American Patents LLC v. Mediatek, Inc. et al

Western District of Texas, txwd-6:2018-cv-00339

Response in Opposition to Motion, filed by American Patents LLC, re 44 MOTION to Dismiss for Lack of Jurisdiction, and Improper Venue filed by Defendant Lenovo (Shanghai) Electronics Technology Co. Ltd., Defendant Lenovo Group Ltd.

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3 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION AMERICAN PATENTS LLC, Plaintiff, v. CIVIL ACTION NO. 6:18-CV-339 MEDIATEK INC., ET AL., JURY TRIAL DEMANDED Defendants. AMERICAN PATENTS' OPPOSITION TO LENOVO'S MOTION TO DISMISS FOR IMPROPER SERVICE OF PROCESS, LACK OF PERSONAL JURISDICTION, AND IMPROPER VENUE 3 TABLE OF CONTENTS I. INTRODUCTION ...................................................................................................................1 II. FACTUAL BACKGROUND .................................................................................................1 A. Lenovo Group Is a Global Operating Company with a U.S. "Operational Center," Employees, and Sales. ....................................................................................................1 B. Lenovo Shanghai Ships Products into the United States and Is the Registrant for U.S. Safety Certifications. ......................................................................................................3 C. Lenovo Group Wholly Owns and Controls Lenovo Shanghai and Lenovo (U.S.), Which Sell Products Directly to U.S. Consumers, Including in Texas. .........................4 III. LEGAL STANDARD .............................................................................................................5 IV. THIS COURT HAS PERSONAL JURISDICTION OVER LENOVO..................................5 A. This Court Has Specific Jurisdiction Under a Stream of Commerce Theory. ................5 1. Lenovo Puts the Accused Products into the Stream of Commerce with the Expectation They Will Be Sold in Texas. ..............................................................5 2. Lenovo's Cases Are Easily Distinguished. .............................................................9 3. Trying American Patents' Claims Against Lenovo in This Court Does Not Offend Traditional Notions of Fair Play and Justice. ....................................10 B. This Court Also Has Specific Jurisdiction Under an Agency Theory ..........................12 C. An Alternative Basis for Personal Jurisdiction Lies Under Rule 4(k)(2) .....................13 D. Otherwise, Jurisdictional Discovery Is Warranted........................................................14 V. SERVICE ON LENOVO WAS PROPER ............................................................................15 A. Texas Law Allows for Substituted Service on Lenovo.................................................15 B. The Secretary of State Properly Forwarded the Summons and Complaint to Lenovo.......................................................................................................................16 C. Because Service Culminated Domestically, The Hague Convention Does Not Apply.............................................................................................................17 D. Lenovo's Cases Are Distinguishable ............................................................................18 E. Alternatively, the Court Should Permit Service by Other Means .................................19 VI. VENUE IS PROPER IN THIS DISTRICT ...........................................................................20 VII. CONCLUSION .....................................................................................................................20 i 3 I. INTRODUCTION On a motion to dismiss, and before any discovery is taken, American Patents' burden is to make only a prima facie case that this Court has personal jurisdiction over defendants Lenovo Group, Ltd. and Lenovo Shanghai (collectively, "Lenovo"). That burden is easily met here. Lenovo Group's own public statements make clear that it is involved in the manufacture, marketing, and sale of the products at issue in this lawsuit, it has employees and offices in the United States, and it has made billions of dollars from the sale of these products in the United States. Lenovo Shanghai ships products to the United States and is the applicant for crucial United States certifications needed to sell the accused Lenovo products here. And those products are ultimately shipped to Lenovo Group's wholly owned U.S. subsidiary for distribution nationwide. Having placed the accused products into established distribution channels throughout the U.S. (including in Texas), Lenovo is subject to this Court's personal jurisdiction. II. FACTUAL BACKGROUND Lenovo relies on a sole fact declarant, Kurt Cranor. Yet Mr. Cranor is not even an employee of Lenovo Group or Lenovo Shanghai. Rather, he is an employee of Lenovo (U.S.), in North Carolina. (Cranor Decl. ¶ 1.) Indeed, his knowledge about the operations of movants should be questioned, as statements in his declaration are demonstrably incorrect.1 Contrary to his declaration, Lenovo Group and Lenovo Shanghai have a direct presence in the United States. A. Lenovo Group Is a Global Operating Company with a U.S. "Operational Center," Employees, and Sales. Mr. Cranor claims Lenovo Group is a mere "holding company." (Cranor Decl. ¶ 2.) But Lenovo Group's own 2017/18 Annual Report shows that it is actually a multinational operating company that is deeply involved in the manufacture and sale of the accused products: • "Lenovo (HKSE: 992) (ADR: LNVGY) is a US$45 billion Fortune 500 company with a vision to become the global leader in Intelligent Transformation through smart 1 Even worse, Lenovo refused to offer Mr. Cranor for a limited deposition on jurisdictional facts, preventing American Patents from testing the extent of Mr. Cranor's personal knowledge. (Declaration of Larry D. Thompson, Jr. ("Thompson Decl."), Exh. A.) 1 3 devices and infrastructure that create the best user experience," (Thompson Decl., Exh. B at iii); • "Lenovo manufactures one of the world's widest portfolio of connected products, including smartphones (Motorola), tablets, PCs (Thinkpad, Yoga, Lenovo Legion) and workstations as well as AR/VR devices and smart home/office solutions," (id.); • "The Group operates globally. . ." (id. at 25); • "Lenovo's manufacturing operation is global, which allows us to tailor our products to regional markets." (Id. at 127). A mere "holding company" would not incur almost $6 billion (US) in operating expenses and take in over $45 billion (US) in revenue, as Lenovo Group reports for fiscal year 2017/2018. (Id. at 35.) Nor would mere "holding company" have "a headcount of more than 54,000 worldwide." (Id. at 43.) Contrary to Mr. Cranor's representation that Lenovo makes no United States sales, Lenovo's Annual Report boasts over $14 billion in sales for the "Americas Group." (Id. at 210.) Notably, these are listed as Lenovo sales, not Lenovo (U.S.) sales. Likewise, Lenovo represents that 31% of its revenue is attributed to the Americas. (Id. at 22.) Lenovo also represents to its investors that it is actively engaged in business in the United States. For example, the Annual Report states "Lenovo currently conducts more than US$120 million in business annually with small and/or certified diverse suppliers in the United States." (Id. at 130.) Lenovo also represents that it has no offices in the United States. (Cranor Decl. ¶ 4.) Yet Lenovo Group's website states it is a "global company. . . with operational centers located strategically around the world." (Id., Exh. C.) One of Lenovo Group's three "Operational Centers" is listed as being in Morrisville, North Carolina. (Id.) Lenovo states it has no employees in the United States. (Cranor Decl. ¶ 4.) Again, this statement is belied by Lenovo's own website. Under "Management," the website includes and Matthew Zielinski, Laura Quatela, and Kurt Skaugen. (Thompson Decl., Exh. D.) Mr. Zielinski is "President of North America at Lenovo Group Ltd." and Ms. Quatela is "Chief Legal Officer and Senior Vice President of Lenovo Group Limited." (Id., Exh. E). Both operate out of North Carolina. (Id., Exh. F.) Similarly, Lenovo Group's Annual Report lists Kurt Skaugen as 2 3 "Executive Vice President of the Company and President of the Data Center Group." (Id., Exh. B, at 146.) Mr. Skaugen also operates out of North Carolina. (Id., Exh. F.) Lenovo's website allows searching for jobs with Lenovo worldwide, including in Texas. A recent visit showed eight jobs listed in Dallas and Houston, including a Corporate Account Executive with responsibility for "delivering net new account wins across the corporate account segment in the Houston territory." (Id., Exh. G.) Neither the "Careers" landing page nor the specific job posting mention Lenovo (United States.); rather, they tout things like "Lenovo is a $40B+ company with customers in more than 160 countries." (Id., Exhs. H, G-2, -3.) Lenovo Group's Annual Report also treats employees of Lenovo (U.S.) as employees of Lenovo Group. For example, the report recognizes that "[t]he Group operates a number of post- employment medical benefit schemes, the largest being in the United States." (Id., Exh. B at 194.) Likewise, Lenovo states: "We are also an Affirmative Action – Equal Opportunity Employer in the United States." (Id. at 134.) B. Lenovo Shanghai Ships Products into the United States and Is the Registrant for U.S. Safety Certifications. Mr. Cranor also claims that neither Lenovo Group nor Lenovo Shanghai "ship the accused products into the United States." (Cranor Decl. ¶ 4.) Yet import records clearly list Lenovo Shanghai as the "shipper" for hundreds of Lenovo computer products shipped to the United States from 2012 to 2019. (Id., Exh. I.) The assertion that Lenovo (U.S.) is responsible for "all U.S. activities relating to the accused products" (Cranor Decl. ¶ 4) is similarly false, because Lenovo Shanghai is listed as the registrant for UL and FCC certifications in the United States. The UL listing number for the United States and Canada (E302238) and the FCC ID (O57TB8504F) are both clearly visible on the back of one of the accused Lenovo products, the Tab 4 8 (Model Lenovo TB-8504F). (Thompson Decl., Exh. J.) The same UL listing number corresponds to Lenovo Shanghai, the registrant for UL filings for a variety of Lenovo products, including the infringing Tab 4 8. (Id., 3 3 Exh. K.) Similarly, the FCC ID (O57TB8504F) corresponds to the FCC record for that product, again listing Lenovo Shanghai as the applicant. (Id., Exh. L, at 5, 7.) C. Lenovo Group Wholly Owns and Controls Lenovo Shanghai and Lenovo (U.S.), Which Sell Products Directly to U.S. Consumers, Including in Texas. Lenovo attempts to downplay its corporate relationships by referring to Lenovo (U.S.) vaguely as an "affiliate" of Lenovo Group and Lenovo Shanghai. (Cranor Decl. ¶ 3.) But Lenovo (U.S.) and Lenovo Shanghai are actually wholly owned subsidiaries of Lenovo Group. (Thompson Decl., Exhs. B, at 264; Dkt. 45.) Lenovo's Annual Report reveals that the "principal activities" of Lenovo (U.S.) consist of "[d]istribution of IT products." (Id., Exh. B at 264.) Similarly, Lenovo Shanghai's principal activities are listed as "[d]istribution of IT products and provision of IT services." (Id. at 259.) Lenovo Group, Lenovo (U.S.), and Lenovo Shanghai are indistinguishable to consumers. For example, a Google search for any of the three companies leads to the Lenovo.com website, where Lenovo products are advertised and where the United States and Shanghai offices are both listed as part of Lenovo's "worldwide operations." (Thompson Decl. ¶ 15 and Exh. C.) Similarly, a Google search for "Lenovo United States management" and "Lenovo Shanghai management" both lead to the same list of Lenovo's CEO and high-level managers. (Thompson Decl. ¶ 15 and Exh. D.) The only Lenovo-related entity to file an Annual Report is Lenovo Group, and those reports are available on Lenovo.com. Lenovo publicly states in its Annual Report that it is the company behind Lenovo's U.S. sales. Lenovo Group and Lenovo (U.S.) identify and advertise themselves interchangeably as Lenovo to promote Lenovo products. Lenovo holds itself out as a "global brand" with a "global supply chain" and "global service." (Id., Exh. B, at 10, 32, 34, 44.) To this end, Lenovo products are sold from national resellers, retailers in Texas, and on Lenovo's own website, Lenovo.com. For instance, one of the accused products, the Tab 4 8, is sold by Amazon nationwide. (Id., Exh. N.) This product can also be purchased from the Houston location of the retailer MicroCenter, which operates in sixteen states, including two 4 3 locations in Texas. (Id. ¶ 17, Exh. O.) It is also available for purchase directly from Lenovo's website. (Id., Exh. P.) A related accused product, the Tab 4 10, is available for pickup in-store at a Walmart in Waco. (Id., Exh. M.) And "Lenovo branded hardware, software, and related services" are sold to the State of Texas itself. (Id., Exhs. Q.) III. LEGAL STANDARD To survive a motion to dismiss for lack of personal jurisdiction, American Patents need establish only a prima facie case for jurisdiction. The Court may make the determination without an evidentiary hearing, resolving all factual disputes concerning the complaint's allegations or the parties' evidentiary submissions in American Patents' favor. Johnson v. The Berkley Group, Inc., No. A12CV1184LY, 2013 WL 12130296, at *2 (W.D. Tex. July 2, 2013) (citing Luv N' Care, Ltd. v. Insta–Mix. Inc., 438 F.3d 465, 469 (5th Cir. 2006)). The law of the Federal Circuit applies to the question of whether a court has personal jurisdiction over a defendant in a patent case. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564-65 (Fed. Cir. 1994). A court has personal jurisdiction so long as it comports with Texas's long-arm statute and with due process. "Under the Texas long-arm statute, a court has personal jurisdiction over a foreign defendant to the fullest extent allowed by the federal constitution," Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208, 213 (5th Cir. 2000), so in Texas, these two inquiries collapse into one. In order to comport with due process, the assertion of jurisdiction must be based on sufficient "minimum contacts" with the forum state, and not offend "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). IV. THIS COURT HAS PERSONAL JURISDICTION OVER LENOVO A. This Court Has Specific Jurisdiction2 Under a Stream of Commerce Theory. 1. Lenovo Puts the Accused Products into the Stream of Commerce with the Expectation They Will Be Sold in Texas. 2 American Patents does not contend that the Court has general jurisdiction over Lenovo. 5 3 At minimum, this Court has jurisdiction over Lenovo under the "stream of commerce" theory of personal jurisdiction. Under that theory, when a foreign company uses its distribution network to sell infringing products in a forum, it is subject to jurisdiction in that forum. The theory focuses on whether a defendant places a product within the stream of commerce, as part of efforts "to serve, directly or indirectly, the market for its product." World-Wide Volkswagen Corp. v. Woodson ("Volkswagen"), 444 U.S. 286, 297 (1980). Foreign defendants cannot escape the jurisdiction of U.S. courts simply by using their subsidiaries and other companies to sell their products here: the court properly "asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state." Id. at 297-98 (emph. added). Thus, "a prima facie showing of purposeful entry into the Texas stream of commerce is established by showing that the defendant's products were sold into a nationwide distribution network and that the products were available in Texas." IDQ Operating, Inc. v. Aerospace Communications Holdings Co., Ltd., 6:15-CV-781, 2016 WL 5349488, at *4 (E.D. Tex. June 10, 2016) (emph. added).3 Lenovo disputes the application of the stream of commerce theory by asserting it does not manufacture or ship the products in or into the United States, and is not responsible for "U.S. activities." (Mtn. at 13, 15.) Not so. Lenovo Group actively controls the manufacture and distribution of the accused products worldwide, and Lenovo Shanghai ships accused products here, and obtains necessary certifications for their sale in this country. Lenovo Shanghai is 3 Fifth Circuit law does not require that a defendant take some action purposefully directed toward the forum State, in addition to placing its product in the stream of commerce knowing that it would be used or sold in the forum state, for personal jurisdiction to exist. See Ham v. La Cienega Music Co., 4 F.3d 413, 416 (5th Cir. 1993) ("Absent rejection by a majority on the Supreme Court, we have continued to apply the stream of commerce analysis found in our pre- Asahi cases."); see also Irving v. OwensCorning Fiberglas Corp., 864 F.2d 383, 386 (5th Cir. 1989) ("Because the Court's splintered view of minimum contacts in Asahi provides no clear guidance on this issue, we continue to gauge [defendant's] contacts with Texas by the stream of commerce standard as described in World-Wide Volkswagen and embraced in this circuit."). Where an appellate court has not resolved an issue subject to its law, this Court has applied Fifth Circuit law. See Vasquez v. Hankook Tire Am. Corp., No. EP-00-CA-EP, 2000 WL 33348223, at *3-4 (W.D. Tex. Sept. 14, 2000). 6 3 responsible for obtaining necessary and important United States certifications through UL and the FCC, availing itself of the benefits and protections of those marks by certifying the products' safety to retailers and consumers. Lenovo Group touts its North Carolina office as one of three "Operational Centers," and at least three of its top executives are based out of North Carolina with responsibility over U.S. operations. Thus, Lenovo Group and Lenovo Shanghai directly serve the United States market for the accused products through these activities. Even if Lenovo's assertions were true—and there is ample evidence that they are not—its position hinges on the faulty premise that jurisdiction cannot be found over a company that has no physical presence in, and does not directly import into, the United States. Not so. Even where "the foreign manufacturer ha[s] no license for doing business in the forum, no assets, employees, or agents for service of process in the forum, and no direct sales in the forum … exercise of jurisdiction [is] proper [where] the manufacturer purposefully shipped products through an established distribution channel with the expectation that those products would be sold in the forum." Nuance Communications, Inc. v. Abbyy Software House, 626 F.3d 1222, 1233 (Fed. Cir. 2010). Indeed, Lenovo's activities abroad and here are part of Lenovo's "global supply chain" that places the accused products into established distribution channels with the expectation they will ultimately be sold throughout the United States, including in Texas. Lenovo Shanghai works in concert with Lenovo (U.S.), whose connections with the United States are uncontested; and its function is the "distribution of IT products." (Thompson Decl., Exh. B at 264.) Lenovo Group then widely publicizes sales in the U.S. market, including to small and diverse suppliers, to investors. For instance, its Annual Report boasts over $14 billion in sales for the "Americas Group" (not for Lenovo (U.S)). (Id. at 210.) Lenovo's knowledge that the accused products are sold in the United States, and its use of a specially created U.S. subsidiary to sell them here, supports this Court's exercise of personal jurisdiction over Lenovo. Nuance Communications, 626 F.3d at 1231 (holding that district court erred in dismissing for lack of personal jurisdiction a 7 3 Russian accused infringer that had intentionally set up a U.S. sister corporation to act as its distributor of the accused software product). And the accused products are in fact sold in Texas to end-users, by way of Lenovo's concerted, purposeful efforts to widely sell and distribute their products in this forum. Lenovo's products are sold to the State of Texas itself. The accused products are also sold nationwide to consumers through sites like Amazon.com and Lenovo.com, and are also available for purchase at MicroCenter in Houston and Walmart in Waco, among other locations. And when accused products are sold by major national retailers, including in Texas, courts routinely hold that distribution channels have been established to sell the infringing products in Texas: • Denman Tire Corp. v. Compania Hulera Tornel, S.A. De C.V., No. DR-12- CV-027-AM/VRG, 2014 WL 12564118, at *10 (W.D. Tex. Mar. 31, 2014) (where defendant admitted that its products were sold "anywhere," including in Texas, the court found "it was aware of, or it could reasonably foresee, that the tires it manufactured. . . would wind up in the Texas market for sale to its consumers"); • GSK Technologies, Inc. v. Schneider Elec., S.A., No. 606CV361, 2007 WL 788343, at *2 (E.D. Tex. Mar. 14, 2007) (when defendants operating under a common brand name purposefully placed infringing products in the stream of commerce, and they were found for sale at major retailers in Texas, plaintiff sufficiently alleged stream of commerce theory of personal jurisdiction); • IDQ Operating, supra, 2016 WL 5349488, at *4 (holding that where defendant "does not dispute that it sells its products to Wal-Mart, a nationwide retailer, and that Wal-Mart sells the products 'everywhere,' including Texas," plaintiff "met its burden of making a prima facie showing that ACH placed its products into the stream of commerce with knowledge and an intention that they be sold in Texas"). In fact, nearly one-tenth of MicroCenter's stores are in Texas, making it especially likely that a Lenovo product sold through that store will be sold here. (See Thompson Decl., ¶ 17.) So Lenovo cannot deny that it places the accused products in an "established distribution channel with the expectation that those products would be sold in the forum." Nuance Communications, supra, 626 F.3d at 1233. Lenovo has further directed their activities here through their sale of accused products in this forum—and indeed Lenovo seeks to strengthen those sales through its search for Texas sales executives, including sales representatives that must be located in Texas. (Exh. G-3.) And, the accused products are in fact sold in Texas, so 8 3 Lenovo's activities are related to the claims in this action. Absolute Software, Inc. v. World Computer Sec. Corp., No. A-09-CA-142-LY, 2009 WL 10678335, at *6 (W.D. Tex. Dec. 2, 2009) (holding specific jurisdiction existed over out-of-state defendant who operated a website providing information about the accused products and who, through its sales and distribution partner, sold the infringing product in the forum). 2. Lenovo's Cases Are Easily Distinguished. Rather than refute jurisdiction by alleging specific facts, Lenovo instead relies heavily on a number of cases. Yet none of these cases help Lenovo because they are all easily distinguishable from the facts at hand. Lenovo relies on Nespresso USA, Inc. v. Ethical Coffee Co. SA, 263 F. Supp. 3d 498, 504 (D. Del. 2017) and Univ. of Massachusetts Med. Sch. v. L'Oreal S.A., 2018 WL 5919745, at *10 (D. Del. Nov. 13, 2018). But in both cases, the U.S. subsidiaries were solely responsible for the design, manufacturing, and marketing of the accused products, and plaintiffs' assertion of jurisdiction against the foreign parent companies rested solely on the parent-subsidiary relationship. Id. Here, in contrast, the evidence shows that the foreign Lenovo defendants are responsible for manufacturing, branding, and marketing Lenovo products and for introducing them into the domestic stream of commerce. Silicon Labs., Inc. v. Cresta Tech. Corp., 2014 WL 3530817, at *3 (W.D. Tex. July 14, 2014) is easily distinguishable as well. CrestaTech, an out of state defendant, made component parts that it sold to a manufacturer (Haugppage), who then distributed the final products to major retail stores. The court found no personal jurisdiction over CrestaTech because it did not itself place its products into the stream of commerce; rather, it sold them to Haugppage, an unaffiliated company. Id. But Lenovo is not a parts manufacturer who sells chips to the ultimate product manufacturer; it is the product manufacturer, who is responsible for distributing the accused products into marketplaces nationwide, including Texas. Lenovo also cites to Auto Wax, Inc. v. Kasei Kogyo Co., 2001 WL 1891719, at *2 (W.D. Tex. Sept. 26, 2001). In that case, the defendant foreign manufacturer sold its products to a 9 3 third-party customer in California, who in turn sold the products to its customers in Texas. The evidence demonstrated that defendant's involvement in the U.S. ended when it shipped products to an unrelated company in California. Here, Lenovo Shanghai ships the products to its own affiliates in the United States, with the intention that they be sold in nationwide retailers, including in Texas. So Lenovo's distribution of products to the United States is not the end of its involvement. It is instead a crucial step in its "global supply chain" to ultimately sell the products to domestic customers. 3. Trying American Patents' Claims Against Lenovo in This Court Does Not Offend Traditional Notions of Fair Play and Justice. The cases in which personal jurisdiction offend traditional notions of fair play and substantial justice "are limited to the rare situations in which the plaintiff's interest and the state's interest in adjudicating the dispute in the forum are so attenuated that they are clearly outweighed by the burden of subjecting the defendant to litigation in the forum." Beverly Hills Fan, supra, 21 F.3d at 1568. This is not such a case. Lenovo presents little evidence as to any burden on it. Rather, it argues that "Plaintiff would have to travel to China to depose" witnesses. (Mtn., at 16.) But whether Plaintiff must travel abroad is of no bearing on the burden to Lenovo. Nor are Motion Games, LLC v. Nintendo, 2014 WL 5306961 (E.D. Tex., Oct. 16, 2014) or In re Outsidewall Tire Litigation, 267 F.R.D. 466 (E.D. Va. 2010) helpful to Lenovo. Neither case involved whether defendants were subject to personal jurisdiction; instead, they were discovery disputes about where to take depositions. In fact, Lenovo does not cite a single case where personal jurisdiction turned on the location of future depositions. And Lenovo's argument that American Patents has no interest in litigating in Texas is absolutely false. American Patents is a Texas LLC with its principal place of business in Tyler, and is managed by a lifelong Texas resident. (See Dkt. 1, ¶ 2; Dkt. 44-7, 44-8.) In Absolute Software, 2009 WL 10678335, at *7, this Court held that where plaintiff's main office in the country was in Texas, "[t]hat fact alone demonstrates their interest in adjudicating this dispute in 10 3 Texas." In re Zimmer, 609 F.3d 1378, 1381 (Fed. Cir. 2010) is thus not on point, because in that case, defendant's motion to transfer venue from Texas to Michigan was granted where plaintiff was a Michigan corporation with its registered office in Michigan and both corporate officers were residents of Michigan.4 The interest of Texas here is also great because American Patents is a Texas company asserting the violation of its property rights. See Absolute Software, supra, 2009 WL 10678335, at *7; Denman Tire Corp. supra, 2014 WL 12564118, at *11 (traditional notions of fair play and substantial justice were not offended by requiring the manufacturer of goods that are sold to Texas consumers to submit to personal jurisdiction in that district). In any event, the Federal Circuit gives little weight to this factor where, as here, the foreign defendant has ties with its U.S. distributor. For instance, in Nuance Communications, supra, 626 F.3d at 1234, like in this case, the foreign manufacturer established a distribution system with its domestic subsidiary and knew the destination of its products. The court thus held that the foreign party's "conduct and connections with the forum state were such that it should have reasonably have anticipated being brought into court there." Id. The court also found that the fact that the foreign and domestic parties shared counsel and operated under a Global Management Team "should ameliorate any possible burden of litigating in" the United States. Id. In this case as well, the parties share counsel, operate under a global management structure, and Lenovo Group has employees in this country, all of which ameliorate any possible burden of litigating here. See also Gerber Sci. Int'l, Inc. v. Roland DGA Corp., No. 3:06-CV-2024, 2010 WL 3928071, at *6 (D. Conn. Sept. 20, 2010) (the burden on a foreign defendant to litigate in Connecticut was not too great where the defendant had applied for patents and retained counsel in the United States, and where its employees routinely traveled to the United States). 4 Similarly, in In re Microsoft Corp., 630 F.3d 1361, 1362 (Fed. Cir. 2011), plaintiff operated the business from the U.K, not Texas. 11 3 B. This Court Also Has Specific Jurisdiction Under an Agency Theory. The United States Supreme Court has recognized that agency relationships are relevant to the existence of specific jurisdiction: "A corporation can purposefully avail itself of a forum by directing its agents or distributors to take action there." Daimler AG v. Bauman, 571 U.S. 117, 135 n.13 (2014). As opposed to the alter ego theory,5 the agency theory does not treat the parent and subsidiary as one entity, "but rather attributes specific acts to the parent because of the parent's authorization of those acts." Cephalon, Inc. v. Watson Pharm., Inc., 629 F. Supp. 2d 338, 348 (D. Del. 2009). "The agency theory may be applied not only to parents and subsidiaries, but also to companies that are 'two arms of the same business group,' operate in concert with each other, and enter into agreements with each other that are nearer than arm's length." Id. Finally, the Court need not find that corporate formalities were violated in order to exercise specific jurisdiction based on the ties between entities. See, e.g., Oakley, Inc. v. Jofa AB, 287 F.Supp. 2d 1111, 1116 (C.D. Cal. 2003) (denying foreign holding company's motion to dismiss for lack of personal jurisdiction where the company acted in concert with its subsidiaries to serve the market of the forum state by designing the infringing products and encouraging the sale and distribution of those products). American Patents alleges that the Lenovo Defendants "are part of the same corporate structure and chain for the making, importing, offering to sell, selling, and/or using of the accused products in the United States," and "operate as a unitary business venture." (Dkt. 1 ¶¶ 17, 19.) The Annual Report describes a "global" company, with Lenovo (U.S.) operating in concert with and at the direction of Lenovo Group to sell Lenovo products in worldwide markets, including in this country. Publicly available information reveals essentially no distinction in 5 Lenovo's brief lumps the agency and alter ego theories together, although they are subject to different analyses. Thus, for instance, the "exhaustive multifactor analysis" Lenovo describes is only for alter ego theory. Gundle Lining Constr. Corp. v. Adams Cnty. Asphalt, Inc., 85 F.3d 201, 208 (5th Cir. 1996). And in Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 447 F.3d 411, 416 (5th Cir. 2006), although the court did note that alter ego theory is "reserved for exceptional cases," it said no such thing about the agency theory. Id. 12 3 corporate management with any Lenovo Defendants. (Thompson Decl. ¶ 15 and Exh. C.) Likewise, there is little or no distinction in branding or marketing through the Lenovo website. These facts all refute Lenovo's cursory and unsupported contention that the Lenovo Defendants have "merely an ordinary corporate affiliate relationship" with each other. (Mtn., at 11.) Rather, the facts support the finding of an agency relationship, where the Lenovo (U.S.) operates at less than arm's length with Lenovo Group—and at Lenovo Group's direction to sell products here, at least through Lenovo Group's head of North America operations. See Cephalon, 629 F. Supp. 2d at 348 (subsidiary's sales activities were attributed to the parent under the agency theory where parties had nearer-than-arm's-length relationship and operated in concert with respect to drug sales); In re Chinese-Manufactured Drywall Prod. Liab. Litig., 753 F.3d 521, 531 (5th Cir. 2014) (finding that subsidiary acted as parent's agent where parent capitalized, staffed, and had business dealings with subsidiary, and subsidiary held itself out to be same entity as parent). C. An Alternative Basis for Personal Jurisdiction Lies Under Rule 4(k)(2). Under Federal Rule of Civil Procedure 4(k)(2), "a federal district court may exercise personal jurisdiction over a foreign defendant for claims arising under federal law if the defendant has sufficient contacts with the United States as a whole, but does not have sufficient contacts to satisfy the due process concerns of the forum state's long-arm statute." Ruiz v. Martinez, No. EP-07-CV-078-PRM, 2007 WL 1857185, at *9 (W.D. Tex. May 17, 2007). Both the Fifth and Federal Circuits "have adopted an approach that places the burden on the defendant." Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1414 (Fed. Cir. 2009) (citing Adams v. Unione Mediterranea DI Sicurta, 364 F.3d 646, 651 (5th Cir.2004) and adopting approach for Fed. Circuit). Under that approach, if it is shown that defendant has sufficient national contacts, the burden is on the defendant to name a state in which the suit can proceed. Id. "[I]f the defendant contends that he cannot be sued in the forum state and refuses to identify any other where suit is possible, then the federal court is entitled to use Rule 4(k)(2)." Id. at 1415. This approach best achieves the goal of Rule 4(k)(2), which is to avoid the situation 13 3 where "defendants escap[e] jurisdiction in U.S. federal courts while still having minimum contacts with the United States." Id. Lenovo denies that it is subject to jurisdiction under this rule. But Lenovo clearly has minimum contacts with the United States as a whole. Lenovo's arguments otherwise are belied by the evidence presented above: that Lenovo Shanghai ships products here and registers them for important U.S. safety certifications with the UL and FCC; that Lenovo Group maintains an operational center and high-level employees in North Carolina, uses its wholly owned subsidiary to distribute products to national retailers, and touts those U.S. sales to the investing public. And despite Lenovo's presense in North Carolina, it denies that it would be subject to jurisdiction even there. Because Lenovo has minimum national contacts but has failed to identify any other state where this suit could have been brought, personal jurisdiction in this Court under Rule 4(k)(2)is appropriate. Ceats, Inc. v. Cont'l Airlines, No. 6:10CV120, 2011 WL 13137131, at *3- 4 (E.D. Tex. Mar. 29, 2011) (criticizing defendant's "gamesmanship" of refusing to concede jurisdiction in any state, and thus finding jurisdiction under Rule 4(k)(2) appropriate); Bluestone Innovations Texas, L.L.C. v. Formosa Epitaxy Inc., 822 F. Supp. 2d 657, 664 (E.D. Tex. 2011) (where plaintiff presented sufficient evidence to make a prima facie showing that defendant delivered its allegedly infringing products into the stream of commerce with the expectation that they would be purchased in the United States, but evidence was insufficient to establish contacts with Texas, court held it had personal jurisdiction under Rule 4(k)(2).) D. Otherwise, Jurisdictional Discovery Is Warranted. Even if the Court concludes that American Patents has not made the required prima facie showing, it would be premature to dismiss Lenovo for lack of personal jurisdiction without providing Plaintiff the opportunity to take jurisdictional discovery. This Court has held that "[i]f a plaintiff presents factual allegations that suggest with reasonable particularity the possible existence of the requisite contacts. . . the plaintiff's right to conduct jurisdictional discovery should be sustained." Next Techs., Inc. v. ThermoGenisis, LLC, 121 F. Supp. 3d 671, 676 (W.D. Tex. 2015) (quoting Fielding v. Hubert Burda Media, Inc., 415 F.3d 419, 429 (5th Cir. 2005)). 14 3 Thus, to the extent that any question remains about the issues above—including whether: (1) Lenovo was involved in the manufacture, sale, or marketing of the accused products, expecting that they would be sold in Texas; or (2) whether Lenovo (U.S.)'s sales of the accused products in Texas are authorized by its parent Lenovo Group—American Patents should be permitted to develop these facts through limited jurisdictional discovery.6 V. SERVICE ON LENOVO WAS PROPER As Lenovo recognizes, substituted service through the Texas Secretary of State is available on a foreign defendant that engages in business in this State. (Mtn., at 5.) American Patents properly effectuated service on Lenovo by serving the Texas Secretary of State, and the Secretary properly forwarded notice of the complaint and summons to Lenovo. And contrary to Lenovo's argument, recent U.S. Supreme Court law makes clear that where service culminates domestically, as occurred here, the Hague Convention does not apply. A. Texas Law Allows for Substituted Service on Lenovo. A plaintiff may serve a foreign corporation by "following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made." Fed. R. Civ. Proc. 4(h)(1)(A), 4(e)(1). In turn, Texas provide for substituted service on certain nonresidents through the Secretary of State: The secretary of state is an agent for service of process on a nonresident who engages in business in this state, but does not maintain a regular place of business in this state or a designated agent for service of process, in any proceeding that arises out of the business done in this state and to which the nonresident is a party. Tex. Civ. Prac. & Rem. Code § 17.044(b) (emphasis added). The Secretary "shall immediately mail a copy of the process to the nonresident at the address provided." Id. § 17.045(a). A defendant "engages in business" in the State when its contacts are sufficient for the court to exercise jurisdiction over it, which Lenovo acknowledges. (Mtn., at 8 ("This district has 6 A separate motion is not required. Buffer v. Grupo Radio Centro, S.A.B. De C.V., No. EP-10- CV-364-DB, 2011 WL 13238335, at *2 (W.D. Tex. Oct. 20, 2011) (granting leave to conduct jurisdictional discovery as requested in response to motion to dismiss). 15 3 analyzed whether a defendant engages in business under the Texas statute using a personal jurisdiction analysis."); see also Am. Express Centurion Bank v. Haryanto, 491 S.W.3d 337, 342 (Tex. App. 2016).) As discussed above, Lenovo's contacts with this forum are sufficient for this Court to exercise specific jurisdiction over it, and thus Lenovo "engages in business" pursuant to the statute. Further, Texas' long-arm statute explicitly defines certain acts in this state— including commission of a tort in whole or in part—as doing business in this State. Tex. Civ. Prac. & Rem. Code § 17.042. American Patents' allegations that Lenovo committed patent infringement in this district also satisfies the analysis. ATEN Intern. Co. Ltd. v. Emine Tech. Co., Ltd., 261 F.R.D. 112, 121 (E.D. Tex. 2009) ("Since patent infringement is a tort, the sale of [a defendant's] infringing products in Texas is sufficient evidence that [the defendant] was 'doing business' under the Texas service statute, and thus sufficient evidence to meet the service provision of Federal Rule of Civil Procedure 4(h)(1)(A)."). Lenovo is therefore a "nonresident who engages in business in this state. . . but does not maintain a designated agent for services of process." Tex. Civ. Prac. & Rem. Code § 17.044(b). Texas law thus provides that the secretary of state is an agent for service of process. B. The Secretary of State Properly Forwarded the Summons and Complaint to Lenovo. Lenovo makes the bizarre argument that it was not served because the Certificates of Service of record from the Secretary of State were not "actually a Certificate of Service." (Mtn., at 7.) Yet there can be no dispute that the record Certificates—documents that bear the signature and seal of the Texas Secretary of State, and his certification that a copy of the Summons and Complaint in this case was received by his office and forwarded by Registered Mail to Lenovo Shanghai and Lenovo Group—constitute Certificates of Service from the Secretary of State. (Dkt. 42.) To the extent Lenovo objects that the Secretary's cover letter was not included in the court filing, then American Patents remedies that by attaching the cover letter as an exhibit. (Thompson Decl., Exh. R [Secretary of State cover letter stating "Please find enclosed your Certificate(s) of Service for the case styled above.].) And to the extent Lenovo is arguing that 16 3 there is no proof that it was "in fact" served because "no response [had] been received in [the secretary of state's] office" (Mtn., at 7), this argument must fail. See Capitol Brick, Inc. v. Fleming Mfg. Co., 722 S.W.2d 399, 401 (Tex.1986) (holding that Secretary of State's certificate of service was conclusive evidence that the Secretary of State received the service of process for the out-of-state defendant and forwarded the service as required by the statute). C. Because Service Culminated Domestically, The Convention Does Not Apply. Substituted service is complete, or culminates, when the Secretary of State is served. Because service culminated here domestically, the Hague Convention does not apply.7 The Secretary of State acts as a party's registered agent when it engages in business in the State but fails to name its own registered agent. Bonewitz v. Bonewitz, 726 S.W.2d 227, 230 (Tex. App. 1987) (quoting Tex. Civ. Prac. & Rem. Code Ann. § 17.044 ["The secretary of state is an agent for service of process. . ."].). Just as service is complete when a party's registered agent is served, substituted service is deemed complete when the Secretary of State is served. Id. ("Service of process upon one who is an authorized agent for service of process constitutes constructive service upon the defendant. . ."). Service in this case was thus complete when American Patents served the Secretary of State in Texas. Where service on a defendant culminates in the United States, the Hague Convention is not implicated. Water Splash v. Menon, 137 S. Ct. 1504, 1509 (2017). Lenovo acknowledges the holding in Water Splash—that the Hague Convention applies to "service by mail"—but neglects to analyze or recognize how it applies here. (Mtn., at 6.) As the Water Splash court explained, "the text of the Convention reveals, and we have explicitly held, that the scope of the Convention is limited to service of documents." Water Splash, supra, 137 S. Ct. at 1509 (emphasis added). The Convention does not apply to 7 American Patents' request that Lenovo "waive formal foreign service" in exchange for an extension is consistent with its position that it can alternatively serve Lenovo through substituted service on the Secretary of State. American Patents has similarly offered Lenovo's foreign co- defendants extensions in exchange for waiving these ancillary challenges to service—which they have all accepted. (See Dkt. 18, 19, 22.) 17 3 transmissions abroad for non-service purposes, that is, "to transmissions abroad that do not culminate in service." Id. (emphasis added). Rather, the Convention "applies only when there is both transmission of a document from the requesting state to the receiving state, and service upon the person for whom it is intended." Id. (quoting Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 706 (1988) (emphasis added)). Accordingly, the Court posited that "it is hard to imagine how the Convention could interfere with any non-service communications." Id. Yet that intereference is precisely what Lenovo's position would require. Lenovo argues that the post-service communication between the Texas Secretary of State and Lenovo implicates the Hague Convention. This communication is a non-service communication, intended to provide notice of the service upon the Secretary of State. Compare Tex. Civ. Prac. & Rem. Code § 17.045 ("Notice to Nonresident") with id. § 17.044 ("Substituted Service on Secretary of State"). Indeed, the Texas Supreme Court held that service is complete upon serving the Secretary of State, even if the nonresident defendant never receives a forwarded copy of the service documents. Campus Investments, Inc. v. Cullever, 144 S.W.3d 464, 466 (Tex. 2004) (upholding default judgment against defendant who "never received anything the Secretary sent"). In fact, "the Secretary of State is not authorized by law to serve process." World Distributors, Inc. v. Knox, 968 S.W.2d 474, 479 (Tex. App. 1998). So, as a matter of Texas law, the notice that the Secretary of State sends to the foreign defendant cannot constitute service. D. Lenovo's Cases Are Distinguishable. Three of the cases cited by Lenovo do not even deal with the Texas substituted service statute. (Mtn., at 6.) In two of these cases, the plaintiff tried to serve an overseas defendant by mailing the complaint directly to the defendant's overseas office. Prince v. Gov't of People's Republic of China, 2017 WL 4861988, at *5 (S.D.N.Y. Oct. 25, 2017); Tillotson Corp. v. Supermax Corp. Bhd., 2008 WL 11336243, at *1 (N.D. Ga. May 21, 2008). And in Rice v. Electrolux Home Prod., Inc., 2018 WL 4964076, at *4-5 (M.D. Pa. Oct. 15, 2018), plaintiff had not even attempted to serve defendant yet; plaintiff was seeking alternative means of service such as service by e-mail. 18 3 Lenovo also relies on Esparza v. Paragon Shipping, Inc., 2013 WL 6835239, at *3 (S.D. Tex. Dec. 23, 2013). There, plaintiff used substituted service to serve defendant through the Texas Secretary of State, but provided defendant's wrong address for forwarding the complaint. Defendant's motion to dismiss was denied; rather, plaintiff sought, and was granted, additional time to provide defendant's correct address. Id. at *4. Here, the Texas Secretary of State forwarded the documents to Lenovo Shanghai and Lenovo Group's main offices, and they do not claim that these were the wrong offices or that they failed to receive those documents. Finally, in Alternative Delivery Sols., Inc. v. R.R. Donnelley & Sons Co., 2005 WL 1862631, at *2 (W.D. Tex. July 8, 2005) (a pre-Water Splash case), the court reasoned that because the Texas Secretary of State "must send notice of service of process to a nonresident defendant via registered mail. . . this transmittal of service documents abroad implicates the Hague Convention and its requirements." Water Splash now makes clear that it is not the transmittal of documents that implicates the Hague Convention, but the service of documents. Water Splash, 137 S. Ct. at 1509. Simply sending notice of service of process that culminated domestically does not implicate the Hague Convention. With the benefit of this distinction from Water Splash, the court in Alternative Delivery would reach a different conclusion today. E. Alternatively, the Court Should Permit Service by Other Means. "Generally, dismissal of a complaint is inappropriate when there is a reasonable prospect that service may be properly effectuated." Blue Spike, LLC v. ASUS Computer Int'l, Inc., 6:16- CV-1384-RWS-KNM, 2018 WL 3301705, at *8 (E.D. Tex. Feb. 20, 2018). So if the Court determines that substituted service on Lenovo was improper, then it should allow service by alternate means under Rule 4(f)(3) rather than dismiss the complaint.8 Notably, "Rule 4(f) does not require that the plaintiff try to serve an internationally–based defendant under Rule 4(f)(1) or 4(f)(2) before authorizing [alternative] service under Rule 4(f)(3)." WorldVentures Holdings, 8 This request does not require a separate motion. Arista Records LLC v. Media Svcs. LLC, No. 06 Civ. 15319(NRB), 2008 WL 563470, at *1 (S.D.N.Y. Feb. 25, 2008) (granting request for service by alternate means when raised in plaintiffs' opposition brief and not in separate motion). 19 3 LLC v. Mavie, 4:18-CV-393-ALM, 2018 WL 6523306, at *13 (E.D. Tex. Dec. 12, 2018) (citing AngioDynamics, Inc. v. Biolitec AG, 780 F.3d 420, 429 (1st Cir. 2015)). If service by alternate means is necessary, American Patents requests authorization to do so via email to Lenovo's U.S.-based outside counsel of record. See Fundamental Innovation Sys. Int'l, LLC v. ZTE Corp., 3:17-CV-01827-N, 2018 WL 3330022, at *5 (N.D. Tex. Mar. 16, 2018) (finding that service was improper but permitting plaintiff "to effect alternative service under Rule 4(f)(3) on [a Chinese defendant] through its counsel in this matter" without having filed a separate motion). The Hague Convention does not prohibit service by this or by similar means such as LinkedIn or Facebook addresses, and such methods have been found to comport with due process requirements.9 Alternate service is reasonable at least because Hague service on Chinese defendants like Lenovo is expected to take one to two years, if it occurs at all.10 VI. VENUE IS PROPER IN THIS DISTRICT Lenovo acknowledges that foreign defendants like Lenovo may be sued in any judicial district. (Mtn., at 19 (citing 28 U.S.C. § 1391(c).) So venue is proper in this District. VII. CONCLUSION For the reasons stated herein, the Court should deny Lenovo's motion to dismiss. 9 See, e.g., X-Mobile Techs. LLC v. Lenovo Grp., Ltd., No. 4:17-cv-700, Dkt. 12 (E.D. Tex. Nov. 14, 2017) (granting motion for alternate service on Chinese defendant via email to counsel, and to defendant's LinkedIn and Facebook accounts); Juicero, Inc. v. iTaste Co,, No. 17-cv-01921- BLF, 2017 WL 3996196, at *2-3 (N.D. Cal. Jun. 5, 2017) (finding that alternate service on Chinese defendant company by email, Facebook, and on defendant's U.S. counsel comported with due process and was not prohibited by the Hague Convention or China's objections to particular Hague Convention articles); Richmond Techs., Inc. v. Aumtech Bus. Solutions, No. 11- cv-02460-LHK, 2011 WL 2607158, at *12 (N.D. Cal. July 1, 2011) (holding that "[s]ervice upon a foreign defendant's United States-based counsel is a common form of service ordered under Rule 4(f)(3) . . . . Nothing in the Hague Convention prohibits such service."). 10 See Ex. T ["Suing a Chinese entity in the United States? Expect a two year wait to serve process"] (reporting current turnaround times for Hague service in China of as much as two years, with "rumblings in the transnational litigation community that they've stopped executing US requests altogether."). 20 3 Dated: February 14, 2019 Respectfully submitted, /s/ Michael D. Ellis Matthew J. Antonelli (admission pending) Texas Bar No. 24068432 matt@ahtlawfirm.com Zachariah S. Harrington (admission pending) Texas Bar No. 24057886 zac@ahtlawfirm.com Larry D. Thompson, Jr. (admission pending) Texas Bar No. 24051428 larry@ahtlawfirm.com Christopher Ryan Pinckney (admission pending) Texas Bar No. 24067819 ryan@ahtlawfirm.com Michael D. Ellis Texas Bar No. 24081586 michael@ahtlawfirm.com ANTONELLI, HARRINGTON & THOMPSON LLP 4306 Yoakum Blvd., Ste. 450 Houston, TX 77006 (713) 581-3000 Stafford Davis State Bar No. 24054605 sdavis@stafforddavisfirm.com Catherine Bartles Texas Bar No. 24104849 cbartles@stafforddavisfirm.com THE STAFFORD DAVIS FIRM The People's Petroleum Building 102 North College Avenue, 13th Floor Tyler, Texas 75702 (903) 593-7000 (903) 705-7369 fax Attorneys for American Patents LLC 21