Costar Group, Inc. v. Loopnet, Inc., Civil Action No. DKC 99-2983.

• Decision Date: 17 July 2000
• Docket Number: Civil Action No. DKC 99-2983.
• Citation: 106 F.Supp.2d 780
• Parties: COSTAR GROUP, INC. et al. v. LOOPNET, INC. et al.
• Court: U.S. District Court — District of Maryland

106 F.Supp.2d 780

COSTAR GROUP, INC. et al. v. LOOPNET, INC. et al.

Civil Action No. DKC 99-2983.

United States District Court, D. Maryland.

July 17, 2000.

Charles D. Ossola, Arnold & Porter, Washington, DC, for plaintiff.

R. Wayne Pierce, Law Office, Baltimore, MD, Ann M. Grillo, Niles, Barton & Wilmer, Baltimore, MD, for defendant.

MEMORANDUM OPINION

CHASANOW, District Judge.

On February 10, 2000, the court ordered Defendant De Andre to submit to another deposition on the issue of personal jurisdiction after finding his counsel had "impeded and frustrated the fair examination of De Andre" on that issue during his initial deposition. In addition, pursuant to Rules 30(d)(2) and 37(a)(4), the court ordered De Andre's counsel to pay the reasonable costs and attorney's fees associated with retaking De Andre's deposition and filing the motion to compel his deposition testimony. CoStar has now deposed De Andre pursuant to the court's Order and the parties have submitted additional briefing on the issue of personal jurisdiction. The court also has CoStar's statement of expenses and LoopNet's response thereto.

I. Background

Plaintiffs, CoStar Group, Inc. and CoStar Realty Information, Inc. (collectively "CoStar"), both Delaware corporations with their principal place of business in Maryland, are in the business of creating, producing and distributing databases containing photographs and descriptions of commercial real estate. CoStar licenses the databases to clients with an interest in the commercial real estate market, such as brokers, investors, developers, lenders and purchasers.

Defendant LoopNet, a California corporation with its principal place of business in San Francisco, is an Internet-based commercial real estate listing service. LoopNet describes its real estate listing service as a "web hosting service for users who wish to advertise real estate over the internet."¹ Through LoopNet's Internet web site, commercial real estate professionals and other users can upload or "post" real estate listings, complete with descriptive text and photographs of the property, to be viewed by other users whose search criteria match the property listing. According to LoopNet, the posting of real estate listings is done by the user and is almost entirely automated. To post a property listing, a user completes an on-line form by providing certain required information and, if desired, attaching a photograph of the property. After a user submits a real estate listing with a photograph, a LoopNet employee reviews the photograph to make sure it is a photograph of commercial real estate and not, for example, pornography. LoopNet claims that it also reviews photographs to see whether they bear a copyright notice. Only after this review by a LoopNet employee is the photograph posted on the LoopNet web site with the property listing posted by the user. Users cannot post photographs directly to the LoopNet web site.²

LoopNet's web site is accessible to Maryland residents and contains listings for Maryland properties. Real estate professionals can post their Maryland listings directly from the LoopNet web site (www.loopnet.com) or through the web sites of two Maryland "participating organizations" that use LoopNet's commercial real estate listing service. The two Maryland participating organizations, the Greater Washington Commercial Association of REALTORS ("GWCAR") and the Mid-Atlantic Real Estate Marketing Association ("MAREMA"), are regional associations for real estate professionals that serve the commercial real estate markets in Maryland, Northern Virginia and the District of Columbia. As participating organizations, both GWCAR and MAREMA have links to the LoopNet listing service on their web sites. Users can also search LoopNet listings directly from the GWCAR and MAREMA web sites.³

This action arises out of allegations that LoopNet has posted on its web site several photographs from CoStar's databases, including photographs of Maryland properties submitted through the GWCAR and MAREMA web sites. CoStar alleges that LoopNet has thereby infringed CoStar's copyright in the photographs and is liable for direct and contributory copyright infringement.⁴

CoStar has also named Dennis De Andre, president and CEO of LoopNet and a member of its board of directors, as a defendant. CoStar alleges De Andre is vicariously liable for LoopNet's copyright infringement. De Andre founded LoopNet in 1995 with Michael Keene, who De Andre described as a passive owner, and originally owned 67% of the company. Several rounds of financing from venture capitalists have reduced his ownership interest, but De Andre retains a considerable equity interest in the company. As president and CEO, De Andre "help[s] guide the overall direction of the company, both in terms of its business model and its financial dealings." He is involved in product development, fund-raising and the general management of the company. He also appears to have the right and ability to control decisions relating to the posting of real estate listings and photographs by LoopNet users and to determine LoopNet's copyright policy. For example, De Andre testified at his deposition that he was consulted directly when there were questions regarding potentially infringing photographs.

De Andre was involved in establishing LoopNet's affiliation with GWCAR, which has its principal place of business in the District of Columbia. De Andre initiated the relationship with a letter offering to help GWCAR advertise its listings on the Internet by making LoopNet services available through the GWCAR web site. He testified that he helped GWCAR prioritize its products and acted as a liaison between LoopNet and GWCAR. De Andre also negotiated and signed the contract with GWCAR that gave LoopNet the exclusive right to market GWCAR commercial real estate listings on the Internet. CoStar's argument that this court has jurisdiction over De Andre is based primarily on De Andre's contacts with GWCAR.

II. Analysis

A. Personal Jurisdiction

When a court's power to exercise personal jurisdiction over a nonresident defendant is challenged by a motion under Fed. R.Civ.P. 12(b)(2), "the jurisdictional question thus raised is one for the judge, with the burden on the plaintiff ultimately to prove the existence of a ground for jurisdiction by a preponderance of the evidence." Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989). If the existence of jurisdiction turns on disputed facts, the court may resolve the challenge after a separate evidentiary hearing, or may defer ruling pending receipt at trial of evidence relevant to the jurisdictional question. Id. If the court chooses to rule solely on the basis of the complaint, affidavits and discovery materials, "the burden on the plaintiff is simply to make a prima facie showing of a sufficient jurisdictional basis in order to survive the jurisdictional challenge." Id.; see Owens-Illinois, Inc. v. Rapid Am. Corp. (In re Celotex Corp.), 124 F.3d 619, 628 (4th Cir.1997); Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir.1993); see also American Tel. & Tel. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir.1996); Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.1990). "In deciding whether the plaintiff has proved a prima facie case of personal jurisdiction, the district court must draw all reasonable inferences arising from the proof, and resolve all factual disputes, in the plaintiff's favor." Mylan, 2 F.3d at 60.

As noted in the court's prior opinion, Maryland's long-arm statute permits the exercise of personal jurisdiction to the limits permitted by federal due process. See Hansford v. District of Columbia, 329 Md. 112, 128 n. 7, 617 A.2d 1057, 1064 n. 7 (1993). Thus, the only inquiry for the court is whether De Andre has certain "minimum contacts" with Maryland such that the maintenance of this suit does not offend "traditional notions of fair play and substantial justice." See International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)); Ellicott Mach. Corp. v. John Holland Party Ltd., 995 F.2d 474, 477 (4th Cir.1993). The crucial issue is whether the defendant's contacts with the forum state are substantial enough that he reasonably could "expect to be haled before a [Maryland] court." Shaffer v. Heitner, 433 U.S. 186, 216, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). A defendant has fair warning that he might be subject to a forum's jurisdiction if he purposefully directs his activities at forum residents and "the litigation results from alleged injuries that `arise out of or relate to' those activities." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984); Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984)). It is not necessary that the defendant ever actually enter the forum state's territory; so long as the defendant has purposefully directed his activities toward the forum state, and the litigation arises from those activities, due process is satisfied. Id. at 476, 104 S.Ct. 1868 ("[W]e have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction." (citingKeeton, 465 U.S. at 774-75, 104 S.Ct. 1473)). With regard to jurisdiction over corporate employees, the Supreme Court has made clear that the employee's contacts are not to be judged by the corporation's activities in the forum; rather, the court must look at the degree to which the employee personally participated in the alleged wrongdoing. Calder v. Jones, 465 U.S. 783, 790, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (citing Rush v. Savchuk, 444 U.S. 320, 332, 100 S.Ct. 571, 62 L.Ed.2d 516 (1980)); see Keeton v. Hustler...