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)

• D Utah - Jurisdiction for alleged trademark infringement proper under effects test. System Designs, Inc. v. New CustomWare Co., Inc. (3/5/03)

• 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

• Web Site Found to Have Targeted Utah On the Basis of Its Universal Accessibility

• 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).

• 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).

• New Company Used Trademarked Terms

• 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

• 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.

• 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.

• 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.

• Web Site Found to Have Targeted Utah

• 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.

• 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.

• 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.

• 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.

• 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.

• Evidence of Actual Transactions Unnecessary

• 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:

• [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.

• 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.

• 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.

• "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."

• 'Effects Test' Also Basis for Jurisdiction

• 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.

• 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.

• 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.

• 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.

• The court concluded that all the elements of the effects test had been satisfied, justifying an exercise of jurisdiction by the court.

• 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.

• The text of System Designs is available at http://pub.bna.com/eclr/1158.pdf.

• The text of Rainy Day Books is available at http://pub.bna.com/eclr/012083.htm.