Adtile Techs. Inc. v. Perion Network Ltd.

• Decision Date: 24 June 2016
• Docket Number: Civ. No. 15-1193-SLR
• Citation: 192 F.Supp.3d 515
• Parties: ADTILE TECHNOLOGIES INC., Plaintiff, v. PERION NETWORK LTD. and Intercept Interactive, Inc. d/b/a Undertone, Defendants.
• Court: U.S. District Court — District of Delaware

192 F.Supp.3d 515

ADTILE TECHNOLOGIES INC., Plaintiff,

v.PERION NETWORK LTD. and Intercept Interactive, Inc. d/b/a Undertone, Defendants.

Civ. No. 15-1193-SLR

United States District Court, D. Delaware.

Signed June 24, 2016

Donald E. Reid, Esquire of Morris Nichols Arsht & Tunnell LLP, Wilmington, Delaware. Counsel for Plaintiff. Of Counsel: Greg L. Lippetz, Esquire of Jones Day.

David E.Moore, Esquire, Bindu A. Palapura, Esquire, and Stephanie E. O'Byrne, Esquire of Potter Anderson & Corroon LLP, Wilmington, Delaware. Counsel for Defendants. Of Counsel: Jonathan M. Wagner, Esquire, Tobias B. Jacoby, Esquire, and Adina C. Levine, Esquire of Kramer Levin Naftalis & Frankel LLP.

MEMORANDUM OPINION

SUE L. ROBINSON, District Judge

I. INTRODUCTION

On December 22, 2015, plaintiff Adtile Technologies, Inc. ("Adtile") filed a complaint for breach of contract, breach of the covenant of good faith and fair dealing, misappropriation of trade secrets and confidential information, copyright and trademark infringement, unfair competition, false designation of origin, common law trademark infringement, and common law unfair competition against defendants Perion Network Ltd. ("Perion") and Intercept Interactive, Inc. d/b/a Undertone ("Undertone"). (D.I. 1) Presently before the court are Perion's motion to dismiss the complaint for lack of personal jurisdiction (D.I. 22) and Undertone's motion to stay the present action and compel arbitration (D.I. 25). The court has jurisdiction over the copyright and Lanham Act claims pursuant to 28 U.S.C. §§ 1331, 1338(a) and (b) and 15 U.S.C. § 1121(a). The court has supplemental jurisdiction over Adtile's additional claims pursuant to 28 U.S.C. § 1367(a).

II. BACKGROUND

Adtile is a company organized under the laws of the State of California with its principal place of business in San Diego, California. Adtile develops multi-sensor advertising technology and services for smartphones and tablets, with a focus on mobile "Motion Ads." (D.I. 1 at ¶ 8) Undertone is a marketing company organized under the laws of the State of New York with a principal place of business in New York, New York. Perion is a company organized under the laws of Israel with a principal place of business in Holon, Israel. (D.I. 1 at ¶¶ 9-10)

Since 2013, Adtile has developed and launched Motion Ads, which provide users a unique motion-activated advertising experience. On February 14, 2014, Undertone and Adtile entered into discussions regarding Adtile's sensor-enabled technology pursuant to a non-disclosure agreement dated March 11, 2014 ("March NDA"). On August 18, 2014, the parties entered into a license agreement (the "License Agreement") and a new NDA, which provides that Adtile would produce Motion Ads and Undertone would sell such ads to its customers. (D.I. 33, ex. 11) On June 12, 2015, Adtile and Undertone terminated the License Agreement (the "Termination Agreement"). (D.I. 33, ex. 16) The License and Termination Agreements provide for the resolution of disputes according to the laws of the State of Delaware. (D.I. 33, exs. 11, 16)

According to Adtile, in June 2015, Perion inquired about using and investing in Adtile's technology.¹ Perion stated that it had also reached out to Undertone, as Undertone used motion-activated ads with great success. Adtile informed Perion that Undertone was a client and was using Adtile's technology. (D.I. 13 at ¶¶ 38-42) Perion announced on December 1, 2015 that it had acquired Undertone for $180 million. (D.I. 14, ex. A) Perion refers to Undertone as its "digital advertising firm." (D.I. 14, ex. B)

III. PERSONAL JURISDICTION

A. Standard

Rule 12(b)(2) of the Federal Rules of Civil Procedure directs the court to dismiss a case when the court lacks personal jurisdiction. Fed. R. Civ. P. 12(b)(2). When reviewing a motion to dismiss pursuant to Rule 12(b)(2), a court must accept as true all allegations of jurisdictional fact made by plaintiff and resolve all factual disputes in plaintiff's favor. Traynor v. Liu , 495 F.Supp.2d 444, 448 (D.Del.2007). Once a jurisdictional defense has been raised, plaintiff bears the burden of establishing, with reasonable particularity, that sufficient minimum contacts have occurred between defendant and the forum to support jurisdiction. See Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Ass'n , 819 F.2d 434, 437 (3d Cir.1987). To meet this burden, plaintiff must produce "sworn affidavits or other competent evidence," since a Rule 12(b)(2) motion "requires resolution of factual issues outside the pleadings." Time Share Vacation Club v. Atlantic Resorts, Ltd. , 735 F.2d 61, 67 n. 9 (3d Cir.1984).

Pursuant to the relevant portions of Delaware's long-arm statute, 10 Del. C. § 3104(c)(1)-(4), a court may exercise personal jurisdiction over a defendant when a defendant or its agent:

(1) Transacts any business or performs any character of work or service in the State;

(2) Contracts to supply services or things in this State;(3) Causes tortious injury in the State by an act or omission in this State;

(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State.

10 Del. C. § 3104(c)(1)-(4). With the exception of (c)(4), the long-arm statute requires a showing of specific jurisdiction. See Shoemaker v. McConnell , 556 F.Supp.2d 351, 354, 355 (D.Del.2008). Subsection (4) confers general jurisdiction, which requires a greater number of contacts, but allows the exercise of personal jurisdiction even when the claim is unrelated to the forum contacts. See Applied Biosystems, Inc. v. Cruachem, Ltd. , 772 F.Supp. 1458, 1466 (D.Del.1991).

If a defendant is found to be within the reach of the long-arm statute, the court then must analyze whether the exercise of personal jurisdiction comports with due process, to wit, whether plaintiff has demonstrated that defendant "purposefully avail[ed] itself of the privilege of conducting activities within the forum state," so that it should "reasonably anticipate being haled into court there." World – Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) (citations omitted). For the court to exercise specific personal jurisdiction consistent with due process, plaintiff's cause of action must have arisen from defendant's activities in the forum State. See Burger King Corp. v. Rudzewicz , 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). For the court to exercise general personal jurisdiction consistent with due process, plaintiff's cause of action can be unrelated to defendant's activities in the forum state, so long as defendant has "continuous and systematic contacts with the forum state." Applied Biosystems , 772 F.Supp. at 1470. In Daimler AG v. Bauman , –––U.S. ––––, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014), the Supreme Court stated that the "paradigm all-purpose forums for general jurisdiction are a corporation's place of incorporation and principal place of business." Id. at 749. The Supreme Court did not hold that a corporation may be subject to general jurisdiction only in one of these locations, but rejected the notion that "continuous and systematic" contacts alone could confer general jurisdiction, clarifying that the role of general jurisdiction is to "afford plaintiffs recourse to at least one clear and certain forum in which a corporate defendant may be sued on any and all claims." Id. at 760–62.

B. Specific Jurisdiction

Adtile contends that this court has specific jurisdiction, because of Perion's ownership of Undertone and because Perion has marketed Undertone's "UMOTION" ads as its own. More specifically, the License and Termination Agreements entered into by Undertone and Adtile select Delaware as an appropriate forum for the resolution of disputes. Perion refers to Undertone as its "digital advertising firm." Perion advertises and supports the sales of motion-activated ads by Undertone, which ads "are sold to Delaware customers for viewing by Delaware end users." In a December 2015 S&P Capital IQ Company Report on Perion, Perion included on its product list certain products purportedly developed by Undertone. Adtile further contends that Perion has a corporate officer (and another employee) who list their place of employment on Linkedln as "at Perion/Undertone," which demonstrates a lack of corporate separateness. (D.I. 34 at 6-9; D.I. 36 at ¶¶ 2, 13, exs. A, L)

Specific jurisdiction arises when a defendant has both purposefully directed its activities at residents of the forum state and the action arises from, or is directly related to, defendant's action within the forum state. See Burger King Corp. , 471 U.S. at 472, 105 S.Ct. 2174. Adtile asks this court to subject Perion to Delaware jurisdiction based on Undertone's actions; however, "mere ownership of a subsidiary does not subject the parent corporation to personal jurisdiction in the state of the subsidiary." Action Mfg. Co. v. Simon Wrecking Co. , 375 F.Supp.2d 411, 420 (E.D.Pa.2005) ; see Lucas v. Gulf & Western Industries, Inc. , 666 F.2d 800, 805–06 (3d Cir.1981) ("[A] foreign corporation is not subject to the jurisdiction of the forum state merely because of its ownership of the shares of stock of a subsidiary doing business in that state."); see also Cannon Mfg. Co. v. Cudahy Packing Co. , 267 U.S. 333, 336, 45 S.Ct. 250, 69 L.Ed. 634 (1925). To hold Perion responsible for its subsidiary's actions, Adtile must convince the court to pierce the corporate veil under an agency or alter-ego theory. Action Mfg. Co. , 375 F.Supp.2d at 421.

A court may pierce the corporate veil in order to "prevent fraud, illegality, or injustice, or when recognition of the corporate entity would defeat public policy or shield someone from liability for a crime." Zubik v. Zubik , 384 F.2d 267, 272 (3d Cir.1967)....