Music Makers Holdings, LLC v. Sarro (Maryland U.S.D.C.)

Filed: July 14, 2010
Opinion by Judge Roger W. Titus

Held: A foreign defendant was not subject to personal jurisdiction in Maryland on the basis of correspondence sent to and received from the jurisdiction, maintenance of a website, advertising, or tortious conduct not intentionally directed into the State.

Facts: A Maryland plaintiff sued a foreign defendant for infringing upon its trademark. The defendant moved to dismiss for lack of personal jurisdiction. The plaintiff argued that the defendant was subject to personal jurisdiction because it transacted business in the State, caused tortious injury in the State, and engaged in a "persistent course of conduct in the State." The plaintiff pointed to five things that justified the exercise of personal jurisdiction, which the court addressed in turn:

Analysis:

The defendant sent cease and desist letters to the plaintiff in the State: The plaintiff argued that the defendant subjected herself to personal jurisdiction by sending the plaintiff cease-and-desist letters in Maryland about the mark. Relying on multiple cases from outside the jurisdiction, the court held that cease and desist letters, alone, are an insufficient basis. A defendant does not "transact business" within the meaning of the long-arm statute by sending letters to a purported infringer of its rights. Moreover, the maintenance of a suit based solely on such letters would “offend traditional notions of fair play and substantial justice."

The defendant received e-mails and phone calls originating from Maryland inquiring about the mark: The plaintiff argued that such contacts were sufficient to establish personal jurisdiction. The court held that these contacts did not establish that the defendant was transacting business or engaging in a persistent course of conduct in the State. Moreover, the contacts would not satisfy due process because they did not show that the defendant purposefully availed herself of conducting activities in the State.

The defendant's website: The court articulated the standard in the Fourth Circuit for establishing personal jurisdiction by means of a website. In the Fourth Circuit, the mere act of “placing information on the Internet is not sufficient by itself to subject that person to personal jurisdiction in each State in which the information is accessed.” Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 399 (4th Cir. 2003). Rather, the defendant “must have acted with the manifest intent of targeting Marylanders.” Id. at 400.

The Fourth Circuit has adopted a “sliding scale” model for website-based specific jurisdiction. Under this sliding scale, there are passive, interactive, and semi-interactive websites. At one end of the spectrum are situations where a defendant clearly does business over the internet. If the defendant enters into contracts with residents that involve the knowing and repeated transmission of computer files over the internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on a web site. A passive web site that does little more than make information available is not grounds for the exercise of personal jurisdiction. The middle ground is occupied by interactive web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information.

The defendant's site provided information regarding her camp, a toll-free number, and a registration form which visitors could print and mail to defendant in New York. It also had a Google search box. It did not have an electronic application, a payment-by-credit card function, live chat, or an interactive e-mail form. Accordingly, the court deemed the site passive and an insufficient basis for personal jurisdiction.

The defendant advertised on camp marketing web sites: The plaintiff argued that this was a purposeful availment of the Maryland marketplace. The court concluded that, as with the defendant's own site, the third-party websites do not indicate that defendant “direct[ed] electronic activity into the State . . . with the manifested intent of engaging in business or other interactions within the state.” The generic advertising found on these third-party websites was insufficient to invoke personal jurisdiction.

The effects test: The plaintiff argued that the defendant's willful infringement of its rights satisfied the effects test. The effects test requires that a plaintiff show 1) an intentional tort, 2) suffered by the plaintiff in the forum, and 3) the defendant expressly aimed its conduct at the forum. The court found that the third requirement was lacking - there was no showing that the defendant aimed its conduct at Maryland.

Accordingly, the court dismissed for lack of personal jurisdiction.

The full opinion is available in pdf.

Employers Council on Flexible Compensation v. Feltman (4th Cir.)

Filed: June 21, 2010
Per curiam opinion

Held: Statutory damages may be awarded for violations of the Anticybersquatting Consumer Protection Act (the “ACPA”).

Facts: The Employers Council on Flexible Compensation (“ECFC”) registered the domain name “ecfc.org.” The Employers Council on Flexible Compensation, Ltd. (“ECFC Ltd”), an entity whose owners were involved in litigation with ECFC, registered the domain name “ecfc.com” and maintained a website that was nearly identical to “ecfc.org.”

ECFC filed a lawsuit against ECFC Ltd alleging, among other things, violation of the ACPA. The trial court awarded $20,000 in statutory damages on the ACPA claim. ECFC Ltd appealed, arguing that the trial court abused its discretion in awarding the damages.

Analysis: On appeal, the Fourth Circuit held that the trial court did not abuse its discretion in awarding the damages. Under the ACPA, an owner of a protected mark may bring an action against any person who has a bad faith intent to profit from that mark and registers a domain name that is confusingly similar to that mark. The owner may recover statutory damages (instead of actual damages) in the amount of not less than $1,000 and not more than $100,000 per domain name, as the court considers just.

The Fourth Circuit discussed several factors that shape the analysis of whether statutory damages may be awarded. These factors include exploitation of a close working relationship with the owner of a protected mark and conducting insufficient research as to whether the owner abandoned its rights in the marks.

The full opinion is available in pdf.

LTVN Holdings, LLC v. Odeh (Maryland U.S.D.C.)

Filed: November 5, 2009.
Opinion by: Judge Catherine C. Blake

Held: A non-resident defendant's assent to a forum selection clause in an Internet "clickwrap" agreement, alone, is sufficient to justify the exercise of personal jurisdiction over such a defendant and constitutes a waiver of any objection to venue.

Facts: Defendant LLC and its principal, citizens of Louisiana, obtained access to Plaintiff's Internet-based video content by registering on Plaintiff's website and accepting Plaintiff's on-line terms of use. The terms included a forum-selection clause, requiring that "any action to enforce this agreement shall be brought in the federal or state courts located in the State of Maryland." Plaintiff sued both the LLC and its principal in Maryland, alleging that they improperly tampered with Plaintiff's video content and passed it off on their website as the Defendant LLC's property. Defendants never visited Maryland and conducted no business there.

Analysis: The forum-selection clause in the Network Affiliate Agreement is valid, mandatory, and enforceable. Courts have routinely upheld such clauses where defendants clicked only once on a button indicating their assent to an on-line agreement containing those terms, even if they have not read the agreements. Defendant did not meet its "heavy burden" of showing that the forum-selection clause was "unreasonable, unfair, or unjust" in order to justify a judicial refusal to enforce it. As a result, Defendants' consent to the forum-selection clause, standing alone, is sufficient to confer personal jurisdiction in Maryland and makes venue in this district proper. Assent to the clause constitutes a waiver of objections to both personal jurisdiction and venue.

The plaintiff had previously prevailed in two other cases challenging the same type of contract provisions, Costar Realty Information, Inc. v. Field, 612 F.Supp. 2d 660 (2009) and Costar Realty Information, Inc. v. Meissner, 604 F.Supp. 2d 757 (2009).

Practice Pointer: Corporate principals, like the President of the Defendant LLC here, may be exposing themselves to personal liability merely by "clicking" their assent to an on-line service-provider's terms of use, even if the entity is the intended user of the on-line content. Such agreements may not distinguish between a user acting in his personal capacity and a user acting as agent for a corporate principal.

The full opinion is available in PDF.

Blue Bird, LLC v. Nolan (Cir. Ct. Mont. Cnty)

Filed April 28, 2009
Opinion by Judge Ronald B. Rubin

Held: Deciding an issue of first impression in the State, the Circuit Court for Montgomery County held that an internet "click-wrap" agreement governing terms of use of a website is valid and enforceable under Maryland law.

Facts: The issue arose in connection with the defendants' motion to dismiss for lack of personal jurisdiction. The defendants' sole contacts with the State were over the internet. Among the relevant contacts, the defendants agreed to terms of use on the plaintiff's website by clicking "I accept." The terms included a forum selection clause whereby the defendants purported to consent to jurisdiction in the State. The court applied an objective standard to evaluate the formation of a contract and concluded that the defendants manifested their assent to the terms of use by clicking.

The full opinion is available in PDF.