BP Chem Ltd v. Formosa Chem & Fibre Corp. , 229 F.3d 254 ( 2000 )

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit
10-3-2000
BP Chem Ltd v. Formosa Chem & Fibre Corp.
Precedential or Non-Precedential:
Docket 99-5452
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Filed October 3, 2000
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NOS. 98-5468/5469 and 99-5423/5451/5452
BP CHEMICALS LTD. (an English corporation)
v.
FORMOSA CHEMICAL & FIBRE CORPORATION
(a Taiwanese corporation); JOSEPH OAT CORPORATION
(a Pennsylvania corporation)
Formosa Chemical & Fibre Corporation
Appellant in Nos. 98-5468 and 99-5423
Joseph Oat Corporation
Appellant in Nos. 98-5469 and 99-5451
BP CHEMICALS LTD. (an English corporation)
Appellant in No. 99-5452
v.
FORMOSA CHEMICAL & FIBRE CORPORATION
(a Taiwanese corporation); JOSEPH OAT CORPORATION
(a Pennsylvania corporation)
On Appeal From the United States District Court
For the District of New Jersey
(D.C. Civil Action No. 97-cv-04554)
District Judge: Honorable Joseph J. Rodriguez
Argued February 29, 2000
Before: ALITO and STAPLETON, Circuit Judges, and
POLLAK,* District Judge
_________________________________________________________________
* Honorable Louis H. Pollak, Senior United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
(Filed: October 3, 2000)
John E. Caruso
Montgomery, McCracken, Walker &
Rhoads
123 South Broad Street
Philadelphia, PA 19109
and
Daniel L. Brockett (Argued)
Robin G. Weaver
Squire, Sanders & Dempsey
4900 Society Center
Cleveland, OH 44114-1304
Attorneys for Appellee/
Cross-Appellant BP Chemicals Ltd.
Marc S. Palay (Argued)
Winston & Strawn
43 Rue du Rhone
1204 Geneva
Switzerland
and
Jerome W. Pope
Winston & Strawn
35 West Wacker Drive, Suite 4200
Chicago, IL 60601
and
Jonathan F. Bloom
Robert D. Carmignani
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103
Attorneys for Appellant/
Cross Appellee Formosa Chemical
& Fibre Corporation
2
Allison E. Accurso
Jon C. Martin
Fox, Rothschild, O'Brien &
Frankel, LLP
Princeton Pike Corporate Center
997 Lenox Drive, Building 3
Lawrenceville, NJ 08648-2311
Attorneys for Appellant/
Cross-Appellee Joseph Oat
Corporation
OPINION OF THE COURT
STAPLETON, Circuit Judge:
This is a trade secret case filed in the United States
District Court for the District of New Jersey by BP
Chemicals Ltd. (BP), a British corporation, against Formosa
Chemical & Fibre Corporation (FCFC), a Taiwanese
corporation, and Joseph Oat Corporation (JOC), a
Pennsylvania corporation with its principal place of
business in New Jersey. BP asserts claims underS 44(b)
and (h) of the Lanham Act, 15 U.S.C. S 1126(b) and (h),
Articles 2 and 10 bis of the Paris Convention for the
Protection of Industrial Property (hereinafter "the Paris
Convention"), and New Jersey common law. BP alleges that
FCFC misappropriated trade secrets relating to its
methanol carbonylation process for making acetic acid by
copying elements of an acetic acid plant design that BP's
predecessor, Monsanto, had provided in 1980 to a licensee,
China Petrochemical Development Corporation (CPDC). BP
further alleges that FCFC and JOC entered into a contract
whereby JOC would fabricate in New Jersey a number of
chemical process vessels and heat exchangers using
misappropriated technical specifications for ultimate use in
the construction of an acetic acid plant in Taiwan. BP
sought a preliminary injunction preventing JOC and FCFC
from exporting these vessels to Taiwan. BP's amended
complaint made clear that it sought to enjoin FCFC not
only from taking possession of the JOC equipment, but
from taking possession of any equipment manufactured in
3
the United States by U.S. companies using BP's trade
secrets. BP also sought compensatory and punitive
damages from FCFC.
FCFC moved to dismiss the claim against it for lack of
personal jurisdiction. The District Court deferred ruling on
the motion until the conclusion of the five-month
preliminary injunction hearing. The Court ultimately denied
FCFC's motion to dismiss and ruled that BP had
demonstrated its entitlement to preliminary injunctive relief
against FCFC and JOC. The injunction entered pertained
only to the JOC equipment. Following further submissions
of the parties, the District Court established the length and
terms of the injunction, limiting the duration to thirty
months, beginning April 20, 1998, and ending October 20,
2000. FCFC and JOC filed timely notices of appeal. BP filed
a timely cross-appeal.
The undisputed facts are as follows. FCFC is a publicly-
traded Taiwanese corporation with its principal place of
business in Taipei, Taiwan. FCFC is a subsidiary of a
Taiwanese conglomerate known as the Formosa Plastics
Group (FPG), which is owned by Y.C. Wang. In 1996, FPG's
U.S. operations produced revenue of $2.58 billion. FCFC
has a 3.51% stock interest in Formosa Plastics
Corporations (FPC), a Delaware corporation with
headquarters in New Jersey. In developing the design for its
acetic acid plant, FCFC used "ASPEN" software that it
leased from Nan Ya Plastics Corporation, another affiliate of
FPG.
FCFC has a contract with JOC under which JOC will
fabricate vessels in New Jersey for delivery to FCFC in
Taiwan. It is performance of this contract that the instant
action seeks to enjoin. Correspondence by fax or otherwise
between FCFC and JOC regarding this contract has
occurred "at least once a week" over a period of a number
of months. (A. 19597-600.)
FCFC has contracts for the purchase of equipment for its
acetic acid plant with at least eight U.S. vendors in addition
to JOC. These vendors received "bid packages" containing
specifications that allegedly incorporate misappropriated
trade secrets. The process for soliciting bids was that
4
FCFC's engineering team would prepare a bid package and
send it to a purchasing group. BP asserts, and FCFC does
not dispute, that the purchasing group was actually the
purchasing group of FPG, not FCFC. The purchasing group
would then send the bid packages to the Taiwanese agents
of U.S. vendors, who would in turn send them to their U.S.
clients. All meetings between FCFC representatives and
representatives of equipment vendors and their agents took
place in Taiwan. No FCFC personnel visited the United
States for any purpose in connection with the design or
construction of the acetic acid plant. There is no evidence
that any U.S. vendor received bid packages directly from
FCFC, or even from FPG's purchasing group, rather than
through Taiwanese agents of the U.S. vendors.
FCFC's contract with Nooter, one of the U.S. equipment
vendors, contains a provision requiring arbitration in New
York of any disputes concerning that contract. The
contracts with the other vendors call for arbitration in
Taiwan.
FCFC also has business contacts with the United States
that are unrelated to its acetic acid plant project. In the
past five years, FCFC entered into four contracts with U.S.
companies for the purchase of chemical process technology,
at least two of which involved the training of FCFC
personnel in the United States. For example, FCFC has
recently contracted with ABB Lummus Global, Inc., a New
Jersey engineering firm. In performing this contract,
Lummus is receiving daily faxes from FCFC in Taiwan.
For more than a decade, FCFC has exported products
(primarily rayon and fiber) to customers in the U.S. The
parties agree that in 1996, these sales totaled about four
million dollars. However, these sales were normally made in
Taiwan through Taiwanese agents, and there is no evidence
of direct sales by FCFC to purchasers in the United States.
FCFC has no sales force, no representative offices, and no
warehouses or other facilities in the U.S. There is no
evidence that FCFC ever advertised its products in the U.S.
FCFC argues on appeal that the District Court did not
have personal jurisdiction over it. Both FCFC and JOC
further argue that the District Court erred in issuing the
5
preliminary injunction by (1) determining the likelihood of
success on the merits under the law of New Jersey rather
than Taiwan, and (2) finding that the injunction was
necessary to prevent imminent, irreparable harm. BP cross-
appeals, asserting that the District Court erred in limiting
the duration of the injunction to thirty months.
I.
The District Court found that "the nature and extent of
[FCFC's] contacts with New Jersey and with the United
States as a whole allow[ed it] to assert jurisdiction over
FCFC under Fed. R. Civ. P. 4(k)(2)." (Dist. Ct. Op. at 10.)
We hold that the District Court did not have personal
jurisdiction over FCFC.
Rule 4(k)(2) provides that:
[i]f the exercise of jurisdiction is consistent with the
Constitution and laws of the United States, serving a
summons or filing a waiver of service is also effective,
with respect to claims arising under federal law, to
establish personal jurisdiction over the person of any
defendant who is not subject to the jurisdiction of the
courts of general jurisdiction of any state.
Fed. R. Civ. Proc. 4(k)(2).
Rule 4(k)(2) thus sanctions personal jurisdiction over
foreign defendants for claims arising under federal law
when the defendant has sufficient contacts with the
nation as a whole to justify the imposition of United
States' law but without sufficient contacts to satisfy the
due process concerns of the long-arm statute of any
particular state.
World Tanker Carriers Corp. v. MV YA Mawlaya, 99 F.3d
717, 720 (5th Cir. 1996). FCFC argues that while the
District Court correctly found that FCFC did not have
sufficient contacts with New Jersey to justify assertion of
jurisdiction under the State's long-arm statute, it
incorrectly concluded (1) that BP's cause of action arose
under federal law, and (2) that FCFC had sufficient
contacts with the United States as a whole to justify
assertion of jurisdiction under Rule 4(k)(2). Because we
6
agree that the District Court erred in concluding that
FCFC's contacts with the United States were sufficient to
warrant the assertion of personal jurisdiction over it, we
may assume, without deciding, that BP's claim arises under
federal law.1
Once FCFC moved to dismiss, BP had the burden of
coming forth with competent evidence demonstrating that
FCFC had sufficient contacts with the United States to
justify the court's assertion of either specific or general
personal jurisdiction. See Stranahan Gear Co. v. NL Indus.,
Inc., 800 F.2d 53, 58 (3d Cir. 1998). Specific personal
jurisdiction exists when the defendant has "purposefully
directed his activities at residents of the forum and the
litigation results from alleged injuries that `arise out of or
related to' those activities." Burger King Corp. v. Rudzewicz,
471 U.S. 462, 472 (1985). General personal jurisdiction
exists when the defendant's contacts with the forum,
whether or not related to the litigation, are "continuous and
systematic." Helicopteros Macionales de Columbia v. Hall,
_________________________________________________________________
1. Great Britain and the United States are signatories to the Paris
Convention. BP characterizes its claim as arising under Articles 2 and 10
bis of the Paris Convention and S 44 of the Lanham Act. Article 2
provides that nationals of signatory countries "shall, as regards to the
protection of industrial property, enjoy in all the other countries of the
Union the advantages that their respective laws now grant, or may
hereafter grant, to nationals." Paris Convention, Art. 2, I.E.L. IV-A.
Article 10 bis provides that "[t]he countries of the Union are bound to
assure to nationals of such countries effective protection against unfair
competition." Id. Art. 10 bis. In L'Aiglon Apparel, Inc. v. Lana Lobell,
Inc.,
214 F.2d 649 (3d Cir. 1954), we found that S 44 subsections (b) and (h)
were intended by Congress "to implement international agreements [like
the Paris Convention] that are not self-executing" and "to fashion a
remedy to coincide with rights growing from the . . . substantive
provisions of [those] agreements." Id. at 654. BP thus asserts that as a
matter of federal law it is entitled to the same protection that New
Jersey
law affords to U.S. citizens. Its pleadings expressly disavow any right to
relief based on conduct of FCFC in Taiwan so it claims no extraterritorial
effect for the Lanham Act. Compare Van ity Fair Mills, Inc. v. T. Eaton
Co.,
234 F.2d 633, 644 (2d Cir. 1956). Given FCFC's limited contacts with
the United States, we find it unnecessary to decide whether BP's claim
against it arises under federal law and, if so, whether it states a claim
against FCFC upon which relief could be granted.
7
466 U.S. 408, 416 (1984). We examine in turn whether the
District Court has specific or general personal jurisdiction
over FCFC.
A.
FCFC's contacts with the United States do not give rise to
specific jurisdiction. The constitutional touchstone of due
process analysis is "whether the defendant purposefully
established `minimum contacts' in the forum." Burger King
Corp., 471 U.S. at 474. "[T]he foreseeability that is critical
to due process analysis . . . is that the defendant's conduct
and connection with the forum . . . are such that he should
reasonably anticipate being haled into court there." Id.
(quoting World-Wide Volkswagen Corp. v. Woodson , 444
U.S. 286, 295 (1980)). "It is essential in each case that
there be some act by which the defendant purposely avails
itself of the privilege of conducting activities within the
forum . . . , thus invoking the benefits and protections of its
laws." Id. at 475 (quoting Hanson v. Denckla, 357 U.S. 235,
253 (1958)). "This `purposeful availment' requirement
ensures that a defendant will not be haled into a
jurisdiction solely as a result of `random,'`fortuitous,' or
`attenuated' contacts . . . ." Id. (quoting Keeton v. Hustler
Magazine, Inc., 465 U.S. 770, 774 (1984)).
The Supreme Court has given several reasons why a
forum may legitimately exercise jurisdiction over a
nonresident who "purposefully directs" his activities toward
forum residents. "A State generally has a `manifest interest'
in providing its residents with a convenient forum for
redressing injuries inflicted by out-of-state actors." Id. at
473 (quoting Keeton, 465 U.S. at 776). "Moreover, where
individuals `purposefully derive benefit' from their interstate
activities, it may well be unfair to allow them to escape
having to account in other States for consequences
that arise proximately from such activities." Id. at
473-74. Finally, "because `modern transportation and
communications have made it much less burdensome for a
party sued to defend himself in a State where he engages in
economic activity,' it usually will not be unfair to subject
him to the burdens of litigating in another forum for
disputes relating to such activity." Id. at 474 (quoting
8
McGee v. International Life Ins. Co., 355 U.S. 220, 223
(1957)).
"With respect to interstate contractual obligations, [the
Supreme Court] ha[s] emphasized that parties who `reach
out beyond one state and create continuing relationships
and obligations with citizens of another state' are subject to
regulation and sanctions in the other State for the
consequences of their activities." Id. at 473 (quoting
Travelers Health Ass'n v. Virginia, 339 U.S. 643, 647
(1950)). On the other hand, "[i]f the question is whether an
individual's contract with an out-of-state party alone can
automatically establish sufficient minimum contacts in the
other party's home forum, . . . the answer is clearly that it
cannot." Id. at 478. The Supreme Court has endorsed "a
`highly realistic' approach that recognizes that a `contract' is
`ordinarily but an intermediate step serving to tie up prior
business negotiations with future consequences which
themselves are the real object of the business transaction.' "
Id. at 479 (quoting Hoopeston Canning Co. v. Cullen, 318
U.S. 313, 316 (1943)). "It is these factors--prior
negotiations and contemplated future consequences, along
with the terms of the contract and the parties' actual
course of dealing--that must be evaluated in determining
whether the defendant purposefully established minimum
contacts within the forum." Id.
"Once it has been decided that a defendant purposefully
established minimum contacts within the forum . . . , these
contacts may be considered in light of other factors to
determine whether the assertion of personal jurisdiction
would comport with `fair play and substantial justice.' " Id.
(quoting International Shoe, 326 U.S. at 320). "Thus courts
`in appropriate case[s]' may evaluate `the burden on the
defendant,' `the forum State's interest in adjudicating the
dispute,' `the plaintiff's interest in obtaining convenient and
effective relief,' `the interstate judicial system's interest in
obtaining the most efficient resolution of controversies,' and
the `shared interest of the several States in furthering
fundamental substantial social policies.' " Id. at 476-77
(quoting World-Wide Volkswagen, 444 U.S. at 292). "These
considerations sometimes serve to establish the
reasonableness of jurisdiction upon a lesser showing of
9
minimum contacts than would otherwise be required." Id.
at 477. "On the other hand, where a defendant who
purposefully has directed his activities at forum residents
seeks to defeat jurisdiction, he must present a compelling
case that the presence of some other considerations would
render jurisdiction unreasonable." Id."Nevertheless,
minimum requirements inherent in the concept of`fair play
and substantial justice' may defeat reasonableness of
jurisdiction even if the defendant has purposefully engaged
in forum activities." Id. at 477-78.
Applying these principles in Burger King, the Supreme
Court found jurisdiction proper where the defendant,
"[e]schewing the option of operating an independent local
enterprise, . . . deliberately `reach[ed] out beyond' [his home
forum] and negotiated with a Florida corporation for the
purchase of a long-term franchise and the manifold benefits
that would derive from affiliation with a nationwide
organization." Id. at 479-80. The Court emphasized that he
entered "a 20-year relationship that envisioned continuing
and wide-reaching contacts with Burger King in Florida,"
which relationship could be viewed as neither "random,"
"fortuitous," or "attentuated." Id. Moreover, the Court stated
that the Court of Appeals, in finding jurisdiction improper,
"gave insufficient weight to provisions in the various
franchise documents providing that all disputes would be
governed by Florida law." Id. at 481. The Court reasoned
that "[a]lthough such a provision standing alone would be
insufficient to confer jurisdiction, . . . when combined with
the 20-year interdependent relationship [the defendant]
established with Burger King's Miami headquarters, it
reinforced his deliberate affiliation with the forum State and
the reasonable foreseeability of possible litigation there." Id.
In this case FCFC's alleged misappropriation and
improper use of BP's trade secrets have occurred and
continue to occur in Taiwan. The primary alleged injury to
BP has occurred and continues to occur in Great Britain.
See Horne v. Adolph Coors Co., 684 F.2d 255, 259-60 (3d
Cir. 1982) (holding that in a trade secret case, the injury
occurs to the owner of the trade secret wherever he
resides). Thus, the primary tortious conduct giving rise to
BP's claim against FCFC and to the injury caused thereby
10
is unrelated to the United States. The only FCFC contacts
with the United States that are in any way related to BP's
claim against it are that (1) it placed orders in Taiwan with
eight United States based equipment suppliers to enable it
to build the offending plant in Taiwan, (2) in furtherance of
those orders it has sent correspondence from Taiwan into
the United States, and (3) in one of those eight orders it
agreed to arbitrate with that supplier in New York. Thus, in
substance, this is a case where FCFC availed itself of the
assistance of eight U.S. based companies who solicited its
business in Taiwan in order to build a plant in Taiwan
allegedly with resulting injury to BP in Great Britain.
Accordingly, we find no act by which FCFC "purposefully
avail[ed] itself of the privilege of conducting activities within
the forum . . . , thus invoking the benefits and protections
of its laws." Burger King, 471 U.S. at 475.
Burger King teaches that "a non-resident's contracting
with a forum resident, without more, is insufficient to
establish the requisite `minimum contacts.' " Sunbelt Corp.
v. Noble, Dentor & Assoc., Inc., 5 F.3d 28, 32 (3d Cir. 1993).
The same is true of "informational communications in
furtherance of [such a] contract." Id. at 32. Besides the
contracts and implementing correspondence, there are no
significant contacts here with the United States. The fact
that these contracts were for a one-time purchase of
equipment that was to be shipped to Taiwan and were
solicited and negotiated through the Taiwanese agents of
the U.S. vendors seems to us to negate any inference of
"purposeful availment."
In our view, FCFC's undertaking, in its contract with
Nooter, to arbitrate in New York any disputes arising under
the contract is the single fact that offers most substantial
support for the proposition that the manner in which FCFC
conducted its program of purchases of American equipment
for its acetic acid plant reflected a measure of acquiescence
in the possible need to submit to the jurisdiction of
American courts, should disputes arise. But we think that
this fact is not sufficient to carry the day. We of course
recognize that, in the event of a dispute between FCFC and
Nooter, the contractual agreement between FCFC and
Nooter would probably -- and properly -- be regarded as a
11
waiver of objections to judicial jurisdiction as well, whether
that jurisdiction was to be exercised by a New York state
court or, in the alternative, by a federal court, located
anywhere in the United States, with respect to a claim
arising under federal law. But the dispute in the case at bar
does not involve Nooter, and the FCFC-JOC contract
contains no comparable venue-selection provision. More to
the point, the provision in the FCFC-Nooter contract only
involved venue selection. It was not a provision stipulating
that New York law, or the law of any other American
jurisdiction, would govern such disputes as might arise.
Accordingly, we are not persuaded that the provision
constitutes purposeful availment of the benefits and
protections of United States law. Given the attenuated
connection between the arbitration clause and the instant
litigation, it is insufficient to make the Court's exercise of
jurisdiction comport with "traditional notions of fair play
and substantial justice." Cf. Kahn Lucas Lancaster v. Lark
Int'l Ltd., 956 F. Supp. 1131, 1138-39 (S.D.N.Y. 1997) (New
York arbitration clause is insufficient basis for jurisdiction
over suit even between the parties to the contract
containing the clause until the plaintiff indicates a desire to
arbitrate the suit).
Finally, we note that the United States has, at best, a
very limited interest in adjudicating this dispute between
two non-citizens, which is primarily a dispute regarding
acts that took place in Taiwan that caused an injury in
Great Britain. Although BP emphasizes that this suit seeks
only to enjoin and recover damages for FCFC's actions in
the United States, and not its acts of misappropriation in
Taiwan, it cites no authority for the proposition that a
plaintiff can strengthen the relationship between the
defendant, the forum and the litigation by limiting the relief
sought. Regardless of whether BP seeks relief for the
actions of FCFC in Taiwan, the fact remains that FCFC has
done nothing of substance other than contract in Taiwan
with the Unites States based vendors to make one-time
deliveries of equipment in Taiwan. Under Burger King, those
purchases and the associated correspondence sent from
Taiwan are insufficient to create specific personal
jurisdiction.
12
We find substantial support for our holding in Burlington
Indus., Inc. v. Maple Indus., Inc., 97 F.3d 1100, 1103 (8th
Cir. 1996). The plaintiff there brought a claim for
misappropriation of trade secrets in the Eastern District of
Arkansas. As a basis for specific jurisdiction, the plaintiff
pointed to the fact that the four machines incorporating the
misappropriated trade secrets were purchased from a third-
party Arkansas resident. See id. However, none of the
defendant's employees went to Arkansas to negotiate their
purchase or supervise their manufacture. See id. The Court
acknowledged that telephone calls between the defendant
and the vendor, numbering at least one hundred,"can be
evidence of a continuous and systematic business
relationship," but it found that while these phone contacts
"remain a consideration, they are insufficient, alone, to
confer personal jurisdiction." Id.
B.
We conclude, as well, that FCFC's United States contacts
are not such that an assertion of general personal
jurisdiction comports with the demands of due process. As
we have noted, even where the connection between a
defendant's contacts and the litigation are insufficient to
give rise to specific jurisdiction, general jurisdiction will be
available where the defendant's contacts unrelated to the
litigation are "continuous and systematic." Helicopteros
Nacionales de Colombia v. Hall, 466 U.S. 408, 416 (1984).
While FCFC exports its products to the United States, it
is undisputed that it has no personnel or facilities here and
there is no evidence that it has in any way advertised or
solicited business here. As a result there is simply no basis
for concluding that it has a continuous presence in the
United States.
Contrary to BP's suggestion, FCFC's relationship with
FPG and its chairman, Mr. Wang, does not provide the
requisite presence here. FCFC is a legally separate entity.
The mere fact that FCFC had an arrangement with FPG,
the details of which are not revealed in the record, whereby
FCFC would submit bid packages to FPG's purchasing
group, who would in turn submit them to other agents, and
13
the fact that FCFC leased software from Nan Ya, another
FPG affiliate, is not a sufficient basis on which to pierce the
corporate veil and assert jurisdiction over FCFC on the
basis of the United States contacts of other FPG affiliates.
See Cohn v. Insurance Co., 54 F.3d 1108, 1116 (3d Cir.
1995) ("party seeking to pierce corporate veil must establish
that controlling corporation wholly ignored separate status
of controlled corporation and so dominated and controlled
its affairs that separate existence is a mere sham").
Moreover, FCFC's passive ownership of 3.5% of the stock of
a Delaware corporation cannot constitute the kind of
continuous and systematic business contacts that give rise
to general jurisdiction. See Shaffer v. Heitner , 433 U.S. 186,
213 (1977); Grimes v. Vitalink Communications Corp., 17
F.3d 1553, 1559 (3d Cir. 1994). Finally, the fact that FCFC
has entered into four other recent contracts for the
purchase of chemical technology, two of which involved
FCFC personnel traveling to the United States for training,
is insufficient. See Helicopteros, 466 U.S. at 416-17 (visits
in connection with training and purchases, even if
occurring at regular intervals, are insufficient basis for
general jurisdiction). Even considering the cumulative effect
of these various contacts together, the requirements for
general jurisdiction are not met.
II.
"In order to obtain a preliminary injunction, the moving
party must show (1) irreparable injury, (2) a reasonable
probability of success on the merits, (3) the harm to it
outweighs the possible harm to other interested parties,
and (4) harm to the public." Frank Russell Co. v. Wellington
Management Co., 154 F.3d 97, 101 (3d Cir. 1998). A
District Court then balances these four factors to determine
if an injunction should issue. See id. JOC asserts that the
District Court erred in finding that BP had demonstrated
both imminent and irreparable injury and a likelihood of
success on the merits.
A.
We find that the record supports the District Court's
conclusion that an injunction was necessary to prevent
14
imminent and irreparable harm. The District Court did not
clearly err in crediting BP's witness who testified as to the
damage that would be done to BP's reputation, credibility
and ability to license its technology if FCFC's plant became
operational, giving rise to the public perception that BP was
unable to protect its proprietary trade secrets. Such
injuries to reputation are difficult to calculate, and thus
money damages are an inadequate remedy. See Ferrero v.
Associated Materials Inc., 923 F.2d 1441, 1449 (11th Cir.
1991) (holding that injury to goodwill is irreparable).
Moreover, although the evidence suggests that FCFC's plant
would not have become operational for at least a year after
the injunction was issued, the history of the instant
proceedings belies JOC's unsupported assertion that a year
was ample time to obtain a trial on the merits in Taiwan in
the event that the equipment were allowed to leave this
country. See Geritrex Corp. v. Dermarite Indus., LLC, 910 F.
Supp. 955, 966 (S.D.N.Y. 1996); Wright et al., Federal
Practice and Procedure S 2948.1, at 139 (2d ed. 1995)
(explaining that imminence requires that the harm will
occur before a trial on the merits can be had). The
operation of FCFC's plant is not so remote in time as to be
uncertain or speculative. See Continental Group, Inc. v.
Amoco Chems. Corp., 614 F.2d 351, 359 (3d Cir. 1980).
Finally, the District Court's finding that any delay on BP's
part in filing suit "was caused by BP's conscientious
decision to fully investigate the very serious charges before
filing suit" is not clearly erroneous. BP Chems., Ltd. v.
Formosa Chem. & Fibre Corp., No. 97-cv-4554, at 41 (D.N.J.
Sept. 15, 1998). To the extent that delay can justify denial
of a motion for a preliminary injunction, see, e.g., Citibank,
N.A. v. Citytrust, 756 F.2d 273, 276 (2d Cir. 1985), "a delay
caused by a plaintiff's good faith efforts to investigate an
infringement" or to determine how serious an infringement
is does not preclude a finding of irreparable harm. Tom
Doherty Assocs., Inc. v. Saban Entertainment, Inc. , 60 F.3d
27, 39 (2d Cir. 1995).
B.
In determining whether BP had shown a likelihood of
success, however, the District Court concluded that New
15
Jersey had the most significant relationship with the case
and applied New Jersey law in analyzing each issue. We
conclude that it erred in doing so.2
BP bases its claim against JOC on the following
Restatement rule to which it maintains the New Jersey
courts are committed:
One who discloses or uses another's trade secret
without a privilege to do so is liable to the other if . . .
(c) he learned the secret from a third person with
notice of the facts that it was a secret and that the
third person discovered it by improper means or that
the third person's disclosure was otherwise a breach of
duty to the other.
Restatement (First) of Torts S 757 (1939); see also Williams
v. Curtiss-Wright Corp., 681 F.2d 161, 164 & n.3 (3d Cir.
1982) (holding that New Jersey has substantially adopted
Restatement section 757(c)).
JOC does not dispute, as we understand it, that New
Jersey courts follow this rule.3 It stresses, however, that
_________________________________________________________________
2. FCFC and JOC argued before us, under appropriate argument
headings, that BP had not shown a likelihood of success on the merits
and, under appropriate subheadings, that the record would not support
a finding (1) that any information Tu gave FCFC was a trade secret, or
(2) that Tu breached a duty by giving information to FCFC. Both briefs
(see FCFC's opening brief at 50 and JOC's opening brief at 17-18) took
the position that, contrary to the ruling of the District Court, both of
these issues are governed by Taiwanese law. FCFC's brief cited authority
in support of this position, and JOC expressly incorporated that
authority. Having considered the conflicts of law issues thus raised, we
have concluded that the District Court has entered an injunction, and is
currently proceeding to the merits issues, based on an erroneous view of
the law. Under these circumstances, we deem it appropriate and prudent
to advise the District Court at this time regarding our view of the
conflicts of law issues.
3. It does dispute the application of the rule to the facts of this case,
asserting that JOC did not have notice that FCFC had discovered the
secret by improper means at the time it learned the secret from FCFC,
and that therefore Restatement section 758 rather than section 757
applies. Section 758 governs where the defendant does not have notice
that the third party who disclosed the secret obtained it by improper
16
under New Jersey's flexible "governmental-interest analysis,
. . . the determinative law is that of the state with the
greatest interest in governing the particular issue to be
decided." Veazey v. Doremus, 510 A.2d 1187, 1189 (N.J.
1986) (emphasis supplied); accord O'Connor v. Busch
Gardens, 605 A.2d 773, 774 (N.J. Super. Ct. App. Div.
1992) ("[C]hoice of law decisions can and should be made
on an issue-by-issue basis, and thus the law of different
states can apply to different issues in the same case.); see
also Restatement (Second) of Conflict of LawsS 145, S145
cmt. d. JOC points out that in addition to issues regarding
its knowledge and conduct, the likelihood of BP's success
on its claim depends on whether it can establish (1) that it
had a protectable interest in its proprietary information --
i.e., a "trade secret" (and, in particular, that Monsanto and
CPDC took the requisite security measures to protect the
methanol carbonylation technology) and (2) that FCFC
tortiously acquired BP's trade secret (and, in particular,
that FCFC's consultant, Mr. Tu, owed a duty of
confidentiality with respect to the technology and that
FCFC had knowledge of a breach of duty in receiving and
using BP's technology). Thus, while it appears to be
undisputed that New Jersey law governs the issues of
JOC's knowledge and conduct, this does not necessarily
signify that New Jersey law -- as opposed to Taiwanese law
-- applies to the two additional issues necessary to BP's
case against JOC.
JOC has tendered affidavits tending to show that
Taiwanese law governing the protectability of commercially
valuable information and what constitutes a tortious
_________________________________________________________________
means until after the defendant learns the secret. See Restatement (First)
of Torts S 758 & cmt. a. Section 758 protects from liability an innocent
third party who learns of the secret if prior to receiving notice "he has
so
changed his position that to subject him to liability would be
inequitable." Id. S 758(b). JOC argues that its substantial investment of
time and money in the manufacturing process thus precludes liability.
The events from which the District Court inferred notice, however, all
occurred prior to JOC's entering into its contract with FCFC. Thus,
sections 757 and 758 do not differ in any respect that is relevant to the
issue before us in this appeal.
17
conversion of such a protectable interest is different from,
and more difficult for BP than, the New Jersey law
governing those issues. As to the issue of protectability, the
affidavits indicate, for example, that "[a] single unprotected
disclosure [by either BP, Monsanto, CPDC or other
Monsanto licensees] of the secret terminates its trade secret
status immediately (like a needle hits a balloon)," (A. 6024),
and that "BP is required to show that CPDC actually took
steps to safeguard the information," (A. 1046 (emphasis
added)). As to the issue of whether FCFC tortiously
acquired the information from Tu, the affidavits indicate
that:
BP is required to show that CPDC actually entered into
a confidentiality agreement with Mr. Tu. There must be
evidence that Mr. Tu was put on notice or instructed
as to what materials he should consider confidential.
Under Taiwanese law, corporate obligations do not
attach to a corporation's employee. The employee has
to be subject to [sic] specific agreement or clear
instructions as to exactly what he was required to keep
confidential.
(A. 1046).
We recognize that BP has tendered conflicting affidavits
tending to show that JOC's affidavits do not accurately
characterize Taiwanese law and that Taiwanese and New
Jersey law are the same as to these issues. It is enough for
present purposes, however, to find that there is record
evidence that, if believed, would support a finding that
there are relevant differences in the laws of the two
sovereigns that the parties claim to be governing. This
requires us to determine whether Taiwan or New Jersey has
the more substantial interest in determining:
(1) whether proprietary information licensed by its
purported owner for use in Taiwan was protectable and
whether at the time of its alleged conversion in Taiwan
it had been returned to the public domain; and
(2) whether FCFC's acquisition of the alleged trade
secret in Taiwan was wrongful.
In both instances, we conclude based on the current record
that Taiwan had the more substantial interest in having its
18
law applied and that a New Jersey court would apply that
law in a case like this.
We believe Taiwan has the greater interest in setting the
standards regarding whether information that has been
licensed by a British company to a Taiwanese company has
been sufficiently safeguarded to warrant legal protection or
whether it has entered the Taiwanese public domain. This
issue implicates policy judgments regarding the appropriate
balance between protecting trade secrets, thereby
encouraging both the development of new technology and
the willingness of foreign companies to share their
technology with Taiwanese businesses, and free
interchange and access to information, which also has
profound implications for the health of the Taiwanese
economy. New Jersey's interest, on the other hand, would
appear to be virtually nil. As we have previously pointed
out, BP, the purported owner of the trade secret, is not a
resident of New Jersey and, while it may suffer some
marginal injury there, New Jersey is assuredly not the
principal situs of either the direct or the indirect injury
inflicted.4 Moreover, we are doubtful that a New Jersey
court would apply New Jersey law even if BP were a New
Jersey corporation. A state's interest in protecting its
citizens from injury by protecting intellectual property
which they choose to license to foreign companies cannot
outweigh the interests of the foreign sovereign in setting the
standards for the protection of intellectual property within
its own borders. Cf. O'Connor, 605 A.2d at 775.
The New Jersey Superior Court's decision in O'Connor is
instructive. There, a New Jersey resident was injured in
Virginia. The injuries were allegedly caused by both the
New Jersey plaintiff's and the Virginia defendant's
negligence. The issue was whether the court should apply
Virginia's strict rule of common-law contributory negligence
_________________________________________________________________
4. As we have previously pointed out, Great Britain, where BP is
domiciled, is the principal situs of the injury alleged by BP. However, as
we point out below, conventional choice of law doctrine ordinarily does
not give great weight to the place of injury in cases, like the case at
bar,
arising out of claims of misappropriation of trade values. In any event,
no party has suggested that British law governs any of the issues
presented in this case.
19
or New Jersey's comparative negligence rule, which afforded
more protection to the injured plaintiff. The court held that:
New Jersey's concern for its injured citizens is also
legitimate, but it cannot exempt them from other
states' law setting standards for local conditions and
conduct. If New Jersey's comparative negligence
doctrine followed [the plaintiff] [i]nto. . . Virginia, it
would follow her into every other state as well, and
would supplant local liability rules wherever she went.
That would be an impermissible intrusion into the
affairs of other states.
Id.; cf. Restatement (Third) of the Foreign Relations Law of
the United States SS 402, 403 (1987) (discussing bases of
and limitations on the jurisdiction to prescribe law with
respect to a person or activity having connections with
other states). Similarly, in this case, neither New Jersey nor
Great Britain's concern for their injured citizens can
outweigh Taiwan's interest in setting standards for the
protection of intellectual property in Taiwan.
Similarly, Taiwan has the greater interest in having its
law applied to determine whether FCFC, a Taiwanese
company, acted tortiously in acquiring information in
Taiwan from CPDC, another Taiwanese company, and, in
particular, as to the circumstances under which a
Taiwanese company's actions have created a duty of
confidentiality in its employees. Again the law in this area
reflects a delicate balance of competing interests that has
the capacity to profoundly affect the Taiwanese economy,
and any interest that New Jersey would have in protecting
trade secret holders who export their intellectual property
to Taiwan is greatly outweighed by Taiwan's interest in
setting the standards that govern the conduct of its own
citizens regarding intellectual property that is present
within its borders.
The conclusion that Taiwan's interest in both of these
issues is greater than New Jersey's finds further support in
the Restatement (Second) of Conflict of Laws , to which New
Jersey courts have often looked for guidance. See, e.g.,
Veazey, 510 A.2d at 251; Rose, 293 A.2d at 367-77;
O'Connor, 605 A.2d at 774. The Restatement suggests that
20
the following factors should be taken into account in
determining which state has the most significant
relationship with a particular issue in tort law:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury
occurred,
(c) the domicile, residence, nationality, place of
incorporation and place of business of the parties, and
(d) the place where the relationship, if any, betw een
the parties is centered.
Restatement (Second) of Conflicts S 145 (1971).
"[T]he place where the conduct occurred is given
particular weight in the case of torts involving . .. unfair
competition." Id. S 145, cmt. (e), at 420. Moreover, while the
general rule is that in determining whether an interest is
entitled to legal protection, "the applicable law will usually
be the local law of the state where the injury occurred," id.
S 158 (emphasis added), the Restatement qualifies this rule,
stating:
"[s]ituations do arise, however, where the place of
injury will not play an important role in the selection of
the state of applicable law. . . . This will . . . be so
when . . . there may be little reason in logic or
persuasiveness to say that one state rather than
another is the place of injury, or when, such as in the
case of multistate defamation, injury has occurred in
two or more states.
Id. The Restatement further states that"the place of injury
is less significant in the case of . . . such unfair competition
as consists of false advertising and the misappropriation of
trade values." Id. S145 cmt f. The Restatement's
explanation for the unimportance of the place of injury in
cases of misappropriation of trade values is directly
applicable here:
The injury suffered through false advertising is the loss
of customers or of trade. Such customers or trade will
frequently be lost in two or more states. The effect of
the loss, which is pecuniary in its nature, will normally
21
be felt most severely at the plaintiff's headquarters or
principal place of business. But this place may have
only a slight relationship to the defendant's activities
and to the plaintiff's loss of customers or trade.
The situation is essentially the same when
misappropriation of the plaintiff's trade values is
involved, except that the plaintiff may have suffered no
pecuniary loss but the defendant rather may have
obtained an unfair profit.
Id. Equally applicable here is the conclusion that in such
cases, "the place of injury does not play so important a role
for choice-of-law purposes . . . as in the case of other kinds
of torts[ and that i]nstead, the principal location of the
defendant's conduct is the contact that will usually be given
the greatest weight in determining the state whose local law
determines the rights and liabilities that arise." Id.
The vast majority of the conduct that is relevant to these
two issues occurred in Taiwan.5 BP licenced the trade
secrets to CPDC in Taiwan. To the extent that BP and
CPDC took measures to safeguard those secrets in CPDC's
hands, those measures were taken in Taiwan. FCFC
acquired whatever information it acquired in Taiwan,
designed its plant in Taiwan, prepared the bid packages
with the specifications for the equipment in Taiwan, and
delivered those packages to Taiwanese agents of U.S.
companies in Taiwan.
Moreover, while neither BP nor JOC is Taiwanese, which
by itself weighs against the application of Taiwanese law,
both have established significant relationships with Taiwan,
BP by licensing its technology to a Taiwanese company and
JOC by maintaining agents in Taiwan for the purpose of
soliciting Taiwanese business. These relationships are
centered in Taiwan, and these relationships gave rise to the
events that are at issue here.
We hold that Taiwan has the greater interest in having its
_________________________________________________________________
5. Although BP has alleged misconduct occurring in New Jersey, namely
JOC's fabrication of equipment using misappropriated technical
specifications, this conduct has no relevance to either of the issues
regarding which JOC asserts that Taiwanese law applies.
22
law govern the issues of whether BP had a protectable
interest in the information licensed to CPDC and whether
FCFC acted unlawfully in acquiring it. Therefore, to the
extent that there is a conflict of law on these issues,
Taiwanese law should govern.
As we have previously noted, there is evidence in the
current record that, if believed, would support a conclusion
that Taiwanese and New Jersey law do not differ in any
respect material here. The District Court had no occasion to
resolve the conflict presented in the affidavits before it
because it erroneously concluded that New Jersey law
governed all issues. While we conclude that we are
authorized to resolve that conflict, see Fed. R. Civ. Proc.
44.1 (the content of foreign law is an "issue of law");
Franzen v. Equitable Life Assurance Soc'y, 33 A.2d 599, 602
(N.J. 1943) (same), we believe the District Court is in the
best position to determine what at this point is essentially
a credibility issue -- i.e., which expert to believe. The
District Court will thus be required to determine hereafter
whether Taiwanese law differs from that of New Jersey. It
may address this issue in the context of a renewed
application for a preliminary injunction and/or in the
context of a merits determination. In either context, it will
have discretion to supplement the existing record with
testimony or otherwise and/or to conduct its own
independent investigation regarding Taiwanese law. See
Fed. R. Civ. Proc. 44.1; N.J. R. Evid. 201(a); Franzen, 33
A.2d at 602.
III.
We will reverse the District Court's order of May 14,
1999, and direct that it: (a) dismiss FCFC for want of
personal jurisdiction, and (b) conduct further proceedings
with respect to BP's claim against JOC in a manner
consistent with this opinion.6
_________________________________________________________________
6. Because we are setting aside the injunction entered by the District
Court and remanding for further proceedings, we need not address the
question, posed by BP's cross-appeal, whether the District Court erred in
limiting the duration of the injunction to thirty months.
23
ALITO, Circuit Judge, concurring in the judgment:
Except with respect to the comments below, writing
separately in this case would not serve a useful purpose. I
do not join part IIIB of the opinion of the Court. Both FCFC
and JOC merely mentioned the choice-of-law issue in
passing in their briefs. See FCFC Br. At 41, 50 n.7; JOC Br.
At 17. " `[A] passing reference to an issue . . . will not suffice
to bring that issue before this Court.' " Laborers' Int'l Union
of N. Am. v. Foster Wheeler Corp., 26 F.3d 375, 398 (3d Cir.
1994) (citation omitted) (ellipsis in original). I would hold
that no choice-of-law issue is properly before the Court in
this appeal. Without full briefing from the parties, I am
unwilling to join the Court's novel application of New Jersey
choice-of-law principles.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
24