Motion to Dismiss Foreign Corporation Denied by District of Delaware

A foreign corporation manufactures in a foreign country products alleged to infringe a U.S. Patent. They provide modules to original equipment manufacturers here in the U.S. who then incorporate them into products sold to consumers through retailers across the country and on the Internet. The foreign corporation also owns directly and indirectly subsidiaries which are Delaware corporations. Are these contacts with Delaware enough to establish personal jurisdiction over the foreign corporation? Judge Farnan recently answered that question in the affirmative in his decision denying a motion to dismiss filed by defendants in LG.Philips LCD Co., Ltd. v. Chi Mei Optoelectronics, Corp., et al., C.A. Nos. 06-726-JJF, 07-357-JJF, Memo. Op. (D. Del. Apr. 29, 2008).

Jurisdiction under the Delaware Long-Arm Statute was proper because the foreign corporation, Chi Mei Optoelectronics, “acted in consort” with the original equipment manufacturers here in the United States to place products containing the allegedly infringing modules into a national distribution network which ultimately allowed some products to be sold in Delaware. Id. at 12. The fact that there was a “middle man” through which the defendant sold its product did not protect it from the possibility of being subject to jurisdiction of the Delaware court. Id. Furthermore, the plaintiff, LG.Philips provided “sufficient evidence” of revenues from sales of the accused products in Delaware. Id. The Court noted and “found instructive” the defendant’s failure to provide any evidence rebutting the “factual presumption that a portion of [their] large revenues from the United States market are the result of products incorporating its … module sold in Delaware…” Id.

Jurisdiction also comports with Due Process, because given the defendant’s contract with its original equipment manufacturers (and one major one in particular), the substantial quantities of modules it ships to the U.S. to be incorporated into end products and sold in retail stores here, and the size of its business, Judge Farnan found it “far from a stretch to conclude” that the modules would end up in Delaware. Id. at 14.

For a copy of the opinion click here.

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