Am Law 100 firm Polsinelli has won an appeal on behalf of client Jack Henry & Associates Inc. and numerous Jack Henry customers, from the United States Court of Appeals for the Federal Circuit. The appeal case is formally known as Jack Henry & Associates, Inc. v. Plano Encryption Technologies, case number 16-2700 and holds that non-practicing entities may be subject to jurisdiction wherever they send demand letters.
“We know demand letters can create a great deal of anxiety for our customers, and they look to Jack Henry & Associates for answers and support. Jay Heidrick and the rest of the team at Polsinelli have been strong partners over the years in helping us address these concerns. We are pleased with the court’s decision, but even more pleased with our customers’ continued faith in our ability to address legal issues that can be disruptive to their business objectives,” said Craig Morgan, general counsel at Jack Henry.
In the case, Plano Encryption sent out dozens of demand letters to Jack Henry customers alleging they were infringing Plano Encryption’s patents. Rather than waiting to be sued, Jack Henry and its customers filed a declaratory judgment action against Plano Encryption in the United States District Court for the Northern District of Texas seeking a ruling that Jack Henry and the customers did not infringe Plano Encryption’s patents.
Plano Encryption filed a motion to dismiss for improper venue, asserting that venue would only be proper in the Eastern District of Texas. Plano Encryption argued that it did not do business in the Northern District and had no contacts outside the Eastern District of Texas, relying on Red Wing Shoe Co. v. Hockerson–Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998) and other cases, which it claimed precluded courts from exercising personal jurisdiction based solely on demand letters. The district court agreed and dismissed the action, holding that venue was improper due to Plano Encryption’s lack of contacts with the Northern District of Texas.
Led by Polsinelli Shareholder Jay Heidrick, Jack Henry and its customers appealed the ruling to the Federal Circuit. Heidrick and team argued that Plano Encryption’s sole business is to enforce its patents, and that by sending its demand letters to banks in the Northern District of Texas, it was engaging in its sole business in the Northern District of Texas.
Heidrick argued that every other business is subject to jurisdiction if it conducts business in a particular jurisdiction, that non-practicing entities like Plano Encryption “do business” where they direct demand letters, and that non-practicing entities should not be treated any differently than other businesses.
The Federal Circuit agreed and wholly adopted Jack Henry’s arguments. The court noted that Plano Encryption purposefully directed its activities to the Northern District of Texas by sending its demand letters, which is Plano Encryption’s sole business. The court therefore held that jurisdiction was proper because the lawsuit stemmed from Plano Encryption’s activities in the Northern District, and that Plano Encryption had failed to provide a compelling reason why it should not be subject to jurisdiction in that district.
In stating additional views, Judge Stoll, joined by Judge Wallach, noted that the Federal Circuit’s earlier holding in Red Wing has been consistently misinterpreted by district courts, and encouraged the Federal Circuit to revisit the Red Wing decision in order to clarify that no special jurisdiction rules apply to non-practicing entities in patent infringement cases.
“This case is a great testament of the loyalty Jack Henry has to its customers. Rather than sitting back and waiting for its customers to be sued, Jack Henry was proactive on behalf of its customers and allowed us to assert novel – but common sense – legal arguments that ultimately prevailed, and will be a great tool for Jack Henry and its customers to address venue shopping by non-practicing entities,” said Heidrick.
About Jack Henry & Associates, Inc.
Jack Henry & Associates, Inc.® (NASDAQ: JKHY) is a leading provider of technology solutions and payment processing services primarily for the financial services industry. Its solutions serve more than 9,000 customers nationwide and are marketed and supported through three primary brands. Jack Henry Banking® supports banks ranging from community banks to multi-billion-dollar institutions with information processing solutions. Symitar® is a leading provider of information processing solutions for credit unions of all sizes. ProfitStars® provides highly specialized products and services that enable financial institutions of every asset size and charter, and diverse corporate entities to mitigate and control risks, optimize revenue and growth opportunities, and contain costs. Additional information is available at www.jackhenry.com.
Polsinelli is an Am Law 100 firm with more than 825 attorneys in 21 cities coast to coast. Ranked #24 for Client Service Excellence1 and #10 for best client relationships2 among 650 U.S. law firms, Polsinelli is also named among the top 30 best-known firms in the nation3 for the second consecutive year. The firm’s attorneys provide value through practical legal counsel infused with business insight, and focus on health care, financial services, real estate, intellectual property, mid-market corporate, labor and employment, and business litigation. www.polsinelli.com | Polsinelli PC | In California, Polsinelli LLP
12018 BTI Client Service A-Team Report
22017 BTI Industry Power Rankings
32018 BTI Brand Elite