Adtile Technologies Inc. v. Perion Network Ltd. et al

Filing 54

MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 6/24/2016. (fms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
ADTILE TECHNOLOGIES INC.,
Plaintiff,

v.
PERION NETWORK LTD. and
INTERCEPT INTERACTIVE, INC.
d/b/a UNDERTONE,
Defendants.

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Civ. No. 15-1193-SLR

Donald E. Reid, Esquire of Morris Nichols Arsht & Tunnell LLP, Wilmington, Delaware.
Counsel for Plaintiff. Of Counsel: Greg L. Lippetz, Esquire of Jones Day.
David E.Moore, Esquire, Bindu A. Palapura, Esquire, and Stephanie E. O'Byrne,
Esquire of Potter Anderson & Corroon LLP, Wilmington, Delaware. Counsel for
Defendants. Of Counsel: Jonathan M. Wagner, Esquire, Tobias B. Jacoby, Esquire,
and Adina C. Levine, Esquire of Kramer Levin Naftalis & Frankel LLP.

MEMORANDUM OPINION

Ji\- ,

2016
Dated: June
Wilmington, Delaware

R~O~Judge
I. INTRODUCTION
On December 22, 2015, plaintiff Adtile Technologies, Inc. ("Adtile") filed a
complaint for breach of contract, breach of the covenant of good faith and fair dealing,
misappropriation of trade secrets and confidential information, copyright and trademark
infringement, unfair competition, false designation of origin, common law tradem.ark
infringement, and common law unfair competition against defendants Perion Network
Ltd. ("Perion") and Intercept Interactive, Inc. d/b/a Undertone ("Undertone"). (D.I. 1)
Presently before the court are Perion's motion to dismiss the complaint for lack of
personal j~risdiction (D.I. 22) and Undertone's motion to stay the present action and
compel arbitration (D.I. 25). The court has jurisdiction over the copyright and Lanham
Act claims pursuant to 28 U.S.C. §§ 1331, 1338(a) and (b) and 15 U.S.C. § 1121 (a).
The court has supplemental jurisdiction over Adtile's additional claims pursuant to 28
U.S.C. § 1367(a).

II. BACKGROUND
Adtile is a company organized under the laws of the State of California with its
principal place of business in San Diego, California. Adtile develops multi-sensor
advertising technology and services for smartphones and tablets, with a focus on mobile
"Motion Ads." (D.I. 1 at 118) Undertone is a marketing company organized under the
laws of the State of New York with a principal place of business in New York, New York.
Perion is a company organized under the laws of Israel with a principal place of
business in Holon, Israel. (D.I. 1 at 11119-10)

Since 2013, Adtile has developed and launched Motion Ads, which provide users
a unique motion-activated advertising experience. On February 14, 2014, Undertone
and Adtile entered into discussions regarding Adtile's sensor-enabled technology
pursuant to a non-disclosure agreement dated March 11, 2014 ("March NOA"). On
August 18, 2014, the parties entered into a license agreement (the "License
Agreement") and a new NOA, which provides that Adtile would produce Motion Ads and
Undertone would sell such ads to its customers. (D. I. 33, ex. 11) On June 12, 2015,
Adtile and Undertone terminated the License Agreement (the "Termination Agreement").
(D.I. 33, ex. 16) The License and Termination Agreements provide for the resolution of
disputes according to the laws of the State of Delaware. (D. I. 33, exs. 11, 16)
According to Adtile, in June 2015, Perion inquired about using and investing in
Adtile's technology. 1 Perion stated that it had also reached out to Undertone, as
Undertone used motion-activated ads with great success. Adtile informed Perion that
Undertone was a client and was using Adtile's technology. (D. I. 13 at 1{1{ 38-42) Perion
announced on December 1, 2015 that it had acquired Undertone for $180 million. (D.I.
14, ex. A) Perion refers to Undertone as its "digital advertising firm." (D.I. 14, ex. B)

Ill. PERSONAL JURISDICTION
A. Standard
Rule 12(b)(2) of the Federal Rules of Civil Procedure directs the court to dismiss
a case when the court lacks personal jurisdiction. Fed. R. Civ. P. 12(b)(2). When
reviewing a motion to dismiss pursuant to Rule 12(b)(2), a court must accept as true all
allegations of jurisdictional fact made by plaintiff and resolve all factual disputes in

1

Adtile and Perion previously explored a relationship in August 2014. ·

2

plaintiff's favor. Traynor v. Liu, 495 F. Supp. 2d 444, 448 (D. Del. 2007). Once a
jurisdictional defense has been raised, plaintiff bears the burden of establishing, with
reasonable particularity, that sufficient minimum contacts have occurred between .
defendant and the forum to support jurisdiction. See Provident Nat'/ Bank v. Cal. Fed.
Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987). To meet this burden, plaintiff
must produce "sworn affidavits or other competent evidence," since a Rule 12(b)(2)
motion "requires resolution of factual issues outside the pleadings." Time Share
Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n.9 (3d Cir. 1984).
Pursuant to the relevant portions of Delaware's long-arm statute, 10 Del. C. §
3104(c)(1)-(4), a court may exercise personal jurisdiction over a defendant when a
defendant or its agent:
( 1) Transacts any business or performs any character of work or service in
the State;
(2) Contracts to supply services or things in this State;
(3) Causes tortious injury in the State by an act or omission in this State;
(4) Causes tortious injury in the State or outside of the State by an act or
omission outside the State if the person regularly does or solicits
business, engages in any other persistent course of conduct in the State
or derives substantial revenue from services, or things used or consumed
in the State.
10 Del. C. § 3104(c)(1)-(4). With the exception of (c)(4), the long-arm statute requires a
showing of specific jurisdiction. See Shoemaker v. McConnell, 556 F. Supp. 2d 351,
354, 355 (D. Del. 2008). Subsection (4) confers general jurisdiction, which requires a
greater number of contacts, but allows the exercise of personal jurisdiction even when
the claim is unrelated to the forum contacts. See Applied Biosystems, Inc. v.
Cruachem, Ltd., 772 F. Supp. 1458, 1466 (D. Del. 1991).

3

If a defendant is found to be within the reach of the long-arni statute, the court
then must analyze whether the exerc.ise.of personal jurisdiction comports with due
process, to wit, whether plaintiff has demonstrated that defendant "purposefully avail[ed]
itself of the privilege of conducting activities within the forum state," so that it should
"reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 297 (1980) (citations omitted). For the court to exercise

specific personal jurisdiction consistent with due process, plaintiff's cause of action must
have arisen from defendant's activities in the forum State. See Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 472 (1985). For the court to exercise general personal

jurisdiction consistent with due process, plaintiff's cause of action can be unrelated to
defendant's activities in the forum state, so long as defendant has "continuous and
systematic contacts with the forum state." Applied Biosystems, 772 F. Supp. at 1470.
In Daimler AG v. Bauman, - - U.S.--, 134 S.Ct. 746 (2014), the Supreme Court
stated that the "paradigm all-purpose forums for general jurisdiction are a corporation's
place of incorporation and principal place of business." Id. at 749. The Supreme Court
did not hold that a corporation may be subject to general jurisdiction only in one of these
locations, but rejected the notion that "continuous and systematic" contacts alone could
confer general jurisdiction, clarifying that the role of general jurisdiction is to "afford
plaintiffs recourse to at least one clear and certain forum in which a corporate defendant
may be sued on any and all claims." Id. at 760-62.

B. Specific Jurisdiction
Adtile contends that this court has specific jurisdiction, because of Perion's
pwnership of Undertone and because Perion has marketed Undertone's "UMOTION"

4

ads as its own. More specifically, the License and Termination Agreements entered into
by Undertone and Adtile select Delaware as an appropriate forum for the resolution of
disputes. Perion refers to Undertone as its "digital advertising firm." Perion advertises
and supports the sales of motion-activated ads by Undertone, which ads "are sold to
Delaware customers for viewing by Delaware end users." In a December 2015 S&P
Capital IQ Company Report on Perion, Perion included on its product list certain
products purportedly developed by Undertone. Adtile further contends that Perion has a
corporate officer (and another employee) who list their place of employment on Linkedln
as "at Perion/Undertone," which demonstrates a lack of corporate separateness. (D.I.
34 at 6-9; D.I. 36 at

,.m 2, 13, exs. A, L)

Specific jurisdiction arises when a defendant has both purposefully directed its
activities at residents of the forum state and the action arises from, or is directly related
to, defendant's action within the forum state. See Burger King Corp., 471 U.S. at 472.
Adtile asks this court to subject Perion to Delaware jurisdiction based on Undertone's
actions; however, "mere ownership of a subsidiary does not subject the parent
corporation to personal jurisdiction in the state of the subsidiary." Action Mfg. Co. v.
Simon Wrecking Co., .375 F. Supp. 2d 411, 420 (E.D. Pa. 2005); see Lucas v. Gulf &
Western Industries, Inc., 666 F.2d 800, 805-06 (3d Cir. 1981) ("[A] foreign corporation is
not subject to the jurisdiction of the forum state merely because of its ownership of the
shares of stock of a subsidiary doing business in that state."); see also Cannon Mfg. Co.
v. Cudahy Packing Co., 267 U.S. 333, 336 (1925). To hold Perion responsible for its
subsidiary's actions, Adtile must convince the court to pierce the corporate veil under an
agency or alter-ego theory. 'Action Mfg. Co., 375 F. Supp. 2d at 421.

5

A court may pierce the corporate veil in order to "prevent fraud, illegality, or
injustice, or when recognition of the corporate entity would defeat public policy or shield
someone from liability for a crime." Zubik v. Zubik, 384 F.2d 267, 272 (3d Cir. 1967).
The Third Circuit test is composed of two parts: the alter ego test and the agency test.
Lucas, 666 F.2d at 806. The alter ego test requires that the court "ignore the corporate
boundaries between parent and subsidiary if fraud or inequity is shown." Applied
Biosystems, 772 F. Supp. at 1463. The agency test considers
the degree of control which the parent exercises over the subsidiary. The
factors relevant to this determination include the extent of overlap of
officers and directors, methods of financing, the division of responsibility
for day-to-day management, and the process. by which each corporation
obtains its business. No one factor is either necessary or determinative;
rather it is the specific combination of elements which is significant.
Id. In essence "[t]he activities of a parent company are imputed to the subsidiary only if
the subsidiary is the parent's agent or alter ego so that the '"independence of the
separate corporate entities [is] disregarded."' Fisherv. Teva PFC SRL, 212 F. App'x
72, 76 (3d Cir. 2006) (quoting Lucas, 666 F.2d at 806). Adtile's evidence includes
Linkedln listings of "Perion/Undertone" as the employment place for a corporate officer
(and another employee) and general allegations of a lack of corporate separateness.
Adtile has not produced any evidence to show that Undertone does not "make [its] own
decisions about day-to-day activities," including "design[ing], manufactur[ing],
market[ing], and distribut[ing]." Monsanto Co. v. Syngenta Seeds, Inc., 443 F. Supp. 2d
636, 645 (0. Del. 2006). Perion, through a sworn affidavit, states that Perion and its
subsidiaries maintain separate books, records, and accounts. (D.I. 24 at~ 10)
Although Adtile demonstrates an overlap of one director between Perion and
Undertone, the test requires a "specific combination of elements." Applied

6

Biosystems, 772 F. Supp. at 1463 (emphasis added). The allegations are insufficient to

support an agency or alter ego theory and, therefore, Adtile has not sufficiently alleged
that the court should pierce the corporate veil and attribute Undertone's actions to
Perion.
The Third Circuit Court of Appeals uses a "purposeful availment" test for deciding
whether a defendant's internet website meets the Burger King test for specific
jurisdiction. See Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446, 452 (3d Cir. 2003).
Adtile asks the court to subject Perion to specific jurisdiction in Delaware based on
"ongoing sales and advertisement of infringing motion-activated ads sold across the
country, including in Delaware," rather than a "specific injury limited to one geographic
location." (D.I. 34 at 10) Specifically, Adtile submits that Perion has advertised
infringing ads2 as its own on Perion's website, without mention of Undertone. (D.I. 34 at
8; D.I. 36

at~

6, ex. E) For advertisements to grant personal jurisdiction under

Delaware's long arm statute, they "must be specifically directed toward Delaware
residents." Applied Biosystems, 772 F. Supp. at 1467. Adtile has not alleged, let alone
submitted evidence, that any advertisement was specifically directed towards Delaware.
On the other hand, Perion has submitted an affidavit that it does not conduct business
in Delaware and that its website is informational and does not allow consumers to
purchase goods or services. (D.I. 24 at~~ 4-9) Adtile's stream of commerce
allegations are similarly unpersuasive. Adtile has not introduced evidence to meet its
burden of demonstrating that Perion had an intent to serve the Delaware market by

2

Without distinguishing which ads target or are sold in Delaware.
7

placing its ~oods in the United States stream of commerce. DNA Genotek Inc. v.

Spectrum DNA, 2016 WL 450044, at *2 (D. Del. Feb. 4, 2016).

C. General Jurisdiction
Perion is not incorporated in Delaware and does not have an office or employees
in Delaware. (D.I. 43 at 5; D.I. 24at1J 5) As evidence of Perion's contacts with
Delaware, Adtile submits a declaration stating that Perion works directly with companies
incorporated in Delaware (such as Twitter, Lenovo, and APN LLC). Perion derives the
"majority" of its revenue from service agreements with its search. partners, one of which
is a Delaware corporation. Moreover, Perion has acquired two Delaware corporations.
(D.I. 36at1J1J4, 9, 11, 1215)
According to the Supreme Court, "the exercise of general jurisdiction in every
State in which a corporation 'engages in a substantial, continuous, and systematic
course of business' ... is unacceptably grasping." Daimler, 134 S. Ct. at 761.
"Accordingly, the inquiry ... is not whether a foreign corporation's in-forum contacts can
be said to be in some sense continuous and systematic, it is whether that corporation's
affiliations with the State are so continuous and systematic as to render [it] essentially at
home in the forum State." Id. at 761. (citation and internal quotations omitted).
In the case at bar, the exercise of general jurisdiction over Perion based on the
cited relationships with Delaware would be the type of "unacceptably grasping" test the
Supreme Court in Daimler sought to avoid. Similarly, Adtile's contention that Perion's
nationwide sales qualify as business in each state, conferring general jurisdiction in
Delaware, is too broad. See id. at 762 n.20 ("A corporation that operates in many
places can scarcely be deemed at home in all of them."). The Supreme Court's

8

decision in Daimler expressly contradicts Adtile's position regarding Delaware
subsidiaries by rejecting the exercise of general jurisdiction over a company "wherever
they have an in-state subsidiary or affiliate." Id. at 760. 3
Given that Perion is an Israeli corporation, the court looks to Rule 4 of the
Federal Rules of Civil Procedure for claims that arise under federal law: "[S]erving a
summons or filing a waiver of service establishes personal jurisdiction over a defendant
if: (A) the defendant is not subject to jurisdiction in any state's courts of general
jurisdiction; and (B) exercising jurisdiction is consistent with the United States
Constitution and laws." Fed. R. Civ. P. 4(k)(2). The rule provides a "narrow exception"
when a plaintiff makes "an affirmative representation that the defendant is not subject to
the general jurisdiction of any state court." Monsanto Co., 443 F. Supp. 2d at 647; see
United States. v. Offshore Marine Ltd., 179 F.R.D. 156, 160 (D.V.I. 1998) ("Accordingly
to survive a motion to dismiss for want of personal jurisdiction, the plaintiff bears the
burden to prove that [defendant] is not otherwise subject to service of process in any
. state"); see also Commisseriat A L'Energie Atomique v. Chi Mei Optoelectronics Corp.,
293 F. Supp. 2d 423, 430 (D. Del. 2003) (holding that simply establishing United States
contacts was not enough to prove defendant could not be subject to suit in any state).
Adtile claims that the burden shifts to Perion, but does not demonstrate in the first

3

Adtile contends that the Delaware subsidiaries' websites confer general jurisdi9tion
through the subsidiaries' commercial activity. However, Adtile incorrectly attributes the
activity on the websites to Perion. Even if the court were to consider the subsidiaries'
websites, Adtile has not demonstrated that these websites have provided services to
Delaware residents and, "[i]nstead, plaintiff has merely concluded that, because
defendant has not excluded Delaware from accessing its website, it has subjected itself
to the jurisdiction of the Delaware courts." (D.I. 36); inno360, Inc., 50 F. Supp. 3d at
595.

9

instance that Perion is not subject to suit in any other state. See Monsanto Co., 443 F.
Supp. 2d at 647 (dismissing a case where plaintiff attempted "to shift the burden ... by
arguing that, if the court finds no jurisdiction lies in Delaware, then no jurisdiction lies in
any other state and Rule 4(k)(2) applies"). The court grants Perion's motion to
dismiss. 4 · 5

IV. ARBITRATION
A. Agreements
The License Agreement6 provides that Adtile owned the proprietary licensed
software product - the Ad Builder (the "Licensed Software") - and any related
documentation (the "Licensed Documentation"). (D.I. 33, ex. 11 at§§ B, C) Undertone
was allowed to use the Licensed Software and Licensed Documentation for its internal
purposes, but Adtile was allowed to approve the showing of any ads created with the
Licensed Software. (Id. at§ 1.1 (a)) The License Agreement further provides that
Undertone owns any "deliverables," i.e., work product produced by Adtile for Undertone.
Undertone is deemed the author of the deliverables for copyright purposes. Adtile
retains the ownership of "all technology," including the code libraries developed for the
Motion Ads and used by Adtile to provide deliverables. (Id. at § 2.2)
The License Agreement includes a section captioned, "Governing Law; Dispute
Resolution," which provides that the License Agreement "shall be governed by and

4

Adtile has not made a prima facie case of personal jurisdiction. Metcalfe v.
Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009) ("If the district court does
not hold an evidentiary hearing, 'the plaintiff[s] need only establish a prima facie case of
personal jurisdiction."').
5 Perion's motion to dismiss for failure to state a claim is moot.
6 Executed on August 26, 2014.
10

construed according to the laws of the State of Delaware" and "[a]ny controversy or
claim arising out of or relating to this Agreement will be settled by binding arbitration."
Specifically, "[a]rbitration will be by the JAMS and will be referred to a single neutral
arbiter for final determination under the JAMS Comprehensive Arbitration Rules ... and
held in Wilmington, Delaware." 7 (Id. at§ 9.11) A merger clause recites, "[t]his
Agreement, including any exhibits and addenda, constitutes the entire understanding
and agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior or .contemporaneous oral or written communications with
respect hereto, all of which are merged herein." (Id. at§ 9.13)
The License Agreement refers to "a separate [NOA], a form of which is attached
hereto as Exhibit A, concurrently with the execution of this Agreement and as a
condition precedent to the effectiveness hereof." (Id. at§ 9.14) The NDA8 includes a
section captioned, "Governing Law," which recites that "Delaware law shall govern the
interpretation of this [NOA], without reference to rules regarding conflicts of law. Any
dispute arising out of this [NOA] shall be submitted to a state or federal court sitting in
Wilmington, Delaware, which shall have the exclusive jurisdiction regarding the dispute
and to whose jurisdiction the Parties irrevocably submit."9 (Id., NOA at§ 11) The NOA
further provides that "[t]his [NOA] constitutes the Parties' entire [NOA] with respect to

7

This section also provides that "[n]othing in this section will prevent any party from
seeking or obtaining injunctive relief and other remedies available under these
provisioris."
8 Entered into "as of the Effective Date" of the License Agreement and executed on
August 26, 2014.
9 Undertone and Adtile previously entered into the March NOA to facilitate discussions,
which also chose Delaware law, but specified that disputes should be submitted to a
state or federal court in Riverside County, California. (D.I. 13, ex. I)
11

the subject matter hereof and supersedes any and all prior statements or agreements,
both written and oral." (Id., NOA at§ 14)
The Termination Agreement provides that certain specified provisions of the
License Agreement and NOA survived the Termination Agreement. (D.I. 33, ex. 16 at§
2) It also contains a section "Governing Law; Dispute Resolution," which includes the
same broad and mandatory arbitration provision included in the License Agreement.

(Id. at§ 6.9)

B. Standard
It is presumed that courts must decide questions of arbitrability "unless the
parties clearly and unmistakably provide otherwise." Opalinski v. Robert Half lnt'l Inc.,
761 F.3d 326, 335 (3d Cir. 2014) (citations omitted). The Third Circuit has observed
that "[v]irtually every circuit to have considered the issue has determined that
incorporation of the [American Arbitration Association ("AAA")] rules constitutes clear
and unmistakable evidence that the parties agreed to arbitrate arbitrability" in the

° Chesapeake Appalachia, LLC v. Scout

context of bilateral arbitration disputes. 1

Petroleum, LLC, 809 F.3d 746, 763-64 (3d Cir. 2016) (collecting cases); see also URS
Corp. v. Lebanese Co. for Dev. & Reconstruction of Beirut Cent. Dist. SAL, 512 F.
Supp. 2d 199, 207 (D. Del. 2007) (finding that plaintiff "failed to demonstrate that an
order by this court on the issue of arbitrability prior to a decision by the ICC tribunal
[would] adhere to the purposes of the New York Convention, when the "ICC rules make

10

Ultimately concluding that incorporation of the AAA rules was insufficient, in and of
itself, to delegate to an arbitrator the question of whether class-wide arbitration is
permissible. Chesapeake, 809 F.3d at 764-66.
12

clear that the question of arbitrability will ultimately be addressed by the ICC tribunal
composed of the confirmed arbitrators").
According to the JAMS Comprehensive Arbitration Rules, the "Parties shall be
deemed to have made these Rules a part of their Arbitration agreement.... whenever
they have provided for Arbitration by JAMS under its Comprehensive Rules or for
Arbitration by JAMS without specifying any particular JAMS Rules .... " (D.I. 27, ex. C
at Rule 1(b)). Moreover, JAMS provides that
Jurisdictional and arbitrability disputes, including disputes over the
formation, existence, validity, interpretation or scope of the agreement
under which Arbitration is sought, and who are proper Parties to the
Arbitration, shall be submitted to and ruled on by the Arbitrator. The
Arbitrator has the authority to determine jurisdiction and arbitrability
issues as a preliminary matter.

(Id. at Rule 11(b)) (emphasis added)
C. Analysis
Adtile concedes that its breach of contract and breach of the covenant of good
faith and fair dealing are properly arbitrable, ·but argues that each other claim misappropriation of trade secrets and confidential information, copyright and trademark
infringement, unfair competition, false designation of origin, common law trademark
infringement, common law unfair competition - are not subject to arbitration. Each of
Adtile's claims arise from the following set of facts. Adtile and Undertone entered into
the License Agreement. Adtile shared with Undertone certain material, which is
allegedly copyrighted, trademarked, confidential, or trade secret information. 11
Undertone and Adtile terminated the License Agreement. Undertone continued using

11

Details of such allegations are recited in more detail in the order on Adtile's motion for
preliminary injunction.
13

the shared information. Both the License Agreement and the Termination Agreement
reference such material and the distribution thereof. (See e.g., D.I. 33, ex. 11 at§ 2.2;
ex. 16 at§§ 2, 3) The NOA contains a "Governing Law" provision, however, both the
License Agreement (which contains a merger· clause and includes the NOA as an
exhibit) and the Termination Agreement contain a broad arbitration clause. Moreover,
although the NOA does not contain an arbitration provision, it broadly defines
"confidential information" as "any information furnished or disclosed, in whatever form or
medium," relating to Adtile's business and includes "business procedures, processes,
techniques, methods, ideas, ... product designs, source codes, product planning, trade
secrets, ... and

materi~I

samples, [as well as] any Ad Materials or information from an

Advertiser 10" as defined in the License Agreement. 12 The NDA's confidential
information necessarily overlaps with the information shared pursuant to the License
· Agreement and central to the disputes at bar. Adtile and Undertone agreed to submit
"any controversy or claim arising out of or relating to" the License and Termination
Agreements to arbitration. 13 The court concludes that the arbitrator is tasked with
determining whether Adtile's claims at bar are subject to arbitration. See Liv. Standard
Fiber, LLC, Civ. No. 8191-VCN, 2013 WL 1286202, at *6 (Del. Ch. Mar. 28, 2013)
(finding that "together the broad arbitration clause and the reference to the JAMS Rules
clearly show that the parties intended to arbitrate issues of substantive arbitrability with
respect to disputes that relate to the prior agreements").

V. STAY

12

The March NOA uses substantially the same broad definition of confidential
information. (D.I. 13, ex. I at§ 2)
13 The court has separately addressed Adtile's motion for preliminary injunction.

14

The FAA mandates that district courts shall stay proceedings while arbitration is
pending if a suit is brought "upon any issue referable to arbitration under an agreement
in writing for such arbitration" and the court is "satisfied that the issue involved in such
suit or proceeding is referable to arbitration under such an agreement .... " 9 U.S.C. §
3. The FAA limits the role of courts to determine: (1) whether the parties entered into a
valid arbitration agreement; and (2) whether the specific dispute falls within the scope of
the agreement. John Hancock Mutual Life Ins. Co. v. Olick, 151 F.3d 132, 136 (3d Cir.
1998). Courts generally operate under a pronounced "presumption of arbitrability."

Battaglia v. McKendry, 233 F.3d 720, 725 (3d Cir. 2000) (quoting AT & T Techs., Inc. v.
Communications Workers of Am., 475 U.S. 643, 650 (1986)).
When determining whether a given claim falls within the scope of an
arbitration agreement, a court must "focus on the factual allegations in the
complaint rather than the legal causes of action asserted." "If these
factual allegations 'touch matters' covered by the parties' contract, then
those claims must be arbitrated, whatever the legal labels attached to
them." Moreover, "any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration, whether the problem at hand is
the construction of the contract language itself or an allegation of waiver,
delay, or a like defense to arbitrability."

Vara/lo v. Elkins Park Hosp., 63 F. App'x 601, 603 (3d Cir. 2003) (citations omitted).
The parties do not dispute whether the arbitration provision is valid, instead,
Adtile argues that with the exception of the breach of contract and breach of the
covenant of good faith and fair dealing, its claims are not subject to arbitration. The
court has determined that whether Adtile's claims at bar are subject to arbitration is
properly determined by the arbitrator. As discussed above, each of Adtile's claims stem
from the same factual allegations and may be properly said to touch upon the License

15

and Termination Agreements. The court will stay the proceeding pending completion of
arbitration.

VI. CONCLUSION
For the foregoing reasons, Perion's motion to dismiss the complaint for lack of
personal jurisdiction (D.I. 22) is granted; and Undertone's motion to stay the present
action and compel arbitration (D.I. 25) is granted. An appropriate order shall issue.

16