MONSANTO COMPANY, Plaintiff-Appellee, v. Homan MCFARLING, Defendant-Appellant.
No. 01-1390.
United States Court of Appeals, Federal Circuit.
Decided: Aug. 23, 2002.
Rehearing En Banc Denied: Oct. 16, 2002.*
302 F.3d 1291
* Dyk, Circuit Judge, did not participate in the vote.
Transcript of Sentencing Hearing, Record Vol. 20, at 14-15. Hence, both the record and the sentencing court‘s pronouncement provide a sufficient basis to uphold the sentence imposed upon Petrie.
CONCLUSION
For all of the foregoing reasons, Petrie‘s conviction and sentence are AFFIRMED. The preliminary forfeiture order is VACATED because the district court lacked jurisdiction to enter it.
Jim Waide, Waide & Associates, P.A., of Tupelo, MS, argued for defendant-appellant.
Before NEWMAN, CLEVENGER, and BRYSON, Circuit Judges.
Opinion for the court filed by Circuit Judge PAULINE NEWMAN. Dissenting opinion filed by Circuit Judge CLEVENGER.
PAULINE NEWMAN, Circuit Judge.
Mr. Homan McFarling appeals the grant of a preliminary injunction by the United States District Court for the Eastern District of Missouri,1 prohibiting Mr. McFarling, pendente lite, from using the plant genes and seed obtained from crops grown from Monsanto Company‘s patented soybean seed having the brand name Roundup Ready. We conclude that the district court acted within its discretion in granting the preliminary injunction.
BACKGROUND
Monsanto developed genetically modified plants that are resistant to glyphosate herbicides such as Roundup® brand herbicide. The herbicide can then be sprayed broadly in planted fields, killing the weeds but not harming the resistant crops. This results in substantial savings in labor costs for weed control. Monsanto‘s United States Patents Nos. 5,633,435 and 5,352,605 claim the glyphosate-tolerant plants, the genetically modified seeds for such plants, the specific modified genes, and the method of producing the genetically modified plants.
Monsanto authorizes various companies to manufacture the patented seeds, which are then sold to farmers. Monsanto requires that sellers of the patented seeds obtain from the farmers/purchasers a “Technology Agreement,” and the farmers pay a license fee to Monsanto of $6.50 per 50-pound bag of soybean seed. Mr. McFarling, a farmer in Mississippi, purchased Roundup Ready® soybean seed in 1997 and again in 1998; he signed the Technology Agreement and paid the license fee for each purchase. The signature line is immediately below the following statement: “I acknowledge that I have read and understand the terms and conditions of this Agreement and that I agree to them.”
The agreements include the requirement that the seeds are to be used “for planting a commercial crop only in a single season” and direct the licensee not to “save any crop produced from this seed for replanting, or supply saved seeds to anyone for replanting.” Mr. McFarling does not dispute that he violated the terms of the Technology Agreement. He saved 1,500 bushels of the patented soybeans from his harvest during one season, and instead of selling these soybeans as crop he planted them as seed in the next season. He repeated this activity in the following growing season, and stated that unless enjoined he intended to plant soybeans saved from the 2000 harvest in 2001. McFarling paid no license fee for this saved soybean seed, which retained the genetic modifications of the Roundup Ready® seed.
The district court denied Mr. McFarling‘s motion to dismiss for lack of personal jurisdiction and granted Monsanto‘s motion for a preliminary injunction. This appeal followed.
DISCUSSION
The Forum Selection Clause
Mr. McFarling argues that the district court did not acquire personal jurisdiction over him based on the forum selection clause in the 1998 Technology Agreement. This clause was printed in capital letters, indeed the only provision of the Technology Agreement that is in all capital letters. All of the provisions of the Technology Agreement are on the same page, on the reverse side of the signature page:
THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF MISSOURI AND THE UNITED STATES (OTHER THAN THE CHOICE OF LAW RULES). THE PARTIES CONSENT TO THE EXCLUSIVE JURISDICTION OF THE U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI, EASTERN DIVISION, AND THE CIRCUIT COURT OF THE COUNTY OF ST. LOUIS, STATE OF MISSOURI, FOR ALL DISPUTES ARISING UNDER THIS AGREEMENT.
McFarling states that he never turned over the agreement,2 and that he did not consent to jurisdiction in Missouri based on a forum selection clause that he did not intentionally sign. McFarling argues that he has no contacts with Missouri, and that the Missouri district court‘s exercise of personal jurisdiction violates his due process rights under the Fifth Amendment.
Whether a district court has personal jurisdiction of a defendant in a patent infringement action is subject to plenary review. Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1359, 58 USPQ2d 1774, 1776 (Fed.Cir.2001). The issue here is not the reach of a state‘s long-arm statute, but the effect of a forum selection clause whereby jurisdiction is obtained by contractual consent or waiver. Such a clause is enforceable unless the party challenging it clearly demonstrates that it is invalid or that enforcement would be unreasonable and unjust. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (noting that the enforcement of freely negotiated forum selection provisions “does not offend due process” when the provisions are neither unreasonable nor unjust); see also M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (holding that a forum selection clause requiring suit in a foreign court should be enforced unless the plaintiff attempting to avoid it “could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching“).
The district court held that the forum selection clause of the Technology Agreement is valid and enforceable. Mr. McFarling, challenging this holding on the ground of fairness, refers to Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991), in which the Court held enforceable a forum selection clause printed on a cruise ticket, but stated that “forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness.” Id. at 595. McFarling states that unlike a cruise ship that carries passengers to and from many places, he purchased, planted, and harvested the seeds, and executed the Technology Agreements, all in Mississippi, and thus that Mississippi is clearly the fairest forum. He states that the plaintiffs in Carnival conceded that they had notice of the forum selection provision, but that he did not have notice because he did not read the back of the agreement. McFarling cites Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 112, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), for the proposition that minimum contact jurisdictional standards are not met unless the defendant performed an act “purposefully directed toward the forum State,” and argues that his “negligent” signing of the agreement was not purposeful. The district court correctly viewed the issue as one of validity of the contract provision, not an issue of minimum contacts.
Forum selection clauses are valid and accepted unless they are clearly unreasonable or fraudulent. Monsanto argues that the clause is reasonable because of Monsanto‘s legitimate interest in litigating disputes arising from these Technology Agreements in the venue of its principal place of business, one of the justifications asserted by the cruise line in Carnival. Monsanto also states that this common venue enhances judicial efficiency, produces greater uniformity of result, and decreases litigation costs.
The district court found that Mr. McFarling did not dispute that his ignorance of the clause was solely the result of his voluntary failure to read what he signed. A party who signs an agreement is bound by its terms, unless he was fraudulently induced not to read it or was fraudulently misled as to its content or significance. See Bradley v. Chiron Corp., 136 F.3d 1317, 1322, 45 USPQ2d 1819, 1822 (Fed.Cir.1998) (applying California law that a person is bound to a written agreement that he signs but neglects to read). Both Missouri and Mississippi contract law reflect this universal rule, making it unnecessary to consider choice of law issues. See, e.g., Binkley v. Palmer, 10 S.W.3d 166, 171 (Mo.Ct.App.1999) (“It has long been settled in Missouri that absent a showing of fraud, a party who is capable of reading and understanding a contract is charged with the knowledge of that which he or she signs.“); Oglesbee v. National Security Fire & Casualty Co., 788 F.Supp. 909, 913 (S.D.Miss.1992) (“Under Mississippi law, unless a party was induced not
The Injunction Pendente Lite
The district court granted Monsanto‘s motion for a preliminary injunction, on Mr. McFarling‘s statement that he
The general rule for grant of a preliminary injunction is that a party must establish (1) a reasonable likelihood of success on the merits; (2) irreparable harm,
On appeal, Mr. McFarling challenges the district court‘s analysis of only one of the four factors: the likelihood of Monsanto‘s success on the merits. McFarling does not now challenge the validity of Monsanto‘s patents; instead, he argues that the Technology Agreements constitute an illegal restraint of trade, in violation of the
1.
First, Mr. McFarling argues that the Technology Agreements create an illegal tying arrangement by requiring farmers to buy new Roundup Ready® seed each year instead of allowing them to produce their own Roundup Ready® seed from the prior year‘s crop. McFarling cites Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984), for the proposition that a tying arrangement violates the Sherman Act when the seller exploits “its control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms.” Id. at 12. According to McFarling, the tied product is a fresh supply of Monsanto‘s Roundup Ready® seed in future years, while the tying product is the original purchase of Roundup Ready® seed. McFarling states that he does not want to buy future Roundup Ready® seed, because he can produce his own genetically modified Roundup Ready® seed. McFarling also states that even if these restrictions do not constitute antitrust violations, the requirement that farmers buy new seed each year impermissibly broadens the patent grant, with anti-competitive effect.
Mr. McFarling further argues that the Technology Agreements constitute illegal agreements among competitors, referring to the agreements between Monsanto and its local distributors whereby the local sellers must require farmers to enter into the Technology Agreements as a condition of buying the Roundup Ready® seed. McFarling cites Citizen Publishing Co. v. United States, 394 U.S. 131, 89 S.Ct. 927, 22 L.Ed.2d 148 (1969), for the proposition that agreements among competitors to fix the material terms of a sale are illegal. As a result of such alleged collusion, McFarling states that farmers in the United States pay higher prices for Roundup Ready® seed than do farmers in Argentina. Monsanto states that as the patent holder it decides unilaterally the terms on which its patents are licensed and its product sold under the Technology Agreements. Monsanto explains that the seed companies that are licensed by Monsanto to produce and sell the modified soybean seed have no control over the terms of the Technology Agreements that Monsanto requires of farmers who choose to purchase the Monsanto seed.
The district court found that Mr. McFarling was not likely to succeed on his
A purchaser‘s desire to buy a superior product does not require benevolent behavior by the purveyor of the superior product. Nor does an inventor of new technology violate the antitrust laws merely because its patented product is favored by consumers. See Abbott Labs. v. Brennan, 952 F.2d 1346, 1354, 21 USPQ2d 1192, 1199 (Fed.Cir.1991) (“The commercial advantage gained by new technology and its statutory protection by patent do not convert the possessor thereof into a prohibited monopolist.“)
In accordance with the Technology Agreement, the purchaser agrees to use the purchased seed for the purpose of growing crops and not for the purpose of producing new seed. In Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, 24 USPQ2d 1173 (Fed.Cir.1992) this court held that use of a patented product “in violation of a valid restriction may be remedied under the patent law, provided that no other law prevents enforcement of the patent.” Id. at 701. A restriction on use to make additional patented product, to constitute an antitrust violation, must meet the requirements of such violation and be outside the scope of the patent grant. See General Talking Pictures Corp. v. Western Elec. Co., 305 U.S. 124, 127, 59 S.Ct. 116, 83 L.Ed. 81, 39 USPQ 329, 330 (1938). The district court correctly held that Mr. McFarling has not shown a reasonable likelihood of success on antitrust/misuse grounds; the record does not support Mr. McFarling‘s theory that he is required to buy future patented seeds from Monsanto in order to buy present patented seeds.
2.
As a second ground for challenging the agreements, Mr. McFarling states that the contractual prohibition against using the patented soybeans to produce additional seeds for planting by the farmer violates the doctrines of patent exhaustion and first sale, and that the parties could not enter into an enforceable contract that has this effect. In support, McFarling cites the statement in United States v. Univis Lens Co., 316 U.S. 241, 249, 62 S.Ct. 1088, 86 L.Ed. 1408, 53 USPQ 404, 407 (1942), that when a patented product has been sold the purchaser acquires “the right to use and sell it, and ... the authorized sale of an article which is capable of use only in practicing the patent is a relinquishment of the patent monopoly with respect to the article sold.” It follows, McFarling argues, that once Monsanto sold the patented seeds to McFarling, its patent rights on the seeds and their products were exhausted and could not be restricted by agreement. Monsanto responds that it is within the scope of Monsanto‘s patent rights to prevent others from making, for the purpose of planting, a new batch of patented seeds from the purchased seeds.
The restrictions in the Technology Agreement are within the scope of the
3.
McFarling argues that the contractual prohibition against using the patented seed to produce new seed for planting, when he produced only enough new seed for his own use the following season, violates section 2543 of the PVPA, which permits farmers to save seeds of plants registered under the PVPA.
The PVPA and the Patent Act are complementary forms of statutory protection of plant “breeders’ rights.” Utility patents under Title 35 provide rights and privileges that differ from those provided by Plant Variety Protection certificates. In J.E.M. AG Supply, 534 U.S. at —, 122 S.Ct. at 604-05, the Court held that utility patents are available to plants and seeds that meet the requirements of patentability, independent of and in addition to rights under the PVPA. The Court observed that one of the differences between the two statutes is that “there are no exemptions for research or saving seed under a utility patent.” Id. at —, 122 S.Ct. at 604. It is thus established that the right to save seed of plants registered under the PVPA does not impart the right to save seed of plants patented under the Patent Act.
4.
Mr. McFarling complains that the price charged for Roundup Ready® seeds is higher than for other soybean seeds, and that it is cheaper for him to produce his own Roundup Ready® seeds. He also states that Monsanto sells Roundup Ready® seeds at a lower price in Argentina.
We need not repeat that in a market economy a purveyor may charge the price that the product can sustain; there is no requirement that a patentee must lower his price to that of the less desired products he replaces. See, e.g., E. Bement & Sons v. National Harrow Co., 186 U.S. 70, 93, 22 S.Ct. 747, 46 L.Ed. 1058 (1902) (“The owner of a patented article can, of course, charge such price as he may choose ....“); Carter-Wallace, Inc. v. United States, 196 Ct.Cl. 35, 449 F.2d 1374, 1383, 171 USPQ 359, 365 (1971) (“[A]s a general rule and absent any overriding unlawful conduct, patentees can charge for their patented products and licenses whatever the market will bear.“) This aspect does not add weight to the antitrust arguments pressed by Mr. McFarling.
CONCLUSION
Mr. McFarling conceded that he violated the terms of the Technology Agreements. The district court found that Monsanto had a reasonable likelihood of success on the issues of infringement and breach of contract, and that it was unlikely that an antitrust violation would be found. We do
AFFIRMED.
PAULINE NEWMAN
UNITED STATES CIRCUIT JUDGE
CLEVENGER, Circuit Judge, dissenting.
I respectfully dissent. It is an elementary principle of constitutional law that no court may render judgment upon one over whom the court lacks personal jurisdiction. The requirement that a court must have personal jurisdiction to render a valid judgment arises, in the case of a federal question, from the Due Process Clause of the Fifth Amendment and represents a restriction on judicial power as a matter of personal liberty. Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982). Like other individual liberties, the right to due process may be waived, and a defendant by contract may consent to the jurisdiction of a court which otherwise would have no power over him. Nat‘l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-16, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964).
However, the conclusion that a defendant has surrendered his right to due process of law is not one that a court should reach casually. “In the civil area, the Court has said that ‘[w]e do not presume acquiescence in the loss of fundamental rights.’ Indeed, in the civil no less than the criminal area, ‘courts indulge every reasonable presumption against waiver.‘” Fuentes v. Shevin, 407 U.S. 67, 94 n. 31, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972) (citation omitted) (quoting Ohio Bell Tel. Co. v. Pub. Util. Comm‘n, 301 U.S. 292, 307 (1937) and Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393 (1937)). Let us be clear what we hold by enforcing Monsanto‘s forum selection clause against McFarling: we hold that an accused infringer may surrender his right to due process in advance by signing a contract of adhesion—regardless of whether that accused infringer knew that by so doing he abandoned his constitutional rights.
It cannot seriously be disputed that by signing the Technology Agreement McFarling became attached to a contract of adhesion. Although the definition of an adhesive contract varies, Monsanto‘s own state of Missouri has defined an adhesive contract as “one in which the parties have unequal standing in terms of bargaining power (usually a large corporation versus an individual) and often involve take-it-or-leave-it provisions in printed form contracts.” High Life Sales Co. v. Brown-Forman Corp., 823 S.W.2d 493, 497 (Mo.1992) (en banc). The Technology Agreement certainly meets these criteria: the terms printed on the reverse of the Technology Agreement are not subject to negotiation and Monsanto‘s billions of dollars in assets far exceed McFarling‘s alleged net worth of $75,000.
But the relative bargaining power of Monsanto and McFarling is not the only indicium of a contract of adhesion here. Courts are more likely to label a contract adhesive when its terms are lopsided in favor of the drafter and when the purchaser has no other practical source to turn for necessary goods, for these factors tend to erode the premise that the rights given up by the lesser party were surrendered freely and fairly. No one perusing the Technology Agreement can doubt that its
Another hallmark of the adhesion contract is that the purchaser cannot reasonably obtain the necessary goods or services on alternative terms from any other source. Monsanto widely licenses its patents on glyphosate resistance technology, and over 200 seed companies offer Roundup Ready soybean seed. But each and every one of those licenses requires that the ultimate consumer (the farmer) sign Monsanto‘s own Technology Agreement. While Monsanto‘s monopoly on glyphosate resistance technology may be an entirely lawful one, Monsanto‘s control of the market means that farmers have no place else to turn for glyphosate-resistant seed. Farmers may certainly obtain ordinary soybean seed without acceding to the terms of the Technology Agreement. However, in only a few short years since their introduction, Roundup Ready seeds now account for at least 66 percent of soybean acreage planted in the United States, testifying that despite the substantial added cost of the Technology Fee most farmers find glyphosate-resistant soybeans far more competitive than ordinary seed. Testimony adduced at the preliminary injunction hearing indicated that glyphosate-resistant soybeans are especially important to farmers like McFarling, because northeastern Mississippi harbors particular weeds that are difficult to control without glyphosate-based herbicides. Taken together, these facts indicate that farmers like McFarling have little choice but to sign the Technology Agreement if they wish to remain competitive in the soybean market.
I reiterate that the commercial terms of adhesion contracts are generally enforceable absent a showing of substantive unconscionability. But whether such a contract should be effective to extinguish those rights guaranteed by the Due Process Clause of the Constitution is another matter altogether. As the highest court of Monsanto‘s own state of Missouri has noted: “Many courts have refused to enforce
To be sure, the Supreme Court has yet to hold that adhesion contracts are ineffective to surrender rights granted by the Due Process Clause. But the Court‘s assessment of such surrenders has hardly been favorable. In Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), the Court considered an alleged waiver by an adhesion contract of the right to a prior hearing, another aspect of the personal liberty conferred by the Due Process Clause. The Court at length contrasted the alleged waiver of due process rights by an adhesion contract with the freely negotiated waiver in an earlier case, Overmyer v. Frick:
In D.H. Overmyer Co. v. Frick Co., 405 U.S. 174 (1972), the Court recently outlined the considerations relevant to determination of a contractual waiver of due process rights. Applying the standards governing waiver of constitutional rights in a criminal proceeding—although not holding that such standards must necessarily apply—the Court held that, on the particular facts of that case, the contractual waiver of due process rights was “voluntarily, intelligently, and knowingly” made. The contract in Overmyer was negotiated between two corporations; the waiver provision was specifically bargained for and drafted by their lawyers in the process of these negotiations. As the Court noted, it was “not a case of unequal bargaining power or overreaching. The Overmyer-Frick agreement, from the start, was not a contract of adhesion.” Both parties were “aware of the significance” of the waiver provision.
The facts of the present case are a far cry from those of Overmyer. There was no bargaining over contractual terms between the parties who, in any event, were far from equal in bargaining power. The purported waiver provision was a printed part of a form sales contract and a necessary condition of the sale. The appellees made no showing whatever that the appellants were actually aware or made aware of the significance of the fine print now relied upon as a waiver of constitutional rights.
The Court in Overmyer observed that “where the contract is one of adhesion, where there is great disparity in bargaining power, and where the debtor receives nothing for the (waiver) provision, other legal consequences may ensue.”
Id. at 94-95. The Court‘s words need no complex exegesis, and no reader could fail to recognize Monsanto‘s Technology Agreement in the Court‘s description of Mrs. Fuentes‘s onerous contract. True, the Fuentes Court found no need to determine whether due process
The majority bases its conclusion on well-established contract principles maintaining that failure to read a contract will not excuse one from the contract‘s obligations. I agree, but “these principles have been modified when contract terms appear on the back of a contract.” Advance Elevator Co., Inc. v. Four State Supply Co., 572 N.W.2d 186, 188 (Iowa Ct.App.1997). Where the front of a contract makes no reference to terms on its reverse, and the drafter of the contract does not bring the language on the reverse side of the contract to the attention of the other party, terms on the reverse are without legal effect. Id. at 189.
It is instructive to compare the Technology Agreement to the cruise ship ticket of Carnival Cruise Lines v. Shute, in which the Supreme Court found enforceable a defensive forum selection clause printed on the back of the ticket. The face of Mrs. Shute‘s ticket prominently advertised the existence of additional terms in no less than three separate places:
SUBJECT TO CONDITIONS OF CONTRACT ON LAST PAGES
and:
IMPORTANT! PLEASE READ CONTRACT ON LAST PAGES 1, 2, 3
and:
The provisions on the reverse hereof are incorporated as though fully rewritten.
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 605 (1991).
In contrast, the face of Monsanto‘s 1998 Technology Agreement has no reference at all to its reverse, and the signature block merely states that the customer has read, understood, and accedes to “the terms and conditions of this Agreement,” without any indication at all that some terms might be found on the Agreement‘s other side. Furthermore, Mrs. Shute conceded that she had notice of the forum selection clause, see Carnival Cruise Lines, 499 U.S. at 590, and thereby satisfied Fuentes‘s criterion that a surrender of due process rights should be made knowingly. McFarling, on the other hand, specifically testified that he was unaware of the existence of the forum selection clause when he signed the Technology
Monsanto‘s argument for the enforceability of its forum selection clause relies heavily on the Supreme Court‘s opinion in Carnival Cruise Lines. But Carnival Cruise Lines provides neither precedent nor rationale for the substantial expansion of the law imposed by the court in this case at Monsanto‘s request. First and perhaps foremost, Carnival Cruise Lines, like The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), approved of a defensive forum selection clause enforced against a plaintiff and did not address the surrender of constitutional rights. Although the Due Process Clause does protect a plaintiff‘s property interest in his or her claim, see Logan v. Zimmerman Brush Co., 455 U.S. 422, 428-31 (1982); Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 313-14 (1950), a plaintiff forfeits no interest in life, liberty, or property to the state by agreeing that a future claim may be brought only in a forum of the defendant‘s choice. In contrast, the interests protected by the Due Process Clause are at their zenith when the machinery of the legal system is invoked against a defendant who has no traffic with the forum in question:
An out-of-state defendant summoned by a plaintiff is faced with the full powers of the forum State to render judgment against it. The defendant must generally hire counsel and travel to the forum to defend itself from the plaintiff‘s claim, or suffer a default judgment. The defendant may be forced to participate in extended and often costly discovery, and will be forced to respond in damages or to comply with some other form of remedy imposed by the court should it lose the suit. The defendant may also face liability for court costs and attorney‘s fees. These burdens are substantial, and the minimum contacts requirement of the Due Process Clause prevents the forum State from unfairly imposing them upon the defendant.
Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 808, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985).3 To be sure, litigation is frequently costly and inconvenient for plaintiffs as well. But a plaintiff takes on its burdens only by choice. A plaintiff like Monsanto may be faced with the unpleasant alternatives of prosecuting suspected infringers like McFarling or forfeiting its valuable proprietary position, but heretofore the burden of initiating infringement litigation where the infringer resides has been accepted as another cost attendant to enjoyment of the patent right. McFarling here has admitted the acts that would constitute
Nor did Carnival Cruise Lines approve of enforcing a forum selection clause found in a contract of adhesion. Although Carnival Cruise Lines referred to the disparity of bargaining power between the cruise line and the passenger, and recognized that under such circumstances the forum selection clause was not subject to negotiation, the Court did not describe the contract for passage on a cruise line as a contract of adhesion. Indeed, by some definitions, a contract for passage on a cruise line could never be a contract of adhesion, because passage on a cruise line is a discretionary purchase and is available from many competing sellers. Some courts would exclude contracts for such goods and services from the definition of adhesion contract altogether. See, e.g., Jones v. Dressel, 623 P.2d 370, 374 (Colo.1981). Thus, the Court in Carnival Cruise Lines had no occasion to pass upon the validity of a forum selection clause—even a defensive one—imposed by a contract of adhesion.
Monsanto in this case, and patentees in general, can lay claim to few or none of the policy rationales advanced by the Supreme Court to justify enforcement of the forum selection clause in
The Supreme Court‘s second rationale in Carnival Cruise Lines was that forum selection clauses have the salutary effect of dispelling confusion about where suits must be brought. Id. at 593-94. Defensive forum selection clauses usually achieve this certainty by limiting suit to the defendant‘s home forum, thereby avoiding a minimum contacts analysis. But offensive forum selection clauses provide little additional certainty because they interfere with basic notions that infringers are sued in fora in which they reside or to which they have directed infringing conduct. Absent the forum selection clause, there would be no question at all that this suit ought to be brought in Mississippi, where the defendant may be found and the allegedly infringing acts transpired. And unlike cruise ship passengers, patent infringers—particularly farmers—tend to stay put, and determining the situs of patent infringement is generally a simple matter.
Carnival Cruise Lines‘s final rationale for enforcing forum selection clauses in form contracts, and the one relied upon most heavily by Monsanto, is that purchasers benefit from such clauses in the form
In sum, the Supreme Court in Carnival Cruise Lines did not establish a per se rule that forum selection clauses are enforceable. Although the Court reaffirmed The Bremen‘s presumption in favor of enforcement, it also maintained The Bremen‘s requirement that enforcement of the clause be reasonable, and emphasized that “forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness.” Carnival Cruise Lines, 499 U.S. at 595. But here, the district court seems to have abstained from any scrutiny of the forum selection clause at all, concluding that the clause was valid and enforceable simply because McFarling signed it. This is not the sort of inquiry contemplated by Carnival Cruise Lines. The circumstances of this case, in nearly every instance opposite from those that led the Supreme Court to find enforcement of the forum selection clause fair and reasonable in Carnival Cruise Lines, ought to compel a more meaningful inquiry if the guarantees of the Fifth Amendment are to be given their proper due.
I can find no reported case in the thirty years since Fuentes and The Bremen were decided in which a court has enforced a forum selection clause against a defendant who has acceded to an adhesion contract.4 Certainly there is no shortage of cases in which a defensive forum selection clause controls, most notably Carnival Cruise Lines. Far fewer are cases in the ordinary commercial context in which a plaintiff brings suit on the basis of a forum selection clause signed by the defendant, and at best courts are divided on how to approach such cases. Compare Mellon First United Leasing v. Hansen, 301 Ill.App.3d 1041, 235 Ill.Dec. 508, 705 N.E.2d 121 (1998) (refusing to exercise jurisdiction over out-of-state defendant based on forum selection clause in mailing equipment lease) with Chase Third Century Leasing Co. v. Williams, 782 S.W.2d 408 (Mo.Ct.App.1989) (exercising jurisdiction over out-of-state defendant based on forum selection clause in copier lease).5 But no court has gone so far as to hold that a true contract of adhesion can subject a defendant to litigation in a court that would otherwise have no power over him. If any court goes so far, it should be the Supreme Court, not this court.
No. 02-1022.
United States Court of Appeals, Federal Circuit.
DECIDED: Aug. 30, 2002.