CompuServe, Inc. v. Patterson

Decision Date22 July 1996
Docket NumberNo. 95-3452,95-3452
Citation89 F.3d 1257
Parties, 39 U.S.P.Q.2d 1502, 24 Media L. Rep. 2100 COMPUSERVE, INCORPORATED, Plaintiff-Appellant, v. Richard S. PATTERSON, individually, and Flashpoint Development, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

Stephen D. Jones (argued and briefed), Roetzel & Andress, Columbus, OH and Kent D. Stuckey, Columbus, OH, for plaintiff-appellant.

Richard S. Patterson, Houston, TX, for defendant-appellee.

Before BROWN, KENNEDY, and WELLFORD, Circuit Judges.

BAILEY BROWN, Circuit Judge.

In a case that requires us to consider the scope of the federal courts' jurisdictional powers in a new context, a computer network giant, CompuServe, appeals the dismissal, for lack of personal jurisdiction, of its complaint in which it sought a declaratory judgment that it had not infringed on the defendants' common law copyrights or otherwise engaged in unfair competition. The district court held that the electronic links between the defendant Patterson, who is a Texan, 1 and Ohio, where CompuServe is headquartered, were "too tenuous to support the exercise of personal jurisdiction." The district court also denied CompuServe's motion for reconsideration. Because we believe that CompuServe made a prima facie showing that the defendant's contacts with Ohio were sufficient to support the exercise of personal jurisdiction, we REVERSE the district court's dismissal and REMAND this case for further proceedings consistent with this opinion.

I. BACKGROUND

CompuServe is a computer information service headquartered in Columbus, Ohio. It contracts with individual subscribers, such as the defendant, to provide, inter alia, access to computing and information services via the Internet, and it is the second largest such provider currently operating on the so-called "information super highway." 2 A CompuServe subscriber may use the service to gain electronic access to more than 1700 information services. 3

CompuServe also operates as an electronic conduit to provide its subscribers computer software products, which may originate either from CompuServe itself or from other parties. Computer software generated and distributed in this manner is, according to CompuServe, often referred to as "shareware." Shareware makes money only through the voluntary compliance of an "end user," that is, another CompuServe subscriber who may or may not pay the creator's suggested licensing fee if she uses the software beyond a specified trial period. The "end user" pays that fee directly to CompuServe in Ohio, and CompuServe takes a 15% fee for its trouble before remitting the balance to the shareware's creator. 4

Defendant, Richard Patterson, is an attorney and a resident of Houston, Texas who claims never to have visited Ohio. Patterson also does business as FlashPoint Development. He subscribed to CompuServe, and he also placed items of "shareware" on the CompuServe system for others to use and purchase. When he became a shareware "provider," Patterson entered into a "Shareware Registration Agreement" ("SRA") with CompuServe. Under the SRA, CompuServe provides its subscribers with access to the software, or shareware, that Patterson creates. The SRA purports to create an independent contractor relationship between Patterson and CompuServe, whereby Patterson may place software of his creation on CompuServe's system. The SRA does not mention Patterson's software by name; in fact, it leaves the content and identification of that software to Patterson.

The SRA incorporates by reference two other documents: the CompuServe Service Agreement ("Service Agreement") and the Rules of Operation, both of which are published on the CompuServe Information Service. Both the SRA and the Service Agreement expressly provide that they are entered into in Ohio, and the Service Agreement further provides that it is to "be governed by and construed in accordance with" Ohio law. These documents appear to be standardized and entirely the product of CompuServe. It bears noting, however, that the SRA asks a new shareware "provider" like Patterson to type "AGREE" at various points in the document "[i]n recognition of your on line agreement to all the above terms and conditions." Thus, Patterson's assent to the SRA was first manifested at his own computer in Texas, then transmitted to the CompuServe computer system in Ohio.

From 1991 through 1994, Patterson electronically transmitted 32 master software files to CompuServe. These files were stored in CompuServe's system in Ohio, and they were displayed in different services for CompuServe subscribers, who could "download" them into their own computers and, if they chose to do so, pay for them. Patterson also advertised his software on the CompuServe system, and he indicated a price term in at least one of his advertisements. CompuServe asserts that Patterson marketed his software exclusively on its system. Patterson, for his part, stated that he has sold less than $650 worth of his software to only 12 Ohio residents via CompuServe.

Patterson's software product was, apparently, a program designed to help people navigate their way around the larger Internet network. CompuServe began to market a similar product, however, with markings and names that Patterson took to be too similar to his own. Thus, in December of 1993, Patterson notified CompuServe (appropriately via an electronic mail or "E-mail" message 5) that the terms "WinNAV," "Windows Navigator," and "FlashPoint Windows Navigator" were common law trademarks which he and his company owned. Patterson stated that CompuServe's marketing of its product infringed these trademarks, and otherwise constituted deceptive trade practices. CompuServe changed the name of its program, but Patterson continued to complain. CompuServe asserts that, if Patterson's allegations of trademark infringement are correct, they threaten CompuServe's software sales revenue with a loss of approximately $10.8 million.

After Patterson demanded at least $100,000 to settle his potential claims, CompuServe filed this declaratory judgment action in the federal district court for the Southern District of Ohio, relying on the court's diversity subject matter jurisdiction. CompuServe sought, among other things, a declaration that it had not infringed any common law trademarks of Patterson or FlashPoint Development, and that it was not otherwise guilty of unfair or deceptive trade practices. Patterson responded pro se with a consolidated motion to dismiss on several grounds, including lack of personal jurisdiction. Patterson also submitted a supporting affidavit, in which he denied many jurisdictional facts, including his having ever visited Ohio. CompuServe then filed a memorandum in opposition to Patterson's consolidated motion, along with several supporting exhibits.

The district court, considering only these pleadings and papers, granted Patterson's motion to dismiss for lack of personal jurisdiction in a thorough and thoughtful opinion. 6 At various points in its consideration of the case, however, the district court expressly relied on Patterson's affidavit. Joint Appendix at 97, 98, 99. The court below then denied CompuServe's motion for a rehearing, which it construed as a motion for reconsideration under Federal Rule of Civil Procedure 59(e). CompuServe timely appealed. Patterson, however, filed no appellate brief, and he did not appear at oral argument.

II. ANALYSIS
A. Standards of Review.

We conduct a plenary review of personal jurisdiction issues. E.g., Reynolds v. International Amateur Athletic Fed'n, 23 F.3d 1110, 1117 (6th Cir.) (citing Conti v. Pneumatic Prods., 977 F.2d 978, 985 (6th Cir.1992)), cert. denied, --- U.S. ----, 115 S.Ct. 423, 130 L.Ed.2d 338 (1994). CompuServe, as the party seeking assertion of in personam jurisdiction, bears the burden of showing that such jurisdiction exists. E.g., Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir.1991). When, however, a district court rules on a jurisdictional motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(2) without conducting an evidentiary hearing, the court must consider the pleadings and affidavits in a light most favorable to the plaintiff--here, CompuServe. Id. at 1458-59. To defeat such a motion, a party in CompuServe's position need only make a prima facie showing of jurisdiction. Id.

Furthermore, a "court disposing of a 12(b)(2) motion does not weigh the controverting assertions of the party seeking dismissal," Patterson in this case, because we want "to prevent non-resident defendants from regularly avoiding personal jurisdiction simply by filing an affidavit denying all jurisdictional facts." Id. at 1459 (emphasis added). Dismissal in this procedural posture is proper only if all the specific facts which the plaintiff (CompuServe) alleges collectively fail to state a prima facie case for jurisdiction. Id.

B. Personal Jurisdiction.

This case presents a novel question of first impression: Did CompuServe make a prima facie showing that Patterson's contacts with Ohio, which have been almost entirely electronic in nature, are sufficient, under the Due Process Clause, to support the district court's exercise of personal jurisdiction over him?

The Supreme Court has noted, on more than one occasion, the confluence of the "increasing nationalization of commerce" and "modern transportation and communication," and the resulting relaxation of the limits that the Due Process Clause imposes on courts' jurisdiction. E.g., World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 293, 100 S.Ct. 559, 565, 62 L.Ed.2d 490 (1980) (quoting McGee v. International Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957)). Simply stated, there is less perceived need today for the federal constitution to protect defendants from "inconvenient litigation," because all but the most remote forums are...

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