Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-01148/USCOURTS-cand-3_07-cv-01148-3/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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1 After Clear Water and Denouement moved to dismiss, I

granted plaintiff’s request for jurisdictional discovery.

Following discovery, plaintiff filed a first amended complaint

which added three additional defendants, two of whom, Escape

Velocity and SolarDiesel, then moved to dismiss.

2 No defendant currently seeks dismissal for improper

venue.

1

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

GOODMAN BALL, INC.,

Plaintiff(s),

v.

CLEAR WATER USA, INC., et

al.,

Defendant(s).

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No. C07-1148 BZ

ORDER GRANTING IN PART

DEFENDANTS’ MOTION TO

DISMISS

Before the court are the motions1 of defendants Clear

Water USA, Inc. (Clear Water), Denouement Strategies, Inc.

(Denouement), Escape Velocity of Tampa Bay, Inc. (Escape

Velocity) and SolarDiesel Corporation (SolarDiesel) to dismiss 

the amended complaint for lack of personal jurisdiction, 

or in the alternative, to transfer venue.2

 Defendant Mach II

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3 All parties have consented to my jurisdiction for all

proceedings, including entry of final judgment, pursuant to 28

U.S.C. § 636(c). 

4 Eighteen of the systems were shipped to Port Hueneme,

California. 

2

Aviation, Inc. (Mach II) acknowledged personal jurisdiction

but joined in the request to transfer venue pursuant to 28

U.S.C. § 1404(a).3

The first amended complaint accuses Mach II and the

moving defendants of infringing plaintiff’s patents. 

Specifically, plaintiff alleges that defendants manufactured,

sold, imported and distributed in California, water

purification systems (the accused systems) that infringed

plaintiff’s patented water purification and power generation

technology.

For purposes of these motions, the essence of plaintiff’s

amended complaint is that non-moving defendant Mach II

contracted with Defense Supply Center Philadelphia to sell the

accused systems to the government and deliver them to the U.S.

Navy in Port Hueneme, California4 and Gulfport, Mississippi. 

Mach II in turn entered into an agreement with Acqua America,

Inc. (Acqua) for Acqua’s affiliate to manufacture the units. 

Escape Velocity is charged with providing financing Mach II

needed to purchase the accused systems. Denouement, Clear

Water and SolarDiesel are charged with having played other

roles in the distribution of the accused systems. 

It appears from the record that all defendants were

operated, at all relevant times, by two individuals, Walter

Holmich and John Stanton. Mr. Holmich is president of Clear

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3

Water, a Florida corporation. Mr. Holmich was also the

president of Mach II, a Florida corporation, until it was

dissolved. Escape Velocity and Denouement are Florida

corporations owned by Mr. Stanton. SolarDiesel is a wholly

owned subsidiary of EarthFirst Technologies, Inc. Mr. Stanton

is chairman of EarthFirst Technologies, Inc. Mr. Stanton and

Mr. Holmich are friends. 

The parties agree that because the personal jurisdiction

inquiry in this case is intimately intertwined with the

substance of the patent laws, the law of the Federal Circuit

applies. The Federal Circuit and the Ninth Circuit agree that

“where the district court's disposition as to the personal

jurisdictional question is based on affidavits and other

written materials in the absence of an evidentiary hearing, a

plaintiff need only to make a prima facie showing that

defendants are subject to personal jurisdiction.” Electronics

for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir.

2003); see also Deprenyl Animal Health, Inc. V. University of

Toronto Innovations Found., 297 F.3d 1343, 1347 (Fed. Cir.

2002); American Tel. & Tel. Co. v. Compagnie Bruxelles

Lambert, 94 F.3d 586, 589 (9th Cir. 1996). “In the procedural

posture of a motion to dismiss, a district court must accept

the uncontroverted allegations in the plaintiff's complaint as

true and resolve any factual conflicts in the affidavits in

the plaintiff's favor.” Electronics for Imaging, Inc., 340

F.3d at 1349. 

The parties agree that California’s long arm statute,

California Code of Civil Procedure § 410.10, allows the

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5 In Asahi Metal Industry Co. v. Superior Court of

California, 480 U.S. 102 (1987), the Supreme Court split over

the degree and character of minimum contact required under the

stream of commerce theory. See Beverly Hills Fan Co., 21 F.3d

at 1566. Four justices concluded that a defendant that places

products into a “regular and anticipated” stream of commerce

and is aware that the product is or may be directed into the

forum state is susceptible to jurisdiction. Four other

justices, however, concluded that a showing of some “additional

conduct” is required to satisfy due process. See Asahi Metal

Industry Co., 480 U.S. at 116-17 (Brennan, J., concurring in

part); Beverly Hills Fan Co., 21 F.3d at 1556. The Federal

Circuit has steadfastly refused to take a position as to which

view it considers controlling. See, e.g., Kernius v. Int’l

4

exercise of personal jurisdiction on any basis provided under

the federal constitution. A court may have either “general”

or “specific” jurisdiction over a party. General jurisdiction

lies where the defendant has “continuous and systematic

contacts” with the forum state. Electronics for Imaging,

Inc., 340 F.3d at 1349. Plaintiff does not contend that this

court has general jurisdiction over any party. Specific

jurisdiction lies where the cause of action arises at least in

part out of activities that defendant has purposefully

directed toward the forum state and where the exercise of

jurisdiction is otherwise reasonable. See LSI Industries Inc.

v. Hubbell Lighting, Inc., 232 F.3d 1369, 1375 (Fed. Cir.

2000); Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d

1558, 1568 (Fed. Cir. 1994).

In part, plaintiff relies on a stream of commerce theory

to support personal jurisdiction. Jurisdiction lies over a

defendant that “delivers its products into the stream of

commerce with the expectation that they will be purchased by

consumers in the forum State.” Beverly Hills Fan Co., 21 F.3d

at 1565, (internal quotations omitted).5 Where the action for

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Electronics, Inc., 433 F. Supp. 2d 621, 625 (D. Md. 2006)

(discussing Federal Circuit cases). The resolution of these

motions does not require me to resolve the question. 

5

patent infringement involves a product shipped into a state

through such an established distribution channel, the due

process requirement of “minimum contacts” with the state is

satisfied. Id. At 1565. The stream of commerce theory has

been applied to the sale and distribution of consumer products

sold on the retail market. See id. at 1566 - 67. Here, the

accused systems are large, specialized military equipment,

sold pursuant to a one-time military procurement which does

not rise to the level of an established distribution channel. 

For these reasons, the Beverly Hills Fan Co. stream of

commerce theory is not by itself sufficient to sustain

jurisdiction over all defendants. 

ESCAPE VELOCITY

Plaintiff has established prima facie that Escape

Velocity has sufficient contacts with California to exercise

“specific jurisdiction” over it. Viewing the factual

conflicts in plaintiff’s favor, see Electronics for Imaging,

Inc., 340 F.3d at 1349, Escape Velocity’s provision of

financing to allow Mach II to acquire the accused systems,

eighteen of which were sent to Point Hueneme, California,

demonstrate its crucial role in the manufacture and sale of

some or all of the accused systems and their delivery to

California. Put another way, it appears from the record that

had Escape Velocity not paid Acqua, at least some of the

accused systems either would not have been manufactured or

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would not have been sold to Mach II and delivered to

California. Providing financing for systems which it knew

were going to be delivered to California is an activity of

Escape Velocity purposefully directed towards California such

that it is reasonable to exercise jurisdiction over it with

respect to a claim that the accused systems infringe

plaintiff’s patents. See Hanson v. Denckla, 357 U.S. 235,

253-4 (1958); Beverly Hills Fan Co., 21 F.3d at 1566. 

Exercising jurisdiction over Escape Velocity also

comports with concepts of “fair play and substantial justice.” 

Burger King Corp. V. Rudzewicz, 471 U.S. 462, 

477 - 8 (1985). Balancing the factors for determining

reasonableness, jurisdiction over Escape Velocity in

California is reasonable. See Terracom v. Valley Nat’l Bank,

49 F.3d 555, 561 (9th Cir. 1995). The accused systems were

delivered to California, and plaintiff is located in

California. California has a significant interest “in

discouraging injuries that occur within the state” and to its

citizens. See Electronics for Imaging, Inc., 340 F.3d at 1351

- 52. The burden of requiring Escape Velocity to defend this

suit in California is minimal since it shares counsel with

Mach II and since many witnesses are located in California. 

The accused systems, and the Navy personnel who use them, are

located in Port Hueneme, California. Plaintiff’s witnesses

are in the Bay Area. Accordingly, Escape Velocity’s motion to

dismiss for lack of personal jurisdiction pursuant to Federal

Rule of Civil Procedure 12(b)(2)is DENIED.

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6 The “place of performance” is where government

inspectors visit to inspect and accept the items to be shipped

per the order. Mach II’s business address and place of

operations was the same as Clear Water’s.

7

CLEAR WATER

Plaintiff has failed to make a prima facie showing of

specific jurisdiction over Clear Water. Clear Water had

almost no involvement with the sale or delivery of the accused

systems to the Navy in Port Hueneme, California. While Clear

Water was listed as the “place of performance” of the third

purchase order between Mach II and the government its

cancellation negates what little relationship Clear Water had

to the accused systems.6

 The use on one occasion of Clear

Water letterhead to address a written complaint to Acqua

regarding invoices for certain systems (Pl.’s Supl. Opp., Exh.

7) while troublesome, seems more of an anomaly than anything

else. That letter was not sent to California. 

It appears that, from at least December 2005 through

December 2006, Clear Water maintained a website that

advertised the accused systems to Californians. However, the

passive website only displayed products for sale and allowed

visitors to request further information; visitors could not

place orders on the site. There is no evidence that the

website specifically targeted Californians. “A passive

website is insufficient to establish purposeful availment for

the purpose of due process.” Cybersell, Inc. v. Cybersell,

Inc., 130 F.3d 414, 419-20 (9th Cir. 1997). Plaintiff has

failed to provide prima facie evidence that its injuries arise

out of Clear Water’s contacts with California or that Clear

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7 Denouement has never maintained an address or place

of business in California, paid taxes in California, or brought

or defended a lawsuit in California. 

8

Water purposefully directed its contacts with California. See

Electronics for Imaging, Inc., 340 F.3d at 1350-1. As such,

Clear Water’s motion to dismiss is GRANTED.

DENOUEMENT

Denouement’s contacts with California also fail to give

rise to personal jurisdiction.7 Mach II provided Denouement

with twenty-two water purification units in satisfaction of a

debt owed Escape Velocity. It is undisputed that these

twenty-two units were transferred to SolarDiesel and are

currently in its possession in Florida. The record does not

disclose that these units are accused of infringement or that

they have ever been to California. Denouement’s involvement

in accepting and transferring the twenty-two units that

remained in Florida do not link Denouement to California. 

Denouement admits to having advertised water purification

units on its website at www.sdvo.net, formerly at www.sdvo.us. 

There is no evidence that these units infringed. In contrast

to Clear Water’s website, Denouement’s included a link to the

“PayPal” service, through which customers could make payments

to Denouement via the internet. No customer, however, has

ever used the PayPal link on either Denouement’s former or

current website. Indeed, no items are available for sale on

its current website. There is no evidence that the site’s

content was in any way targeted to California. Given the

character of the website and Denouement’s lack of connection

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to California, its maintenance of the site does not establish

sufficient minimum contacts. See, e.g., Trintec Indus., Inc.,

395 F.3d at 1281. Accordingly, Denouement’s motion to dismiss

is GRANTED.

SOLARDIESEL

SolarDiesel is also a Florida corporation with which Mr.

Stanton is associated. SolarDiesel does not maintain a

website, does not maintain an office or place of business in

California, and has never maintained an address in California. 

Although Mr. Stanton admits it wants to sell the twenty-two

systems in its possession, their purchase and storage do not

in any way connect SolarDiesel to California. As such,

plaintiff has not made a prima facie showing that SolarDiesel

has sufficient minimum contacts to California to establish

personal jurisdiction and SolarDiesel’s motion to dismiss is

GRANTED. 

Defendants also request that the suit be transferred

pursuant to 28 U.S.C. § 1404(a) to the Middle District of

Florida, which they contend is a more convenient forum. I

disagree that Florida would be a more convenient forum. 

Defendants contend that the majority of witnesses would be

located in Florida. However, the inventors of the patented

technology, as well as witnesses regarding the design,

function, and operation of plaintiff’s systems, are located in

California. The accused systems and the Navy personnel with

knowledge of them are located in California. As such, the

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8 Escape Velocity and SolarDiesel’s motion for leave to

file a late Reply is GRANTED, as unopposed.

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motion to transfer venue is DENIED.8 Escape Velocity shall

answer the complaint by November 15, 2007.

Dated: October 31, 2007

 Bernard Zimmerman 

 United States Magistrate Judge

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