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Jack Henry & Associates, Inc. v. Plano Encryption Technologies LLC

United States Court of Appeals, Federal Circuit

December 7, 2018

JACK HENRY & ASSOCIATES, INC., COMMUNITY BANK OF TEXAS NA, AMERICAN NATIONAL BANK OF TEXAS NA, GREEN BANCORP, INC., GREEN BANK NA, MOODY NATIONAL BANK NA, FIRST SONORA BANCSHARES INC, FIRST NATIONAL BANK OF SONORA, EXTRACO BANKS NA, CITIZENS STATE BANK, TEXAS GULF BANK NA, JEFFERSON BANK, Plaintiffs-Appellants
v.
PLANO ENCRYPTION TECHNOLOGIES LLC, Defendant-Appellee

          Appeal from the United States District Court for the Northern District of Texas in No. 3:15-cv-03745-N, Judge David C. Godbey.

          Jay E. Heidrick, Polsinelli PC, Kansas City, MO, argued for plaintiffs-appellants. Also represented by Russell S. Jones, Jr.; Michael David Pegues, Dallas, TX.

          Jeremy Seth Pitcock, The Pitcock Law Group, New York, NY, argued for defendant-appellee.

          Before Newman, Wallach, and Stoll, Circuit Judges.

          NEWMAN, CIRCUIT JUDGE.

         Jack Henry & Associates, Inc. ("Jack Henry") and eleven Texas banks ("the Banks"), collectively "Appellants," appeal the ruling of the United States District Court for the Northern District of Texas, dismissing this declaratory judgment action against Plano Encryption Technologies LLC ("PET"). The district court held, citing Federal Circuit rulings, that PET's contacts with the Northern District did not subject it to personal jurisdiction, and therefore that venue was improper.[1]

         Applying the venue statute and guided by precedent, we conclude that PET is subject to personal jurisdiction in the Northern District. We reverse the dismissal and remand for further proceedings.

         I

         Venue in the Northern District

         PET is a Limited Liability Company established in the State of Texas, and is registered to do business throughout Texas, with its registered address in Plano, Texas. Plano is in the Eastern District of Texas. The Banks all have their principal offices or branches or customers in the Northern District of Texas.

         PET declares that its "sole business is to enforce its intellectual property." J.A. 543 (Declaration of Bradley Liddle, Chief Executive Officer). Mr. Liddle wrote to each of the Banks, identifying PET's patents, stating that the Banks are believed to be infringing the patents, and inviting non-exclusive licenses. The letters to all the Banks are similar, see, e.g., the following letter addressed to Robert Hulsey (President and CEO) and Steve Booker (EVP) of American National Bank of Texas, at its address in Terrell, Texas. Terrell is in the Northern District:

PET has reviewed the technology of American National Bank of Texas ("ANBTX") and believes that ANBTX is infringing several claims of its patents, including without limitation U.S. Patent Nos. 5, 974, 550; 5, 991, 399; and 6, 587, 858. Our review of your mobile apps indicates that your company infringes at least claims 1, 9, 29 and 37 of U.S. Patent No. 5, 991, 399 (the '399 patent), as illustrated by the claims charts attached as Exhibit A. . . . that ANBTX infringes at least claims 14-17 of U.S. Patent No. 5, 974, 550 (the '550 patent), as illustrated by the claims charts attached as Exhibit B. . . . at least claim 6 of U.S. Patent No. 6, 587, 858 (the '858 patent) is infringed in connection with at least your online banking features, as set forth in the claims charts attached as Exhibit C.

J.A. 137 (footnote omitted). Exhibit A is entitled "Draft Settlement Claims Chart-U.S. Patent No. 5, 991, 399 vs. ANBTX," and consists of 22 pages of "infringement" analysis for claims 1, 9, 29, and 37 of Patent No. 5, 991, 399, claim clause by claim clause. J.A. 139-60. Exhibit B is 16 pages of infringement analysis of claims 14-17 of Patent No. 5, 974, 550, JA 161-76; and Exhibit C is 4 pages of infringement analysis of claim 11 of Patent No. 6, 587, 858. JA 177-80. The letter further states:

PET actively licenses and enforces its patent rights and has recently filed a lawsuit against Citizens National Bank for infringement of the technology covered by these patents. Plano Encryption Technologies, LLC v. Citizens National Bank, Civ. No. 2:15-cv-1168 (E.D. Tex.). We write to invite you to take a license to our patent portfolio.

J.A. 137.

         Similar letters and attachments were sent to each of the Banks, i.e., to Bob Malone (President and CEO) and Patrick Holt (EVP and COO) of Sonora Bank at its address in Sonora, in the Northern District of Texas, J.A. 326; to Cory Newsom (President and CEO) and Dwight Overton (EVP) of City Bank at its address in Lubbock, in the Northern District of Texas, J.A. 573; to F. Scott Dueser (President and CEO) and Gary Webb (EVP) of First Financial Bank at its address in Abilene, in the Northern District of Texas, J.A. 575; to Eddie Schulz (President and CEO) and Kyle McNeese (SVP) of Lubbock National Bank at its address in Lubbock, in the Northern District of Texas, J.A. 577; and to J. Pat Hickman (CEO) and David Jones (General Counsel) of Happy State Bank, at its address in Amarillo, in the Northern District of Texas, J.A. 621. These banks have their principal offices in the Northern District, and the other banks have branches or customers in the Northern District. It is not disputed that all the Banks conduct banking business in the Northern District of Texas. All the letters from PET state that "review indicates" PET patents are infringed and refer to PET's pending lawsuit against Citizens National Bank in the Eastern District.

         Jack Henry provides software systems for the Banks' mobile apps, and states that it is indemnifying the Banks for any liability for infringement. Jack Henry's counsel wrote to PET, giving reasons why the PET patents are not infringed, questioning patent validity, and requesting PET and its counsel to meet and discuss the issues. J.A. 132-35.

         PET did not respond to Jack Henry. PET's counsel at Chaudhari Law, PLLC wrote to each of the Banks, stating that "only your bank is accused of infringement." These letters disputed Jack Henry's views of non-infringement and invalidity, and further stated:

We have a successful history of enforcing the intellectual property rights of our clients against in-fringers. In addition to obtaining numerous licenses, we have also won jury verdicts against infringers, including one last September in Marshall, TX, which was one of ...

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