No. C 04-04825 JW.
April 1, 2005
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
Plaintiff Cairo, Inc. ("Plaintiff" or "Cairo") has filed a complaint for declaratory relief against Defendant Crossmedia Services, Inc. ("Defendant" or "CMS") seeking a declaratory judgment from this Court that (1) its web site does not infringe any copyrightable material belonging to CMS; (2) its web site does not infringe any registered federal trademark held by CMS; (3) its web site does not infringe any California trademark held by CMS; (4) its web site does not constitute an unfair trade practice under federal or California law; (5) its conduct does not breach any enforceable contract with CMS; (6) it has not committed trespass as to CMS's personal property; (7) it has not misappropriated property or assets belonging to CMS; and (8) it has not wrongfully interfered with CMS's business relationships. Defendant moves to dismiss Plaintiff's Complaint for improper venue, pursuant to FED. R. CIV. P. 12(b)(3). On Tuesday, March 29, 2005, this Court held a hearing regarding Defendant's motion. Based upon counsels' comments at the hearing and upon all papers filed to date, this Court GRANTS CMS's motion to dismiss.
II. BACKGROUNDCairo is a Delaware corporation with its principal place of business in San Ramon, California. (Complaint ¶ 5.) CMS is a Delaware Corporation with its principal place of business in Chicago, Illinois. (Id.) Both parties operate web sites that allow users to search for products on sale at local retailers. (Complaint ¶¶ 1, 2.)
A. CMS's Business
CMS's business has two aspects: its SmartCircular Service and its ShopLocal Network. (Hand Declaration ¶ 3.) The SmartCircular Service and ShopLocal Network enable CMS's retail customers to distribute their promotional information via the Internet to shoppers in local geographic markets and enable these shoppers to identify sales, specials, and promotions at local retailers. (Id.) CMS enters into agreements with retailers and other businesses to make their promotional materials available on CMS's web sites. (Hand Declaration ¶ 4.)
Using its SmartCircular Service, which allegedly consists of proprietary processes and technology, CMS takes its customers' promotional materials and creates interactive electronic versions of those materials. (Id.) CMS hosts these materials on more than 250 web sites that it operates. (Id.) A shopper may access the interactive promotional materials created by CMS through CMS's ShopLocal Network or through the retailers' own web sites. (Hand Declaration ¶ 5.) When a shopper clicks on a link on a retailer's web site to view the retailer's promotional materials, the shopper is directed to a web site hosted by CMS. (Id.)
CMS's ShopLocal Network provides shoppers with access to the interactive promotional materials that CMS has created for its customers with its SmartCircular Services technology. (Hand Declaration ¶ 6.) A shopper can use the ShopLocal Network by visiting any one of a number of web sites, including CMS's shoplocal.com, saleshound.com, and realmalls.com; more than 140 local newspaper sites; and certain "portals" and "destination sites." (Id.)
When a shopper visits the web site of one of CMS's retail customers and clicks on a link for sales or specials, the shopper is directed to a CMS web page that asks her to enter her zip code, or city and state, to find the sales, specials, and promotions in her area. (Hand Declaration ¶ 7.) Once the location information is entered, the shopper is directed to a page displaying CMS's customers' interactive promotional material. (Id.)
Jurisdiction for any claims arising under this Agreement shall lie exclusively with the state or federal courts in Chicago, Illinois where CrossMedia has its principal place of business.
(Id. at 7:8-9.)
B. Cairo's Business
Cairo's web site allows a user to search its database of in-store sales information. (Moss Declaration ¶ 6.) By entering her zip code, a user can search for products on sale at local retail stores by typing in a particular product in which she is interested, by selecting a product category prepared by Cairo, by selecting a retailer from a prepared list, or by selecting a specific brand from a list prepared by Cairo. (Id.) The user's search results include the name of the specific product on sale accompanied by a small image of the retailer's newspaper weekly circular. (Moss Declaration ¶ 7.) If the user clicks on the name of the product, the user is directed to the retailer's web page with information about that particular product. (Id.) Alternatively, if the user clicks on the image of the circular, she is directed to the retailer's weekly circular web page. (Id.)
Cairo compiles information from retailers' weekly circular web pages, some of which are enabled by CMS. (Moss Declaration ¶¶ 3, 5.) Cairo collects sale information from retailers' web sites by means of computer programs variously referred to as "robots," "spiders," or "crawlers," which automatically visit retailers' web sites, record the relevant sales information from the retailers' weekly circular web pages, and then return that information to a database maintained by Cairo. (Moss Declaration ¶ 3.)
C. The Dispute
Within days after Cairo launched its web site in October 2004, CMS discovered by reviewing its server logs and by reviewing the Cairo site that Cairo was copying promotional materials from CMS's SmartCircular web pages and posting a version of those materials on the Cairo site. (Hand Declaration ¶ 10.) CMS alleges that Cairo's scraper program submits requests to the servers hosting CMS's web pages and in response, the servers provide a copy of the requested web pages to the scraper. (Id.) When users of the Cairo site search a particular product or brand, Cairo displays as the search results the promotional material it has copied from the CMS pages in the form of thumbnail images with accompanying text. (Id.) A user of the Cairo site who clicks on some of the thumbnail images or associated text links is connected to a CMS web page via a "deep link" where she will find a larger, searchable, interactive version of the image and text, created and displayed by CMS. (Id.)
The Ninth Circuit treats motions to dismiss pursuant to contractual forum selection clauses as motions under Rule 12(b)(3) for improper venue. See Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). Under the Supreme Court's standard for resolving motions to dismiss based on a forum selection clause, the pleadings are not accepted as true, as would be required under a Rule 12(b)(6) analysis, and the court may consider facts outside the pleadings.Id. If there are contested facts bearing on the enforceability of the forum selection clause, the court is obligated to draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party.Murphy v. Schneider National, Inc., 362 F.3d 1133, 1138 (9th Cir. 2004). If the facts asserted by the non-moving party are sufficient to preclude enforcement of a forum selection clause, the non-moving party survives a 12(b)(3) motion. Alternatively, if material facts are in dispute, the court may hold the motion in abeyance until a pre-trial evidentiary hearing resolves disputed facts. Id. at 1139.
The Supreme Court has held that forum selection clauses are "prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." M/S Bremen v. Zapata Offshore Co., 407 U.S. 1, 10 (1972). The party challenging the clause bears a "heavy burden of proof" and must "clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." Id., at 15. AlthoughBremen involved an international forum selection question, the Ninth Circuit has applied the principles announced in Bremen to the domestic context. See Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 279 (9th Cir. 1984).
As a preliminary matter, Cairo asserts that the question of whether a contract exists to bind Cairo to CMS's terms should not be resolved on a pleadings motion because Cairo would be required to prove its case on the merits prior to conducting any discovery. The Court agrees that the merits of any potential contractual dispute between the parties should be reserved for and decided by the trial court that will eventually preside over this case. However, strictly for purposes of Defendant's Motion to Dismiss, this Court has before it all facts necessary to resolve the issue of whether Cairo is bound by CMS's terms.
B. Cairo's Copyright and Trademark Claims are Dismissed as Encompassed by the Forum Selection Clause
Cairo argues that CMS's forum selection clause does not apply to Cairo's federal copyright claim nor to its federal and state trademark claims. Cairo is mistaken. Tort claims are covered by a forum selection clause if "resolution of the claims relates to interpretation of the contract." Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 (9th Cir. 1988). The copyright and trademark claims are based on the same events as the other claims set forth in Cairo's Complaint, and relate to the central conflict over whether CMS's terms were binding on Cairo in the first instance. Thus, to avoid duplication of litigation of claims arising out of the same facts, the Court finds that Cairo's copyright and trademark claims are within the scope of the forum selection clause and must be dismissed.
For the reasons set forth above, Defendant's Motion to Dismiss is GRANTED. All findings in this Order are made for the limited purpose of assessing whether venue in this Court is proper. Nothing in this Order is intended to address the merits of any claim, contractual or otherwise.