Blue Rhino Global Sourcing, Inc. v. Sanxin Int'l Ltd.

BLUE RHINO GLOBAL SOURCING, INC. Plaintiff, v. SANXIN INTERNATIONAL LTD. f/k/a SUMXING INTERNATIONAL LTD., BAZHOU SANXIN STEEL PIPE CO., LTD.,and CARLOS E. RODRIGUEZ Defendants.

1:16CV581

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

August 18, 2017

MEMORANDUM OPINION AND ORDER

LORETTA C. BIGGS, District Judge.

Plaintiff initiated this action on June 6, 2016, alleging patent infringement under 35 U.S.C. § 1. (ECF No. 1.) Before the Court are motions to dismiss filed by Defendants, Sanxin International Ltd. ("SI") and Carlos E. Rodriguez ("Rodriguez") (collectively "Defendants"), for lack of personal jurisdiction and failure to state a claim, (ECF Nos. 15, 17). Also before the Court is Defendants' Motion to Amend their motions to dismiss, ("Motion to Amend"), (ECF No. 22). For the reasons set forth below, Defendant Sanxin International Ltd.'s Motion to Dismiss First Amended Complaint will be granted; Defendant Carlos E. Rodriguez's Motion to Dismiss First Amended Complaint will be granted; and Defendants' Motion to Amend will be denied as moot.

I. BACKGROUND

Plaintiff, Blue Rhino Global Sourcing, Inc. ("Blue Rhino"), describes itself as "a leading distributor of grills and other outdoor living accessories" in the United States. (ECF No. 10 ¶ 14.) Blue Rhino is the assignee of United States Design Patent No. D680,795 ("the '795 Patent"), entitled "Barbecue Grill," issued by the United States Patent & Trademark Office on April 30, 2013. (Id. ¶¶ 15, 16; see ECF No. 10-1.)

None of the Defendants in this action are residents of North Carolina. Rodriguez is a resident of Minnesota and serves as President and a director of Defendant, SI. (Id. ¶ 4; ECF No. 16-1 ¶ 1.) SI, formerly known as Sumxing International, Ltd.,¹ is a Delaware corporation with its principal place of business in Cottage Grove, Minnesota. (ECF No. 10 ¶ 2; ECF No. 16-1 ¶ 2.) SI does not have any offices or employees in North Carolina, and it does not lease or own any property in the state. (ECF No. 16-1 ¶ 4.) In the Spring of 2016, SI was purchased by Defendant, Bazhou Sanxin Steel Pipe Co., Ltd. ("Bazhou Sanxin"), a Chinese corporation "engaged in the business of making, importing, marketing, offering for sale, and selling, a variety of outdoor living accessories, including grills." (ECF No. 10 ¶¶ 3, 18; ECF No. 16-1 ¶ 3.)

SI's business includes: (1) serving as a customer service contact for certain products manufactured by Bazhou Sanxin, (id. ¶ 7); and (2) serving "as a sales representative in the [United States] for Bazhou Sanxin," (id. ¶ 8). As a customer service contact, SI fields "post-purchase inquiries" from individual purchasers of Bazhou Sanxin products, as well as inquiries from retail stores that carry Bazhou Sanxin products. (Id. ¶ 7.) One such product is a 17.5 inch Square Charcoal Grill ("Charcoal Grill"), bearing model number BY16-102-002-02,which, according to the Complaint,² infringes on Plaintiff's patent. (ECF No. 10 ¶¶ 26, 27, 30; ECF No. 16-1 ¶¶ 5, 9.) The Charcoal Grill is only sold through Walmart,³ and although SI "does not market, manufacture, sell or offer to sell" this (or any other) grill, (ECF No. 16-1 ¶¶ 6, 15), it "serves as a customer service contact when purchasers of the [Charcoal Grill], or a retail store carrying the [grill], have missing or damaged parts or questions regarding the grill," (ECF No. 16-1 ¶ 9). SI's email address and telephone number are included in the Owner's Manual provided in each box containing the unassembled Charcoal Grill. (ECF No. 10-2 at 12; ECF No. 16-1 ¶ 9.)

SI does not initiate contact with customers or retailers of the Charcoal Grill. (See ECF No. 16-1 ¶¶ 9-10, 15.) It "is only involved with providing replacement parts after a grill has been purchased and it is discovered to inadvertently have been supplied with missing or damaged parts." (Id. ¶ 31.) As such, SI "has never shipped an entire grill" to North Carolina or any other state in response to a customer inquiry. (Id. ¶ 30.)

When a customer or retail store contacts SI to request replacement parts for a Bazhou Sanxin product, including the Charcoal Grill, SI sends the requested parts at no cost to the customer or retailer. (See id. ¶¶ 9, 10, 14.) SI then invoices Bazhou Sanxin for the shipping costs incurred. (Id. ¶ 11.) Between March 2014⁴ and October 10, 2016, SI fielded 131customer service inquiries from individuals and retail stores in North Carolina; 24 of those inquiries involved the Charcoal Grill, and the remaining 107 of those inquiries involved other Bazhou Sanxin products. (Id. ¶¶ 12-13, 20-24.) Rodriguez, who handled "approximately ten percent" of the post-purchase inquiries, recalls having "shipped a replacement part for [the Charcoal Grill] to North Carolina only one time." (ECF No. 18-1 ¶ 24.)

The other aspect of SI's business—i.e., its sales representative services—is "limited to specific products and specific retailers in North America." (ECF No. 16-1 ¶ 8.) This "does not, and never has," included serving as a sales representative for the Charcoal Grill. (Id. ¶¶ 8, 9, 15.) SI has made no sales in North Carolina, nor has it ever offered for sale, or sold, products via online marketplaces such as Amazon or eBay. (Id. ¶¶ 23, 25.) SI does not provide any sales representative services to Walmart, the sole retailer of the allegedly infringing grills. (Id. ¶ 15.) In or around 2013 and 2014, SI attempted to have two North Carolina retailers—Family Dollar and Lowe's Companies, Inc. ("Lowe's")—carry Bazhou Sanxin products, none of which included the Charcoal Grill. (Id. ¶¶ 19-20.) Ultimately, neither Family Dollar nor Lowe's elected to carry any Bazhou Sanxin products. (Id.)

The instant lawsuit arises from Blue Rhino's allegations that the Charcoal Grill infringes the '795 Patent. Defendants have each moved to dismiss the Complaint for lack of personal jurisdiction and failure to state a claim. (ECF Nos. 15, 17.) Defendants have also filed a Motion to Amend their motions to dismiss. (ECF No. 22.) To date, Defendant Bazhou Sanxin has not made an appearance in this case.

II. DEFENDANTS' MOTIONS TO DISMISS

Defendants move to dismiss the Complaint for lack of personal jurisdiction pursuant to Rule 12(b)(2), and failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 15 at 1; ECF No. 17 at 1.) The Court must first address the threshold issue of personal jurisdiction. See Sucampo Pharms., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 548 (4th Cir. 2006) (explaining that "dismissal of a case on an issue relating to the merits of the dispute, such as failure to state a claim, is improper without resolving threshold issues of jurisdiction, including personal jurisdiction" (citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584 (1999))).

A. Personal Jurisdiction

When evaluating personal jurisdiction in patent cases, courts apply Federal Circuit law "because the jurisdictional question at issue . . . is 'intimately involved with the substance of the patent laws.'" Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1359 (Fed. Cir. 2001) (quoting Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir. 1995)). On a personal jurisdiction challenge, the plaintiff bears the burden of proving personal jurisdiction by a preponderance of the evidence. Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). However, where, as here, the court decides a pretrial personal jurisdiction motion without jurisdictional discovery or an evidentiary hearing—relying instead on "affidavits and other written materials" in the record—the plaintiff need only make a prima facie showing of personal jurisdiction. Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003). When considering whether the plaintiff has made such a showing, the court "must accept the uncontroverted allegations in the plaintiff's complaint as true and resolve any factual conflicts . . . in the plaintiff's favor."Id. (emphasis added). See Akro Corp., 45 F.3d at 1543 (stating "where the plaintiff's factual allegations are not directly controverted, they are taken as true for purposes of determining jurisdiction" (quotation omitted)). "Once the defendant presents evidence indicating that the requisite minimum contacts do not exist, the plaintiff must come forward with affidavits or other evidence in support of its position." Syngenta Crop Protection, LLC v. Willowood, LLC, 139 F. Supp. 3d 722, 728 (M.D.N.C. 2015).

A federal district court can exercise personal jurisdiction over a non-resident defendant only if: (1) such jurisdiction is proper under the long-arm statute of the state in which the district court sits; and (2) exercising jurisdiction over the non-resident defendant in the forum state is consistent with the Due Process Clause of the Fourteenth Amendment. Polar Electro Oy v. Suunto Oy, 829 F.3d 1343, 1348 (Fed. Cir. 2016). North Carolina's long-arm statute "permits the exercise of personal jurisdiction . . . to the outer limits allowable under federal due process." Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th Cir. 2014). See N.C. Gen. Stat. § 1-75.4(1)(d); Dillon v. Numismatic Funding Corp., 231 S.E.2d 629, 630 (N.C. 1977) ("[I]t is apparent that the [North Carolina] General Assembly intended to make available to the North Carolina courts the full jurisdictional powers permissible under federal due process."). Therefore, when North Carolina is the forum state, the two-prong test "collapse[s] into a single inquiry" allowing the court to proceed directly to the constitutional analysis. See Inamed, 249 F.3d at 1360; accord Universal Leather, 773 F.3d at 558-59.

There are two types of personal jurisdiction: general jurisdiction and specific jurisdiction. AFTG-TG, LLC v. Nuvoton Tech. Corp., 689 F.3d 1358, 1360 (Fed. Cir. 2012) (per curiam). General jurisdiction, "permits a court to assert jurisdiction over a defendant basedon a forum connection unrelated to...