Seitz, is that correct? [00:00:46] Speaker 02: Yes, it is. [00:00:48] Speaker 02: You may proceed. [00:00:49] Speaker 02: Thank you. [00:00:52] Speaker 00: May it please the court. [00:00:54] Speaker 00: My name's Adam Seitz. [00:00:55] Speaker 00: I'm counsel here for Digital Ally. [00:00:57] Speaker 00: The issue that we are addressing today is the district court's denial or finding that there was no specific jurisdiction in our underlying declaratory judgment claim for non-infringement. [00:01:07] Speaker 00: We believe the district court made two specific errors. [00:01:10] Speaker 00: They essentially roll into one error as I walk through them. [00:01:13] Speaker 00: The first error is that the district court characterized utilities contacts in Kansas as commercial and marketing in nature. [00:01:21] Speaker 00: We believe that those contacts certainly had some component of that, but also included technical contacts in nature relating to how the product operated. [00:01:29] Speaker 00: The second error is that the district court said that the contacts ultimately didn't matter. [00:01:33] Speaker 00: in any event, because utility did not own the 556 patent, the patent issue, at the time that the contacts were made in Kansas. [00:01:41] Speaker 02: But the entire negotiation on the commercialization issue was to commercialize your products, right? [00:01:49] Speaker 00: There was a component of commercializing Digital Allies products, yes. [00:01:53] Speaker 00: Another component was trying to integrate their products with our products. [00:01:57] Speaker 00: And all this took place prior to utility obtaining the patent? [00:02:02] Speaker 00: That is correct. [00:02:03] Speaker 00: And I understand this is a unique case with that timing and the aspect of the contact. [00:02:09] Speaker 02: It's a very important element. [00:02:11] Speaker 00: I agree. [00:02:11] Speaker 00: And I think the easiest way to kind of wrap your head around it is to start with an understanding, just very briefly, of the 556 patent. [00:02:18] Speaker 00: I'm going to look at just one small aspect of the claims to help guide the discussion on the contacts, which I believe has helped to clarify a lot of this timing. [00:02:27] Speaker 00: So the 556 patent, owned by utility, relates to mobile surveillance or digital surveillance systems, an example of which would be a camera that might go on a rear view mirror in a police car or an emergency vehicle. [00:02:40] Speaker 00: It can capture audio, video, and other information. [00:02:43] Speaker 00: If you were to perform an infringement analysis on the claims of that patent, it requires more than merely just buying the product at a Best Buy and looking at it or using it. [00:02:53] Speaker 00: It requires more than merely looking at the manuals for that product. [00:02:56] Speaker 00: It requires looking at the claims and analysis of the very technical details of how a product would operate. [00:03:03] Speaker 00: In some instances, potentially even the source code or software of that product. [00:03:07] Speaker 00: The claims require an analysis of how your audio and video information from your rear view mirror is being combined into a single data stream, how it's being sent wirelessly to a different location, and how it's being stored with different bits of metadata. [00:03:21] Speaker 00: So with that technical understanding for how you would perform an infringement analysis, [00:03:25] Speaker 00: You can look at the contacts and begin to see how they relate to our declaratory judgment actions. [00:03:31] Speaker 02: So the contacts... But how can the patent be implicated if utility didn't own the patent at the time these contacts were made? [00:03:39] Speaker 00: The patent would not have been implicated at the time that those contacts were made. [00:03:42] Speaker 00: I would agree with that. [00:03:43] Speaker 00: Our contention, however, is that they used the contacts that they made, contacts that related to utility-acquired digital allies source code, its software. [00:03:53] Speaker 00: It was reviewing, analyzing, testing, rewriting the software, our source code for our products. [00:04:00] Speaker 00: It was conducting testing on how it sends information. [00:04:03] Speaker 00: Examples of this is in the record at 381, 372, 378. [00:04:08] Speaker 00: It was an iterative process over four or more months where they were testing our products, the very same products that are the subject of our declaratory judgment action. [00:04:17] Speaker 00: Now, the catch comes at that time there was no patent. [00:04:20] Speaker 00: And so they would not relate to the patent. [00:04:22] Speaker 00: I would agree with that. [00:04:23] Speaker 00: But the relationship fell apart at some point. [00:04:27] Speaker 00: And when the relationship fell apart, Utility went out armed with the knowledge of exactly how digital ally products. [00:04:35] Speaker 02: So if Utility did not own the pen at the time that these discussions took place, wouldn't you say that those discussions were just commercialization in nature? [00:04:46] Speaker 02: At that time, yes. [00:04:48] Speaker 02: OK. [00:04:49] Speaker 02: So what does our case law say in that regard? [00:04:51] Speaker 02: In the area of minimum contacts and personal jurisdiction, what does it say with respect to commercialization contacts? [00:05:01] Speaker 00: So commercialization contacts, the case law certainly says that those are not enough when you're looking at a claritory judgment. [00:05:07] Speaker 00: So that's our case law. [00:05:08] Speaker 02: That is correct. [00:05:09] Speaker 02: That they're not enough. [00:05:10] Speaker 02: That is correct. [00:05:10] Speaker 02: So what other contacts do you think give rise to jurisdiction? [00:05:16] Speaker 00: And I've not found a case with this situation here, Your Honor. [00:05:19] Speaker 00: We know from, we know from absent radio systems, we know that merely sending a letter is not enough. [00:05:24] Speaker 00: We know that there has to be something more than what I'm saying. [00:05:27] Speaker 02: There were also letters sent to state officials of other states. [00:05:30] Speaker 00: That's right. [00:05:31] Speaker 00: The harm of which was felt in the state of Kansas. [00:05:34] Speaker 02: But what, do you have any cases that would support that, that you're making contacts with other states, that that gives rise to jurisdiction in [00:05:43] Speaker 02: Just call it the home state, Kansas. [00:05:46] Speaker 00: Yes, Your Honor. [00:05:46] Speaker 00: In the case of Avacent, this court sided with approval to the U.S. [00:05:51] Speaker 00: Supreme Court case of Calder v. Jones, 465 U.S. [00:05:54] Speaker 00: 783, where you were having letters that were sent to a different forum, the harm of which was being felt in the home forum, or where the lawsuit was going to be filed, where the Supreme Court said in that instance, [00:06:08] Speaker 00: The brunt of the harm is in the forum, even though the defendant never entered that forum. [00:06:12] Speaker 01: At the same time, though, our case log says that cease and desist letters alone are not good enough. [00:06:19] Speaker 00: I agree. [00:06:20] Speaker 00: I agree. [00:06:20] Speaker 00: And what I'm saying is that the cease and desist letters by themselves would not be enough. [00:06:25] Speaker 00: I agree. [00:06:26] Speaker 00: Avacent is very clear on that point. [00:06:28] Speaker 01: And commercialization efforts are not good enough by themselves. [00:06:31] Speaker 00: But what I believe, Your Honor, is that given the inferences that we're allowed to take at this context, the inferences that should be taken in digital allies' favor, [00:06:38] Speaker 00: that when you look at the contacts that were made, it is a very reasonable inference to assume that the utility took the information that it obtained exactly on how our product operated and used that as part of its infringement analysis to send these letters out. [00:06:54] Speaker 01: I didn't see your briefs really try to come to grips with our opinion in radio systems versus accession. [00:07:04] Speaker 01: And not only the statements of law, but really the facts. [00:07:07] Speaker 01: which seemed to be a pretty close carbon copy of what's going on here. [00:07:14] Speaker 01: And in fact, if anything, the fact there seems like it would make a more compelling case for specific jurisdiction over that declaratory judgment defendant. [00:07:25] Speaker 00: I think one of the biggest differences between radio systems in our case is here, we are saying, and we think the inferences allow us to say, that the information obtained prior to when utility acquired the 556 pass [00:07:38] Speaker 00: the information on how our products operate, those contacts in Kansas, is being used to make the allegations as part of its enforcement actions today. [00:07:47] Speaker 00: I think that's one of the biggest distinguishing facts that makes us unique and different from radio systems. [00:07:52] Speaker 01: But radio systems along the way, that inventor in New Jersey who came to Tennessee to try to strike up a joint business partnership, initially that inventor didn't have a patent and then ultimately during the discussions he [00:08:07] Speaker 01: He had a patent. [00:08:08] Speaker 01: So not only was he learning about the Tennessee company's products and internal components, but he also had a patent. [00:08:20] Speaker 01: And ultimately, you know, our court said, well, that's not good enough because what was going on there was an attempt to strike up a joint commercial effort. [00:08:33] Speaker 00: And again, what I did not see in radio systems was an explicit finding or inference from those facts that he was obtaining information that was necessary for, that he had to use for his infringement allegations or his enforcement actions later. [00:08:48] Speaker 00: And that's the difference that I believe exists in this case. [00:08:51] Speaker 00: The information that utility obtained on our source code as part of obtaining our software, the tests that they did on how our product operates to send things wirelessly, [00:09:01] Speaker 00: I believe it's a reasonable inference to say that that is the key. [00:09:05] Speaker 02: On the other hand, a year elapsed from the time that those contacts were made to the time that you filed your declaratory action. [00:09:14] Speaker 02: How was the utility to know whether your technology remained the same or not? [00:09:20] Speaker 00: The products, that's a good question. [00:09:23] Speaker 00: So the products that they tested at that time that we see in the record are what's referred to as the DVM-500 and the DVM-750. [00:09:31] Speaker 00: Those were the exact same products that were still on sale. [00:09:35] Speaker 00: No changes as far as external looks would be, no changes as far as different software versions like you see in many products today when you have a different number product. [00:09:48] Speaker 00: They were the very same from the time they met with digital in Kansas, conducted the tests and learned the information on how those products operated, and are the very same products that were listed in our declaratory judgment complaint. [00:10:03] Speaker 00: So our contention and the key difference between radio systems is that we believe that utility, without the information that it learned through its contacts in Kansas, that they would not be able to complete the second prong of any infringement analysis, which is of course comparing the claims of the patent to the accused product. [00:10:25] Speaker 00: The reason we believe this, the reason we think this is a reasonable inference, is given the technical nature of those claims. [00:10:30] Speaker 00: claims that require what we say is a much more in-depth technical knowledge of a product than merely looking at a manual. [00:10:37] Speaker 00: So we believe it's reasonable to infer that Utility used that technical knowledge from its contacts in Kansas as a basis for its enforcement actions. [00:10:47] Speaker 01: Do you think it's reasonable to infer that at the time of these conversations in 2011 that Utility had some secret plan in mind to acquire a patent a year and a half later? [00:10:59] Speaker 00: I think that's probably too far of a step to infer. [00:11:02] Speaker 00: But at the point that they acquired the patent, I think it is very reasonable to say that those previous commercialization efforts, I'm sorry, that would not be correct. [00:11:10] Speaker 00: At the point that they decided to use that information as part of their infringement study and their infringement allegations, that those previous commercial and marketing activities would then become enforcement activities, which could give rise to specific jurisdiction because that was obtained [00:11:27] Speaker 00: through contacts in Kansas, all of which was initiated by utility. [00:11:32] Speaker 00: So I understand the timing certainly is an issue there, and I agree that that is something that seems to align with radio systems, but given that we believe the inference should be that they took that information that they obtained while in Kansas and then used that as part of their infringement allegations, those marketing and commercialization efforts would now support a claim for specific jurisdiction. [00:11:55] Speaker 02: You reserve four minutes of your time, correct? [00:11:57] Speaker 00: Yes, thank you, Your Honor. [00:12:07] Speaker 03: Mr. Moreland? [00:12:10] Speaker 03: Thank you, Your Honors. [00:12:11] Speaker 03: May it please the Court, my name is David Moreland and I'm representing Happily Utility Associates Inc. [00:12:18] Speaker 03: Basic premise here is the lower court got it right. [00:12:20] Speaker 03: On the issues that were properly before the court, it weighed the facts and applied the precedent to this court properly. [00:12:28] Speaker 03: It wasn't brought up in the discussion just now, but I will address it briefly, because it is on the record in the briefs. [00:12:32] Speaker 03: And that's the issue of the promissory estoppel claim in the court below. [00:12:36] Speaker 03: That issue was never briefed before the lower court. [00:12:39] Speaker 03: It's not proper before this court. [00:12:41] Speaker 03: So I'll submit that, for one, the court shouldn't rely on that as a basis for specific jurisdiction. [00:12:46] Speaker 03: But I'll also say that even if it were properly before this court, [00:12:50] Speaker 03: The case law is very clear that unilateral acts of third parties, of other parties, cannot be the basis for personal jurisdiction. [00:12:59] Speaker 03: Here we have an unknown, unnamed third party perspective patent, I guess perspective license fee of the patent, who is alleged to have done some act in the form, but from a [00:13:13] Speaker 03: a clear reading of case law, the relationship must rely, excuse me, must arise out of context that the defendant himself creates with the forum state. [00:13:22] Speaker 03: And in the recent Supreme Court case, the Walden versus Fiora case, in 2014, that is clear. [00:13:29] Speaker 03: So let's talk about the two categories of acts that we've discussed earlier. [00:13:34] Speaker 03: There's the sales letters that were sent by utility to the alleged customers of Digital Ally. [00:13:42] Speaker 03: And then there's the contacts by [00:13:44] Speaker 03: by utility with appellant before utility ever received the patent or acquired the patent. [00:13:52] Speaker 03: First, the letters themselves, this court has said that enforcement activities taking place outside the state cannot form the basis for specific jurisdiction. [00:14:04] Speaker 03: So I believe that the letters themselves shouldn't even be at issue in this particular analysis. [00:14:08] Speaker 03: They're not, they were not sent into the form. [00:14:11] Speaker 01: Even if the effects are felt somewhere else? [00:14:13] Speaker 03: Yes, Your Honor. [00:14:14] Speaker 03: In the radio systems case, the effects presumably from sending or contacting the PTO relating to the patent to a prospective patent and enforcing the patent in that case would have been felt in the forum, yet this court said that the enforcement efforts there specifically were not contacts that should be taken into consideration. [00:14:37] Speaker 01: Is Calder B. Jones relevant here? [00:14:41] Speaker 03: Your Honor, I mean, the Calder v. Jones is discussed in Abbotson, which is relied on by the court and radio systems, for the proposition that these enforcement activities do not give rise to personal jurisdiction in the forum. [00:14:53] Speaker 03: To the extent that they relate at all, and Calder could be applicable in the case, I think that they would be a very minuscule portion of the analysis, obviously. [00:15:04] Speaker 03: And if you're in the forum, this court has said you can't, cease and desist letters in the forum even wouldn't be enough to [00:15:11] Speaker 03: raise a specific jurisdiction, so certainly if you're extending outside the foreign, it's even less of a contact in the sense of a specific jurisdiction that would be more unfair, I suppose, to allow the cause of action to be raised based on those grounds. [00:15:28] Speaker 03: So I would contend that the letters themselves are not something that should even be a starting point for the discussion, but if they are [00:15:39] Speaker 03: There's not something more that would be necessary to trigger specific jurisdiction, as this Court has said that it is required. [00:15:45] Speaker 03: If we talk about the activity that occurred prior to the patent being acquired by utility, Your Honor, as we were talking about earlier, this Court has made clear that commercialization efforts in the form are not enforcement acts that will give rise to specific jurisdiction. [00:16:03] Speaker 02: Normally, when I see commercialization, you're talking about business activity and a move towards opening or creating business opportunities. [00:16:15] Speaker 02: Your opponent is saying that in the midst of these discussions, you had access to the source code. [00:16:21] Speaker 02: It's all focused on their technology. [00:16:25] Speaker 02: If you borrowed that technology or enhanced on it, why would that not give rise to jurisdictions? [00:16:33] Speaker 03: it would give rise to jurisdiction because the whole premise of that analysis is, in my view, in error. [00:16:41] Speaker 03: One, it's in error because any business relationship, and this is characterized by digital allies declarations in the lower court as a proposed business relationship. [00:16:51] Speaker 03: Any business relationship, there's gonna be some information exchanged between the parties. [00:16:55] Speaker 02: But if that's commercial information, then that's one thing. [00:16:57] Speaker 02: But if you're looking at the very core of a technology like source code, [00:17:03] Speaker 02: Would that not be something else? [00:17:05] Speaker 03: I don't believe so because in the commercial context, and in this context specifically, the point of the proposed business relationship was to take a product that Digital Ally had and add a component that Utility had. [00:17:18] Speaker 03: The two parties would come together, build a common product that would then be resold through Digital Ally's three sellers. [00:17:26] Speaker 03: So I think in a common situation you're going to have, [00:17:30] Speaker 02: Then later on, you get that information, you get what you added, what Digital Alley contributed, you put it together and now you're sending letters to customers, potential customers to other states saying watch out for the competitive product, they may be infringing. [00:17:51] Speaker 03: Well, notably the letters do not mention Digital Ally. [00:17:54] Speaker 03: They don't mention any of the products. [00:17:56] Speaker 03: There's no technical information relating to Digital Ally. [00:17:58] Speaker 02: How many companies are involved in this technology? [00:18:00] Speaker 03: In this particular technology, I couldn't tell you offhand. [00:18:03] Speaker 03: I can certainly say there's more than just the two parties that are represented here, certainly, in the technology that's at issue. [00:18:11] Speaker 03: But I couldn't give you an accurate count on how many. [00:18:14] Speaker 02: But it certainly... The letters were sent to states that were customers of digital reality, correct? [00:18:22] Speaker 03: If we accept the facts on their face, then that would be correct, as pled in the lower court by a digital ally. [00:18:30] Speaker 03: And that's their allegation that those are their customers. [00:18:32] Speaker 03: But again, the letters themselves mention nothing about Digital Ally. [00:18:37] Speaker 03: They don't mention any products. [00:18:38] Speaker 03: So let's go through the second error that is the premise of the argument that Digital Ally is making is that there was some nefarious conduct that was taking place at the time that utility and Digital Ally were having discussions for this proposed business relationship in 2010 and 2011. [00:18:56] Speaker 03: That for some reason, there was a motive that was [00:18:59] Speaker 03: all along, and this is all wild speculation, there's nothing in the record to support this, that the utility all along had this motive that it would require this kind of information. [00:19:10] Speaker 02: They may be asserting that, but really what they're trying to do is say, give us the opportunity to present this theory in court. [00:19:18] Speaker 02: And that's what's been denied them. [00:19:23] Speaker 02: They want the opportunity to get the declaratory action. [00:19:27] Speaker 03: Right, agreed. [00:19:29] Speaker 03: To get to that point, the issue of force before the court is whether or not it's proper to bring that action in Kansas. [00:19:38] Speaker 03: But there's no facts that would support that it would be proper to bring that action in Kansas because there's been no threat of litigation in Kansas. [00:19:45] Speaker 03: There's been no enforcement efforts whatsoever in Kansas based on that patent. [00:19:51] Speaker 03: And the contacts that are being relied on occurred well over a year prior to the patent even being acquired by the utility. [00:19:58] Speaker 03: There's just no, this court has said there has to be a material relationship between the acts and the calls of action. [00:20:07] Speaker 03: Here we've got these tenuous random fortuitous acts, if you will, in the sense of the Supreme Court saying in Burger King, those aren't allowed. [00:20:14] Speaker 03: These are the types of acts that are now being asserted as having a material relationship to the patent and to the calls, excuse me, to the calls of action. [00:20:24] Speaker 03: And I'll also say the calls of action here is one of non-imprisonment, is to clear the air of [00:20:28] Speaker 03: a wrongful allegation of infringement. [00:20:31] Speaker 03: I don't know how you can clear the air of a wrongful allegation of infringement if there's never been one made. [00:20:36] Speaker 03: So that alone, I guess, shows the disconnect between the cause of action and the acts that are being relied on to support that personal jurisdiction based on those calls, a specific jurisdiction here. [00:20:51] Speaker 03: One further step in this whole analysis is that there has to be some foresealed, let me back up, [00:20:57] Speaker 03: Perceivability is a linchpin of the personal jurisdiction analysis of the Burger King court, Supreme Court, and Burger King said that there has to be reasonable foreseeability for the defendant to be held into the court in that jurisdiction based on the acts. [00:21:21] Speaker 03: Here, if we were to accept the facts, if we were to take the facts and say that specific jurisdiction could be drawn out of [00:21:28] Speaker 03: a point in time when the defendant here in utility had no, had no, did not have the patent, it's impossible to have foreseeability that acts on a business relationship would somehow trigger a cause of action for non-infringement when it had never even acquired that patent. [00:21:50] Speaker 03: So the foreseeability, there's no foreseeability, I should say. [00:21:55] Speaker 03: It's just not there. [00:21:56] Speaker 03: It's impossible to have it. [00:21:58] Speaker 03: Again, this goes back to, in a sense, wild speculation on the part of the appellant. [00:22:08] Speaker 03: I'll submit that the specific jurisdiction cannot be based on wild speculation, nor can it be based on continuous context. [00:22:15] Speaker 03: I don't have any further questions. [00:22:19] Speaker 03: Thank you very much. [00:22:27] Speaker 02: You have four minutes, Mr. Seitz. [00:22:29] Speaker 02: Thank you. [00:22:33] Speaker 00: Your Honor, I just want to point out a few things and then give the rest of my time to questions if there are. [00:22:38] Speaker 00: You asked a question about the letters and some of the customers and allegations of infringement. [00:22:42] Speaker 00: I wanted to make sure you had a clear citation for the record. [00:22:46] Speaker 00: The letters that were sent to New York, there's emails from New York back to my client Digital Ally saying, [00:22:51] Speaker 00: Is this you? [00:22:52] Speaker 00: Is this a problem with infringement? [00:22:54] Speaker 00: That's an A49. [00:22:55] Speaker 02: Were you the only customer to these states on this type of technology? [00:23:01] Speaker 00: Yes. [00:23:02] Speaker 00: I'm not certain I have that in the record, John. [00:23:04] Speaker 00: And I'm failing to draw a citation to it. [00:23:05] Speaker 00: If you look at the Heckman Declaration at A359, he talks about the length of their relationship and the amount of sales that they had made to Nebraska, for example, which included every product that Digital Ally sells for a very significant length of time. [00:23:21] Speaker 00: There's a declaration from a Captain Stern with the Verona Police Department at A419 who says they received a letter and the first thing they thought was that it was an allegation of infringement against Digital Ally. [00:23:34] Speaker 00: And then there's an email from Traverse City, Michigan at A410 where they reached out to Digital Ally and said, we have received this letter. [00:23:41] Speaker 00: We can't continue in order with you because of these infringement allegations. [00:23:46] Speaker 00: And Your Honor, I'm not asking, or Your Honors, I'm not asking for there to be some finding that this is nefarious conduct at this point. [00:23:52] Speaker 00: I would like the opportunity to try and prove that. [00:23:55] Speaker 00: But what we're saying at this point is that there is enough in the record to look and see that there were technical information that was exchanged during those meetings for a significant period of time, and that in the context of a motion to dismiss here for personal jurisdiction, it's a reasonable inference that can be taken in our favor, that at the point [00:24:13] Speaker 00: That information was used as part of the infringement allegations. [00:24:17] Speaker 00: It became enforcement activity that gives rise to specific jurisdiction. [00:24:21] Speaker 00: And the only other thing I have that I do want to raise on the estoppel issue, there's a case that I found that we failed to cite in our brief specifically relating to whether you can impute the contacts of a predecessor corporation to a successor corporation for purposes of jurisdiction. [00:24:38] Speaker 00: That's Purdue Research Foundation, the Sanofi, [00:24:41] Speaker 00: F3D773, it's a Seventh Circuit case from 2003, where they cite the Fifth Circuit and Tenth Circuit cases saying several courts have recognized that the jurisdictional context of a predecessor corporation may be imputed to the successor corporation without offending due process. [00:24:59] Speaker 01: How? [00:25:01] Speaker 00: Privity? [00:25:02] Speaker 00: You would need to establish privacy. [00:25:05] Speaker 01: I mean, it's a very fact-specific... I didn't see you identify who the predecessor in interest [00:25:10] Speaker 01: was in this particular case. [00:25:13] Speaker 00: That's right, Your Honor. [00:25:13] Speaker 00: It was not something that we included as part of Mr. Heckman's declaration. [00:25:17] Speaker 00: We responded to what we thought was the non-affranchisement aspect. [00:25:21] Speaker 01: Do you know who it is? [00:25:22] Speaker 00: Yes, I do. [00:25:23] Speaker 00: It's Integrient Systems, one of the previous assignees in the assignment history. [00:25:29] Speaker 01: Are they in privity with utility? [00:25:32] Speaker 00: I don't have access to the information that the utility has as far as the purchase agreement there. [00:25:38] Speaker 00: That was not provided as part of any jurisdictional discovery at this point.