Hyperquest, Inc. v. NuGen I.T., Inc.
| Decision Date | 18 June 2008 |
| Docket Number | No. 08 C 0485.,08 C 0485. |
| Citation | 627 F.Supp.2d 884 |
| Parties | HYPERQUEST, INC., Plaintiff, v. NuGEN I.T., INC. and Dayle Phillips, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Deborah R. Hogan, Chad A. Blumenfield, Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd., Chicago, IL, for Plaintiff.
Kristen Werries Collier, Monte Loren Mann, Novack and Macey, LLP, Chicago, IL, Mark J. Peterson, Nora M. Kane, Stinson Morrison Hecker LLP, Omaha, NE, for Defendant.
Before the Court is Defendant Nugen I.T., Inc's ("NuGen") and Dayle Phillips's (Phillips) (collectively, "Defendants") Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2) and Defendant Phillips's Motion for Judgment on the Pleadings pursuant to Fed. R. Civ. P. 12(c). For the following reasons, Defendants' motion to dismiss on jurisdictional grounds is granted. Because the Court need not reach Phillips's concurrent motion for judgment on the pleadings, it is denied as moot,
The Court shall consider the following facts, which it takes from Plaintiff's Complaint for Injunctive Relief and Damages and from the declarations submitted by the parties in support of their positions. However, as discussed more fully below, the Court sustains in part Defendants' objection to several portions of the Declaration of Jeffery J. Hogan ("Hogan"). As such, the Court shall disregard those paragraphs in Hogan's Declaration that it determines constitute either hearsay or irrelevant matter and are therefore not properly before the Court. See infra Part II.B.
Plaintiff Hyperquest, Inc. ("Hyperquest") brought a one-count complaint for copyright infringement against Phillips, in his individual capacity, and NuGen, which allegedly marketed and sold a software product that copied protected graphics and other materials from Hyperquest's competing software, "e-Doc Express." See Compl. ¶¶ 33, 35, 37-42. Defendant Phillips is the President, Secretary, Treasurer and shareholder of the corporate defendant, NuGen. Compl. ¶¶ 3. Phillips is a Kansas resident. Id. In support of his motion, Phillips declared that he: does not conduct business in Illinois, either personally or through NuGen; does not own property or have an office in Illinois; is not registered to do business in Illinois; has never voted in Illinois; has never been liable for income taxes in Illinois; and has never lived in Illinois. Def.'s Memo In Support, Ex. A., Decl. of Dayle E. Phillips ("Phillips Decl."), ¶¶ 6-9. Phillips also declared that he had no involvement with Hyperquest in Illinois following his employment with a company known as the Safelite Group Inc. f/k/a Safelite Glass Corp. ("Safelite"), which we discuss below. Id. ¶ 13.
Defendant NuGen is a Nevada corporation, incorporated as of April 2006, with its principle place of business in Las Vegas, Nevada. Compl. ¶ 2. NuGen's majority shareholder, who is familiar with the company's day-to-day operations, declared that NuGen: has no offices in Illinois; is not registered to do business in Illinois; does not own or lease property in Illinois; does not conduct any business in Illinois; and has not solicited business or made sales in Illinois, Def.'s Memo In Support, Ex. B., Decl. of John Pete Tagliapietra ("NuGen Decl."), ¶¶ 2-8.
Plaintiff Hyperquest is a Delaware corporation with its principle place of business in Skokie, Illinois. Compl. ¶ 1. Hyperquest provides internet-based technology products and services to entities in the property and casualty insurance industry. Id. On July 6, 2004 Hyperquest acquired from Safelite a "worldwide, exclusive" license to market, lease and sublicense Safelite e-Doc Express software, which was initially designed for the electronic processing of insurance claims. Id. ¶¶ 11, 31-32. A few years later, in October 2007 Hyperquest discovered that Phillips was working with NuGen to market and sell a product similar to e-Doc Express, which they called "Enterprise Workflow." Id. ¶¶ 33-34. This discovery caused Hyperquest to seek copyright protection for its e-Doc Express software and eventually spawned this lawsuit. Hyperquest's relationship with Phillips, however, began three years earlier.
In 1996 Phillips founded DAIS, Inc., a Kansas corporation, and began product development for the e-Doc Express software. Compl. ¶¶ 7-8. In October 2000 DAIS, Inc. merged with Small Hill, Inc. to form a company called Quivox Systems Incorporated ("Quivox"). Id. ¶ 9. Sometime in 2001, while working at Quivox, Phillips completed development of e-Doc Express. Id. ¶ 10. In July 2001 Quivox ceased operations, which allowed Safelite to consider a potential acquisition of Quivox's assets, which included the e-Doc Express software. Id. ¶¶ 14, 16. In 2003, just prior to its acquisition of Quivox's assets, Safelite identified Phillips as a valuable resource to the company and sought to extend to Phillips an offer of employment given his intimate knowledge of e-Doc Express. Id. ¶ 17. Phillips accepted Safelite's offer of employment in April 2003. Id. ¶ 18. On May 9, 2003 Safelite and Quivox entered into an asset purchase agreement through which Quivox assigned to Safelite all rights and interest to the e-Doc Express software. Id. ¶¶ 19-20,
The e-Doc Express software is used primarily by insurance companies to assign repair claims, over the internet, to people who prepare estimates of repair costs. See Memo In Opposition, Ex. A, Decl. of Jeffrey J. Hogan ("Hogan Decl."), ¶¶ 57-59. These people include employees of insurance companies, independent appraisal companies and appraisers that work for repair shops. Id. ¶ 59. For these appraisers to accept an assignment and to return their estimates back to the insurance company using the internet, the appraiser must download to its computer a bundle of programs that allows them to do so. Id. ¶ 61. This software is made available to appraisers through "an interactive website." Id. Although, the record remains unclear as to what internet website, exactly, appraisers access and interact with to download the e-Doc Express software.
In November 2006 Safelite filed a U.S. copyright application for the registration of e-Doc Express. Compl. ¶ 36. On November 21, 2006 the U.S. Copyright Office issued to Safelite copyright registration TX u001318816 for e-Doc Express. Id. On January 7, 2008 Hyperquest recorded with the U.S. Copyright Office the e-Doc Express license that it previously acquired from Safelite. Id. ¶ 37.
Beginning in May 2003 Hyperquest and Safelite considered the possibility of working together. Id. ¶ 8; Compl. ¶ 21. Later that year the two companies contemplated the potential integration of Safelite's e-Doc Express software into certain products developed by Hyperquest. Compl. ¶ 22. Phillips, as a Safelite employee with an intimate knowledge of e-Doc Express, took part in the companies' discussions and was eventually introduced to Hyperquest's president and founder, Jeffrey J. Hogan ("Hogan"). Compl. ¶¶ 17, 22; Hogan Decl. ¶¶ 11, 20. As the discussions progressed between July 11, 2003 and August 1, 2003, Phillips approached Hogan regarding a potential business relationship between Phillips and Hyperquest, independent of Safelite. Hogan Decl. ¶ 14.
Thereafter, Phillips remained a Safelite employee, but nevertheless attempted on several occasions to establish a working relationship between himself and Hyperquest. Id. ¶ 17. On each occasion, Phillips communicated with Hogan through either e-mail, facsimile, telephone or in-person. Id. ¶¶ 14-16, 18-19, 22-23. All the while, Safelite and Hyperquest continued to conduct meetings and discussions regarding the integration of e-Doc Express with Hyperquest's software. Id. ¶ 25. Between September 2003 and March 2004, on at least four occasions, Phillips traveled to Chicago on behalf of Safelite to take part in meetings or discussions and to execute an integration plan for the two companies. Id. ¶¶ 25-26, 31, 33, 38. Yet, while Phillips traveled generally on behalf of Safelite, he continued to discuss with Hogan his various ideas for a working relationship between himself and Hyperquest. Id. ¶¶ 26-28, 34, 37, 39.
Hogan last met with Phillips in-person on March 1, 2004. Id. ¶ 40. By this time Phillips had notified Safelite that he was leaving the company, and thus Phillips traveled to Chicago on behalf of Safelite to complete a number of projects relating to the integration of the e-Doc Express software. Id. During this visit, which Hogan describes as an "intense week of work," Phillips spoke with Hogan once again regarding a potential working relationship. Id. ¶ 41. Phillips left Safelite and the State of Illinois on March 5, 2004. Id. ¶ 40.
For a brief period after Phillips left Safelite, he continued his discussions with Hogan. See id. ¶¶ 41-51. These discussions were limited to either telephone or electronic communications. Specifically, Phillips sent to Hogan additional e-mails on March 11, 2004 and March 12, 2004 regarding a software application that he and an unnamed partner had developed to integrate with Hyperquest's "system" and the e-Doc Express program. Id. ¶ 41. On March 22, 2004 Phillips sent to Hogan an e-mail requesting a telephone conference, which they conducted on March 29, 2004. Id. ¶ 43, 45. And, on March 31, 2004 Phillips sent to Hogan a draft agreement in which he proposed that NuGen—an entity that had not yet been incorporated would act as a reseller of the e-Doc Express software. Id. ¶ 47. Ultimately, Hyperquest and Nugen did not enter into a business relationship. Id. ¶ 52. Phillips's March 31, 2004 communication is the last, documented contact between Phillips and Hogan. According to Phillips, that was his last contact with...
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