Reynolds and Reynolds Holdings v. Data Supplies

• Decision Date: 05 February 2004
• Docket Number: No. 2:03CV763.,2:03CV763.
• Citation: 301 F.Supp.2d 545
• Court: U.S. District Court — Eastern District of Virginia
• Parties: REYNOLDS AND REYNOLDS HOLDINGS, INC., and The Reynolds and Reynolds Company, Plaintiffs, v. DATA SUPPLIES, INC., Defendant.

Page 545

301 F.Supp.2d 545

REYNOLDS AND REYNOLDS HOLDINGS, INC., and The Reynolds and Reynolds Company, Plaintiffs, v. DATA SUPPLIES, INC., Defendant.

No. 2:03CV763.

United States District Court, E.D. Virginia, Norfolk Division.

February 5, 2004.

COPYRIGHT MATERIAL OMITTED

Adam C. Paul, Esquire, Kirkpatrick & Lockhart, LLP, Washington, DC, James L. Chapman, IV, Esquire, Crenshaw, Ware & Martin, Norfolk, Counsel for Plaintiffs.

Conrad M. Shumadine, Esquire, Willcox & Savage, P.C., Norfolk, Amy C. Martin, Esquire, Bowen, Riley, Warnock & Jacobson, PLC, Nashville, TN, Counsel for Defendant.

OPINION AND DISMISSAL ORDER

REBECCA BEACH SMITH, District Judge.

This matter comes before the court on three motions. Defendant Data Supplies, Inc. ("DSI") has filed a motion to dismiss for lack of personal jurisdiction, and, in the alternative, a motion to transfer venue to the United States District Court for the Middle District of Tennessee. Plaintiffs Reynolds and Reynolds Holdings, Inc., and the Reynolds and Reynolds Company ("the Reynolds Companies") have filed a motion seeking limited discovery on the issue of personal jurisdiction. For the reasons stated below, the court GRANTS DSI's motion to dismiss for lack of personal jurisdiction andDENIES the Reynolds Companies' motion for limited discovery. Because DSI filed its motion to transfer in the alternative and the Reynolds Companies oppose transfer to the Middle District of Tennessee, the motion to transfer is MOOT.

I. Procedural History

On November 4, 2003, the Reynolds Companies filed a seventeen-count complaint in the above-captioned matter in the Eastern District of Virginia, alleging, inter alia, patent, trademark, and copyright infringement causes of action under federal and state law. At issue in the patent infringement claims are United States Design Patent No. D342,967 ("the '967 patent") and United States Patent No. 5,779,543 ("the '543 patent"). Both patents cover the design of business forms. The '967 patent protects a particular arrangement of boxes and lines on a piece of paper. The '543 patent protects the design and construction of a multi-layer business form. These patents are utilized in the Reynolds Companies' manufacture of preprinted forms used by car dealerships and are sold by the Reynolds Companies under the registered trademarks SOLD PACK, TRADE PACK, LAW, and a stylized version of LAW. In addition, the Reynolds Companies have registered with the United States Copyright Office a multi-page consumer credit sale contract entitled "Simple Interest Motor Vehicle Contract and Security Agreement, Form No. 553-NC (REV.10/98)" (hereinafter referred to as the "Reynolds Motor Vehicle Contract"). The design of the Reynolds Motor Vehicle Contract incorporates the '967 patent.

The Reynolds Companies allege that DSI has violated their rights under the patent, copyright, and trademark laws by "advertising and selling preprinted business forms, including through the Internet, within this judicial district and in interstate commerce under the marks SOLD PACKET, TRADE PACKET, and LAW." (Compl.¶ 13.) In particular, the Reynolds Companies allege that DSI's own "Simple Interest Motor Vehicle Contract and Security Agreement, Form No. 553-NC (REV.10/98)"¹ (hereinafter referred to as the "DSI Motor Vehicle Contract") is available on DSI's website and violates the Reynolds Companies' copyrighted work and the '967 patent.

Prior to the filing of the above-captioned action, the Reynolds Companies were named defendants in a pending action filed in the Middle District of Tennessee on October 8, 2003, by Performance Business Forms, Incorporated ("PBF"). DSI is one of PBF's distributors. In the Tennessee action, PBF seeks a declaration that preprinted forms manufactured by the Reynolds Companies are not subject to copyright protection. In addition, PBF's complaint alleges causes of action under the Sherman and Clayton Acts,² as well as under Tennessee state law. In response to PBF's complaint, the Reynolds Companies filed an answer and a two-count counterclaim, alleging copyright infringement and patent infringement of the '543 patent.

On December 22, 2003, DSI filed a motion to dismiss for lack of personal jurisdiction, and, in the alternative, a motion to transfer venue to the United States District Court for the Middle District of Tennessee, essentially on the ground that the case between PBF and the Reynolds Companies is pending there. Attached to DSI's memorandum in support of these motions was an affidavit by John Salluard ("Salluard"), Chief Financial Officer of DSI. Salluard's affidavit states that (1) DSI has no offices, employees, or sales persons in Virginia; (2) DSI owns no property in Virginia; (3) DSI does not advertise in Virginia; (4) DSI does not contract with any manufacturer or distributor in Virginia; (5) over the last two years, a DSI salesman located in Tennessee has sold $7,152 worth of business forms to two dealerships in Western Virginia, one in Bristol and one in Gate City; (6) over the last two years, DSI's total sales in Virginia constituted approximately 0.4% of its total gross sales; (7) DSI maintains a website through which customers can order certain products, but they cannot order any of the forms at issue in this dispute over the Internet; and (8) DSI has not sold any of the business forms at issue in this dispute to anyone in Virginia.

On January 5, 2004, the Reynolds Companies filed a memorandum in opposition to DSI's motions, and a motion for limited discovery on the issue of personal jurisdiction. Attached to the Reynolds Companies' memorandum was a Dun and Bradstreet report showing that DSI's gross sales for 2002 were approximately $58 million. Also attached to the memorandum in opposition was the declaration of David Butler ("Butler"), a forms sales representative for the Reynolds Companies. Butler's declaration states that, while at a car dealership in North Carolina, Butler witnessed an employee of the dealership access the DSI website and display and print a webpage containing an image of the DSI Motor Vehicle Contract. Attached to the declaration is a printout of the page Butler viewed. It shows an image of what appears to be the front page of the DSI Motor Vehicle Contract. It does not appear that images of the subsequent pages of the form are accessible from the site, and it is clear that the form cannot be purchased directly. Underneath the image of the first page, a DSI representative's name and contact information are listed. On January 8, 2004, DSI filed its reply memorandum, in which it also responded to the Reynolds Companies' motion for limited discovery. The time for the Reynolds Companies to file a reply to DSI's response to the motion for limited discovery has lapsed. The motions are ripe for review.

II. Standard of Review

In patent-related cases filed in the Eastern District of Virginia, Federal Circuit law governs substantive issues, and the law of the Fourth Circuit applies to procedural matters that are not unique to patent law. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (Fed.Cir.1994). When a defendant challenges the court's personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, the jurisdictional question is resolved by the judge, and the burden is on the plaintiff to prove that the court may properly exercise jurisdiction over the defendant by a preponderance of the evidence. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989). If necessary, the court may resolve disputed factual issues regarding personal jurisdiction at trial or at a separate evidentiary hearing. Id. If the court determines not to grant a separate evidentiary hearing, the court may decide the jurisdictional question on the basis of the pleadings, motion papers, and supporting legal memoranda. Id. If it does so, however, the plaintiff need only make a "prima facie" showing of jurisdiction, and "the court must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Id.

III. Analysis

A. Personal Jurisdiction

Federal Circuit law governs the substantive issue of whether the court may constitutionally exercise personal jurisdiction over a particular defendant in patent and patent-related cases. Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343, 1348 (Fed.Cir.2002); Cognitronics Imaging Sys., Inc. v. Recognition Research Inc., 83 F.Supp.2d 689, 694 n. 5 (E.D.Va.2000). Before the court can exercise personal jurisdiction over a defendant in a federal question case, it must determine (1) whether an applicable state statute potentially confers jurisdiction by authorizing service of process on the defendant, and (2) whether the exercise of jurisdiction would satisfy the requirements of the due process clause of the Fifth Amendment. Deprenyl, 297 F.3d at 1350-51. Although it was developed in the context of the Fourteenth Amendment, the standard articulated by International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and its progeny is applicable to the due process inquiry. Id. International Shoe and subsequent cases have developed a two-prong test for evaluating the constitutionality of exercising personal jurisdiction over a corporate defendant who is not a resident of the forum state. First, the defendant must have sufficient "minimum contacts" with the forum. International Shoe, 326 U.S. at 316, 66 S.Ct. 154. Second, maintenance of the suit against the defendant must not offend "traditional notions of fair play and substantial justice." Id. Under the "minimum contacts" test, a defendant may be subject to either specific jurisdiction or general jurisdiction. The court can exercise specific jurisdiction over the defendant where the cause of action "arises out of" or "relates to" defendant's...