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Jinni Tech Ltd. v. Red.Com Inc.

United States District Court, W.D. Washington, Seattle

October 20, 2017

JINNI TECH LTD, et al., Plaintiffs,
v.
RED.COM, INC., et al., Defendants.

          ORDER

          JAMES L. ROBART UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Before the court are (1) Red.com, Inc. and Red.com, LLC's (collectively, “Defendants” or “RED”) motion to dismiss under Federal Rules of Civil Procedure 12(b)(2), 12(b)(3), and 12(b)(6), or in the alternative, to transfer venue to the district court for the Central District of California (MTD (Dkt. # 15)); and (2) Jinni Tech Ltd (“Jinni Tech”) and Bruce Royce's (collectively, “Plaintiffs”) surreply to strike Defendants' reply in its entirety (Surreply (Dkt. # 29)). The court has considered the parties' submissions in support of and in opposition to the motion to dismiss, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court GRANTS in part and DENIES in part Defendants' motion to dismiss and STRIKES the portions of Defendants' reply that advance the forum selection clause argument.

         II. BACKGROUND

         This case stems from the competing products manufactured and sold by the parties in the filmmaking equipment industry.[2] (See FAC (Dkt. # 10) ¶¶ 3-6.) RED manufactures and sells high-end, digital cameras-the RED digital cameras-which are widely used by the filmmaking community. (See Id. ¶¶ 42-44.) As part of their business, Defendants also sell the RED Mini-Mag-a memory storage device, known as a solid state drive (“SSD”), that is compatible with the RED digital cameras. (Id. ¶¶ 41-42.) Defendants' President, Jarred Land, owns and operates a website called reduser.net, which hosts a forum for individual RED camera owners and others active in the cinematography industry to “share information about RED cameras and accessories.” (Id. ¶¶ 23, 43-44.)

         Jinni Tech also manufactures cinematography equipment. (See Id. ¶ 34.) Its founder, Mr. Royce, is an engineer who has worked in the television industry, and he formed Jinni Tech to manufacture and sell high-quality products for professional cameras and computer systems used in film production. (Id. ¶¶ 18-19, 34-36.) Jinni Tech introduced its competing SSD media accessory called the JinniMag, which it marketed as “an affordable third-party media accessory that is compatible with RED cameras.” (Id. ¶ 38; see Id. ¶¶ 34-37.) Jinni Tech introduced the JinniMag on July 31, 2016. (Id. ¶¶ 37, 66-67.)

         Plaintiffs' claims arise from the events occurring after Jinni Tech unveiled the JinniMag: (1) a series of allegedly false statements made or encouraged by Defendants after the introduction of the JinniMag; and (2) a separate patent infringement suit regarding the JinniMag filed by Defendants in the Central District of California.[3] (See Id. ¶¶ 107-88.) The court recites the relevant facts as to each category of claims below.

         A. Statements Regarding Plaintiffs After the Introduction of JinniMag

         On July 31, 2016-the same day that the JinniMag was introduced-Mr. Land posted on a Facebook group of RED consumers that the JinniMag “is not legit . . . not certified . . . not endorsed . . . . Even if this was real there are too many inaccuracies and violations going on here to list.” (Id. ¶ 68.) This post was subsequently republished on other Facebook groups of RED camera users. (See Id. ¶ 70.) Many Facebook users subsequently “warned RED customers and other users that Mr. Land identified JinniMag as a ‘scam' and ‘IP theft' and ‘a fake.'” (Id. ¶ 71.)

The same day, Mr. Land posted a message on the reduser.net forum about the introduction of the JinniMag:

For some random company to hack and duplicate our IP and our firmware (which is the only way they could do this) is exactly like someone stealing your films and calling them their own and selling them to others.
I don't know where this company is from. I assume the UK cover is just bullshit. Someone said China but I really hope this is not the case as China has made such significant improvements over the last decade turning around their attitude towards Copyright infringement, Trademark violations, and IP theft (which it appears this company has broken all three in one swoop)[.]
I will shut RED completely down . . . I am not kidding . . . If stealing each other's [product] suddenly is deemed acceptable.

(Id. ¶ 75.) Like the Facebook post above, Mr. Land's message on reduser.net was republished and repeated by other users. One user stated that “cheap knock off SSDs” like JinniMag “are clearly engaging in criminal behavior.” (Id. ¶ 77a.) Another user accused Jinni Tech of having “stolen someone else's fruit of their [sic] hard labor and financial commitment.” (Id. ¶ 77d.)

         Occasionally, users would “express[] appreciation for Jinni Tech's lower-priced JinniMag alternative, ” but Mr. Land would “shout them down with intimidating messages aimed at inflaming RED's users against Jinni Tech.” (Id. ¶ 79.) For example, on August 1, 2016, a user shared that he or she would be interested in “pick[ing] up a few [JinniMags]” because RED prices are “incredibly over-inflated.” (Id. ¶ 80.) Mr. Land responded the same day, stating:

We invented something. Someone is saying they have stole[n] it. And you are sitting there telling everyone that is ok.
It is the same as if you saved up or borrowed $10, 000, 000[.00] and went and wrote and directed and shot your film. [Y]ou edit it together and finish it and put it up on Itunes for $9.99 to get your money back.
But someone from [C]hina looks at your film and . . . just download[s] this guy[']s film, steal[s] it, change[s] the opening credits with [his or her] logo and reupload[s] it on Itunes and only charge[s] $1.00. That's not right.

(Id. ¶ 81.) Later in the same thread, Mr. Land posted:

Lawyers will deal with these guys doing this . . . but it is you guys that think that this is OK that have me way way way more pissed off.

(Id. ¶ 82.)

         After Mr. Land's postings, other users continued to discuss Jinni Tech and the JinniMag in a disparaging light. One user suggested that Mr. Land “try to take them down through the FBI” (id.¶ 85a); others proposed that RED sue Jinni Tech, block its product, or void the warranties of customers who chose to use JinniMag (id. ¶ 85c). In December, when a user promoted the JinniMag on the forum, others responded immediately that it was “[n]ot a good idea to be promoting that around here.” (Id. ¶ 86a.) Another user concurred: “[Mr. Land] had some very stern warnings when this came up in the past. Basically it's IP theft. I would take the warnings seriously.” (Id. ¶ 86b.)

         The online postings escalated as users on reduser.net began to share personal information about Mr. Royce. On August 1, 2016, one user posted Mr. Royce's name, personal email address, and phone number on reduser.net. (Id. ¶ 90.) Defendants did not remove this information or warn users to refrain from posting personal identifying information. (Id. ¶ 91.) Other users personally attacked Mr. Royce on various online // forums. (See Id. ¶ 94.) Defendants did not discourage these users from doing so and took no action to prevent any such attacks in the future. (Id. ¶ 95.)

         As a result of these postings, Plaintiffs allege that Mr. Royce and his family suffered “serious emotional distress, anxiety, and stress, resulting in harm to Mr. Royce's emotional and physical health, including severe physical pain and a sleep disorder.” (Id. ¶ 98.) Moreover, the comments have caused “serious damage to Mr. Royce's professional reputation.” (Id. ¶ 97.)

         After these disparaging comments, Plaintiffs noticed that “many potential customers who expressed an interest in buying [its] products declined to do so.” (Id. ¶ 87.) For instance, one consumer had ordered the JinniMag but canceled her order after seeing the Facebook comments, explicitly explaining that she was “not touching these” because they were “[b]ad mojo.” (Id. ¶ 87b.) Another user posted that he or she was “excited by [JinniMags] when they were first announced, but now that it turns out that they've got no permissions to create them I'm steering well clear.” (Id. ¶ 87a.)

         Plaintiffs filed suit on February 10, 2017. (See Compl. (Dkt. # 1).) Their complaint alleges that Defendants falsely advertised its products and engaged in unfair competition, in violation of the Lanham Act, 15 U.S.C. § 1125(a). (Id. ¶¶ 90-108.) It also asserted various violations of Washington law, including product disparagement and trade libel (id. ¶¶ 109-15); tortious interference (id. ¶¶ 116-22); intentional and negligent infliction of emotional distress (id. ¶¶ 136-43); defamation (id. ¶¶ 144-52); and portraying Plaintiffs in a false light (id. ¶¶ 153-61). Finally, the complaint alleged that Defendants violated the Washington Consumer Protection Act by engaging in unfair competition in violation of RCW 19.86 (id. ¶¶ 123-28) and violating Mr. Royce's right of privacy in contravention of RCW 9.73.060 (id. ¶¶ 129-35).

         B. Patent Infringement Claims

         A month later, on March 2, 2017, Red.com, Inc. brought suit against Jinni Tech and Mr. Royce in the Central District of California, alleging patent infringement, trademark infringement, and various other violations of federal and state law. See generally Red.com, Inc. v. Jinni Tech, Ltd., No. 8:17-cv-00382-CJC-KES, Dkt. # 1 (“Compl.”) (C.D. Cal.) (hereinafter, “the patent infringement suit”).[4] The complaint describes the '385 patent, owned by RED, which covers the RED SSD accessories. Id., Compl. ¶ 14. It asserts that Jinni Tech and Mr. Royce “have in the past infringed and are currently infringing the '385 patent.” Id., Compl. ¶ 43.

         Jinni Tech and Mr. Royce moved to dismiss the patent infringement suit on various grounds, including lack of personal jurisdiction and improper venue, and alternatively, to transfer the action to this district. Id., Dkt. # 30 (“Order on MTD”) at 1-2. The District Court denied the motion. See generally id., Order on MTD. First, the court found that it has personal jurisdiction over Jinni Tech and Mr. Royce because they “committed intentional acts directed at the forum which they knew would have a direct effect on [Red.com, Inc.] in the forum.” Id., Order on MTD at 9. Moreover, the court concluded that venue is proper because the “alleged acts of infringement were directed at [Red.com, Inc.] whose principal place of business and website servers are located in this judicial district.” Id., Order on MTD at 15. Lastly, the court declined to transfer venue. Id., Order on MTD at 17.

         On May 23, 2017, Jinni Tech and Mr. Royce filed an amended complaint in this suit, adding two claims seeking declaratory judgments of noninfringement and invalidity of the '385 Patent-the same patent at issue in the patent infringement suit currently pending in the Central District of California. (See FAC ¶¶ 183-88.)

         III. ANALYSIS

         Defendants move to dismiss Plaintiffs' claims under Federal Rules of Civil Procedure 12(b)(2) for lack of personal jurisdiction, 12(b)(3) for improper venue, and 12(b)(6) for failure to state a claim. (MTD at 5-6.) Plaintiffs oppose the motion and move to strike Defendants' reply brief. (See Surreply at 1.) The court first addresses Plaintiffs' motion to strike and then turns to each basis for dismissal.

         A. Motion to Strike

         Plaintiffs move this court pursuant to Local Civil Rule 7(g) to strike Defendants' reply brief in its entirety for “add[ing] new facts and arguments which were not raised in its [m]otion.” (Surreply at 1.) Specifically, Plaintiffs challenge Defendants' argument that Plaintiffs are subject to exclusive personal jurisdiction in California because of “four adhesion agreements” that each include a “forum selection clause.” (Id. at 2.)

         “New arguments may not be introduced in a reply brief, ” United States v. Puerta, 982 F.2d 1297, 1300 n.1 (9th Cir. 1992), and a court “need not consider arguments raised for the first time in a reply brief, ” Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007). If new facts or arguments are introduced in a reply, the nonmoving party may file a surreply requesting that the court strike the material. Local Rules W.D. Wash. LCR 7(g).

         Defendants introduce both new facts and new arguments in their reply. For the first time, Defendants introduce various contracts that Mr. Royce allegedly agreed to, including the Red Website Terms of Use, the Red Firmware License Agreement, the R3D SDK License Agreement, and the RedlinkTM SDK License Agreement, all of which contain forum selection clauses. (See Reply at 3-5.) They did not, however, raise any of these contractual agreements in the motion to dismiss. (See generally MTD.) Defendants then rely on these newly introduced facts to argue that the forum selection clauses deprive this court of jurisdiction. (Reply at 6-7.) Defendants again did not raise this argument in the motion to dismiss. (See generally MTD.) Because the forum selection argument was not raised until Defendants' reply, the court will not consider this argument and strikes the portions of the reply advancing this new argument.

         However, the court does not agree that it must strike the reply in its entirety, as Plaintiffs urge. (See Surreply at 1.) Certain portions of the reply deal with arguments that previously raised, such as the impact of Red.com, Inc.'s conversion to Red.com, LLC (Reply at 8-9); Plaintiffs' failure to dispute that Defendants could not be held liable for the posts of unaffiliated individual users (id. at 10-11); and Defendants' contention that Mr. Land was acting outside the scope of his employment (id. at 11-12). These portions of the reply do not introduce new facts or arguments, and the court declines to strike them.

         Accordingly, the court strikes only the parts of the reply that advance the argument involving the forum selection clauses. The remainder of the reply stands as filed.

         B. Motion to Dismiss for Lack of Personal Jurisdiction

         Defendants argue that the amended complaint fails to establish personal jurisdiction over them, and they therefore move to dismiss all claims on that basis. (MTD at 8-18.) Plaintiffs disagree. (Resp. at 6-9.) For the reasons stated below, the court concludes that it has personal jurisdiction over Defendants.

         1. Legal Standard

         Federal Rule of Civil Procedure 12(b)(2) allows a defendant to move to dismiss for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2). “In opposing a defendant's motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that jurisdiction is proper.” CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011). However, in the absence of an evidentiary hearing, “the plaintiff need only make ‘a prima facie showing of jurisdictional facts to withstand the motion to dismiss.'” Wash. Shoe Co. v. A-Z Sporting Goods, Inc., 704 F.3d 668, 671-72 (9th Cir. 2012) (quoting Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006)). Although a plaintiff cannot simply rest on the bare allegations of her complaint, the court must accept ...


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