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Rates Tech., Inc. v. Cequel Communs., LLC

United States District Court, S.D. New York

March 25, 2014

RATES TECHNOLOGY INC., Plaintiff,
v.
CEQUEL COMMUNICATIONS, LLC d/b/a SUDDENLINK COMMUNICATIONS, Defendant

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For Rates Technology Inc., Plaintiff: Milton Springut, Tal S. Benschar, Springut Law PC, New York, N.Y. USA; Scott Spencer, Scott Spencer Law, New York, N.Y. USA.

For Cequel Communications, Llc, d/b/a Suddenlink Communications, doing business as Suddenlink Communications, Defendant: Jeremy M. Suhr, PRO HAC VICE, Rouse Hendricks German May P.C., Kansas City, MO USA; Kristina Marvelle Allen, Meghan Silhan Mastrocovi, McGuireWoods LLP (NYC), New York, N.Y. USA; Mark W. McGrory, PRO HAC VICE, Larry Rouse, Rouse Hendricks German May PC, Kansas City, MO USA.

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MEMORANDUM & ORDER

ANDREW L. CARTER, JR., United States District Judge.

I. Introduction

Plaintiff Rates Technology Inc. (" RTI" ) filed the instant action against Defendant Cequel Communications, LLC d/b/a Suddenlink

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Communications (" Cequel" ), alleging infringement of its patents related to the routing of telephone calls based on cost and a method for updating the database in a telephone call routing system. Defendant moves to dismiss the Complaint pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Defendant argues Plaintiff cannot establish personal jurisdiction where Defendant has no contacts that would support the exercise of jurisdiction over it in this forum. Plaintiff claims since Defendant has an ongoing, permanent arrangement with third parties to use transmission networks and fiber routes that pass through New York, there are sufficient contacts to demonstrate personal jurisdiction. Plaintiff also seeks jurisdictional discovery if the Court finds Plaintiff has failed to make a prima facie showing of personal jurisdiction.

II. Background

As set forth in the Complaint, RTI holds a valid and enforceable patent, known as the 085 patent, " for inventions relating to the routing of telephone calls based upon cost." (Am. Compl. ¶ 8.) RTI claims Cequel has infringed on the 085 patent through " making, using, advertising, marketing, selling, and/or offering to sell IP-based services, including telephone products and/or services which include high capacity switches to offer local and toll services to its customers[.]" (Id. ¶ 10.) Such infringement includes " 'soft switches' and related network equipment (such as media gateways, signaling gateways, applications servers and other converged network elements) to enable the switching and routing of voice calls over IP packet networks . . . as well as managing the related PSTN call traffic interface . . . ." (Id.)

RTI holds a second valid and enforceable patent, known as the 769 patent, " for inventions relating to a method for updating a database in a telephone call routing system." (Id. ¶ 16.) Cequel allegedly infringed on the 769 patent through " making, using, advertising, marketing, selling, and/or offering to sell IP-based services, including using telephone products and/or service which include high-capacity switches to offer local and toll services to its customers[.]" (Id. ¶ 18.) Such infringement includes " 'soft switches' and related network equipment (such as media gateways, signaling gateways, applications servers and other converged network elements) to enable the switching and routing of voice calls over IP packet networks, as well as managing the related PSTN call traffic interface . . . ." (Id.)

Cequel is a limited liability company incorporated in Delaware with its principal place of business in St. Louis, Missouri. (Id. ¶ 2.) " Cequel provides 'Voice over Internet Protocol ('VoIP') telephone services' and . . . provides 'all . . . local and long distance calls' where the 'long distance includes the 50 states.'" (Id. ¶ 5(a).) " VoIP services route voice calls as data." (Id. ¶ 5(c).) " A national network for VoIP telephone services routes and disperses calls throughout the country including New York . . . ." (Id.) In turn, " some data of Cequel . . . may 'pass through' systems or facilities . . . in New York." (Id. ¶ 5(b).)

According to Plaintiff, Cequel represented to its inventors at a conference that " the 'core backbone' of its 'national' 'network' includes 'New York,' and . . . provided a map showing . . . that its 'Core backbone' runs through New York, among other places." (Id. ¶ 5(a).) Because " the systems or facilities in New York are part of the 'core backbone[,]' . . . such activities are on-going and continuous." (Id. ¶ 5(c).) RTI asserts, " Cequel is systematically and continually doing business in New York, either itself or through an agent, by maintaining, leasing, renting or otherwise using

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computer and/or data transmission equipment which form part of its 'Core Backbone[]' . . . ." (Id. ¶ 5(e).)

In the alternative, Plaintiff alleges " Cequel's 'Core Backbone' and the computers or other data transmission equipment that comprise [sic] same, are part of the apparatus and means of practicing the patented art relating to least cost-routing . . . ." (Id. ¶ 5(f).) Plaintiff claims Cequel's infringement of its patents injured Plaintiff in New York, and Cequel derives substantial revenue from interstate or international commerce. (Id. ¶ 5(g).) " The acts of infringement . . . occur throughout Cequel's system, which . . . is located throughout the United States, and is meant to serve customers from many places in the United States to the entirety of the country. (Id.) Therefore, Cequel " should reasonably have expected its acts committed to have consequences in the State of New York." (Id.)

Attached to its Motion, Cequel included an affidavit from Rodney Lanham, its Vice President of Technical Operations.[1] (Lanham Decl. ¶ 2.) Mr. Lanham states, " Cequel . . . is in the business of providing cable broadband services, including [VoIP] telephony services, to customers in states such as Arizona, Arkansas, California, Louisiana, Missouri, North Carolina, Ohio, Oklahoma, Texas, and West Virginia." (Id. ¶ 5.) Cequel does not have any offices, employees, bank accounts, or property in New York. (Id. ¶ ¶ 6, 8-9.) Indeed, Cequel is not registered to do business in New York and has not designated an agent for service of process there. (Id. ¶ ¶ 10-11.) Cequel does not have a mailing address or telephone listing in New York, does not transact business in New York, and does not contract to supply goods and services in New York. (Id. ¶ ¶ 7, 12.) Nor does Cequel solicit business in New York or derive any substantial revenue from goods or services in New York. (Id. ¶ 13.)

Since Cequel does not own or possess any equipment in New York, it " has arranged for rights to have its data routed through networks and fiber that third parties own and operate . . . including one that traverses New York." (Id. ¶ 19.) Mr. Lanham further states Cequel has no New York customers, so " no data traffic originates [or] . . . exits the network" in New York. (Id. ¶ 20.) Data bound for other locations, however, might be routed through New York " via fiber owned and operated by third parties." (Id.) Cequel admittedly has an Ashburn, Virginia to Chicago fiber route, which contains a pass through in New York. (Lanham Decl., Ex. 1 at 11.) The Ashburn to Chicago fiber route purportedly provides a redundancy of routes for video data traffic for television services and to transport data traffic originating on or destined for the Internet, neither of which include telephony traffic. (Lanham Decl. ¶ 21.)

The Ashburn to Chicago fiber route could also potentially be used as a redundancy route for VoIP telephony services, according to Mr. Lanham. (Id. ¶ 22.) " Only on extremely rare occasions would VoIP telephony data traffic traverse the Ashburn to Chicago fiber route." (Id.) He gives examples such as if there was a significant failure in another portion of the network, then such traffic could be routed through New York. (Id.) Yet, " none of the computers or other data transmission

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equipment that determine the routing of telephony calls is located in New York." ...


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