Big Guy's Pinball, LLC v. Domain PLAYPINBOX.COM et al

Filing 40

ORDER Denying 20 Motion to Dismiss for Lack of Personal Jurisdiction, Denying Motion to Dismiss for Improper Venue, Denying Motion to Dismiss For Failure to State A Claim, and Denying Motion to Transfer Venue. Signed by District Judge Victoria A. Roberts. (LVer)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
BIG GUY’S PINBALL, LLC,
Plaintiff,

Case No. 14-CV-14185
Hon. Victoria A. Roberts

v.
JIMMY LIPHAM,
Defendant.
_______________________________/
ORDER DENYING MOTION TO DISMISS FOR LACK OF PERSONAL
JURISDICTION, DENYING MOTION TO DISMISS FOR IMPROPER VENUE,
DENYING MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM, AND
DENYING MOTION TO TRANSFER VENUE (DOC. #20)
I.

BACKGROUND
Plaintiff Big Guy’s Pinball, LLC (“BGP”), a limited liability company incorporated in

and with its principal place of business in Michigan, brought this action against Defendant
Jimmy Lipham (“Lipham”), a resident of Georgia, for copyright infringement and unfair
competition (Count I), violation of the Michigan Uniform Trade Secrets Act, M.C.L. 445.1901 et
seq. (Count II), and tortious interference with business relationships and/or business expectations
(Count III).
Lipham moved to dismiss for: (1) lack of personal jurisdiction; (2) improper venue; and
(3) failure to state a claim upon which relief can be granted. In the alternative, he moved to
transfer venue. Lipham’s motions to dismiss and to transfer venue are based on his out-of-state
defendant status. Lipham’s motion to dismiss for failure to state a claim rests on his contention
that BGP violated the GNU General Public License (“GPL”) which governs the usage of Free
Software, a “collaborative ecosystem based on principles of reciprocity.” Lipham argues that

1

because BGP did not follow the requirements of the GPL, he did nothing wrong by uploading the
modified software. He requests that the Court recognize an equitable defense to the copyright
infringement allegations under this “novel” theory. BGP opposes all of Lipham’s motions. Oral
argument was heard on July 8th, 2015.
The Court finds that it may exercise personal jurisdiction over Lipham under Michigan’s
long-arm statute and that the exercise of personal jurisdiction does not violate federal due
process. Venue is proper, because Lipham is subject to personal jurisdiction in this forum. And,
the Court declines to transfer venue to the Northern District of Georgia; Lipham does not meet
his burden to overcome the substantial deference given to BGP’s choice of forum. Lastly, BGP’s
claim will not be dismissed for failure to state a claim upon which relief can be granted. BGP
does state a proper claim, and this Court cannot consider the merit of Lipham’s equitable defense
argument.
A.

STATEMENT OF FACTS

BGP holds a copyright in proprietary software known as “Nucore,” which emulates the
functions of obsolete hardware used in Pinball 2000 pinball games. BGP first published Nucore
for public download in March 2009 via its website and sold the software both on optical compact
disks and as downloadable files.
In July 2013, digital copies of Nucore were downloaded from BGP’s website by an
internet user with an IP address identified as belonging to Lipham. A security file stored within
Nucore recorded the user’s entries. BGP alleges that Lipham downloaded Nucore, removed the
security keys that prevented unauthorized sharing, and uploaded a modified version of Nucore
under the name of “Pinbox” to his own website called “PlayPinBox.com.” The Nucore

2

alternative was available for free download. BGP obtained subpoenas which revealed Lipham to
be both the IP address user and the website domain owner.
II.

ANALYSIS
A. THIS COURT MAY EXERCISE LIMITED PERSONAL JURISDICTION
OVER LIPHAM, AND THE EXERCISE DOES NOT VIOLATE THE DUE
PROCESS CLAUSE OF THE UNITED STATES CONSTITUTION.
To avoid dismissal where there has been no evidentiary hearing, a plaintiff must only

present a prima facie case for jurisdiction. Audi AG & Volkswagen of Am., Inc. v. D'Amato, 341
F. Supp. 2d 734, 741 (E.D. Mich. 2004). The Court must consider all affidavits and pleadings in
the light most favorable to the plaintiffs and not weigh the assertions of the party seeking
dismissal. Id. The Court may exercise personal jurisdiction over a defendant if both the
defendant is subject to service of process under Michigan’s long-arm statute and the exercise of
jurisdiction would not deny the defendant due process. Michigan Coal. of Radioactive Material
Users, Inc. v. Griepentrog, 954 F.2d 1174, 1176 (6th Cir. 1992). Because Michigan’s long-arm
statute, M.C.L. § 600.705, extends to the limits of federal due process, this Court must determine
only whether the exercise of personal jurisdiction over Lipham would violate Lipham’s due
process rights. Id.
Due process requires the plaintiff to establish that the defendant has minimum contacts
with the forum state sufficient to comport with “traditional notions of fair play and substantial
justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).
The Sixth Circuit sets forth three criteria that must be met for a court to exercise personal
jurisdiction over a non-resident defendant:
First, the defendant must purposefully avail himself of the privilege of acting in the
forum state or causing a consequence in the forum state. Second, the cause of action must

3

arise from the defendant's activities there. Finally, the acts of the defendant or
consequences caused by the defendant must have a substantial enough connection with
the forum state to make the exercise of jurisdiction over the defendant reasonable.
341 F. Supp. 2d at 742 (quoting Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 150 (6th
Cir.1997)).
1. LIPHAM PURPOSEFULLY AVAILED HIMSELF OF CAUSING
CONSEQUENCES IN MICHIGAN.
The “purposeful availment” requirement protects a defendant from being forced to
litigate in a forum due to “‘random,’ ‘fortuitous’ or ‘attenuated’” contacts. Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528 (1985). The defendant’s
conduct and connection with the forum state must be of the nature that the defendant could
reasonably anticipate being sued in that forum. Id. at 474. “Purposeful availment” is satisfied
when a defendant deliberately engages in conduct that can be “properly regarded as a prime
generating cause of the effects resulting in Michigan.” 341 F. Supp. 2d at 742. Lipham’s
deliberate actions aimed at Michigan-based BGP amounted to an intentional tort, which satisfies
the purposeful availment requirement under the “effects test” that the Supreme Court adopted in
Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984).
a. THE “EFFECTS TEST”
In Calder, the Court held that a valid basis for personal jurisdiction over an out-of-state
defendant existed on the theory that the defendants intended to, and did, cause tortious injury to
the plaintiff in the forum state, even though the defendants did not have sufficient minimum
contacts with the forum state. Id. at 788-89. For the “effects test” to apply, BGP must show that
(1) BGP felt the brunt of the injury in Michigan, (2) Lipham used BGP’s copyrighted material

4

intentionally or deliberately, and (3) Lipham expressly aimed his actions at Michigan. Ford
Motor Co. v. Great Domains, Inc., 141 F. Supp. 2d 763, 774 (E.D. Mich. 2001).
The facts that BGP alleges, which the Court must accept as true, satisfy the elements
required for application of the “effects test.” First, BGP demonstrates that it felt the brunt of the
injury resulting from Lipham’s actions in Michigan. BGP is incorporated in Michigan and has its
primary place of business in Michigan. Naturally, Michigan is the state in which BGP has felt the
copyright infringement.
Second, BGP alleges that Lipham deliberately and intentionally downloaded Nucore and
uploaded a modified version of the software available for free download on his website. Lipham
argues that he never intended to infringe on BGP’s copyright, but his argument rests on a theory
that there should be an equitable defense to actions which otherwise constitute copyright
infringement. Since the merit of Lipham’s equitable defense argument cannot be considered at
this stage, BGP satisfies its requirement to show that Lipham’s actions were deliberate or
intentional.
Third, BGP has shown that Lipham’s acts were expressly aimed at Michigan. Lipham’s
deliberate actions resulting in copyright infringement were expressly aimed at BGP, a Michiganbased corporation that has its headquarters in Michigan. Two of BGP’s co-founders also reside
in Michigan. Whether Lipham had actual knowledge that BGP was located in Michigan does not
matter. If Lipham was ignorant of this fact, that ignorance does not protect him from litigating in
the state where he caused consequences resulting in tortious injury. Taking BGP’s allegations as
true, Lipham could have reasonably anticipated being sued in Michigan. Having shown that the
“effects test” applies, the “purposeful availment” requirement is satisfied.

5

2. THE CAUSE OF ACTION ARISES FROM LIPHAM’S FORUMRELATED ACTIVITIES.
The second criterion regarding exercising personal jurisdiction over an out-of-state
defendant is whether the cause of action arises from the defendant’s forum-related activities.
BGP is suing Lipham for copyright infringement and unfair competition (Count I), violation of
the Michigan Uniform Trade Secrets Act, M.C.L. 445.1901 et seq. (Count II), and tortious
interference with business relationships and/or business expectances (Count III). These claims
center around Lipham’s alleged infringement of BGP’s copyright. Taking BGP’s allegations as
true, Lipham took deliberate actions that resulted in tortious injury to BGP in Michigan.
Therefore, this cause of action arises from Lipham’s forum-related activities.
3. EXERCISE OF PERSONAL JURISDICTION OVER LIPHAM IS
REASONABLE.
When the first two criteria for a prima facie case are met, an inference arises that
exercising personal jurisdiction over the defendant is reasonable. CompuServe, Inc. v. Patterson,
89 F.3d 1257, 1268 (6th Cir. 1996). But, this Court must still consider several factors when
determining the reasonableness of exercising jurisdiction, namely “the burden on the defendant,
the interest of the forum state, the plaintiff's interest in obtaining relief, and the interest of other
states in securing the most efficient resolution of controversies.’” Id. (citing American Greetings
Corp., 839 F.2d at 1169–70). In Audi AG & Volkswagen of Am., Inc. v. D'Amato, the Court
found that the plaintiff’s interest in obtaining relief, coupled with Michigan’s interest in
protecting companies that principally reside in Michigan from trademark infringement,
significantly outweighed whatever burden the defendant faced. 341 F. Supp. 2d at 748. Certainly,
Michigan’s interest in protecting Michigan-based companies from copyright infringement is as
compelling as its interest in protecting them from trademark infringement. And, BGP

6

demonstrates a strong interest in obtaining relief. Balancing these two interests against Lipham’s
interest in avoiding inconvenience, the Court concludes that the exercise of personal jurisdiction
over Lipham is reasonable.
The three criteria established by the Sixth Circuit for exercising personal jurisdiction over
an out-of-state defendant have been met.
B. VENUE IS PROPER IN MICHIGAN.
Lipham argues that BGP’s claims should be dismissed for improper venue under Rule
12(b)(3). Venue in copyright infringement cases is proper in any district in which the defendant
is subject to personal jurisdiction. And venue will not be transferred, because Lipham does not
meet his burden to overcome the substantial deference to BGP’s choice of forum.
Venue for copyright infringement claims is governed by 28 U.S.C. § 1400(a), which
states:
Civil actions, suits, or proceedings arising under any Act of Congress relating to
copyrights or exclusive rights in mask works or designs may be instituted in the district in
which the defendant or his agent resides or may be found.
28 U.S.C. § 1400(a). The general rule of construction of § 1400(a) is that a defendant “may be
found” in any district where he is subject to personal jurisdiction. Brink v. Ecologic, Inc., 987 F.
Supp. 958, 965 (E.D. Mich. 1997). Lipham argues that this interpretation only applies to
corporations, citing Blue Compass Corp. v. Polish Masters of Am., 777 F. Supp. 4 (D. Vt. 1991)
as precedent. But § 1400(a) does not distinguish between corporate and non-corporate
defendants. Further, Blue Compass appears to be the single case that makes this distinction
among the vast majority of decisions holding that a defendant “may be found” in any district in
which he is subject to personal jurisdiction. Quality Improvement Consultants, Inc. v. Williams,

7

No. CIV.02-3994(JEL/JGL), 2003 WL 543393, at *7-8 (D. Minn. Feb. 24, 2003). Lipham is
subject to personal jurisdiction in the Eastern District of Michigan. Therefore, applying the wellestablished rule of construction of § 1400(a), Lipham may be “found” in the Eastern District of
Michigan; venue is proper.
1. LIPHAM DOES NOT MEET HIS BURDEN TO OVERCOME THE
SUBSTANTIAL DEFERENCE GIVEN TO BGP’S CHOICE OF
FORUM. ACCORDINGLY, VENUE WILL NOT BE TRANSFERRED.
In the alternative, Lipham argues that venue should be transferred to the Northern District
of Georgia for the convenience of the parties and witnesses under 28 U.S.C. § 1404(a). District
courts have wide discretion to transfer an action under § 1404(a) in order to “prevent waste of
time, energy and money, and to protect litigants, witnesses and the public against unnecessary
inconvenience and expense.” Helder v. Hitachi Power Tools, USA Ltd., 764 F.Supp. 93, 95–96
(E.D.Mich.1991) (citing Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945
(1964)). § 1404(a) provides that “[f]or the convenience of parties and witnesses, in the interest of
justice, a district court may transfer any civil action to any other district or division where it
might have been brought.” The movant bears the burden to demonstrate by a preponderance of
the evidence that “fairness and practicality strongly favor the forum to which transfer is sought.”
Id. (citing Thomas v. Home Depot, U.S.A., Inc., 131 F.Supp.2d 934, 936 (E.D.Mich.2001).
This action could have been brought in Lipham’s proposed venue, because Lipham
resides in the Northern District of Georgia. Therefore, to determine whether a transfer of venue
is appropriate, the Court considers the following factors: (1) the convenience of the parties; (2)
the convenience of the witnesses; (3) the relative ease of access to sources of proof; (4) the
availability of process to compel attendance of unwilling witnesses; (5) the cost of obtaining
willing witnesses; (6) the practical problems associated with trying the case most expeditiously

8

and inexpensively; and (7) the interest of justice. Thomas v. Home Depot, U.S.A., Inc., 131 F.
Supp. 2d 934, 936 (E.D. Mich. 2001). Because the evidence in this case is documentary and can
easily be stored and transported electronically, the factors that are most pertinent are those
related to the convenience of the parties and witnesses.
Courts must give a plaintiff's choice of forum substantial deference. 341 F. Supp. 2d at
749. In Audi AG & Volkswagen of Am., Inc. v. D'Amato, the court found that the plaintiffs’
choice of forum in the Eastern District of Michigan was entitled to substantial deference because
the plaintiffs principally resided in the district and had substantial connections to the district. Id.
at 750. Similarly, the two co-founders of BGP principally reside in the Eastern District of
Michigan and therefore have substantial connections to the forum. And, a state generally has a
“manifest interest” in providing its residents with a convenient forum for redressing injuries
inflicted by out-of-state actors. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 105 S. Ct.
2174, 2182, 85 L. Ed. 2d 528 (1985).
While Lipham contends that Michigan is an inconvenient venue, he does not show that it
would be more inconvenient for him to litigate in Michigan than it would be for BGP to litigate
in Georgia. Lipham merely states that travel from Georgia to Michigan “is not convenient” for
him. The Court will not transfer venue if the result is “simply to shift the inconvenience from one
party to another.” Audi AG & Volkswagen of Am., Inc. v. Izumi, 204 F. Supp. 2d 1014, 1023
(E.D. Mich. 2002).
Lipham also argues that venue should be transferred to Georgia for the convenience of a
key witness, Mr. Steve Ellenoff, the third co-founder of BGP who resides in Georgia. Witnesses'
convenience is “one of the most important factors in determining whether to grant a motion to
change venue under § 1404(a).” 341 F. Supp. 2d at 750. Lipham did not identify Mr. Ellenoff as

9

a witness in his original motion but only addressed him as a potential witness in his reply brief.
Lipham does not assert definitive plans to call Mr. Ellenoff as a witness and fails to specify what
the subject matter of Mr. Ellenoff’s testimony would be. Lipham does not cite concerns over
costs or other practical difficulties in compelling Mr. Ellenoff to give testimony; he merely
concludes that a Georgia venue is “[o]bviously…more convenient” because Mr. Ellenoff resides
there. The two co-founders of BGP who plan to testify reside in Michigan and would find the
Eastern District of Michigan more convenient. Therefore, both parties can point to convenience
of witnesses as a reason to choose one venue or the other. Lipham does not meet the burden to
show by a preponderance of the evidence that fairness and practicality strongly favor a Georgia
venue. In light of both BGP’s connections to the forum and Michigan’s interest in protecting
Michigan-based companies from tortious injury, transfer of venue is not appropriate.
C. BGP STATES A CLAIM FOR WHICH RELIEF MAY BE GRANTED.
Lipham argues that BGP’s claim should be dismissed for failure to state a claim for
which relief can be granted under Fed. R. Civ. P. 12(b)(6). The purpose of a motion under Fed.
R. Civ. P. 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is
entitled to legal relief even if everything alleged in the complaint is true. Mayer v. Mylod, 988
F.2d 635, 638 (6th Cir. 1993) (citing Nishiyama v. Dickson County, Tennessee, 814 F.2d 277,
279 (6th Cir.1987)). But Lipham does not attack the legal sufficiency of BGP’s complaint.
Rather, his argument rests on his theory that BGP’s violation of the GPL provides an equitable
defense to his actions that otherwise constitute copyright infringement.
The Court cannot consider the merit of Lipham’s argument, since BGP only has to state a
claim for which relief can be granted at this stage. BGP claims that Lipham committed copyright
infringement in violation of 17 U.S.C. § 101 et seq.To state a claim under 17 U.S.C. § 101 et

10

seq., a plaintiff must allege that the defendant violated at least one of the five exclusive rights
granted to copyright holders under 17 U.S.C. § 106. 17 U.S.C.A. § 501 (West 2002). BGP has
specifically alleged that Lipham violated BGP’s copyright by downloading a copy of Nucore,
creating a derivative program that was essentially an exact copy of Nucore, and uploading the
derivative program to his website in order to distribute it freely to any Internet user. Therefore,
BGP has alleged that Lipham violated at least the exclusive right to “prepare derivative works
based upon the copyrighted work.” 17 U.S.C.A. § 106 (West 2002). BGP properly states a claim
for which relief may be granted.
III.

CONCLUSION
Lipham is subject to personal jurisdiction in the Eastern District of Michigan. It follows

that venue is proper. Venue should not be transferred, because Lipham does not meet the burden
to demonstrate that fairness and practicality strongly favor transfer. Lastly, Lipham’s motion to
dismiss for failure to state a claim is unfounded.
The Court DENIES all of Lipham’s motions.
IT IS ORDERED.

S/Victoria A. Roberts
Victoria A. Roberts
United States District Judge
Dated: July 10, 2015
The undersigned certifies that a copy of this
document was served on the attorneys of record
by electronic means or U.S. Mail on July 10,
2015.
s/Linda Vertriest
Deputy Clerk 

11