Federal Circuit Allows Service on Russian Corporation Through an American Affiliate
As American companies face increased competition from foreign entities, service on foreign defendants can be a critical issue for intellectual property litigants.
The Federal Circuit recently took a broad view of both service and personal jurisdiction in a patent infringement case in Nuance Comm’s, Inc. v. Abbyy Software House, et al., 2010 U.S. App. LEXIS 23419 (Fed. Cir. Nov. 12, 2010). In Nuance, the Court reversed the District Court’s dismissal of a Russian corporation for lack of jurisdiction and insufficient service of process.
The Court’s ruling on jurisdiction is not surprising, as the Russian defendant had imported the accused software to its American affiliate in California, and the decision is consistent with Federal Circuit authority applying the “stream of commerce” test for jurisdiction (as we discuss here). By allowing substituted service on the Russian company through its American affiliate under Rule 4(f)(3), however, the decision opens up a flexible and relatively simple avenue for parties to serve foreign defendants through their U.S. agents where Hague Convention service is impossible or merely time consuming.
Background
Nuance initially filed suit for patent infringement against one defendant, Abbyy USA. In discovery, Abbyy USA identified Abbyy Software, a Cyprus corporation, as its parent company, and Abbyy Production, a Russian corporation, as another wholly owned subsidiary of Abbyy Software. Nuance then filed an amended Complaint adding Abbyy Software and Abbyy Production as defendants. The Federal Circuit opinion primarily addresses Abbyy Production, the Russian defendant, because the record contained few facts about Abbyy Software, and so the Court remanded for further consideration of jurisdiction over that defendant.
Service of Process in Russia
The Court stated that a local process server served Abbyy Production with the Amended Complaint, but neither the Federal Circuit nor the District Court indicates how service was made. The Federal Circuit merely states that service was personally received in Moscow by Abbyy Production’s Manager. Assuming that the local process server didn’t travel to Russia to personally serve the Complaint, it appears that Nuance merely shipped the Amended Complaint (and a Russian translation) to Moscow.
Fed.R.Civ.P. 4(h)(2) allows for service on a foreign corporation outside the U.S. in any manner prescribed in Rule 4(f), except for personal delivery under Rule 4(f)(2)(C)(i). Nuance admittedly did not attempt service under the Hague Convention because it claimed - and the Court agreed - that Russia would refuse to serve documents under the Hague Convention. Abbyy argued that Nuance must at least attempt service under the Hague Convention, but the Court rejected that argument, stating that alternative service methods were available without a prior attempt at Hague Convention service.
While it agreed that Nuance need not attempt Hague Convention service, the Court did not uphold Nuance’s apparent service by mail directly to Abbyy Production in Moscow. The Court also did not rule on Nuance’s claim that service had been properly made under Rule 4(f)(2)(A), which allows service in accordance with foreign law.”
Rule 4(f)(3)
Rather, the Court turned to Rule 4(f)(3) which allows service “by other means not prohibited by international agreement, as the court orders.” The Federal Circuit held that substituted service on Abbyy Software through its American affiliate, Abbyy USA, was sufficient. It was not necessary, the Court noted, that Abbyy USA be Abbyy Production’s “general manager” because Rule 4(f)(3) only required that service (1) be directed by the court, and (2) not be prohibited by international agreement. Substituted service on Abbyy USA, the Court found, was reasonable and comported with due process because it was “reasonably calculated . . . to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” On remand, the Court ordered, the District Court should allow alternate service as it deemed appropriate, including at least substitute service on Abbyy USA.
The Nuance case is somewhat unique in that Russia refuses to carry out service through the Hague Convention. The Federal Circuit’s decision, however, does not limit service under Rule 4(f)(3) to situations where Hague Convention service is not available or would be futile. Rather, the decision suggests that Rule 4(f)(3) is a flexible tool that district courts are authorized to use to meet the circumstances of a particular case. For example, the Court noted other cases allowing service under Rule 4(f)(3) by email, by service on the defendant’s international courier, and even by service on the defendant’s U.S. based attorneys. Thus, the Nuance decision should be a powerful tool to help litigants persuade district courts to authorize substituted service on a foreign defendant’s U.S. affiliates or agents under Rule 4(f)(3), both where Hague Convention service is impossible and also where such service would be simply time consuming or impractical.
