The inventor from New Jersey, Thomas Sullivan, tried to charm a Tennessee company, Radio Systems, into paying him for a license to make and sell his invention. Radio Systems at length agreed to let Mr. Sullivan drop by to show them his device, which he called "Wedgit" and on which he held a U.S. Patent. But first he had to sign a Confidential Disclosure Agreement.
The CDA included a "Choice of Law" clause, which in fact did more than select the law that would govern. It said:
The Parties agree that this Agreement is to be construed in accordance with the laws of the State of Tennessee in the United States of America and Disclosing Party [the inventor guy] consents to the personal jurisdiction of, and agrees that exclusive jurisdiction shall reside in, all courts of the State of Tennessee and the U.S. District Court for the Eastern District of Tennessee regarding any cause of action under this Agreement or arising out of the subject matter relating to this Agreement.
Radio Systems never followed up on the visit by Mr. Thomas, but in a short while it did apply for a patent covering its SmartDoor pet door. That drew Mr. Sullivan's attention. His lawyer in due course made threats, and the SmartDoor folks responded by suing Mr. Sullivan in Knoxville federal court. Radio Systems asked for a judgment declaring that it didn't infringe Mr. Sullivan's patent. He moved to dismiss on the ground that the district court hadn't the power to bind him to a decision because it lacked personal jurisdiction over him. The district court granted the motion.
The Federal Circuit upheld the dismissal. It first held that, under its tests for the "minimum contacts" necessary to the exercise of personal jurisdiction, the inventor hadn't done enough in Tennessee to try to enforce his patent. Sure, he'd worked to get the Tennessee company to license his invention, but that doesn't count as enforcing the patent, the court ruled. Radio Systems Corp. v. Accession, Inc., No. 10-1390 (Fed. Cir. Apr. 25, 2011).
The thing that intrigued Blawgletter came near the end of the opinion. The panel there got to the forum selection and consent clause that appeared in the "Choice of Law" paragraph. The court deemed "cause of action . . . arising out of the subject matter relating to this Agreement" as referring only to claims concerning "Confidential Information" that the inventor in fact imparted in Tennessee.
Oh, yeah? While the court conceded that the CDA defined its "stated purpose" as to "facilitate 'discussions'", it didn't regard the "discussions" as the "subject matter" of the CDA and concluded therefore that the declaratory judgment claim didn't arise out of them. Id., slip op. at 13. But plainly the "discussions" did form the subject matter of the CDA — not just the Confidential Information. The outcome thus should have turned on whether a claim of infringement by Mr. Sullivan would have arisen out of the discussions about possible licensing of the patent for Mr. Sullivan's Wedgit device and like products. The court didn't answer that question.
We would guess the panel felt the Volunteer State outfit had played foul by suing the nice Garden State fellow after he'd tried so hard to deal with them in a nice way. Bad facts make bad law?