Maori v. Maori CV-01-464-JD 05/01/02 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Vincent J. Maori and Ecruichem Research Institute, Ltd.

v. Civil No. 01-464-JD Opinion No.

James N. Maori and NTD Labs., Inc.

O R D E R

The plaintiffs, Vincent Macri and Equichem Research

Institute, Ltd., bring an action arising out of their failed

business relationship with the defendants, James Macri and NTD

Labs. The plaintiffs allege claims of misappropriation, unfair

competition, unjust enrichment, breach of contract, and copyright

infringement. The plaintiffs also seek injunctive relief. The

defendants move to dismiss the action, asserting that the court

lacks personal jurisdiction and that the plaintiffs failed to

state a claim for which relief can be granted, pursuant to

Federal Rules of Civil Procedure 12(b) (2) and 12(b) (6).

Alternatively, the defendants move to transfer the action to the

United States District Court for the Eastern District of New

York, pursuant to

(a). Background1

Defendant NTD, a New York corporation located in Huntington

Station, New York, was founded in 1983. The parties dispute

whether NTD was founded independently by the defendant, James

Macri ("James"), or co-founded with his brother, the plaintiff,

Vincent Macri ("Vincent"). Since at least 1990, however, Vincent

and James equally owned and operated NTD, serving as officers and

directors. At that time, both James and Vincent were New York

residents with homes in Oyster Bay.

NTD engaged in the research and development of technologies

for prenatal screening tests for Down Syndrome and other

chromosomal abnormalities. The screening test method developed

by NTD is known as the "Free Beta" method. NTD consequently

developed computer apparatus and software technology for

implementing Free Beta tests. The software used for the Free

Beta tests is known as "ScreenLab." James, who has a doctorate

in medical sciences, is the inventor, and patents in his name

have been obtained or are pending on several NTD innovations.

Because of their inability to continue working together,

Vincent entered into a written agreement with James in May of

1 For the purposes of this motion only, the facts are taken from the plaintiffs' complaint and the affidavits and supporting materials submitted by the parties.

2 1993 to transfer his 50% of the NTD shares to James, giving him

100% ownership of NTD ("Master Agreement"). In exchange, Vincent

received 100% ownership of Equichem Research Institute, Ltd.

("Equichem NY"), which had been a wholly-owned subsidiary of NTD,

incorporated in New York. Under the terms of the Master

Agreement, Equichem NY would receive an exclusive royalty-free

license to sublicense, sell, or otherwise exploit ScreenLab. In

turn, Equichem NY issued to NTD a royalty-free right to use

ScreenLab internally. The Master Agreement provided that Vincent

would have the same right as NTD and/or James in the Free Beta

technology, and that James and NTD would render reasonable

assistance to Vincent and Equichem NY in obtaining patents for

ScreenLab. The Master Agreement further provided for bimonthly

payments to Vincent, commencing in June of 1993 and continuing

until May of 2003, with a decrease in the amount of the payments

taking effect after the first three years.

In June of 1993, the brothers executed five related

agreements to implement the Master Agreement. James executed a

Quitclaim Assignment that transferred to Equichem NY the entire

right, title and interest in the ScreenLab software and Down's

syndrome detection program developed by NTD as well as all rights

in American and European patents and patent applications for

ScreenLab technology. The parties entered into a License

3 Agreement that granted NTD and James a non-exclusive royalty-free

license to use, copy, reproduce, modify, improve, and enhance the

software assigned to Equichem NY. The License Agreement

expressly prohibits James and NTD from selling, licensing or

sublicensing, or otherwise exploiting the software. The Other

Products Agreement ("Products Agreement") grants to Equichem NY a

non-exclusive license to sublicense, sell, and otherwise exploit

other NTD technology products.2 Another agreement ("Free Beta

Agreement") provides that Vincent shall have the same legal and

equitable rights to use Free Beta Technology as James and NTD,

even though James is the developer and patent holder for the

technology. The Free Beta Agreement authorizes James to license

Free Beta technology to Eastman Kodak, with one-half of any

licensing payments to be paid to Vincent directly. Both James

and Vincent agreed to be bound by any such licensing agreement.

An additional agreement ("Consulting Agreement") provides that

Vincent will be available to NTD for consulting to the extent his

services do not impede his performance with Equichem NY. The

2 The Products Agreement refers to specific technology listed in "schedule 1" annexed to the agreement. The court did not find "schedule 1" among the materials submitted by the plaintiffs. The terms of the Products Agreement provide that NTD will make periodic payments to Equichem NY towards the marketing, research and commercialization of the schedule 1 products, and Equichem NY will pay royalties to NTD for licensing fees received from the schedule 1 products.

4 Consulting Agreement reiterates the compensation terms of the

Master Agreement, which states that Vincent will be paid $13,104

per month, for thirty-five months and $11,021 per month, for the

next eighty-four months, on a bimonthly basis.

The Master Agreement and related agreements were fully

negotiated and executed in the state of New York in May and June

of 1993. Only the Consulting Agreement, License Agreement, and

Products Agreement contain choice-of-law clauses, which state

that the agreements are to be governed by the laws of New York.

None of the agreements contains a forum selection clause.

At the time of the parties' agreements, NTD had been

negotiating with Eastman Kodak to license Free Beta technology

and ScreenLab software. In March of 1994, Kodak was granted an

exclusive license by NTD for Free Beta and a non-exclusive

license by Equichem NY for the use of ScreenLab. Kodak

subsequently sold its clinical laboratory business to Johnson &

Johnson, which assumed the licenses for Free Beta and ScreenLab.

In 1999, Johnson & Johnson's Free Beta license became non­

exclusive .

At some point in 1994, Vincent and his family moved to New

Hampshire. In 1995, Equichem Research Institute, Ltd. was

5 incorporated by Vincent in New Hampshire ("Equichem NH").3 The

plaintiffs characterize Equichem NH as the "successor" company to

Equichem NY. Although the defendants now dispute that

designation, the parties continued their business relationship

with James and NTD operating in New York, and Vincent and

Equichem NH operating in New Hampshire.

In April of 1996, James wrote Vincent to suggest changes to

the Consulting Agreement, for unspecified reasons. Within a

week, Vincent responded to James's proposals with a signed

agreement amending the Master Agreement and the Consulting

Agreement ("1996 Amendment"). The 1996 Amendment states that

Vincent's salary will remain at its current level, instead of

decreasing after three years pursuant to the Consulting

Agreement, and it extends his salary payments to August of 1994,

over one year beyond the time frame established in the Master and

Consulting Agreements. The 1996 Amendment also provides that

James and Vincent agree to meet twice monthly in Boston or

another mutually convenient location, and that NTD will pay

Vincent an annual retirement benefit to be determined by James,

as well as $700 per month for health insurance, until 2004.

James signed the agreement in New York.

3 According to the defendants, Equichem NY was not dissolved until 1998 .

6 Vincent alleges that at some time following the Kodak

licensing agreements in March of 1994, James and NTD began

marketing Free Beta technology "packaged" with interrelated

ScreenLab software, without notifying and paying royalties to

Equichem NH, in violation of Equichem NH's exclusive license

pursuant to the Master Agreement, Quitclaim Assignment, and

License Agreement. In addition, Vincent alleges that in April

and October of 2001, James and NTD "attacked" Equichem NH's

European patent rights for ScreenLab and attempted to have the

European Patent Office nullify its patent rights, in violation of

their obligations under the Master Agreement. Vincent also

alleges that starting in July of 2001, NTD and James failed to

make the payments required by the parties' agreements, and they

have not made any payments since that time.4

On July 13, 2001, James wrote to Vincent in New Hampshire,

stating that Vincent had breached and continued to breach the

Master Agreement since January of 2000. James asserted that

Vincent's breaches relieved NTD and James of any further

4 The plaintiffs allege that the defendants failed to make the required payments starting July 1, but the defendants submit a cancelled check dated June 29, 2001, issued to Vincent to satisfy the July 1 payment. At any rate, there is no dispute that no further payments were made after that check. That dispute is not material for the purpose of this jurisdictional analysis.

7 obligations and duties to Equichem NH or Vincent.

The plaintiffs allege that Equichem NH has registered

ScreenLab, an original work of art, with the United States

Copyright Office. The plaintiffs state in their complaint that a

copy of the registration is attached as "Exhibit D." Exhibit D

appears to be an application for copyright registration,

submitted to the United States Register of Copyright by Equichem

Research Institute, Ltd., dated November 9, 2001.

On December 12, 2001, the plaintiffs sent the defendants a

notice to cure their default on the payments, pursuant to the

terms of the Master Agreement. On December 13, 2001, the

plaintiffs filed this diversity action against the defendants.

Discussion

The defendants, James and NTD, move to dismiss the

plaintiffs' action on the ground that this court lacks personal

jurisdiction over the defendants. See Fed. R. Civ. P. 12(b)(2).

The defendants also move, in the alternative, to dismiss the

action on the ground that the plaintiffs fail to state claims

upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6).

The defendants argue that if the action is not dismissed, it

should be transferred to the Eastern District of New York under

the doctrine of forum non conveniens. See

(a).

The plaintiffs object.

8 I. Personal Jurisdiction

The defendants contend that they are not subject to personal

jurisdiction in New Hampshire because they lack minimum contacts

with this forum. They argue that they are New York residents,

NTD is incorporated in New York and its principal place of

business is in New York, neither NTD nor James is licensed to do

business or has done business in New Hampshire, and none of the

actions alleged by the plaintiffs took place in New Hampshire.

On a motion to dismiss for lack of personal jurisdiction,

"the plaintiff ultimately bears the burden of persuading the

court that jurisdiction exists." Massachusetts Sch. of Law at

Andover v. Am. Bar Ass'n,

(1st Cir. 1998);

Sawtelle v. Farrell.

(1st Cir. 1995) . Where,

as here, no evidentiary hearing is held, the plaintiffs need only

make a prima facie showing of personal jurisdiction. See Nowak

v. Tak How Investments, Ltd.,

(1st Cir. 1996)

(noting that a full-blown evidentiary hearing is not necessary

where the facts are essentially undisputed); Sawtelle,

. Under the prima facie standard, the court considers

properly documented facts alleged in the pleadings and in the

parties' supplemental filings, including affidavits. See

Sawtelle, 7 0 F.3d at 13 85; Foster-Miller, Inc. v. Babcock &

Wilcox Canada,

(1st Cir. 1995) . The facts

alleged by the plaintiff are taken as true and construed in the

9 light most favorable to the plaintiff's jurisdictional assertion.

See Mass. Sch. of Law,

. Facts affirmed by the

defendants are considered to the extent that they are undisputed.

See i d .

When subject matter jurisdiction is premised on diversity, a

federal court may assert personal jurisdiction over a nonresident

if the plaintiff establishes "sufficient contacts between the

defendant and the forum to satisfy both the state's long-arm

statute and the Fourteenth Amendment Due Process clause."

Sawtelle,

. New Hampshire's long-arm statute.

Revised Statutes Annotated § ("RSA") 510:4, I, has been

interpreted to authorize jurisdiction coextensive with the

federal due process standard. See Phillips Exeter Acad, v.

Howard Phillips Fund,

(1st Cir. 1999). The

court therefore needs only to determine whether applying personal

jurisdiction to the defendants would comply with the requirements

of Fourteenth Amendment due process. See id.; Mass. Sch. of Law,

. The constitutional touchstone for personal

jurisdiction is minimum contacts. See United. Elec., Radio and

Mach. Workers of Am. v. 163 Pleasant St. Corp.,

,

1087 (1st Cir. 1992). "The minimum contacts standard requires

that a court asserting personal jurisdiction determine that the

nonresident defendant possesses sufficient contacts with the

forum state so that subjecting [him] to it does not offend

10 'traditional notions of fair play and substantial justice.'"

Id., quoting Int'l Shoe Co. v. Washington,

(1945) .

The minimum contacts required depend on whether the

plaintiff is asserting jurisdiction under a theory of "general"

or "specific" jurisdiction. See Sawtelle,

n.3.

A defendant who has maintained continuous and systematic contacts

with the forum state is subject to general jurisdiction in that

forum with respect to all causes of action, even those unrelated

to the defendants' forum-based activities. See Phillips Exeter

Acad.,

; Remsberq v. Docusearch, Inc., No. 00-211-

B,

, at *3 (D.N.H. Jan. 31, 2002). Where a

defendant does not have continuous and systematic contacts

sufficient to establish general jurisdiction, a court may

exercise specific jurisdiction over a defendant if the cause of

action arises from, or relates to, the defendant's contacts with

the forum. See Phillips Exeter Acad.,

88; The

Mountain Corp. v. Noles, No. 01-207-B,

, at *3

(D.N.H. Jan. 9, 2002). Although they do not label it as such,

the plaintiffs assert specific jurisdiction over the defendants

in this case.

The First Circuit applies a three-part analysis to determine

whether exercising specific jurisdiction would comport with due

process requirements. See Phillips Exeter Acad.,

288. First, under the "relatedness" prong, the court must ask

whether the claim that undergirds the litigation directly relates

to or arises out of the defendant's contacts with the forum. Id .

Second, the court must ask whether those contacts constitute

purposeful availment of the benefits and protections afforded by

the forum's laws. Jtd. Third, the court must analyze the overall

reasonableness of an exercise of jurisdiction, taking into

account a number of "Gestalt factors" that relate to the

fundamental fairness of exercising jurisdiction. .Id.; United

Elec. Workers, 960 F.2d at 1088.

"Questions of specific jurisdiction are always tied to the

particular claims asserted." Phillips Exeter Acad.,

. Here, the plaintiffs allege multiple causes of action based

on theories of tort, contract, and copyright infringement.

Because each type of claim requires a different analysis, the

court will apply the tripartite test to the plaintiffs' contract,

tort, and copyright claims separately. See Phillips Exeter

Acad.,

; Mass. Sch. of Law,

;

Anderson v. Century Prod. Co., 943. F. Supp. 137, 141, 143-44

(D.N.H. 1996) .

A. Breach of Contract Claims

The plaintiffs allege breach of contract on separate grounds

in counts V-VIII. In count V, the plaintiffs allege that the

12 defendants breached the Master Agreement and Consulting Agreement

by failing to make salary payments to Vincent and failing to make

payments to Equichem. In counts VI and VII, the plaintiffs

allege that the defendants breached the Master Agreement, the

Quitclaim Assignment, the Free Beta Agreement, and the License

Agreement, by offering to provide ScreenLab software packaged

with Free Beta rights, and by interfering with the plaintiffs'

rights to obtain patents.5 In count VIII, the plaintiffs allege

that the defendants are about to or have already licensed

ScreenLab along with the Free Beta method, without the

plaintiffs' authorization, for their commercial and/or financial

gain, in breach of the Master Agreement, Quitclaim Assignment and

License Agreement.

1. Relatedness

"[T]he relatedness requirement focuses on the nexus between

the defendant's contact and the plaintiff's cause of action."

Ticketmaster-New York v. Alioto,

(1st Cir.

5 In count VI the plaintiffs seek injunctive relief, and in count VII they seek damages. In these counts the plaintiffs state that the "defendants . . . interfer[ed] with defendants' right to obtain patents for the software." It appears that the plaintiffs inadvertently used the word "defendants'" instead of "plaintiffs'" in these two allegations. The court will proceed on the assumption that the plaintiffs intended to allege that the defendants interfered with the plaintiffs' right.

13 1994). In a contract case, relatedness is established if the

defendants' contacts with the forum "were instrumental either in

the formation of the contract or in its breach." Phillips Exeter

Acad.,

; United Elec. Workers, 960 F.2d at 1089.

The defendant's in-state contacts must constitute at least a

material element of proof for the plaintiff's claim. See United

Elec. Workers, 960 F.2d at 1089. The mere existence of a

contractual relationship between a nonresident defendant and a

plaintiff is insufficient to establish relatedness in the

plaintiff's forum. See Phillips Exeter Acad.,

.

While communications such as letters and faxes sent into the

forum are contacts, they are meaningful in the jurisdictional

analysis only if they give rise to the plaintiff's cause of

action. See Sawtelle,

; Int'l Paper Box Mach.

Co.. Inc. v. Paperboard U.S. Indus.. Inc.. et al . . No. 99-184-JD,

200 0 WL 14 8 04 62, at *4 ("IPBM").

In arguing for personal jurisdiction over their contract

claims, the plaintiffs do not dispute that the 1993 agreements

were initially formed in New York.6 They contend, however, that

6 As previously noted, the Master Agreement and the Consulting Agreement were amended in 1996 when James sent Vincent a letter proposing amendments and Vincent responded by drafting and signing a modification to the agreements, the 1996 Amendment, and returning it to James in New York. The 1996 Amendment, therefore, occurred in part in New Hampshire.

14 the defendants' communications sent to them in New Hampshire are

sufficient contacts to meet the relatedness prong for their

breach claims.

In count V the plaintiffs allege a breach of contract claim

based on the defendants' failure to make payments to Vincent and

Equichem NH required under the parties' agreements. Vincent

affirms that the defendants made payments to him and Equichem NH

in New Hampshire and that their failure to continue doing so

constitutes in-forum contacts giving rise to the breach claimed

in count V. Vincent also argues that the July 13, 2001 letter

sent by James to the plaintiffs in New Hampshire effectively

repudiated the parties' agreements, and is an in-forum contact

that gives rise to the breach claim. James states in the letter

that he and NTD were relieved of their obligations under the

agreements and would not continue performing under them. Those

agreements establish the defendants' obligation to make the

payments at issue in the breach claim.

The defendants' failure to pay the plaintiffs in New

Hampshire under the terms of the Master Agreement and Consulting

Agreement by itself is not enough to satisfy the relatedness

requirement. See Phillips Exeter Acad,,

.

However, the July 13 letter may be construed as a repudiation of

the parties' agreements, and as such it is material to the

breaches of the Master Agreement and Consulting Agreement alleged

15 by the plaintiffs in count V. In addition, the 1996 Amendment

occurred partially in New Hampshire, and it modified the terms of

the defendants' obligation to make payments to Vincent.

Therefore, the 1996 Amendment constitutes an in-forum contact

that is material to the plaintiffs' breach claim. Taken

together, the July 13 letter, the 1996 Amendment, and the

defendants' failure to make the payments to the plaintiffs in New

Hampshire as required by the agreements, are sufficiently related

to the plaintiffs' breach of contract claim in count V to support

personal jurisdiction.

In counts VI and VII, the plaintiffs allege that the

defendants offered to license ScreenLab without authority, and

interfered with Equichem NH's patent rights. James's July 13

letter announcing that the defendants would no longer perform

under the agreements suffices as an in-forum contact material to

the breach claims regarding the licensing rights established in

those agreements. In addition, Vincent affirms that the

defendants communicated with the plaintiffs in New Hampshire by

mail, fax, telephone and courier service. He states that through

these contacts, James announced his and NTD's breaches by sending

drafts of unilaterally negotiated licenses for ScreenLab packaged

with Free Beta, and soliciting Vincent's authority for the

defendants to proceed unilaterally. Although the substance of

those contacts is not supported by documentation, the defendants

16 do not dispute Vincent's description. When considered together

with the July 13 letter, the defendants' in-forum communications

give rise to the plaintiffs' count VI and VII breach claims, to

the extent that they involve licensing rights.

In counts VI and VII, the plaintiffs also allege that the

defendants interfered with their interests in ScreenLab's

European patent. The defendants' obligation to "render

reasonable assistance" to the plaintiffs in obtaining ScreenLab

patents was established in the Master Agreement. As discussed

above, the July 13 letter is an in-forum contact material to the

plaintiffs' claim that the defendants breached the Master

Agreement. To the extent that the defendants' interference with

the patent process breached a duty that was established in the

Master Agreement, the July 13 letter ending the defendants'

performance under the Master Agreement is material to that

breach. Considering the facts in the light most favorable to

Vincent and Equichem NH, the defendants' contacts in New

Hampshire are sufficiently related to the plaintiffs' claims of

breach in counts VI and VII to support personal jurisdiction.

In count VIII, the plaintiffs allege that the defendants

are about to or have entered into licenses for ScreenLab along

with the Free Beta method, for their financial and/or commercial

gain. For the reasons set forth above, the defendants' July 13

letter and communications to Vincent in New Hampshire constitute

17 in-forum contacts material to the plaintiffs' claims of breach

regarding licensing rights, and therefore are sufficiently

related to the breach claim in count VIII to support personal

jurisdiction.

2. Purposeful Availment

"The purposeful availment test requires us to consider

whether the [defendants'] contacts with New Hampshire 'represent

a purposeful availment of the privilege of conducting activities

in [New Hampshire], thereby invoking the benefits and protections

of [its] laws and making the defendant[s '] involuntary presence

before the state's courts foreseeable.'" Phillips Exeter Acad.,

, quoting United Elec. Workers. 960 F.2d at 1089.

"The function of the purposeful availment requirement is to

assure that personal jurisdiction is not premised solely upon a

defendant's 'isolated, random or fortuitous' contacts with the

forum state." Sawtelle,

, quoting Keeton v.

Hustler Magazine, Inc.,

(1984). The two focal

points for an analysis of purposeful availment are whether the

defendants' contacts in the forum were voluntary and foreseeable.

See Nowak,

.

18 a. Voluntariness

"The defendant's contacts with the forum state must be

voluntary-that is, not based on the unilateral actions of a party

or a third person." Nowak,

; see also Helicopteros

Nacionales de Columbia, S.A. v. Hall,

(1984)

(holding that location of bank on which a party chooses to draw

checks for payment is unilateral decision inappropriate for

consideration for jurisdictional purposes). "'[I]t is essential

in each case that there be some act by which the defendant

purposefully avails itself of the privilege of conducting

activities within the forum state.'" Burger King, 471 U.S. at

475, quoting Hanson v. Denckla,

(1958); Nowak,

. Contacts are not voluntary if the plaintiffs

draw the defendants into continuing business with them through

coercion or deception. See Remsberq,

, at *5.

Here, the defendants entered the Master Agreement and its

corollary agreements with the plaintiffs in New York, while all

parties involved were New York residents and corporations. The

defendants argue that since they did not reach into New Hampshire

to form the agreements, Vincent's decision to move to New

Hampshire and incorporate Equichem there was a unilateral

activity that renders their contacts in this forum involuntary.

The defendants point out that nothing in the negotiation,

formation or terms of the agreements indicates that the

19 defendants intended to avail themselves of the laws or privileges

in New Hampshire.

For seven years following Vincent's move and six years

following Equichem's reincorporation, however, the defendants

continued to deal with the plaintiffs in New Hampshire. James

sent his proposals for the 1996 Amendment to Vincent in New

Hampshire, and Vincent drafted and executed the amendment in New

Hampshire. Taking the plaintiffs' asserted facts as true, it

appears that during their business relationship the defendants

derived a benefit from the performance of Vincent and Equichem NH

pursuant to the agreements. Although NTD and James may not have

had a say in the plaintiffs' decision to relocate, the

defendants' continued dealings with the plaintiffs show voluntary

contacts with New Hampshire.

b. Foreseeability

In addition to being voluntary, the defendants' contacts

with the forum state must be foreseeable, "such that [they]

should reasonably anticipate being haled into court there."

Nowak,

. "The enforcement of personal jurisdiction

over a non-resident defendant is foreseeable when that defendant

has established a continuing obligation between itself and the

forum state." Sawtelle,

; see also Burger King,

471 U.S. at 476 (finding that defendant had entered a twenty-year

20 relationship that envisioned continuing contacts with forum

state). While the mere existence of an agreement between the

parties is insufficient to show foreseeability, additional

factors such as the parties' course of dealing, the benefit to

the defendant, the terms of the agreement, prior negotiations,

and expected future consequences of the agreement pertain to the

foreseeability of jurisdiction in the forum. See Phillips Exeter

Acad.,

; U.S.S. Yachts, Inc. v. Ocean Yachts,

Inc., 894 F .2d 9, 12 (1st Cir. 1990).

Here, the Consulting Agreement anticipated a ten-year

relationship between the parties, which suggests that the

defendants could foresee a long-term relationship with Vincent.

The 1996 Amendment, formed with the plaintiffs when they were

located in New Hampshire, extended the duration of that

relationship. None of the agreements contain provisions

restricting performance to New York, or forum selection clauses.7

Taking the supported allegations of the plaintiff as true, the

defendants received commercial benefit from continuing their

relationship with the plaintiffs, including a royalty-free

license to use ScreenLab and the consulting services of Vincent.

Furthermore, the parties' course of dealing shows that the

7 Three of the agreements contained choice of law clauses indicating that New York law should govern the agreements.

21 defendants conducted business with the plaintiffs after their

move to New Hampshire, by negotiating the 1996 Amendment and

continuing to make periodic payments to Vincent and Equichem NH

pursuant to their agreements.8

The defendants' long-term relationship, expected commercial

benefits, and negotiations with the plaintiffs, in addition to

their agreements, show that the defendants had continuing

obligations with the plaintiffs in New Hampshire. Based on their

ongoing business relationship with the plaintiffs after they

relocated to New Hampshire, the defendants could reasonably

foresee the possibility of being haled into court in New

Hampshire.

3. Gestalt Factors

The third prong of the specific jurisdiction analysis

focuses on whether exercising jurisdiction would be consistent

with traditional notions of "fair play and substantial justice."

Int'1 Shoe C o .,

; see also Nowak,

.

In making this determination of fairness, there are five factors

that must be considered: "(1) the defendants' burden of

8 The defendants argue that they were unaware that Equichem NY had become a New Hampshire corporation. However, their course of dealing indicates that the defendants knew Equichem was located in New Hampshire.

22 appearing; (2) the forum state's interest in ajudicating 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." Sawtelle,

. "[T]he

reasonableness prong of the due process inquiry evokes a sliding

scale: the weaker the plaintiff's showing on the first two

prongs (relatedness and purposeful availment ) , the less a

defendant need show in terms of unreasonableness to defeat

jurisdiction." Ticketmaster,

.

The plaintiffs argue that the Gestalt factors weigh in favor

of asserting jurisdiction. The defendants do not make specific

arguments regarding the Gestalt factors, aside from James's

affirmation that his absence from NTD to litigate the claims in

New Hampshire would be disruptive to NTD's business. The

relatedness and purposeful availment showings in this case are

sufficient to establish personal jurisdiction in the absence of

any showing by the defendants that exercising jurisdiction would

be unreasonable. See Nowak,

. Therefore, the

court concludes that exercising jurisdiction over the contract

claims in New Hampshire is reasonable and comports with the

standards of fair play and substantial justice.

23 B. Tort Claims

In counts I-IV the plaintiffs bring four tort claims based

on three causes of action. In count I, misappropriation, the

plaintiffs allege that "defendants have misappropriated

plaintiffs' rights in the ScreenLab software." In count II,

unfair competition, they allege that "defendants' interference

with plaintiffs' European patent registration and plaintiffs'

ability to exploit its ScreenLab software constitutes unfair

competition." In count III, unjust enrichment, the plaintiffs

allege that "[a]s set forth above, defendants have taken for

themselves plaintiffs' interests in the ScreenLab software and

have been unjustly enriched thereby." In count IV, the

plaintiffs seek a constructive trust to remedy the injury caused

by the torts.

The relatedness requirement for tort claims is satisfied

where the in-forum contacts are both the cause in fact and the

proximate cause of the plaintiff's injuries. See Burger King,

471 U.S. at 474; Mass. Sch. of Law,

; The Mountain

Corp.,

, at *3. A defendants' in-forum contacts are

the cause in fact of the claim if "'the injury would not have

occurred 'but for' the defendant's forum state activity.'" Mass.

Sch. of Law,

, guoting United Elec. Workers, 960

F.2d at 1089; see also Phillips Exeter Acad.,

(holding that defendant's breach of fiduciary duty outside the

24 forum was inadequate to support finding of relatedness);

Remsberq,

, at *4 (finding that defendant's

contacts with forum state were causes in fact for deceased's

death because information transmitted was necessary for killer to

complete his pla n ) . The proximate cause requirement is met where

the defendants' contacts serve to make the resulting injury

foreseeable to the defendants. See Nowak,

;

Remsberq,

, at *4 (finding that defendant was aware

that information transmitted could be misused to harm deceased).

The effects of a tort felt in a forum are not equivalent to an

actual injury caused in the forum by in-forum activities. See

U.S. v. Swiss Am. Bank, Ltd.,

(1st Cir. 2001),

citing Kowalski v. Dohertv, Wallace, Pillsburv & Murphy,

(1st Cir. 1988); Phillips Exeter Acad.,

.

The plaintiffs bear the burden of establishing that the

defendants' in-forum contacts are the actual and legal causes of

the claims asserted. See Mass Sch. of Law,

.

The court bases its analysis on the plaintiffs' supported

pleadings. In this case, the plaintiffs' allegations and

memorandum are conclusory and do not show that the defendants'

contacts give rise to the tortious activities alleged.

Vincent affirms that the defendants have "made clear to him"

their intentions to market and possibly license ScreenLab in

violation of the parties' agreements, but he does not suggest

25 that those activities have occurred in New Hampshire. The record

before the court does not establish the defendants' contacts with

New Hampshire as a cause in fact or legal cause of the

plaintiffs' claims. The court therefore does not have sufficient

information to determine whether the defendants had contacts

related to the claims alleged sufficient to meet the requirements

necessary to assert personal jurisdiction. The plaintiffs fail

to meet their burden of showing that the court may exercise

personal jurisdiction over the defendants as to the plaintiffs'

tort claims, in counts I-IV.

C. Federal Copyright Claims

Equichem NH brings two copyright infringement claims

pursuant to

et seq. In counts IX and X, it

alleges that it has registered a copyright for ScreenLab and that

the defendants have violated, or are about to violate, Equichem

NH's rights as owner of the copyright.9

Section 101 et seq. does not contain a provision for

personal jurisdiction or nationwide service of process. See

Janmark, Inc. v. Reidv,

(7th Cir. 1997);

Sabanek Assocs., Inc. v. Navarro, No. 95-269-B,

,

9 The two claims are based on the same cause of action, but count IX seeks equitable relief and count X seeks damages.

26 at *1 (D.N.H. 1995). The court therefore applies the New

Hampshire long-arm statute, which is construed as coextensive

with due process. See Fed. R. Civ. P. 4 (k) (1) (A); Phillips

Exeter A c a d .,

.10 The due process analysis

requires the court to apply the tripartite test, to determine

whether the defendants have in-forum contacts sufficient to

establish specific jurisdiction. See Sabanek Assocs.,

, at *3-4.

To meet the first prong of the test, Equichem NH must show

that its infringement claims directly relate to or arise from the

defendants' contacts in New Hampshire. Equichem NH claims that

the defendants' actions have infringed, or are about to infringe,

its rights to the ScreenLab software. To prevail on a claim of

copyright infringement, a plaintiff must show ownership of a

valid copyright and illicit copying. See Yankee Candle Co.. Inc.

v. Bridgewater Candle Co., LLC,

(1st Cir. 2001).

Equichem NH has not shown that any of the defendants' in-forum

contacts are material to either ownership of the copyright or

illicit copying. To the extent that Equichem NH has ownership

rights to the ScreenLab software, the rights were created by

assignments that were part of the agreements executed in New

10 Rule 4 (k) (1) (A) extends personal jurisdiction over a party served who would be subject to the jurisdiction of a court in the state where the district court is located.

27 York. Equichem NH does not allege that the defendants illicitly

copied the SreenLab software in New Hampshire, or that they

attempted to market the software in New Hampshire. Equichem NH

fails to meet its burden of showing that the defendants' in-forum

contacts gave rise to its federal copyright claims.

D. Inconsistent Personal Jurisdiction

"It is basic law that a court must have personal

jurisdiction over the parties to hear a case, that is, the power

to require the parties to obey its decrees." Swiss Am. Bank,

247 F.3d at 617 (quotation omitted). Furthermore, personal

jurisdiction must be established for each of the causes of

action in a complaint. See Phillips Exeter Acad..

; Anderson. 943 F. Supp. at 141. "There must be an

independent basis for the assertion of personal jurisdiction for

each claim. Jurisdiction over one claim does not imply

jurisdiction over another." Debrenci v. Bru-Jell Leasing Corp.,

(D. Mass. 1989), Quoted in Anderson, 943 F.

Supp. at 141.

Where, as here, due process only allows the court to assert

personal jurisdiction over the defendants for some of the claims

asserted by the plaintiffs, the court may not exercise

jurisdiction over the remaining claims. The plaintiffs' tort

and federal copyright claims are dismissed for lack of personal

28 jurisdiction, without prejudice to the plaintiffs' rights to

refile the claims in any district where the defendants may be

subject to personal jurisdiction. See Phillips Exeter Acad.,

196 F .3d at 292 n.4; IPBM,

, at *6.

II. Transfer of Venue

The defendants move to transfer this action to the Eastern

District of New York on the ground of forum non conveniens,

pursuant to

(a). Section 1404(a) states: "For

the convenience of parties and witnesses, in the interest of

justice, a district court may transfer any civil action to any

other district or division where it might have been brought." 11

The defendants argue that the overwhelming weight of relevant

contacts is in New York, where the agreements at issue were

negotiated and where the substantive acts relevant to the causes

of action occurred, if at all. In the First Circuit, a court

may not grant a transfer under § 1404 (a) if it does not have

personal jurisdiction over the defendant. See Albion, 171 F.3d

at 2. The court will therefore consider the defendants' motion

to transfer only as it relates to the plaintiffs' breach of

11 Section 1404 (a) is a codification of the doctrine of forum non conveniens, which the defendants invoke in their motion to transfer. See Albion v. YMCA Camp Letts,

(1st Cir. 1999) .

29 contract claims, namely, counts V, VI, VII, and VIII.

The court evaluates motions to transfer according to

"individualized, case-by-case consideration of convenience and

fairness. A motion to transfer under § 1404(a) thus calls on

the district court to weigh in the balance a number of factors."

Stewart Org., Inc. v. Ricoh Corp.,

(1988)

(quotation omitted). Factors of convenience to be considered by

the court include:

(1) the convenience of the parties; (2) the convenience of the witnesses; (3) the relative ease of access to sources of proof; (4) the availability of process; (5) [the] cost of obtaining willing witnesses; and (6) trying the case most expeditiously and inexpensively.

F.A.I. Electronics v. Chambers,

(D. Mass.

1996).

Factors of public interest are also considered. See Gulf

Oil Corp. v. Gilbert.

(1947). The

defendants bear the burden of demonstrating that the factors

weigh in favor of a transfer. See Buckley v. McGraw-Hill, Inc.,

(D.N.H. 1991). "'[UJnless the balance is

strongly in favor of the defendant, the plaintiff's choice of

forum should rarely be disturbed.'" I_d., quoting Gulf Oil,

. The plaintiff's choice of forum is accorded less

weight where "the operative facts of [the] case have no material

connection with [the] district." McFarland v. Yeqen,

Supp. 10, 15-16 (D.N.H. 1988). The decision to transfer venue

is a matter entirely within the district court's discretion.

See Galonis v. Nat'1 Broad. Co . ,

(D.N.H.

1980).

In this case, the parties do not dispute that this action

"might have been brought" in the Eastern District of New York.

See § 1404(a) ,12 The defendants, who reside in New York, would

find it more convenient to litigate there, and they argue that

their witnesses, all located in New York, would find it more

convenient as well. The plaintiffs point out that the

defendants' witnesses are largely employees who may be compelled

to appear in New Hampshire. In contrast, the plaintiffs, who

reside in New Hampshire, would prefer to litigate here, although

they do not assert that they have witnesses located in New

Hampshire. The defendants argue that their books are located in

New York, while the plaintiffs argue their books are in New

Hampshire.

The court concludes that the defendants did not meet their

burden of showing that the factors, on balance, weigh strongly

in favor of a transfer. See Buckley,

. The

defendants' motion to transfer venue to the Eastern District of

12 In this motion, the defendants do not challenge that venue is proper in the District of New Hampshire.

31 New York is denied. However, the court reserves to the

defendants the right to file another motion for transfer of

venue, in the event the plaintiffs commence an action in New

York involving the claims set forth in counts I-IV, IX, and X.

III. Motion to Dismiss

The defendants move to dismiss the plaintiffs' action for

failure to state a claim for which relief may be granted. See

Fed. R. Civ. P. 12(b)(6). When considering a motion to dismiss

pursuant to Rule 12(b)(6), the court takes all well-pleaded

facts in the complaint as true and draws all reasonable

inferences in the plaintiff's favor. See Mass. Sch. of Law,

. A plaintiff's claim should not be dismissed

"'unless it appears beyond doubt that the plaintiff can prove no

set of facts in support of his claim which would entitle him to

relief.'" Judge v. City of Lowell,

(1st Cir.

1998), Quoting Conley v. Gibson,

(1957) .

However, the court does not credit legal conclusions or

"'subjective characterizations or conclusory descriptions of a

general scenario which could be dominated by unpleaded facts .'"

Murphy v. United States,

(1st Cir. 1995),

Quoting Covne v. City of Somerville,

(1st Cir.

1992). To avoid dismissal, the plaintiff must allege facts as

to each element of an actionable legal theory. See Berner v.

32 Delahantv,

(1st Cir. 1997) .

The plaintiffs' claims over which this court has

jurisdiction allege breach of contract. "Under New York law, an

action for breach of contract requires: (1) a contract; (2)

performance of the contract by one party; (3) breach by the

other party; and (4) damages.'" First Investors Corp. v.

Liberty M u t . Ins. Co.,

(2d Cir. 1998), quoting

Rexnord Holdings, Inc. v. Bidermann,

(2d Cir.

1994) ,13

A. Count V: Defendants' Failure to Make Payments

Count V alleges that the defendants breached the Master

Agreement and Consulting Agreement by failing to make payments

to Equichem NH and Vincent. The defendants assert that the

plaintiffs filed suit without first allowing the defendants

fourteen days to cure the defaulted payments, a condition

precedent to commencing suit as provided in the Master

Agreement. The defendants seek dismissal of count V, on the

ground that it is premature and deficient on its face, without

prejudice to renew following service of a new notice to cure and

the expiration, if any, of the cure period. The plaintiffs

13 Since neither party addresses choice of law, and both refer to New York law in their memoranda, the court will apply New York substantive law.

33 allege that the defendants repudiated the Master Agreement, and

that all conditions precedent were waived by that repudiation.

The renunciation of contractual obligations gives rise to

an immediate cause of action by the other party. Stadtmauer v.

Brel Assocs. IV, L.P.,

(2000). "Where it

becomes clear that one party will not live up to a contract, the

aggrieved party is relieved from the performance of futile acts

or conditions precedent." Sunshine Steak, Salad & Seafood, Inc.

v. W.I.M. Realty, Inc.,

(1987). "However,

a contract that is not treated as broken continues to exist for

the benefit of both parties. There is no specific time limit

within which the non-repudiating party must elect his remedy

. . . ." Silver Air v. Aeronautic Dev. Corp., Ltd.. 65

(S.D.N.Y. 1987).

The plaintiffs allege that the defendants failed to make

the periodic payments to Equichem NH and Vincent due under the

Consulting Agreement, as amended, in July of 2001, and that they

have failed to pay any subsequent installments. The plaintiffs

also allege that the defendants have, by their acts and words,

repudiated the Master Agreement, which contains the notice

requirement. The plaintiffs sent the defendants a notice to

cure on December 12, 2001, and filed this action on December 13.

Although the plaintiffs sent the notice "in accordance with the

Master Agreement," that alone, taking the facts in the light

34 most favorable to the plaintiffs, does not necessarily establish

continued operation under the agreement sufficient to overcome

the plaintiffs' allegation of repudiation. Therefore, the

plaintiffs have stated a claim for breach of the Master

Agreement and Consulting Agreement, as amended, and the

defendants' motion to dismiss count V is denied.

B .___ Counts VI and VII: Offering ScreenLab Licenses without _____ Authorization, and Interfering with Patents

In counts VI and VII the plaintiffs allege that the

defendants breached the Master Agreement, Quitclaim Assignment,

Free Beta Agreement, and License Agreement, by offering to

license ScreenLab along with the Free Beta method, and by

interfering with the plaintiffs' right to obtain patents for

ScreenLab.14

The defendants argue that Vincent does not have standing to

bring claims based on the ScreenLab licensing provisions

contained in the parties' agreements. The defendants also argue

that the plaintiffs fail to state claims because they do not

allege that the defendants actually took something that belonged

to the plaintiffs, or that the plaintiffs suffered an injury as

a result of the defendants' actions. Furthermore, the

14 Count VI seeks injunctive relief and count VII seeks damages.

35 defendants argue that the plaintiffs' claim that the defendants

interfered with the plaintiffs' rights to obtain patents is

conclusory.

1. Standing

The defendants challenge Vincent's standing to bring the

breach of contract claims in counts VI and VII, that are based

on the assigned rights to license ScreenLab.15 The defendants

assert that Equichem NH, not Vincent, holds all rights to

license ScreenLab, and that Vincent's status as sole shareholder

of Equichem NH is insufficient to confer standing on him,

personally, for the breach actions. The plaintiffs do not

respond to the defendants' argument.

[T]he general rule, applicable in New York and elsewhere, [is] that where an injury is suffered by a corporation and the shareholders suffer solely through depreciation in the value of their stock, only the corporation itself, its receiver, . . . or a stockholder suing derivatively in the name of the corporation may sustain an action against the wrongdoer.

Vincel v. White Motor Corp.,

(2nd Cir.

1975). The plaintiffs do not allege that any of the parties'

agreements assigned ScreenLab licensing rights to Vincent

15 The plaintiffs' breach claim in count VIII is also based on the assigned rights to license ScreenLab, but the defendants did not challenge Vincent's standing to bring that claim in their motion to dismiss.

36 personally, nor do the plaintiffs allege that Vincent has an

individual interest in the ScreenLab patents.16 The court's

review of the Master Agreement, attached to the complaint, does

not reveal that Vincent has any right in ScreenLab or its

patents independent of Equichem NH.17 Although Vincent is the

sole shareholder of Equichem NH, he is not entitled to bring an

action in his own name against the defendants for injury to

Equichem NH resulting from the defendants' licensing, or

attempted licensing, of ScreenLab, or from their interference

with ScreenLab patents. See Paul Arpin Van Lines, Inc. v.

Universal Transportation Servs., Inc.,

(1st

Cir. 1993); Vincel,

; Uribe et al v. Merch.

Bank of N .Y .,

(1997). Vincent's

claims in counts VI and VII are dismissed.

16 The plaintiffs allege that Vincent and James share rights in the Free Beta technology patents and licenses, however, in the Master Agreement, Free Beta and ScreenLab are addressed separately.

17 The Master Agreement (Complaint Ex. A), Consulting Agreement (Complaint Ex. B ) , and 1996 Amendment (Complaint Ex. C) were attached and incorporated into the plaintiffs' complaint. For this motion, the court considers only those materials.

37 2. Equichem's Claims That Defendants Breached Licensing ___________Provisions

The defendants move to dismiss Equichem's breach claims in

counts VI and VII on the ground that the plaintiffs have not

alleged the necessary elements for a breach action.18 The

plaintiffs allege that the defendants breached the parties'

agreements by attempting to license ScreenLab to third parties.

The plaintiffs further assert that the defendants acted without

notifying plaintiffs that licensees had been identified, that

negotiations were underway, and that one or more agreements in

principle had been reached with multiple licensees. The

defendants argue that the plaintiffs' allegation that the

defendants offered ScreenLab to licensees does not constitute a

breach of the agreements, and also that the plaintiffs failed

to allege injury caused by the defendants' actions.

The Master Agreement states that Equichem NH holds the

exclusive right to "sublicense, sell, or otherwise exploit

ScreenLab." The plaintiffs' allegation that the defendants

exploited ScreenLab by marketing it in conjunction with their

Free Beta technology, without authorization from Equichem NH,

is sufficient to state a claim that the defendants violated

18 For the purposes of this motion only, the defendants do not dispute that Equichem NH is the successor to Equichem NY and holds the rights to license ScreenLab.

38 Equichem NH's exclusive licensing rights. The plaintiffs

allege that they have suffered financial damages as a result of

the defendants' breach of contract. The plaintiffs' allegation

of damages, together with their allegations of the defendants'

breach, is sufficient to satisfy the pleading requirement of a

breach of contract claim. The defendants' motion to dismiss

Equichem NH's breach claims based on its exclusive licensing

rights, alleged in counts VI and VII, is denied.

3. Equichem's Claims That Defendants Interfered With Patents

The defendants assert that the plaintiffs fail to allege

sufficient facts to support Equichem NH's claims in counts VI

and VII that the defendants interfered with its patent rights.

The plaintiffs allege that Equichem NH had the rights to secure

patents for ScreenLab, and that the defendants were obligated

by the Master Agreement to render reasonable assistance in

obtaining the patents. The plaintiffs allege that the

defendants "attacked" Equichem NH's patent rights by

surreptitiously attempting to have their European patent rights

nullified.

The plaintiffs allege no facts to support Equichem NH's

claim that the defendants breached the Master Agreement by

interfering with its patent rights. They do not allege how or

39 by what means the defendants allegedly attempted to interfere,

what ScreenLab's European patent status was prior to the

interference, whether the defendants' interference was

successful, or what injury resulted from the defendants'

interference. The plaintiffs' conclusory allegation of

interference with patent rights is insufficient to state

Equichem NH's claim for breach of the Master Agreement.

Equichem NH's breach claims based on the defendants' alleged

interference with their patent rights, alleged in counts VI and

VII, are insufficiently pleaded and fail to state claims for

which relief may be granted. The defendants' motion to dismiss

is granted as to the patent interference claims.

Conclusion

For the foregoing reasons, the defendants' motion to

dismiss for lack of personal jurisdiction (document no. 8) is

granted in part. The plaintiffs' tort and federal copyright

claims, counts I-IV, IX & X, are dismissed for lack of personal

jurisdiction. The defendants' motion is denied as to the

plaintiffs' contract claims, counts V-VIII.

The defendants' motion to transfer venue to the Eastern

District of New York (document no. 8) is denied. However the

court reserves to the defendants the right to file another

motion for transfer of venue in the event the plaintiffs

40 commence an action in New York involving the claims set forth

in counts I-IV, IX, and X.

The defendants' motion to dismiss for failure to state a

claim for which relief may be granted (document no. 8) is

granted in part. Vincent's claims in counts VI and VII are

dismissed for lack of standing, and Equichem NH's claims based

on the defendants' alleged interference with its patent rights,

in counts VI and VII, are dismissed. The defendants' motion to

dismiss is denied as to the plaintiffs' counts V and VIII, and

Equichem NH's claims based on its exclusive licensing rights,

in counts VI and VII.

SO ORDERED.

Joseph A. DiClerico, Jr. United States District Judge May 1, 2002

cc: James F. Ogorchock, Esquire Martin J. O'Donnell, Esquire Thomas J. Fleming, Esquire Andrew W. Serell, Esquire

41