Protegrity Corp v. TokenEx, LLC

Filing 51

ORDER. As set forth herein, Defendant's 43 Motion to Dismiss is GRANTED. The Clerk is directed to close this case. Signed by Judge Michael P. Shea on 1/14/15. (Khan, J)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
PROTEGRITY CORPORATION,
Plaintiff,
v.

No. 3:13-cv-1719 (MPS)

TOKENEX, LLC,
Defendant.
MEMORANDUM OF DECISION
I.

Introduction
Plaintiff Protegrity Corporation (―Protegrity‖) brings this patent infringement action

against Defendant TokenEx, LLC (―TokenEx‖). TokenEx has moved to dismiss the complaint
for lack of personal jurisdiction.

Because Connecticut‘s long-arm statute does not reach

TokenEx, I GRANT the motion to dismiss.
II. Background and Procedural History
Protegrity is a corporation incorporated under the laws of the Cayman Islands and owns a
portfolio of patents relating to data security solutions. (Am. Compl. [ECF No. 42], ¶¶ 1, 9.) Its
principal subsidiary, Protegrity USA, Inc. (―Protegrity USA‖) has its principal place of business
in Stamford, Connecticut. (Id.) Protegrity alleges that TokenEx, a limited liability company in
Oklahoma that is in the business of providing software services in the field of ―tokenization,‖1
has infringed two of its patents. (Id. ¶¶ 2, 8, 15, 26.)
TokenEx previously moved to dismiss Protegrity‘s complaint for lack of personal
1

Although in their briefing the parties do not explain what tokenization entails in the data security context,
TokenEx‘s website provides this description: ―A customer on your website wants to buy a product. They input their
information – including credit card numbers and other personal data – into your order form. Traditionally, that
information would be passed to you, and it would be your responsibility to keep it secure. But using tokenization,
the information is instead passed into an offsite, secure server. There, the sensitive data is replaced with a ‗token,‘‖
which has no value except as a placeholder and is stored in a secure environment. Alex Pezold, How Tokenization
Keeps your Data Secure, TokenEx (July 11, 2013), available at http://tokenex.com/how-tokenization-keeps-yourdata-secure/.

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jurisdiction. (See ECF No. 26.) I allowed the parties to take discovery on the jurisdictional
issue, and the parties fully briefed the issue of personal jurisdiction.

(See ECF No. 32.)

However, because the parties analyzed the issue under the improper long-arm statute—Conn.
Gen. Stat. § 33-929 instead of Conn. Gen. Stat. § 52-59b2—I denied the motion to dismiss
without prejudice and set new deadlines by which the parties had to rebrief the issue of personal
jurisdiction under the correct statute. (ECF No. 39.) Immediately before TokenEx‘s deadline for
its renewed motion to dismiss, and without seeking leave of this Court, Protegrity filed an
Amended Complaint that named Protegrity USA as a co-plaintiff. (See ECF No. 42.)3 TokenEx
then filed its renewed motion to dismiss for lack of personal jurisdiction, which the parties have
now fully briefed.
III. Legal Standard
In a patent infringement case, the law of the Federal Circuit applies to a personal
jurisdiction challenge. Electronics For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348 (Fed. Cir.
2003) (―Our prior decisions make clear that where the personal jurisdictional inquiry is
‗intimately involved with the substance of the patent laws,‘ we apply Federal Circuit law.‖)
(quoting reference omitted). ―Determining whether specific personal jurisdiction over a
nonresident defendant is proper entails two inquiries: whether a forum state‘s long-arm statute
permits service of process, and whether the assertion of jurisdiction would be inconsistent with
due process.‖ Id. ―In the procedural posture of a motion to dismiss, a district court must accept
the uncontroverted allegations in the plaintiff‘s complaint as true and resolve any factual
2

See Matthews v. SBA, Inc., 89 A.3d 938, 961 (Conn. App. Ct. 2014), cert. denied, 312 Conn. 917 (2014) (holding
that Connecticut‘s ―general long arm jurisdiction provision, § 52-59b, rather than [Connecticut‘s] corporation
specific long arm provision, § 33-929, applies to foreign LLCs.‖).
3
Protegrity concedes that it could not file its Amended Complaint as of right. (See Pls.‘ Response [ECF No. 44], at
1); see also Fed. R. Civ. P. 15(a). However, Protegrity asks that this Court treat its filing of the Amended Complaint
as a request for leave to amend. As such, I grant the amendment but nonetheless find that the allegations in the
Amended Complaint fail to satisfy Protegrity‘s burden of demonstrating that the Court may exercise personal
jurisdiction over TokenEx.

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conflicts in the affidavits in the plaintiff‘s favor.‖

Id.

When the evaluation of personal

jurisdiction ―is based on affidavits and other written materials in the absence of an evidentiary
hearing, a plaintiff need only to make a prima facie showing that defendants are subject to
personal jurisdiction.‖ Id.
IV. Discussion
Plaintiffs argue that TokenEx is subject to personal jurisdiction under Conn. Gen. Stat. §
52-59b(a)(1), which authorizes jurisdiction over a foreign limited liability company that transacts
business in Connecticut. The statute provides as follows, in pertinent part:
(a) As to a cause of action arising from any of the acts enumerated
in this section, a court may exercise personal jurisdiction over any
nonresident individual, foreign partnership or foreign voluntary
association, or over the executor or administrator of such
nonresident individual, foreign partnership or foreign voluntary
association, who in person or through an agent: (1) Transacts any
business within the state . . . .
Conn. Gen. Stat. § 52-59b(a)(1).

Plaintiffs must satisfy two requirements to establish

jurisdiction under this provision. First, they must make a prima facie showing that TokenEx
―transacts any business‖ in Connecticut. ―[A]lthough the term ‗transacts any business‘ is not
defined by statute, we previously have construed the term ‗to embrace a single purposeful
business transaction.‘‖

Ryan v. Cerullo, 282 Conn. 109, 119 (2007) (quoting Zartolas v.

Nisenfeld, 184 Conn. 471, 474 (1981)).

Second, Plaintiffs‘ ―cause of action against [the

defendant must arise] from [the defendant‘s] business activity in this state.‖ Id. at 121-22. ―A
claim ‗arises out of‘ a defendant‘s transaction of business when there exists a substantial nexus
between the business transacted and the cause of action sued upon.‖ Agency Rent A Car Sys.,
Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 31 (2d Cir.1996) (internal citations omitted)
(interpreting N.Y. Civ. Prac. L. & R. § 302(a), upon which the Connecticut long-arm statute was

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modeled).4 ―In determining whether the plaintiffs‘ cause of action arose from the defendants‘
transaction of business within this state we do not resort to a rigid formula. Rather, we balance
considerations of public policy, common sense, and the chronology and geography of the
relevant factors.‖ Zartolas, 184 Conn. at 477.
Neither the allegations in the Amended Complaint nor any of the evidence in the record,
even when construed in the light most favorable to Plaintiffs, satisfies either of these
requirements. First, Plaintiffs have made no showing—even after discovery—that TokenEx
―transacts any business‖ in Connecticut; rather, Plaintiffs concede that TokenEx does not sell its
product in Connecticut and fail to provide evidence of even a single TokenEx customer in
Connecticut. (Pls.‘ Response [ECF No. 44], at 9.) Plaintiffs also do not dispute that TokenEx
has no clients, offices, representatives, employees, officers, shareholders, bank accounts, or post
office box in Connecticut; that TokenEx owns no property and pays no taxes in Connecticut; and
that none of TokenEx‘s employees have ever even visited Connecticut. (Def.‘s MTD [ECF No.
43], Pezold Aff. ¶ 7.) Instead, Plaintiffs‘ argument—that TokenEx‘s contact with Plaintiffs, its
advertising, and its website are sufficient to exercise personal jurisdiction—is unavailing, even
when viewing all such activity collectively.
First, Plaintiffs argue that personal jurisdiction may be exercised because TokenEx ―had
contact with a Connecticut entity‖—presumably, Protegrity USA, which has its principal place
of business in Connecticut.5 (Pls.‘ Response [ECF No. 44], at 9.) Yet the evidence shows this
―contact‖ was unilaterally initiated by Plaintiffs—not TokenEx—and consisted of three emails

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―[I]n enacting s 52–59b, the [Connecticut] legislature used New York Civil Practice Law s 302 . . . as a model. We
therefore find pertinent the judicial interpretation given to that New York statute.‖ Zartolas, 184 Conn. at 474
(internal citation omitted).
5
Plaintiffs also describe this ―contact‖ as between TokenEx and Protegrity, which is not a Connecticut corporation.
(See Pls.‘ [ECF No. 44], Response, at 4.) Regardless, whether the contact was with Protegrity or Protegrity USA, it
is insufficient to confer personal jurisdiction for the reasons set forth in the text.

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and two phone calls from Plaintiffs‘ representatives that TokenEx‘s CEO responded to. (Def.‘s
Reply [ECF No. 47], Pezold Aff. at 1-3.) In addition, these communications all appear related to
Plaintiffs‘ warning that they would file the present lawsuit. (Id.) Although Plaintiffs try to
allege that these communications ―provide[] indication that prior to this litigation, Defendant was
willing to establish business relationships with Connecticut entities,‖ they have provided no
supporting evidence that TokenEx did, in fact, contact Protegrity or Protegrity USA to establish a
business relationship, much less that the parties entered into one such that TokenEx ―transacts
any business‖ in the state. (Pls.‘ Response [ECF No. 44], at 4.) Thus, the parties‘ ―contact‖—
which consisted principally of TokenEx‘s responses to Plaintiffs‘ communications concerning
possible patent infringement—does not, without more, amount to ―a single purposeful business
transaction‖ sufficient to demonstrate TokenEx ―transacts any business‖ in Connecticut. See
Vitale v. Catanese, No. 3:11-cv-1831, 2013 WL 3992394, at *3 (D. Conn. Aug. 2, 2013)
(―[C]ourts have consistently found that the transmission of communications between a nonresident defendant and a party within the jurisdiction does not, by itself, constitute the transaction
of business in the state.‖) (collecting cases); contrast Zartolas, 184 Conn. at 475-76 (finding
non-resident defendants‘ purchase of Connecticut property was a ―single purposeful business
transaction‖ sufficient to confer personal jurisdiction under § 52-59b because the land was in
Connecticut, the deed‘s warranties anticipated subsequent litigation in Connecticut, and
Connecticut was the only forum that could properly determine title).
Plaintiffs‘ alternative argument, that TokenEx ―transacts any business‖ in Connecticut
through its nationwide advertising, is similarly unavailing. TokenEx‘s only yellow page listing
is in Oklahoma. (Def.‘s MTD [ECF No. 43], Pezold Aff. ¶ 10.) It has never advertised on radio,
television, or in a newspaper. (Id.) While TokenEx has had a presence on Twitter, Google, and

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LinkedIn, TokenEx‘s only current advertising,6 which is on three different websites, requires
users to affirmatively search for TokenEx‘s content or be a subscriber to those sites to view the
advertisements. (Id. ¶ 9, 12.) Although Plaintiffs argue that this advertising demonstrates that
TokenEx ―clearly intended to generate interest in its infringing product in all states through its
purchase of national executive summaries, advertisements, and press releases,‖ (Pls.‘ Response,
at 9) (emphasis added), this nationwide advertising, without any additional showing that it
specifically targeted Connecticut consumers, is insufficient to demonstrate that TokenEx
―transacts any business‖ in the state. See Greene v. Sha-Na-Na, 637 F. Supp. 591, 595-56 (D.
Conn. 1986) (holding that defendant‘s advertisement in a national newspaper available in
Connecticut and on a national broadcast aired on a local Connecticut station were insufficient to
constitute a ―single purposeful business transaction‖ under § 52-59b(a)(1)); see also On Site Gas
Sys., Inc. v. USF Techs., Inc., 553 F. Supp. 2d 182, 185 (D. Conn. 2008) (finding that although
defendant‘s advertising in magazine ―is available in Connecticut, neither it nor [defendant‘s]
advertisements are targeted specifically towards Connecticut.

Therefore, the magazine

advertisements do not form a basis on which to exercise personal jurisdiction over
[defendant].‖).
Finally, Plaintiffs‘ argument that TokenEx‘s website is sufficiently ―interactive‖ to confer
personal jurisdiction over them misconstrues the applicable law.

The mere existence of a

website providing contact information is not enough; instead, the court must evaluate the
website‘s level of interactivity:
Courts that have considered the issue of whether web presence
creates personal jurisdiction in a particular forum have categorized
6

Plaintiffs do not dispute TokenEx‘s assertion that it no longer advertises through Google or LinkedIn. (Def.‘s
MTD [ECF No. 43], Pezold Aff. ¶ 9.) More importantly, Plaintiffs have not provided any evidence that TokenEx‘s
advertising—on these sites or others, in the past or present—resulted in any sales in Connecticut or targeted
Connecticut consumers specifically.

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Internet use into three areas for the purpose of determining whether
the exercise of personal jurisdiction is permitted. See VP
Intellectual Properties v. IMTEC Corp., 53 U.S.P.Q.2d 1269
(D.N.J.1999). At one end of the spectrum are cases where
individuals can directly interact with a company over their Internet
site, download, transmit or exchange information, and enter into
contracts with the company via computer. In such cases, the
exercise of jurisdiction is appropriate, particularly when combined
with evidence of sales from the forum state. See CompuServe, Inc.
v. Patterson, 89 F.3d 1257 (6th Cir.1996). At the other end of the
continuum are cases where the defendant has only advertised on
the Internet, and where another medium such as the telephone or
mail is necessary to contact the seller; in the case of such ―passive‖
sites, personal jurisdiction usually does not lie. See Bensusan
Restaurant Corp. v. King, 937 F.Supp. 295 (S.D.N.Y.1996). The
middle ground between the two extremes involves sites where
parties can interact with the defendant company, but may not be
able to contract with the company or make purchases over the
Internet site; in such situations, most courts follow the lead of the
Western District of Pennsylvania in Zippo Mfg. Co. v. Zippo Dot
Com, Inc., 952 F.Supp. 1119 (W.D.Pa.1997) and determine
whether jurisdiction is proper by ―examining the level of
interactivity and commercial nature of the exchange of information
that occurs on the Web site.‖ 952 F.Supp. at 1124.
On-Line Techs. v. Perkin Elmer Corp., 141 F. Supp. 2d 246, 265 (D. Conn. 2001).

The

undisputed evidence shows that TokenEx‘s website falls on the ―passive‖ end of the spectrum.
See Dorchester Fin. Sec. Inc. v. Banco BRJ, S.A., 722 F.3d 81, 86 (2d Cir. 2013) (―[A] district
court may [consider materials outside the pleadings] without converting a motion to dismiss for
lack of personal jurisdiction into a motion for summary judgment.‖).

The website lists

TokenEx‘s phone number, email address, and physical address. (Def.‘s MTD [ECF No. 43],
Pezold Aff. ¶ 13.) It provides no information specifically targeting Connecticut customers and
does not require its guests to submit geographic information. (Id.) The website does not provide
pricing information for TokenEx‘s products or allow for purchases. (Id.) While a visitor may
print out information about TokenEx‘s services and request a 30-day trial of TokenEx services,
TokenEx first evaluates the request before deciding whether to respond. (Id.) In other words,
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the website requires any prospective customers first to contact TokenEx before obtaining its
services. (Id.) Thus, the website is best characterized as ―passive‖ because it does not allow a
prospective customer unilaterally to make purchases from TokenEx. See Carson Optical, Inc. v.
Telebrands Corp., 3:06-cv-821, 2007 WL 2460672, at *4 (D. Conn. Aug. 27, 2007) (finding that
defendant‘s website, which included pricing information, was nonetheless passive and did not
confer personal jurisdiction under § 52-59b(a)(1) because customers could not purchase
defendant‘s products on the website and had to first contact defendant to order products offered
on the site). And to the extent TokenEx has made sales from its website, Plaintiffs have not
made any showing that such sales were to Connecticut customers or that the website specifically
targeted Connecticut customers in any way. Bell v. Shah, No. 3:05-cv-0671, 2006 WL 860588,
at *2 (D. Conn. March 31, 2006) (―Maintaining a website does not constitute transacting
business under the long-arm statute unless the website specifically targets Connecticut
customers, which is not alleged here.‖). TokenEx‘s website thus does not subject it to the
jurisdiction of this Court.
Finally, even assuming, arguendo, that any or all of the above allegations were sufficient
to demonstrate that TokenEx ―transacts any business‖ in Connecticut, Plaintiffs have still failed
to satisfy the second requirement of Conn. Gen. Stat. § 52-59b(a)(1)—that their cause of action
arises out of TokenEx‘s business activity in this state. Ryan, 282 Conn. at. 121-22. In other
words, they have not demonstrated that their patent infringement claim has a ―substantial nexus‖
to their communications with TokenEx, or to any business activity by TokenEx in Connecticut
resulting from TokenEx‘s advertising or website. As discussed above, the parties‘
communications were all initiated by Plaintiffs, were focused on the possibility of patent
infringement, and, in any event, did not result in a business relationship. In short, Plaintiffs

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cannot vest a Connecticut court with personal jurisdiction over a person simply by hurling an
accusation of patent infringement across the country at that person and then receiving responses
in Connecticut.
Because I have determined that Conn. Gen. Stat. § 52-59b(a)(1) does not reach TokenEx,
I need not evaluate whether exercising personal jurisdiction over it would comport with due
process.
V. Conclusion
For the reasons above, I GRANT TokenEx‘s Motion to Dismiss for Lack of Personal
Jurisdiction. The Clerk is directed to close this case.

IT IS SO ORDERED.

/s/
Michael P. Shea, U.S.D.J.
Dated:

Hartford, Connecticut
January 14, 2015

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