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Kindig It Design, Inc. v. Creative Controls, Inc.
Citations: 157 F. Supp. 3d 1167; 2016 U.S. Dist. LEXIS 6712; 2016 WL 247574Docket: Case No. 2:14-cv-00867-JNP-BCW
Court: District Court, D. Utah; January 19, 2016; Federal District Court
Creative Controls, Inc. successfully moved to dismiss and/or transfer Kindig-It Design, Inc.'s supplemental and second amended complaint, citing a lack of personal jurisdiction and failure to state claims under Rule 12(b)(2), (3), and (6). Judge Jill N. Parrish presided over the hearing on September 24, 2015, and requested additional memoranda due to insufficient initial briefings, received on October 12, 2015. The court determined that Kindig demonstrated sufficient contacts with Utah to establish personal jurisdiction for non-patent claims, but not for patent claims. Additionally, only some of Kindig's claims were adequately stated under Rule 12(b)(6). In support of its motion, Creative Controls provided an affidavit from its president asserting no significant contacts with Utah, as it is a Michigan corporation without a business presence, employees, property, or bank accounts in Utah. Kindig contended four contacts: a website allowing orders from Utah, a custom parking brake donation, a single sale of a door handle to a Utah customer, and alleged copying of photographs from Kindig’s website. The court found that the website did not specifically target Utah customers, and Creative Controls’ president confirmed it did not systematically seek Utah customers. The parking brake donation occurred five years prior, with Kindig providing a disk of photographs for promotional use, which are now claimed to be infringed. The single sale to a Utah customer was arranged at Kindig's request and involved a relative of a Kindig employee, which both parties agreed did not warrant personal jurisdiction. Consequently, the court granted in part and denied in part Creative Controls' motion to dismiss. Creative Controls contests the court's personal jurisdiction, which hinges on the defendant's connections to the forum state. General personal jurisdiction requires continuous and systematic affiliations rendering a defendant essentially "at home" in the state, which the parties agree Creative Controls lacks in Utah. Therefore, the focus shifts to specific personal jurisdiction, which is determined by whether the plaintiffs' claims arise from the defendant's contacts with the forum. The court must analyze each of Kindig's claims individually, acknowledging that certain claims, such as patent infringement and copyright infringement, are factually unrelated. This means specific personal jurisdiction may exist for some claims but not for others. If the court has specific personal jurisdiction over one claim, it may invoke pendent personal jurisdiction to hear related claims without independent jurisdiction provided the claims are sufficiently related. The analysis further involves deciding whether Tenth Circuit or Federal Circuit law applies. Both circuits align on the principle that Utah's long-arm statute allows jurisdiction to the extent permitted by due process. For patent-related claims, Federal Circuit law is used, while Tenth Circuit law governs non-patent-related claims. The plaintiff is responsible for establishing personal jurisdiction in both the Federal Circuit and Tenth Circuit. When a motion to dismiss is filed without an evidentiary hearing, the plaintiff only needs to make a prima facie case for personal jurisdiction, supported by affidavits or written materials, with any factual disputes resolved in the plaintiff's favor. In this case, the court lacks specific personal jurisdiction over Creative Controls regarding patent-related claims. Kindig claims jurisdiction based on Creative Controls' interactive website, arguing it reflects intent to conduct business in Utah. Creative Controls counters that it has not made sales to Utah residents, except for one related to Kindig, and there is no evidence of other Utah residents viewing the site. Under Federal Circuit law, specific personal jurisdiction requires that the defendant purposefully directed activities at the forum's residents, the claim must relate to those activities, and asserting jurisdiction must be reasonable. Kindig relies on the Zippo Mfg. Co. sliding scale framework to argue that Creative Controls' website indicates purposeful direction. However, the Federal Circuit has not adopted this framework, and there is significant uncertainty regarding how internet contacts influence personal jurisdiction evaluations across various circuits. The court finds the Zippo sliding scale framework unpersuasive for determining personal jurisdiction in this case. Both parties dispute the classification of Creative Controls’ website under this framework. However, the allegations in the Supplemental and Second Amended Complaint suggest that the website is highly interactive, allowing users to place orders before the lawsuit was filed. This level of interactivity would typically establish personal jurisdiction based on the website alone, even though there is no evidence that any Utah resident interacted with it, aside from a single sale requested by Kindig, which is excluded from the analysis. An affidavit from Creative Controls’ president confirms that the company does not target Utah residents for sales. The court emphasizes that the absence of specific contacts with Utah undermines the justification for applying the Zippo sliding scale instead of traditional personal jurisdiction analysis. The court argues that applying Zippo could eliminate geographic limitations on personal jurisdiction, allowing any court in any state to assert jurisdiction solely based on an interactive website. This scenario would fundamentally disrupt the concept of geographical judicial authority. Furthermore, in the current digital landscape, the vast majority of websites are interactive, making it challenging to rely on Zippo for jurisdictional determinations. Many websites, regardless of their complexity, facilitate various user interactions, and mobile applications add another layer of engagement that bypasses traditional websites entirely. Maintaining an interactive website is now accessible to both individuals and organizations, particularly with the rise of social media platforms like Facebook, where users can easily create pages that allow for extensive interaction. This level of interactivity on social media can surpass that of websites considered highly interactive in the past, such as those assessed in the 1997 Zippo case. The increasing number of interactive websites raises concerns about the applicability of the Zippo sliding scale for personal jurisdiction, as it may lead to an overextension of jurisdictional reach. The Second Circuit has criticized the Zippo framework, asserting that traditional principles of statutory and constitutional personal jurisdiction should guide analysis instead. Traditional jurisdiction tests have adapted to technological advancements, likening internet presence to that of a public telephone number, which does not automatically confer jurisdiction based on mere availability. For personal jurisdiction to exist, a defendant must purposefully avail themselves of a specific forum, which requires targeted actions toward that forum. The court emphasizes that merely having a website does not equate to purposeful availment; instead, there must be demonstrable intent to engage with the forum's market. The analysis of Creative Controls’ website will focus on whether any interactions with Utah residents relate to the claims of patent infringement at issue. A patent infringement claim under 35 U.S.C. § 271(a) arises when an alleged infringer makes, uses, offers to sell, or sells a patented invention without authority. In this case, Creative Controls has no evidence of selling infringing products in Utah except for one product sold at Kindig's request. Specific personal jurisdiction over Creative Controls requires that it established contacts with Utah by offering to sell infringing products to its residents. The Federal Circuit defines "offer to sell" based on traditional contract law, which involves a communication that invites acceptance to form a bargain. Broad interpretations of "offer to sell" include instances where defendants provide price quotes and promotional materials to potential customers. However, plaintiffs must present evidence that such offers were communicated to relevant parties in the forum state. For example, a court noted that allegations were insufficient when there was no evidence of South Carolina residents accessing a defendant's website. The Federal Circuit emphasizes that purposeful availment must be demonstrated, particularly in online contexts, by showing that forum residents interacted with the defendant’s website. To establish that Creative Controls targeted Utah, Kindig must demonstrate that either Creative Controls intentionally aimed its activities at Utah users or that such users engaged with its website. At the motion to dismiss stage, Kindig needs only to allege facts suggesting that Creative Controls made an offer to a Utah resident beyond the sale arranged by Kindig. Kindig has not met its burden to establish specific personal jurisdiction over Creative Controls regarding patent claims. Although Kindig claims that Creative Controls’ interactive website promotes its products and was capable of facilitating transactions, it has not provided evidence that Creative Controls intentionally targeted or made offers to Utah residents. An affidavit from Creative Controls’ president states that the company does not target customers in Utah, and there is no indication that any Utah resident has visited the website outside of Kindig's organized efforts. Consequently, the court finds insufficient minimum contacts with Utah to justify jurisdiction over patent-related claims. Conversely, the court holds that it does have personal jurisdiction over Creative Controls for non-patent claims related to allegedly copied photographs. Kindig presents three arguments for this jurisdiction: first, the website's interactivity; second, the alleged copying of photographs from Kindig's Utah site; and third, Creative Controls' prior donation of a parking brake and receipt of photographs. Under Tenth Circuit law, specific personal jurisdiction requires that the defendant has purposefully availed itself of conducting activities in the forum state, and the claims must arise from those activities. The court notes that the interactive nature of Creative Controls’ website alone does not fulfill the purposeful availment requirement, and while Kindig references the Zippo sliding scale for assessing jurisdiction based on website interactivity, the Tenth Circuit has not definitively endorsed this test. A jurisdictional analysis must maintain traditional geographic limitations, emphasizing the need for intentional activity directed at a forum state rather than mere accessibility. The court finds the Zippo standard unpersuasive under Tenth Circuit law, reaffirming that the test of minimum contacts and purposeful availment applies. Creative Controls did not purposefully avail itself of the Utah forum through its website. However, allegations of illegal copying of photographs from Kindig's Utah website establish personal jurisdiction over Creative Controls for claims related to this infringement. Unlike previous Zippo-based arguments, the claims indicate actual contacts with the forum. The court accepts that these actions signify purposeful availment, making it foreseeable and reasonable for Creative Controls to be subject to Utah jurisdiction. Of Kindig's fourteen claims against Creative Controls, only claims 3 through 10, which involve conversion, copyright infringement, and related issues (the Copyright-Related Claims), arise from the alleged copying of photographs and are thus subject to Utah’s jurisdiction. Conversely, claims 1, 2, 7, 11, 12, 13, and 14 do not relate to the alleged copying and are not connected to Utah. The court must now evaluate whether exercising personal jurisdiction over the Copyright-Related Claims aligns with notions of fair play and substantial justice, considering factors such as the burden on the defendant, Utah's interest in the case, the plaintiff's need for relief, the efficiency of resolution, and the collective interests of the states in upholding social policies. Creative Controls contends that defending a lawsuit in Utah, while based in Michigan, would impose a significant burden; however, the court finds no substantial due process violation given modern transportation and communication. Utah's interests in protecting local copyright ownership and adjudicating unfair trade practices support the exercise of specific personal jurisdiction over Creative Controls. The court clarifies that it cannot assert pendent personal jurisdiction for claims lacking an independent jurisdictional basis unless they arise from the same operative facts. In this case, the unrelated patent claims and business disparagement claims do not meet this criterion, leading to the conclusion that pendent personal jurisdiction is absent. Regarding venue, Creative Controls argues that it is improper due to inconvenience; however, the court, having established specific personal jurisdiction over the Copyright-Related Claims, determines that venue is proper under 28 U.S.C. § 1391(a)(c)(2). The court also denies the request to transfer the Copyright-Related Claims to Michigan, finding no unfairness in litigating them in Utah. Finally, the court addresses Creative Controls’ motion to dismiss under Rule 12(b)(6), concluding that it will only consider the motion concerning the Copyright-Related Claims, as it has jurisdiction solely over those matters, except for the fraud claim. Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint for failing to state a claim upon which relief can be granted. In evaluating such motions, courts accept well-pleaded facts as true, favoring the plaintiff, but do not accept legal conclusions or merely conclusory statements as valid. A claim must be plausible, meaning it must present factual content that allows the court to infer the defendant's liability. The plaintiff is not required to provide extensive factual details but must offer more than labels or a formulaic recitation of the claim's elements. In the case at hand, A. Kindig has adequately pleaded its copyright infringement claims against Creative Controls. Creative Controls contends that Kindig's claims are deficient in three respects: insufficient identification of the copyrighted materials, lack of clarity regarding which of its works infringe, and potential invalidity of some copyrights. 1) The court finds that Kindig’s Complaint sufficiently identifies the copyrighted materials, referencing specific descriptions and attaching relevant copyright registration information. While attaching the actual copyrighted works could have been beneficial, it is not a requirement for surviving a motion to dismiss, as the Complaint meets the standard of providing a clear and concise statement of entitlement to relief. 2) Additionally, Kindig has adequately identified Creative Controls’ alleged infringing actions. Creative Controls has not provided Tenth Circuit authority to support its claim that each infringing item must be specifically named in the Complaint for it to proceed. Thus, the court will consider each of these arguments in detail as the case progresses. Complaints must provide defendants with fair notice of the claims and the supporting grounds. The Complaint against Creative Controls alleges that its website features photographs of customized automobiles nearly identical to those on Kindig's website, establishing a basis for copyright infringement. This satisfies Rule 8's requirements. Creative Controls' argument regarding the potential invalidity of some copyright registrations fails, as Kindig has sufficiently identified the copyrighted works to withstand a motion to dismiss. Creative Controls has not provided enough evidence to challenge the validity of the copyrights at this stage, although it may seek summary judgment if valid claims arise during discovery. Additionally, Kindig's claims for false advertising and deceptive trade practices are upheld. Creative Controls asserts that the photographs in question are not materially misleading and would not influence consumer decisions. However, Kindig only needs to demonstrate that its claims are plausible rather than likely to survive a motion to dismiss. The court finds it plausible that the photographs could influence consumers, indicating that Creative Controls likely intended to attract potential customers using these images. Finally, the court declines to dismiss Kindig’s unjust enrichment and conversion claims as preempted by federal copyright law. Creative Controls relies on a Tenth Circuit case to support its argument, but since it has also claimed that some copyrights may be invalid, further discovery is required to resolve these issues. The court is unable to determine whether unjust enrichment and conversion claims are preempted by copyright law, as the claims include photographs that may not be validly copyrighted. Thus, the court will not address preemption at this time. Kindig's fraud claim, based on Creative Controls' use of Kindig's work on its website, lacks sufficient factual support. Kindig alleges that Creative Controls misled the public but does not claim to have been defrauded itself, which is necessary under Utah law. The court cites a precedent affirming that a fraud claim requires reliance on the fraudulent misrepresentation, which Kindig has not demonstrated. As for personal jurisdiction, the court finds it lacks jurisdiction over Creative Controls concerning claims 1, 2, 7, 9, 11, 12, 13, and 14, while retaining jurisdiction over the remaining claims. Claims 1, 2, 12, 13, and 14 relate to patent infringement or inducement. Claim 7 pertains to unfair competition but is still connected to patent issues. Creative Controls’ alleged copying of photographs and a parking brake donation do not relate to patent claims. The parties have agreed that a single sale to a Utah resident does not establish jurisdiction, consistent with rulings that prevent plaintiffs from manufacturing jurisdiction through orchestrated sales in a specific forum. Consequently, the court grants in part and denies in part Creative Controls’ Motion to Dismiss, dismissing claims 1, 2, 7, 9, 11, 12, 13, and 14. Contacts with a forum formed by a defendant, rather than those resulting from the unilateral actions of a plaintiff, are relevant for due process considerations. The excerpt highlights that many interactive features relevant to the legal landscape did not exist in 1997 when the Zippo case was decided. Although individuals and organizations do not own the technological infrastructure of their Facebook pages, they are responsible for creating and maintaining most of the content, implying that they should be viewed as maintaining a highly interactive website under the Zippo test. A distinction is made between commercial activity, as addressed in Zippo, and the generally non-commercial nature of individual social media pages; however, the court questions the relevance of this distinction for personal jurisdiction, noting that "purposeful availment" can occur for non-commercial reasons. Additionally, it is acknowledged that the specific product sold at Kindig's request cannot establish personal jurisdiction, and Tenth Circuit law applies to personal jurisdiction issues unrelated to patents. The court expresses confusion regarding Creative Controls' claim of being unable to identify which photographs support copyright claims while simultaneously arguing that the images are too small to impact consumer decisions.