Autoscribe Corp. v. Goldman and Steinberg, A-C

• Citation: 47 F.3d 1164,1995 WL 56662
• Decision Date: 06 December 1994
• Docket Number: A-C,No. 94-1749,94-1749
• Parties: NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. AUTOSCRIBE CORPORATION, Plaintiff-Appellant, v. GOLDMAN and Steinberg, d/b/a Intell-heck; Goldman and Steinberg, Incorporated; Intell-heck, Incorporated, Defendants-Appellees. . Argued:
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 1164

47 F.3d 1164

33 U.S.P.Q.2d 1758

NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.

AUTOSCRIBE CORPORATION, Plaintiff-Appellant, v. GOLDMAN and Steinberg, d/b/a Intell-A-Check; Goldman and Steinberg, Incorporated; Intell-A-Check, Incorporated, Defendants-Appellees.

No. 94-1749.

United States Court of Appeals, Fourth Circuit.

Argued: December 6, 1994.

Decided: February 3, 1995.

Appeal from the United States District Court for the District of Maryland, at Baltimore. Walter E. Black, Jr., District Judge. (CA-93-2884-B)

D.Md.

AFFIRMED.

ARGUED: Emerson V. Briggs, III, LEVY, ZITO & NALLS, Washington, DC, for Appellant. Patricia McHugh Lambert, SMITH, SOMERVILLE & CASE, Baltimore, MD, for Appellees. ON BRIEF: Joseph J. Zito, LEVY, ZITO & NALLS, Washington, DC, for Appellant. Allen F. Loucks, James E. Myers, SMITH, SOMERVILLE & CASE, Baltimore, MD; Alfred P. Ewert, Maria C.H. Lin, Andrew M. Riddles, MORGAN & FINNEGAN, New York, NY, for Appellees.

Before RUSSELL and MOTZ, Circuit Judges, and CURRIE, United States District Judge for the District of South Carolina, sitting by designation.

OPINION

PER CURIAM:

This appeal involves the question of whether a federal court, sitting in Maryland, has personal jurisdiction over out-of-state corporate defendants in a copyright infringement action. The defendant corporations entered into a contract to buy a license for copyrighted software from the Maryland corporate plaintiff, telephoned the plaintiff for information as to the use of the software, responded to requests for sales information from Maryland agents of the plaintiff and, on behalf of out-of-state clients, attempted to collect amounts owed to the out-of-state clients by some Maryland residents. Because these contacts do not evidence sufficient purposeful activity by the defendants directed at the State of Maryland to constitute the requisite minimum contacts with Maryland, the exercise of personal jurisdiction over the defendants is not permissible under the Maryland long-arm statute. Accordingly, we affirm the district court's dismissal of this case for lack of personal jurisdiction.

I.

In February, 1993, AutoScribe Corporation, a Maryland corporation with its principal place of business in Maryland, agreed to license software to Goldman & Steinberg, Incorporated, a debt collection agency incorporated in New Jersey, with its principal place of business in that state. AutoScribe signed a licensing agreement and then sent the agreement from its corporate headquarters in Maryland to Goldman & Steinberg in New Jersey. Goldman & Steinberg executed the form licensing agreement in New Jersey and then returned the fully executed agreement and payment for the license to AutoScribe in Maryland. In the agreement, Goldman & Steinberg agreed to purchase a license for AutoScribe's "Auto-Pay" checkdrafting computer software; AutoScribe, in turn, agreed to provide technical support and software updates. The licensing agreement further provided that the copyright to Auto-Pay belonged exclusively to AutoScribe and that Goldman & Steinberg was prohibited from transferring, sublicensing, renting, leasing, distributing, copying, or making any use of the software except for its own debt collection purposes. Following receipt of the Auto-Pay software, Goldman & Steinberg telephoned AutoScribe in Maryland nearly a dozen times seeking technical support and assistance in installing the software. At no point during the sale or subsequent installation of the software did a Goldman & Steinberg employee or agent visit AutoScribe's headquarters or enter Maryland.

Several months later, AutoScribe discovered that Intell-A-Check, Incorporated, had begun marketing software. AutoScribe believed that the Intell-A-Check software employed copyrighted aspects of the Auto-Pay software program. Intell-A-Check, also a New Jersey corporation with its principal place of business in New Jersey, shares the same corporate address and the same president as Goldman & Steinberg. However, Intell-A-Check and Goldman & Steinberg are separately incorporated in New Jersey. Neither Intell-A-Check nor Goldman & Steinberg is licensed to do business in Maryland, and neither company has any employees or clients in Maryland.

On August 12, 1993, AutoScribe's vice-president for marketing, Roy Fales, asked his wife, Judy Fales, to call Intell-A-Check in Kearny, New Jersey. During the telephone conversation, Judy Fales requested information about the Intell-A-Check software from Kevin Fahey, president of Goldman & Steinberg and Intell-A-Check. That same day, Fahey sent a facsimile of a brochure describing the Intell-A-Check software to Judy Fales. Fahey also sent a package to Judy Fales containing, among other things, his business card, information about Goldman & Steinberg's services, information about the Intell-A-Check software, and a demonstration copy of the computer pro gram. Fahey telephoned Judy Fales on three subsequent occasions to solicit her business. ¹

The only additional alleged contacts by Intell-A-Check or Goldman & Steinberg with Maryland involve Goldman & Steinberg's collection of debts on behalf of its clients, none of whom were Marylanders. In attempting to collect these debts, Goldman & Steinberg sent approximately 61,000 dunning letters last year, of which 197 or 0.3% were sent to individuals or corporations in Maryland.

On October 4, 1993, AutoScribe filed this action in the United States District Court for the District of Maryland. The complaint, as later amended, alleged that Goldman & Steinberg, Intell-A-Check, and Goldman & Steinberg doing business as Intell-A-Check, infringed AutoScribe's copyright to the Auto-Pay software, breached the licensing agreement, and misappropriated trade secrets belonging to AutoScribe. Specifically, AutoScribe alleged that the defendants violated the licensing agreement and the "copyright laws" by having "substantially copied the Auto-Pay software and/or created a derivative work based thereon, which they now market under the name Intell-A-Check! check writing software." On December 2, 1993, the defendants filed a motion to dismiss the complaint alleging insufficient service of process, lack of personal jurisdiction, and improper venue. Each side filed affidavits in support of its position. Following a hearing, the district court issued an oral opinion granting the motion to dismiss for lack of personal jurisdiction.

II.

Although none of the parties has attached any importance to the fact, it is of some significance that subject-matter jurisdiction in this case is premised not solely on diversity of citizenship. AutoScribe, asserting a violation of its copyright, also properly relies on 28 U.S.C. Sec. 1338 as a basis for subject-matter jurisdiction. Until recently, the

Supreme Court had not decided a personal jurisdiction question in a nondiversity case. Indeed, the "minimum contacts" doctrine originated in a line of cases that dealt only with the jurisdictional powers of state courts. 4 Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure Sec. 1067.1 at 306 (2d ed. 1987 & Supp.1994). The doctrine, of course, spread to the federal courts in diversity cases, but the anomaly of federal courts when adjudicating federally created rights being bound by limitations "developed under the Fourteenth Amendment," which by its own terms only applies to the states, led a number of federal courts to adopt a "national contacts" standard in federal question cases. Id. at 310.

The Supreme Court has never considered the question, but we, like several of our sister circuits, have held a "national contacts" standard applicable when federal law authorizes nationwide service of process. See Hogue v. Milodon Engineering, Inc., 736 F.2d 989, 991 (4th Cir.1984) (nationwide service under Bankruptcy Rule 704) ("Where Congress has authorized nationwide service of process by federal courts under specific federal statutes, so long as the assertion of jurisdiction over the defendant is compatible with [Fifth Amendment] due process, the service of process is sufficient to establish jurisdiction of the federal court over the person of the defendant").

Where no federal law authorizes nationwide service, the circuits have been divided as to whether a "national contacts" standard is applicable, and, if so, what the standard should be. See Wright & Miller, Sec. 1067 at 312-332, and cases cited therein. The Supreme Court addressed the question in Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97 (1987). Although it is not entirely clear, the Court seems to have recognized that the applicable constitutional provision limiting a federal court's exercise of personal jurisdiction in federal question cases is not the Fourteenth Amendment, but the Fifth Amendment. ² The Omni Court clearly concluded, however, that the Due Process Clause was not the only limit on a federal court's in personam jurisdiction in such cases. Rather, it held that when there is no provision authorizing nationwide service, federal courts must also follow Rule 4 of the Federal Rules of Civil Procedure, which limits a court's exercise of personal jurisdiction to persons who can be reached by the forum state's long-arm statute. Id. at 108.

In Maryland, as in many other states, at least portions of the state's long-arm statute are intended to be coterminous with the reach of the Due Process Clause of the Fourteenth Amendment. See, e.g., Camelback Ski Corp. v. Behning, 513 A.2d 874, 876 (Md.1986), vacated, 480 U.S. 901 (1987), aff'd, 539 A.2d 1187, cert. denied, 488 U.S. 849 (1988). Accordingly, the end result of Omni is to require federal courts based in such states to apply in federal question cases in which there is no provision for nationwide...