Opinion ID: 2814607
Heading Depth: 2
Heading Rank: 3

Heading: Celgard’s Stream-of-Commerce Theory

Text: Celgard asserts an alternative, stream-of-commerce theory of personal jurisdiction over SKI. This theory is based on SKI’s participation with CE manufacturers to use their established distribution channels to avail SKI of the North Carolina market. Celgard points out that neither this court, nor the Supreme Court, has decided whether stream-of-commerce jurisdiction requires merely placing goods into the stream of commerce with the expectation that they would be purchased in the forum state, or if “something more” is required, i.e., the purposeful direction of activities toward the forum. Appellant’s Br. 26–27. Celgard argues that, under either formulation of the stream-of-commerce theory, minimum contacts to satisfy due process are established whenever a defendant purposefully uses an established distribution channel that brings the defendant’s products into the forum. According to Celgard, personal jurisdiction exists if the plaintiff can show that (1) the defendant purposefully takes advantage of the channel; and (2) the channel reaches the forum state. Celgard contends that SKI satisfies these require12 CELGARD, LLC v. SK INNOVATION CO., LTD. ments because it sells separators to other companies, with established distribution channels, that incorporate the infringing separators into CE devices that are sold in North Carolina as a result of those channels. Celgard alleges that its tests show that separators have been found in batteries in CE devices purchased in North Carolina that are consistent with SKI separators. Appellant’s Br. 13–14. SKI acknowledges that neither this court nor the Supreme Court have answered whether mere placement into the stream of commerce is sufficient to establish jurisdiction, or if “something more” (activities directed at the forum state) is required. Appellee’s Br. 30. SKI contends there is no jurisdiction under either test. SKI alleges that Celgard failed to identify a single accused product in North Carolina. SKI points out that while Celgard asserts that tests of products purchased in North Carolina are consistent with the use of SKI separators, Celgard does not show that the tested products use the ceramic coated separator required by the ’586 patent. Moreover, Celgard acknowledges that SKI is not the sole supplier for the manufacturers that supply batteries to Apple and Dell. Celgard replies that SKI’s biggest customers provide a “significant portion” of batteries to Apple and Dell, and that these companies sell their products in North Carolina. Reply Br. 7–8. Celgard argues that, when combining these facts with the results of its tests, the only reasonable inference is that SKI’s accused products have made their way into North Carolina. Celgard further argues that this evidence, coupled with SKI’s inability to show that its products were not in North Carolina, meets the prima facie burden, because it is more likely than not that SKI’s accused products were present in large quantities in North Carolina. CELGARD, LLC v. SK INNOVATION CO., LTD. 13 The precise requirements of the stream-of-commerce theory of jurisdiction remain unsettled. Whether mere placement into the stream of commerce is sufficient to establish jurisdiction, or whether intent that the products reach the forum is required, can be traced to Asahi Metal Industry Co. v. Superior Court of California, Solano County, 480 U.S. 102 (1987). Justice Brennan, joined by three other justices, opined that mere foreseeability that the defendant’s product would wind up in the forum state was sufficient to establish jurisdiction. To Justice Brennan, due process is satisfied when the defendant places a product into the stream of commerce while being “aware that the final product is being marketed in the forum State.” Id. at 117 (Brennan J., concurring in part). Due process is satisfied because the defendant directly benefits from “the retail sale of the final product in the forum State” and indirectly benefits from the “laws that regulate and facilitate commercial activity.” Id. Justice O’Connor wrote separately and was joined by three justices. Justice O’Connor contended that something more than the foreseeability of entry of the defendant’s products into the forum state was required because that low threshold does not guarantee that due process’ purposeful-availment requirement is met. According to Justice O’Connor a “substantial connection . . . between the defendant and the forum State” must arise out of the activities of the defendant that are “purposefully directed toward the forum State.” Id. at 112 (citations and quotation marks omitted). Merely placing “a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State.” Id. (emphasis added). The Supreme Court recently reconsidered the re- quirements for establishing jurisdiction under a streamof-commerce theory in McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011). Again, the Court did not reach consensus on whether something more than foreseeability 14 CELGARD, LLC v. SK INNOVATION CO., LTD. is required. Writing for a plurality of the Court, Justice Kennedy held that jurisdiction over the defendant was improper under a stream-of-commerce theory because the defendant had not purposefully availed himself of the forum state’s laws. Specifically, the jurisdictional facts did not “reveal an intent to invoke or benefit from the protection of” the laws of the forum state. Id. at 2791. This court also has declined to take a position on the requirements of a stream-of-commerce jurisdictional test because the resolution of the cases did not require us to do so. AFTG-TG, LLC v. Nuvoton Tech. Corp., 689 F.3d 1358, 1364–65 (Fed. Cir. 2012) (discussing cases). Similarly, in this case, we do not need to resolve the question as the results of the case are the same under either formulation of the stream-of-commerce test. Celgard is not able to meet the more flexible foreseeability standard articulated by Justice Brennan in Asahi. As Justice Brennan explained, due process is satisfied under the foreseeability standard when the defendant is aware that the product is being marketed in the forum state. Asahi, 480 U.S. at 117 (Brennan J., concurring in part). The defendant’s knowledge gives rise to both the direct benefit from the retail sale of the defendant’s product and the indirect benefits related to the laws enabling commerce in the forum state. Id. Celgard has not provided evidence that SKI was aware that its accused separators were marketed in North Carolina. The record evidence shows only that SKI sells its products to OEMs, who then sell completed batteries to CE manufactures that resell them in the United States. There is no evidence establishing that SKI’s products actually enter the forum state. Celgard’s evidence shows only that tests of separators from batteries taken from CE devices purchased in North Carolina are not inconsistent with SKI’s separators. Those tests do not rule out that other manufacturers’ separators do not have similar composition or that the separators were certainly manufactured by SKI. CELGARD, LLC v. SK INNOVATION CO., LTD. 15 Indeed, Celgard is unable to demonstrate that its own separators are present in North Carolina. Celgard’s evidence fails to show that SKI’s separators actually have been found in North Carolina, much less that SKI can foresee that its separators will make their way there. Celgard’s inability to show that SKI can foresee that its separators will make their way to North Carolina also necessarily implies that SKI did not also have “something more,” a purposeful availment of the privileges and laws of North Carolina, as required by Justice O’Connor’s formulation of the stream-of-commerce test. Id. at 112 (plurality opinion). We hold that the district court correctly declined to exercise jurisdiction under a stream-of-commerce theory.