Rhapsody Solutions LLC v. Cryogenic Vessel Alternatives, Inc. et al

Filing 74

MEMORANDUM AND ORDER on 39 MOTION to Dismiss 36 Amended Complaint/Counterclaim/Crossclaim etc., for Failure to State a Claim and Brief in Support MOTION to Dismiss 36 Amended Complaint/Counterclaim/Crossclaim etc., for Failure to Stat e a Claim and Brief in Support, 53 MOTION for Default Judgment against VCAN Technologies, Inc., 58 Sealed Event, 38 MOTION to Dismiss 36 Amended Complaint/Counterclaim/Crossclaim etc., for Lack of Personal Jurisdiction and Brief in Support MOTION to Dismiss 36 Amended Complaint/Counterclaim/Crossclaim etc., for Lack of Personal Jurisdiction and Brief in Support (Signed by Judge Ewing Werlein, Jr) Parties notified.(kcarr, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
RHAPSODY SOLUTIONS, LLC,

§
§
Plaintiff,
§
§
v.
§
§
§
CRYOGENIC VESSEL ALTERNATIVES, §
INC., CHRIS CARR, Individually, §
DEAN CORBIN, Individually,
§
HECTOR VILLAREAL, Individually, §
INOX INDIA LIMITED, DOES 1-10, §
VCAN TECHNOLOGIES PVT, LTD.,
§
and VCAN TECHNOLOGIES, INC.,
§
§
Defendants,
§
§
v.
§
§
JAMES H. PLANTE III,
§
Individually,
§
§
Third-Party Defendant.
§

CIVIL ACTION No. H-12-1168

MEMORANDUM AND ORDER
Pending are Defendant INOX India Limited’s Motions to Dismiss
for Lack of Personal Jurisdiction (Document No. 38)1 and for
Failure to State a Claim (Document No. 39); and Plaintiff Rhapsody
Solutions’s Motions for Default Judgment as to Defendant VCAN
Technologies, Inc. (Document No. 53) and to Strike the Declarations

1

This motion was filed in response to Plaintiff’s First
Amended Complaint, and supercedes INOX’s Motion to Dismiss under
Rule 12(b)(2) (Document No. 17), which is DENIED as MOOT. Because
INOX India Limited waived service of process, its earlier 12(b)(4)
and 12(b)(5) motions asserted in Document No. 17 are also MOOT.

of Parag Kulkarni (Document No. 58) (filed under seal).
carefully

considering

the

motions,

responses,

replies,

After
and

applicable law, the Court concludes as follows.
I.

Background

In this copyright dispute concerning the alleged infringement
of business management software, Plaintiff Rhapsody Solutions, Inc.
(“Plaintiff”) alleges that it granted to Defendant Cryogenic Vessel
Alternatives (“CVA”) a non-transferable license to use its software
product,

“Exceed

MRP,”

but

that

CVA

and

its

parent

company,

Defendant INOX India Limited (“INOX”), developed a derivative work
and are using the infringing software to manage their businesses.
Plaintiff’s Exceed MRP (Manufacturing Resource Planning) software
assists businesses in tracking orders and in managing business
operations, and was allegedly tailored to suit CVA’s specific
business needs.
Plaintiff alleges that it developed and licensed to CVA its
Exceed MRP Software pursuant to a 2006 software development project
(“Contract”) with CVA; that the Contract provided that the license
was limited and non-transferable; that Plaintiff at all times
retained ownership of the software and copyright; and that the
Contract incorporated an End User License Agreement (“EULA”),
which--among other things--specified that the Exceed MRP Software
may not be modified, reverse engineered, or de-compiled in any
2

manner through current or future technologies, and may be loaded
onto a maximum of one computer or server.2
In 2009, Defendant INOX India Limited (“INOX”), an Indian
company based in Vadovara, Gujarat, India, bought a 70% interest in
CVA.3

Both INOX and CVA are in the business of manufacturing

cryogenic vessels.

They represent on their combined website that

“INOX India and CVA are ONE” and refer to themselves as a “joint
entity” called “INOXCVA.”4

On May 24, 2010, after learning of

INOX’s acquisition of a majority interest in CVA, Plaintiff sent a
letter to INOX addressed to its Director and Chief Executive
Officer, Mr. Parag P. Kulkarni (“Kulkarni”), and copied to CVA
Director Chris Carr (“Carr”), reminding that: Plaintiff is the

2

CVA denies that it signed the Contract, contends that
Plaintiff’s copy of the Contract is missing portions of the
Contract, and asserts it did not agree to the EULA. Plaintiff’s
copy of the Contract is purportedly signed by Jimmy Plante for
Plaintiff and Chris Carr for CVA. Both parties’ versions of the
Contract specifically reference the EULA and further provide that
Plaintiff owns the software. Compare Document No. 36, ex. B at 8
of 12 art. VIII with Document No. 37, ex. 1, at 6 of 7 art. VIII.
For purposes of these motions to dismiss, the Court must resolve
factual disputes in favor of the Plaintiff. Guidry v. U.S. Tobacco
Co., Inc., 188 F.3d 619, 626 (5th Cir. 1999) (on a Rule 12(b)(2)
motion, conflicts in the evidence must be resolved in plaintiff’s
favor for the purposes of determining whether plaintiff has made a
prima facie case for in personam jurisdiction); Lowrey v. Tex. A&M
Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997) (on a Rule 12(b)(6)
motion, the district court must construe the allegations in the
complaint favorably to the pleader and must accept as true all
well-pleaded facts in the complaint).
3

Document No. 36 ¶ 31.

4

See Document No. 52, ex. J.
3

owner

of

the

Exceed

MRP

software;

the

software

“may

not

be

transferred to any other party”; and “the Software may not be
modified, reverse engineered, or de-compiled in any manner.”5
On August 19, 2010, INOX hired VCAN Technologies Pvt. Ltd.
(“VCAN India”) to develop new MRP software for CVA.6

Kulkarni, as

INOX Director and Chief Executive, signed the work order “by and
between” INOX and VCAN India because INOX “intend[ed] to develop
web based software to manage Material Resources Planning for their
subsidiary M/s. CVA Inc., USA.”7

The agreement was made effective

as of September 1, 2011 in a contract signed by Nitin Palkar for
INOX in his capacity as “Project Manager (INOVA).”8

Plaintiff

claims that VCAN India, in concert with INOX, developed an MRP
software program called “INOVA,” and that INOVA is an infringing
copy or derivative work of its copyrighted Exceed MRP software.9
INOX regularly accesses the software which resides on CVA’s Texas
server.10

Plaintiff also alleges that INOX, in concert with VCAN

India and CVA, removed Plaintiff’s copyright management information

5

Document No. 36, ex. A.

6

See Document No. 56, ex. D (Work Order).

7

Id., ex. D at D7, D1.

8

Document No. 52, ex. A at A1-A4 (Sept. 1, 2011 VCAN-INOX
Contract).
9

Document No. 36 ¶¶ 198, 201.

10

See Document No. 52, exs. B24 at 30:16-22; (Kulkarni Depo.);
E4 at 67:13-19 (Carr Depo.).
4

embedded in the Exceed MRP Software code, and that Defendants then
fraudulently

placed

their

own

indicia

of

ownership

on

the

infringing INOVA software in violation of the Digital Millennium
Copyright Act (“DMCA”).11
Plaintiff alleges the following claims against INOX: copyright
infringement in violation of 17 U.S.C. § 501 (Count 3); violations
of

the

Digital

Millennium

Copyright

Act

(“DMCA”)

17

U.S.C.

§§ 1202(a) (False Copyright Management) and 1202(b) (Removal of
Copyright Information) (Counts 10 and 11); violation of the Lanham
Act

15

U.S.C.

§

1125

(False

Advertising)

(Count

12);

unfair

competition (Count 14); and tortious interference with contractual
relations (Count 17); and a request for permanent injunction
(Count 18).

INOX moves to dismiss these claims for lack of

personal jurisdiction and for failure to state a claim (Document
Nos. 38 and 39).12

11

Document No. 36 ¶¶ 140-160.

12

INOX moves to dismiss Plaintiff’s claims against INOX. INOX
includes Plaintiff’s breach of contract claim (Count 13) in this
category, but Plaintiff clarifies in its Response that its breach
of contract claim is against CVA only, not INOX. See Document No.
44 at 17. Plaintiff also states that it is willing to withdraw its
unfair competition and tortious interference claims against INOX,
without prejudice to refiling those claims pending further
discovery. Id. The remainder of the counts in Plaintiff’s First
Amended Complaint contain claims against other Defendants, and are
not considered on INOX’s Motions to Dismiss.
5

II.
A.

Personal Jurisdiction13

Rule 12(b)(2) Legal Standard
A federal court may exercise personal jurisdiction over a

nonresident defendant if:
state

confers

personal

(1) the long-arm statute of the forum
jurisdiction

over

that

defendant;

and

(2) the exercise of such jurisdiction comports with due process
under the United States Constitution.

See Electrosource, Inc. v.

Horizon Battery Techs., Ltd., 176 F.3d 867, 871 (5th Cir. 1999).
Because the Texas long-arm statute has been interpreted to extend
as far as due process permits, the sole inquiry is whether the

13

Plaintiff moves to strike the June 25, 2012, July 23, 2012,
October 12, 2012, and November 12, 2012 declarations of Mr. Parag
Kulkarni, contending that he has “consistently and repeatedly
misrepresented key facts of this case to the Court.” Document No.
58 at 2. INOX represents that Mr. Kulkarni’s June 25 and July 23
declarations were superceded by his latter two declarations, and
that INOX is not relying on the June 25 and July 23 declarations,
which are therefore STRICKEN.
INOX has provided alternative
interpretations for what Plaintiff alleges are misrepresentations
in Mr. Kulkarni’s October 12 and November 12 declarations, and
Plaintiff has submitted evidence to refute much of what Mr.
Kulkarni declares, from all of which it is evident that issues of
fact are in dispute. A motion to strike ordinarily must be denied
when the challenge is over a disputed issue of fact. See Augustus
v. Bd. of Pub. Instruction of Escambia Cnty., Fla., 306 F.2d 862,
868 (5th Cir. 1962). Moreover, as observed below, when analyzing
whether a defendant is subject to the personal jurisdiction of the
Court, conflicts between the facts contained in the parties’
affidavits and other documentation are construed in the plaintiff’s
favor. See Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208,
215 (5th Cir. 2000). Accordingly, Plaintiff’s Motion to Strike the
October 12 and November 12 Declarations of Parag Kulkarni is
DENIED.
6

exercise of personal jurisdiction over a nonresident defendant
comports with federal constitutional due process requirements. Id.
This due process inquiry focuses upon whether the nonresident
defendant has “certain minimum contacts with [the forum] such that
the maintenance of the suit does not offend ‘traditional notions of
fair play and substantial justice.’” Int’l Shoe Co. v. Washington,
66 S. Ct. 154, 158 (1945).

Two types of personal jurisdiction are

recognized: (1) specific and (2) general.

Specific jurisdiction

exists when the cause of action relates to or arises out of the
defendant’s contacts with the forum.

See Helicopteros Nacionales

de Colombia, S.A. v. Hall, 104 S. Ct. 1868, 1872 n.8 (1984).
Specific jurisdiction is proper where the nonresident defendant has
“‘purposefully directed’ his activities at residents of the forum,
and the litigation results from alleged injuries that ‘arise out of
or

relate

to’

those

activities.”

Burger

King

v.

Rudzewicz,

105 S. Ct. 2174, 2182 (1985) (citations omitted).
Alternatively, general jurisdiction may be exercised over a
defendant who has systematic and continuous contacts with the
forum. See Helicopteros, 104 S. Ct. at 1872-73. “[T]he continuous
corporate operations within a state [must be] so substantial and of
such a nature as to justify suit against it on causes of action
arising from dealings entirely distinct from those activities.”
Pervasive Software Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214, 230
(5th Cir. 2012) (quoting Int’l Shoe, 66 S. Ct. at 159); see also

7

Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846,
2856 (2011) (“A corporation’s ‘continuous activity of some sorts
within a state,’ International Shoe instructed, ‘is not enough to
support the demand that the corporation be amenable to suits
unrelated to that activity.’”) (quotation omitted).
When an evidentiary hearing on the question of personal
jurisdiction is not conducted, the party seeking to establish
jurisdiction bears the burden of presenting a prima facie case of
personal jurisdiction. See Alpine View Co. Ltd. v. Atlas Copco AB,
205 F.3d 208, 215 (5th Cir. 2000); Wien Air Alaska, Inc. v. Brandt,
195 F.3d 208, 211 (5th Cir. 1999).
evidence is not required.

Proof by a preponderance of the

Kelly v. Syria Shell Petro. Dev. B.V.,

213 F.3d 841, 854 (5th Cir. 2000).

A plaintiff may present a prima

facie case by producing admissible evidence which, if believed,
would suffice to establish the existence of personal jurisdiction.
See WNS, Inc. v. Farrow, 884 F.2d 200, 203-04 (5th Cir. 1989).
Uncontroverted allegations in the plaintiff’s complaint must be
taken as true, and conflicts between the facts contained in the
parties’ affidavits and other documentation must be construed in
the plaintiff’s favor.

See Alpine View, 205 F.3d at 215.

“If,

however, ‘there are conflicts between some of the facts alleged by
the

plaintiffs

and

those

alleged

by

the

defendants

in

their

affidavits, such conflicts must be resolved in plaintiff(s’) favor
for the purposes of determining whether a prima facie case for in

8

personam jurisdiction has been established.’”

Guidry, 188 F.3d at

626 (citations omitted).
B.

Specific Jurisdiction
1.

Legal Standard

The Fifth Circuit determines the constitutionality of specific
jurisdiction for a nonresident defendant by applying a three-step
analysis: “(1) whether the defendant has minimum contacts with the
forum state, i.e., whether it purposely directed its activities
toward the forum state or purposefully availed itself of the
privileges

of

conducting

activities

there;

(2)

whether

the

plaintiff’s cause of action arises out of or results from the
defendant’s forum-related contacts; and (3) whether the exercise of
personal jurisdiction is fair and reasonable.”

McFadin v. Gerber,

587 F.3d 753, 759 (5th Cir. 2009) (citing Nuovo Pignone, SpA v.
STORMAN ASIA M/V, 310 F.3d 374, 378 (5th Cir. 2002)).

“Once a

plaintiff has established minimum contacts, the burden shifts to
the defendant to show the assertion of jurisdiction would be
unfair.”

Wien Air, 195 F.3d at 215.

“[W]hether the minimum contacts are sufficient to justify
subjection of the non-resident to suit in the forum is determined
not on a mechanical and quantitative test, but rather under the
particular facts upon the quality and nature of the activity with
relation to the forum state.”

Miss. Interstate Express, Inc. v.
9

Transpo, Inc., 681 F.2d 1003, 1006 (5th Cir. 1982).

“A single act

by a defendant can be enough to confer personal jurisdiction if
that act gives rise to the claim being asserted.”

Lewis v. Fresne,

252 F.3d 352, 358–59 (5th Cir. 2001); see also FCA Inv. Co. v.
Baycorp Holdings, Ltd., 48 F. App’x 480, 2002 WL 31049442 at *3
(5th Cir. Aug. 29, 2002) (unpublished op.).
Copyright infringement is considered an intentional tort for
purposes of the Court’s jurisdictional analysis.

See, e.g.,

Illustro Sys. Int’l, LLC v. Int’l Bus. Mach. Corp., No. Civ. A.
3:06-CV-1969, 2007 WL 1321825, at *8 (N.D. Tex. May 4, 2007)
(Lindsay, J.) (“The court determines that copyright infringement is
an intentional tort.”); Isbell v. DM Records, Inc., No. Civ. A.
3:02-CV-1408-G, 2004 WL 1243153, at *10 (N.D. Tex. Jun. 4, 2004)
(“The Calder ‘effects’ test applies to intentional business torts,
including copyright infringement.”) (collecting cases); Frees, Inc.
v. McMillian, No. Civ. A. 05-1979, 2007 WL 2701161, at *1 (W.D. La.
Sept. 7, 2007) (“Copyright infringement also sounds in tort.”); see
also Realsongs v. Gulf Broad. Corp., 824 F. Supp. 89, 91 (M.D. La.
1993) (denying summary judgment for defendants and stating that
“[c]opyright infringement is in the nature of a tort, for which all
who participate in the infringement are jointly and severally
liable”).

10

2.

Analysis

INOX claims that it does not transact business in Texas, has
no place of business in Texas, does not employ Texas residents, and
is “merely the parent company” of CVA.14

Plaintiff’s evidence,

however, shows that: (1) INOX directly hired and initially paid
VCAN

India

to

prepare

INOVA,

which

Plaintiff

contends

is

an

infringing derivative work of its Exceed software, and to install
such software “at CVA Inc. USA,” whose server is located in Texas;15
(2) INOX directly participated in the development of the INOVA
software;16 (3) INOX employee Nitin Palkar “coordinate[d] this
activity to help ease the communication between VCAN and CVA”;17
(4) INOX regularly logs onto CVA’s server located in Texas in order
to use the Exceed MRP and INOVA software to view data, which
Plaintiff alleges INOX has no license or permission to do;18 and
(5) INOX was given user names and passwords to access all of the
modules and links of the Exceed MRP program, which was housed on a

14

Document No. 38 at 2.

15

See Document No. 52, ex. A1, A2; Document No. 56, ex. D;
Document No. 52, ex. B24 at 30:16-22; (Kulkarni Depo.).
16

See Document No. 56, ex. D (Work Order).

17

See Document No. 52, ex. B27 at 19:12-17 (Kulkarni Depo.).

18

Document No. 52, ex. B25 at 27:13-22; B26 at 28:4-8.
11

server in Texas.19 Further, Plaintiff alleges in its complaint that
“Defendant INOX sells cryogenic vessels made and designed with the
use of the INOVA Software.”20
INOX contends that its actions of logging onto and viewing a
software program located on a Texas server do not constitute
infringement, citing Cartoon Network LP, LLLP v. CSC Holdings,
Inc., 536 F.3d 121 (2d Cir. 2008).

In Cartoon Network, the Second

Circuit reversed the district court’s finding of infringement
because the “copy” of digital work was not “fixed” within the
meaning of the copyright statute, failing the duration requirement.
Id. at 130.

In that case, the owner of copyrighted television

content sued a cable television provider that allowed its customers
to record shows for future viewing.

Id. at 124.

Cartoon Network

held that loading a program into a form of Random Access Memory
(“RAM”)21 did not result in copying in that circumstance, because
the copyrighted content remained in the defendant’s RAM less than
1.2 seconds before being overwritten with different content.

Id.

at 129.

19

See Document No. 52, ex. D10 (email from Jeffrey Carr of CVA
to Mr. Palkar of INOX).
20

Document No. 36 ¶ 76.

21

“To run a computer program, the data representing that
program must be transferred from a data storage medium (such as a
floppy disk or a hard drive) to a form of Random Access Memory
(“RAM”) where the data can be processed.” Id. at 128 n.1.
12

However, in MAI Systems Corp. v. Peak Computer, Inc., the
Ninth Circuit held that “copying for purposes of copyright law
occurs when a computer program is transferred from a permanent
storage device to a computer’s RAM.”

991 F.2d 511, 518 (9th Cir.

1993), cert. dism’d, 114 S. Ct. 671 (1994).

Other circuit courts

have held that the loading of copyrighted software into RAM can
create an infringing copy. See, e.g., Stenograph L.L.C. v. Bossard
Assoc., Inc., 144 F.3d 96, 101-02 (D.C. Cir. 1998); Quantum Sys.
Integrators, Inc. v. Sprint Nextel Corp., 338 F. App’x 329, 336337, 2009 WL 1931196, at *6 (4th Cir. Jul. 7, 2009) (unpublished
op.).

Moreover, at least one district court in the Fifth Circuit

has cited MAI Systems for the proposition that “copying occurs when
a computer program is transferred from a permanent storage device
to a computer’s random access memory.” See Playboy Enter., Inc. v.
Webbworld, Inc., 991 F. Supp. 543, 551 (N.D. Tex. 1997), aff’d, 168
F.3d 486 (5th Cir. Jan 08, 1999) (unpublished op.).

Plaintiff

presents evidence to show that INOX accesses the Exceed MRP and
INOVA software such that copyrighted content is available long
enough for an INOX employee to view and evaluate the data displayed
thereon. At this stage of the proceedings, Plaintiff’s allegations
with supporting jurisdictional evidence are sufficient to sustain
Plaintiff’s prima facie case.22

22

Plaintiff’s jurisdictional evidence further shows that INOX,
whether at the behest of CVA or on its own, contracted with VCAN to
develop INOVA. INOX may not avoid jurisdiction by claiming it was
13

Plaintiff’s causes of action arise out of or relate to INOX’s
contacts with the forum.

As set forth above, Plaintiff has

produced evidence that INOX knew that the Exceed and INOVA software
were located on CVA’s server in Texas23 and that INOX regularly
logged onto, accessed, and used both the Exceed software and the
software.24

INOVA

Numerous

courts

have

exercised

personal

jurisdiction over nonresident defendants where the minimum contacts
with the forum consisted of committing a tort through accessing a
server located in the forum state.

See, e.g., Felland v. Clifton,

682 F.3d 665, 676 (7th Cir. 2012) (finding the consideration of
the

location

of

the

computer

server

to

be

appropriate

in

a

determination of specific jurisdiction where the defendant knew
that he was sending correspondence to forum residents); MacDermid,

a mere agent contracting with VCAN for CVA’s benefit. “[I]n an
action in which the plaintiff is seeking to hold an agent
individually liable for his tortious or fraudulent acts . . . an
‘agent is personally liable for his own fraudulent or tortious
acts, even when acting within the course and scope of his
employment.’”
Dagel v. Resident News, LLC, Civ. A. No.
3:11–CV–663–L, 2012 WL 2068727, at *5 (N.D. Tex. Jun. 8, 2012)
(slip op.) (quoting Sanchez v. Mulvaney, 274 S.W.3d 708, 712 (Tex.
App.--San Antonio 2008, no pet.))). Plaintiff alleges that INOX,
in acting with VCAN to develop the INOVA software, removed
Plaintiff’s copyright management information embedded within the
Exceed MRP code and applied its own fraudulent copyright notice and
other indicia of ownership onto the INOVA software.
23

See Document No. 52, ex. B24 at 30:16-22 (Kulkarni Depo.).

24

See, e.g., id., ex. D at D1-D4, D10-D17 (email
correspondence between INOX employees and CVA employees discussing
how to access CVA’s server and the login and password information
for the Exceed and INOVA programs).
14

Inc. v. Deiter, ---F.3d ----, 2012 WL 6684580, at *3 (2d Cir. Dec,
26,

2012)

(finding

specific

defendant where the defendant

jurisdiction

over

a

nonresident

accessed a computer server in the

forum state to commit a tort); CompuServe, Inc. v. Patterson,
89

F.3d

1257,

1264-68

(6th

Cir.

1996)

(holding

nonresident

defendant who uploaded 32 master software files onto plaintiff’s
server in Ohio via the Internet was subject to jurisdiction in Ohio
in trademark and unfair competition declaratory action); Watch Sys.
LLC v. Sys. Design Solutions, Inc., Civ. A. No. 09–5821, 2009 WL
5217085, at *6 (E.D. La. Dec. 31, 2009) (Barbier, J.) (finding
specific jurisdiction where a defendant breached plaintiff’s server
in Louisiana to commit a tort, and the effects of that tort were
foreseeably felt in Louisiana); Abatix Corp. v. Capra, No. Civ. A.
2:07-CV-541, 2008 WL 4427285, *4 (E.D. Tex. Sept. 24, 2008) (Ward,
J.) (finding the exercise of specific jurisdiction proper where
nonresident defendants “directed their allegedly tortious act” at
computer servers located within the forum); Verizon Online Servs.,
Inc.

v.

Ralsky,

203

F.

Supp.

2d

601,

610

(E.D.

Va.

2002)

(nonresident defendant subject to jurisdiction in forum where it
had sent millions of emails through plaintiff’s server located in
the forum); Bus. Info. Sys. v. Prof’l Governmental Research &
Solutions, Inc., No. Civ. A. 1:02CV00017, 2002 WL 32747668, at *1011 (W.D. Va. Oct. 10, 2002) (Williams, J.) (nonresident defendant
subject to jurisdiction where it accessed plaintiff’s server, which

15

was located in the forum state, and disseminated records contained
thereon to its paid subscribers); Info. Techs. Int’l, Inc. v. ITI
of N. Fla., Inc., No. 01 C 4668, 2001 WL 1516750, at *7 (N.D. Ill.
Nov. 28, 2001) (prima facie case of personal jurisdiction where
nonresident defendants “hack[ed] into [plaintiff’s] computer system
and

chang[ed]

receivable”).

the

remittance

address

to

redirect

accounts

In sum, Plaintiff has made a prima facie case that

its causes of action against INOX arise out of or relate to INOX’s
above-described purposeful contacts with Texas.
The burden therefore shifts to INOX to show that the Court’s
exercise of jurisdiction would be unfair.
215.

Wien Air, 195 F.3d at

In considering the fairness issue, the Court examines:

“(1) the defendant’s burden; (2) the forum state’s interests;
(3) the plaintiff’s interest in convenient and effective relief;
(4) the judicial system’s interest in efficient resolution of
controversies; and (5) the shared interest of the several states in
furthering fundamental substantive social policies.”
F.3d at 630 (citations omitted).

Guidry, 188

“To show that an exercise of

jurisdiction is unreasonable once minimum contacts are established,
the defendant must make a ‘compelling case’ against it.” Wien Air,
195 F.3d at 215 (quoting Burger King, 105 S. Ct. at 2185).
INOX argues that Texas has no interest in this dispute and
haling it into court in Texas is unfair because it is based in
India.

To

the

contrary,

Texas

16

has

“a

strong

interest”

in

protecting its citizens from copyright infringement and violations
of the DMCA.
Tex. 2001).

See Sefton v. Jew, 201 F. Supp. 2d 730, 742 (W.D.
The fact that INOX accessed Texas remotely through a

Virtual Private Network (“VPN”) using a computer in India does not
diminish

that

interest.

litigating

this

burdensome

on

Moreover,

dispute

it

than

in

would

Texas
be

INOX

has

not

shown

that

would

be

materially

more

the

countervailing

burden

on

Plaintiff and its principals, if required, to make repeated trips
to

India.

In

fact,

the

record

evidence

shows

that

INOX’s

principals and employees have traveled several times to Texas to
manage their subsidiary during just the past three years.25 In sum,
INOX has not made a compelling case that this Court’s exercise of
jurisdiction over it would offend traditional notions of fair play
and substantial justice. Accordingly, INOX’s motion to dismiss for
lack of personal jurisdiction is denied.
III.
A.

Rule 12(b)(6) Motion to Dismiss

Legal Standard
Rule 12(b)(6) provides for dismissal of an action for “failure

to state a claim upon which relief can be granted.”
12(b)(6).

FED . R. CIV . P.

When a district court reviews the sufficiency of a

complaint before it receives any evidence either by affidavit or

25

See, e.g., id., ex. D at D6-D9, D26 (emails indicating
travel details for INOX employees to come to Texas).
17

admission, its task is inevitably a limited one.
Rhodes, 94 S. Ct. 1683, 1686 (1974).

See Scheuer v.

The issue is not whether the

plaintiff ultimately will prevail, but whether the plaintiff is
entitled to offer evidence to support the claims.

Id.

In considering a motion to dismiss under Rule 12(b)(6), the
district court must construe the allegations in the complaint
favorably to the pleader and must accept as true all well-pleaded
facts in the complaint.

See Lowrey, 117 F.3d at 247.

To survive

dismissal, a complaint must plead “enough facts to state a claim to
relief that is plausible on its face.”
127 S. Ct. 1955, 1974 (2007).

Bell Atl. Corp. v. Twombly,

“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.”
(2009).

While

a

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949

complaint

“does

not

need

detailed

factual

allegations . . . [the] allegations must be enough to raise a right
to relief above the speculative level, on the assumption that all
the allegations in the complaint are true (even if doubtful in
fact).”
B.

Twombly, 127 S. Ct. at 1964-65.

Discussion
Defendant INOX’s Rule 12(b)(6) motion boils down to whether

Plaintiff has stated plausible claims against INOX for copyright
infringement, violations of the DMCA, and false advertising under

18

the Lanham Act.26

INOX’s central basis for seeking dismissal of

these claims rests on the principle that “American copyright law
does not apply to extraterritorial acts of infringement,” citing,
inter alia, Subafilms, Ltd. v. MGM-Pathe Commc’ns Co., 24 F.3d
1088, 1098 (9th Cir. 1994); Palmer v. Braun, 376 F.3d 1254, 1258
(11th Cir. 2004); and Update Art, Inc. v. Modiin Pub., Ltd., 843
F.2d 67, 73 (2d Cir. 1988).27
Accepting the principle that American copyright law does
not apply to wholly extraterritorial acts of infringement, it
nonetheless does apply when at least part of an act of infringement
occurs in the United States.

See, e.g., Palmer, 376 F.3d at 1258

(holding that the importation of infringing work into the United
States was “sufficient to support federal copyright jurisdiction”);
Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45, 52 (2d Cir.
1939) (Hand, J.), aff’d, 60 S. Ct. 681 (1940) (finding that profits
obtained from unauthorized copies of a copyrighted film shown
overseas, where the negatives were produced in America, “took the

26

Plaintiff in its Amended Complaint alleges breach of
contract against Defendant CVA, but not against INOX, and hence
INOX’s motion to dismiss a breach of contract claim is DENIED as
MOOT. Moreover, INOX declares it is willing to withdraw its unfair
competition and tortious inference claims without prejudice to
refiling those claims, pending further discovery. See Document No.
44 at 17 (Plaintiff’s Response) (filed under seal). Accordingly,
Plaintiff’s unfair competition and tortious interference claims are
DISMISSED without prejudice. Any motion for leave to refile these
claims in this cause must be timely filed in the overall context of
the development of the case.
27

Document No. 39 at 5-6.
19

form of property whose situs was the United States” and therefore
“our law seized upon them and imposed upon them a constructive
trust”); see also Yesh Music v. Lakewood Church, No. 4:11-cv-03095,
2012 WL 524187, at *9 (S.D. Tex. Feb. 14, 2012) (Ellison, J.)
(“[I]f, and to the extent, a part of an ‘act’ of infringement
occurs

within

the

United

States,

then,

although

such

act

is

completed in a foreign jurisdiction, those parties who contributed
to the act within the United States may be rendered liable under
American copyright law.” (citation omitted)); compare Subafilms, 24
F.3d 1088 (holding that no infringement took place where the
copying of a copyrighted work occurred overseas and was merely
authorized in the United States).
Plaintiff

in

its

Response

plainly

asserts

that

CVA’s

server--the single server upon which Plaintiff’s software was
licensed to be loaded--was located in Texas, and that INOX logged
onto CVA’s Texas-based server in August 2010 and April 2011, to
infringe Plaintiff’s software. In deciding a motion to dismiss for
failure to state a claim, however, the court may look only to
plaintiff’s well-pleaded facts in the complaint.
at 247.

Lowrey, 117 F.3d

Plaintiff’s First Amended Complaint, unlike its Response

to INOX’s motion, does not allege INOX’s conduct with regard to
CVA’s Texas-based server or make other straightforward factual
allegations of INOX having engaged in at least some acts of
infringement in the United States.

20

Because Plaintiff has amply

demonstrated a basis to allege such facts sufficient “to raise a
right to relief [against INOX] above the speculative level,”
Twombly, 127 S. Ct. at 1964-65, the Court will permit Plaintiff
within fourteen (14) days after the date of this Order to file a
more definite statement in the form of a Second Amended Complaint.
If Plaintiff fails to do so, its causes of action against Defendant
INOX will be subject to dismissal for failure to state a claim upon
which relief can be granted.

FED . R. CIV . P. 12(b)(6).28

28

INOX newly asserts in its Reply that Plaintiff’s Lanham Act
claim should be dismissed on the alternative grounds that Plaintiff
did not sufficiently allege acts constituting the elements of that
claim.
Document No. 50 at 7-9.
To state a claim for false
advertising under the Lanham Act, Plaintiff must plead facts to
show: “(1) a false or misleading statement of fact about a product;
(2) a statement which actually deceived or had the capacity to
deceive a substantial segment of potential consumers; (3) a
material deception in that it was likely to influence a consumer’s
purchasing decision; (4) the product was in interstate commerce;
and (5) plaintiff had been or was likely to have been injured as a
result of the statement in issue.” Pizza Hut Inc. v. Papa John’s
Int’l. Inc., 227 F.3d 489, 495 (5th Cir. 2000); Seven-Up Co. v.
Coca-Cola Co., 86 F.3d 1379, 1383 n.3 (5th Cir. 1996); Healthpoint,
Ltd. v. Ethex Corp., 273 F. Supp. 2d 817, 856 (W.D. Tex. 2001).
Plaintiff claims that INOX has “deceived both prospective and
current customers regarding the origin of the Exceed MRP Software
and the derivative work, the INOVA Software,” and “[a]ny statements
made regarding ownership of the INOVA software and/or Exceed MRP
Software to prospective and/or current customers of INOX, CVA,
and/or INOXCVA, are likely to cause confusion, mistake, or
deception as to origin, sponsorship, or approval of their goods by
Plaintiff when none exists.” Plaintiff also alleges that it “has
been injured as a result of INOX’s statements.”
Plaintiff’s Complaint is rather vague as to whether it merely
“asserts that [INOX] copied the ideas, concepts, structures, and
sequences embodied in [Plaintiff’s] copyrighted work,” or whether
it accuses INOX of “taking tangible copies of [Plaintiff’s]
software, removing its trademarks, and selling them as its own.”
21

IV.
Plaintiff

Motion for Default Judgment

moves

for

default

Technologies, Inc. (“VCAN USA”).

judgment

against

VCAN

Citation and a copy of the First

Amended Complaint were duly served on Defendant VCAN USA according
to law and proof of service has remained on file for the time
required by law.

Defendant VCAN USA has failed to appear or

answer, either personally or through counsel of record, and has
wholly made default.

Accordingly, Plaintiff’s motion for default

judgment is granted.
V.

Order

For the foregoing reasons, it is
ORDERED that Defendant INOX India Limited’s Motion to Dismiss
for Lack of Personal Jurisdiction (Document No. 38) is DENIED;
Defendant INOX India Limited’s Motion to Dismiss for Failure to
State a Claim (Document No. 39) is conditionally GRANTED, and
Plaintiff’s

remaining

claims

against

INOX

for

copyright

infringement, violations of the DMCA, and false advertising under
the

Lanham

Act

will

be

DISMISSED

unless

Plaintiff

Rhapsody

Solutions, within fourteen (14) days after the date of this Order,

If only the former, then Plaintiff’s Lanham Act claim may fail as
a matter of law. See General Universal Systems, Inc. v. Lee, 379
F.3d 131, 149 (5th Cir. 2004). At present, Plaintiff has not pled
sufficient facts to support a claim under the Lanham Act. If the
Plaintiff repleads this claim, it should do so consistent with the
Fifth Circuit precedent set forth in General Universal Systems, 379
F.3d 131.
22

files a more definite statement in the form of a Second Amended
Complaint.

It is further

ORDERED that Plaintiff Rhapsody Solutions’s Motion for Default
Judgment as to Defendant VCAN Technologies, Inc. (Document No. 53)
is GRANTED, and Plaintiff is awarded a default judgment against
Defendant VCAN USA for liability on Plaintiff’s claims against
Defendant VCAN USA as set forth in Plaintiff’s First Amended
Complaint, and Plaintiff Rhapsody Solutions shall have and recover
of and from Defendant VCAN USA such sum of money or other relief as
may be proven upon the damages hearing in this cause.
The Clerk shall notify all parties and provide them with a
signed copy of this Order.
SIGNED at Houston, Texas, on this 5th day of March, 2013.

____________________________________
EWING WERLEIN, JR.
UNITED STATES DISTRICT JUDGE

23