Monday, May 13, 2013

copyright infringement doesn't confer personal jurisdiction; other unfair trade practice issues remain

Shell v. American Family Rights Ass'n, 899 F. Supp. 2d 1035 (D. Colo. 2012)

In yet another demonstration of the fact that there is no field so small that vicious battles can’t break out within it, Shell sued defendants (including AFRA, of which she was initially a cofounder) for using or copying her proprietary information—mostly the contents of her website—and for related torts.  The parties participate in the market for services and information for families involved with child protection services; Shell operated a website at and claimed copyright over every article, paper, and document published on the site.  She licensed her materials, and created a training program based on her trade secrets.  Attendees at her seminars were required to sign a noncompete/nondisclosure agreement before receiving the training or training materials.  Some of the defendants attended her training program, and, as relevant here, Shell alleged that defendant Swallow took and used the noncompete/nondisclosure form and proprietary information without permission.

The court first found that it lacked personal jurisdiction over defendant AFRA.  Though AFRA had members in Colorado and websites “advertised” by AFRA were (available?) in Colorado, that wasn’t enough, absent a showing that these activities were different than those conducted in the other 49 states in which AFRA allegedly had members.  Even if AFRA members/a Colorado affiliate amounted to purposeful direction of AFRA’s activities to Colorado, Shell didn’t allege any connection between those activities and her alleged injuries.  Shell’s harms arose from publication of her copyrighted works on various websites, but she didn’t show that the websites specifically targeted a Colorado audience, engaged in commercial or other significant transactions with Colorado residents, or otherwise were connected to Colorado.

Shell argued that her Colorado residency meant that her harm manifested in Colorado.  But the 10th Circuit requires that the forum state be a focal point of the tort, and residence in the forum state, meaning that harm is suffered there, doesn’t alone establish personal jurisdiction over a defendant who hasn’t purposefully directed activities at the state.  The mere fortuitity of Shell’s Colorado residence didn’t establish specific jurisdiction over AFRA.

The court went on to address numerous other issues, including Shell’s Lanham Act claims against several defendants.  Shell averred that defendant Swallow published a number of defamatory statements about Shell, and that the statements were advertisements, but the complaint had nothing more than conclusory allegations that Swallow engaged in commercial activities.  At most, Swallow allegedly posted comments disparaging Shell and accusing her of criminal/fraudulent conduct.  This might state a claim for defamation, but didn’t plausibly allege that Swallow was advertising her own product or service.  Thus, the Lanham Act false advertising claim was dismissed.

Likewise, the state-law unfair trade practices claim against Swallow failed.  The complaint alleged that Swallow improperly obtained and disseminated materials from Shell’s training seminar and published unfavorable comments about her on the internet.  There were no allegations that Swallow engaged in an unfair trade practice in connection with Swallow’s own “business, vocation, or occupation,” as required, or that her conduct has had a significant impact on the public as consumers of Shell's goods or services. 

Similarly, the Lanham Act claim against defendant Henderson was dismissed.  The complaint didn’t allege nonconclusory facts to show that Henderson advertised anything, was in commercial competition with Shell, or made any statement in order to induce consumers to buy his goods or services.  In fact, the crux of Shell’s suit was that she offered her materials and training in exchange for a fee, but that defendants made them available for free. These activities may have caused Shell financial harm, but didn’t amount to commercial activity by Henderson.

Shell noted that AFRA in the past promoted and advertised her materials when she was a member of the board; offers brochures for anyone to print; publicizes its positions on child welfare issues; and promotes itself as an organization.  But none of that amounted to the sale of a product or service.  What she called advertisements were “merely disparaging statements about her, apparently posted online or communicated person to person.”  

None of the statements were specifically attributed to Henderson, nor were they made in connection with any effort by him to sell a competing product or service.  The only conduct specifically attributed to him was his creation of AFRA interactive online groups, used to exchange information, to “offer AFRA fund raising items,” and to promote AFRA as an organization.  She identified insulting and allegedly false comments posted on those groups and elsewhere by other people, and her disagreement with Henderson’s advice on child welfare issues.  But while those facts might support a defamation claim against the speakers, they didn’t plausibly suggest that Henderson made any false statements in connection with commercial advertising of a competing product or service. (Henderson allegedly made two statements, apparently in communications to other AFRA directors, that he thought Shell had “Alzheimer's or what ...” and that Shell “even went so far as offering to fabricate a sexual harassment case against me because I used to end my phone conversations with the Christian ‘I love you.’”)  Thus, the claim against him was dismissed without leave to amend. 

However, the unfair trade practices claim against Henderson survived.  Henderson was allegedly the founder, board member and former president of AFRA who maintained the AFRA website and set up interactive discussion groups, and he allegedly posted Shell's materials without consent and made nasty comments about her on these sites.  Reading the complaint most favorably to Shell, “because of Mr. Henderson's leadership role in AFRA, the allegations could plausibly suggest that his conduct was in the course of his business, vocation or occupation.”  Publishing Shell’s materials without consent or attribution and disparaging her professional reputation could plausibly be considered an unfair trade practice.  (Dastar?)  The complaint alleged that the market for Shell’s services and materials was affected by this conduct, injuring her financially.

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