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Chrisman Mill Farms, LLC v. Blazer

United States District Court, E.D. Kentucky, Central Division, Lexington

April 19, 2017



          Danny C. Reeves United States District Judge.

         Plaintiff Chrisman Mill Farms, LLC, a retailer and wholesaler of carpenter bee traps, seeks a temporary restraining order and preliminary injunction against Defendant Brian Blazer, a patent holder. [Record Nos. 23, 24] The defendant filed a Motion to Dismiss or Transfer Venue under Rule 12(b)(2) of the Federal Rules of Civil Procedure prior to the plaintiff's Motion for injunctive relief. [Record No. 15] A hearing was held on April 10, 2017, to address both motions. The Court finds that it lacks personal jurisdiction over the defendant after considering the parties' briefs and arguments. As a result, this action will be transferred to the United States District Court for the Northern District of Alabama pursuant to 28 U.S.C. § 1406, where venue is proper and a companion case is currently pending.

         I. Background

         Defendant Blazer owns U.S. Patent No. 8, 375, 624 (“the '624 Patent”) which covers an insect trap meant for carpenter bees. [Record No. 12 at 1-2] ¶ 2015, Chrisman Mill Farms, LLC, and its sole member Anthony Robinson (hereinafter “Chrisman Mill Farms” or “Robinson”), began selling traps that (unknown to them) infringed Blazer's patent. [See Record No. 21-10 at 3-4] When advised of the infringement, Robinson traveled to Blazer's home in Alabama to discuss a licensing agreement. The visit was successful. Blazer and Robinson entered into an agreement on December 29, 2015, under which Robinson (Chrisman Mill Farms) would continue selling the traps, but would pay a royalty of $3 per trap to Blazer. [Record No. 12 at 5] The duration of the agreement was one year, lapsing in December 2016. [Id.]

         Blazer and Robinson's business relationship went beyond their licensure agreement. Blazer also supplied partially-completed traps to Robinson. [Record No. 12 at 5; Record No. 21 at 2] Robinson would finish the traps, brand them with a Chrisman Mill Farms logo, and market them on numerous e-commerce sites, including Amazon. [Record No. 21 at 2]

         This agreement was lucrative for Robinson, who appeared to net a much larger profit on each trap than the $3 royalty being paid to Blazer. [See Record No. 21-7 at 2] As a result, Blazer sought to negotiate more favorable terms for a new contract. Robinson proposed an exclusive licensure agreement but Blazer rejected the offer. [Record No. 21-10 at 2] Because of the apparent inability to reach new terms, Robinson sought the advice of a patent attorney and designed a new trap which he believed did not infringe the '624 Patent. [Record No. 21-4 at 2] Robinson notified Blazer of his intent to begin marketing the new trap, and provided Blazer a 5-day window to object and provide reasons why he believed the newly-designed trap infringed the '624 Patent. [Id.] From the record currently before the Court, Blazer never articulated why the new trap was infringing. Instead, he notified Robinson via text message that he would be filing suit. [Record No. 21-5 at 2] Blazer signed the text message, “welcome to federal court in Alabama.” [Id. at 3]

         In anticipation of the threatened Alabama suit, Robinson filed the present action with this Court on January 6, 2017. [Record No. 1] Robinson seeks a declaratory judgment that the new trap, dubbed “Wood Bee Gone II” (“Bee Gone II”), does not infringe the '624 Patent. Around the time suit was filed, Robinson began marketing and selling the new trap. But Blazer jumped into action by sending claims construction letters to Amazon and at least three other online retailers, notifying them that the Bee Gone II trap infringed his '624 Patent. [Record No. 12 at 6-7; Record No. 24 at 3-5] In response, the retailers de-listed the Bee Gone II trap and notified Robinson of the issue. [Id.]

         On February 27, 2017, Blazer filed a Complaint against Chrisman Mill Farms, LLC, in the United States District Court for the Northern District of Alabama. [Civil Action No. 1:17-320-JEO] The Complaint contains two counts: patent infringement and breach of contract. As to the breach of contract count, the Complaint claims that the parties had entered into a written contract and that Chrisman Mill Farms breached that contract by failing to pay the full amount of royalties owed under the contract. The Complaint further alleges a breach of contract by [Robinson's] “refusing to recognize the majority ownership interest . . . that was granted to [Blazer] by the parties' agreement.” To that end, it states “[Blazer] is entitled to specific performance to remedy this breach in the form of a judgment that [Blazer] owns 51% of [Chrisman Mill Farms] as provided in the parties' agreement.” The written contract is included as “Exhibit C, ” but “Exhibit C” does not appear to be an authentic document.

         Immediately after filing the Alabama action, Blazer responded to the Complaint in this Court with a Motion to Dismiss for Lack of Personal Jurisdiction. [Record No. 15] Blazer argues that, because he never traveled to Kentucky, and because the declaratory judgment action does not arise out of his business activity in Kentucky, the Commonwealth's long-arm statute does not reach him. Further, because the plaintiff has not alleged “other activities” by Blazer, other than text messages, directed at the forum, exercise of personal jurisdiction over him does not comport with due process. Blazer's Motion to Dismiss does not reference the claimed 51% stake in Chrisman Mills Farms.

         Blazer amended his Complaint in the Northern District of Alabama on March 5, 2017. [Civil Action No. 1:17-320-JEO, Record No. 3] The Amended Complaint retains language from the original Complaint, stating that “[i]n 2016, Mr. Robinson, acting on behalf of Defendant, traveled to Plaintiff's residence in Alabama on at least one occasion during which he offered Mr. Blazer a membership position in Defendant Chrisman Mill Farms LLC.” However, the Amended Complaint removes all references to the 51% ownership interest, and claims a breach of contract based only upon a failure to pay royalties. Further, it replaces “Exhibit C” with what appears to be an authentic, signed and notarized contract that does not contain the 51% ownership-interest language.

         Apparently unaware of Blazer's Amended Complaint (and its removal of the ownership- stake claim), Robinson moved in this Court on March 20, 2017, for leave to file a second Amended Complaint. [Record Nos. 18, 20] Robinson argues that “[j]ustice necessitates the entry of a Second Amended Complaint due primarily to the Defendant's new claim to own 51% of Chrisman Mill Farms, LLC.” Substantively, however, the proposed Second Amended Complaint does more. For the first time, the document asserts diversity of citizenship as an additional basis for federal jurisdiction. Further, it substitutes the Lanham Act, 15 U.S.C. § 1125, for the Sherman Act, 15 U.S.C. §2, as another basis for federal question jurisdiction (in addition to the patent issue under 28 U.S.C. § 2201).

         Simultaneous with his proposed Second Amended Complaint, Robinson sought to stay consideration of Blazer's Motion to Dismiss, until such time as the proposed Second Amended Complaint was addressed by the Court. [Record No. 19] Robinson also responded to the Motion to Dismiss. [Record No. 21] Robinson argues in his response that Blazer is subject to personal jurisdiction under the Kentucky long-arm statute, and due process, because he has established minimum contacts here and because this action arises out of Blazer's business conduct in Kentucky. Specifically, he argues that “[t]he declaratory judgment causes of action relate[] to the patent and the causes of action that relate to the improper enforcement activities of the Defendant all clearly arise from the business relationship between the Plaintiff and Defendant.” Additionally, he contends that his breach of warranty claim and tortious interference claim all arise out of Blazer's activities directed at the Commonwealth, which fit into other provisions of the long-arm statute.

         Two weeks after filing the proposed Second Amended Complaint and Motion for a Stay, Robinson filed a Motion for a Temporary Restraining Order and Preliminary Injunction [Record Nos. 23, 24] and withdrew the Motion to Stay [Record Nos. 25, 28]. He seeks injunctive relief requiring Blazer “to withdraw notices of patent infringement to vendors of the WOOD BEE GONE II carpenter bee trap and to refrain from issuing any additional notices.” [Record No. 23 at 1] A hearing was held on April 10, 2017, at which time the parties addressed the Motion for injunctive relief and the Motion to Dismiss. [Record Nos. 26, 27, 30]

         II. Motion to Dismiss

         The plaintiff believes that the Court need not decide the jurisdictional question prior to ruling on the preliminary injunction. Robinson argues that “the pending Motion to Dismiss based on lack of jurisdiction need not be decided prior to the grant of preliminary relief because courts have the authority to issue preliminary injunctions and other orders [] to maintain the status quo while they are inquiring into whether they have jurisdiction.” [Record No. 24 at 9] This argument is unconvincing. The plaintiff's authority, Continental Cablevision of Mich., Inc. v. Edward Rose Realty, Inc., 840 F.2d 16 n.7 (6th Cir. 1988) (table), dealt with a situation more emerging than present here. Because a fully-briefed Motion to Dismiss is pending before the Court, that motion will be resolved before injunctive relief is considered. See Wyrough & Loser, Inc. v. Pelmor Labs., Inc., 376 F.2d 543, 547 (3d Cir. 1967) (“[P]reliminary matters such as defective service, personal jurisdiction and venue should be raised and disposed of before the court considers the merits or quasimerits of a controversy.”).

         The Court first considers what law to apply in adjudicating this controversy. The United States Court of Appeals for the Federal Circuit has exclusive subject-matter jurisdiction over patent-law cases. See Elecs. for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1345 (Fed. Cir. 2005). It is tasked with the “special responsibility to foster national uniformity in patent practice.” Serco Servs. Co., L.P. v. Kelley Co., 51 F.3d 1037, 1038 (Fed. Cir. 1995). Therefore, when actions are “intimately involved” with the patent laws, Federal Circuit precedent applies. Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir. 1995).

         The Amended Complaint is primarily a suit for a declaratory judgment regarding a patent. Therefore, Federal Circuit precedent applies. HealthSpot, Inc. v. Computerized Screening, Inc., 66 F.Supp.3d 962, 967 (N.D. Ohio 2014) (quoting Akro Corp. 45 F.3d at 1543) (“Federal Circuit law governs personal jurisdiction over a patentee defending against a declaratory judgment action because the action is ‘intimately involved with the substance of the patent laws.'”). The plaintiff also raises claims under state law, such as “tortious interference with existing and prospective business relationships.” [Record No. 12 at 3] However, because the patent infringement issue will be a “significant factor” in determining the state-law claims, Federal Circuit law applies.[1] 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1377 (Fed. Cir. 1998).

         For purposes of the Motion to Dismiss, because the parties have not yet conducted discovery, the plaintiff's allegations regarding jurisdiction are subject to deference. Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003). Specifically, “in the absence of an evidentiary hearing, a plaintiff need only to make a prima facie showing that defendants are subject to personal jurisdiction.” Elecs. For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003). The Court should “accept the uncontroverted allegations in the plaintiff's complaint as true and resolve any factual conflicts in the affidavits in the plaintiff's favor.” Id. The issue of jurisdictional was addressed at the April 10th hearing. However, because the focus of that hearing was on the motion for injunctive relief, the Court holds the plaintiff only to the prima facie standard for establishing personal jurisdiction.

         Turning to the merits of the Motion to Dismiss, jurisdiction over an out-of-state defendant is determined in a two-step process. The first question is “whether [the] forum state's long-arm statute permits the assertion of jurisdiction[.]” Graphic Controls Corp. v. Utah Med. Prod., Inc., 149 F.3d 1382, 1385 (Fed. Cir. 1998). In the second step, the Court determines whether an assertion of personal jurisdiction over ...

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