MG Design Associates, Corp. v. Costar Realty Information, Inc. et al
Filing
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OPINION AND ORDER. Signed by the Honorable Sara L. Ellis on 12/1/2016. Mailed notice(rj, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MG DESIGN ASSOCIATES, CORP.,
Plaintiff,
v.
COSTAR REALTY INFORMATION, INC.,
APARTMENTS, LLC d/b/a
APARTMENTS.COM, and NORTHWIND
ENTERPRISES, INC. d/b/a ATLANTIC
EXHIBITS,
Defendants.
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No. 16 C 5166
Judge Sara L. Ellis
OPINION AND ORDER
Believing Defendants used its work to construct a tradeshow exhibit, Plaintiff MG
Design Associates, Corp. (“MG”) brings suit against Defendants CoStar Realty Information, Inc.
(“CoStar”), Apartments, LLC d/b/a Apartments.com (“Apartments”), and Northwind
Enterprises, Inc. d/b/a Atlantic Exhibits (“Atlantic”), alleging copyright infringement in violation
of the Copyright Act of 1976 (the “Copyright Act”), 17 U.S.C. § 101 et seq., fraudulent
misrepresentation, breach of contract, and tortious interference with both contract and
prospective economic advantage. Defendants move to dismiss MG’s claims for lack of personal
jurisdiction and for failure to state a claim. The Court finds that Defendants possess sufficient
contacts with Illinois to authorize personal jurisdiction, but that MG fails to properly allege a
copyright claim. With the dismissal of the federal claims, the Court declines to address MG’s
state law claims until it alleges a basis for the Court’s subject matter jurisdiction. The Court
therefore denies in part and grants in part Defendants’ motions [11, 23], dismissing MG’s lawsuit
without prejudice.
BACKGROUND 1
MG and Atlantic both design and construct trade show exhibits. In 2014, CoStar, a real
estate information company acquired Apartments, which runs the website Apartments.com.
Before the events at issue here, MG had a 15-year business relationship with Apartments. In
April 2015, Apartments’ Tradeshow Manager, Sharon Patenaude, 2 contacted MG to design a
trade show exhibit for an upcoming conference in Las Vegas, Nevada. Patenaude communicated
with MG’s Executive Vice President and then traveled to MG’s office in Pleasant Prairie,
Wisconsin to discuss design plans. MG produced an initial set of design renderings, proposing a
layout and appearance for an Apartments-branded exhibit. After receiving feedback, MG
submitted a second set of design renderings (the “Renderings”) and waited for a response. But
two days later, MG learned that it would not handle any future work for CoStar and Apartments
and that it would not construct an exhibit for the Las Vegas conference. MG sent an invoice for
the Renderings to CoStar, and CoStar paid MG $16,500 for the work. MG would have charged
significantly more, approximately $340,000, had it also constructed an exhibit based on the
Renderings.
After CoStar paid the invoice for the Renderings, CoStar hired Atlantic to construct an
exhibit at the Las Vegas conference (the “Las Vegas Exhibit”), using the Renderings “as the
basis” for the construction. Doc. 1 ¶ 46. Atlantic then advertised on its website that it designed
1
The facts in the background section are taken from MG’s complaint and exhibits attached thereto and
are presumed true for the purpose of resolving Defendants’ motions to dismiss pursuant to Rule 12(b)(6).
See Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011); Local 15, Int’l Bhd. of Elec. Workers, AFLCIO v. Exelon Corp., 495 F.3d 779, 782 (7th Cir. 2007). Facts necessary to ruling on Defendants’
motions to dismiss pursuant to Rule 12(b)(2), including facts from affidavits and other materials outside
the Complaint, appear below with citations to relevant source material.
2
Patenaude affirms that she was an employee of CoStar, performing work for Apartments, during the
events at issue. See generally Doc. 31-1 (First Patenaude Declaration); Doc. 35-1 (Second Patenaude
Declaration).
2
the Las Vegas Exhibit. The Renderings bore a legend on each page stating “[a]ll designs and
ideas . . . are the creative property of [MG],” the paid invoice stated that the Renderings “remain
the property of [MG],” and both the invoice and the Renderings stated that the Renderings “may
not be reproduced in any manner without the express approval of [MG].” Doc. 1 ¶¶ 38, 45; Doc.
1-2. MG never received a request from anyone to use the Renderings or to construct exhibits
based on the Renderings. MG has not performed any work for CoStar or Apartments following
this dispute.
MG is an Illinois corporation with its principal place of business in Pleasant Prairie,
Wisconsin. Doc. 1 ¶ 10. CoStar is a Delaware corporation with its corporate headquarters in
Washington, D.C. Doc. 1 ¶ 11; Doc. 12-1 (Campbell Declaration) ¶ 2. CoStar has an office in
Chicago, Illinois and is registered to do business in Illinois. Doc. 1 ¶ 11. Apartments is a
Delaware limited liability company, and CoStar is Apartments’ sole member. Doc. 12-1 ¶¶ 3–4.
Although MG alleges that Apartments’ primary office is in Chicago, Doc. 1 ¶ 12, Apartments’
corporate executives, including its Chief Executive Officer, Executive Vice President of
Operations, Executive Vice President of Accounting and Finance, and General Counsel and
Secretary have “directed, controlled, and coordinated its business from Washington, D.C,” Doc.
12-1 ¶ 7. Apartments’ only other corporate officer, its President, resided in Illinois until January
2016. Doc. 12-1 ¶ 9. Between April 2014 and the summer of 2015, Apartments maintained its
departments for product design and development, multi-family field sales, finance, and customer
service in Chicago. Id. ¶ 11. Apartments then moved the “majority of [its] departments,”
including its finance, marketing, and customer service departments, to Atlanta, Georgia between
the summer of 2015 and January 2016. Id. ¶ 12. It is unclear whether any departments remain in
Chicago. See id. Atlantic is a Virginia corporation with its principal place of business in
3
Chantilly, Virginia, Doc. 24-1 (Beach Declaration) ¶ 2, and competes with MG in their design
field and for clients, id. ¶ 9.
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(2) challenges whether the Court has jurisdiction
over a party. The party asserting jurisdiction has the burden of proof. See Tamburo v.
Dworkin, 601 F.3d 693, 701 (7th Cir. 2010). The Court may consider affidavits and other
competent evidence submitted by the parties. Purdue Research Found. v. Sanofi–Synthelabo,
S.A., 338 F.3d 773, 782 (7th Cir. 2003). If the Court rules on the motion without a hearing, the
plaintiff need only establish a prima facie case of personal jurisdiction. GCIU–Emp’r Ret. Fund
v. Goldfarb Corp., 565 F.3d 1018, 1023 (7th Cir. 2009). The Court will “read the complaint
liberally, in its entirety, and with every inference drawn in favor of” the plaintiff. Cent. States,
Se. & Sw. Areas Pension Fund v. Phencorp Reinsurance Co., 440 F.3d 870, 878 (7th Cir.
2006) (quoting Textor v. Bd. of Regents of N. Ill. Univ., 711 F.2d 1387, 1393 (7th Cir. 1993)).
“[O]nce the defendant has submitted affidavits or other evidence in opposition to the exercise of
jurisdiction,” however, “the plaintiff must go beyond the pleadings and submit affirmative
evidence supporting the exercise of jurisdiction.” Purdue, 338 F.3d at 783. Any dispute
concerning relevant facts is resolved in the plaintiff’s favor. Id. at 782–83.
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not
its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.
1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all wellpleaded facts in the plaintiff’s complaint and draws all reasonable inferences from those facts in
the plaintiff’s favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive
a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a
4
claim’s basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678.
ANALYSIS
I.
Personal Jurisdiction
CoStar, Apartments, and Atlantic each argue that the Court does not have personal
jurisdiction over them. Because Defendants raise a jurisdictional issue with respect to MG’s
claims, the Court addresses it first. Bunker Ramo Corp. v. United Bus. Forms, Inc., 713 F.2d
1272, 1279 (7th Cir. 1983). MG brings claims under the Copyright Act and state law. The
Copyright Act does not authorize nationwide service of process, and so the Court may exercise
jurisdiction over Defendants only if authorized both by the United States Constitution and
Illinois law. Monster Energy Co. v. Wensheng, 136 F. Supp. 3d 897, 902 (N.D. Ill. 2015); see
also United Airlines, Inc. v. Zaman, 152 F. Supp. 3d 1041, 1046–47 (N.D. Ill. 2015) (“When
subject matter jurisdiction rests on a federal question . . . and supplemental jurisdiction, and no
special federal rule for personal jurisdiction applies, as here; this Court may exercise personal
jurisdiction over Defendant only if it is (1) proper under the forum state’s personal jurisdiction
statute and (2) comports with the requirements of the Due Process Clause.”).
Illinois “permits its courts to exercise personal jurisdiction on any basis permitted by the
constitutions of both Illinois and the United States.” be2 LLC v. Ivanov, 642 F.3d 555, 558 (7th
Cir. 2011); 735 Ill. Comp. Stat. 5/2-209. To the extent the federal constitutional and Illinois
statutory inquiries diverge, “the Illinois constitutional standard is likely more restrictive than its
5
federal counterpart,” but both essentially focus on whether exercising jurisdiction over a
defendant is fair and reasonable and thus a single inquiry suffices. KM Enters, Inc. v. Global
Traffic Techs., Inc., 725 F.3d 718, 732 (7th Cir. 2013); C.H. Johnson Consulting, Inc. v.
Roosevelt Rds. Naval Station Lands & Facilities Redevelopment Auth., No. 1:12-cv-08759, 2013
WL 5926062, at *2 (N.D. Ill. Nov. 5, 2013). The Court, therefore, asks one constitutional
question: do Defendants have “certain minimum contacts with [Illinois] such that the
maintenance of the suit does not offend ‘traditional notions of fair play and substantial
justice[?]’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945)
(quoting Millikin v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 85 L. Ed. 278 (1940)). Minimum
contacts exist where “the defendant’s conduct and connection with the forum State are such that
he should reasonably anticipate being haled into court there.” World–Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1984).
Personal jurisdiction comes in two forms: general and specific. uBID, Inc. v. GoDaddy
Grp., Inc., 623 F.3d 421, 425 (7th Cir. 2010). General jurisdiction arises when the defendant has
“continuous and systematic” contacts with the forum state. Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 416, 104 S. Ct. 1868, 80 L. Ed. 2d 404 (1984). A
defendant is subject to general jurisdiction only where its contacts with the forum state are so
substantial that it can be considered “constructively present” or “at home” in the state. Goodyear
Dunlop Tires Ops., S.A. v. Brown, 564 U.S. 915, 919, 131 S. Ct. 2846, 180 L. Ed. 2d 796 (2011);
Purdue, 338 F.3d at 787; see also Tamburo, 601 F.3d at 701 (“The threshold for general
jurisdiction is high; the contacts must be sufficiently extensive and pervasive to approximate
physical presence.”). Alternatively, the Court has specific jurisdiction “when the defendant
purposefully directs its activities at the forum state and the alleged injury arises out of those
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activities.” Mobile Anesthesiologists Chicago, LLC v. Anesthesia Assocs. of Houston Metroplex,
P.A., 623 F.3d 440, 444 (7th Cir. 2010). “The inquiry whether a forum State may assert specific
jurisdiction over a nonresident defendant focuses on the relationship among the defendant, the
forum, and the litigation” and “the defendant’s suit-related conduct must create a substantial
connection with the forum state.” Walden v. Fiore, --- U.S. ----, 134 S. Ct. 1115, 1121, 188 L.
Ed. 2d 12 (2014). MG elects to demonstrate that the Court has specific jurisdiction over
Defendants. 3
To find specific jurisdiction:
(1) the defendant must have purposefully availed himself of the
privilege of conducting business in the forum state or purposefully
directed his activities at the state, (2) the alleged injury must have
arisen from the defendant’s forum-related activities, and (3) the
exercise of jurisdiction must comport with traditional notions of
fair play and substantial justice.
Felland, 682 F.3d at 674 (citations omitted). “Whether a defendant has purposefully directed
activities at a forum ‘depends in large part on the type of claim at issue’” and “whether the
conduct underlying the claims was purposely directed at the forum state.” Monster Energy Co.,
136 F. Supp. 3d at 903 (quoting Felland, 682 F.3d at 674). There is no “‘pendent’ or
‘supplemental’ theory of specific personal jurisdiction,” and “personal jurisdiction over the
defendant must be established as to each claim asserted.” In re Testosterone Replacement
Therapy Prod. Liab. Litig. Coordinated Pretrial Proceedings, 164 F. Supp. 3d 1040, 1048–49
(N.D. Ill. 2016) (rejecting plaintiffs’ attempts to establish personal jurisdiction over defendants
3
Although MG mentions in passing that it could show there is general jurisdiction over CoStar and
Apartments, it makes no effort to show this is the case and instead argues for specific jurisdiction. See
Doc. 31 at 6 (“While there is, arguably, sufficient grounds to assert general jurisdiction over the
Defendants based upon information in Ms. Campbell’s Declaration (ECF No. 12, Ex. A), the
overwhelming evidence makes clear that the principle of specific jurisdiction should subject CoStar and
Apartments to the jurisdiction of this Court.”). Because MG does not make additional arguments on
general jurisdiction and it is not the Court’s duty to do so for MG, the Court will only address the issue of
specific jurisdiction.
7
by invoking similarities between defendants’ conduct against other plaintiffs that established
specific jurisdiction and defendants’ conduct against other plaintiffs that was related to conduct
that created personal jurisdiction); see also Zivitz v. Greenburg, No. 98 C 5350, 1999 WL
984397, at *7 n.3 (N.D. Ill. Oct. 25, 1999) (common claims against multiple defendants could
only proceed where personal jurisdiction existed independently for each claim over each
defendant).
A.
CoStar and Apartments
The Court considers whether CoStar and Apartments each have had minimum contacts
with Illinois, determining whether they each have a “substantial connection” with Illinois, or, if
their actions otherwise connect them to Illinois in a “meaningful way” by focusing on (1) the
relevance of their contacts with Illinois and (2) how meaningful those contacts were and/or are.
Walden, 134 S. Ct. at 1121, 1122–23, 1125; uBid, Inc., 623 F.3d at 426–32.
MG first argues that the Court has specific jurisdiction because “[t]he transaction that is
the root of this dispute is design work performed by MG Design, an Illinois corporation.” Doc.
31 at 6. But MG’s actions cannot establish specific jurisdiction over Apartments and CoStar
using only MG’s state of incorporation because “the plaintiff cannot be the only link between the
defendant and the forum.” Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc.,
751 F.3d 796, 802 (7th Cir. 2014) (quoting Walden, 134 S. Ct. at 1122).
MG next points to its deal with Apartments to design the Renderings for the marketing
space in Las Vegas, arguing that the actions of CoStar and Apartment’s alleged agent—
Patenaude, CoStar’s Tradeshow Manager and coordinator of the Apartments exhibit for the Las
Vegas conference—show the necessary contacts with Illinois. Importantly, Patenaude was
8
stationed in Illinois to work for CoStar and Apartments, 4 and CoStar and Apartments maintained
offices there for marketing and tradeshow work. “Where a defendant ‘purposefully avails itself
of the privilege of conducting activities within the forum State, thus invoking the benefits and
protections of its laws,’ it submits to the judicial power of an otherwise foreign sovereign to the
extent that power is exercised in connection with the defendant’s activities touching on the
State.” J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 881, 131 S. Ct. 2780, 180 L. Ed. 2d
765 (2011) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1239, 2 L. Ed. 2d
1283 (1958)). Setting up offices in and sending employees to the forum state for tradeshow
operations is enough for minimum contacts in this case. Cf. McIntyre, at 564 U.S. at 886
(holding that defendant could not be brought to court in New Jersey and noting that defendant
did not have an office, property, or employees in the state); Goodyear, 564 U.S. at 921 (“In
contrast to the parent company, Goodyear USA, which does not contest the North Carolina
courts’ personal jurisdiction over it, petitioners are not registered to do business in North
Carolina. They have no place of business, employees, or bank accounts in North Carolina.”); see
also Scovill Mfg. Co. v. Dateline Elec. Co., 461 F.2d 897, 900 (7th Cir. 1972) (employee
attendance in Illinois for business purposes related to dispute authorizes personal jurisdiction
over the employer). CoStar registered to do business in Illinois, Apartments placed its marketing
department in Illinois, and CoStar located its employee responsible for Apartments’ tradeshows
in Illinois. Defendants argue that their operations in Illinois are merely incidental to specific
jurisdiction, but their presence in Illinois is purposeful. Despite keeping the core of their
operations in Washington, D.C., CoStar and Apartments placed their trade show operation and
the employee running that operation in Illinois,; further, that operation is directly related to MG’s
4
CoStar and Apartments do not challenge MG characterizing Patenaude as an “agent” of both
Defendants.
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claims. CoStar and Apartments therefore both have the necessary contacts with Illinois to
authorize personal jurisdiction.
The Court also notes that the parties ignore MG’s breach of contract claim against CoStar
and Apartments. “With respect to interstate contractual obligations, parties who reach out
beyond one state and create continuing relationships and obligations with citizens of another
state are subject to regulation and sanctions in the other State for the consequences of their
activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 105 S.Ct 2174, 85 L.Ed.2d 528
(1985) (internal quotation marks omitted) (citation omitted); see also 735 Ill. Comp. Stat. § 5/2209(a)(7) (Illinois long-arm statute granting specific jurisdiction over a defendant that engages in
the “making or performance of any contract or promise substantially connected” to Illinois). The
Supreme Court “emphasize[s] the need for a ‘highly realistic’ approach that recognizes that a
‘contract’ is ‘ordinarily but an intermediate step serving to tie up prior business negotiations with
future consequences which themselves are the real object of the business transaction.’” Burger
King Corp., 471 U.S. at 473 (citation omitted). Therefore “prior negotiations and contemplated
future consequences, along with the terms of the contract and the parties’ actual course of
dealing” are the factors that guide the issue of purposeful availment. Id. at 479 (internal
quotation marks omitted) (citation omitted). Similarly, Illinois courts consider “(1) who initiated
the transaction; (2) where the contract was negotiated; (3) where the contract was formed; and
(4) where performance of the contract was to take place.” Philos Techs., Inc. v. Philos & D, Inc.,
802 F.3d 905, 913 (7th Cir. 2015) (citation omitted). The parties’ negotiation, course of dealing,
relationship, and actions, and the alleged contract terms all meld into MG’s copyright and tort
claims. The Court therefore finds that there is sufficient connection to Illinois to exercise
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personal jurisdiction over MG’s breach of contract claim against both CoStar and Apartments as
well.
CoStar and Apartments do not raise any issue with fair play and substantial justice, see
generally Doc. 35 at 5–6, and there is no reason to think that because Defendants have, or at least
had until recently, 5 operations in Illinois related to the substantive dispute, Defendants would
suffer any prejudice in litigating the case here. See, e.g., Smart Oil, LCC v. DW Mazel, LLC, No.
15 C 8146, 2016 WL 521071, at *4 (N.D. Ill. Feb. 10, 2016) (“Defendants’ contacts with the
forum state make it reasonable to litigate this case in Illinois.”). Therefore, the Court finds that it
has specific jurisdiction over CoStar and Apartments.
B.
Atlantic
Atlantic argues that MG does not allege that Atlantic had sufficient contacts with Illinois
to authorize specific jurisdiction. In response, MG argues that it has sufficiently alleged facts for
specific jurisdiction over Atlantic because it alleges (1) MG, an Illinois corporation, felt its injury
in Illinois and (2) Atlantic intentionally interfered with MG’s contractual and business
relationships with companies conducting business in Illinois and doing business with an Illinois
corporation and demonstrated an intent to affect an Illinois interest. 6 The fact that MG suffered
5
CoStar and Apartments’ affiant does not attest that Apartments moved all of its operations out of
Chicago to Atlanta. Cf. Doc. 12-1 ¶ 12 (“Between the summer of 2015 and January 2016, the majority of
departments for [Apartments] were relocated to Atlanta, Georgia.”).
6
Both MG and Atlantic fail to discuss whether there is specific jurisdiction over the copyright claims,
brought against all Defendants, including Atlantic, in Counts I and II. Atlantic’s opening brief does not
specifically address the copyright claims, arguing only that “MG has not alleged that Atlantic has any
contacts (let alone substantial suit-related contacts) with the state of Illinois.” Doc. 24 at 6 (emphasis in
original) (footnote omitted). In its response, MG chooses to focus exclusively on “[t]wo of the claims
against Atlantic . . . tortious interference with contract (Count V) and tortious interference with
prospective economic advantage (Count VI).” Doc. 31 at 8. Atlantic, for its part, seems content to
proceed as if only specific jurisdiction for the state law tort claims is at issue, failing to argue in reply that
MG cannot establish prima facie specific jurisdiction over Atlantic for the copyright claim. See generally
Doc. 34 at 4–6. Without clear indication whether personal jurisdiction over Atlantic for the copyright
claims is at issue and because MG alleges Atlantic intentionally infringed on MG’s copyright, it appears
11
injury in Illinois, standing alone, is insufficient to demonstrate minimum contacts. See Advanced
Tactical Ordnance Sys., LLC, 751 F.3d at 802 (after Walden, harming a plaintiff from the forum
state does not create sufficient minimum contacts for specific jurisdiction because the plaintiff
cannot be the defendant’s only link to the forum). Similarly, while MG also argues that CoStar
and Apartments’ connections to Illinois show that Atlantic targeted Illinois, “[c]ontacts between .
. . other third parties and the forum do not satisfy this requirement.” Id. at 801. MG cannot rely
on CoStar and Apartments to prove that this Court has personal jurisdiction over Atlantic. The
Court therefore turns to MG’s contention that Atlantic intentionally affected an Illinois interest.
MG alleges that Atlantic interfered with MG’s business relationships with CoStar and
Apartments by taking MG’s work and then wrongfully using the Renderings for Atlantic’s profit
in violation of copyright and state law. 7 MG argues it satisfies its burden of establishing that the
Court has specific jurisdiction over Atlantic by alleging that (1) Atlantic’s conduct was
intentional and (2) MG is an Illinois corporation. Walden made clear that “[t]he ‘mere fact that
defendant’s conduct affected plaintiffs with connections to the forum State does not suffice to
authorize jurisdiction.’” Advanced Tactical Ordnance Sys., LLC, 751 F.3d at 802 (quoting
Walden, 134 S. Ct. at 1126) (alterations omitted). The “question whether harming a plaintiff in
the forum state creates sufficient minimum contacts is more complex.” Id.
Post-Walden, courts in this district have held that a defendant purposely directs its
conduct at Illinois and reasonably should foresee being brought to court there when the
the parties intend for MG’s arguments for specific jurisdiction for the state law tort claims against
Atlantic to apply with equal effect to the copyright infringement claims involving related conduct.
Therefore the Court addresses whether there is specific jurisdiction over Atlantic with an eye to all claims
against Atlantic.
7
MG also alleges that Atlantic intentionally advertised that it created the design for the Las Vegas
Exhibit, even though Atlantic based the designs on the Renderings and knew that MG created the
Renderings. MG does not allege that Atlantic aimed its advertisements at Illinois, so the Court does not
address whether the advertisements create sufficient contacts for specific jurisdiction.
12
defendant reaches into Illinois by infringing the intellectual property rights of a plaintiff “at
home” in the state, attempting to exploit the infringing conduct with knowledge that the plaintiff
would be injured in Illinois. E.g., IPOX Schuster, LLC v. Nikko Asset Mgmt. Co., --- F. Supp. 3d
----, 2016 WL 3194445, at *5 (N.D. Ill. June 9, 2016) (defendant was subject to specific
jurisdiction in Illinois after it infringed the trademarks of a plaintiff with a principal place of
business in Illinois and exploited the stolen trademarks knowing that plaintiff would suffer in
Illinois). “As a matter of policy, the law ought not require a holder of intellectual property . . . to
go to the home forum of one who has, in effect, reached into the holder’s home forum to take its
property. When an out-of-state entity chooses to trade on the [property] of an entity in the forum
state . . . it has, in the Court’s view, established a relationship not just with the in-state entity, but
with the forum state itself.” Id. (quoting Ariel Invs., LLC v. Ariel Capital Advisors LLC, No. 15
C 3717, slip op. at 5 (N.D. Ill. Oct. 29, 2015)). MG alleges that Atlantic took advantage of MG’s
intellectual property by infringing on MG’s copyright and severing MG’s business with CoStar
and Apartments. MG also alleges that it is incorporated in Illinois, and Atlantic submits
evidence that it is MG’s industry competitor, allowing the reasonable inference that Atlantic
knew its competitor was incorporated in Illinois and an Illinois corporation. 8 Therefore, there is
enough evidence at this stage to show that, taking MG’s allegations as true, Atlantic knew it was
infringing on an Illinois corporation’s intellectual property and interfering with the Illinois
corporation’s business that arose from the intellectual property. 9 Thus, Atlantic has sufficient
contacts with Illinois to authorize specific jurisdiction over Atlantic for MG’s claims of
8
Atlantic provides an affidavit from its Chief Operating Officer, and former Chief Executive Officer and
President, who attests that Atlantic “offer[s] similar services and compete[s] for the same clients” as MG.
Doc. 24-1 ¶ 9.
9
Atlantic’s Chief Operating Officer attests that Atlantic did not know CoStar had an existing contract
with MG, Doc. 24-1 ¶ 11, but this goes to the merits of MG’s tortious interference claims rather than to
the issue of personal jurisdiction over the tort claims.
13
copyright infringement and the tortious interference caused by the intellectual property
infringement. See id. (exercising specific jurisdiction over defendant accused of intellectual
property infringement and related state law claims). Atlantic does not argue that authorizing
jurisdiction violates the traditional notions of fair play and substantial justice, and therefore,
having found that exercising jurisdiction over each Defendant is proper, the Court turns to
Defendants’ motions to dismiss for failure to state a claim.
II.
Direct and Vicarious Copyright Infringement (Count I & Count II)
MG alleges that Defendants constructed the Las Vegas Exhibit by deriving the work from
the Renderings, in violation of MG’s exclusive rights in its copyright. To state a claim for
copyright infringement, MG must allege (1) that MG owns a valid copyright and (2) that
Defendants copied “constituent elements of the work that are original.” Feist Publ’ns, Inc. v.
Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S. Ct. 1282, 113 L. Ed. 2d 358 (1991); see also
Hart v. Amazon.com, Inc., No. 15-C-01217, 2015 WL 8489973, at *5 (N.D. Ill. Dec. 8, 2015)
(“To state a claim for contributory and vicarious copyright infringement, a plaintiff must plead
sufficient facts for a valid claim of direct copyright infringement.”). In addition, “no civil action
for infringement of the copyright in any United States work shall be instituted until
preregistration or registration of the copyright claim[.]” 17 U.S.C. § 411(a). Compliance with
the registration requirement in § 411(a) “is not a condition of copyright protection but is a
prerequisite to suing for infringement.” Brooks-Ngwenya v. Indianapolis Pub. Sch., 564 F.3d
804, 806 (7th Cir. 2009). “[T]he condition must be fulfilled before the litigation begins.
Satisfaction of the condition while the suit is pending does not avoid the need to start anew.”
Brooks-Ngwenya v. Thompson, 202 F. App’x. 125, 127 (7th Cir. 2006); see also TriTeq Lock &
Sec. LLC v. Innovative Secured Sols., LLC, No. 10 CV 1304, 2012 WL 394229, at *4 (N.D. Ill.
14
Feb. 1, 2012) (“To state a claim for copyright infringement, a plaintiff must allege . . . copyright
registration (unless the work is a foreign work, the alleged infringement concerns rights of
attribution and integrity of a work of visual art, or the plaintiff attempted to register the work and
registration was refused)[.]”). MG does not allege it registered or applied for registration prior to
filing suit.
Instead, MG argues that it alleges a “right of attribution” claim under the Visual Artists
Rights Act of 1990 (“VARA”), 17 U.S.C. § 106A. No copyright registration, or application, is
required “for an action brought for a violation of the rights of the author under section 106A(a).”
Kelley v. Chicago Park Dist., 635 F.3d 290, 291 (7th Cir. 2011); TriTeq Lock & Sec. LLC, 2012
WL 394229, at *4 (copyright registration is not necessary if “the alleged infringement concerns
rights of attribution and integrity of a work of visual art”).
Rights of attribution and integrity in a “work of visual art” are a “limited version of the
civil-law concept of the ‘moral rights of the artist.’” Kelley, 635 F.3d at 291.
“Rights of attribution” generally include the artist’s right to be
recognized as the author of his work, to publish anonymously and
pseudonymously, to prevent attribution of his name to works he
did not create, and to prevent his work from being attributed to
other artists. “Rights of integrity” include the artist’s right to
prevent the modification, mutilation, or distortion of his work, and
in some cases (if the work is of recognized stature), to prevent its
destruction.
Id. at 296 (citations omitted). “Rights of attribution” and “rights of integrity” are reserved for
artists who create a “work of visual art.” 17 U.S.C. § 106A(a); Kelley, 635 F.3d at 298.
“A ‘work of visual art’ is—
(1) a painting, drawing, print, or sculpture, existing in a single
copy, in a limited edition of 200 copies or fewer that are signed
and consecutively numbered by the author, or, in the case of a
sculpture, in multiple cast, carved, or fabricated sculptures of 200
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or fewer that are consecutively numbered by the author and bear
the signature or other identifying mark of the author; or
(2) a still photographic image produced for exhibition purposes
only, existing in a single copy that is signed by the author, or in a
limited edition of 200 copies or fewer that are signed and
consecutively numbered by the author.
A work of visual art does not include—
***
(B) any work made for hire;
***
A “work made for hire,” is–
(1) a work prepared by an employee within the scope of his or her
employment . . . .
17 U.S.C. § 101. While MG alleges that Atlantic wrongly claims “performance” of the Las
Vegas Exhibit’s design, MG also alleges that the Renderings “were created by an employee of
MG Design working within the course and scope of his employment.” Doc. 1 ¶ 59. MG uses
VARA’s definition of works “made for hire” near verbatim to describe the Renderings. See 17
U.S.C. § 101 (“A ‘work made for hire’ is . . . a work prepared by an employee within the scope
of his or her employment[.]”).
The Renderings’ purpose is also relevant to whether they are a work made for hire. If the
purpose is “commercial promotion,” then the work does not confer rights of attribution and
integrity. Martin v. City of Indianapolis, 982 F. Supp. 625, 635 (S.D. Ind. 1997), aff’d, 192 F.3d
608 (7th Cir. 1999). MG designed the renderings for Apartments’ trade show display; they were
a design for a client’s commercial promotion and intended to profit MG and attract more
business for MG and its client. See, e.g., Doc. 1 ¶¶ 33–37, 52; see also id. ¶ 53 (“Atlantic also
continues to benefit [from the Renderings] from the fact that it is able to promote, via its website
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and elsewhere, the infringing design as its own, attracting new customers.”). Therefore MG
cannot state a right of attribution claim for infringement of a work of visual art. Instead, it must
allege registration of a copyright and because this was not done prior to filing, MG’s copyright
claims fail and the Court must dismiss it.
III.
State Law Claims (Counts III–VI)
MG also brings claims for fraudulent misrepresentation and breach of contract against
CoStar and Apartments and tortious interference with contract and prospective economic
advantage against Atlantic. MG alleges that the Court has supplemental jurisdiction over these
state law claims pursuant to 28 U.S.C. § 1367. MG does not allege that diversity jurisdiction
exists, and the Court cannot proceed on the assumption that it does. See Downs v. IndyMac
Mortg. Servs., FSB, 560 F. App’x. 589, 591 (7th Cir. 2014) (refusing to find diversity
jurisdiction when it was not pleaded in the complaint). Because the Court dismisses the
copyright claims over which it has original jurisdiction at this time, the Court declines to exercise
supplemental jurisdiction over MG’s state law claims. See 28 U.S.C. § 1367(c); Groce v. Eli
Lilly & Co., 193 F.3d 496, 501 (7th Cir.1999) (“[I]t is the well-established law of this circuit that
the usual practice is to dismiss without prejudice state supplemental claims whenever all federal
claims have been dismissed prior to trial.”). The Court therefore dismisses the state law claims
against Defendants without prejudice and defers consideration of arguments on these claims until
MG adequately alleges a basis for the Court’s subject matter jurisdiction.
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CONCLUSION
The Court denies CoStar and Apartments’ motion to dismiss [11] and Atlantic’s motion
to dismiss [23] as to personal jurisdiction, and the Court grants Defendants’ motions to dismiss
as to the copyright claims, deferring consideration of MG’s state law claims until MG pleads a
sufficient basis for subject matter jurisdiction. Because the dismissal is without prejudice, MG
may file an amended complaint by January 6, 2017.
Dated: December 1, 2016
______________________
SARA L. ELLIS
United States District Judge
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