Foreign Party Cannot Hide Behind Hague Convention To Avoid Service

Order Re Service and Motion to Dismiss Re Service, Xilinx, Inc., v. Godo Kaisha IP Bridge 1, Case No. 3:17-cv-00509-JD (Judge James Donato)

It is not uncommon for parties to race to file competing patent suits in their preferred districts once negotiations break down and litigation appears necessary. In some cases, recognizing that federal courts generally give priority to cases which are the “first filed” and procedurally further along, a party may attempt to delay service of an opposing party’s complaint.  That was the apparent strategy of Japan-based Godo Kaisha IP Bridge 1 (“IPB”) in its patent dispute with San Jose-based Xilinx, Inc. (“Xilinx”).  But as IPB discovered, delay tactics do not always work.

Here, after the parties were unable to resolve their dispute, IPB filed a two-patent infringement suit in the Eastern District of Texas on January 31, 2017, and Xilinx filed a non-infringement declaratory judgment action on twelve different patents the following day in the Northern District of California. (According to Xilinx in its pending Motion to Dismiss or Transfer in the Texas case, Civil Action No. 2:17-cv-00100, IPB violated a Forbearance Agreement by filing suit a day early.)  Even though IPB sued Xilinx in the U.S., it refused to accept service of Xilinx’s action at its principal address in Tokyo.  And after being contacted to accept service on his client’s behalf, IPB’s U.S. trial counsel replied, “I suppose you never heard of the ‘first to file’ rule.  We will serve Xilinx directly, and you can do the same with IPB.  We will be well into the ED Tex case by the time your case is served.”  Based on this and other correspondence regarding service, Judge Donato concluded that “IPB’s counsel declined to accept service in an apparent fit of pique, and the record of events after that indicates that IPB has been unduly difficult to serve in a manner reflecting the uncooperative spirit manifested in [its attorney’s] words.”[1]

Following the refusal of IPB’s U.S.-based counsel to accept service, Xilinx filed a motion for an order of service under Federal Rule 4(f)(3), which permits service in a foreign country “by other means not prohibited by international agreement, as the court orders.” IPB responded that it has a “right” to force service through strict compliance with the Hague Convention, and that Xilinx was required to attempt service through the Hague Convention before resorting to other means.

Judge Donato disagreed. He held that Federal Rule 4 permits service on a foreign corporation in any manner prescribed for an individual, including “by other means” (outside the Hague Convention) so long as it is directed by the court and is not prohibited by international agreement.  He found there is no hierarchy of procedures requiring that service be attempted through the Hague Convention before relying on Rule 4(f)(3), which “is not a last resort or extraordinary relief,” but merely “one means among several which enables service of process on an international defendant.”  Judge Donato then found that service via Rule 4(f)(3) did not violate any international agreement, and granted Xilinx’s motion.

After granting the motion, Judge Donato turned to the question of the proper form of service to order. He found that because IPB hired U.S. counsel, and sued Xilinx in the U.S., service on IPB’s U.S. counsel was “an effective and reasonable method” of service not prohibited by the Hague Convention.  Consequently, Judge Donato ordered service on IPB through its U.S. counsel via email and U.S. mail to their law offices.

IPB’s “unduly difficult” conduct may have delayed service for a time, but Judge Donato was not impressed by its “uncooperative spirit”—which may come back to bite IPB if the case progresses in his court. And this decision is an important reminder of the need to remain professional and civil in filings and correspondence, or risk facing a frustrated judge and possibly even sanctions.

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[1] At the outset of his Order, Judge Donato advised counsel for both parties that the Northern District requires civility, courtesy, and professional integrity from all attorneys admitted to the District, and that conduct falling below the District’s standards will result in monetary or other sanctions. He then required both parties to read the District’s “Guidelines for Professional Conduct”— which we previously discussed on this Blog—and to inform their clients that he ordered them to do so.