Zaletel v. Prisma Labs, Inc.

Filing 55

MEMORANDUM OPINION. Signed by District Judge T. S. Ellis, III on 12/22/2016. (dvanm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
MICHAEL ZALETEL, d/b/a
i4SOFTWARE,
Plaintiff,
v.
PRISMA LABS, INC.,
Defendant.

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Case No. 1:16-cv-1230

MEMORANDUM OPINION
Defendant in this trademark infringement action has moved pursuant to Rule 12(b)(2),
Fed. R. Civ. P., to dismiss plaintiff’s complaint for lack of personal jurisdiction or, in the
alternative, to transfer venue pursuant to 28 U.S.C. § 1404. Thus, at issue is the threshold
question of personal jurisdiction, namely, whether defendant’s distribution of allegedly
infringing smart phone and tablet applications through third-party, online stores constitutes a
sufficient basis for the exercise of personal jurisdiction over defendant in this forum.
I.1
Plaintiff, Michael Zaletel, a software developer, resides and works in North Carolina
where, in 1999, he founded “i4software,” a sole proprietorship, through which plaintiff has been
developing and selling applications (“apps”) for smart phones. In the course of developing and
selling apps, plaintiff registered the “Prizmia” mark with the United States Patent and Trademark
Office, which mark plaintiff uses in connection with his “Prizmia” app.2 The “Prizmia” app

1

The facts recited below are derived from plaintiff’s complaint and the documents submitted in
connection with defendant’s motion to dismiss for lack of personal jurisdiction, which are
properly considered at the Rule 12(b)(2) stage. See Grayson v. Anderson, 816 F.3d 262, 268 (4th
Cir. 2016).
1

allows users to apply “filters” to photographs and videos, which filters have the effect of
modifying images. Plaintiff sells its “Prizmia” app through the Apple App Store for 99 cents.
Defendant, Prisma Labs, Inc., is a software company that is incorporated in Delaware but
based in Moscow, Russia. Indeed, most of defendant’s employees live in Russia. Defendant also
has a recently-opened office in Sunnyvale, California, in the Bay Area, populated by two
recently-hired software developers. The record is unclear whether defendant hired these software
developers as employees or independent contractors, but there is no question that defendant hired
one of these developers one month before plaintiff filed suit, and hired the other developer two
months after plaintiff brought this action. Although defendant contends that its United States
headquarters are in Sunnyvale, California, the record suggests that defendant is not registered to
do business in California.
In June 2016, defendant launched a photo-filtering app, called “Prisma,” which is
available for download without charge on the Apple App Store and the Google Play Store. This
app is designed for devices using Apple’s iOS and Google’s Android operating systems. From
June 2016 to October 2016, defendant’s app has been downloaded approximately 70 million
times. Plaintiff alleges that defendant, through defendant’s use of the “Prisma” mark, infringes
on plaintiff’s registered “Prizmia” mark.
Pertinent to the jurisdictional analysis, the record reflects that individuals, by using
defendant’s “Prisma” app, occasionally send their photographs or videos to one of defendant’s

2

Specifically, plaintiff is the owner of the federally registered trademark Prizmia®, Reg. No.
4,682,035, which was registered on the Principal Register of the U.S. Patent and Trademark
Office (“USPTO”) on February 3, 2015, for “downloadable software for use with mobile
electronic devices for the purpose of photo and video capturing and editing” and “downloadable
software in the nature of a mobile application for photo and video capturing and editing,” in
International Class 9.
2

servers located outside of Virginia. In such instances, defendant’s server processes and filters the
user’s photographs or videos, and then returns the images to the user’s device.3 Importantly,
however, the record discloses that defendant’s servers do not know where an app user’s device is
located when the user’s device sends a request to, or otherwise communicates with, the servers.
Nor do defendant’s servers know where an app user’s device is located when the servers return
filtered images to the user.
In addition, defendant operates a website, http://prisma-ai.com, which contains
information about defendant’s “Prisma” app. This app is not available for download directly on
defendant’s website; rather, defendant’s website includes links to the Apple App Store and the
Google Play Store. If a user clicks through these links, that user could then download
defendant’s app from the third-party distributor. Defendant’s website also includes links to
various news articles about defendant’s app, articles in which defendant’s CEO and other
employees have been quoted, as well as an email address for defendant. It is worth noting too,
that defendant’s website is passive and simply displays information. For instance, the website
does not permit visitors to create an account to use the site (or to use defendant’s app), nor does
the website provide any sort of forms that a user could fill out, such as warranty forms. Nor is
there anything on the website specifically targeting or singling out Virginia.
Finally, it is worth noting the following:


Defendant’s app itself does not require an individual in the United States to create an
account in order to use the app.

3

Plaintiff acknowledges that defendant recently changed its software so that some filters can be
applied on a user’s device, without having to contact defendant’s servers. There is no dispute,
however, that some of defendant’s filters still require users to send images to defendant’s servers.
3



Defendant does not know how many app users are in Virginia, as defendant does not
count or keep track of the number of app-users in Virginia or in any other specific
location.



Defendant’s contracts with the third-party distributors (the Apple App Store and Google
Play Store) are enforceable under states other than Virginia.



Defendant does not have any offices, employees, or contracts in Virginia.



Defendant does not have an established communication network with Virginia
consumers.



Defendant does not market or advertise its app in Virginia, aside from defendant’s
website, which is generally accessible throughout the United States.



Any software updates to the app are made available by the third-party distributors.



Defendant did not design its app specifically for any State’s regulations.

II.
Because defendant has timely filed a Rule 12(b)(2) motion, analysis properly begins with
the question of personal jurisdiction. Once a defendant has raised a timely Rule 12(b)(2) motion,
a plaintiff “bears the burden of demonstrating personal jurisdiction at every stage following such
a challenge.” Grayson v. Anderson, 816 F.3d 262, 267 (4th Cir. 2016). Yet, a plaintiff’s burden
of persuasion depends on the case’s procedural posture. For instance, a plaintiff must satisfy a
prima facie standard “when the court addresses the personal jurisdiction question by reviewing
only the parties’ motion papers, affidavits attached to the motion, supporting legal memoranda,
and the allegations in the complaint[.]” Id. at 268. In such circumstances, “the court must take
the allegations and available evidence relating to personal jurisdiction in the light most favorable
to the plaintiff.” Id.4

4

By contrast, if a pretrial evidentiary hearing is held, a plaintiff must “prove facts supporting
personal jurisdiction by a preponderance of the evidence.” Grayson, 816 F. 3d at 268.
4

Under Fourth Circuit law, resolution of a personal jurisdiction challenge involves a twostep inquiry. See Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th Cir. 2014).
The first step is to determine whether Virginia’s long-arm statute, Va. Code § 8.01–328.1, by its
terms, reaches defendant’s conduct. If the long-arm statute does not reach defendant’s conduct,
the inquiry ends; there is no personal jurisdiction over defendant. See id. But if the long-arm
statute, by its terms, reaches defendant’s conduct, then analysis turns to the second step—the due
process inquiry—to determine whether the long-arm’s reach exceeds its constitutional grasp. Id.;
see also AESP, Inc. v. Signamax, LLC, 29 F. Supp. 3d 683, 688 (E.D. Va. 2014) (describing this
two-step process). Moreover, when a provision of the Virginia long-arm statute is held to permit
the exercise of personal jurisdiction over a defendant to the outer limits allowable under federal
due process, this two-prong test merges into the constitutional inquiry. See Tire Eng’g v.
Shandong Linglong Rubber Co., 682 F.3d 292, 301 (4th Cir. 2012) (“Because Virginia’s longarm statute extends personal jurisdiction to the outer bounds of due process, the two-prong test
collapses into a single inquiry when Virginia is the forum state.”).
The Virginia long-arm statute provides for in personam jurisdiction over any person who
“transact[s] any business” in Virginia, or who causes “tortious injury” in Virginia by an act or

Significantly, an evidentiary hearing “does not automatically involve or require live testimony.”
Id. (emphasis in original). Rather, “an evidentiary hearing requires only that the district court
afford the parties a fair opportunity to present both the relevant jurisdictional evidence and their
legal arguments.” Id. (quotation marks omitted). Thus, the Fourth Circuit has declined “to
impose on a district court the hard and fast rule that it must automatically assemble attorneys and
witnesses when doing so would ultimately serve no meaningful purpose.” Id. at 269. Indeed, a
district court may, in lieu of taking live testimony, “consider evidence in the form of depositions,
interrogatory answers, admissions, or other appropriate forms.” Id. at 268-69. Here, the
distinction between an “evidentiary hearing” and a ruling on the review based solely on the
complaint, motions papers, and related documents is of no moment, because plaintiff fails to
make a prima facie showing of personal jurisdiction.
5

omission outside of Virginia if that person (i) regularly does or solicits business in Virginia, (ii)
engages in any other persistent course of conduct in Virginia, or (iii) derives substantial revenue
from goods used or consumed or services rendered in Virginia. Va. Code. §§ 8.01-32.1(A)(1) &
(4).5 Because these provisions have been interpreted as extending to the limits permitted by the
Due Process Clause, this analysis turns to the constitutional due process inquiry.6 Simply put,
neither long-arm provision constitutionally reaches defendant’s conduct in this case.
As the Fourth Circuit has recently noted, “[p]ersonal jurisdiction over persons conducting
business on the Internet is determined under a [constitutional] standard that has evolved as
necessary to accommodate the nature of the Internet.” Unspam Techs., Inc. v. Chernuk, 716 F.3d
322, 328 (4th Cir. 2013). That constitutional standard starts with the well-entrenched principle
that a defendant must “have certain minimum contacts with [the forum] such that the
maintenance of a suit does not offend traditional notions of fair play and substantial justice.” Int'l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quotation marks omitted). Personal
jurisdiction can be established under either general or specific jurisdiction.7 Where, as here, a
defendant’s alleged contacts with the forum also constitute the asserted basis for the suit,

5

Cf. Alitalia-Linee Aeree Italiane S.p.A. v. Casinoalitalia.com, 128 F. Supp. 2d 340 (E.D. Va.
2001) (“[T]rademark infringement is a tort.”).
6

See, e.g., Consulting Eng’rs Corp v. Geometric Ltd., 561 F.3d 273, 277 (4th Cir. 2009)
(“Because Virginia's long-arm statute is intended to extend personal jurisdiction to the extent
permissible under the due process clause, the statutory inquiry merges with the constitutional
inquiry.”); English & Smith v. Metzger, 901 F.2d 36, 38 (4th Cir. 1990) (“[I]n defining the term
transacting business, we are mindful that the purpose of the Virginia long-arm statute is to extend
jurisdiction to the extent permissible under the due process clause.”).
7

See, e.g., Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414 (1984);
Universal Leather, 773 F.3d at 559; Tire Eng’g v. Shandong Linglong Rubber Co., 682 F.3d 292,
301 (4th Cir. 2012).
6

analysis properly focuses on specific jurisdiction. See Tire Eng’g, 682 F.3d at 301 (where
plaintiff “argues only that the court possess[es] specific jurisdiction over [defendants] . . . our
analysis is confined to that model”). In this regard, the Fourth Circuit has adopted a three-part
inquiry “to determine whether a defendant is subject to jurisdiction in a State because of its
electronic transmissions to that State.” Chernuk, 716 F.3d at 328. Specifically, “the inquiry
considers: (1) the extent to which the defendant purposefully availed itself of the privilege of
conducting activities in the forum state; (2) whether the plaintiff’s claims [arose] out of those
activities; and (3) whether the exercise of personal jurisdiction is constitutionally reasonable.” Id.
(quoting ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir. 2002).8
This first prong—“purposeful availment”—is “grounded on the traditional due process
concept of ‘minimum contacts,’ which itself is premised on the basis that ‘a corporation that

8

Put differently, “a State may, consistent with due process, exercise judicial power over a person
outside of the State when that person (1) directs electronic activity into the State, (2) with the
manifested intent of engaging in business or other interactions within the State, and (3) that
activity creates, in a person within the State, a potential cause of action cognizable in the State's
courts. ” ALS, 292 F.3d at 714.
Notably, the Fourth Circuit in ALS “adopt[ed] and adapt[ed]” the well-known Zippo
“sliding scale” approach for determining when a defendant’s internet contacts with a State could
confer personal jurisdiction over that defendant. Specifically, the Zippo model focused on a
spectrum of activities involving, on one end, situations where “the defendant enters into
contracts with residents of a foreign jurisdiction that involve the knowing and repeated
transmission of computer files over the Internet” and, on the other end, “passive” websites on
which defendants merely “post[] information . . . accessible to users in foreign jurisdictions.”
Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997). Importantly,
the Fourth Circuit placed even greater emphasis on a defendant’s intent to engage in business
within the forum State than did the Zippo court. Thus, it is appropriate to note that
[a] comparison of [the ALS test] to the original Zippo test indicates that the ALS
test emphasizes that requirement of purposeful targeting of a particular forum, not
just the level of interactivity. Under the ALS test, the defendant must direct
activity into the forum state, with the intent to engage in business within the state.
Graduate Mgmt. Admission Council v. Raju, 241 F. Supp. 2d 589, 595 (E.D. Va. 2003)
(emphasis in original).
7

enjoys the privilege of conducting business within a state bears the reciprocal obligation of
answering to legal proceedings there.’” Universal Leather, 773 F.3d at 559 (quoting Tire Eng’g,
682 F.3d at 301). Therefore, “in determining whether a foreign defendant has purposefully
availed itself of the privilege of conducting business in a forum state, [courts] ask whether ‘the
defendant's conduct and connection with the forum [s]tate are such that he should reasonably
anticipate being haled into court there.’” Id. (quoting Fed. Ins. Co. v. Lake Shore Inc., 886 F.2d
654, 658 (4th Cir. 1989). Crucially, to satisfy this standard, “a defendant outside the forum State
must have at least ‘aimed’ its challenged conduct at the forum State.” Chernuk, 716 F. 3d at 328
(quoting Calder v. Jones, 465 U.S. 783, 789 (1984)).
Moreover, where, as here, defendant is a foreign corporation that (i) “has no presence in
Virginia” and (ii) “did not itself sell products into Virginia,” then “plaintiff[,] to establish
personal jurisdiction over defendant, must rely on the ‘stream of commerce’ theory[.]’” AESP,
29 F. Supp. 3d at 689.9 In this regard, the Fourth Circuit has explained,

9

The Supreme Court first adopted the “stream of commerce” theory in World-Wide Volkswagen
Corp. v. Woodson, holding that a defendant corporation may “purposefully avail” itself of the
privilege of conducting business in the forum state if the defendant corporation “delivers its
products into the stream of commerce with the expectation that they will be purchased by
consumers in the forum State.” 444 U.S. 286, 297-98 (1980). Yet, the Supreme Court has split on
what the “stream of commerce” theory requires. See Asahi Metal Indus. v. Superior Court, 480
U.S. 102 (1987). A four-Justice plurality, led by Justice O’Connor, concluded that that placing a
product in the stream of commerce provides personal jurisdiction only if that placement was “an
action of the defendant purposefully directed at the forum State.” Id. at 112 (emphasis added). In
other words, mere placement of a product into the stream of commerce, without more, is not an
act purposefully directed toward a forum state, even when the non-resident defendant is aware
that the product ultimately will enter the forum state. By contrast, Justice Brennan’s
concurrence—which was joined by three other Justices—concluded that an additional showing
of purposefulness was unnecessary because “[a]s long as a participant in this process is aware
that the final product is being marketed in the forum State, the possibility of a lawsuit there
cannot come as a surprise.” Id. at 117. The Fourth Circuit has rejected Justice Brennan’s
approach and has edged towards Justice O’Connor’s. See, e.g., Lesnick v. Hollingsworth & Vose
Co., 35 F.3d 939 (4th Cir. 1994).
8

The touchstone of the minimum contacts analysis remains that an out-of-state
person has engaged in some activity purposefully directed toward the forum state.
. . . To permit a state to assert jurisdiction over any person in the country whose
product is sold in the state simply because a person must expect that to happen
destroys the notion of individual sovereignties inherent in our system of
federalism.
Lesnick v. Hollingsworth & Vose Co., 35 F.3d 939, 945 (4th Cir. 1994) (citations omitted).
Indeed, the Fourth Circuit has reaffirmed that placing products into the stream of commerce
“with the expectation that they would be purchased in [the forum state]” is not enough to
constitute “activity purposefully directed” at that forum state. In re Celotex Corp., 124 F.3d 619,
629 (4th Cir. 1997). As the Fourth Circuit has put it, this approach is necessary to “ensure that a
defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or
‘attenuated’ contacts.” Chernuk, 716 F.3d at 328 (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475 (1985)).
The Fourth Circuit’s approach to the stream of commerce theory is essentially the same
with respect to a defendant’s internet contacts. See ALS, 293 F.3d at 714-15.10 Importantly,
“[u]nder this standard, a person who simply places information on the Internet does not subject
himself to jurisdiction in each State into which the electronic signal is transmitted and received.”
Id. at 714. In the Fourth Circuit’s view, “[s]uch passive Internet activity does not generally
include directing electronic activity into the State with the manifested intent of engaging
business or other interactions in the State thus creating in a person within the State a potential
cause of action cognizable in courts located in the State.” Id.

10

There, the Fourth Circuit concluded that a defendant “purposefully avail[s] itself of the
privilege of conducting business or other transactions in [the forum State]” where the defendant
“directs electronic activity into the State . . . with the manifested intent of engaging in business or
other interactions within the State[.]” ALS, 293 F.3d at 714-15.
9

Relatedly, the Supreme Court recently underscored that a defendant’s relationship to the
forum state “must arise out of contacts that ‘the defendant himself’ creates with the forum state.”
Walden v. Fiore, 134 S. Ct. 1115, 1122 (2014) (quoting Burger King, 471 U.S. at 475). The
Walden Court further emphasized that the “minimum contacts analysis looks to the defendant’s
contacts with the forum State itself, not the defendant’s contacts with persons who reside there.”
Id. (emphasis added). Thus, “[d]ue process requires that a defendant be haled into court in a
forum State based on his own affiliation with the State, not based on the ‘random, fortuitous, or
attenuated’ contacts he makes by interacting with other persons affiliated with the State.” Id.
(quoting Burger King, 471 U.S. at 475).
III.
These principles, applied here, point persuasively to the conclusion that defendant has not
“purposefully availed” itself of the privilege of conducting business in Virginia, and thus
defendant is not subject to specific personal in this forum.
Distilled to its essence, plaintiff’s argument for jurisdiction is (i) that defendant
distributes its Prisma app to Virginia users via downloads through Apple and Google’s online
app stores; (ii) that defendant distributes its Prisma app through defendant’s website,
http://prisma-ai.com, which links individuals directly to the Apple and Google stores; and (iii)
that defendant processes images on servers outside of Virginia and sends the processed images
(via defendant’s Prisma app) to a Virginia user’s device.
In response, defendant contends that plaintiff cannot make a prima facie showing that
defendant purposefully availed itself of the privilege of conducting business in Virginia.
Specifically, defendant argues (i) that defendant’s website is passive and does not target or focus
on Virginia consumers, (ii) that defendant’s app is indirectly distributed through third-party app

10

stores, not defendant, and (iii) that the alleged electronic communications between defendant’s
servers and Prisma app users is not “purposefully directed” at Virginia, but rather these are
random, attenuated, and fortuitous user-initiated contacts. In this last respect, defendant stresses
that defendant’s servers are unaware of the user’s physical address, and that the user has
unilateral control over where the user is located when communicating with the server; put
differently, the user determines whether the contact will occur in Virginia or any other state, and
thus these communications are not directed at the forum State, specifically.
To begin with, the case most apposite to the parties’ lawsuit—Intercarrier Commc’ns
LLC v. WhatsApp Inc.—supports the conclusion that Virginia lacks personal jurisdiction over
defendant. See No. 3:12-cv-776, 2013 WL 5230631 (E.D. Va. Sept. 13, 2013) (holding that
plaintiff failed to make a prima facie showing of personal jurisdiction).11 In WhatsApp, the
plaintiff filed a patent infringement suit against a Delaware corporation headquartered in
California. Defendant’s sole product was a phone app, “WhatsApp Messenger,” which allowed
its 200-300 million users to send and receive text, picture, audio, and video messages over an
internet connection rather than through a phone carrier’s network. The WhatsApp defendant’s

11

Because WhatsApp involved patent claims, Federal Circuit law applied to the personal
jurisdiction issue. Importantly, however, the Federal Circuit’s due process test for personal
jurisdiction is essentially similar to the Fourth Circuit’s. Compare WhatsApp, 2013 WL
5230631, at *3 (“The Federal Circuit applies a three-prong test to determine if specific
jurisdiction exists: (1) whether the defendant purposefully directed activities at residents of the
forum; (2) whether the claim arises out of or relates to those activities; and (3) whether assertion
of personal jurisdiction is reasonable and fair. . . . To satisfy the first prong, it is essential in each
case that there be some act by which the defendant purposefully avails itself of the privilege of
conducting activities within the forum State” (quotation marks omitted)), with Chernuk, 716 F.3d
at 328 (Fourth Circuit’s jurisdictional inquiry considers “(1) the extent to which the defendant
purposefully availed itself of the privilege of conducting activities in the forum state; (2) whether
the plaintiff’s claims [arose] out of those activities; and (3) whether the exercise of personal
jurisdiction is constitutionally reasonable.”).
11

app was primarily available for download on third-party websites (such as the Apple iTunes
Store), and users paid 99 cents per year for that defendant’s app. The defendant, however, did not
directly receive payment; instead, the third-party app stores processed payments and transmitted
a portion of those payments to the defendant. Id. at *1, *4.
The WhatsApp plaintiff claimed that the defendant had purposefully availed itself of the
privilege of conducting business in Virginia, contending (i) that the WhatsApp defendant had
introduced its infringing product into the stream of commerce “knowing that [the product] would
be sold in [the Eastern District of Virginia] and elsewhere in the United States,” id. at *1; (ii) that
the defendant “‘consciously” or “deliberately” targeted Virginia because Virginia users
downloaded or used the defendant’s software within that forum, id. at *4; and (iii) that
individuals in Virginia could “share” their location while using that defendant’s app, id.
In addition, although the WhatsApp defendant had no offices, employees, contracts, or
advertisements in Virginia, that defendant admitted (i) that users of certain smartphone operating
systems could download the defendant’s app directly from the defendant’s website; (ii) that the
defendant’s servers stored information on its users’ telephone numbers, (iii) that the defendant’s
servers may have “store[d] undelivered messages which may contain a user’s location if the user
actively elects to send such a message with their user location, but such information [wa]s held
only as long as necessary to deliver the message,” (iv) that the defendant stored non-user
telephone numbers obtained from its users’ address books in a way that defendant was “unable to
retrieve them in their original form,” (v) that the defendant “store[d] minimal identifying data
about its customers”; and (vi) that some individuals had ordered and used the defendant’s app
while in Virginia. Id. at *1.

12

Crucially, the WhatsApp court held that the plaintiff failed to make a prima facie showing
that the defendant had “purposefully availed” itself of the privilege of conducting business in
Virginia. Id. at *5. In reaching this conclusion, the WhatsApp court explicitly rejected plaintiff’s
argument “that a company ‘consciously’ or ‘deliberately’ targets a forum if a user unilaterally
downloads or uses its software within that forum[.]” Id. at *4. This was so even though a
Virginian could download defendant’s product directly from defendant’s website, and that the
defendant stored identifying data about its customers.
The WhatsApp reasoning, applied here, points persuasively to the conclusion that there is
no personal jurisdiction over defendant Prisma Labs. In fact, defendant in this case has even
fewer contacts with Virginia than did the defendant in WhatsApp; unlike the defendant in
WhatsApp, Prisma Labs (i) does not know the location of its app users, (ii) does not make its app
available for download directly on defendant’s website, (iii) does not charge customers (either
through a third-party app store or directly) to download the app, and (iv) does not store
information about its users or permit users to “share” locations. Thus, if there was no prima facie
showing of purposeful availment in WhatsApp, it follows a fortiori that there is no prima facie
showing in the instant case .
Seeking to avoid this result, plaintiff contends that WhatsApp is distinguishable from the
instant case because, unlike the defendant in WhatsApp, Prisma Labs has a

“real time

relationship [with] its users by which Prisma processes and returns [users’] images from
[defendant’s] remote servers.” P. Br. (Doc. 38) at 17. Even when all reviewable documents are
viewed in the light most favorable to plaintiff, it is pellucid that defendant’s servers do not target
Virginia, because the users who initiate contact with the server unilaterally control the location

13

where the server’s response will wind up.12 In this respect, defendant’s activity is purposefully
directed at the individual user, regardless of where that user is. Thus, defendant’s (and its
server’s) contact with Virginia—as opposed to any other State—is entirely fortuitous and did not
“arise out of contacts that the defendant [itself] create[d] with the forum State.” Walden, 134 S.
Ct. at 1121–22. To hold otherwise would flout the Supreme Court’s direction that the minimum
contacts analysis must “look[] to the defendant’s contacts with the forum State itself, not the
defendant’s contacts with persons who reside there.” Id. at 1122.
This result finds further support in another recent case, AESP, Inc. v. Signamax, LLC,
where a plaintiff’s suit against a Czech LLC for trademark and copyright infringement was
dismissed for lack of personal jurisdiction. See 29 F. Supp. 3d 683 (E.D. Va. 2014). The
defendant in AESP was in the business of selling network connection components and cabling
products. Plaintiff asserted that jurisdiction existed over the defendant based on four transactions
in which defendant’s authorized agent sold the allegedly infringing products to a Pennsylvania
corporation, which subsequently sold those products to two customers in Virginia. Id. at 690. On
these facts, the application of Fourth Circuit law and the “stream of commerce” theory required
the conclusion that no personal jurisdiction existed over that defendant. Id. at 691. This was so
because the defendant “did not direct the sales of its products to Virginia or any Virginia
customers, nor did it require [its authorized agent] to sell the products to Virginia customers.” Id.
at 690 (emphasis added). Rather, “the record reflect[ed] no more than that defendant might

12

See, e.g., Advanced Tactical Ordinance Sys. LLC v. Real Action Paintball, Inc., 751 F.3d 796,
803 (7th Cir. 2014) (noting in the analogous context of emails that “[t]he connection between the
place where an email is opened and a lawsuit is entirely fortuitous” because “email does not exist
in any location at all; it bounces from one server to another, it starts wherever the account-holder
is sitting when she clicks the “send” button, and it winds up wherever the recipient happens to be
at that instant”).
14

expect that the products would eventually be sold somewhere in the United States, including
Virginia.” Id. at 690-91. In this regard, “no evidence in the record . . . reflect[ed] that defendant
specifically structured its relationship with . . . its U.S. distributor, in order to facilitate the sale of
the allegedly infringing products in Virginia.” Id. (emphasis added). Nor was there “any
evidence that defendant marketed the allegedly infringing products in Virginia or advertised in
Virginia.” Id. at 691 (emphasis added). Indeed, “[d]efendant’s only contact with Virginia
appear[ed] to be its sales to a nationwide distributor.” Id. Importantly, however, personal
jurisdiction could not be exercised based on “the mere presence of defendant’s product in
Virginia . . . when it was [defendant’s distributor], not defendant, that sold the products into
Virginia.” Id.
Although AESP involved substantially fewer sales than the instant case does downloads,
the logic in AESP directly maps onto the case at bar. Indeed, the record here reflects no more
than that defendant might expect its “Prisma” app would eventually be downloaded in the United
States, including Virginia. There is nothing in the record plausibly to suggest that defendant
structured its relationship with its third-party distributors to require—or even facilitate—app
downloads specifically in Virginia. And defendant’s distributor, not defendant, makes the app
available for download to a user’s device. Put simply, defendant has merely used nationwide app
stores to place defendant’s product in the stream of commerce, without targeting or directing its
activity toward Virginia in particular. Cf. id. at 690-91.13

13

Plaintiff’s only reply to AESP is the same argument that plaintiff used when addressing
WhatsApp—plaintiff again focuses on the fact that defendant “process[es] [user] images with
Prisma’s servers,” which plaintiff considers to be an “ongoing service relationship with
[defendant’s] customers.” P. Br. (Doc. 38) at 15. Once again, this argument is unpersuasive for
the reasons already stated.
15

Thus, given Fourth Circuit precedent and the logic elucidated in apposite cases, there is
no personal jurisdiction over defendant.
Seeking to avoid this result, plaintiff relies primarily on two decisions, both of which
involved crucially different facts from those presented here. First, plaintiff points to Match.com,
L.L.C. v. Fiesta Catering Int’l, Inc., No. 1:12-cv-368, 2013 WL 428056 (E.D. Va. Jan. 31, 2013).
But that case does not aid plaintiff. The court in Match.com concluded that jurisdiction existed
over a defendant that (i) maintained an interactive dating website that would “match” users with
each other, (ii) required users to register accounts, agree to Terms and Conditions, and pay a
monthly fee to use the website, (iii) had an ongoing relationship with paid subscribers residing in
Virginia by, inter alia, offering commissions to Virginia residents to refer new subscribers to the
defendant’s website, and (v) specifically targeted the Virginia market by “prominently
advertising the number of members it has in a given geographic area within Virginia.” Id. at *1,
*4. Thus, plaintiff’s reliance on Match.com is misplaced, as defendant Prisma Labs’ internet
contacts with Virginia are far more attenuated; indeed, defendant’s contacts with Virginia are
entirely fortuitous.
Second, plaintiff relies on Jones v. Boto, 498 F. Supp. 2d 822 (E.D. Va. 2007), but that
case is also inapposite. In Boto, the defendant sold artificial trees to Wal-Mart and Target stores
throughout the U.S., including Virginia. Id. at 829. To begin with, the Boto court noted that the
defendant’s sales to Virginia Wal-Mart and Target branches would have been insufficient to
confer personal jurisdiction under the stream of commerce theory. Id. at 828-29. Importantly,
however, the defendant in Boto also maintained a website accessible in Virginia where
consumers could (i) retrieve information about the trees those consumers bought, and, (ii)
complete warranty registration forms. Id. Indeed, the Boto court noted that the defendant’s

16

website was designed to provide services to consumers in Virginia. Id. The court in Boto also
noted that the record supported a prima facie finding of jurisdiction in light of the defendant’s
“regular course of dealing that resulted in deliveries of substantial quantities and dollar amounts
of products into Virginia on an annual basis over a period of at least several years.” Id. at 830
n.10.
In these respects, Boto is distinguishable from the case at bar. Here, defendant’s website
does not provide a service to app users, nor does defendant’s website contain anything similar to
the warranty registration forms present in Boto. Moreover, the Boto defendant’s contacts with the
forum were far less attenuated, fortuitous, and unilateral than those in the instant case. Indeed, in
Boto, the defendant’s trees necessarily were physically in Virginia when purchased at Virginia
Wal-Mart and Target branches—thus, a purchaser, in order to buy a tree from a Virginia WalMart or Target, necessarily had to engage in a transaction with a Virginia store in Virginia. Put
differently, the purchasers in Boto did not have unilateral control over where the transactions
with the defendant occurred. By contrast, defendant’s “Prisma” app, which has been available for
fewer than six months, is purchased in Virginia only when a user elects to download defendant’s
app while that user happens to be located in Virginia.
In sum, plaintiff has not made a prima facie showing that defendant purposefully availed
itself of the privilege of conducting business in Virginia, and thus there is no personal
jurisdiction over defendant in this forum.
IV.
Analysis thus turns to the issue of transfer. Although defendant moved to transfer the
matter to the Northern District of California pursuant to 28 U.S.C. § 1404(a), which permits

17

transfer “[f]or the convenience of the parties and witnesses,”14 section 1404 is inapplicable
because there is no personal jurisdiction over defendant.15 Importantly, however, plaintiff, an
individual entrepreneur based in North Carolina, selected the Eastern District of Virginia as the
forum for this suit to obtain a prompt resolution of the underlying trademark infringement
claims, as plaintiff contends that defendant’s expansive and infringing use of plaintiff’s mark is
rapidly causing plaintiff irreparable harm. Given this, plaintiff prefers transfer to dismissal, but
opposes a cross-country transfer. Thus, it is appropriate to consider whether transfer to
defendant’s state of incorporation—Delaware—may be effective pursuant to 28 U.S.C. §§ 1406
and 1631.
Specifically, § 1406 provides for transfer of “a case laying venue in the wrong division or
district” to “any district or division in which [the case] could have been brought” if transfer is “in
the interest of justice.” 28 U.S.C. § 1406(a). Although § 1406 speaks only of transfer on the
ground of improper venue, § 1406 may be implemented in the Fourth Circuit to effect transfer of
a case for lack of personal jurisdiction.16 Similarly, § 1631 provides an independent ground to

14

28 U.S.C. § 1404(a).

15

Even assuming the existence of personal jurisdiction over defendant, transfer to the Northern
District of California pursuant to § 1404(a) would be inappropriate on this record. There is no
reliable indication in the record identifying the number of witnesses or the materiality of their
testimony; hence, in this respect, there is no way to evaluate inconvenience to the witnesses or
parties. And the fact that defendant’s recent headquarters appear to be in California is not a
persuasive basis for a § 1404 transfer, because sending the case to the Northern District of
California would merely shift the balance of inconvenience from defendant to plaintiff.
Moreover, the interests of justice would not be served by such a transfer, because delay in the
disposition of this case would ensue, as the docket in the Northern District of California appears
to be slower than the docket in the Eastern District of Virginia.
16

At first blush, it appears that § 1406, by its text, applies only to transfers based on improper
venue. The Fourth Circuit, however, has interpreted § 1406 broadly to permit transfer for lack of
personal jurisdiction, as well. See, e.g., Porter v. Groat, 840 F.2d 255, 258 (4th Cir. 1988)
18

transfer this case to “any other such court in which the action . . . could have been brought at the
time it was filed” if “there is a want of jurisdiction” in the Eastern District of Virginia and
transfer is “in the interest of justice.” Id. § 1631. Notably, § 1631 may be invoked when there is a
lack of either personal or subject matter jurisdiction.17 Thus, to transfer a case pursuant to §
1631, “a court must find that (1) the proposed transferee court has jurisdiction, (2) the action
would have been timely filed had it been brought initially in the transferee court, and (3) transfer
would serve the interests of justice.” Afifi v. U.S. Dept. of Interior, 924 F.2d 61, 64 n.6 (4th Cir.
1991).
It is also important to note that “district courts ‘generally favor transfer over dismissal,
unless there is evidence that a case was brought in an improper venue in bad faith or to harass
defendants.’” Cont’l Cas. Co. v. Argentine Republic, 893 F. Supp. 2d 747, 754 (E.D. Va. 2012)
(quoting Gov’t of Egypt Procurement Office v. M/V Robert E. Lee, 216 F. Supp. 2d 468, 473 (D.

(“[W]e adopt as the rule in this circuit the reading of § 1406(a) that authorizes the transfer of a
case to any district, which would have had venue if the case were originally brought there, for
any reason which constitutes an impediment to a decision on the merits in the transferor district
but would not be an impediment in the transferee district.”); Robertson v. Northcutt, 850 F.2d
690 (4th Cir. 1988) (Table Decision) (finding reversible error where district court lacking
personal jurisdiction over defendant failed to transfer case pursuant to § 1406); DeSantis v.
Hafner Creations, Inc., 949 F. Supp. 419, 427 (E.D. Va. 1996) (“Notwithstanding the absence of
personal jurisdiction, federal courts have the power to transfer matters in the interests of justice
under 28 U.S.C. § 1406(a).”). This interpretation of § 1406 is consonant with the Supreme
Court’s view. See Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466 (1962) (district court lacking
personal jurisdiction over a defendant may transfer the case under § 1406(a)).
17

See, e.g., In re Carefirst of Md., Inc., 305 F.3d 253, 262 & n.2 (4th Cir. 2002) (holding that a §
1631 transfer order was not reviewable on appeal under the collateral order doctrine and
declining to join circuit split on applicability of § 1631 to cases involving want of personal
jurisdiction); Fed. Home Loan Bank of Bos. v. Moody’s Corp., 821 F.3d 102, 114 (1st Cir. 2016)
(demonstrating through a compelling and thorough analysis that § 1631 “encompasses both
personal and subject matter jurisdiction”); Chavez v. Dole Food Co., 836 F.3d 205, 224 (3d. Cir.
2016) (en banc) (citing Moody’s favorably and concluding that “the statutory directive in [§§
1406 & 1631] is the same” regardless whether the jurisdictional defect stems from a lack of
personal or subject matter jurisdiction).
19

Md. 2002)). This is so because “[t]ransfer would facilitate a more expeditious resolution of the
merits of the controversy in a concededly proper forum and would avoid the costs and delay that
would result from dismissal and refiling[.]” Id. (quoting Verosol B.V. v. Hunter Douglas, Inc.,
806 F. Supp. 582, 594 (E.D. Va. 1992)).
Here, it is appropriate, pursuant to 28 U.S.C. §§ 1406 and 1631, to transfer this matter to
the United States District Court for the District of Delaware. To begin with, the District of
Delaware has general jurisdiction over defendant because defendant is incorporated under the
laws of Delaware. See Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014) (noting that an
entity’s state of incorporation is the “paradigm” forum for general jurisdiction). And because
defendant is subject to general personal jurisdiction in Delaware, venue is proper there. See 28
U.S.C. § 1391(b)(1) (venue is proper where defendant is a resident); id. § 1391(c) (for venue
purposes, “an entity with the capacity to sue and be sued in its common name under applicable
law . . . shall be deemed to reside, if a defendant, in any judicial district in which such defendant
is subject to the court's personal jurisdiction”). Thus, there is no question that plaintiff could have
originally filed this action in the District of Delaware.
Moreover, transfer to the District of Delaware is in the interest of justice because (i)
plaintiff appears to have filed this suit in good faith and with a reasonable basis for believing that
the Eastern District of Virginia was a proper forum, and because the parties have an interest in a
swift resolution of plaintiff’s infringement claims and motion for preliminary injunction,18 (ii) it
is unclear whether any other State besides Delaware would have personal jurisdiction over

18

See Cont’l Cas. Co., 893 F. Supp. 2d at 754 (transfer is favored, unless case was brought in
bad faith or to harass defendants, because transfer “facilitate[s] a more expeditious resolution of
the merits of the controversy in a concededly proper forum and would avoid the costs and delay
that would result from dismissal and refiling”).
20

defendant, 19 (iii) plaintiff is a .single entrepreneur residing in North Carolina, and thus it is much
more convenient for plaintiff' to travel to Delaware than to California, and (iv) it appears that
defendants, witnesses and evidence are all located in Moscow1 such that defendant will be
required to travel regardless where this action is litigawt20
In conclusion. in the interests of justice, the matter is appropriately ttansferred to the
District of Delaware pursuantto 28 U.S.C. §§ 1406 and 1631.
V.
In sum, because the record reflects a lack of personal jurisdiction over defendant, and
because the interests ofjustice counsel in favor of transfer to Delaware pursuant to §§ 1406 and
1631, the matter is appropriately transferred to the United States District Court for the District of
Delaware.
An appropriate Order has already issued.

Alexandria, Virginia
December 22, 2016
T. S. Ell is, llJ
United States Ifstiict Judge

19 Indeed, the same jurisdictional infirmities preventing Vuginia from exercising personal
jurisdiction over defendant would likely persist if plaintiff' pursued this action i4 any other State,
including plaintiff's borne state of Nmth carolioa. It is also unclear whether California would
have jurisdiction, particularly because it does not appear that defendant is even registered to do
business there, and because defendant's recently-acquired contacts may have been manufactured
in respoi,se to this lawsuit
20 Defendant's recently-acquired office and newly-hired developers in California do not change
this analysis. particularly in light of the fact that one of defendant's two California-based
developers was hired after this litigation began.
21