PLIXER INTERNATIONAL, INC., Plaintiff, Appellee, v. SCRUTINIZER GMBH, Defendant, Appellant.
No. 18-1195
United States Court of Appeals For the First Circuit
September 13, 2018
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before Lynch, Selya, and Lipez, Circuit Judges.
James G. Goggin, with whom Verrill Dana, LLP was on brief, for appellee.
John A. Woodcock III, with whom Edward J. Sackman and Bernstein Shur PA were on brief, for appellant.
LYNCH, Circuit
I.
We take the following facts from the undisputed record. Scrutinizer GmbH1 (Scrutinizer) is a German corporation with its principal place of business in Kassel, Germany. Through its interactive, English-language website, Scrutinizer runs a “self-service platform” that helps customers build better software. Scrutinizer brings its customers’ code from a third-party hosting service like GitHub2 to its “controlled cloud environment,” where it runs “software analysis tools” meant to “improve source-code quality, eliminate bugs, and find security vulnerabilities.”
Scrutinizer offers potential customers a fourteen-day free trial. In the course of its activities, Scrutinizer employs Google Analytics.
Customers who contract to use Scrutinizer‘s online service can pay only in euros. Scrutinizer‘s standard contract with those customers contains a forum-selection clause and a choice-of-law clause that provide that all lawsuits relating to the contract be brought in German courts and under German law. Scrutinizer maintains no U.S. office, phone number, or agent for service of process; it directs no advertising at the United States; and its employees do not go to the United States on business.
Scrutinizer provides its service globally. In an affidavit, Scrutinizer‘s founder said that customers can use the service “anywhere where Internet access is available.” Scrutinizer‘s website states that it is “[t]rusted by over 5000 projects and companies around the world.” Over three-and-a-half years, from January 2014 to June 2017,3 Scrutinizer sold its services to 156
Plixer International, Inc. (Plixer), a Maine corporation, sued Scrutinizer in federal district court in Maine on November 21, 2016, for trademark infringement. Plixer owns the U.S. registered mark “Scrutinizer,” for which it filed in July 2015. Plixer‘s trademark application said that Plixer used the mark as early as November 2005. That application covered “[c]omputer software and hardware for analyzing, reporting and responding to malware infections and application performance problems, used in the field of information technology.” In its complaint, Plixer alleged that Scrutinizer‘s use of the term “Scrutinizer” caused “confusion, mistake or deception as to the source” of Scrutinizer‘s services; that the use “will infringe and/or dilute Plixer‘s prior rights” in the mark; that the use “will interfere with Plixer‘s use” of its mark; and that Scrutinizer‘s “services are closely related to the services covered by Plixer‘s” mark, so “the public is likely to be confused about whether Plixer is the source of [Scrutinizer‘s] services or whether Plixer is affiliated with or the sponsor of [Scrutinizer‘s] services.”
Plixer gave two bases for personal jurisdiction over Scrutinizer, only one of which is at issue in this appeal.4 It said that Scrutinizer‘s nationwide contacts with the United States supported specific jurisdiction under
In January 2017, after this lawsuit began, Scrutinizer filed a U.S. trademark application for “Scrutinizer.” The record is silent on the reasons why Scrutinizer filed this application.
On prima facie review, the district court found that it could constitutionally exercise specific personal jurisdiction over Scrutinizer under
As part of its analysis, the district court considered Scrutinizer‘s application for U.S. trademark protection. The record gave the district court “no hint” why Scrutinizer had filed the application. Id. at 243. The district court did not find that contact conclusive, but said that “it does confirm [Scrutinizer‘s] desire to deal with the American market.” Id. at 243.
We granted this interlocutory appeal on the district court‘s recommendation.6
II.
A. Standard of Review
The district court held that Plixer had made a prima facie showing of personal jurisdiction. On prima facie review, we take the plaintiff‘s evidentiary proffers as true and we consider uncontradicted facts proffered by the defendant. C.W. Downer & Co. v. Bioriginal Food & Sci. Corp., 771 F.3d 59, 65 (1st Cir. 2014). The plaintiff‘s burden is to proffer evidence “sufficient to support findings of all facts essential to personal jurisdiction” without relying on unsupported allegations. A Corp. v. All Am. Plumbing, Inc., 812 F.3d 54, 58 (1st Cir. 2016). We review de novo the district court‘s conclusion that Plixer met its burden of proffering sufficient evidence to support findings of all facts essential to personal jurisdiction. See Foster-Miller, Inc. v. Babcock & Wilcox Can., 46 F.3d 138, 147 (1st Cir. 1995).
B. Personal Jurisdiction
Plixer‘s basis for asserting personal jurisdiction over Scrutinizer is
This is a federal question case, so constitutional limits on jurisdiction come from the Due Process Clause of the Fifth Amendment. United States v. Swiss Am. Bank, Ltd. (Swiss II), 274 F.3d 610, 618 (1st Cir. 2001). The Fifth Amendment Due Process Clause requires the plaintiff to “show that the defendant has adequate contacts with the United States as a whole, rather than with a particular state.”8 Id.
Due process requires that the defendant “have certain minimum contacts with [the forum] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.‘” Int‘l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). Plixer has asserted specific personal jurisdiction over Scrutinizer, so the minimum contacts inquiry has three prongs: relatedness, purposeful availment, and reasonableness. That is, Plixer must show that (1) its claim directly arises out of or relates to the defendant‘s forum activities; (2) the defendant‘s forum contacts represent a purposeful availment of the privilege of conducting activities in that forum, thus invoking the benefits and protections of the forum‘s laws and rendering the defendant‘s involuntary presence in the forum‘s courts foreseeable; and (3) the exercise of jurisdiction is reasonable. A Corp., 812 F.3d at 59.
Plixer must show that it has met all three requirements to establish personal jurisdiction. C.W. Downer, 771 F.3d at 65. Scrutinizer has conceded the first requirement;9 we hold that Plixer has met the remaining two.
1. Purposeful Availment
Plixer bears the burden of demonstrating that Scrutinizer has purposefully availed “itself of the privilege of conducting activities within the forum [], thus invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958). The purposeful availment requirement ensures that the exercise of jurisdiction is essentially voluntary and foreseeable, C.W. Downer, 771 F.3d at 66, not premised on a defendant‘s “random, fortuitous, or attenuated contacts,” Carreras v. PMG Collins, LLC, 660 F.3d 549, 555 (1st Cir. 2011) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). This requirement applies to foreign defendants. See C.W. Downer, 771 F.3d at 66 (citing J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 885-87 (2011) (plurality opinion)).
The Supreme Court has not definitively answered how a defendant‘s online activities translate into contacts for purposes of the minimum contacts analysis. Instead, in Walden v. Fiore, it “le[ft] questions about
This Court has twice addressed “virtual contacts,” but in cases whose factual scenarios are far-removed from this one. One baseline principle has emerged: a website operator does not necessarily purposefully avail itself of the benefits and protections of every state in which its website is accessible. See A Corp., 812 F.3d at 61 (holding that “the mere availability of a passive website” cannot by itself subject a defendant to personal jurisdiction in the forum); Cossaboon v. Maine Med. Ctr., 600 F.3d 25, 35 (1st Cir. 2010) (noting that the running of a “website that is visible in a forum and that gives information about a company and its products” cannot alone support the exercise of jurisdiction) (quoting McBee v. Delica Co., 417 F.3d 107, 124 (1st Cir. 2005)); accord be2 LLC v. Ivanov, 642 F.3d 555, 558-59 (7th Cir. 2011); Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 454 (3d Cir. 2003); ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 713-14 (4th Cir. 2002). The district court held that Scrutinizer had not merely made its website available in the United States; it had used that website to engage “in sizeable and continuing commerce with United States customers.” Plixer, 293 F. Supp. 3d at 242. As a result, Scrutinizer “should not be surprised at United States-based litigation.” Id. We agree.
Scrutinizer attacks the district court ruling with three arguments. Scrutinizer first says that it did no more than enter its product into the stream of commerce. Second, it argues that its contacts with the United States were not its own but instead the product of its customers’ unilateral actions. And third, it says that because it did not specifically target the United States it is not subject to specific personal jurisdiction in a United States forum. We reject each attack.
First, this is not the prototypical stream-of-commerce case. Cases including a standard stream-of-commerce analysis usually involve entities who cannot necessarily predict or control where downstream their products will land; intervening actors like distributors may take the products to unforeseeable markets. But no intervening actor can bring Scrutinizer‘s product somewhere unexpected. Scrutinizer‘s service goes only to the customers that Scrutinizer has accepted. This means that we have an objectively clearer picture of Scrutinizer‘s intent to serve the forum, the crux of the purposeful availment inquiry. See C.W. Downer, 771 F.3d at 66.
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), illustrates a significant difference between this case and the prototypical stream-of-commerce one. There, the Audi-owning plaintiff drove his car into Oklahoma, a market that the defendant did not then serve. See id. at 295. A car manufacturer cannot limit where its customers take its product. In contrast, Scrutinizer can take steps to limit access to its website. For instance, Scrutinizer could design its site to not interact with U.S. users, cf. Yahoo! Inc. v. La Ligue Contre Le Racisme et L‘Antisemitisme, 433 F.3d 1199, 1203 (9th Cir. 2006), but it has not done so. And Scrutinizer could take the low-tech step of posting a disclaimer that its service is not intended for U.S. users. See Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997); cf. Illinois v. Hemi Group LLC, 622 F.3d 754, 755 (7th Cir. 2010). Again, it has
Scrutinizer says that we should not consider whether a defendant blocks access to its website — access-blocking software is imperfect, developing technology. If a defendant tries to limit U.S. users’ ability to access its website, however, that is surely relevant to its intent not to serve the United States. The converse is true here: Scrutinizer‘s failure to implement such restrictions, coupled with its substantial U.S. business, provides an objective measure of its intent to serve customers in the U.S. market and thereby profit. And Scrutinizer‘s warnings about the inefficacy of access-blocking technology are misplaced based on the record before us. Scrutinizer can track where its customers are from — it provided state-by-state customer information in response to Plixer‘s discovery request.
Second, Scrutinizer voluntarily served U.S. customers. Specific personal jurisdiction must be based on a defendant‘s voluntary contact with the forum; it “may not rest on the ‘unilateral activity of another party or a third person.‘” Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 208 (1st Cir. 1994) (quoting Burger King, 471 U.S. at 475). Here, Scrutinizer made a globally accessible website and U.S. customers used that website to purchase and pay for Scrutinizer‘s service. Further, Scrutinizer knew that it was serving U.S. customers and took no steps to limit its website‘s reach or block its use by U.S. customers. After three-and-a-half years of knowingly serving U.S. customers, Scrutinizer cannot now claim that its contact with the United States was involuntary. Cf. Walden, 571 U.S. at 286 (noting that the exercise of jurisdiction may be constitutional even though a defendant‘s forum contacts are “intertwined with his transactions or interactions with the plaintiff or other parties“).
Third, Scrutinizer‘s purposeful U.S. contacts were sufficient to put Scrutinizer on notice that it should expect to be haled into U.S. court. Scrutinizer has “target[ed] the world” by making its website globally accessible. See Nicastro, 564 U.S. at 890 (Breyer, J., concurring). But Scrutinizer says that it could not reasonably anticipate specific jurisdiction because it did not specifically target the United States with its business. We disagree.
Supreme Court precedent does not establish specific targeting of a forum as the only means of showing that the purposeful availment test has been met. The Supreme Court last considered personal jurisdiction over a foreign defendant in Nicastro. The Nicastro plurality would have permitted the exercise of jurisdiction “only where the defendant can be said to have targeted the forum.” Id. at 882. That is the same rule that Scrutinizer urges us to adopt. However, this rule did not command a majority on the Court and so is not binding here.
Justice Breyer found no jurisdiction under any of the Court‘s precedents. There was “no ‘regular . . . flow’ or ‘regular course’ of sales,” as required by the concurrences in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987), see id. at 117 (Brennan, J., concurring in part and concurring in judgment); id. at 122 (Stevens, J., concurring in part and concurring in judgment). Nicastro, 564 U.S. at 889 (Breyer, J., concurring). And there was “no ‘something more‘” that the Asahi plurality would have required, see Asahi, 480 U.S. at 111-12 (opinion of O‘Connor, J.). Nicastro, 564 U.S. at 889 (Breyer, J., concurring). As such, “the plurality‘s seemingly strict no-jurisdiction rule” was unnecessary. Id. at 890. Justice Breyer also criticized New Jersey‘s test, which would subject a foreign defendant to jurisdiction so long as it “knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states.” Id. at 891. We need not adopt such a broad rule as the New Jersey court‘s to uphold the exercise of specific personal jurisdiction over Scrutinizer.
Ultimately, although a close call, we conclude that the German company could have “reasonably anticipated” the exercise of specific personal jurisdiction based on its U.S. contacts. Scrutinizer‘s “regular flow or regular course of sales” in the United States show that it has purposefully availed itself of the U.S. forum. The record does not reveal what percentage of Scrutinizer‘s business came from the United States. Nor does the record reveal whether Scrutinizer ever did an online trademark search for the term “Scrutinizer,” either before or after it sought U.S. customers.11 But the record does show that Scrutinizer used its website to obtain U.S. customer contracts. Those contracts yielded nearly $200,000 in business over three-and-a-half years. This is not a situation where a defendant merely made a website accessible in the forum. See, e.g., Scottsdale Capital Advisors Corp. v. The Deal, LLC, 887 F.3d 17, 21 (1st Cir. 2018). Instead, Scrutinizer‘s voluntary service of the U.S. market and its not insubstantial income from that market show that it could have “reasonably anticipated” being haled into U.S. court.
This conclusion is also consistent with post-Nicastro rulings from around the country. For instance, the en banc Oregon Supreme Court found a regular course of sales where the defendant sold “over 1,100 CTE battery chargers within Oregon over a two-year period,” with in-state sales totaling about $30,000. Willemsen v. Invacare Corp., 282 P.3d 867, 874, 871 (Or. 2012) (en banc). This “pattern of sales” made the exercise of personal jurisdiction over the defendant constitutional. Id. at 877. In contrast, a New Jersey federal district court found no regular course of sales when, over about a year, fewer than ten in-state sales brought the defendant “less than $3,383 in revenue.” Oticon, Inc. v. Sebotek Hearing Sys., LLC, 865 F. Supp. 2d 501, 514-15 (D.N.J. 2011). “Such scant sales activity” did not “justify the exercise of specific jurisdiction” there. Id. Scrutinizer‘s U.S. business more resembles the former example than the latter one.
Further, our holding is in accord with those of our sister circuits. The Ninth Circuit upheld the exercise of jurisdiction over a defendant who “continuously and deliberately exploited” the forum market, and who specifically targeted its website at the forum market. Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1230 (9th Cir. 2011). The Sixth Circuit upheld the exercise of jurisdiction over a defendant who “regularly [chose] to do business with [forum] residents.” Bird v. Parsons, 289 F.3d 865, 875 (6th Cir. 2002). In contrast, the Seventh Circuit found no jurisdiction when the plaintiff pointed to no litigation-related in-forum sales and to no efforts to specifically target the forum. See Advanced Tactical Ordinance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 801, 803 (7th Cir. 2014). And the Fourth Circuit found that a Maryland court had no jurisdiction over a nonprofit defendant who limited its services to Illinois and who accepted, over ten years, less than $1,600 in donations from Marylanders. See Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 395, 401 (4th Cir. 2003). We think each of these are consistent with our holding that Scrutinizer is subject to personal jurisdiction.
Finally, we consider Scrutinizer‘s U.S. trademark application, filed after this litigation began. We have stated that “in most cases, contacts coming into existence after the cause of action arose will not be relevant.” Harlow, 432 F.3d at 62. But we made that statement in a suit where the plaintiff alleged medical malpractice. See id. at 53. That discrete-in-time tort is unlike the alleged continuing “tortious” conduct at issue here. Moreover, Harlow based its general rule on the concept of “relatedness,” see id. at 62, which Scrutinizer has conceded. Because Scrutinizer‘s trademark application lies outside Harlow‘s rule, we consider the application for whatever impact it has.
The parties have not spoken to why Scrutinizer filed the application, except to suggest that filing may be a precondition for sending a cease and desist letter. We agree with the district court that this contact confirms Scrutinizer‘s desire to deal with the U.S. market, but does not “tip the scales.” Plixer, 293 F. Supp. 3d at 243.
Though Plixer has satisfied the first two prongs of the analysis, we must still see whether the exercise of jurisdiction here is fair and reasonable. We consider five “gestalt” factors:
(1) the defendant‘s burden of appearing [in the forum], (2) the [forum‘s] interest in adjudicating the dispute, (3) the plaintiff‘s interest in obtaining convenient and effective relief, (4) the judicial system‘s interest in obtaining the most effective resolution of the controversy, and (5) the common interests of all sovereigns in promoting substantive social policies.
Ticketmaster, 26 F.3d at 209 (citing Burger King, 471 U.S. at 477). These factors typically “play a larger role in cases . . . where the minimum contacts question is very close.” C.W. Downer, 771 F.3d at 69 (quoting Adelson v. Hananel (Adelson I), 510 F.3d 43, 51 (1st Cir. 2007)). The defendant bears the burden of establishing that the exercise of jurisdiction would be unreasonable, Burger King, 471 U.S. at 477, and, although the question is close, Scrutinizer has not shown that it would be unreasonable to assert jurisdiction here.
We consider first the burden on Scrutinizer. That a foreign defendant is involved here is of some weight. Subjecting a defendant to a foreign legal system poses “unique burdens” that carry “significant weight in assessing the reasonableness” of jurisdiction. Asahi, 480 U.S. at 114. We acknowledge this significant burden, but do not find it dispositive. Scrutinizer does substantial and recurrent business in the U.S. As such it “cannot wholly expect to escape the reach of United States courts.” Jet Wine & Spirits, Inc. v. Bacardi & Co., Ltd., 298 F.3d 1, 12 (1st Cir. 2002). Although this factor points in Scrutinizer‘s favor, its weight is somewhat diminished by Scrutinizer‘s substantial U.S. business.
For further support, Scrutinizer points to the burden of cross-Atlantic travel. But “mounting an out-of-state defense most always means added trouble and cost,” BlueTarp Fin., Inc. v. Matrix Constr. Co., 709 F.3d 72, 83 (1st Cir. 2013), and modern travel “creates no especially ponderous burden for business travelers,” Pritzker v. Yari, 42 F.3d 53, 64 (1st Cir. 1994). A defendant hoping to show that travel burdens should make the difference must show that those burdens are “special or unusual.” BlueTarp, 709 F.3d at 83 (quoting Hannon v. Beard, 524 F.3d 275, 285 (1st Cir. 2008)) (internal quotation marks omitted). Scrutinizer has not done so. As we noted in C.W. Downer, many of the case‘s logistical challenges “can be resolved through the use of affidavits and video devices.” 771 F.3d at 70.
On the second factor, Scrutinizer does not dispute that the United States has an interest in adjudicating a dispute over the application of U.S. trademark law. See, e.g., McBee v. Delica Co., Ltd., 417 F.3d 107, 121 (1st Cir. 2005) (noting the “core purposes of the Lanham Act, which are both to protect the ability of American consumers to avoid confusion and to help assure a trademark‘s owner that it will reap the financial and reputational rewards associated with having a desirable name or product“). Further, the United States has an interest in remedying an alleged injury that occurs in the United States. See Keeton, 465 U.S. at 777.
As to the final three factors, Scrutinizer presents no arguments tending to show that the exercise of jurisdiction would be unreasonable here. It concedes that Plixer has an interest in obtaining effective relief in a U.S. forum. And it doubts whether the fourth and fifth factors apply. Even if the
The gestalt factors do not support Scrutinizer‘s protests. “When minimum contacts have been established, often the interests of the plaintiff and the forum in the exercise of jurisdiction will justify even the serious burdens placed on the alien defendant.” Asahi, 480 U.S. at 114. Scrutinizer has not shown that the exercise of jurisdiction here would be unreasonable.
* * *
Our role is limited to adjudicating the precise issue in front of us. This appeal raised only one issue: whether the exercise of specific personal jurisdiction over Scrutinizer would violate the Fifth Amendment‘s Due Process Clause. We conclude that on the facts here the exercise of jurisdiction would not violate the Due Process Clause.
III.
The judgment of the district court is affirmed.