Dmarcian, Inc. v. DMARC Advisor BV

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 and
) PRELIMINARY INJUNCTION
DMARCIAN EUROPE BV, )
)
Defendant. )
________________________________ )
THIS MATTER is before the Court on the Defendant’s Motion to
Dismiss [Doc. 22] and the Plaintiff’s Motion for Preliminary Injunction. [Doc.
6].
On March 12, 2021, dmarcian, Inc. (“dmarcian” or the “Plaintiff”) filed
this action against dmarcian Europe BV (“dmarcian Europe” or the
“Defendant”). [Doc. 1]. On March 25, 2021, the Plaintiff filed a Motion for
Temporary Restraining Order and Preliminary Injunction. [Doc. 6].
On March 30, 2021, the Defendant filed an opposition to the Plaintiff’s
Motion for Temporary Restraining Order and Preliminary Injunction
challenging the Court’s personal jurisdiction over it. [Doc. 11 at 6].
On March 31, 2021, the Court entered an Order denying the Plaintiff’s
Motion for Temporary Restraining Order, holding the Plaintiff’s Motion for
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Preliminary Injunction in abeyance pending further presentation of evidence
and briefing, and directing the parties to appear for a hearing regarding the
Plaintiff’s Motion for Preliminary Injunction on April 23, 2021. [Doc. 12].
On April 7, 2021, the Plaintiff filed an Amended Complaint asserting
claims for (i) breach of written contract, (ii) breach of oral contract, (iii)
copyright infringement under 17 U.S.C. § 101 (the “Copyright Act”), (iv)
trademark infringement under 15 U.S.C. § 1051 et seq. (the “Lanham Act”);
(v) false designations of origin under the Lanham Act; (vi) defamation; (vii)
misappropriation of trade secrets under the North Carolina Trade Secrets
Protection Act, N.C. Gen. Stat. § 66-152 et seq. (the “NCTSPA”); (viii)
computer trespass; (ix) tortious interference with contract; (x) tortious
interference with prospective economic advantage; (xi) misappropriation of
trade secrets under the Defend Trade Secrets Act of 2016, 18 U.S.C. §§
1836(b), 1839 et seq. (the “DTSA”); (xii) common law trademark
infringement; (xiii) unjust enrichment; and (xiv) unfair or deceptive business
practices under N.C. Gen. Stat. §75-1.1 et seq. (“Chapter 75”). [Doc. 19].
On April 19, 2021, the Defendant filed a Motion to Dismiss, arguing
that the Plaintiff failed to show that the Court has personal jurisdiction over
the Defendant and that the Court should dismiss based on the doctrine of
forum non conveniens. [Doc. 22; Doc. 23].
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On the same date, the Defendant filed an opposition to the Plaintiff’s
Motion for Preliminary Injunction. [Doc. 25; Doc. 26]. On April 21, 2021, the
Plaintiff replied to the Defendant’s opposition to the Plaintiff’s Motion for
Preliminary Injunction. [Doc. 29].
On April 23, 2021, the parties appeared for a hearing on the Plaintiff’s
Motion for Preliminary Injunction. The Court directed the parties to file
additional briefing regarding the scope of the preliminary relief. On April 30,
2021, the parties submitted their briefs. [Doc. 32; Doc. 33].
On April 30, 2021, the Plaintiff filed a response to the Defendant’s
Motion to Dismiss. [Doc. 31]. On May 7, 2021, the Defendant replied. [Doc.
35].
Having been exhaustively briefed, these issues are ripe for disposition.
I. PERSONAL JURISDICTION
The Defendant moves to dismiss this action for lack of personal
jurisdiction. [Doc. 23 at 7-18].
A. Standard of Review
Under Federal Rule of Civil Procedure 12(b)(2), a defendant must
affirmatively raise a personal jurisdiction challenge. The plaintiff, however,
bears the burden of demonstrating personal jurisdiction at every stage
following such a challenge. Grayson v. Anderson, 816 F.3d 262, 267 (4th
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Cir. 2016) (citing Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)). “[A]
Rule 12(b)(2) challenge raises an issue for the court to resolve, generally as
a preliminary matter.” Grayson, 816 F.3d at 267 (citation omitted).
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,
816 F.3d at 268. 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). If the existence of
jurisdiction turns on disputed factual questions and a prima facie showing of
personal jurisdiction has been made, a district court can proceed as if it has
personal jurisdiction over the matter, although factual determinations to the
contrary may be made at trial. Public Impact, LLC v. Boston Consulting
Group, Inc., 117 F.Supp.3d 732, 736 (M.D.N.C. Aug. 3, 2015) (citations
omitted). “Nevertheless, either at trial or at a pretrial evidentiary hearing, the
plaintiff must eventually prove the existence of personal jurisdiction by a
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preponderance of the evidence.” Public Impact, LLC v. Boston Consulting
Group, Inc., 117 F.Supp.3d 732, 737 (M.D.N.C. Aug. 3, 2015) (citing New
Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 n. 5
(4th Cir. 2005)).
B. Facts Regarding Personal Jurisdiction
Viewing the pleadings and affidavits in the light most favorable to the
Plaintiff, in accord with Universal Leather, 773 F.3d at 558, the following is a
summary of the relevant facts.
The Plaintiff is a Delaware corporation with a principal place of
business in Brevard, North Carolina. [Doc. 19 at ¶ 3]. The Plaintiff provides
DMARC email protection products and services, which help protect
businesses from phishing attacks. [Id. at ¶¶ 16-19]. Tim Draegen is the
Plaintiff’s founder and former CEO, and his wife Shannon Draegen is the
Plaintiff’s current CEO. [Id. at ¶ 24].
The Plaintiff claims to own several types of intellectual property
protected by United States intellectual property law. The Plaintiff alleges that
Copyright Registration number TX0008941559 protects its products,
software, intellectual property, source code, and technology. [Id. at ¶¶ 41-
44]. The Plaintiff also alleges that Trademark Registration No. 5,702,379
protects its trademark, DMARCIAN®. [Id. at ¶¶ 45-46]. The Plaintiff further
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alleges that it owns common law trademark rights in the
stylized mark. [Id. at ¶ 48]. The Plaintiff further alleges that it owns trade
secrets, including source code; historical customer data; client contacts;
business and market intelligence; and sales leads. [Id. at ¶ 162].
Around 2013, a Dutch individual named Martijn Groeneweg reached
out to Tim Draegen to discuss the formation of a business relationship
regarding the software, products, and services developed and being
developed by Draegen. [Id. at ¶¶ 32-33]. Draegen was in North Carolina
when he received the texts and phone calls from Groeneweg regarding the
proposed business arrangement. [Id. at ¶ 33].
In 2016, Draegen traveled to the Netherlands and negotiated a
licensing agreement between the Plaintiff and the Defendant. [Doc. 26-9 at
¶¶ 10-11]. While the parties never reduced the agreement to writing, the
Plaintiff alleges that the agreement gave the Defendant a license to use and
sell the Plaintiff’s intellectual property to customers in Europe, Africa, and
Russia. [Id.]. In exchange, the agreement gave Tim Draegen an option to
purchase the majority interest in the Defendant for €1. [Id. at ¶ 10].
In 2017, Groeneweg restructured the Defendant, a Dutch corporation
he controlled, to promote and sell the Plaintiff’s services and products in the
respective markets, and renamed it dmarcian Europe BV. [Doc. 19 at ¶¶ 4,
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33; Doc. 26-1 at ¶ 6]. On July 12, 2018, Tim Draegen exercised his option
to purchase the majority interest in the Defendant. [Doc. 26-17 at 4]. At that
point, Tim Draegen owned 50.01% of the Defendant. The other 49.99% was
then owned by The Digital Xpedition Holding BV (“TDX”), a Dutch corporation
controlled by Groeneweg. [Doc. 26-9 at ¶ 10; Doc. 26-12 at 2]. TDX then
served as the Defendant’s director and managed the Defendant’s affairs.
[Doc. 26-1 at 7].
Under the terms of the parties’ relationship, the Plaintiff fielded all sales
leads in North Carolina, routed certain leads coming from the European
Union, Russia, and Africa to the Defendant for service, and supported the
Defendant’s service to those customers by providing operational assistance,
technical support, and platform maintenance. [Doc. 26-9 at ¶ 10; Doc. 19 at
¶¶ 7, 11, 33; Doc. 30 at ¶¶ 4, 8, 9]. The Plaintiff continued developing,
supplying, and operating the services, products, and technology for each
customer from its North Carolina office. [Id.].
The Plaintiff provided the Defendant with access to its computer
systems and its proprietary code for continued product and software
development efforts by a group of Bulgarian developers working for the
Defendant. [Doc. 19 at ¶ 33]. After some time, the Plaintiff agreed to not
charge licensing fees to the Defendant in exchange for the Defendant
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funding the continued development of the source code. [Id.]. From 2017 to
the present, the Defendant has spent at least €1,300,000 writing new code
further developing the software. [Doc. 26-9 at ¶ 20]. The Plaintiff’s
developers have also continued to work on the software code during that
same time. [Doc. 35-1 at ¶ 15]. Even when the Defendant’s employees were
working on the software code, the Plaintiff continued housing and controlling
it. [Doc. 30 at ¶¶ 13-16].
Throughout the parties’ agreement, the Defendant’s European
employees participated in several virtual training sessions and multiple
meetings with the Plaintiff’s representatives in North Carolina. [Doc. 30 at
¶¶ 24-29]. In January 2019, Groeneweg visited the Plaintiff’s offices in North
Carolina as the Defendant’s representative to discuss plans for sales,
marketing, deployment, and customer development. [Doc. 19 at ¶ 6; Doc.
30 at ¶ 31; Doc. 30-3].
In December 2019, the Defendant asserted for the first time that it had
an ownership interest in the code that had been developed by the Bulgarian
developers. [Doc. 19 at ¶ 36]. The Plaintiff disagreed and directed the
Defendant to formally assign to the Plaintiff any new code that had been
created by the Bulgarian developers. [Id.]. The Defendant, through its
manager TDX, refused and asked the Plaintiff to present a buyout offer for
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the minority share of the Defendant. [Id. at ¶¶ 36, 54]. The parties began
quarreling over the terms of the licensing agreement and the Plaintiff
responded by briefly suspending the Defendant’s access to its computer
systems. [Doc. 26-1 at ¶ 18].
In July 2020, Tim Draegen, as majority shareholder in the Defendant,
called a shareholders’ meeting to resolve the licensing dispute. [Doc. 19 at
¶ 55; Doc. 26-1 at ¶ 20]. Around that time, the Defendant allegedly arranged
for the Bulgarian developers to assign any rights they may have to the newly
revamped source code to the Defendant. [Doc. 19 at ¶ 59].
Before that meeting could take place, TDX (the Defendant’s minority
shareholder) filed an action on July 28, 2020, with the Enterprise Court of
the Appellate Court of Amsterdam in the Netherlands (the “Enterprise
Chamber”). [Id. at ¶ 56; Doc. 26-1 at ¶ 2]. The Enterprise Chamber is a
Dutch court with jurisdiction to address disputes among owners of Dutch
business entities. [Doc. 19 at ¶ 57]. The Enterprise Chamber “can take far-
reaching measures in the context of intramural corporate disputes, including
dismissal and appointment of (temporary) directors or supervisory directors,
or depriving one or more shareholders of their governance rights connected
with their shares.” [Doc. 26-1 at ¶ 21].
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On September 7, 2020, the Enterprise Chamber ordered an
investigation into the management and affairs of the Defendant from January
1, 2016, to August 20, 2020. [Doc. 26-2 at 13-16]. On the same date, the
Enterprise Chamber divested Tim Draegen and TDX of all but one of their
shares in the Defendant; appointed Yvette Borrius, a Dutch attorney, as a
proxy of those interests pending the resolution of the dispute; and appointed
Hub Harmeling, a Dutch attorney, as the Defendant’s new managing director
pending the resolution of the dispute. [Doc. 19 at ¶ 60; Doc. 26-1 at ¶ 25;
Doc. 26-2 at 28; Doc. 26-9 at ¶ 26].1
After Harmeling was appointed as the new managing director, the
Plaintiff briefly suspended the Defendant’s access to its computer systems
in September 2020. [Doc. 26-1 at ¶ 25].2 Harmeling and Draegen continued
trying to resolve the dispute for several months. [Id. at ¶ 26]. On or about
January 22, 2021, the Plaintiff notified the Defendant that it was “no longer
prepared or able to continue providing technology, services, customers, and
use of its trademarks to” the Defendant unless the Defendant agreed to pay
1 Tim Draegen is not a party to this action. Therefore, the Court offers no opinion as to
whether Borrius or Harmeling owe any fiduciary obligations to Tim Draegen, the beneficial
owner of the majority interest in the Defendant, pursuant to North Carolina or United
States law.
2 Harmeling claims that the Plaintiff never fully restored the Defendant’s access. [Doc.
26-1 at ¶ 25].
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80% of its income to the Plaintiff as a licensing fee. [Doc. 19 at ¶ 64; Doc.
35-4 at 5]. The parties were unable to agree on a licensing fee and the
Plaintiff terminated the Defendant’s intellectual property license and access
to the Plaintiff’s computer systems on January 22, 2021. [Doc. 19 at ¶ 76;
Doc. 26-1 at ¶ 30].3 The Plaintiff alleges that even though the license was
terminated, the Defendant has continued using the Plaintiff’s copyrighted
software code and trademark to service customers. [Doc. 19 at ¶ 39].
On January 29, 2021, Defendant commenced a new action against the
Plaintiff, this one in a Rotterdam Court, seeking an injunction requiring the
Plaintiff to restore the Defendant’s access to the Plaintiff’s intellectual
property pending the resolution of the Enterprise Chamber proceeding.
[Doc. 19 at ¶ 67; Doc. 26-1 at ¶ 39]. Because the Rotterdam Court held a
hearing on February 1, 2021, only two days after the commencement of the
action, the Plaintiff was unable to appear and the Rotterdam Court granted
the requested injunction ex parte. [Id.].4 The Plaintiff has refused to comply
with the injunction and has been fined €500,000 for refusing to fully restore
the Defendant’s access to its systems. [Doc. 26-5 at ¶ 15].
3 While the Amended Complaint claims that the Plaintiff reduced the Defendant’s access
so that the Defendant could service only its existing customers, [Doc. 19 at ¶ 70], the
Defendant claims that it was unable to service its existing customers after the access was
revoked. [Doc. 26-1 at ¶ 32].
4 The Plaintiff has since moved to set aside the injunction. [Doc. 26-1 at ¶ 41].
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Following the injunction, the Plaintiff asserts that the Defendant’s
conduct worsened. [Doc. 19 at ¶ 77]. The Plaintiff’s evidence shows that
the Defendant broke completely free from the Plaintiff’s platform and
operations and terminated the Plaintiff’s access to certain customer
information. [Id. at ¶¶ 39, 110]. The Plaintiff argues that the Defendant’s
actions violated the parties’ agreement by making it impossible for the
Plaintiff to control and manage the relationship between the Defendant and
the Defendant’s clients. [Doc. 19 at ¶ 86]. In fact, the Defendant has sent
messages to customers acknowledging that it has “set up a safe new
platform[,]” and that its “[u]ser data . . . cannot be accessed by anyone
outside the European territory” and “is securely out of reach of third parties,
including dmarcian, Inc.” [Doc. 8-13 at 3-4].
The Plaintiff alleges that the Defendant also began a course of conduct
to deceive customers into doing business with the Defendant, rather than the
Plaintiff. The Defendant allegedly took control of several European websites
featuring the Plaintiff’s trademark in their domain names. [Doc. 8 at ¶¶ 8-9].
The Defendant’s websites allegedly display the Plaintiff’s stylized logo,
except for a small alteration adding the word “EUROPE” in small letters
below the logo. [Id. at ¶ 12]. At various points, the Defendant’s websites
have allegedly included videos by Tim Draegen, the likenesses of the
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Plaintiff’s employees,5 and the identities of the Plaintiff’s global customers.
[Doc. 19 at ¶¶ 16-19]. While the Defendant’s websites are virtually identical
to the Plaintiff’s websites, they include the Defendant’s contact information,
rather than the Plaintiff’s, to ensure that any visitors will contact the
Defendant for services. [Doc. 8 at ¶¶ 13-14; Doc. 19 at ¶ 91].
The Plaintiff claims that the Defendant’s confusingly similar websites
misdirect the Plaintiff’s potential and current customers to the Defendant’s
platform instead of the Plaintiff’s platform and are causing new customers to
register with the Defendant, rather than the Plaintiff. [Doc. 8 at ¶¶ 8-12; Doc.
19 at ¶ 71]. Tim Draegen states in his affidavit that although the Defendant
claims to service only customers from outside the United States, he visited
one of the Defendant’s websites from within the United States and was
directed to the Defendant’s platform when he selected the option for
customers in “the Americas.” [Doc. 16 at ¶ 7].
The Plaintiff further alleges that the Defendant has been deceiving the
Plaintiff’s current customers into leaving the Plaintiff’s platform and joining
the Defendant’s platform by redirecting the Plaintiff’s customers to
infrastructure controlled by the Defendant and making misrepresentations to
5 The Plaintiff concedes that since the filing of this civil action, the Defendant has removed
the likenesses of the Plaintiff’s employees from its websites. [Doc. 8 at ¶ 18].
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customers regarding a potential data breach by the Plaintiff. [Doc. 19 at ¶¶
71, 83; Doc. 15 at ¶ 7; Doc. 8-11].6 According to the Plaintiff, the Defendant
is using this purported data breach to trick the Plaintiff’s customers into
providing the Defendant with information which the Defendant can use to
access the Plaintiff’s platform and steal information for its own use on its own
platform. [Doc. 19 at ¶ 84].
The Plaintiff further alleges that the Defendant’s website is offering the
Plaintiff’s copyrighted software and source code for sale to third parties
without the Plaintiff’s authorization. [Id. at ¶¶ 71, 90, 96]. The Plaintiff claims
that the copyrighted software and source code constitute trade secrets. [Id.
at ¶ 71].
B. Analysis of Personal Jurisdiction
For a court to have personal jurisdiction over the person of a defendant,
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). A court’s exercise of jurisdiction over a nonresident
6 The Defendant’s messages suggest that the Plaintiff’s access to information about its
own customers constitutes some sort of data breach. [Doc. 8-13 at 2-4].
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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, 326 U.S. 310, 316
(1945) (internal quotation marks omitted).
1. Long-Arm Statute
The Defendant claims that the Amended Complaint does not establish
the Court’s jurisdiction over the Defendant because it fails to cite a particular
provision of the North Carolina long-arm statute. [Doc. 23 at 8-11]. However,
“[t]he failure to plead the particulars of jurisdiction is not fatal to the claim so
long as the facts alleged permit the inference of jurisdiction under the
statute.” Williams v. Inst. for Computational Stud. at Colo. State Univ., 85
N.C. App. 421, 428, 355 S.E.2d 177, 182 (1987).
Under § 1-75.4(4)(a), North Carolina courts have jurisdiction over
actions “claiming injury to person or property within [North Carolina] arising
out of an act or omission outside [North Carolina] by the defendant, provided
in addition that at or about the time of the injury . . . activities were carried on
within [North Carolina]. . . on behalf of the defendant[.]” “In cases of
trademark infringement, the wrong occurs not only at the place where the
infringing label is affixed but also where the confusion occurs.” Christian Sci.
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Bd. of Directors of First Church of Christ, Scientist v. Robinson, 123 F. Supp.
2d 965, 972 (W.D.N.C. 2000) (citation omitted). Accordingly, foreign
infringement on a North Carolina company’s trademark can cause a local
injury. Regent Lighting Corp. v. Am. Lighting Concept, Inc., 25 F. Supp. 2d
705, 709 (M.D.N.C. 1997). Likewise, a foreigner’s use of a North Carolina
company’s trade secret can constitute a local injury. Fran's Pecans, Inc. v.
Greene, 134 N.C. App. 110, 113, 516 S.E.2d 647, 650 (1999) (citing Hankins
v. Somers, 39 N.C. App. 617, 621, 251 S.E.2d 640, 643 (1979)). The North
Carolina Court of Appeals has concluded that a North Carolina plaintiff’s
performance of contractual services for a defendant qualifies as activities
“carried on within [North Carolina] . . . on behalf of the defendant[.]
Inspirational Network, Inc. v. Combs, 131 N.C. App. 231, 237, 506 S.E.2d
754, 759 (1998)
Here, the Defendant’s alleged intellectual property infringement and
misuse caused injury to the Plaintiff in North Carolina. Regent Lighting, 25
F. Supp. 2d at 709; Fran's Pecans, 134 N.C. App. at 113, 516 S.E.2d at 650
(citing Hankins, 39 N.C. App. at 621, 251 S.E.2d at 643). While the Plaintiff
does not provide the specific date that the Defendant began infringing on the
Plaintiff’s intellectual property from the Netherlands, that infringement clearly
started sometime between late 2020 and early 2021. During that time, the
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Plaintiff was carrying on activities within North Carolina on behalf of the
Defendant by overseeing and revising the Defendant’s changes to the
copyrighted source code; fielding sales leads in North Carolina and routing
certain leads to the Defendant; managing the source code repository for the
parties’ joint benefit; and providing the Defendant with operational
assistance, technical support, platform maintenance, and customer support.
[Doc. 26-9 at ¶ 10; Doc. 19 at ¶¶ 7, 11, 33; Doc. 30 at ¶¶ 4, 8-10, 12, 14-15,
21-22].7 Because the Plaintiff was performing services on behalf of the
Defendant within North Carolina at or around the time of the injury, the Court
concludes that § 1-75.4(4)(a) provides personal jurisdiction over the
Defendant.8
Further, under N.C. Gen Stat. § 1-75.4(5)(b), North Carolina courts
have jurisdiction over actions arising from “services actually performed for
the defendant by the plaintiff within [North Carolina] if such performance
within [North Carolina] was authorized or ratified by the defendant[.]” As
discussed above, the Plaintiff asserts that it performed services for the
7 Tim Draegen states that the Plaintiff continues to provide the Defendant with the tools
to service customers despite the Defendant’s ongoing infringement. [Doc. 30 at ¶ 20].
The provision of those services is occurring at the time of the injury to the Plaintiff. N.C.
Gen. Stat. § 1-75.4(4)(a).
8 The Court’s conclusion is consistent “with the mandate that the North Carolina long-arm
statute receive liberal construction, in favor of finding jurisdiction.” Dowless v. Warren-
Rupp Houdailles, Inc., 800 F.2d 1305, 1307 n.5 (4th Cir. 1986) (collecting cases).
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Defendant under the contract by overseeing the Defendant’s changes to its
intellectual property; fielding sales leads in North Carolina and routing certain
leads to the Defendant; managing the source code repository for the parties’
joint benefit; and providing the Defendant with operational assistance,
technical support, platform maintenance, and customer support. [Doc. 26-9
at ¶ 10; Doc. 19 at ¶¶ 7, 11, 33; Doc. 30 at ¶¶ 4, 8-10, 12, 14-15, 21-22].
While the Defendant argues that this action does not arise from those
services, those services were allegedly performed pursuant to the contract
between the parties. Moreover, the Plaintiff’s provision of those services
provided the Defendant with the opportunity to misappropriate the Plaintiff’s
trade secrets and infringe on the Plaintiff’s intellectual property. Because the
evidence before the Court shows that the Defendant accepted those
services, the Court concludes that the Plaintiff’s provision of services to the
Defendant was ratified and authorized and is, therefore, also sufficient to
establish personal jurisdiction under N.C. Gen. Stat. §§ 1-75.4(5)(b).
2. Minimum Contacts
The sufficiency of a defendant’s 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
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continuous and systematic. This is referred to as “general jurisdiction.”9
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. ESAB Grp., Inc. v. Centricut, Inc., 126
F.3d 617, 623 (4th Cir. 1997). 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) (quoting
Christian Sci. Bd., 259 F.3d at 215).
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
& Distribution, LLC v. Shandong Linglong Rubber Co., Ltd., 682 F.3d 292,
301 (4th Cir. 2012)). In determining whether a foreign defendant has
9 The Plaintiff does not contend that the Court has general jurisdiction over the Defendant.
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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). When a business is involved, those
factors include:
(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 to occur within the forum.
Id. (quotation marks and citation omitted). Relevant to this analysis are the
quality and nature of the defendant's connections, not merely the number of
contacts between the defendant and the forum state. UMG Recordings, Inc.
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v. Kurbanov, 963 F.3d 344, 352 (4th Cir. 2020), cert. denied, 141 S. Ct. 1057,
208 L. Ed. 2d 525 (2021). Nevertheless, 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.’” Universal Leather, 773 F.3d
at 560 (quoting Tire Eng’g, 682 F.3d at 302).
In evaluating a parties’ contacts with a particular forum, the Fourth
Circuit has placed “special importance on ‘the fact that defendant initiated
contact with the plaintiff in the forum state and repeatedly reached into the
forum state to transact business during in-person visits there.’” Sneha Media
& Ent., LLC v. Associated Broad. Co. P Ltd., 911 F.3d 192, 200 (4th Cir.
2018) (quoting Universal Leather, 773 F.3d at 562). For example, the Fourth
Circuit has concluded that personal jurisdiction existed when a defendant’s
employees made “first contact” with the plaintiff, traveled to the plaintiff’s
offices in North Carolina on several occasions, and corresponded with the
plaintiff’s employees in North Carolina on a “weekly” basis over the course
of two years. Universal Leather, 773 F.3d at 562.
Like the defendant in Universal Leather, it is undisputed that the
Defendant in this case reached into the forum state to initiate the relationship
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that led to the business arrangement between the parties. [Doc. 33 at ¶ 3].
The Defendant argues, without citing any authority, that it never “reached
into the forum state to solicit or initiate business” because the Plaintiff had
not yet been formed when Groeneweg reached out to Tim Draegen in North
Carolina to begin the relationship that led to the joint enterprise between the
Plaintiff and the Defendant. [Doc. 23 at 13]. However, Groeneweg’s initial
reach into North Carolina is significant because it established the connection
that ultimately led to the business arrangement between the Plaintiff and the
Defendant. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984)
(noting that minimum contacts analysis “focuses on ‘the relationship among
the defendant, the forum, and the litigation’”) (quoting Shaffer v. Heitner, 433
U.S. 186, 204 (1977)). Moreover, Tim Draegen, like the Plaintiff, is a North
Carolina resident and was in North Carolina when contacted by Groeneweg.
[Doc. 19 at ¶ 33]. Accordingly, while the Defendant did not specifically
interact with the not-yet-formed Plaintiff corporation, that initial interaction
remains significant in the minimum contacts analysis. Walden v. Fiore, 571
U.S. 277, 285 (2014) (explaining that “our ‘minimum contacts’ analysis looks
to the defendant's contacts with the forum State itself, not the defendant's
contacts with persons who reside there.”). Because the Defendant reached
into North Carolina and initiated a long-term business relationship with a
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North Carolina resident, that factor weighs in favor of exercising jurisdiction.
Universal Leather, 773 F.3d at 562 (directing courts to examine whether “the
defendant reached into the forum state to solicit or initiate business.”).
Moreover, like the defendant in Universal Leather, the Defendant’s
employees visited the forum state and repeatedly communicated with the
Plaintiff’s employees in the forum state to transact business and further the
purpose of the parties’ business arrangement. For example, Groeneweg,
visited North Carolina for a week in 2019 in his capacity as the Defendant’s
managing director to discuss plans for sales, marketing, deployment, and
customer development. [Doc. 30 at ¶ 31; Doc. 30-3]. The Defendant’s
employees also regularly attended monthly “all hands” virtual meetings, and
weekly “department” virtual meetings, which were all led by the Plaintiff’s
employees in North Carolina. [Doc. 30 at ¶¶ 24-30]. The numerous
substantive interactions between the Defendant and the forum state weigh
in favor of exercising jurisdiction here. Universal Leather, 773 F.3d at 562
(explaining that courts analyzing personal jurisdiction should evaluate
whether the defendant made in-person contact with the resident of the forum
in the forum state regarding the business relationship and the nature, quality,
and extent of the parties’ communications about the business being
transacted).
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24
Notably, the parties’ business arrangement did not involve separate
entities in concept or execution. Without a formal written contract, the parties
collectively shared intellectual property, sales leads, operational assistance,
technical help, platform maintenance, and customer support. [Doc. 19 at ¶¶
7, 11, 33; Doc. 30 at ¶¶ 4, 8, 9]. The evidence before the Court describes
what is not so much an arms-length business transaction, but rather a
decision to collaborate and work in concert. Thus, for jurisdictional purposes
the parties’ arrangement should be analyzed as more akin to a joint
enterprise. Tire Eng'g, 682 F.3d at 302 (concluding that there was
“purposeful availment where a defendant substantially collaborated with a
forum resident and that joint enterprise constituted an integral element of the
dispute.”).
The evidence further shows that the Defendant understood that the
parties’ long-term business relationship would necessitate continuing and
wide-reaching contacts with a corporation with its primary place of business
in North Carolina. [Doc. 26-1 at ¶¶ 12, 13, 16, 33 (characterizing the
relationship between the parties as a cooperation or a collaboration); Doc.
19 at ¶ 11 (showing the relationship between the parties)]. The Supreme
Court has “upheld the assertion of jurisdiction over defendants who have
purposefully ‘reach[ed] out beyond’ their State and into another by, for
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example, entering a contractual relationship that ‘envisioned continuing and
wide-reaching contacts’ in the forum State[.]” Walden, 571 U.S. at 285
(quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 479–80 (1985)).
Accordingly, the characteristics of the parties’ business relationship weigh in
favor of the exercise of jurisdiction here. Universal Leather, 773 F.3d at 562
(explaining that the jurisdictional analysis includes whether the defendant
deliberately engaged in significant or long-term business activities in the
forum state).
Contrary to the Defendant’s assertion, [Doc. 23 at 11-12], this is not a
situation where the “locus of the parties' interaction was overwhelmingly
abroad.” Tire Eng'g, 682 F.3d at 302. While the Defendant largely performed
its obligations under the contract from abroad, the allegations and evidence
at this stage demonstrate that the Defendant and its employees entered into
a contractual agreement with a corporation in North Carolina; visited North
Carolina to participate in training and planning sessions in furtherance of that
agreement; engaged in several meetings and other communications with
individuals located in North Carolina to accomplish that agreement; and
performed under that contract for several years by paying compensation into
North Carolina, acting on client referrals directed through North Carolina, and
accepting operational assistance, technical help, platform maintenance, and
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26
customer support from North Carolina. [Doc. 19 at ¶¶ 7, 11, 33; Doc. 30 at
¶¶ 4, 8, 9]. This evidence, which is largely undisputed, establishes that the
Defendant reached into the forum state to initiate business; made in-person
contact in the forum state with residents of the forum state regarding the
business relationship; deliberately engaged in long-term business activities
in the forum state; engaged in extensive communications about the business
being transacted with residents of the forum state; and accepted services
rendered from North Carolina. Universal Leather, 773 F.3d at 560;
Williamson Produce, Inc. v. Satcher, 122 N.C. App. 589, 594, 471 S.E.2d 96,
99 (1996). While the Defendant may not have owned offices, sold products,
or stationed employees in North Carolina, the substantial cooperation
between the Plaintiff and the Defendant appears to have resulted in a
business collaboration that had significant ties to North Carolina. Universal
Leather, 773 F.3d at 560 (citing Tire Eng’g, 682 F.3d at 302). As such, the
Defendant “should reasonably anticipate being haled into court” in North
Carolina. See World-Wide Volkswagen, 444 U.S. at 297. Accordingly, the
first prong of specific jurisdiction is met here. See CFA Inst. v. Inst. of
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Chartered Fin. Analysts of India, 551 F.3d 285, 295 (4th Cir. 2009); Universal
Leather, 773 F.3d at 560; Tire Eng'g, 682 F.3d at 303.10
Once purposeful availment is satisfied, the second prong of the specific
jurisdiction analysis 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 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 intellectual property claims arise from the
Defendant’s North Carolina-related activities, including the Defendant’s
misuse of trademarks that have developed a reputation within North Carolina
and the Defendant’s use of intellectual property maintained, controlled, and
owned by a corporation with its primary place of business in North Carolina.
Doc. 19 at ¶¶ 8-12, 33, 78-96, 112-13]. Moreover, the Plaintiff’s tortious
interference claims stem from the Defendant’s interference with the Plaintiff’s
10 The Plaintiff further contends that the Defendant’s actions support jurisdiction under
Federal Rule of Civil Procedure 4(k)(2). [Doc. 31 at 19-20]. Because the Court concludes
that the Plaintiff has sufficient minimum contacts with North Carolina, this issue need not
be addressed.
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client relationships, which are alleged to be governed pursuant to North
Carolina law. [Doc. 30 at ¶¶ 3, 5-7]. Further, the substantial correspondence
and collaboration between the parties forms an important part of the
Plaintiff’s claims. Tire Eng’g, 682 F.3d at 303. Accordingly, the second
prong of personal jurisdiction is satisfied.
The final prong of the specific jurisdiction analysis considers “whether
the exercise of personal jurisdiction would be constitutionally ‘reasonable.’”
ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir.
2002) (quoting Christian Sci. Bd. of Directors of First Church of Christ,
Scientist v. Nolan, 259 F.3d 209, 217 (4th Cir. 2001)). 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
Inst., 551 F.3d at 296 (quoting Nolan, 259 F.3d at 217). “The burden on the
defendant, interests of the forum state, and the plaintiff's interest in 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. [Doc. 19 at ¶ 4]. A corporate
defendant’s domicile abroad, standing alone, does not render domestic
exercise of jurisdiction unduly burdensome. Tire Eng’g, 682 F.3d at 303
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29
(citation omitted). Nevertheless, the Fourth Circuit has recognized 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 – counsel[s] that defending the suit would
not be particularly burdensome.” Id. Here, the Defendant has secured
capable counsel to represent it in this matter. Moreover, the Defendant
chose to do business with forum residents. [Doc. 19 at ¶¶ 7, 33].11
Therefore, it was reasonably foreseeable that the defendant could be subject
to suit here. CFA Inst., 551 F.3d at 296 (explaining that “the inequity of being
haled into a foreign forum is mitigated if it was reasonably foreseeable that
the defendant could be subject to suit there.”) (citation and quotations
omitted). Accordingly, defending this lawsuit in North Carolina should not be
particularly burdensome for the Defendant.
Further, North Carolina maintains a “manifest interest” in resolving the
grievances of its businesses. Burger King, 471 U.S. at 478–79 (explaining
that a state has a “manifest interest” in providing its residents with a
convenient forum for redressing injuries inflicted by out-of-state actors.).
11 In fact, Tim Draegen was the Defendant’s majority shareholder before the Enterprise
Court placed all but one of his shares in the control of a proxy. [Doc. 19 at ¶ 60; Doc. 26-
1 at ¶ 25; Doc. 26-2 at 28]. Because the Defendant’s majority shareholder was a North
Carolina resident for a substantial period (and he apparently continues to own a beneficial
majority interest), the Defendant could have reasonably foreseen that it may be haled into
court in North Carolina.
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That is particularly so in this case, where North Carolina law governs or
informs many of the Plaintiff’s claims. [Doc. 19 at ¶¶ 114-124, 158-199, 211-
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). Because foreign courts cannot apply United States
trademark law, the Plaintiff’s interest in obtaining relief in this forum is
particularly high. See Calzaturificio Rangoni S.p.A. v. U.S. Shoe Corp., 868
F. Supp. 1414, 1418 (S.D.N.Y. 1994). Accordingly, the third prong of the test
for specific personal jurisdiction is met.
After considering the relevant factors, the Court concludes that the
exercise of personal jurisdiction over the Defendant comports with
constitutional due process. Tire Eng'g, 682 F.3d at 301.
II. FORUM NON CONVENIENS
The Defendant also moves to dismiss this action based on the doctrine
of forum non conveniens, arguing that this dispute is more properly litigated
in the Netherlands. [Doc. 23 at 18-25].
“The forum non conveniens doctrine is a common law doctrine now
largely limited in federal court to cases where the alternative forum for
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litigating the dispute is outside of the United States.” Compania Naviera
Joanna SA v. Koninklijke Boskalis Westminster NV, 569 F.3d 189, 200 (4th
Cir. 2009) (citing Sinochem International Co. v. Malaysia International
Shipping Corp., 549 U.S. 422, 435-36 (2007)). “Under the doctrine, a court
may dismiss an action in favor of an alternative forum when ‘the chosen
forum would establish . . . oppressiveness and vexation to a defendant . . .
out of all proportion to plaintiff's convenience, or when the chosen forum [is]
inappropriate because of considerations affecting the court's own
administration and legal problems.’” Id. (quoting American Dredging Co. v.
Miller, 510 U.S. 443, 447 (1994)).12
A remedy pursuant to forum non conveniens may be available when
an alternative forum is “(1) available; (2) adequate; and (3) more convenient
in light of the public and private interests involved.” Jiali Tang v. Synutra Int'l,
Inc., 656 F.3d 242, 248 (4th Cir. 2011) (citing Piper Aircraft Co. v. Reyno,
454 U.S. 235, 241 (1981)). The application of forum non conveniens is
appropriate when the court can make a finding “that, when weighed against
plaintiff's choice of forum, the relevant public and private interests strongly
12 The concept of forum non conveniens is largely embodied in 28 U.S.C. § 1404(a), and
pertains to the transfer of an action to a more convenient forum. Here, the Defendant
seeks the most draconian of remedies under forum non conveniens, that of dismissal of
the action, notwithstanding the presence of subject matter and personal jurisdiction here.
The more drastic the remedy sought, the greater the burden is to show the
appropriateness of the remedy.
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favor a specific, adequate, and available alternative forum.” Tang v. Synutra
Int'l, Inc., 656 F.3d 242, 246 (4th Cir. 2011) (quoting Kontoulas v. A.H. Robins
Co., 745 F.2d 312 (4th Cir. 1984)) (internal quotation marks omitted). “The
moving party bears the burden of showing that an adequate alternative forum
exists.” Jiali Tang, 656 F.3d at 248 (citing Galustian v. Peter, 591 F.3d 724,
731 (4th Cir. 2010); Fid. Bank PLC v. N. Fox Shipping N.V., 242 F. App’x.
84, 90 (4th Cir. 2007) (unpublished)).
With regard to the availability and adequacy of the Dutch courts as an
alternative forum, the Supreme Court has held that an alternative forum
ordinarily exists when the defendant is amenable to service of process in the
foreign forum. Piper Aircraft, 454 U.S. at 254 n. 22. An alternate forum can
be considered unavailable, however, if that forum fails to provide a cause of
action for a plaintiff's alleged injury or fails to offer a satisfactory remedy for
a plaintiff’s injury. See Galustian v. Peter, 591 F.3d 724, 731 (4th Cir. 2010).
Likewise, a forum will be considered adequate only when “the parties will not
be deprived of all remedies or treated unfairly, even though they may not
enjoy all the same benefits as they might receive in an American court.” Id.
(quoting Fidelity Bank PLC v. N. Fox Shipping N.V., 242 F. App’x. 84, 90 (4th
Cir. 2007)).
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33
The central problem with the Defendant’s argument is that foreign
courts have no jurisdiction to adjudicate trademark claims arising under
United States law. Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633, 644
(2d. Cir. 1956) (explaining that when trademark rights “within the United
States are being litigated in an American court, the decisions of foreign
courts concerning the respective trademark rights of the parties are irrelevant
and inadmissible.”); see also Halo Creative & Design Ltd. v. Comptoir Des
Indes Inc., 816 F.3d 1366, 1373 (Fed. Cir. 2016) (collecting cases).13
Because the Dutch courts cannot adjudicate the Plaintiff’s trademark
infringement claims, the Plaintiff would be left with no meaningful remedy on
those claims, even if found to have been wronged. Piper Aircraft, 454 U.S.
at 254-55 (noting that an alternative forum was inadequate when the plaintiffs
would “be deprived of any remedy . . . .”). Accordingly, the Court concludes
that Defendant has failed to carry its burden to demonstrate that the Dutch
courts are an adequate alternative forum. Galustian, 591 F.3d at 732
(denying a motion to dismiss for forum non conveniens where an affidavit
13 While the Defendant has submitted a declaration from its Dutch attorney, Alfred
Meijboom, attesting that the Dutch courts provide an adequate forum because they can
address all the Plaintiff’s claims, [Doc. 26-5], that conclusory statement fails to address
the jurisprudence of the United States courts that the Dutch courts have no jurisdiction to
address the Plaintiff’s trademark infringement claim. Nor does it explain any alternative
means by which the Plaintiff can resolve that claim in the Dutch courts.
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submitted by the moving party failed to demonstrate the availability of a
particular cause of action, or a remedy for that cause of action, in the foreign
court).14
Even if the Defendant had established that the Dutch courts were an
available and adequate forum, the private and public interests to be weighed
in considering a forum non conveniens motion also weigh against the
Defendant. When considering such motion, the public interest factors
include: “[1] the administrative difficulties flowing from court congestion; [2]
the local interest in having localized controversies decided at home; [3] the
interest in having the trial of a diversity case in a forum that is at home with
the law that must govern the action; [4] the avoidance of unnecessary
problems in conflict of laws or in application of foreign law; and [5] the
unfairness of burdening citizens in an unrelated forum with jury duty.” Piper
Aircraft, 454 U.S. at 241, n. 6. The private interest factors include: “(1) the
relative ease of access to sources of proof; (2) availability of compulsory
process for attendance of unwilling, and the cost of obtaining attendance of
willing, witnesses; (3) possibility of view of premises, if view would be
14 While the Defendant highlights that it is amenable to service in the Netherlands and
that American courts have previously found Dutch courts to be an adequate forum, [Doc.
23 at 19], the Dutch courts have abstained from addressing the Plaintiff’s intellectual
property claims that are asserted in this action. [Doc. 10-1 at ¶ 3.4; Doc. 8-14 at ¶¶ 2.12;
3.5]. Accordingly, even if the Dutch courts provided remedies for the Plaintiff’s intellectual
property claims, it is not clear that those remedies would be available to the Plaintiff.
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35
appropriate to the action; and (4) all other practical problems that make trial
of a case easy, expeditious and inexpensive.” American Dredging, 510 U.S.
at 448 (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)).
The Court’s analysis begins with the plaintiff’s choice of forum, which
“ordinarily deserves substantial deference.” Piper Aircraft Co. v. Reyno, 454
U.S. at 242 (1981). The plaintiff's “choice of forum is entitled to even greater
deference when the plaintiff chooses [its] ‘home forum.’” DiFederico v.
Marriott Int'l, Inc., 714 F.3d 796, 803 (4th Cir. 2013) (quoting Piper Aircraft,
454 U.S. at 255–56). “When the alternative forum under consideration is
foreign, ‘home forum’ refers to any federal district in the United States.” Id.
(citing Adelson v. Hananel, 510 F.3d 43, 53 (1st Cir. 2007)). A plaintiff’s
choice of its home forum “is presumptively convenient, and should be
overridden only when the defendant ‘establish[es] such oppressiveness and
vexation to a defendant as to be out of all proportion to plaintiff's
convenience, which may be shown to be slight or nonexistent.’” Id. (quoting
Koster v. (American) Lumbermens Mut. Cas. Co., 330 U.S. 518, 524 (1947)).
Because the Plaintiff has brought this lawsuit in its home forum, the Plaintiff’s
choice of this forum is entitled to significant deference. Id.
The Defendant argues, however, that the deference typically afforded
to a plaintiff’s choice of its home forum should not apply to the circumstances
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36
present in this case, where “an American corporation doing extensive foreign
business brings an action for injury occurring in a foreign country.” [Doc. 23
at 19 (quoting DTEX, LLC, v. BBVA Bancomer, S.A., 508 F.3d 785, 795 (5th
Cir. 2007))]. However, DTEX and the other cases cited by the Defendant
are inapposite. In the present case, the intellectual property rights of the
Plaintiff are rights under United States law and the harm alleged to flow from
the Defendant infringement is harm being suffered in this district. The cases
on which the Defendant relies pertain to losses being suffered in other
countries. The Defendant cites no authority whatsoever for applying this
proposition to the facts at issue in this case. Accordingly, the Court
concludes that the Defendant must overcome a substantial burden to
outweigh the deference owed to the Plaintiff’s choice of this forum. Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 255 (1981) (explaining that “strong
presumption in favor of the plaintiff's choice of forum” can “be overcome only
when the private and public interest factors clearly point towards trial in the
alternative forum.”).
Turning to the remaining private and public interests, the ongoing
Dutch proceedings do not strongly impact the forum non conveniens analysis
because “the mere presence of parallel litigation bears only marginally on
the touchstone of the forum non conveniens analysis; namely, convenience.”
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37
SAS Inst., Inc. v. World Programming Ltd., 468 F. App'x 264, 266 (4th Cir.
2012) (citing Adelson v. Hananel, 510 F.3d 43, 54 (1st Cir. 2007); Guidi v.
Inter–Cont'l Hotels Corp., 224 F.3d 142, 148 (2d Cir. 2000)). While a trial in
this forum may present difficulties with access to the Defendant’s witnesses
and evidence, which are largely in Europe, a trial in the Dutch courts would
present similar issues for the Plaintiff’s witnesses and evidence, which are
largely in the United States. Moreover, the Defendant has not shown that
any witness is actually unwilling to testify or will be unavailable if the
proceedings take place in this forum. DiFederico, 714 F.3d at 806
(explaining that the availability of compulsory process for witnesses “should
be given little weight in the overall balancing scheme when the defendant
has not shown that any witness is actually unwilling to testify.”). There is
also the issue of language. The Defendant has shown by its filings in this
Court that its principals and witnesses are conversant in English, the
language to be employed in this forum. On the other hand, the proceedings
in the Netherlands presumably would be conducted in Dutch. There is
nothing before the Court to show that the Plaintiff’s principals and witnesses
have any knowledge of the Dutch language. As such, conducting this
litigation in English will be much more convenient for the parties. Further,
neither party claims that a trial will require the ability to view premises in the
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38
United States or the Netherlands. Accordingly, this forum is comparably
more convenient than the Dutch courts.
In addition, this forum is appropriate for determining the claims at issue
in the Plaintiff’s lawsuit, many of which are governed by North Carolina law.
[Doc. 19 at ¶¶ 114-124, 158-199, 211-205]. Notably, none of the Plaintiff’s
claims are governed by Dutch or other foreign law. [Id.].15 Moreover, while
“[j]ury duty is a burden that ought not to be imposed upon the people of a
community which has no relation to the litigation[,]” American Dredging, 510
U.S. at 447-48 (quoting Gulf Oil, 330 U.S. at 508), a North Carolina jury will
have an interest in resolving this dispute because the harms being felt by the
Plaintiff are being felt within the forum and the Plaintiff has its primary place
of business in this forum. DiFederico, 714 F.3d at 808 (denying a motion to
dismiss for forum non conveniens in part because a Maryland jury had “a
strong interest in deciding this case.”).16 Unlike the Dutch proceedings,
15 The Defendant argues that the law applicable to it “is Dutch, not U.S., law.” [Doc. 23
at 24]. When United States trademarks and copyrights are at issue, however, United
States law can apply even when the infringement occurred outside of the United States.
See Herrmann Int'l, Inc. v. Herrmann Int'l Eur., No. 1:17-cv-00073-MR, 2021 WL 861712,
at *8-*13 (W.D.N.C. Mar. 8, 2021) (Reidinger, C.J.). Moreover, the Plaintiff has submitted
an affidavit stating that United States law governs this dispute as the location of the
licensor under Article 4 of Regulation (EC) No 593/2008 of the European Parliament and
of the Council on the law applicable to contractual obligations. [Doc. 17 at ¶ 21]. The
Defendant has submitted no contrary authority.
16 There is nothing before the Court to indicate that this matter would be tried before a
jury in the Dutch courts.
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39
where the Plaintiff has a pending objection to the exercise of jurisdiction,
[Doc. 19 at ¶¶ 61-69; Doc. 20-1], this Court has now resolved that it has
jurisdiction to hear this matter. In addition, this Court is far more familiar with
applying United States intellectual property law than the Dutch courts. As
such, there is no question about the Court’s willingness or competence to
handle the intellectual property claims arising under United States law, which
will prevent the parties from having to assert those claims in a different
venue. Accordingly, the Court’s adjudication of this dispute may prevent
further court congestion, administrative difficulties, and unnecessary
problems in conflicts of law or application of foreign law.
In short, the Court concludes that the Defendant has failed to
overcome its heavy burden to show that this forum is so inconvenient as to
outweigh the Plaintiff’s choice of its home forum. Accordingly, even if the
Dutch courts presented an adequate alternative forum for adjudicating the
Plaintiff’s claims, the public and private interests weigh against granting the
Defendant any remedy under forum non conveniens. Therefore, the
Defendant’s Motion to Dismiss for forum non conveniens will be denied.
III. PRELIMINARY INJUNCTION
Having determined that this Court can properly exercise personal
jurisdiction over the Defendant and that this is an appropriate forum for the
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adjudication of the Plaintiff’s claims, the Court turns next to the Plaintiff’s
Motion for Preliminary Injunction. Because the relief requested by the
Plaintiff would be interim remedies for the intellectual property and tortious
interference claims, the Court will solely address the Plaintiff’s Motion for
Preliminary Injunction with respect to those claims. McNeil-PPC, Inc. v.
Granutec, Inc., 919 F. Supp. 198, 201 (E.D.N.C. 1995); Nabisco Brands, Inc.
v. Conusa Corp., 722 F. Supp. 1287, 1292 n.4 (M.D.N.C. 1989).
A plaintiff seeking a preliminary injunction must demonstrate that (1) it
is likely to succeed on the merits, (2) it is likely to suffer irreparable harm
absent injunctive relief, (3) the balance of equities tips in its favor, and (4)
the injunction would be in the public interest. Winter v. Natural Res. Def.
Council, Inc., 555 U.S. 7, 20 (2008). In addition, under the “mandatory and
unambiguous” language of Rule 65(c), the “district court must fix a bond
whenever it grants a preliminary injunction or restraining order.” Hoechst
Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 421 (4th Cir. 1999).
“A preliminary injunction is an extraordinary remedy never awarded as
of right.” Id. at 24. Thus, 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. Vill. of Gambell, 480
U.S. 531, 542 (1987). Ultimately, a plaintiff’s entitlement to preliminary
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41
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).
The primary function of a preliminary injunction is to maintain or restore
the status quo. See Di Biase v. SPX Corp., 872 F.3d 224, 231 (4th Cir.
2017); see Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 422
(4th Cir. 1999) (explaining that “a preliminary injunction preserves the status
quo pending a final trial on the merits[.]”). Accordingly, any preliminary
injunction must “be tailored to restrain no more than what is reasonably
required to accomplish its ends.” Consolidation Coal Co. v. Disabled Miners
of S. W. Va., 442 F.2d 1261, 1267 (4th Cir. 1971).
“When considering a motion for preliminary injunction, a district court
may assess the relative strength and persuasiveness of the evidence
presented by the parties, and is not required to resolve factual disputes in
favor of the non-moving party.” Queen Virgin Remy, Co. v. Thomason, No.
1:15-CV-1638-SCJ, 2015 WL 11422300, at *2 (N.D. Ga. June 10, 2015),
modified, No. 1:15-CV-1638-SCJ, 2015 WL 11455760 (N.D. Ga. Oct. 21,
2015) (citing Imaging Business Machines, LLC. v. BancTec, Inc., 459 F.3d
1186, 1192 (11th Cir. 2006)). If the evidence is contested, however, the court
“‘must assess the facts, draw whatever reasonable inferences it might favor,
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and decide the likely ramifications.’” Weaver v. Henderson, 984 F.2d 11, 14
(1st Cir. 1993) (quoting Independent Oil & Chem. Workers of Quincy, Inc. v.
Procter & Gamble Mfg. Co., 864 F.2d 927, 929 (1st Cir. 1988)).
At the preliminary injunction stage, allegations set forth in a verified
complaint are treated the same as affidavits. IDS Life Ins. Co. v. SunAmerica
Life Ins. Co., 136 F.3d 537, 542 (7th Cir. 1998) (noting that “[v]erified
complaints[ are] the equivalent of affidavits”); Synthes USA, LLC v. Davis,
No. 4:17-CV-02879-RBH, 2017 WL 5972705, at *1 (D.S.C. Dec. 1, 2017)
(explaining that “a verified complaint is wholly sufficient for purposes of ruling
on a preliminary injunction motion.”) (citation omitted).17
A. Likelihood of Success on the Merits
1. Laches
As a threshold matter, the Defendant argues that all interim relief
should be denied because the Plaintiff’s claims are barred by the doctrine of
laches. [Doc. 27 at 25]. Before addressing the merits of the Plaintiff’s
underlying claims, the Court will address the Defendant’s assertion of laches.
17 “In fact, the Fourth Circuit has indicated a complaint—verified or not—must be
considered.” Synthes USA, 2017 WL 5972705, at *1 (citing G.G. ex rel. Grimm v.
Gloucester Cty. Sch. Bd., 822 F.3d 709, 725–26 (4th Cir. 2016), vacated and remanded
on other grounds, 137 S. Ct. 1239 (2017).
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Laches is an “equitable doctrine” that can bar a request for relief. Perry
v. Judd, 471 F. App’x 219, 222 (4th Cir. 2012). Laches requires a defendant
to prove two elements: “(1) lack of diligence by the party against whom the
defense is asserted, and (2) prejudice to the party asserting the defense.”
Costello v. United States, 365 U.S. 265, 282 (1961). “The first element of
laches, lack of diligence, is satisfied where a plaintiff has unreasonably
delayed in pursuing his claim.” E.E.O.C. v. Navy Fed. Credit Union, 424 F.3d
397, 409 (4th Cir. 2005) (citing White v. Daniel, 909 F.2d 99, 102 (4th Cir.
1990)). “When a party acts within the applicable statute of limitations, laches
will not apply absent exceptional circumstances.” Carolina First Bank v.
Stambaugh, No. 1:10-cv-00174, 2011 WL 6217409, at *4 (W.D.N.C. Dec.
14, 2011) (Reidinger, J.) (citing Phipps v. Robinson, 858 F.2d 965, 972 (4th
Cir. 1988)). Moreover, laches will not penalize a plaintiff for attempting to
resolve a dispute within a reasonable time before racing to the courthouse.
Mogavero v. McLucas, 543 F.2d 1081, 1083 (4th Cir. 1976) (“In the interest
of encouraging disputants to settle claims prior to the institution of litigation,
we conclude that such a period should not be counted for purposes of
laches.”).
The Plaintiff filed this action well within the statute of limitations for its
claims. N.C. Gen. Stat. 1–52(1) (three-year statute of limitations for breach
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of contract claims under North Carolina law); 17 U.S.C. § 507(b) (three-year
statute of limitations for copyright infringement claims under the Copyright
Act); Lyons P'ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 796 (4th Cir.
2001) (four-year statute of limitations for trademark infringement claims
under the Lanham Act); 18 U.S.C. § 1836(d) (three-year statute of limitations
for claims for misappropriation of trade secrets under the DTSA); N.C. Gen.
Stat. § 66–157 (three-year statute of limitations for claims for
misappropriation of trade secrets under the NCTSPA); N.C. Gen. Stat. § 1-
52(5) (three-year statute of limitations for claims for tortious interference
under North Carolina law). Accordingly, laches does not apply unless the
Defendant can show the existence of exceptional circumstances. Carolina
First Bank, 2011 WL 6217409, at *4 (citing Phipps, 858 F.2d at 972). The
Defendant has failed to demonstrate any exceptional circumstances in this
case.
Moreover, although the Defendant’s breach of contract allegedly
occurred in December 2019, the Plaintiff claims that the Defendant escalated
its wrongful conduct in early 2021. [Doc. 19 at ¶ 77]. The Plaintiff promptly
initiated this action after becoming aware of the Defendant’s worsening
conduct, which forms the basis for many of the Plaintiff’s claims, including
the ones for tortious interference, trademark infringement, misappropriation
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of trade secrets, computer trespass, and defamation. By filing this action
within a few months of its claims ripening, the Plaintiff showed diligence, not
a lack thereof.
While the Defendant claims that the Plaintiff showed a lack of diligence
on its breach of contract claim by waiting to initiate this action until nearly
fifteen months after the Defendant allegedly breached the contract in
December 2019, [Doc. 25 at 29], the Plaintiff alleges that it “attempted to
discuss and resolve the Defendant’s breaches during the fall of 2020.” [Doc.
19 at ¶ 62]. Beyond negotiating with the Defendant, the Plaintiff has also
been diligently pursuing its rights and attempting to protect itself in other
ways. For instance, the Plaintiff sent the Defendant a cease-and-desist letter
on February 16, 2021. [Id. at ¶ 94]. The Plaintiff also filed a complaint in
accordance with the Uniform Domain Name Dispute Resolution Policy
(“UDRP”) on February 25, 2021. [Id. at ¶ 98]. The Plaintiff did not
demonstrate a lack of diligence by attempting to negotiate and resolve this
dispute for several months after learning about the alleged breach of
contract. Mogavero, 543 F.2d at 1083.
For these reasons, the Court concludes that the Plaintiff acted with
diligence when pursuing its claims. Accordingly, the Court concludes that
the equitable doctrine of laches is inapplicable to this case.
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2. Copyright Claims
The Plaintiff’s third cause of action is for violations of the Copyright Act.
[Doc. 19 at ¶¶ 125-36].
Copyright infringement occurs when a person “violates any of the
exclusive rights of the copyright owner.” 17 U.S.C. § 501(a). “Therefore, the
two elements of an infringement claim are (1) ownership of a valid copyright
and (2) encroachment upon one of the exclusive rights afforded by the
copyright.” Elektra Ent. Grp., Inc. v. Doe, No. 5:08-cv-1159-FL, 2008 WL
5111886, at *2 (E.D.N.C. Dec. 4, 2008) (citing Avtec Systems, Inc. v. Peiffer,
21 F.3d 568, 571 (4th Cir. 1994)). “A certificate of registration issued by the
Copyright Office is ‘prima facie evidence of the validity of the copyright and
of the facts stated in the certificate,’ such as ownership.” Universal Furniture
Int'l, Inc. v. Collezione Europa USA, Inc., 618 F.3d 417, 428 (4th Cir. 2010),
as amended (Aug. 24, 2010) (citing 17 U.S.C. § 410(c)). An individual’s
reproduction of a copyrighted work encroaches on that copyright because
“the Copyright Act grants the copyright holder ‘exclusive’ rights to use and to
authorize the use of his work in five qualified ways, including reproduction of
the copyrighted work in copies[.]” Sony Corp. v. Universal City Studios, Inc.,
464 U.S. 417, 432–33 (1984).
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The Amended Complaint asserts that the Plaintiff has copyrighted its
products, software, intellectual property, source code, and technology with
the United States Copyright Office and that its registration has been
accepted and confirmed by the Copyright Office as bearing Registration
number TX0008941559. [Doc. 19 at ¶ 40-44]. Accordingly, the Plaintiff has
demonstrated that it owns a valid copyright. Universal Furniture, 618 F.3d
at 428 (citing 17 U.S.C. § 410(c)).
The Amended Complaint further asserts that the Defendant has used,
copied, sold, and distributed the Plaintiff’s copyrighted information. [Doc. 19
at ¶ 127]. Accordingly, the Plaintiff has established that the Defendant is
encroaching on the rights afforded by the copyright.
The Defendant argues that the Plaintiff’s copyright infringement claim
fails because the Copyright Act can only be applied to its extraterritorial
conduct if the “predicate-act doctrine” applies. [Doc. 25 at 17]. Tire Eng'g &
Distribution, LLC v. Shandong Linglong Rubber Co., 682 F.3d 292, 306 (4th
Cir. 2012) (citing Update Art, Inc. v. Modiin Publ'g, Ltd., 843 F.2d 67, 73 (2d
Cir. 1988)). To invoke the predicate-act doctrine, “a plaintiff is required to
show a domestic violation of the Copyright Act and damages flowing from
foreign exploitation of that infringing act.” Id. at 308. Courts are split on
“whether all parts of the infringing act must take place in the United States,
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or if it is sufficient that some part of the infringing acts take place in the United
States.” Shropshire v. Canning, 809 F. Supp. 2d 1139, 1145 (N.D. Cal.
2011) (collecting cases).
The Plaintiff’s Amended Complaint asserts that the Defendant is using,
copying, selling, and distributing the Plaintiff’s copyrighted products,
software, intellectual property, source code, and technology. [Doc. 19 at ¶
26].18 The Plaintiff has also presented evidence to show that the Defendant
is using the Plaintiff’s copyrighted information to service customers in the
United States from the Defendant’s offices abroad, specifically a California
company named Clarizen. [Doc. 15 at ¶ 4; Doc. 15-2]. The Plaintiff presents
further evidence to show that the Defendant is servicing American customers
who merely have offices and operations in Europe and elsewhere. [Doc. 8
at ¶ 5]. That evidence shows that the Plaintiff is likely to ultimately prove that
the Defendant’s actions are causing companies within the United States to
use the Plaintiff’s copyrighted information without authorization. Accordingly,
the Court concludes that the Plaintiff has demonstrated a likelihood of
18 While the Defendant’s prior use of the Plaintiff’s intellectual property may have been
lawful pursuant to the licensing agreement between the parties, the Plaintiff claims that
the Defendant’s recent use of its intellectual property has exceeded any scope of that
license. Tattoo Art Inc. v. TAT Int'l LLC, 498 F. App'x 341, 346 (4th Cir. 2012) (explaining
that “‘[a] licensee infringes the owner's copyright if its use exceeds the scope of its
license.’”) (quoting ITOFCA, Inc. v. MegaTrans Logistics, Inc., 322 F.3d 928, 940 (7th Cir.
2003)).
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success on its argument that the Defendant’s actions have led to copyright
infringement within the United States. Because the Defendant’s foreign
exploitation of that infringement within the United States has allegedly
caused the Plaintiff damages, the Court concludes at this time that the
predicate-act doctrine authorizes the application of the Copyright Act to the
Defendant’s conduct.19
3. Trademark Claims
The Plaintiff in its fourth and fifth causes of action asserts violations of
the Lanham Act, including trademark infringement and false designation of
origin. [Doc. 19 ¶¶ 137-57]. The Plaintiff in its twelfth cause of action asserts
common-law trademark infringement. [Id. at ¶¶ 211-215].
To prevail on a trademark infringement claim under the Lanham Act,
the Plaintiff must show that it has a valid mark and that the similarity of the
defendant's mark to the plaintiff's mark creates a “likelihood of confusion” in
the marketplace. See Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 124
(4th Cir. 1990). “[A] certificate of registration of a mark serves as prima facie
evidence that the registrant owns the registered mark, has properly
registered it under the Lanham Act, and is entitled to its exclusive use in
19 Although the Court concludes that the Plaintiff has shown a likelihood of success on its
claim under the Copyright Act at this stage, it remains to be seen whether the Plaintiff will
ultimately prove that a predicate-act occurred within the United States.
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commerce.” Brittingham v. Jenkins, 914 F.2d 447, 452 (4th Cir. 1990). The
Fourth Circuit has enunciated at least nine factors that are relevant to the
likelihood of confusion, including:
(1) the strength or distinctiveness of the plaintiff's
mark as actually used in the marketplace; (2) the
similarity of the two marks to consumers; (3) the
similarity of the goods or services that the marks
identify; (4) the similarity of the facilities used by the
markholders; (5) the similarity of advertising used by
the markholders; (6) the defendant's intent; (7) actual
confusion; (8) the quality of the defendant's product;
and (9) the sophistication of the consuming public.
George & Co., LLC v. Imagination Entm't Ltd., 575 F.3d 383, 393 (4th Cir.
2009).
The Plaintiff asserts that it has a valid trademark and provides its
registration from the U.S. Patent and Trademark Office. [Doc. 19 at ¶¶ 45-
49; Doc. 19-1 at 1]. Accordingly, the Court concludes that the Plaintiff has a
valid trademark.
The Court further concludes that the Plaintiff demonstrates a likelihood
of confusion. The Plaintiff asserts that its mark has “become distinctive and
famous as the indication of origin of [its] services” and that its mark “is
instantly recognizable and has undoubtedly acquired valuable goodwill.”
[Doc. 19 at ¶ 49]. While the Defendant argues that the Plaintiff’s Amended
Complaint only claims that the use of the Plaintiff’s trademark “is likely to
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cause confusion or mistake among consumers, customers, and their
employees as to the origin, sponsorship or approval of Defendant’s goods or
services,” [Doc. 25 at 19 (citing Doc. 19 at ¶ 141)], the Plaintiff has submitted
several exhibits showing consumers that have contacted the parties or
posted on the internet after becoming confused about the relationship
between the Plaintiff and the Defendant. [Doc. 8 at ¶ 24; Doc. 8-11 at 1-10;
Doc. 8-12; Doc. 15-5 at 1-2]. Beyond a mere likelihood of confusion, those
exhibits demonstrate actual confusion. Such confusion is unsurprising given
that the Defendant is using the Plaintiff’s mark as its domain name; hosting
a website that is virtually identical to the Plaintiff’s website; and operating a
business that provides essentially the same services as the Plaintiff. [Doc.
19 at ¶ 138; Doc. 8-1; Doc. 8-2; Doc. 8-3; Doc. 8-4; Doc. 8-6; Doc. 8-7].
Based on the evidence submitted by the Plaintiff, the Court concludes that
the Plaintiff has demonstrated a likelihood of success of ultimately proving
that the Defendant’s use of the mark has caused consumer confusion.
The Lanham Act, however, only regulates “commerce which may
lawfully be regulated by Congress.” Steele v. Bulova Watch Co., 344 U.S.
280, 286 (1952). Accordingly, the Court can only enjoin the Defendant’s
conduct after considering whether: (1) the defendant’s conduct had a
significant effect on United States commerce; (2) the defendant is a citizen
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of the United States; and (3) the issuance of an injunction would interfere
with trademark rights under the relevant foreign law. Id. at 283-86.
Generally, “the absence of two of the three Bulova factors in this case is fatal
to an argument that the conduct is governed by the Lanham Act.” Totalplan
Corp. of Am. v. Colborne, 14 F.3d 824, 831 (2d Cir. 1994).
The first factor considers whether the Defendant’s conduct had a
significant effect on United States commerce. Nintendo of Am., Inc., v.
Aeropower Co., Ltd., 34 F.3d 246, 250–51 (4th Cir. 1994). While the
operation of a passive website generally is insufficient to show a significant
effect on United States commerce, the Defendant is operating a platform
using the Plaintiff’s mark that provides an option for customers in “the
Americas” and the Plaintiff has apparently enticed at least one United States
company to change platforms from the Plaintiff’s to the Defendant’s. [Doc.
15 at ¶ 4; Doc. 30 at ¶ 32; Doc. 16 at ¶ 7]. While the Defendant argues that
the Plaintiff has provided no allegations or evidence to show consumer
confusion in the United States, [Doc. 25 at 19], the Plaintiff asserts and
provides evidence that the Defendant’s use of a “confusingly similar” mark
has caused actual confusion and has led to reputational, relationship and
economic injury to the Plaintiff’s business in the United States. [Doc. 8 at ¶
24; Doc. 8-11 at 1-10; Doc. 8-12; Doc. 15-5 at 1-2]. Notably, one of the
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internet posts about the dispute states that the resulting confusion “has
completely eroded any faith we have in dmarcian (US and EU). We’ll be
moving to a new provider.” [Doc. 8-11 at 3]. That negative post, along with
many others, is readily accessible to U.S. consumers on the internet, as are
the Defendant’s various websites containing the confusingly similar marks
and domain names. Bulova, 344 U.S. at 286 (explaining that the application
of the Lanham Act was appropriate where a defendant’s “operations and
their effects were not confined within the territorial limits of a foreign nation.”).
Further, the Defendant has affirmatively caused at least some confusion
among U.S. consumers by sending a message regarding a data breach to
every customer of the Plaintiff and the Defendant, including those located
within the United States. [Doc. 8 at ¶ 27]. It is likely that at least some of the
consumers in the United States would be confused upon learning about a
purported data breach from an apparently separate entity that is using the
Plaintiff’s mark. Such confusion leads to “the archetypal injury contemplated
by the Act” by harming a plaintiff’s “trade reputation in United States
markets.” Tire Eng'g & Distribution, LLC v. Shandong Linglong Rubber Co.,
682 F.3d 292, 310 (4th Cir. 2012) (citing Aeropower, 34 F.3d at 250).
Because the evidence at this stage demonstrates that the Defendant’s
trademark infringement is damaging the Plaintiff’s reputation and confusing
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consumers in the United States, [Doc. 43 at ¶¶ 30, 34-36], the Court
concludes that the Plaintiff has demonstrated a likelihood of success on a
claim that the Defendant’s actions have had and are having a significant
effect on United States commerce. Sterling Drug, Inc. v. Bayer AG, 14 F.3d
733, 746, 747 (2d Cir. 1994).
The second factor examines the citizenship of the Defendant. Bulova,
344 U.S. at 285-86. Where the alleged infringing foreign acts involve a
foreign citizen, “courts have been reluctant to extend the reach of the
Lanham Act.” Aerogroup Int'l, Inc. v. Marlboro Footworks, Ltd., 955 F.Supp.
220, 226–27 (S.D.N.Y. 1997). Defendant is a Dutch corporation [Doc. 19 at
¶ 4], and thus this factor counsels somewhat against extending the Lanham
Act to the Defendant’s conduct. Aerogroup, 955 F. Supp. at 226–27.
Nevertheless, foreign citizenship alone is not sufficient to defeat
extraterritorial application of the Lanham Act. Totalplan, 14 F.3d at 831. The
weight of this factor is variable because the “application of United States law
to United States nationals abroad ordinarily raises considerably less serious
questions of international comity than does the application of United States
law to foreign nationals abroad.” E.E.O.C. v. Arabian Am. Oil Co., 499 U.S.
244, 274 (1991) (Marshall, J., dissenting). That is particularly true in a case
such as this one where the foreign corporate Defendant has a majority
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American shareholder, and thus is not the ordinary case of a foreign-owned,
foreign-operated, foreign-located defendant. Though this factor may weigh
against the extension of the Lanham Act to the Defendant’s activities, such
weight is rather light.
The third factor considers whether the application of the Lanham Act
would interfere with trademark rights under the relevant foreign law. Bulova,
344 U.S. at 283-86. Courts have concluded that the Lanham Act “should not
be given an extraterritorial application against foreign citizens acting under
presumably valid trade-marks in a foreign country.” See Vanity Fair Mills,
Inc. v. T. Eaton Co., 234 F.2d 633, 643 (2d Cir. 1956). Here, the Defendant
does not claim that it has any valid trademarks in foreign countries. While
the Plaintiff has some foreign trademarks, [Doc. 15-1], those foreign
trademarks are not at issue in this case. Although there are unresolved
proceedings in the Dutch courts, [Doc. 10-1 at ¶ 3.4; Doc. 8-14 at ¶¶ 2.12,
3.5], the Dutch courts have expressly declined to resolve the intellectual
property disputes presented in this case and have no authority to adjudicate
trademark claims arising under United States law. Vanity Fair, 234 F.2d at
644 (explaining that when trademark rights “within the United States are
being litigated in an American court, the decisions of foreign courts
concerning the respective trademark rights of the parties are irrelevant and
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inadmissible.”); see also Halo Creative & Design Ltd. v. Comptoir Des Indes
Inc., 816 F.3d 1366, 1373 (Fed. Cir. 2016) (collecting cases). Because the
Dutch proceedings cannot adjudicate the Plaintiff’s trademark claims, the
application of the Lanham Act to the Defendant is not “fraught with
possibilities of discord and conflict with the authorities of another country.”
Vanity Fair Mills, 234 F.2d at 647.
On balance, the Court concludes that the Lanham Act can be applied
extraterritorially on the facts presented in this case. While the Defendant is
a foreign citizen, the Defendant’s actions have had a significant effect on
United States commerce and there are no foreign trademarks at issue here.
Because the Plaintiff has demonstrated that it owns a valid trademark and a
likelihood of success of ultimately proving that the Defendant’s actions are
causing consumer confusion, the Court concludes that the Plaintiff has
shown a likelihood of success on the merits of its claims under the Lanham
Act.
Having concluded that the Plaintiff has shown a likelihood of success
on the merits of its trademark infringement claim under the Lanham Act, the
Court need not address the Plaintiff’s claims for false designation of origin or
common-law trademark infringement under the Lanham Act at this time.
McNeil-PPC, Inc. v. Granutec, Inc., 919 F. Supp. 198, 201 (E.D.N.C. 1995);
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Nabisco Brands, Inc. v. Conusa Corp., 722 F. Supp. 1287, 1292 n.4
(M.D.N.C. 1989).
4. Trade Secrets Claims
The Plaintiff in its seventh and eleventh causes of action asserts claims
for misappropriation of trade secrets under the NCTSPA and the DTSA,
respectively. [Doc. 19 at ¶¶ 161-71; 200-10].
To establish a misappropriation claim under the DTSA, the plaintiff
must show “(1) that he holds a trade secret, (2) that the trade secret was
misappropriated, and (3) that the trade secret implicates interstate or foreign
commerce.” Hunter Structural, P.A. v. Arp Eng'g, Inc., No. 3:17-cv-00086,
2018 WL 662367, at *5 (W.D.N.C. Feb. 1, 2018) (Mullen, J.) (citing 18 U.S.C.
§ 1836(b)(1)).
The DTSA defines a trade secret as
all forms and types of financial, business, scientific,
technical, economic, or engineering information,
including patterns, plans, compilations, program
devices, formulas, designs, prototypes, methods,
techniques, processes, procedures, programs, or
codes, whether tangible or intangible, and whether or
how stored, compiled, or memorialized physically,
electronically, graphically, photographically, or in
writing if—
(A) the owner thereof has taken reasonable
measures to keep such information secret; and
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(B) the information derives independent economic
value, actual or potential, from not being generally
known to, and not being readily ascertainable
through proper means by, another person who can
obtain economic value from the disclosure or use of
the information[.]
18 U.S.C. § 1839(3). The Amended Complaint describes the Plaintiff’s trade
secrets as its source code; customer database; account registrations;
business and market intelligence stemming from the account registrations;
application database; and sales lead information. [Doc. 19 at ¶ 162]. The
Amended Complaint asserts that the Plaintiff has undertaken “reasonable
measures to protect” that information from disclosure, including taking
security measures; conducting yearly penetration tests; restricting access to
the source code; adopting terms of service and privacy policies; and
requiring its employees to sign confidentiality agreements, nondisclosure
agreements, and appropriate use policies. [Id. at ¶ 202]. The Amended
Complaint further asserts that such information derives independent
economic value as a result of not being generally known. [Id. at ¶ 201].
Based on those verified allegations, which are not disputed by the
Defendant, the Court concludes that the Plaintiff has shown a likelihood of
success of proving that such information constitutes trade secrets under the
DTSA.
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The DTSA protects against the “misappropriation” of a trade secret, 18
U.S.C. § 1836(b), which is roughly defined as the unauthorized acquisition,
disclosure, or use of a trade secret. Id. at § 1839(5). Although the Plaintiff
admits that the Defendant was previously authorized to use the Plaintiff’s
trade secrets in certain contexts, the Amended Complaint asserts that the
Defendant acquired the trade secrets under circumstances giving rise to a
duty to maintain their secrecy or limit their use to purposes for the parties’
joint benefit. [Doc. 19 at ¶ 203]. The Amended Complaint further asserts
that the Defendant has misappropriated the Plaintiff’s trade secrets by
disclosing and using those trade secrets beyond the scope of the parties’
agreement. [Id. at ¶ 203-04]. The Defendant does not dispute that it has
used the Plaintiff’s trade secrets without authorization, only that it has never
done so in the United States. [Doc. 25 at 20-21]. Accordingly, the Court
concludes that the Plaintiff has shown a likelihood of success of proving that
the Defendant misappropriated its trade secrets.
The DTSA requires that the trade secrets have been used in interstate
or foreign commerce. Hunter Structural, 2018 WL 662367, at *5 (citing 18
U.S.C. § 1836(b)(1)). The Amended Complaint asserts that the Defendant
has used the Plaintiff’s trade secrets in interstate and foreign commerce.
[Doc. 19 at ¶ 205]. The Defendant does not dispute that it has used the trade
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secrets in foreign commerce. [Doc. 25 at 20-21]. Accordingly, the Court
concludes that the Plaintiff has shown a likelihood of success of proving that
the Defendant used the trade secrets in interstate or foreign commerce.
The thrust of the Defendant’s argument is that an extraterritorial claim
cannot be brought under the DTSA unless “an act in furtherance of the
offense was committed in the United States.” [Id. at 20 (citing Herrmann Int'l,
Inc. v. Herrmann Int'l Eur., No. 1:17-cv-00073-MR, 2021 WL 861712, at *16
(W.D.N.C. Mar. 8, 2021) (Reidinger, C.J.)]. While the DTSA defines an
“offense” as the improper acquisition, unauthorized disclosure, or
unauthorized use of a trade secret, 18 U.S.C. § 1836(b); § 1839(5), “[t]he
statute does not define what constitutes ‘an act in furtherance of the
offense.’” Luminati Networks Ltd. v. BIScience Inc., No. 2:18-cv-00483-JRG,
2019 WL 2084426, at *9 (E.D. Tex. May 13, 2019) (citing 18 U.S.C. §
1837(2)).
Courts interpreting the DTSA have established a relatively low bar for
acts that are considered “in furtherance of the offense.” For instance, the
Southern District of New York has concluded that such acts were committed
when the defendant’s officer met with the plaintiff’s CEO in the United States;
the parties negotiated a contract in the United States that led to the
authorization for the disclosure of the trade secrets; and one of the
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defendant’s officers had a contract that took place partly in the United States.
Medcenter Holdings Inc. v. WebMD Health Corp., No. 1:20-cv-00053 (ALC),
2021 WL 1178129, at *6 (S.D.N.Y. Mar. 29, 2021). Likewise, the Central
District of California has concluded that a defendant attending meetings in
the United States to develop and manufacture products containing
misappropriated trade secrets committed an act in furtherance of a
misappropriation. MACOM Tech. Sols. Inc. v. Litrinium, Inc., No.
SACV19220JVSJDEX, 2019 WL 4282906, at *5 (C.D. Cal. June 3, 2019).
On the other hand, the Middle District of Florida has found that a defendant’s
attendance at a trade show in the United States did not constitute an act in
furtherance of a misappropriation because there was no connection between
the “attendance at the trade show [and] the alleged misappropriation of the
plaintiffs’ trade secrets.” ProV Int'l Inc. v. Lucca, No. 8:19-cv-978-T-23AAS,
2019 WL 5578880, at *3 (M.D. Fla. Oct. 29, 2019). Those cases
demonstrate that courts place less import on the scope of the actions
committed within the United States than the tie between those actions and
the misappropriation.
The Plaintiff asserts that the Defendant committed two acts in
furtherance of the misappropriation within the United States: “(a) accessing
Plaintiff’s data located in the United States; and (b) marketing the Trade
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Secrets to customers in the United States through its website instructing US
customers or prospective customers to register with Defendant’s separate
platform.” [Doc. 19 at ¶ 206]. Although initially justified by the parties’
cooperation, the Defendant’s access to the Plaintiff’s data stored on servers
within the United States created the opportunity for the Defendant to acquire
the Plaintiff’s trade secrets. [Id. at ¶¶ 166-69]. The Plaintiff has presented
evidence to show that the Defendant is using the Plaintiff’s trade secrets to
conduct business with customers in the United States, including a California
company named Clarizen. [Doc. 15 at ¶¶ 3-4; Doc. 15-2]. Indeed, Tim
Draegen claims that when he visited one of the Defendant’s websites from
his location in the United States, he was directed to the Defendant’s platform
when he selected the option for customers in “the Americas.” [Doc. 16 at ¶
7]. The Plaintiff’s evidence suggests that the Defendant’s foreign actions
have led to the unauthorized use or disclosure of the Plaintiff’s trade secrets
within the United States. Because the Defendant originally gained access to
the Plaintiff trade secrets within the United States, and the evidence
suggests that the Defendant’s actions have led to the use or disclosure of
the Plaintiff’s trade secrets within the United States, the Court concludes that
the DTSA can be applied to the Defendant’s conduct. See vPersonalize Inc.
v. Magnetize Consultants Ltd., 437 F. Supp. 3d 860, 879 (W.D. Wash. 2020)
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(explaining that “[i]nsulating a foreign defendant for the sole reason that a
transaction occurred over the internet, rather than in a brick and mortar
location, is untenable in the context of modern commerce.”).
5. Tortious Interference Claims
The Plaintiff’s ninth and tenth causes of action are for tortious
interference with contract and tortious interference with prospective
economic advantage, respectively. [Doc. 19 at ¶¶ 177-99].
Under North Carolina law, to state a claim for tortious interference with
contract a plaintiff must allege: (1) the existence of a valid contract between
the plaintiff and a third person; (2) the defendant knew of this contract; (3)
the defendant intentionally induced the third person not to perform the
contract; (4) the defendant's acts were committed without justification; and
(5) the plaintiff suffered actual damage. Barker v. Kimberly-Clark Corp., 136
N.C. App. 455, 462, 524 S.E.2d 821, 826 (2000). Whether a defendant’s
interference with a contract is justified depends on the surrounding
circumstances; the defendant’s motive or conduct; the interests sought to be
advanced; the social interest in protecting the freedom of defendant’s action;
and plaintiff’s contractual interests. Embree Const. Grp., Inc. v. Rafcor, Inc.,
330 N.C. 487, 498, 411 S.E.2d 916, 924 (1992).
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The Amended Complaint asserts that the Plaintiff has valid contracts
with every one of its customers, including those serviced by the Defendant.
[Doc. 19 at ¶¶ 31, 178, 181]. The Amended Complaint further asserts that
the Defendant knew of the Plaintiff’s contracts with those customers and has
intentionally induced those customers to switch platforms from the Plaintiff’s
platform to the Defendant’s platform. [Id. at ¶¶ 179-81]. Indeed, the Plaintiff
asserts and provides evidence that the Defendant has falsely communicated
information to the Plaintiff’s customers to solicit business and damage the
Plaintiff’s reputation. [Doc. 19 at ¶¶ 70-71, 88, 158-59; Doc. 8 at ¶ 26-28].
The Plaintiff has provided evidence that at least one of the Plaintiff’s U.S.
customers has switched to the Defendant’s platform, suggesting that the
Defendant’s efforts have been successful. [Doc. 15 at ¶¶ 3-4; Doc. 15-2].20
The Amended Complaint further asserts that the Defendant’s actions were
committed without justification and have resulted in actual damage to the
Plaintiff. [Doc. 19 at ¶¶ 182-83]. Based on the evidence submitted by the
Plaintiff and the Plaintiff’s verified Amended Complaint, the Court concludes
20 While the Defendant argues that the U.S. customer simply “chose to create an account
on the European platform[,]” [Doc. 35-1 at ¶ 4], the evidence strongly suggests that the
customer changed its provider in response to the Defendant’s inducement. Moreover,
although the Defendant highlights that the U.S. customer’s IT department is based in
Israel, [Doc. 35 at 7 n.5, that distinction does not change the assertion that the Defendant
is allegedly interfering with a North Carolina corporation’s contract with a California
company.
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that the Plaintiff has established a likelihood of success on the merits on its
claim for tortious interference with contract against the Defendant.
Because the Plaintiff has established a likelihood of success on the
merits on its claim for tortious interference with contract, the Plaintiff can
show a likelihood of success on the merits on its claim for tortious
interference with prospective economic advantage by demonstrating the
existence of “a contract that would have been entered into but for the
defendant's conduct.” Movement Mortg., LLC v. McDonald, No. 3:17-cv-
00716-RJC-DSC, 2018 WL 6733953, at *5 (W.D.N.C. Nov. 6, 2018), report
and recommendation adopted, No. 3:17-cv-00716-RJC-DSC, 2019 WL
452773 (W.D.N.C. Feb. 5, 2019) (citing Beck v. City of Durham, 154 N.C.
App. 221, 231, 573 S.E.2d 183, 191 (2002)).
Here, the Amended Complaint asserts that customers who register for
a trial on the Plaintiff’s website are usually offered the opportunity to enter a
contract with Plaintiff at the trial’s conclusion. [Doc. 19 at ¶¶ 11, 178, 187].
The Amended Complaint further asserts that under normal circumstances,
approximately 800 customers register for trials with the Plaintiff each month
and that under normal circumstances approximately 40% of those trials lead
to paying customers for the Plaintiff. [Id. at ¶ 189]. The Amended Complaint
also asserts that after the Defendant obtained the information about the
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Plaintiff’s sales leads, the Defendant deceived those prospective customers
to use its website instead of the Plaintiff’s website by making false
statements and utilizing a website that is misleadingly similar to the Plaintiff’s.
[Id. at ¶¶ 192-93]. Based on that evidence, the Court concludes that the
Plaintiff has established a likelihood of success on the merits on its claim for
tortious interference with prospective economic advantage.
Because the Court has concluded that the Plaintiff has shown a
likelihood of success on the merits on its claims for copyright infringement
under the Copyright Act, trademark infringement under the Lanham Act,
misappropriation of trade secrets under the DTSA, and tortious interference
with contract and prospective economic advantage, it need not consider the
Plaintiff’s other claims to accord the full interim relief requested by the
Plaintiff’s Motion for Preliminary Injunction. McNeil-PPC, Inc. v. Granutec,
Inc., 919 F. Supp. 198, 201 (E.D.N.C. 1995); Nabisco Brands, Inc. v. Conusa
Corp., 722 F. Supp. 1287, 1292 n.4 (M.D.N.C. 1989). The Court makes no
conclusions regarding the Plaintiff’s likelihood of success on the merits of
those claims.
B. Irreparable Harm
The Supreme Court's “frequently reiterated standard requires [a
plaintiff] seeking preliminary relief to demonstrate that irreparable injury is
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likely in the absence of an injunction.” Winter v. Nat. Res. Def. Council, Inc.,
555 U.S. 7, 22 (2008) (internal emphasis omitted). “Mere injuries, however
substantial, in terms of money, time and energy necessarily expended in the
absence of an injunction are not enough.” Roe v. Dep't of Def., 947 F.3d
207, 228 (4th Cir. 2020) (quoting Di Biase v. SPX Corp., 872 F.3d 224, 230
(4th Cir. 2017)) (internal quotation marks and alteration omitted). “The
possibility of permanent loss of customers to a competitor or the loss of
goodwill may give rise to irreparable harm.” Handsome Brook Farm, LLC v.
Humane Farm Animal Care, Inc., 700 F. App'x 251, 263 (4th Cir. 2017)
(quoting Multi-Channel TV Cable Co. v. Charlottesville Quality Cable
Operating Co., 22 F.3d 546, 552 (4th Cir. 1994)), abrogated on other grounds
by Winter, 555 U.S. at 22). Moreover, irreparable harm regularly flows from
copyright infringement, trademark infringement, and misappropriation of
trade secrets. See Christopher Phelps & Assocs., LLC v. Galloway, 492 F.3d
532, 544 (4th Cir. 2007) (finding that irreparable injury often flows from
copyright infringement); Lone Star Steakhouse & Saloon, Inc. v. Alpha of
Virginia, Inc., 43 F.3d 922, 938-39 (4th Cir. 1995) (recognizing that
irreparable injury regularly flows from trademark infringement); Outdoor
Lighting Perspectives Franchising, Inc. v. Home Amenities, Inc., 2012 WL
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137808, at *2-*3 (W.D.N.C. Jan 18, 2012) (explaining that irreparable harm
normally flows from misappropriation of trade secrets).
Here, the Plaintiff states that it has spent more than $1,400,000
building its brand and reputation. [Doc. 8 at ¶ 32]. Because the Plaintiff is
in the business of protecting consumer’s online security, the Defendant is
causing significant harm to the Plaintiff’s reputation by using the Plaintiff’s
intellectual property and making public statements about a purported data
breach affecting the Plaintiff’s customers. [Doc. 8 at ¶ 25]. The Plaintiff has
shown that the Defendant’s actions are damaging its reputation and causing
customers to terminate their relationship with the Plaintiff. [Doc. 8 at ¶ 24;
Doc. 8-11 at 3]. Third-party competitors are using the damage to the
Plaintiff’s reputation as an opportunity to solicit the Plaintiff’s customers,
[Doc. 8 at ¶ 28; Doc. 8-12], which makes the damages to the Plaintiff more
difficult to quantify. Douglas Dynamics, LLC v. Buyers Prod. Co., 717 F.3d
1336, 1344 (Fed. Cir. 2013) (explaining that “[i]rreparable injury
encompasses different types of losses that are often difficult to quantify,
including lost sales and erosion in reputation and brand distinction.”).
Moreover, the Plaintiff has demonstrated a likelihood of success on the
merits on its claims for copyright infringement under the Copyright Act,
trademark infringement under the Lanham Act, and misappropriation of trade
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secrets under the DTSA. See Christopher Phelps, 492 F.3d at 544; Lone
Star Steakhouse, 43 F.3d at 938-39; Outdoor Lighting Perspectives, 2012
WL 137808, at *2-*3. The evidence supplied by the Plaintiff shows that
irreparable harm will flow from those claims unless a preliminary injunction
is entered. [Doc. 8 at ¶¶ 23-24, 28; Doc. 8-11 at 3; Doc. 8-12].
The irreparable harm to the Plaintiff will only worsen as the Defendant
continues using the Plaintiff’s intellectual property, drawing visitors to its
confusingly similar website, and contacting the Plaintiff’s customers. See
Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc., 700 F.
App'x 251, 263 (4th Cir. 2017) (“The business's reputation continues to be
tarnished as questions about the reliability of its [functions] continue to
circulate.”). The Defendant has indicated that it will not stop using the
Plaintiff’s intellectual property or performing other actions that harm the
Plaintiff unless enjoined by the Court.
The harms stemming from the Defendant’s continued conduct cannot
be fully compensated by monetary damages. Broad. Music, Inc. v. Prana
Hosp., Inc., 158 F. Supp. 3d 184, 195 (S.D.N.Y. 2016) (citation omitted)
(explaining that “[m]onetary damages [are] inadequate where the defendant
poses a significant threat of future infringement.”); Sony BMG Music Entm't
v. Robinson, No. 5:08-cv-00474-BR, 2009 WL 10689624, at *3 (E.D.N.C.
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July 6, 2009) (stating that “[t]he remedy available at law for this injury,
monetary damages, will only compensate for [d]efendant's one-time
infringement . . . and not for inevitable future transfers”).21
While the Defendant argues that the Plaintiff fails to show an
irreparable harm because the Defendant is using the intellectual property
only in certain markets outside the United States and has been doing so for
years, [Doc. 25 at 23], the Plaintiff has presented evidence to show that the
Defendant’s use of the Plaintiff’s intellectual property has demonstrably
changed and is now causing consumer confusion that is impacting the
Plaintiff’s customer relationships. [Doc. 8 at ¶ 24; Doc. 8-11 at 3]. Moreover,
the Plaintiff has presented evidence to show that the Defendant is using the
Plaintiff’s intellectual property to service a customer that is based in the
United States. [Doc. 15 at ¶¶ 3-4; Doc. 15-2]. Those actions go beyond the
scope of the parties’ initial agreement and highlight the irreparable harm that
is facing the Plaintiff from the Defendant’s actions.
Because the Defendant’s conduct is causing damage to the Plaintiff’s
reputation, loss of goodwill, and lost sales that may not ultimately be
21 Any damages award would be speculative as to the extent that the Defendant may
infringe upon or misappropriate the Plaintiff’s intellectual property in the future. Hence,
an award of monetary damages would not adequately compensate for such future losses.
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quantifiable, the Court concludes that the Plaintiff has demonstrated that it
will suffer an irreparable harm in the absence of an injunction.
C. Balance of Equities
A plaintiff seeking a preliminary injunction must establish that the
balance of equities tips in its favor. Winter, 555 U.S. at 20. “[I]n 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.’” Armento v. Asheville Buncombe Cmty. Christian Ministry, Inc., No.
17-cv-00150- MR-DLH, 2017 WL 3838638 at *1 (W.D.N.C. Sept. 1, 2017)
(Reidinger, J.) (quoting Amoco Prod. Co. v. Vill. of Gambell, 480 U.S. 531,
542 (1987)).
Acknowledging the competing interests at stake and the potentially
significant harm that an injunction could cause to either party, the Court
allowed the parties to offer proposed restraints that will minimize the harms
to each side while the contractual dispute is being litigated in the Dutch
courts. [Doc. 32; Doc. 33]. The Plaintiff asks the Court to enjoin the
Defendant from (1) migrating new customers to its platform; (2) using the
Plaintiff’s intellectual property or, alternatively, using that intellectual property
to secure new customers; (3) disparaging the Plaintiff or claiming an
ownership right in the Plaintiff’s software; (4) changing any customers from
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the Plaintiff’s credit card payments to payments to the Defendant through
invoice or other payment method; (5) continuing to use a website with a
similar appearance and content as the Plaintiff’s website; and (6) using the
dmarcian domain names or other confusingly similar domain names. [Doc.
33 at 5-6]. While the Defendant continues to object to the Court’s exercise
of personal jurisdiction, the Defendant voluntarily commits to (1) serve
customers only located in Europe, Africa, and Russia; (2) update its websites
to reflect a geographic limitation to Europe, Africa, and Russia and remove
references to the Plaintiff or its employees; (3) block website access to IP
addresses associated with countries outside Europe, Africa, and Russia and
direct those visitors to the Plaintiff; (4) use only the stylized “dmarcian” logo;
(5) refrain from encouraging customers in Europe, Africa, or Russia who
currently pay the Plaintiff to pay the Defendant; (6) refrain from making public
statements that would place the Plaintiff in a negative light; and (7) issue a
joint statement with the Plaintiff affirming compliance with European data-
protection laws, contingent on the Plaintiff restoring the Defendant’s access
to certain customer information. [Doc. 32 at 3-6].
Considering the particular interests that the Plaintiff seeks to protect
during the pendency of this action, as well as the limitations the Defendant
concedes it can easily withstand, it is clear that a narrowly tailored
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preliminary injunction can be fashioned that can preserve the legal positions
of the parties while not causing significant harm to the Plaintiff or the
Defendant. Thus, the Court’s injunction will provide a better balance of the
interests at stake and the competing harms than the current status quo.
Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 422 (4th Cir.
1999) (explaining that a preliminary injunction is typically intended to
preserve the status quo). Accordingly, the Court concludes that the balance
of the equities tips in favor of granting this preliminary injunction.
D. Public Interest
A plaintiff seeking a preliminary injunction must establish that the
granting of an injunction is in the public interest. Winter, 555 U.S. at 20.
There is a public interest in limiting customer confusion. Lone Star
Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 939 (4th
Cir. 1995) (holding that an injunction in a trademark infringement case “would
serve the public interest by preventing future consumers from being misled”).
Moreover, the public has a strong interest in protecting intellectual property
rights. EMI Apr. Music Inc. v. Rodriguez, 691 F. Supp. 2d 632, 635
(M.D.N.C. 2010) (intellectual property); Forestry Sys., Inc. v. Coyner, No.
1:11-cv-00295, 2011 WL 1457707, at *2 (M.D.N.C. Apr. 15, 2011) (trade
secrets); PCTV Gold, Inc. v. SpeedNet, LLC., 508 F.3d 1137, 1145 (8th Cir.
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2007) (contractual rights). While the Defendant argues that an injunction will
harm its customers, [Doc. 25 at 26], the Court’s injunction will have only a
limited effect on those third-party interests. For instance, it will not prevent
them from doing business with the Defendant or using the intellectual
property that is at issue here. Cf SAS Inst., Inc. v. World Programming Ltd.,
874 F.3d 370, 388 (4th Cir. 2017) (explaining that an injunction was not in
the public interest because the defendant’s customers “would have to
expend significant time and money to replace their existing [software], either
now or in the near future.”) As such, the Court concludes that the public
interest related to the Defendant’s customers is minimal. Because the
Plaintiff’s claims seek to prevent consumer confusion and protect intellectual
property rights, the Court concludes that the granting of an injunction is in
the public interest.
E. Security
Federal Rule of Civil Procedure 65(c) provides: “The court may issue
a preliminary injunction . . . only if the movant gives security in an amount
that the court considers proper to pay the costs and damages sustained by
any party found to have been wrongfully enjoined or restrained.” Fed. R. Civ.
P. 65(c). In light of the relatively narrow restraints on the Defendant that are
being granted herein, the Court finds that a bond in the amount of $25,000
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is sufficient to pay the Defendant's costs and damages in the event the
Defendant is found to have been wrongfully restrained. Accordingly, the
Plaintiff will be required to post $25,000 as security with the Clerk’s Office
before this injunction will take effect.
O R D E R
IT IS, THEREFORE, ORDERED that the Defendant’s Motion to
Dismiss [Doc. 22] is DENIED IN PART and HELD IN ABEYANCE IN PART.
The Plaintiff’s Motion for Preliminary Injunction [Doc. 6] is GRANTED IN
PART as to the Plaintiff’s claims for copyright infringement under the
Copyright Act; trademark infringement under the Lanham Act;
misappropriation of trade secrets under the DTSA; tortious interference with
contract; and tortious interference with prospective economic advantage as
set forth below, and DENIED as to the Plaintiff’s other claims.
IT IS FURTHER ORDERED that the Defendant, its officers, agents,
servants, employees, attorneys, affiliates, and those persons in active
concert or participation with the Defendant are HEREBY ENJOINED from:
(1) providing services to any customers located outside of Europe,
Africa, or Russia, except for the six customers detailed in the
Defendant’s Brief on Proposed Voluntary Commitments [Doc. 32 at 4
n.3];
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(2) providing access to any of its websites to IP addresses from
countries outside of Europe, Africa, or Russia. The Defendant shall
inform website visitors from outside of those areas that it does not
create new accounts in that region and shall direct those customers to
contact dmarcian, Inc. for services through the Plaintiff’s website
https://dmarcian.com;
(3) making changes to the copyrighted software except as specifically
and expressly allowed or directed by this Order;
(4) using the Plaintiff’s trademark in any manner unless such use is
accompanied by a statement which reads: “This trademark is the
trademark of dmarcian, Inc. This website is produced and generated
and posted by dmarcian Europe BV, which is a different entity from
dmarcian, Inc. This trademark is being used at this location without
the permission of dmarcian, Inc. and only pursuant to the terms of a
court order allowing its temporary use during litigation between
dmarcian, Inc. and dmarcian Europe BV.” That statement must be at
least the size of the trademark itself, as presented, or 12-point type
when displayed on a 24” computer screen, whichever is larger. Such
statement must appear immediately adjacent to the location where the
trademark appears, and must be shown at each location where the
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trademark appears, whether that be on the Defendant’s website, in
printed material, an electronic display, or otherwise;
(5) displaying any website with the “dmarcian” name unless that
website includes a statement that “The dmarcian software was
originally developed by dmarcian, Inc. This is not the website of
dmarcian, Inc. The website of dmarcian, Inc. can be found at
https://dmarcian.com.” That statement must be displayed as a banner
at the top of each page of the website on which the dmarcian name
appears and must be of a size that is at least 12-point type when
displayed on a 24” computer screen, and the reference to the website
of the Plaintiff must be a link to that website;
(6) redirecting, encouraging, or allowing any customer to change its
service provider or payment recipient from dmarcian, Inc. to dmarcian
Europe, BV;
(7) making any public statement about dmarcian, Inc. except as
expressly allowed or directed herein; and
IT IS FURTHER ORDERED that the Defendant shall provide to the
Court (under seal) copies of all documents sufficient to show all income
received by the Defendant and the sources thereof, all expenditures made
by the Defendant and the payors thereof, and all net income generated by
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the Defendant’s business efforts from the date of this Order until the
conclusion of this action.
IT IS FURTHER ORDERED that the Plaintiff shall post a bond in the
amount of $25,000.
IT IS SO ORDERED.
Signed: May 26, 2021
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