Pervasive Software, Inc. v. Lexware GmbH & Co. KG

• Decision Date: 20 July 2012
• Docket Number: No. 11–50097.,11–50097.
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: PERVASIVE SOFTWARE, INC., Plaintiff–Appellant, v. LEXWARE GMBH & COMPANY KG, Defendant–Appellee.

688 F.3d 214

PERVASIVE SOFTWARE, INC., Plaintiff–Appellant,

v.LEXWARE GMBH & COMPANY KG, Defendant–Appellee.

No. 11–50097.

United States Court of Appeals,Fifth Circuit.

July 20, 2012.

Brendan Donald Cook (argued), Andrew Clark Biberstein, Baker & McKenzie, L.L.P., Houston, TX, for Plaintiff–Appellant.

Samuel Eugene Stubbs (argued), Rodney Jack Reynolds, Pillsbury, Winthrop, Shaw, Pittman, L.L.P., Houston, TX, for Defendant–Appellee.

Appeal from the United States District Court for the Western District of Texas.

Before DENNIS, CLEMENT and HIGGINSON, Circuit Judges.

DENNIS, Circuit Judge:

The plaintiff-appellant, Pervasive Software Inc. (“Pervasive”), a Delaware corporation having its principal office in Austin, Texas, sued defendant-appellee, Lexware GmbH & Co. Kg (“Lexware”), a corporation organized under the laws of the Federal Republic of Germany, for damages and injunctive relief on the basis of breach of contract, quantum meruit, unjust enrichment, and conversion in a Texas state court. Lexware removed the case to the federal district court, and that court, in response to Lexware's motion, dismissed the case for lack of personal jurisdiction over Lexware. Pervasive appealed. We affirm, concluding that Pervasive has failed to establish a prima facie case that Lexware had minimum contacts with Texas to support the exercise of either specific or general personal jurisdiction over Lexware.

I. Facts and Procedural History

Pervasive, formerly named Btrieve Technologies, Inc., is a computer software manufacturer, incorporated under the law of Delaware, with its principal place of business in Austin, Texas. Pervasive sells its software products globally, has employees and offices in Germany, Europe, and elsewhere, and conducts business worldwide. Lexware is a German software developer based in Freiburg, Germany. It produces German tax and financial software programs for German taxpayers exclusively in the German language.

Among its software products, Pervasive has developed and sold globally the Btrieve Client Engine Version 6.15 (“Btrieve” or “Btrieve software”).¹ In 1994, Lexware purchased a copy of Btrieve software in Germany from SOS Software Service GmbH (“SOS”), a third-party German software distributor. ² Lexware paid 1,327.25 deutschmarks to SOS for Btrieve. Included in the software package was a license agreement, the Derivative Software License Agreement (“DSLA”). By purchasing and using the Btrieve software package, Lexware signified that it entered into the DSLA with Pervasive. The DSLA specified the terms and conditions of Lexware's Btrieve software license and contained a Texas choice-of-law clause. The DSLA was for a term of one year, to be renewed automatically until one party terminated the agreement. The DSLA did not require Lexware to make additional payments or royalties to Pervasive, and under the DSLA Pervasive had no obligation to provide Lexware with ongoing technical support or assistance for Btrieve. Two forms accompanied the DSLA: (1) a request that the purchaser identify the product that it purchased; and (2) a request that the purchaser indicate the product name, category, and description of its derivative products. Both forms requested that they be completed and mailed to Pervasive's office in Austin, Texas. According to Pervasive, Lexware did not return these forms.

Lexware incorporated Btrieve into several of its products, German financial and tax software programs that were designed to assist German speaking taxpayers in preparing their German tax returns. The programs were not available in English. Pervasive did not agree to assist Lexware in incorporating Btrieve into its products or provide Lexware any technical assistance with Btrieve.

In 1999 and 2000, Pervasive and Lexware entered into a second, separate licenseagreement, the European Manufacturing Partner Agreement (EMPA). The EMPA involved a different and new Pervasive product line, the PSQL products. The parties negotiated and executed this agreement during several in-person meetings of their representatives in Germany. The EMPA required Lexware to make monthly reports to Pervasive and to incur a royalty fee to Pervasive each time Lexware sold a derivative product containing PSQL. Lexware made a one-time, non-refundable prepayment to Pervasive from which the royalty fees were to be deducted. In 2002, Lexware released a new German taxpayer product line incorporating PSQL but discontinued it less than one year later because it was commercially unsuccessful. The EMPA had an initial three-year term that Lexware did not extend. In 2000, Pervasive and Lexware negotiated two addenda to the EMPA. The first (“Addendum 1”) set forth Lexware's agreement to purchase from Pervasive 7,500 enabling technology user seats for PSQL, and contained provisions for reporting requirements and royalty fee payments. Lexware prepaid a fee of $125,250 for the 7,500 enabling seats. Addendum 1 to the EMPA was executed by the parties effective June 30, 2000. The second addendum (“Addendum 2”) governed an Educational Grant Program. These addenda did not purport to amend or alter the DSLA. In 2006, 2008, and 2009, Lexware purchased three additional items for download from the Pervasive website that were not related to the Btrieve software it bought from SOS in 1994.

Pervasive and Lexware did not communicate directly with each other until 1999, when they began negotiations in respect to the EMPA. They then communicated several times between 1999 and 2003 regarding the EMPA and Lexware's reporting and royalty fee requirements. In 2002, Lexware asked Pervasive for a certificate that it was a U.S. taxpayer so as to enable Lexware to obtain an exemption from German taxes in connection with its payment of royalty fees under the EMPA. In 2003, Lexware asked Pervasive for certification that Pervasive was a U.S. corporation for the purposes of U.S. federal taxation. These requests were not related to the DSLA and pertained only to the EMPA and Addendum 1. Pervasive supplied the certificate of its U.S. taxpayer status to Lexware in June 2003. The companies did not communicate again until 2007, when Lexware requested a price quote for a new version of PSQL; the e-mail was forwarded to Pervasive's German representatives, one of whom then called Lexware to discuss PSQL and Btrieve. Lexware did not purchase the new version of PSQL. In 2009, Lexware contacted Pervasive and requested the Btrieve Ultimate Patch or update, but Pervasive ultimately did not provide Lexware with that software patch or update.

Lexware does not have an office, own property, or have agents or employees in Texas, and it does not promote, market, or sell its products inside Texas. Its products are specifically designed for the German taxpayer market and are only available in the German language. Pervasive did not assist Lexware in incorporating Btrieve into its German taxpayer products or provide it with any other technical support. Lexware has an interactive website, using only the German language, that allows customers to purchase and download free trials of Lexware's software products. The website is accessible worldwide, including in Texas. Lexware has sent fifteen internet orders to twelve Texas billing or shipping addresses since 2007. Lexware's materials may also be purchased on several third-party vendor websites, which are accessible by persons in Texas. Lexware books are available for purchase on Amazon's U.S. website.

Pervasive describes itself as “a global leader in embeddable data management and data integration software,” and has sold its products to customers in more than 150 countries. It has an interactive website that is accessible worldwide and in Germany, and it has used foreign third-party distributors. Most of Pervasive's offices are in Texas, but the company maintains a European Service and Support Center in Dublin, Ireland, and has several offices in Japan and Europe, including in Germany. Pervasive employed two German resident representatives, who used a German e-mail address (pervasive.de) to contact Lexware. Many of Pervasive's communications with Lexware were in German. Lexware representatives also used German e-mail addresses (lexware.de).

In 2008, Pervasive representatives e-mailed Lexware, in the German language, to request the return of the Btrieve master CD and key generator.³ Lexware replied, promising to handle the request but asking for more information about when and to whom Pervasive gave the CD and key generator. The record does not reflect whether Pervasive supplied Lexware with this information. In 2009, Pervasive's German representatives requested that Lexware report on its distribution of Lexware software products that incorporated Btrieve. Lexware refused on grounds that the DSLA did not obligate Lexware to make such reports or to pay Pervasive any royalty on the sale of Lexware products. Pervasive then contacted Lexware to terminate the DSLA. When Lexware rejected its demand, Pervasive sent Lexware a cease-and-desist letter. On March 26, 2010, Pervasive filed a complaint against Lexware in the 200th Judicial District of Travis County, Texas, seeking damages and injunctive relief. Pervasive raised four causes of action. First, Pervasive claimed that Lexware breached its contractual obligations under the DLSA. Pervasive also claimed that it was entitled to the fair value of Lexware's use of Btrieve under quantum meruit and unjust enrichment. Finally, Pervasive claimed that Lexware committed the tort of conversion by wrongfully exercising dominion and control over Btrieve. Lexware removed the case to the United States District Court for the Western District of Texas and filed motions to dismiss for lack of personal jurisdiction and failure to state a claim upon which relief can be granted. SeeFed.R.Civ.P. 12(b)(2), 12(b)(6). The district court granted Lexware's 12(b)(2) motion, and Pervasive appealed.

II. Discussion

A. Standards of...