Sonic Foundry, Inc. v. Astute Technology, LLC

Filing 31

ORDER granting 12 Motion to Dismiss signed by District Judge Lynn Adelman on 11/22/13. Further ordering that the parties have 10 days from the date of this order to show cause why the documents filed under seal at Docket 25 , 27 and 29 should remain sealed.(cc: all counsel) (dmm)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WISCONSIN
SONIC FOUNDRY, INC.,
Plaintiff,
v.

Case No. 13-CV-00087

ASTUTE TECHNOLOGY, LLC,
Defendant.

DECISION AND ORDER
Defendant Astute Technology, LLC (“Astute”) sued a company known as Learners
Digest International (“LDI”) for patent infringement in the United States District Court for the
Eastern District of Texas. LDI is a customer of Sonic Foundry, Inc. (“Sonic”), the plaintiff
in the present case. Sonic, a Wisconsin corporation, created the products that are the
subject of Astute's infringement claims against LDI. Following the commencement of the
Texas suit, Sonic agreed to indemnify and defend LDI. Subsequently Sonic filed the
present action under the Declaratory Judgment Act, 28 U.S.C., §§ 2201–02, seeking a
declaration of non-infringement and invalidity regarding Astute’s patents. Astute now
moves to dismiss for lack of personal and subject matter jurisdiction or, in the alternative,
to transfer the case to the Eastern District of Texas for consolidation with Astute's action
against LDI. In this decision, I address the issue of personal jurisdiction as I conclude that
it is dispositive.
To determine whether I have personal jurisdiction, I must first decide whether
jurisdiction exists under Wisconsin’s long-arm statute and then whether the assertion of

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personal jurisdiction would be consistent with the constitutional requirement of due
process. See Trintec Indus., Inc. v. Pedre Promotional Prods., Inc., 395 F.3d 1275, 1279
(Fed. Cir. 2005); see also Patent Rights Prot. Grp., LLC v. Video Gaming Techs., Inc., 603
F.3d 1364, 1368 (Fed. Cir. 2010) (holding that Federal Circuit law governs disputes over
personal jurisdiction in patent cases). There are two types of personal jurisdiction: specific
and general. Rasmussen v. General Motors Corp., 335 Wis. 2d 1, 12–13 (2011). Specific
jurisdiction exists when the litigation is related to or arises out of the defendant’s contacts
with a state. Id. General jurisdiction exists where a defendant has more substantial
contacts with a state such that it is reasonable for a court within the state to hear any claim
against the defendant. Id.; see also uBid, Inc. v. GoDaddy Group, Inc., 623 F.3d 421,
425–26 (7th Cir. 2010) (“The standard for general jurisdiction is demanding because the
consequences can be severe: if a defendant is subject to general jurisdiction in a state,
then it may be called into court there to answer for any alleged wrong, committed in any
place, no matter how unrelated to the defendant's contacts with the forum.”). Only general
jurisdiction is at issue in this case because the suit is unrelated to Astute’s contacts with
Wisconsin.
Sonic argues that I have general jurisdiction over Astute under Wis. Stat.
§ 801.05(1)(d). Under this section, a Wisconsin court has general jurisdiction over a
defendant who had taken up “local presence or status” within the state at the time the
action was commenced by “engag[ing] in substantial and not isolated activities within the
state.” This section corresponds in a general way to the “doing business” statutes common
in other states. Nagel v. Crain Cutter, Co., 50 Wis. 2d 638, 646 (1971). And it requires not

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just isolated contact with Wisconsin but “substantial activities” which are “continuous and
systematic.” Travelers Ins. Co. v. George McArthur & Sons, 25 Wis. 2d 197, 203 (1964).
Generally, a defendant is subject to personal jurisdiction under this section of the long-arm
statute if it “‘solicit[s], create[s], nurture[s], or maintain[s], whether through personal
contacts or long-distance communications, a continuing business relationship with anyone
in the state.’” Druschel v. Cloeren, 295 Wis. 2d 858, 864–65 (Ct. App. 2006) (quoting
Stauffacher v. Bennett, 969 F.2d 455, 457 (7th Cir. 1992)).
Since § 801.05(1)(d) was “intended to provide for the exercise of jurisdiction over
nonresident defendants to the full extent consistent with the requisites of due process of
law,” Zerbel v. H.L. Federman & Co., 48 Wis. 2d 54, 59–60 (1970), Wisconsin courts
consider the requirements of due process when applying it. Specifically, Wisconsin courts
consider “1) the quantity of the [defendant’s] contacts; 2) the quality of the contacts; 3) the
source of the contacts and their connection with the cause of action; 4) the state’s interest;
and 5) the convenience of the parties.” FL Hunts, LLC v. Wheeler, 322 Wis. 2d 738, 748
(Ct. App. 2009). A court must weigh these facts to determine whether it is reasonable to
subject the particular nonresident defendant to Wisconsin litigation. Nagel, 50 Wis. 2d at
648.
Astute is a Virginia-based company which is in the business of recording live
presentations and making them available for later online viewing. The patents at issue
involve the methods it uses to capture, digitize and synchronize some of its presentations.
Astute’s contacts with Wisconsin are of four types. First, in August 2008, Astute recorded
a presentation for a non-Wisconsin client which required Astute to be present in Wisconsin

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for one day. Second, between August 2009 and July 2013, Astute received via its website
240 orders from Wisconsin residents for copies of recorded presentations. These orders
represented 0.72% of Astute’s sales of recorded presentation (during this period Astute
processed a total of 33,155 orders). The Wisconsin orders came from 162 customers,
which means 78 orders were from repeat customers. Direct email solicitations from Astute
may have prompted some of the repeat orders because it sometimes sends automated
emails to previous customers. It is possible that other Wisconsin residents viewed a
presentation recorded by Astute without Astute’s knowledge. This is because an
organization that puts on a presentation sometimes distributes copies of it without
assistance from Astute and does not provide Astute with a list of the recipients. Astute also
offers some free content on its website that anyone can view. However, it does not track
the addresses of the viewers.
Astute’s third contact with Wisconsin occurred between August 2010 and May 2013
during which time it hosted a “Keep America Fishing” website for a Virginia-based
organization, the American Sportfishing Association (the “ASA”). The website asked people
living in upper Midwestern states, including Wisconsin, to protect the right to fish and
donate to the ASA. Fourth, in June 2012, an agent of Astute contacted Sonic at its
Wisconsin headquarters and offered to sell the patents presently at issue to Sonic.
Neither the fact that Astute recorded a presentation in Wisconsin in August 2008
nor that it offered to sell Sonic its patents in June 2012 is helpful to plaintiff. The question
under § 801.05(1)(d) is whether Astute had substantial contacts with the State of
Wisconsin in February 2013, when Sonic commenced this lawsuit. See FL Hunts, 322 Wis.
2d at 747–48 (“[I]t was error for the court to analyze [defendant’s] contacts preceding the
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commencement of the action . . . .”). The August 2008 and June 2012 events took place
well before plaintiff filed its complaint, and neither event was part of an ongoing business
relationship. That Astute hosted a website for the ASA until May 2013 is similarly unhelpful
to plaintiff. This evidence proves only that Astute had an ongoing business relationship with
the ASA, an organization based in Virginia. Although the Keep America Fishing website
solicited donations from people in Wisconsin, no evidence indicates that Astute was the
entity asking for or collecting the donations. All Astute did was provide technical support
to the ASA. Thus, to resolve the issue of general jurisdiction, I need only consider whether
Astute’s distribution of copies of its recorded presentations to Wisconsin residents
constituted “substantial” contacts that were “continuous and systematic.”
As noted, I must consider the quantity and quality of Astute’s contacts, the
connection between Astute’s contacts and Sonic’s cause of action, the state’s interest and
the convenience of the parties. As to the quantity of Astute’s Wisconsin contacts, between
August 2009 and July 2013, Astute sold 240 copies of its recorded presentations to
Wisconsin residents. This is a moderately substantial number, but there is no evidence
indicating whether it represented a substantial dollar amount. And the quality of the
contacts was very low. This is so because Astute typically does not promote its recorded
content. Instead, it relies on the organizations that hire it to encourage their clients to
purchase its products. Thus, most of Astute’s Wisconsin sales resulted from the efforts of
third-party organizations and not from Astute’s own interactions with customers. The only
orders that might have been generated by Astute’s sales efforts are the 78 from repeat
customers. This is because, as stated, Astute sometimes sends automated emails to
previous customers. However, Astute’s business relationship with such customers is limited
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to sending an automated mass-marketing email and filling an order placed on its website.
There is no evidence that any employee of Astute had any personal contact of any sort
with any Wisconsin customer. See Druschel, 295 Wis. 2d at 866 (noting that “personal
visits are the highest quality of contact” and that “[t]he next highest quality of contact is
personal contact of another type”).
The next factor weighs in favor of Astute because none of Astute’s contacts with
Wisconsin are related to the present lawsuit. The fourth and fifth factors are less important
but slightly favor Sonic. Wisconsin has an interest in providing a forum for its citizens, and
litigation in Wisconsin would be convenient to Sonic.
Considering all of the relevant factors, I conclude that the evidence does not support
my exercising personal jurisdiction over Astute under the Wisconsin long-arm statute. The
quality of Astute’s contacts with its Wisconsin customers was so low that it does not justify
subjecting Astute to general jurisdiction under § 801.05(1)(d). Astute’s activities in
Wisconsin were not extensive enough to enable me to conclude that Astute established
a “local presence or status” within this state. See also uBid, 623 F.3d at 425–26 (noting
that due process only allows a defendant to be subject to general jurisdiction in a state if
it has “such extensive contacts with the state that it can be treated as present in the state
for essentially all purposes”). Therefore, I will grant Astute’s motion to dismiss for lack of
personal jurisdiction.
Both parties filed their supplemental briefs discussing jurisdiction and portions of the
attachments thereto under seal. I will give the parties 10 days to show good cause why
these documents should remain sealed. If they do not respond by this deadline, I will order
the clerk to unseal the documents. See Cnty. Materials Corp. v. Allan Block Corp., 502
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F.3d 730, 740 (7th Cir. 2007); Baxter Int’l, Inc. v. Abbott Labs., 297 F.3d 544, 545 (7th Cir.
2002).
THEREFORE, IT IS ORDERED that defendant’s motion to dismiss for lack of
personal jurisdiction (Docket #12) is GRANTED.
IT IS FURTHER ORDERED that the parties have 10 days from the date of this order
to show cause why the documents filed under seal at Docket #25, 27 and 29 should
remain sealed.
Dated at Milwaukee, Wisconsin, this 22nd day of November, 2013.
s/ Lynn Adelman
_______________________
LYNN ADELMAN
District Judge

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