System Designs, Inc. v. New Customware Co., Inc.
| Decision Date | 05 March 2003 |
| Docket Number | No. 2:01-CV-0070PGC.,2:01-CV-0070PGC. |
| Parties | SYSTEM DESIGNS, INC., a Utah corporation, Plaintiff, v. NEW CUSTOMWARE COMPANY, INC., a California corporation, Defendant. |
| Court | U.S. District Court — District of Utah |
Peter M. deJonge, David R. McKinney, Thorpe North & Western, Sandy, UT, for plaintiff.
James S. Jardine, Arthur B. Berger, Ray Quinney & Nebeker, Salt Lake City, UT, Marc C. Levy, Preston Gates & Ellis, Seattle, WA, for defendant.
Defendant New Custom Ware Company, Inc. ("New CustomWare") filed a motion to dismiss this action for lack of personal jurisdiction. Plaintiff System Designs, Inc. ("System") responded arguing sufficient contacts to establish jurisdiction. After reviewing the record and hearing oral argument, the court finds sufficient contacts with Utah to establish personal jurisdiction over New CustomWare and therefore denies its motion to dismiss.
The facts relevant to this issue do not appear to be in dispute. Since 1978, System Designs owned and used the registered trademark of "CustomWare," for use with its computer software. System is a Utah company. Its computer software applications involve payroll administration, accounting applications, inventory management, and work flow management. System currently maintains a website advertising its software.
New CustomWare provided training, consulting, and mentoring services to companies focusing specifically on JAVA web service technology and used the New CustomWare mark in connection with its services. New CustomWare typically provided training to its customers on-site, and at their customer's facilities throughout the United States. New CustomWare provided seminars to the general public throughout the United States, but held none in Utah.
New CustomWare formerly maintained a website—www.CustomWare.com—and on that website indicated it served over 500 clients. The New CustomWare clients included large corporations with a national presence, including U.S. West, Wells Fargo, AT & T, Dell, Qwest and Sprint. The website advertised New CustomWare and indicated it will provide service at any location of the customer's choice. The site allowed customers to register and pay for New CustomWare training courses on line. The site also included a limited access section restricted to those with a username and password provided by the defendant. The limited access section of the website provided updates related to JAVA (a programming language) and the training courses New CustomWare offered. Visitors to the website could communicate with New CustomWare about their training needs via an e-mail through the website. Approximately 10 customers actually used the website to register for classes.
New CustomWare essentially was a "virtual" company. Its president, Mr. Salil Deshpande, resided in California. The primary asset of New CustomWare consisted of the "trainers" employed by New CustomWare to travel around the United States and teach the classes requested by the New CustomWare clients. New CustomWare had neither a manufacturing plant nor any "brick and mortar" facility housing its products. Instead, its trainers resided throughout the United States. New CustomWare never taught a class in Utah nor did any of their trainers reside in Utah.
From June 2001 through November 2001, New CustomWare placed advertisements in JAVA Developer's Journal ("JDJ"), advertising its services and including the CustomWare mark. During this time frame, over 100,000 individuals per month subscribed to JDJ throughout the United States. During May 2001, JDJ sold 966 copies of this publication in Utah, either through subscriptions or newsstand sales.
In October 2000, System sent a letter (apparently one of several) to New Custom Ware advising it that continuing use of the New CustomWare mark infringed on System's trademark rights. New Custom-Ware claims it never received the letter and, in any event, continued to use the New CustomWare mark.
On October 4, 2001, System filed a complaint in this court, alleging trademark infringement and federal and state unfair competition claims. System sought a preliminary and permanent injunctions, declaratory judgment, general and punitive damages, and costs and fees. New CustomWare responded, raising affirmative defenses including lack of personal jurisdiction, improper venue, forum nonconviens, laches, statute of limitations, and abandonment of trademark. New CustomWare further counterclaimed, alleging the trademark had became generic and seeking cancellation of the trademark.
Recently, New CustomWare ceased operations. It now only collects receivables.
The matter is currently before the court on New Custom Ware's motion to dismiss. System bears the burden of establishing personal jurisdiction over a nonresident defendant in a diversity action.1 However, New CustomWare filed this motion for lack of personal jurisdiction based on affidavits and other written materials, and thus System need only make a prima facie showing of personal jurisdiction.2 The court resolves all factual disputes in the plaintiffs favor in determining whether the plaintiff has made the required prima facie showing.3
System only alleges specific personal jurisdiction over New CustomWare. Specific personal jurisdiction exists when a non-resident defendant purposefully establishes sufficient minimum contacts with the forum state, the cause of action arises out of these contacts, and jurisdiction is constitutionally reasonable.4 The evaluation of specific jurisdiction requires a three-part inquiry: 1) the defendant's acts or contacts must implicate Utah under the Utah longarm statute; 2) a nexus must exist between the plaintiffs claims and the defendant's acts or contacts; and 3) the application of the Utah long-arm statute must satisfy the requirements of federal due process.5 Utah's long-arm statute provides in pertinent part:
Any person ... who in person or through an agent does any of the following enumerated acts, submits himself to the jurisdiction of the courts of this state as to any claim arising out of or related to:
1) the transaction of any business within the state;
2) the contracting to supply goods or services to the state 3) the causing of any injury within this state whether tortious or by breach of warranty ... 6
The Utah legislature declared that the long-arm statute must be interpreted broadly "so as to assert jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution."7 It is frequently helpful to undertake the due process analysis first, because any set of circumstances that satisfies due process will also satisfy the long-arm statute.8 The court will proceed in this fashion.
The first prong of the due process test looks at whether the defendant has sufficient minimum contacts with the forum state. In judging minimum contacts, a court properly focuses on the relationship among the defendant, the forum, and the litigation.9 Minimum contacts must have a basis in some act by which the defendant purposefully avails itself of the privilege of conducting activities in the forum state, thus invoking the benefits and privilege of its laws.10 The requirement of "purposeful availment" ensures that the defendant will not be haled into a jurisdiction as a result of random, fortuitous, or attenuated contacts.11 This requires New CustomWare to have deliberately created a relationship with Utah that would serve to make Utah's exercise of jurisdiction foreseeable.12 New CustomWare must "expressly aim" or "intentionally direct" its activity at Utah residents.13
System argues five grounds for finding such minimum contacts: (1) intentional acts of New CustomWare infringing a Utah trademark; (2) the New Custom-Ware website, using the Customware trademark; (3) the advertisement in the JDJ; (4) the letter from System to New CustomWare alerting New CustomWare that it was infringing on a Utah company; and (5) these contacts taken collectively. The court will address each of these in turn.
Trademark infringement is a tort.14 In a tort case, as explained by the Supreme Court in Colder v. Jones, jurisdiction may attach if the defendant's conduct is aimed at or has an effect in the forum state.15 Personal jurisdiction can be based upon intentional actions, expressly aimed at the forum state, causing harm, the brunt of which is suffered, and which the defendant knows is likely to be suffered, in the forum state.16
The Ninth Circuit discussed Calder's, "effects test" in trademark infringement cases in Cybersell, Inc. v. Cybersell, Inc.17 In that case, a Florida company with a website directly targeting Florida residents allegedly infringed on an Arizona company's trademark. The Arizona company had not completed its federal registration of its trademark at the time the Florida website began operation. The Florida website required those seeking information to e-mail Cybersell in Florida for more information and listed a local Florida phone number. Upon learning of the potential infringement, the Florida company immediately changed the name of its company and its domain name on the web. The Ninth Circuit concluded that personal jurisdiction over the Florida defendants was not proper in Arizona. The court merely held that there was nothing comparable about the Florida web-page to the facts in Calder, which involved a libelous newspaper article targeting a forum state resident.18
The Ninth Circuit in Panavision further discussed the nature of the "effects" test in trademark infringement cases. The court held that a defendant who had registered the Panavision domain name in a scheme...
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...long-arm statute ... The allegedly tortious conduct includes common law trademark infringement ...”); Sys. Designs, Inc. v. New Custom W are Co., 248 F.Supp.2d 1093, 1097 (D.Utah 2003) (“Trademark infringement is a tort. In a tort case, ... jurisdiction may attach if the defendant's conduct......
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