Tuesday, May 25, 2010

Custom Direct, LLC v. Wynwyn, Inc. (Maryland U.S.D.C.)

Filed: May 4, 2010.

Opinion by: Judge Richard D. Bennett.

Held: Reaffirming that a plaintiff who is a business competitor of a defendant is not a "consumer" with standing to bring a claim under the Maryland Deceptive Trade Practices Act, Md. Code Ann., Comm. Law § 13-301, et seq. ("MDTPA") and holding that the maintenance of a passive Internet website that merely makes information available to viewers located in Maryland who may be interested in it is insufficient to establish personal jurisdiction over a non-resident defendant.


Plaintiff is one of the top manufacturers and suppliers of business and personal checks in the United States. After Defendant’s contract to perform Internet marketing for Plaintiff expired, Plaintiff alleges, Defendant continued to use Plaintiff’s trademarks to attract customers to Plaintiff’s competitors. Accordingly, Plaintiff sued Defendant for trademark and copyright infringement under the Lanham Act and the Maryland Deceptive Trade Practices Act and for unfair competition under common law.

Plaintiff also brought claims against a co-defendant, who is a full-time college student, living in Minnesota, who is not an employee of Defendant, and who has never resided in Maryland. This Co-Defendant after the contract expired maintained a website that offers products that compete with Plaintiff. While under contract with Plaintiff, Co-Defendant directed from his website potential customers navigating on the web (including those residing in Maryland) to the Plaintiff’s website and he received referral fees for any successful transactions between Plaintiff and a referred internet user. The Co-Defendant did not sell anything to Maryland residents.


Initially, the Court determined that Plaintiff was not entitled to recover statutory copyright damages, enhanced or punitive damages and attorneys’ fees under the Copyright Act because Plaintiff’s copyright registration did not predate the date of first infringement.

Next, the Court held that Plaintiff lacked standing to bring a claim under the MDTPA. In particular, the Court reaffirmed the holding in Penn-Plax, Inc. v. Schultz, Inc., 988 F. Supp. 906 (D. Md. 1997), which rejected the argument made by the Plaintiff that the MDTPA’s definition of “person” gives corporate plaintiffs standing to sue under the MDTPA. Because the statute expressly limits standing to consumers, the MDTPA claim was dismissed.

The Court also dismissed all claims against the Co-Defendant for lack of personal jurisdiction. The Court held to exercise personal jurisdiction over a non-resident: two conditions had to be satisfied: (1) jurisdiction must be authorized under the State’s long-arm statute, and (2) the exercise of jurisdiction must comport with due process. In order to comport with due process, a non-resident Defendant must have sufficient “minimum contacts” with the forum state so that it “does not offend traditional notions of fair play and substantial justice” before a MD has personal jurisdiction over a non-resident.

To support jurisdiction, Plaintiff had to show that the Co-Defendant: “'(1) direct[ed] electronic activity into the State, (2) with the manifested intent of engaging in business or other interactions within the State, and (3) that activity create[d], in a person within the State, a potential cause of action cognizable in the State's courts.'” (quoting ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 714 (4th Cir. 2002)). Passive internet activity, which does little more than make information available to those who are interested in it, does not satisfy the first or second elements of the ALS Scan test.

Applying this rule, the Court found no evidence that the Co-Defendant’s website targeted customers in Maryland, or that it was anything but passive in nature. Because any commissions the Co-defendant made arose from a consumer purchasing goods from the Plaintiff after linking from the Defendant’s site to Plaintiff’s, the Defendant was doing nothing more than making information available to persons interested in it. The Co-Defendant had no active or direct relationships with any of Plaintiff's purchasers and had even signed an agreement with the Plaintiff that prohibited the Co-Defendant from engaging in any active relationship or exchanging information with visitors to the Co-defendant site. As a result, the Co-Defendant’s electronic "contacts" with Md residents were insufficient to support personal jurisdiction over the Co-Defendant in Maryland.

The full opinion is available in PDF.

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