Adtile Technologies Inc. v. Perion Network Ltd.
Adtile Technologies Inc. v. Perion Network Ltd.
Opinion of the Court
MEMORANDUM OPINION
I. INTRODUCTION
On December 22, 2015, plaintiff Adtile Technologies, Inc. (“Adtile”) filed a complaint for breach of contract, breach of the covenant of good faith and fair dealing, misappropriation of trade secrets and confidential information, copyright and trademark infringement, unfair competition, false designation of origin, common law trademark infringement, and common law unfair competition against defendants Per-ion Network Ltd. (“Perion”) and Intercept Interactive, Inc. d/b/a Undertone (“Undertone”). (D.I. 1) Presently before the court are Perion’s motion to dismiss the complaint for lack of personal jurisdiction (D.I. 22) and Undertone’s motion to stay the present action and compel arbitration (D.I. 25). The court has jurisdiction over the copyright and Lanham Act claims pursuant to 28 U.S.C. §§ 1331, 1338(a) and (b) and 15 U.S.C. § 1121(a). The court has supplemental jurisdiction over Adtile’s ad
II. BACKGROUND
Adtile is a company organized under the laws of the State of California with its principal place of business in San Diego, California. Adtile develops multi-sensor advertising technology and services for smaitphones and tablets, with a focus on mobile “Motion Ads.” (D.I. 1 at ¶ 8) Undertone is a marketing company organized under the laws of the State of New York with a principal place of business in New York, New York. Perion is a company organized under the laws of Israel with a principal place of business in Holon, Israel. (D.1.1 at ¶¶ 9-10)
Since 2013, Adtile has developed and launched Motion Ads, which provide users a unique motion-activated advertising experience. On February 14, 2014, Undertone and Adtile entered into discussions regarding Adtile’s sensor-enabled technology pursuant to a non-disclosure agreement dated March 11, 2014 (“March NDA”). On August 18, 2014, the parties entered into a license agreement (the “License Agreement”) and a new NDA, which provides that Adtile would produce’ Motion Ads and Undertone would sell such ads to its customers. (D,I. 33, ex. 11) On June 12, 2016, Adtile and Undertone terminated the License Agreement (the “Termination Agreement”). (D.I. 33, ex. 16) The License and Termination Agreements provide for the resolution of disputes according to the laws of the State of Delaware. (D.I. 33, exs. 11,16)
According to Adtile, in June 2015, Per-ion inquired about using and investing in Adtile’s technology.
III. PERSONAL JURISDICTION
A. Standard
Rule 12(b)(2) of the Federal Rules of Civil Procedure directs the court to dismiss a case when the court lacks personal jurisdiction. Fed. R. Civ. P. 12(b)(2). When reviewing a motion to dismiss pursuant to Rule 12(b)(2), a court must accept as true all allegations of jurisdictional fact made by plaintiff and resolve all factual disputes in plaintiffs favor. Traynor v. Liu, 495 F.Supp.2d 444, 448 (D.Del. 2007). Once a jurisdictional defense has been raised,, plaintiff bears the burden of establishing, with reasonable, particularity, that sufficient minimum contacts have occurred between defendant and the forum to support jurisdiction. See Provident Nat’l Bank v. Cal. Fed. Sav. & Loan Ass’n, 819 F.2d 434, 437 (3d Cir. 1987). To meet this burden, plaintiff must produce “sworn affidavits or other competent evidence,” since a Rule 12(b)(2) motion “requires resolution of factual issues outside the pleadings.” Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n. 9 (3d Cir. 1984).
Pursuant to the relevant portions of Delaware’s long-arm statute, 10 Del. C. § 3104(c)(l)-(4), a court may exercise personal jurisdiction over a defendant when a defendant or its agent:
(1) Transacts any business or performs any character of work or service in the ' State; •
(2) Contracts to supply services or things in this State;
*521 (3) Causes tortious injury in the State by an act or omission in this, State;
(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State.
10 Del. C. § 3104(c)(l)-(4). With the exception of (c)(4), the long-arm statute requires a showing of specific-jurisdiction. See Shoemaker v. McConnell, 556 F.Supp.2d 351, 354, 355 (D.Del. 2008). Subsection (4) confers general jurisdiction, which requires a greater number of contacts, but allows the exercise of personal jurisdiction even when the claim is uráelated to the forum contacts. See Applied Biosystems, Inc. v. Cruachem, Ltd., 772 F.Supp. 1458, 1466 (D.Del. 1991).
If a defendant is found to be within the reach of the long-arm statute, the court then must analyze whether the exercise of personal jurisdiction comports with due process, to wit, whether plaintiff has demonstrated, that defendant “purposefully availfed] itself of the privilege of conducting activities within the forum state,” so that it should “reasonably anticipate being haled into court there:” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) (citations omitted). For the court to exercise specific personal jurisdiction consistent with due process, plaintiffs cause of action must- have arisen from defendant’s activities in -the forum State. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). For the court to exercise general personal jurisdiction consistent with due process, plaintiffs cause of action can be unrelated to. defendant’s activities in the forum state, so long as defendant has “continuous and systematic contacts with the forum state.” Applied Biosystems, 772 F.Supp. at 1470. In Daimler AG v. Bauman, - U.S. -, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014), the Supreme Court stated that the “paradigm all-purpose forums for general jurisdiction are a corporation’s place of incorporation and principal place of business.” Id. at 749. The Supreme Court did not hold that a corporation may be subject to general jurisdiction only in one of these locations, but rejected the notion that “continuous and systematic” contacts alone could confer general jurisdiction, clarifying that the role of general jurisdiction is to “afford plaintiffs recourse to at least one clear and certain forum in which a corporate defendant may be sued on any and all claims.” Id. at 760-62.
B. Specific Jurisdiction
Adtile contends that this court has specific jurisdiction, because of Perion’s ownership of Undertone and because Perion has marketed Undertone’s “UMOTION” ads as its own. More specifically, the License and Termination Agreements entered into by Undertone and Adtile select Delaware as an appropriate forum for the resolution of disputes. Perion refers to Undertone as its “digital advertising firm.” Perion advertises and supports the sales of motion-activated ads by Undertone, which ads “are sold to Delaware customers for viewing by Delaware end users.” In a December 2015 S&P Capital IQ Company Report on Perion, Perion included on its product list certain products purportedly developed by Undertone. Adtile further contends that Perion has a corporate officer (and another employee) who list their place of employment on Linkedln as “at Perion/Undertone,” which demonstrates a lack of corporate separateness. (D.I. 34 at 6-9; D.I. 36 at.lfif 2,13, exs. A, L)
Specific jurisdiction arises when a defendant has both purposefully directed
A court may pierce the corporate veil in order to “prevent fraud, illegality, or injustice, or when recognition of the corporate entity would defeat public policy or shield someone from liability for a crime.” Zubik v. Zubik, 384 F.2d 267, 272 (3d Cir. 1967). The Third Circuit test is composed of two parts: the alter ego test and the agency test. Lucas, 666 F.2d at 806. The alter ego test requires that the court “ignore the corporate boundaries between parent and subsidiary if fraud or inequity is shown.” Applied Biosystems, 772 F.Supp. at 1463. The agency test con-sidei-s
the degree of control which the parent exercises over the subsidiary. The factors relevant to this determination include the extent of overlap of officers and directors, methods of financing, the division of responsibility for day-to-day management, and the process by which each corporation obtains its business. No one factor is either necessary or determinative; rather it is the specific combination of elements which is significant.
Id. In essence “[t]he activities of a parent company are imputed to the subsidiary only if the subsidiary is the parent’s agent or alter ego so that the “ ‘independence of the separate corporate entities [is] disregarded.’” Fisher v. Teva PFC SRL, 212 Fed.Appx. 72, 76 (3d Cir. 2006) (quoting Lucas, 666 F.2d at 806). Adtile’s evidence includes Linkedln listings of “Perion/Un-dertone” as the employment place for a corporate officer (and another employee) and general allegations- of a lack of corporate separateness. Adtile has not produced any evidence to show that Undertone dope not “make [its] own decisions about day-today activities,” including “designing], manufacturing], marketing], and distributing].” Monsanto Co. v. Syngenta Seeds, Inc., 443 F.Supp.2d 636, 645 (D.Del. 2006). Perion, through a sworn affidavit, states that Perion 'and its subsidiaries maintain separate books, records, and accounts. (D.I. 24 at ¶ 10) Although Adtile demonstrates an overlap of one -director between Perion and Undertone, the test requires a “specific combination of elements.” Applied Biosystems, 772 F.Supp. at 1463 (emphasis added). The allegations are insufficient to support an agency or alter ego theory and, therefore, Adtile has not sufficiently alleged that the court should pierce the corporate veil and attribute Undertone’s actions to Perion.
The Third Circuit Court- of Appeals uses a “purposeful availment” test for deciding whether a defendant’s internet website meets the Burger King test for specific jurisdiction; See Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 452 (3d Cir. 2003). Adtile asks the court to subject Perion to specific jurisdiction in Delaware based on “ongoing sales and adver
C. General Jurisdiction
Perion is not incorporated in Delaware and does not have an office or employees in Delaware. (D.I. 43 at 5; D.I. 24 at ¶ 5) As evidence of Perion’s contacts with Delaware, Adtile submits, a declaration stating that Perion works directly with companies incorporated in Delaware (such as Twitter, Lenovo, and APN LLC). Perion derives the “majority” of its revenue from service agreements with its search partners,- one of which is a Delaware corporation. Moreover, Perion has acquired two Delaware corporations, (D.I. 36 at ¶¶4,,9, 11, 12 15)
According to the Supreme Court, “the exercise of general jurisdiction in every State in which a corporation ‘engages in a substantial, continuous, and systematic course of business’ ... is unacceptably grasping!” Daimler, 134 S.Ct. at 761. “Accordingly, the inquiry ... is not whether a foreign corporation’s in-forum contacts can be said to be in some sense continuous and systematic, it is whether that corporation’s affiliations with the State are so continuous and systematic as to render [it] essentially at home in the forum State.” Id. at 761 (citation ■ and internal quotations omitted).
In the case at bar, the exercise of general jurisdiction over Perion based on the cited relationships with Delaware would be the type of “unacceptably grasping” test the Supreme Court in Daimler sought to avoid. Similarly, Adtile’s contention that Perion’s nationwide sales qualify as business in each state, conferring general jurisdiction in Delaware, is too broad. See id. at 762 n. 20 (“A corporation that operates in many places can scarcely be deemed at home in all of them.”). The Supreme Court’s decision in’ Daimler expressly contradicts Adtile’s position regarding Delaware subsidiaries by rejecting the exercise of general jurisdiction over a company “wherever they have an in-state subsidiary or affiliate.” Id. at 760.
Given that Perion is an Israeli corporation, the court looks to Rule 4 of
IV. ARBITRATION
A. Agreements
The License Agreement
The License Agreement includes a section captioned, “Governing Law; Dispute Resolution,” which provides that the License Agreement “shall be governed by and construed according to the laws of the State of Delaware” and “[a]ny controversy or claim arising out of or relating to this Agreement will be settled by binding arbitration.” Specifically, “[arbitration will be by the JAMS and will be referred to a single neutral arbiter for final determination under the JAMS Comprehensive Arbitration Rules ... and held in Wilmington, Delaware.”
The License Agreement refers to “a separate [NDA], a form of which is attached hereto as Exhibit A, concurrently with the execution of this Agreement and as a. condition precedent to the effectiveness hereof.” (Id. at § 9.14) The NDA
The Termination Agreement provides that certain specified provisions of the License Agreement and NDA survived the Termination Agreement. (D.I. 33, ex. 16 at § 2) It also contains a section “Governing Law; Dispute Resolution,” which includes the same broad and mandatory arbitration provision included in the License Agreement. (Id. at § 6.9)
B. Standard
It is presumed that courts must decide' questions of arbitrability “unless the parties clearly and unmistakably provide otherwise.” Opalinski v. Robert Half Int'l Inc., 761 F.3d 326, 336 (3d Cir. 2014) (citations omitted). The Third Circuit has observed that “[v]irtually every circuit to have considered the issue has determined that incorporation of the [American Arbitration Association (“AAA”) ] rules constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability” in the context of bilateral arbitration disputes.
According to the JAMS Comprehensive Arbitration ■ Rules, the “Parties shall be deemed to have made these Rules a part of their Arbitration agreement ... whenever they have provided for Arbitration by JAMS under its Comprehensive Rules or for Arbitration by JAMS without specifying any particular JAMS Rules ...” (D.I. 27, ex. C at Rule 1(b)). Moreover, JAMS provides that:
*526 Jurisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought, and who are proper Parties to the Arbitration, shall be submitted to and ruled on by the Arbitrator. The Arbitrator has the authority to determine jurisdiction and arbitrability issues as a preliminary matter.
(Id. at Rule 11(b)) (emphasis added)
C. Analysis
Adtile concedes that its breach of contract and breach of the covenant of good faith and fair dealing are properly arbitrable, but argues that each other claim—misappropriation of trade secrets and confidential information, copyright and trademark infringement, unfair competition, false designation of origin, common law trademark infringement, common law unfair competition—are not subject to arbitration. Each of Adtile’s claims arise from the following set of facts. Adtile and Undertone entered' into the License Agreement. Adtile shared with Undertone certain material, which is allegedly copyrighted, trademarked, confidential, or trade secret information.
V. STAY
The FAA mandates that district courts shall stay proceedings while arbitration is pending if a suit is brought “upon any issue referable to arbitration under an agreement in writing for such arbitration” and the court is “satisfied that
When determining whether a given claim falls within the scope of an arbitration agreement, a court must “focus on the factual allegations in the complaint rather than the legal causes of action asserted.” “If these factual allegations ‘touch matters’ covered by the parties’ contract, then those claims must be arbitrated, whatever the legal labels attached to them.” Moreover, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”
Varallo v. Elkins Park Hosp., 63 Fed.Appx. 601, 603 (3d Cir. 2003) (citations omitted).
The parties do not dispute whether the arbitration provision is valid, instead, Adtile argues that with the exception of the breach of contract and breach of the covenant of good faith and fair dealing, its claims are not subject to arbitration. The court has determined -that whether Adtile’s claims at bar are subject to arbitration is properly determined, by the arbitrator. As discussed above, each of Adtile’s claims stem from the same factual allegations and may be properly said to touch upon the License and Termination Agreements. The court will stay the proceeding pending completion of arbitration.
VI. CONCLUSION
For the foregoing reasons, Perion’s motion to dismiss the complaint for lack of personal jurisdiction (D.I. 22) is granted; and Undertone’s motion to stay the present action and compel arbitration (D.I. 25) is granted. An appropriate order shall issue.
. Adtile and Perion previously explored a relationship in August 2014.
, Without distinguishing which ads target or are sold in Delaware.
. Adtile contends that the Delaware subsidiar- . ies' websites confer general jurisdiction through the subsidiaries’ commercial activity. However, Adtile incorrectly attributes the .activity on the websites to Perion. Even if the court were to consider the subsidiaries’ websites, Adtile has not demonstrated that these websites have provided services to Delaware residents and, ''[i]nstead,- plaintiff has merely concluded that, because defendant has not éxcluded1 Delaware from accessing its website, it has subjected itself to the jurisdiction of the Delaware courts.” (D.I. 36); inno360,
.Adtile has not made a prima facie case of personal jurisdiction. Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009) ("If the district court does not hold an eviden-tiary hearing, 'the plaintifffs] need only establish a prima facie case of personal jurisdiction.’ ”).
. Perion’s motion to ’ dismiss for failure to state a claim is moot.
. Executed on August 26, 2014.
. This section also provides that "[n]othing in this section will prevent any parly from seeking or obtaining injunctive relief and other remedies available under these provisions.”
. Entered into "as of the Effective Date” of the License Agreement and executed on August 26, 2014.
. Undertone and Adtile previously entered into the March NDA to facilitate discussions, which also chose Delaware law, but specified that disputes should be submitted to a state or federal court in Riverside County, California. (D.I. 13, ex. I)..
.Ultimately concluding that incorporation of the AAA rules was insufficient, in and of itself, to delegate to an arbitrator the question of whether class-wide arbitration is permissible. Chesapeake, 809 F.3d at 764-66.
. Details of such allegations are recited in more detail in the order on Adtile’s motion for preliminary injunction.
. The March NDA uses substantially the same broad definition of confidential information. (D.I. 13, ex. I at § 2)
.The court has separately addressed Adtile’s motion for preliminaiy injunction.
Reference
- Full Case Name
- ADTILE TECHNOLOGIES INC. v. PERION NETWORK LTD. and Intercept Interactive, Inc. d/b/a Undertone
- Cited By
- 6 cases
- Status
- Published