Dmarcian, Inc. v. Dmarcian Eur. BV
| Decision Date | 14 February 2023 |
| Docket Number | 21-1721,21-2005,22-1728 |
| Parties | DMARCIAN, INC., Plaintiff - Appellee, v. DMARCIAN EUROPE BV, Defendant-Appellant. DMARCIAN, INC., Plaintiff - Appellee, v. DMARCIAN EUROPE BV, Defendant-Appellant. DMARCIAN, INC., Plaintiff - Appellee, v. DMARCIAN EUROPE BV, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Samuel B. Hartzell, WOMBLE BOND DICKINSON (US) LLP, Raleigh, North Carolina, for Appellant.
Pamela Suzanne Duffy, ELLIS &WINTERS, LLP, Greensboro, North Carolina; David Anthony Dorey, BLANK ROME LLP, Wilmington Delaware, for Appellee.
ON BRIEF:
Pressly M. Millen, WOMBLE BOND DICKINSON (US) LLP, Raleigh, North Carolina, for Appellant.
Before WILKINSON and HEYTENS, Circuit Judges, and Henry E. HUDSON, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.
This is a case of two software companies-dmarcian, Inc. (dInc) and dmarcian Europe BV (dBV)-and a broken business relationship. The original dmarcian, dInc, is a Delaware corporation with headquarters in North Carolina. Its corporate homonym, dBV, is a Dutch entity based in the Netherlands. In 2016, the two companies negotiated an agreement authorizing dBV to sell dInc's software in Europe and Africa. The license was done on a handshake, and the parties now dispute its terms.
After an initially fruitful partnership, disagreements arose in 2019, ultimately prompting two suits by dBV in the Netherlands and the present suit by dInc in the United States. Among other allegations, dInc accuses dBV of directly competing for customers, which prompted dInc to bring claims of copyright and trademark infringement, misappropriation of trade secrets, and tortious interference. The district court exercised personal jurisdiction over dBV and declined to dismiss for forum non conveniens. The district court also issued a preliminary injunction limiting dBV's use of dInc's intellectual property. The district court later held dBV in contempt for violating the injunction, and dBV now appeals.
For the reasons set forth herein, we affirm except as to one aspect of the contempt order, which we vacate and remand for further proceedings as to the proper amount of sanctions.
dmarcian, Inc. was founded in 2014 by Tim Draegen, a North Carolina resident, to commercialize software that he developed two years earlier. His software, branded as "dmarcian," helps users authenticate incoming emails through the Domain-based Message Authentication Reporting and Conformance (DMARC) protocol. Users can thus guard themselves against malicious senders masquerading as legitimate businesses or individuals in so-called "phishing" attacks. dInc formally registered "dmarcian" as a trademark in 2019 and copyrighted its source code in 2021. dInc has asserted its source code, customer lists, sales leads, and general market intelligence as trade secrets.
Draegen initially promoted his software through a website: dmarcian.com. His efforts caught the eye of Martijn Groeneweg, a Dutch businessman and co-founder of Mailmerk BV-which would later become dmarcian Europe BV. Groeneweg contacted Draegen in 2013 to propose helping market dmarcian in Europe. Although Draegen and Groeneweg did not reach an agreement, they kept in touch.
In mid-2014, Groeneweg informed Draegen that he had registered the web domains, dmarcian.eu and dmarcian.nl, and programmed them to route traffic to dmarcian.com. Their discussions continued for more than a year, until Draegen ultimately travelled to the Netherlands in January 2016 and met with Groeneweg in person. At that time, the two orally negotiated an agreement between dInc and Mailmerk.
Per the 2016 agreement, which was never reduced to writing, Mailmerk was to rebrand as dmarcian Europe BV (dBV), which it did in 2017. Draegen was also given the option to purchase a 50.01% stake in dBV for 1, which he exercised in 2018. In return, dBV received a license to sell dmarcian software in Europe and Africa.
Following the agreement, dInc directed certain sales leads in Europe and Africa to dBV. dInc also provided dBV employees and customers with operational assistance and technical support, in addition to housing, developing, and maintaining the dmarcian source code from its North Carolina office. dInc shared the source code, meanwhile, with dBV engineers in Bulgaria and the Netherlands who made software improvements. dBV engineers also redesigned dInc's website, dmarcian.com, and made Dutch, French, and Spanish versions linking to dmarcian.com. dInc alleges that its website typically attracted hundreds of new customers each month.
Throughout the partnership, dBV and dInc personnel corresponded regularly. The two companies' employees took part in multiple meetings and virtual training sessions hosted by dInc's representatives in North Carolina. Additionally, Draegen traveled at least once each year to meet dBV personnel in Europe, sometimes bringing other dInc employees along with him. Groeneweg, for his part, travelled once to North Carolina in January 2019 to meet with dInc employees.
Tensions arose in late 2019 when dBV asserted ownership of parts of the dmarcian code that had been written by dBV's developers. dInc voiced disagreement, and initial talks between the companies failed to make headway. At one point, dInc briefly cut off dBV's access to dInc's computer systems. In July 2020, Draegen, as dBV's majority owner, called a shareholders' meeting to resolve the ongoing dispute. In response, dBV's minority shareholder-an entity controlled by Groeneweg-filed suit in the Enterprise Court of the Appellate Court of Amsterdam in the Netherlands (Enterprise Chamber), a Dutch court specialized in Dutch corporate governance disputes. In September 2020, the Enterprise Chamber seized control of dBV and ordered an investigation into its management and affairs. The Chamber named a Dutch attorney as dBV's managing director pending the resolution of the investigation.
Following the Chamber's ruling, dInc again briefly suspended dBV's access to dInc's computer systems. After several months, with the companies still at an impasse in negotiations, dInc announced in January 2021 that it would terminate dBV's license the following month. In response, dBV filed for injunctive relief in Rotterdam Court, prompting a hearing two days later. After dInc representatives failed to appear at the hearing, the Rotterdam Court granted the injunction, ordering dInc to restore dBV's access to its servers and maintain dBV's license while the Chamber investigation proceeded.
After the injunction, dInc alleges that dBV continued selling the dmarcian software while restricting dInc's access to certain customers. According to dInc, dBV set up multiple websites with dInc's logo (only adding the word "EUROPE"), the likenesses of dInc employees, and the identities of dInc customers. dBV's websites were "virtually identical" to dInc's website, except for providing dBV's contact information. dmarcian, Inc. v. dmarcian Eur. BV (dmarcian II), No. 1:21-CV-00067-MR, 2021 WL 2144915, at *5 . Draegen testified that a link on dBV's website for "the Americas" routed users to the dBV platform. dBV says it only created these websites because dInc had terminated its access to dInc's computer systems.
Additionally, dInc accuses dBV of reporting a "data breach" to authorities and customers as a ruse to lure dInc's business to dBV's "safe new platform." Id. dInc alleges that at least one company based in the United States, Clarizen, consequently switched from dInc to dBV. dBV counters that it was obligated to report a data breach because dInc had terminated dBV's access to customer data.
From this point forward, dBV allegedly operated bootlegged versions of dInc's website and encroached on dInc's sales territory with dBV's own platform, derived from dInc's intellectual property. In short, dInc and dBV had gone from partners to competitors. These actions prompted the current lawsuit.
On March 12, 2021, dInc filed suit against dBV in the Western District of North Carolina. Two weeks later, dInc filed a motion for a temporary restraining order and a preliminary injunction. The district court denied dInc's motion for a temporary restraining order but reserved ruling on the preliminary injunction "pending further presentation of evidence and briefing by the parties." dmarcian, Inc. v. dmarcian Eur. BV (dmarcian I), No. 1:21-CV-00067-MR, 2021 WL 1225876, at *4 (W.D. N.C. Mar. 31, 2021).
In April, dInc amended its complaint, claiming breach of contract, copyright infringement under 17 U.S.C. § 101 (Copyright Act), trademark infringement under 15 U.S.C. § 1051 et seq. (Lanham Act), defamation, misappropriation of trade secrets under North Carolina General Statute § 66-152 et seq. (North Carolina Trade Secrets Protection Act) and under 18 U.S.C. §§ 1836(b), 1839 et seq. (Defend Trade Secrets Act), computer trespass, tortious interference, common law trademark infringement, unjust enrichment, and unfair or deceptive business practices. In response, dBV filed a motion to dismiss for lack of personal jurisdiction and forum non conveniens.
The district court denied dBV's motion to dismiss and entered a preliminary injunction against it. For the injunction, the district court only addressed dInc's copyright trademark, trade secrets, and tortious interference claims, which formed the basis of dInc's requested interim relief. The district court found that dInc was likely to succeed...
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