The authors of this blog post revisited Judge Amy Coney Barrett's opinions for the U.S. Court of Appeals for the Seventh Circuit in her three years on the bench in light of her recent nomination for the U.S. Supreme Court. In doing so, the authors found a recent opinion penned by Judge Barrett related to a trade secret dispute in the case of J.S.T. Corp. v. Foxconn Interconnect Technology Ltd., 965 F.3d 571 (7th Cir. 2020), which is between an Illinois electronic equipment manufacturer, J.S.T. Corporation, and several of its out-of-state competitors, including TE Connectivity Corporation and a group of related companies under the Foxconn umbrella. The opinion gives some insight into Judge Barrett's thinking on personal jurisdiction issues in relation to trade secret claims.
The J.S.T./Foxconn dispute centers around the competitors' alleged misappropriation of J.S.T.'s trade secrets. In particular, J.S.T.'s customer provided its proprietary design specifications for an electrical adapter to J.S.T.'s competitors to manufacture the adapter in place of J.S.T. The competitors moved to dismiss the two count complaint – trade secret misappropriation and unjust enrichment – for lack of personal jurisdiction. The defendants argued that none were headquartered in Illinois and none manufactured or sold the adapter in Illinois. Instead, the defendants sold the adapters to J.S.T.'s customers in Texas or China, which were subsequently sold to an automotive company and incorporated into cars sold nationwide. At the lower court, the defendants successfully argued that their connection to Illinois was too attenuated to support jurisdiction. The Seventh Circuit affirmed the decision. In doing so, Judge Barrett walks through the Supreme Court jurisprudence and rejected J.S.T.'s stream of commerce analysis for the trade secret claim.
Since J.S.T. focused on the import of the consumer sale of products in Illinois, the court focused its analysis there. However, the court noted "[f]or the point of consumer sale to be as relevant to this litigation as it is to products liability suits, there must also be a connection here between downstream consumer sales and J.S.T.'s underlying claims." The court continued, stating "[u]nlike products liability, the tort of trade secret misappropriation is not intrinsically linked to interactions with a consumer. Trade secret law is not like trademark law, in which consumer confusion can be at the heart of the underlying claim." The court then looked at the elements of trade secret misappropriation and noted that the "acquisition, disclosure, and use of a secret are all actions that can be completed long before an offending product ever comes into contact with a consumer." Looking to the facts of this case, "if the defendants knowingly acquired, disclosed, or used J.S.T.'s trade secrets anywhere, it was not in Illinois."
J.S.T. further argued that jurisdiction was appropriate because it felt harm in Illinois. The court acknowledged that this argument was clever but quickly disposed of it. Judge Barrett noted that it is not a "mechanical scan for anything that courts label an 'element,'" but the focus is on the elements of the underlying tort "for the light that they cast on the 'relationship between the defendant, the forum, and the litigation.'" With that in mind, the Court stated that the focus is on the "defendant's conduct, not the plaintiff's injury, that must form the necessary connection with the forum State." While the sale of cars that incorporated the adapters at issue were sold to Illinois consumers, "Illinois consumers have virtually nothing to do with the defendants' interactions … which are the foundation of J.S.T.'s trade secret claim." Accordingly, the Seventh Circuit affirmed the district court's dismissal for lack of personal jurisdiction.
While likely not an issue to make it to the floor during confirmation proceedings, this opinion is a good reminder for trade secret plaintiffs that injury in their home state may not be enough to confer jurisdiction.
Originally published by Holland & Knight, October 2020
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