United States District Court, S.D. New York
June 14, 2005.
THE McGRAW-HILL COMPANIES, INC., Plaintiff,
INGENIUM TECHNOLOGIES CORPORATION, Defendant.
The opinion of the court was delivered by: JED RAKOFF, District Judge
On April 15, the Court denied defendant's motion to dismiss the
above-captioned case. See Order, 4/15/05. This Memorandum
states the reasons for that determination.
Because the grounds for defendant's motions are not premised
only on the pleadings but raise such as issues as abstention and
lack of personal jurisdiction, the Court has considered, as to
applicable grounds, facts going beyond the pleadings that were
uncontested for the purpose of this motion. The pertinent facts
are as follows:
Plaintiff McGraw-Hill Companies, Inc. ("McGraw-Hill") is a New
York corporation. See First Amended Complaint ("Complaint") ¶¶
1, 21. Defendant Ingenium Technologies Corporation ("Ingenium")
is incorporated under the laws of British Columbia, Canada, with
its principal offices in Vancouver, British Columbia. Id. ¶ 3.
It has 23 employees, all located in Vancouver. Certification of
Howard Evans, 3/21/05.
One of McGraw-Hill's businesses is providing data regarding the
construction industry in the form, inter alia, of a
computerized data service. See Complaint ¶¶ 18-20, 26. Some
time prior to 2000, Ingenium developed a web-based application that allowed customers
of computerized data services, such as McGraw-Hill's, to search
and manage their data. Id. ¶ 30. On March 28, 2000, the parties
signed an Agreement under which McGraw-Hill agreed to promote and
distribute Ingenium's software to its customer base, rebranding
it as a McGraw-Hill product with McGraw-Hill trademarks, in
exchange for a percentage of the revenues. See Marketing and
Distribution Agreement (the "Agreement"), attached as Exhibit A
to Declaration of Brian P. Tonry, 3/21/05. McGraw-Hill negotiated
this agreement from its New York office. Declaration of Brian P.
Tonry, 4/1/05 ("Tonry April Decl."), ¶ 3.
Over the next few years, the parties worked closely to develop
new versions of the service, which is now called Premium, market
it to McGraw-Hill's customer base, and integrate it into
McGraw-Hill's other offerings. This arrangement became Ingenium's
main source of revenue. Tonry April Decl. ¶ 2. Approximately 80
Premium customers were based in New York, and they produced at
least $180,000 in annual revenues for Ingenium. Id. ¶ 4. While
the contracts the customers signed were with McGraw-Hill,
Ingenium until 2004 was the sole provider of customer service,
training, and other technical support for these customers. See
Certification of Howard Evans, 4/1/05, ¶ 48. Beginning in 2001,
Ingenium officials met with McGraw-Hill employees at
McGraw-Hill's offices in New York several times each year. Id.
¶ 7. There were numerous other contacts with New York as well;
for example, Ingenium each month e-mailed to a McGraw-Hill employee based in New York a revenue and expense
report relating to their arrangements. Id. ¶ 5.
The Agreement is due to expire on June 30, 2005, see
Complaint ¶ 64. As the expiration approached, the parties began
to squabble over, among other things, their respective
contractual obligations, whether Ingenium has a protected
interest in the Premium customer base or is merely a third-party
supplier to McGraw-Hill, and who owns various intellectual
properties involved. On January 17, 2005, Ingenium sued
McGraw-Hill in British Columbia, see Statement of Claim,
attached to Declaration of David J. Sheehan, 4/1/05, as Exhibit
B, alleging breach of contract and seeking money damages, a
declaration of Ingenium's intellectual property rights, and
injunctive relief. See id. at 8-9. On February 14, 2005,
McGraw-Hill filed this action, which now has ten causes of
action, including, inter alia, breach of contract, trademark
and copyright infringement, and tortious interference with
contract and with prospective economic advantage. See
Complaint. On April 1, the British Columbian court denied
Ingenium's motion for a preliminary injunction, see Reasons for
Judgment, attached to Reply Certification of David A. Garner,
4/6/05, as Exhibit B ("British Columbian Judgment"). On April 15,
this Court denied McGraw-Hill's motion for a preliminary
injunction without prejudice to McGraw-Hill's renewing its motion
in accordance with certain guidelines. See Order, 4/15/05.
While McGraw-Hill has declined to renew its motion, Ingenium has filed its own preliminary injunction motion, which
is now fully briefed.
Against this background, defendant contends, first, that this
Court should abstain, and dismiss, in favor of the first-filed
case in British Columbia. See Colorado River Water Conserv.
Dist. v. United States, 424 U.S. 800, 817 (1976). While several
of the factors favoring abstention are present here, notably the
identity of the parties and the overlap of certain of the breach
of contract claims, a very significant part of the instant
lawsuit centers on plaintiff's claims that defendant has
infringed, or is about to infringe, plaintiff's United States
copyrights and trademarks, and serious doubts have been raised
about the ability of the British Columbian court to adjudicate
these claims in ways that would avoid re-litigation here. Indeed,
it is well-established that "decisions of foreign courts
concerning the respective trademark rights of the parties are
irrelevant and inadmissible" in United States courts hearing
Lanham Act claims, Vanity Fair Mills, Inc. v. T. Eaton Co.,
234 F.2d 633, 639 (2d Cir. 1956); see Calzaturificio Rangoni S.A.
v. United States Shoe Corp., 868 F. Supp. 1414, 1418-19
(S.D.N.Y. 1994) (refusing to enforce trademark judgment from
Italian court). Furthermore, a significant part of the relief
sought by both sides with respect to the trademark and copyright
disputes is injunctive relief, and the British Columbian court
has already expressed doubts about its authority to restrain
McGraw-Hill's behavior, which largely is unconnected with Canada.
See British Columbian Judgment ¶ 28. Under these circumstances,
it would be inappropriate for this Court, the only court with clear authority to hear the case and to grant
full relief both before and after trial, to abstain in favor of a
potentially inadequate alternative forum.
Second, given the absence of an adequate alternative forum,
defendant's motion to dismiss on the ground of forum non
conveniens is likewise denied.
Third, defendant's motion to dismiss on grounds of
international comity must likewise fail, not only because of the
absence of an adequate alternative forum, but also because this
simple commercial dispute does not implicate the primary concern
of the comity doctrine, which is avoiding entangling United
States courts in international relations. See Jota v. Texaco
Inc., 157 F.3d 153, 160 (2d Cir. 1998).
Fourth, defendant's motion to dismiss for lack of personal
jurisdiction must likewise be denied. With respect to the federal
law claims (for copyright and trademark infringement), the Court
applies the long-arm statute of the forum state, New York. See
PDK Labs., Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir.
1997). Among other things, New York's law-arm statute permits
personal jurisdiction over an out-of-state defendant who commits
a tortious act outside of the state that causes injury to "person
or property within the state," N.Y.C.P.L.R. § 302(a)(3), provided
the defendant "expects or should reasonably expect the act to
have consequences in the state and derives substantial revenue
from interstate or international commerce," id. § 302(a)(3)(ii).*fn1 The
torts of copyright and trademark infringement cause injury in the
state where the allegedly infringed intellectual property is
held, see, e.g., Design Tex Group, Inc. v. U.S. Vinyl Mfg.
Corp., 2005 U.S. Dist. LEXIS 2143, at *4 (S.D.N.Y. 2005), in
this case New York. It is reasonably foreseeable that the
provision of materials that infringe the copyrights and
trademarks of a New York company will have consequences in New
York, see Citigroup Inc. v. City Holdings Co.,
97 F. Supp. 2d 549, 568 (S.D.N.Y. 2000), and the defendant derives substantial
revenue from international commerce. New York's long-arm statute
is therefore satisfied with respect to the federal-law claims.
As for the state-law claims, personal jurisdiction can be
asserted over anyone who "transacts any business within the state
or contracts anywhere to supply goods or services in the state."
N.Y.C.P.L.R. § 302(a)(1). Depending upon whose interpretation of
the disputed contract prevails at trial, defendant either
contracted to supply its service to a New York company or
contracted to have its services supplied to Premium customers,
including many located in New York, see Citigroup,
97 F. Supp. 2d at 566 (where licensee of intellectual property uses
material in New York pursuant to agreement, licensor is deemed to
have contracted to supply materials in state). Defendant also transacted business within the state,
since, during the course of this years-long relationship with a
New York company, it made various web-based services available to
specific customers in New York, its officers regularly traveled
to New York and conducted business here, and it was in constant
telephonic and computer contact with both plaintiff's employees
and Premium customers in New York.*fn2 See United Feature
Syndicate, Inc. v. Miller Features Syndicate, Inc.,
216 F. Supp. 2d 198, 205-06 (S.D.N.Y. 2002). Finally, the defendant has had
sufficient contacts with New York as to have "purposefully
availed" itself "of the privileges of conducting business in New
York so as to reasonably expect to be subject to suit here," PDK
Labs, 103 F.3d at 1110-11, thereby satisfying due process
Fifth, defendant's motion to dismiss the trademark and
copyright claims on grounds of extraterritorial application and
on grounds of lack of ripeness is likewise denied. While
defendant is correct that copyright and trademark laws have only
limited extraterritorial application, see Sterling Drug v.
Bayer AG, 14 F.3d 733, 745-46 (2d Cir. 1994); Filmvideo
Releasing Corp. v. Hastings, 668 F.2d 91, 93 (2d Cir. 1981), no
such extraterritorial application is contemplated in this case,
where plaintiff seeks an injunction that applies to activities felt within the United States. See,
e.g., United Feature Syndicate, 216 F. Supp. 2d at 225 (motion
to dismiss copyright infringement claim for similar reasons
"borders on the frivolous" where allegedly infringing material is
accessible from computers within United States). Similarly
baseless is defendant's argument that there is no ripe claim or
controversy here; it is abundantly clear that the two parties are
on a collision course that has already framed the essential
disputes in plain terms and that will enable the Court to
determine their respective rights in the Premium service. Thus,
the Court can properly exercise subject matter jurisdiction over
Accordingly, for the reasons stated above, the Court on April
15, 2005, denied defendant's motion to dismiss in its entirety.