Federal Circuit Allows Easier Foreign Corporation Service Requirements
Published: September 30, 2021
In In re: OnePlus Technology (Shenzhen) Co. Ltd., case number 2021-165, the U.S. Court of Appeals for the Federal Circuit validated a possible framework for courts and plaintiffs in patent cases to significantly speed up the process of serving complaints on foreign defendants.
In September 2020, Plaintiff Brazos filed five related patent infringement actions in the United States District Court for the Western District of Texas against Defendant OnePlus, a Chinese company. Brazos alleged that OnePlus has no place of business or employees in the United States. Although the People’s Republic of China is a signatory to the Hague Convention, Brazos elected not to attempt service on OnePlus through the Hague Convention. Instead, citing the burdens involved in effecting service through Hague Convention procedures in China, Brazos requested that the district court grant it leave under Fed. R. Civ. P. 4(f)(3) to use alternative methods to effect service. Judge Albright granted the motion, and Brazos served the complaint and summons on attorneys who had represented OnePlus in the past and on OnePlus’s authorized agent for service in Hayward, California.
OnePlus made a special appearance for the sole purpose of challenging the sufficiency of the service. Judge Albright rejected the challenge, holding that Rule 4(f)(3) gave the court discretion to order service of a foreign defendant by means other than those prescribed by the Hague Convention and that the service was effective. OnePlus then sought an in-case petition to the Federal Circuit to compel the district court to vacate its order authorizing alternative service and requiring that Brazos effect service pursuant to Hague Convention procedures.
OnePlus sought relief on three related grounds: first, that the service in the case was ineffective; second, that as a result of the ineffective service, the district court lacked in personam jurisdiction over OnePlus; and third, that it was an abuse of discretion for the district court to authorize alternative service in this case in the absence of a showing of a need to do so.
As to the first ground, the Federal Circuit rejected OnePlus’ argument that service authorized by a court under Rule 4(f)(3) did not establish personal jurisdiction over OnePlus because it did not satisfy the service provisions of the forum state’s long-arm statute. The Federal Circuit noted it previously has held that service of process under Rule 4(f)(3), which provides for court-directed service “by any means not prohibited by international agreement,” is not the same as service under Rule 4(e)(1), which does not require a court order and provides for service by “following state law.” Therefore, the Federal Circuit held OnePlus’s reliance on the service requirements of the Texas long-arm statute are not applicable here.
For the second ground, OnePlus argued that Rule 4(f) by its terms applies only to service of process effected abroad and that the district court’s order authorizing service in this country was therefore invalid. However, the Federal Circuit again noted prior case law had already rejected the argument that Rule 4(f)(3) cannot be used to authorize alternative service that is affected within the United States.
OnePlus’s third and final ground was that the district court committed a clear abuse of discretion by authorizing alternative service under Rule 4(f)(3) even though Brazos made no showing that service under the Hague Convention had been tried and failed, would have been unlikely to succeed, or was otherwise impracticable. The Federal Circuit did note it had concerns about the district court’s invocation of alternative means of service under Rule 4(f)(3) based solely on the fact that service under the Hague Convention is more cumbersome than more informal means of service on representatives of a foreign entity. Rule 4(f)(3) was not meant to displace the other rules for service in every instance in which alternative means of service are seen as more convenient. But, in the end, the Federal Circuit dismissed these worries, reasoning the district court has not announced that it intends to order alternative service in every case in which more conventional means of service would be merely inconvenient, and in fact, the record reflects that the district court has not granted relief under Rule 4(f)(3) in all such cases.
Thus, given the broad discretion accorded to district courts in determining whether to grant relief under Rule 4(f)(3), the Court denied the petition and let the service stand. Moving forward, only time will tell if other courts and judges allow bypassing the Hague Convention in order to serve process through alternative and less formal means under Rule 4(f)(3). And, this may be particularly applicable to companies in China where it can take a year or two in some cases for service through the Hague Convention and have significant service and translation costs.