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In 1995 System Designs, Inc. nationally (not internationally) trademarked
and servicemarked its long time used (since 1978) name of CustomWare®.
We have been using the name of CustomWare® for our software
system since 1978. We also started defending the suit in 1995 and have been
in negotiations/litigation since then. In 2005 system Designs, Inc. transferred to CustomWare Designs, Inc. the trademark and servicemark.
In March of 2003 System Designs set national precedence with regard to
jurisdiction issues covering use of a trademark on the internet.
In July of 2003, the California based company of New CustomWare a.k.a.
CustomWare settled the suit. In addition to monetary remuneration, System
Designs acquired the domain name of
customware.com.
With the successful defense of our trademark, we are
now aggressively pursuing all infringements of the
CustomWare® trademark and servicemark.
The net effect of the precedence is that System Designs may file suit
in Salt Lake City, Utah against all alleged infringements and the defendants
must come to Utah for any trial. This places the burden for out-of-state
expenses on the defendant.
THE PRECENDECE:
JurisNotes.com, Inc.
Intellectual Property Notes 3/18/2003
http://www.jurisnotes.com/Cases/customware.htm
(details with footnotes)
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D Utah - Jurisdiction for alleged trademark infringement proper under
effects test. System Designs, Inc. v. New CustomWare Co., Inc. (3/5/03)
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Plaintiff alleged specific personal jurisdiction over defendant. The court
indicated that a strong argument could be made for finding that defendant
was subject to personal jurisdiction in Utah based on the alleged infringement
alone. But the court found it unnecessary to create a per se
rule regarding direct trademark infringement because in this case, there
was "something more" to establish jurisdiction: defendant's website, which
intended to reach potential Utah customers. In the court's view, jurisdiction
for the alleged infringement was proper under the effects test.
Electronic Law & Commerce Report
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Web Site Found to Have Targeted Utah On the Basis
of Its Universal Accessibility
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A Web site that was universally accessible targeted Utah by making it
possible for residents to access the site and conduct transactions, although
there was no evidence that the site's operator had actually engaged in any
transactions in the forum state, the U.S. District Court for the District
of Utah ruled March 5 (System Designs Inc. v. New Customware Co., D. Utah,
No. 2:01-CV-00770PGC, 3/5/03).
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Furthermore, the court ruled that the harm resulting
from trademark infringement takes place where the trademark holder is
located and therefore the defendant was subject to jurisdiction
in the forum state under the "effects test" of Calder v. Jones, 465 U.S.
783 (1984).
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New Company Used Trademarked Terms
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The plaintiff, System Designs Inc. of Salt Lake City, had since 1978 held
the federal registration for the NEW CUSTOMWARE trademark for use in connection
with its business management software
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New Customware Co., now no longer in operation, provided computer training
and consulting and organized seminars around the country. New Customware
was essentially a "virtual" company run by its president, Salil Deshpande
of San Carlos, Calif. The company's trainers operated throughout the country,
but none of them had ever conducted a class in Utah.
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The defendant operated a Web site promoting its training service, which
listed a number of large companies as clients. These companies--such as U.S.
West Inc., Wells Fargo & Co., AT&T Corp., Dell Computer Corp., Qwest
Communications Inc., and Sprint Communications Co.--were national companies
with presences in Utah. The site was configured to permit users to register
and pay for courses online, to customize training courses, and to communicate
with New Customware through e-mail.
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In 2001, System Designs brought suit against New Customware, alleging
trademark infringement and unfair competition under federal and state law.
New Customware sought dismissal for lack of personal jurisdiction.
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Web Site Found to Have Targeted Utah
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In denying the defendant's motion, Judge Paul G. Cassell found grounds
for specific jurisdiction on at least two grounds--the Web site and the
allegation of trademark infringement.
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Finding that the Utah long-arm statute permitted any exercise of jurisdiction
permitted by constitutional due process, the court turned first to the question
of whether the defendant had purposely availed itself of the privilege of
conducting business in Utah such that there were minimum contacts justifying
an exercise of jurisdiction. The court determined that the accessibility
of the Web site combined with its functionalities created minimum contacts
sufficient to justify an exercise of jurisdiction by a court in Utah.
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Beginning with the sliding scale test set forth in Zippo Manufacturing
Co. v. Zippo Dot Com, 952 F. Supp. 1119 (W.D. Pa. 1997) (2 ECLR 197, 2/14/97),
the court determined that the defendant's site was an "interactive" site
that fell in the midrange of the sliding scale. In order to determine whether
the site tipped the scale in the direction of minimum contacts, the court
looked to Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2nd Cir. 1997)
(2 ECLR 981, 9/19/97), which demanded "something more" than the mere
accessibility of a Web site to forum residents in order to establish minimum
contacts.
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In looking for the "something more" that linked the defendant to Utah,
the court emphasized that the "quality" of the contacts with Utah were more
important than the "quantity" of the contacts.
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The court compared the instant case to that in Rainy Day Books v. Rainy
Day Books & Café LLC, 186 F. Supp. 2d 1158 (D. Kan. 2002). In
that case, the U.S. District Court for the District of Kansas exercised
jurisdiction over an online bookstore based in Maryland that had allegedly
infringed on a trademark held by a Kansas bookstore.
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Evidence of Actual Transactions Unnecessary
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The Rainy Day court did not have evidence regarding the number of actual
sales to Kansas residents, but it concluded that such information was not
necessary to establish jurisdiction:
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[T]he focus of the inquiry is on the Defendant's actions in setting up
and maintaining a commercial website, which targeted Kansas residents by
its alleged use of Plaintiff's service marks. ... Proof of an actual book
sale to a Kansas resident from Defendant's website merely supports Plaintiff's
contention that defendant's website is a commercial website accessible by
Kansas residents.
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That there were very few transactions executed through New Customware's
Web site and none of them were with Utah residents was irrelevant, the court
concluded. In fact, if the existence of actual transactions was the key then
the plaintiff could have easily manufactured jurisdiction by doing it itself.
Furthermore, the absence of completed transactions does not mean that a company
might not have engaged in serious negotiations with a forum resident that
subsequently fell through.
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Thus, although there were not any "deliberate or repeated" contacts in
evidence, the court concluded that the defendant had intentionally targeted
Utah--along with other states--through its Web site. If the defendant had
not intended to target Utah, the court said, then it could have structured
its site and business to exclude Utah customers.
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"Far from avoiding connections with Utah, however, New Customware's own
actions in offering registration and design of training classes through their
website then including a list of major clients with Utah connections,
demonstrates they purposefully directed their conduct toward Utah," the court
said. "By listing companies with a large Utah presence, at this stage in
the proceedings the court must conclude that New Customware expressly aimed
its actions at the Utah market with its website and sought business from
customers here."
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'Effects Test' Also Basis for Jurisdiction
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The court also determined that the allegation of trademark infringement
was alone a basis for personal jurisdiction under Calder's effects test,
which permits jurisdiction when there is an allegation of tortious conduct
that is aimed at the forum state or the brunt of whose effects would foreseeably
be felt in the forum state.
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The court contrasted the instant case with Cybersell Inc. v. Cybersell
Inc., 130 F.3d 414 (9th Cir. 1997) (2 ECLR 1273, 12/10/97), which refused
to allow jurisdiction in a case in which the plaintiff had not completed
its federal trademark registration at the time the allegedly infringing Web
site went live.
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Panavision International LP v. Toeppen, 141 F.3d 1316 (9th Cir. 1998)
(3 ECLR 522, 4/22/98), found "something more" than the mere accessibility
of a Web site--an extortion scheme.
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Similarly, the court said, in this case there was "something more"--the
alleged infringement of a federally registered trademark. The registration
operated as constructive notice to the world and the defendant had in effect
consented to jurisdiction in the state of the trademark holder by failing
to conduct a trademark search before adopting its company name.
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The court concluded that all the elements of the effects test had been
satisfied, justifying an exercise of jurisdiction by the court.
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New Customware was represented by Arthur B. Berger and James S. Jardine
of Ray, Quinney & Nebeker, Salt Lake City; and Marc C. Levy of Preston,
Gates & Ellis, Seattle. System Designs was represented by David R. McKinney
and Peter M. deJonge of Thorpe, North & Western, Sandy, Utah.
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The text of System Designs is available at http://pub.bna.com/eclr/1158.pdf.
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The text of Rainy Day Books is available at http://pub.bna.com/eclr/012083.htm.
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