Dmarcian, Inc. v. DMARC Advisor BV

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:21-cv-00067-MR
DMARCIAN, INC., )
)
Plaintiff, )
)
vs. ) O R D E R
)
DMARCIAN EUROPE BV )
)
Defendant. )
________________________________ )
THIS MATTER is before the court on the Plaintiff’s Motion for
Temporary Restraining Order. [Doc. 6].
On March 12, 2021, dmarcian, Inc. (the “Plaintiff”) filed this action
against dmarcian Europe BV (the “Defendant”), asserting claims for breach
of contract; copyright infringement under 17 U.S.C. § 101 (the “Copyright
Act”; trademark infringement under 15 U.S.C. § 1051 et seq. (the “Lanham
Act”); false designations of origin under the Lanham Act; defamation;
misappropriation of trade secrets under the North Carolina Trade Secrets
Protection Act, N.C. Gen. Stat. § 66-152 et seq.; computer trespass; tortious
interference with contract; tortious interference with prospective economic
advantage; and unfair or deceptive trade practices under N.C. Gen. Stat. §
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75-1.1. [Doc. 1 at ¶¶ 114-205]. The Plaintiff’s Complaint included a request
for a preliminary injunction. [Id. at 38].
On March 25, 2021, the Plaintiff filed the present Motion seeking a
temporary restraining order and preliminary injunction enjoining the
Defendant from (1) making, using, distributing, and/or selling dmarcian
software Code/derivative works; (2) directly or indirectly using Plaintiff’s
[trademarks] or any other similar mark, word, or name similar likely to cause
confusion, mistake, or deceive; (3) infringing Plaintiff’s registered copyright;
(4) misrepresenting its present affiliation with Plaintiff; and (5) interfering with
customer relationships, contacting, posting false notice to, and
misrepresenting falsely to customers that Plaintiff caused a breach of
customer data.” [Doc. 6 at 1-2].
On March 29, 2021, the Defendant’s counsel filed a notice of
appearance and requested an opportunity to submit briefing in response to
the Plaintiff’s request for a temporary restraining order and a preliminary
injunction. [Doc. 10]. On the same date, the Court entered an order allowing
the Defendant to submit an opposition brief by noon on March 30, 2021.
[Text-Only Order Entered March 29, 2021]. On March 30, 2021, the
Defendant submitted its brief opposing the Plaintiff’s request for a temporary
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restraining order, arguing that the Court lacks personal jurisdiction over the
Defendant. [Doc. 11].
I. PERSONAL JURISDICTION
A court cannot issue a temporary restraining order absent personal
jurisdiction over all parties. See Land-O-Nod Co. v. Bassett Furniture Indus.,
708 F.2d 1338, 1340 (8th Cir. 1983); Kroger Co. v. Malease Foods Corp.,
437 F.3d 506, 510 (6th Cir. 2006). When, as here, a district court considers
a question of personal jurisdiction based on the allegations of a complaint,
motions papers, affidavits, and supporting memoranda, the plaintiff has the
burden of making a prima facie showing in support of its assertion of
jurisdiction. Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th
Cir. 2014); Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016). In
deciding whether the plaintiff has met this burden, “the district 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.” Universal Leather, 773 F.3d at 558 (internal
quotation marks and citation omitted). “Nevertheless, either at trial or at a
pretrial evidentiary hearing, the plaintiff must eventually prove the existence
of personal jurisdiction by a preponderance of the evidence.” Public Impact,
LLC v. Boston Consulting Group, Inc., 117 F.Supp.3d 732, 737 (M.D.N.C.
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Aug. 3, 2015) (citing New Wellington Fin. Corp. v. Flagship Resort Dev.
Corp., 416 F.3d 290, 294 n. 5 (4th Cir. 2005)). The Plaintiff bears the burden
of establishing personal jurisdiction by a preponderance of the evidence.
Grayson, 816 F.3d at 267 (4th Cir. 2016) (citing Combs v. Bakker, 886 F.2d
673, 676 (4th Cir. 1989)).
For the Court to have personal jurisdiction, the Plaintiff must show that
exercising jurisdiction will (1) comply with the forum state’s long-arm statute
and (2) comport with the due process requirements of the Fourteenth
Amendment. See Carefirst of Maryland, Inc. v. Carefirst Pregnancy Centers,
Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citation omitted). Because North
Carolina’s long-arm statute has been construed to extend as far as due
process allows, Christian Sci. Bd. of Directors of First Church of Christ,
Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001), this two-pronged test
is collapsed into the single inquiry of whether the exercise of personal
jurisdiction over the defendant comports with due process. Universal
Leather, 773 F.3d at 559. A court’s exercise of jurisdiction over a
nonresident defendant comports with due process if the defendant has
sufficient “minimum contacts” with the forum, such that to require the
defendant to defend its interest in that state “does not offend traditional
notions of fair play and substantial justice.” Int’l Shoe Co. v. Washington,
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326 U.S. 310, 316 (1945) (internal quotation marks omitted). The sufficiency
of the contacts depends on the circumstances of the case. A court can have
personal jurisdiction over a defendant for all claims if the defendant’s
contacts with the forum state are continuous and systematic. This is referred
to as “general jurisdiction.”1 However, more limited contacts can be sufficient
to establish personal jurisdiction over a defendant where those contacts
relate to the substance of the particular claim being asserted. This is referred
to as “specific jurisdiction.” See e.g., Helicopteros Nacionales de Colombia,
S.A. v. Hall, 466 U.S. 408, 414-16 (1984). In determining whether specific
jurisdiction exists, the Court considers (1) the extent to which the defendant
purposefully availed itself of the privilege of conducting activities in the state;
(2) whether the plaintiff’s claims arise out of those activities; and (3) whether
the exercise of personal jurisdiction would be constitutionally “reasonable.”
ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 711-12 (4th
Cir. 2002).
The first prong of the specific jurisdiction inquiry is grounded on the
premise that “a corporation that enjoys the privilege of conducting business
within a state bears the reciprocal obligation of answering to legal
proceedings there.” Universal Leather, 773 F.3d at 559 (quoting Tire Eng’g
1 The Plaintiff does not contend that the Court has general jurisdiction over the Defendant.
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& Distribution, LLC v. Shandong Linglong Rubber Co., Ltd., 682 F.3d 292,
301 (4th Cir. 2012)). In determining whether a foreign defendant has
purposefully availed itself of the privilege of conducting business in a forum
state, the Court asks whether “the defendant’s conduct and connection with
the forum [s]tate are such that he should reasonably anticipate being haled
into court there.” Fed. Ins. Co. v. Lake Shore Inc., 886 F.2d 654, 658 (4th
Cir. 1989) (quoting World-Wide Volkswagen v. Woodsen, 444 U.S. 286, 297
(1980)). This analysis is flexible and “depends on a number of factors that
courts consider on a case-by-case basis.” Universal Leather, 773 F.3d at
560 (citing Tire Eng’g, 682 F.3d at 302). In the business context, those
factors include, but are not limited to: (1) whether the defendant maintains
offices or agents in the forum state; (2) whether the defendant owns property
in the forum state; (3) whether the defendant reached into the forum state to
solicit or initiate business; (4) whether the defendant deliberately engaged in
significant or long-term business activities in the forum state; (5) whether the
parties contractually agreed that the law of the forum state would govern
disputes; (6) whether the defendant made in-person contact with the resident
of the forum in the forum state regarding the business relationship; (7) the
nature, quality and extent of the parties’ communications about the business
being transacted; and (8) whether the performance of contractual duties was
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to occur within the forum. Id. (quotation marks and citation omitted). The
Fourth Circuit “generally [has] concluded that a foreign defendant has
purposefully availed itself of the privilege of conducting business in the forum
state when the defendant ‘substantially collaborated with a forum resident
and that joint enterprise constituted an integral element of the dispute.’” Id.
(citing Tire Eng’g, 682 F.3d at 302).
The alleged facts in this case appear to meet the first prong. The
Plaintiff alleges that the Defendant entered into a contractual agreement with
a North Carolina corporation; visited North Carolina to participate in training
and planning sessions in furtherance of that contract’s purpose;2 and
performed under that contract for several years by paying compensation to
a North Carolina corporation and accepting client referrals that were directed
through a North Carolina corporation. [Doc. 1 at ¶¶ 7-12].3 Those
2 While the Defendant contends that “[t]he allegations of the Complaint appear to show
that” the Defendant “has not been in [North Carolina] for any purpose,” [Doc. 11 at 10],
the Complaint alleges that “the Defendant’s representatives have visited Plaintiff’s offices
in North Carolina for training and planning purposes” under the parties’ agreement. [Doc.
1 at ¶ 7]. That fact, taken as true at this stage, supports the exercise of personal
jurisdiction over the Defendant.
3 The Plaintiff further alleges that the Defendant’s actions after the breach of contract
were directed at the forum state, including using the Plaintiff’s trademarks and copyrights
in United States commerce generally. [Doc. 7 at 23, 35 (citing Doc. 1 at ¶¶ 45-49, 138-
40, 144-46, 150-55)]. It is unclear if those allegations create personal jurisdiction over
the Defendant under Federal Rule of Civil Procedure 4(k)(2). ISI Intern., Inc. v. Borden
Ladner Gervais LLP, 256 F.3d 548, 551 (7th Cir. 2001). Nevertheless, the Court need
not address this issue given its finding of specific personal jurisdiction in the forum state.
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allegations, taken as true, establish that the Defendant reached into the
forum state to solicit or initiate business; deliberately engaged in long-term
business activities in the forum state; made in-person contact with a resident
of the forum in the forum state regarding the business relationship; and
engaged in extensive communications about the business being transacted.
Universal Leather, 773 F.3d at 560. In short, the Defendant has engaged in
a course of conduct over several years through which it has purposefully
availed itself of the privilege of conducting business in the forum state. See
Herrmann Int'l, Inc. v. Herrmann Int'l Eur., No. 1:17-cv-00073-MR, 2018 WL
4682344, at *5 (W.D.N.C. Sept. 28, 2018) (Reidinger, C.J.). Because that
substantial collaboration between the Plaintiff and the Defendant appears to
have resulted in a joint enterprise between the parties, Universal Leather,
773 F.3d at 560 (citing Tire Eng’g, 682 F.3d at 302), the Defendant “should
reasonably anticipate being haled into court” in North Carolina. See World-
Wide Volkswagen, 444 U.S. at 297.
With respect to the second prong of specific jurisdiction, once
purposeful availment is satisfied, a court looks to whether “the plaintiff’s
claims arise out of activities directed at the forum state.” Tire Eng’g, 682
F.3d at 303. Where the activity in the forum state is the genesis of the
dispute, this prong is easily satisfied. Id. (internal quotation marks and
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citation omitted). Similarly, this prong is satisfied if “substantial
correspondence and collaboration between the parties, one of which is
based in the forum state, forms an important part of the claim.” Id. Here, the
Plaintiff’s claims arise from the Defendant’s purposefully directed activities in
the forum state, including that the Defendant stole intellectual property
belonging to a North Carolina corporation and maintained and controlled
inside of North Carolina; directed defamatory statements about the Plaintiff
into North Carolina and the United States; and interfered with the Plaintiff’s
relationships with clients in North Carolina and the United States. [Id. at ¶¶
78-96; 112-113]. This conduct, combined with the substantial collaboration
between the parties, including the Plaintiff as a North Carolina corporation,
forms an integral part of the Plaintiff’s claims. Accordingly, the second prong
is satisfied.
The Court turns to the final prong of the analysis: whether the exercise
of personal jurisdiction would be constitutionally “reasonable.” This prong
“ensures that litigation is not ‘so gravely difficult and inconvenient’ as to place
the defendant at a severe disadvantage in comparison to his opponent.”
CFA Institute v. Institute of Chartered Financial Analysis of India, 551 F.3d
285, 296 (4th Cir. 2009) (quoting Nolan, 259 F.3d at 217). “The burden on
the defendant, interests of the forum state, and the plaintiff’s interest in
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obtaining relief guide [the Court’s] inquiry.” Tire Eng’g, 682 F.3d at 303
(citation omitted).
The Defendant is a Dutch private company organized and existing
pursuant to the laws of the Netherlands. A corporate defendant’s domicile
abroad, standing alone, does not render domestic exercise of jurisdiction
unduly burdensome. Id. Nevertheless, the Fourth Circuit recognizes that a
foreign defendant’s “ability to secure counsel in the forum state and its choice
to do business with a forum resident – which also made the prospect of
litigation in the state foreseeable – counseled that defending the suit would
not be particularly burdensome.” Id.
Here, the Defendant has secured counsel to represent it in this matter
and, at least according to the Plaintiff’s allegations, chose to do business
with forum residents. [Doc. 1 at Further, in this case, North Carolina
maintains a “substantial interest” in resolving the grievances of its
businesses, particularly when North Carolina law governs or informs some
of the claims. [Doc. 1 at ¶¶ 114-124, 158-205]. Finally, the Plaintiff has a
substantial interest in protecting its trademark and business interests “after
having ‘carved out a market niche by cultivating’ [its] distinctive mark and
products.” Tire Eng’g, 682 F.3d at 303 (quoting Nolan, 259 F.3d at 297). As
such, the third prong of the test for specific personal jurisdiction is met.
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Based on this limited record and briefing, the Court concludes that it
has personal jurisdiction over the Defendant in this action. Notwithstanding
this abbreviated analysis, this conclusion is without prejudice to the
Defendant submitting a motion pursuant to Federal Rule of Civil Procedure
12(b)(2) that more fully challenges the Court’s jurisdiction. If the Defendant
files such a motion, the Court will allow both parties to fully brief that issue.
II. TEMPORARY RESTRAINING ORDER
A plaintiff seeking a temporary restraining order must establish that:
(1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm
in absence of preliminary relief; (3) the balance of equities tips in its favor;
and (4) injunctive relief is in the public interest. Winter v. Natural Resources
Defense Council, Inc., 555 U.S. 7, 20 (2008). Thus, in each case the Court
“must balance the competing claims of injury and must consider the effect
on each party of the granting or withholding of the requested relief.” Amoco
Prod. Co. v. Village of Gambell, 480 U.S. 531, 542 (1987). A plaintiff's
entitlement to preliminary injunctive relief is a matter of discretion with the
Court. See Metropolitan Reg'l Info. Sys., Inc. v. American Home Realty
Network, Inc., 722 F.3d 591, 595 (4th Cir. 2013).
Before this action was commenced, the Defendant filed an action in
Rotterdam, Netherlands challenging the Plaintiff’s decision to terminate the
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Defendant’s access to its computer systems. [Doc. 1 at ¶ 67-69]. The parties
agree that the Rotterdam Court entered an injunction ordering the Plaintiff to
restore the Defendant’s access to those systems. [Doc. 1 at 15; Doc. 11 at
12]. While the Plaintiff contends that the Rotterdam Court lacked jurisdiction
to enter that injunction, [Doc. 1 at ¶¶ 67], those proceedings appear to have
partially determined the legal relationship between the parties and may
therefore have a preclusive effect on the Plaintiff’s claims in this action. The
Plaintiff has presented no argument from which the Court can determine the
preclusive effect, if any, that those proceedings may have on the Plaintiff’s
claims or the parties’ relationship here. For instance, the Plaintiff’s breach
of contract claim in this action may be entirely precluded by the findings of
the Rotterdam Court. Because the effect of the Rotterdam proceedings is
unclear, the Court cannot determine if the Plaintiff is likely to succeed on any
of its claims.
The Plaintiff nevertheless contends that this Court should exercise
jurisdiction over this dispute because the Rotterdam proceedings did not
address the Plaintiff’s intellectual property rights. [Doc. 1 at ¶¶ 67-69]. The
Plaintiff’s intellectual property claims in this action arise under the Lanham
Act, the Copyright Act, and the North Carolina Trade Secrets Protection Act.
[Id. at ¶¶ 125-157, 161-171]. Those claims appear to assert that the
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Defendant infringed on the Plaintiff’s intellectual property rights through
actions taking place outside of the United States.
The Plaintiff has not addressed, and it is therefore unclear, whether the
North Carolina Trade Secrets Protection Act applies to extraterritorial
conduct.4 Moreover, the Plaintiff has not addressed the difficult legal issues
presented by an attempt to apply the Lanham Act or the Copyright Act to
such extraterritorial conduct. See generally Herrmann, No. 1:17-cv-00073-
MR, 2021 WL 861712, at *8-*17 (W.D.N.C., Mar. 8, 2021) (Reidinger, C.J.).
Although the Plaintiff’s allegations suggest that there may be some
connection between the Defendant’s conduct and the United States, the
Plaintiff has not established that it is ultimately likely to prove that the
Defendant’s conduct falls within the Lanham Act as “commerce which may
lawfully be regulated by Congress[,]” Steele v. Bulova Watch Co., 344 U.S.
280, 286 (1952), that such conduct constitutes a “predicate act” to support
jurisdiction under the Copyright Act. Tire Eng'g, 682 F.3d at 306 (citing
Update Art, Inc. v. Modiin Publ'g, Ltd., 843 F.2d 67, 73 (2d Cir. 1988)), or
that the North Carolina Trade Secrets Protection Act applies here.
Accordingly, the Court concludes that the Plaintiff’s showing with regard to a
4 Because the Plaintiff does not present a claim under the Defend Trade Secrets Act, 18
U.S.C. § 1832 et seq., only North Carolina law is relevant to this issue.
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Temporary Restraining Order is insufficient to establish a likelihood of
success on the merits of its claims under the Lanham Act, the Copyright Act,5
or the North Carolina Trade Secrets Protection Act at this time.
For these reasons, the Court concludes that the Plaintiff’s Motion for a
Temporary Restraining Order [Doc. 6] should be denied. The Court reserves
the issue of whether the Plaintiff is entitled to preliminary injunctive relief
pending further presentation of evidence and briefing by the parties.
O R D E R
IT IS, THEREFORE, ORDERED that the Plaintiff’s Motion for
Temporary Restraining Order [Doc. 6] is DENIED.
IT IS FURTHER ORDERED that the Plaintiff’s Motion for Preliminary
Injunction [Doc. 6] is HELD IN ABEYANCE pending further presentation of
evidence and briefing by the parties. The Plaintiff may supplement its
evidence in support of its Motion for Preliminary Injunction within seven (7)
days of the entry of this Order. The Defendant’s response to the Plaintiff’s
Motion for Preliminary Injunction shall be filed no later than April 19, 2021,
with the Plaintiff ‘s reply to be filed by April 21, 2021. The parties shall
appear on April 23, 2021, at 10:00 a.m. in Courtroom 1, United States
5 The Plaintiff has also not explained why this Court, rather than the Rotterdam Court,
should resolve the claims arising under the Copyright Act. Creative Tech., Ltd. v. Aztech
Sys. Pte., Ltd., 61 F.3d 696, 702 (9th Cir. 1995).
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Courthouse, 100 Otis Street, Asheville, North Carolina 28801, for a hearing
on the Plaintiff’s Motion for Preliminary Injunction.
IT IS SO ORDERED.
Signed: March 31, 2021
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