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Knowledge Based Solutions, Inc. v. Dijk

United States District Court, E.D. Michigan, Southern Division

September 7, 2017

KNOWLEDGE BASED SOLUTIONS, INC., d/b/a GENWORKS, d/b/a GENWORKS INTERNATIONAL, d/b/a KBS INTERNATIONAL, Plaintiff,
v.
REINIER VAN DIJK, Defendant.

          OPINION AND ORDER GRANTING IN PART MOTION TO DISMISS [15]

          LAURIE J. MICHELSON U.S. DISTRICT JUDGE

         Plaintiff Knowledge Based Solutions, Inc., doing business as Genworks, is a Michigan-based software company. It formerly licensed its software to Delft University of Technology in the Netherlands. During the time it did so, Defendant Reiner Van Dijk was a graduate student at the university and used Genworks' software as part of his research. Pursuant to a non-disclosure, non-compete agreement, Van Dijk received confidential information about Genworks' proprietary software. Genworks claims that after obtaining this information, Van Dijk created competing software. It further alleges that Van Dijk's new company now licenses that software to TU Delft. Accordingly, Genworks filed suit asserting, among other claims, breach of contract, copyright infringement, misappropriation of trade secrets, and tortious interference with business relationships.

         Van Dijk, a Netherlands resident, seeks to have this case dismissed. He asserts lack of personal jurisdiction. In the alternative, Van Dijk says that this forum is too inconvenient and thus dismissal is warranted under the doctrine of forum non conveniens. In the second alternative, Van Dijk offers multiple reasons for dismissing all of Genworks' claims under Federal Rule of Civil Procedure 12(b)(6).

         While close, the Court believes that exercising personal jurisdiction comports with due process. And this forum is not too inconvenient. Further, save for one breach of contract claim and Genworks' U.S. copyright claim, Van Dijk has not persuaded the Court to dismiss Genworks' claims under Rule 12(b)(6). All of this is explained in detail below.

         I.

         A.

         Genworks is a small, Michigan software company. It has two full-time employees, one of which is David Cooper. (R. 16, PID 321.) Cooper is “primarily responsible for developing, marketing, and support[ing]” Genwork's software. (R. 13, PID 181.) Although small, Genworks has a subsidiary, Genworks B.V., located in Delft, Netherlands. (See R. 13, PID 169.)

         Genworks makes a knowledge-based engineering system. (R. 13, PID 181-82.) A user of knowledge-based engineering software can write object definitions in a high-level language and then the software will process those definitions into an application. (See R. 13, PID 149, 181.) The application might be, for example, a 3D modeling application for designing products. (R. 13, PID 181.) Genworks' knowledge-based engineering system is called the General-purpose Declarative Language software (“GDL Software”). (R. 13, PID 149.) Cooper is the software's creator. (R. 13, PID 181.) There are three versions of the GDL Software: an open-source version, a professional version, and an enterprise version. (R. 13, PID 149.)

         Users of the open-source version of the GDL Software are able to examine the source code, copy it, and write new software based on it-subject to certain conditions. (“‘Source code' is the part of software that most computer users don't ever see; it's the code computer programmers can manipulate to change how a piece of software-a ‘program' or ‘application'- works. Opensource.com, What is Open Source? https://opensource.com/ resources/what-open-source (last visited Aug. 29, 2017).) To be more specific, the open-source version of the GDL Software (“Open-Source GDL”) is covered by the GNU Affero General Public License v3 (“AGPL”), a “copyleft” license generally available to authors of software. Under the AGPL, a user is permitted to “convey a work based on” Open-Source GDL provided that, among other conditions, the user also licenses his software under the AGPL. (R. 13, PID 162.) Thus, in conveying a work based on Open-Source GDL, the user “may not impose any further restrictions on the exercise of the rights granted or affirmed under” the AGPL, including “impos[ing] a license fee, royalty, or other charge for exercise of rights granted under” the AGPL. (R. 13, PID 164.)

         The professional and enterprise versions of the GDL Software (collectively, “Proprietary GDL”) are covered by the Genworks Software License Agreement (“SLA”). (R. 13, PID 151.) It appears that users of Proprietary GDL do not have access to that software's source code. Indeed, paragraph 5.1(2) of the SLA prohibits copying and reverse engineering Proprietary GDL: “You may not: . . . alter, modify, translate, reverse engineer, decompile, disassemble, macroexpand, or copy (except for the program backup copy) the program or the accompanying documentation, or otherwise attempt to discover the internal workings or any Trade Secrets contained within the Software[.]” (R. 13, PID 152.)

         B.

         In 2009, Van Dijk began pursuing a Ph.D. from TU Delft in the Netherlands. (R. 14, PID 251.) Among other topics, Van Dijk conducted research in the field of knowledge-based engineering. (R. 14, PID 252.)

         As part of his research, Van Dijk used the GDL Software. (R. 15, PID 252.) Although TU Delft had paid Genworks for a license, Genworks maintains that all users of the GDL Software at the university had to check a box assenting to the SLA. (R. 13, PID 184.)

         In December 2010, Van Dijk signed (in the traditional sense) two contracts with Genworks or Genworks B.V.: the Genworks Non-Disclosure/Non-Compete Agreement (“Non-Compete Agreement”) and the Genworks Contributor Agreement (“Contributor Agreement”). According to Cooper, the Non-Compete Agreement gave Van Dijk access to the source code for Proprietary GDL. (R. 13, PID 184.) Under the Non-Compete Agreement, unless marked otherwise, “[a]ny information” Van Dijk received from Genworks was to be treated as proprietary, a trade secret, and covered by the agreement. (R. 13, PID 158.) The Non-Compete Agreement also prohibited Van Dijk from “using the Information in any manner or for any purpose which can be considered as competitive with Genworks, as determined by Genworks.” (Id.) Finally, under the Non-Compete Agreement, Van Dijk agreed to “contribute any useful results or derivations from the Information back to Genworks under the terms of the Genworks Contributor Agreement[.]” (Id.) The Contributor Agreement defined “contribution” to mean “any source code, object code, . . . or any other material posted or submitted by [Van Dijk] to a project” and required Van Dijk to assign Genworks joint ownership of any copyright in a “contribution.” (R. 13, PID 168.)

         In 2013, Van Dijk began developing what would later be known as ParaPy Software. (R. 15, PID 258.) Like GDL Software, ParaPy Software is a knowledge-based engineering system. (R. 15, PID 260.) But unlike GDL Software, which is primarily written in Lisp, ParaPy Software is primarily written in Python. (See R. 15, PID 260, 262.) Beyond that similarity and difference, the parties dispute how similar (or dissimilar depending on perspective) ParaPy Software is to GDL Software.

         Not long after Van Dijk had been “prototyping” what would later become ParaPy Software, Van Dijk received an email from his professor at TU Delft. (R. 15, PID 261.)According to Van Dijk's translation of that October 2013 email, his professor stated:

Today I e-mailed Dave Cooper to make an appointment for next week. I hinted that there are development in Delft that have an influence on the use of GDL by TU Delft. He called me 5 minutes later in a slight panic. I told him about the development of a new KBE language and the reason for being disappointed with GDL (emacs, bugs, expensive, lack of documentation, lousy IDE, etc.). He's currently a bit in shock, but I thought it was sincere to inform him about it.

(R. 15, PID 261.)

         In 2015, Van Dijk and Cooper attempted to collaborate to create the “next generation dual-technology platform (Lisp/Python), ” but the two did not “share the same vision.” (R. 15, PID 261.) Van Dijk says that Cooper then sent him a “legal memorandum” asserting copyright infringement. (R. 15, PID 262.) Van Dijk allegedly invited Cooper to come to the Netherlands to examine the code underlying ParaPy Software, but Cooper never did so. (Id.) According to Van Dijk, “For almost 1.5 years I didn't hear anything from Cooper.” (Id.)

         In April 2016, Van Dijk founded a company, ParaPy, with non-party Max Baan. (R. 15, PID 260.) The company consists of two entities: a holding company, ParaPy Holding B.V., and an operating company, ParaPy B.V. (Id.) “All intellectual property rights are owned by the holding company, not [Van Dijk] or anyone else individually.” (Id.)

         In August 2016, Cooper and Van Dijk ran into each other while rooming in the same house prior to an aerospace conference. According to Van Dijk, Cooper's conference presentation included “a preview of recent developments at Genworks to develop a KBE language in Python.” (R. 15, PID 263.) Van Dijk was “surprised to see this sudden and abrupt change after 15 years in Lisp.” (Id.) Shortly before Van Dijk's presentation, Cooper served Van Dijk with the present lawsuit. (R. 15, PID 263.)

         C.

         Genwork's amended complaint asserts seven counts (some with multiple claims). Genworks alleges that in creating or distributing ParaPy, Van Dijk breached provisions of the SLA, the Non-Compete Agreement, the Contributor Agreement, and the AGPL. (R. 13, PID 130-31.) As alternatives, Genworks claims that Van Dijk is liable under the doctrines of promissory estoppel and unjust enrichment. (R. 13, PID 131-33.) Genworks also brings claims under U.S. and Dutch copyright law. (R. 13, PID 134-37.) Genworks further asserts that Van Dijk violated Michigan's trade secrets act. (R. 13, PID 137-39.) Finally, Genworks says that Van Dijk has tortiously interfered with its business relationships. (R. 13, PID 139-40.)

         D.

         Van Dijk has moved to dismiss Genworks' amended complaint on several grounds. (R. 15.) First, Van Dijk says that this Court cannot, consistent with the Due Process Clause, require him to defend Genworks' claims in this forum. Van Dijk further argues that even if this Court could properly exercise personal jurisdiction over the claims in this case, the Netherlands is a more convenient forum. And, says Van Dijk, if dismissal under the doctrine of forum non conveniens is not proper, the Court should dismiss the amended complaint because Genworks has not stated a claim upon which relief may be granted.

         II.

         The Court begins with Van Dijk's personal-jurisdiction defense.

         “In deciding a motion to dismiss for lack of personal jurisdiction, the district court may rely upon the affidavits alone; it may permit discovery in aid of deciding the motion; or it may conduct an evidentiary hearing to resolve any apparent factual questions.” MAG IAS Holdings, Inc. v. Schmuckle, 854 F.3d 894, 899 (6th Cir. 2017). Here, the parties have submitted affidavits and have not asked for discovery or an evidentiary hearing. So this means that the Court must view the pleadings and affidavits in the light most favorable to Genworks and ignore Van Dijk's “controverting assertions.” Air Prod. & Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir. 2007). Further, given the absence of discovery or an evidentiary hearing, Genworks need only make a prima facie showing that this Court may exercise personal jurisdiction over each claim in this lawsuit. See MAG IAS Holdings, 854 F.3d at 899; Schneider v. Hardesty, 669 F.3d 693, 699 (6th Cir. 2012).

         The reference to “each claim in this lawsuit” is important. Genworks has not asserted that Van Dijk is subject to general jurisdiction in this forum. Instead, Genworks asserts specific jurisdiction. (See R. 16, PID 311-18.) But that means that for each claim asserted, personal jurisdiction over that claim is proper only if the claim arises from Van Dijk's contacts with Michigan. Air Products, 503 F.3d at 550. So personal jurisdiction must be analyzed on a claim-by-claim basis (which the parties failed to do). See SunCoke Energy Inc. v. MAN Ferrostaal Aktiengesellschaft, 563 F.3d 211, 217 (6th Cir. 2009) (White J., concurring) (agreeing with dissent that “personal jurisdiction must be proper as to each claim”); Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 1180 (9th Cir. 2004).

         Before examining each of Genworks' claims, one more point is important. Van Dijk makes no argument that he is beyond the reach of Michigan's long-arm statute. See Green v. Wilson, 565 N.W.2d 813, 816-17 (Mich. 1997) (indicating that Michigan's long-arm statute may not be coextensive with the Due Process Clause). Instead, Van Dijk only argues that requiring him to defend in this forum would violate the Due Process Clause. (See R. 15, PID 227-34.) A defendant can waive a personal-jurisdiction defense, so, for at least that reason, the Court will consider only the constitutional argument Van Dijk has presented.

         The Due Process Clause protects a defendant from having to litigate a claim in a forum that he would not “reasonably anticipate” having to do so. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985). In the Sixth Circuit, courts apply the following three-part test to decide whether the exercise of specific jurisdiction is consistent with due process:

First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.

AlixPartners, LLP v. Brewington, 836 F.3d 543, 549-50 (6th Cir. 2016). Courts sometimes refer to this as the Southern Machine test, see Air Products, 503 F.3d at 550, as that was apparently the first case to articulate the three-part inquiry, see Southern Machine Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968).

         A.

         The Court begins with Genworks' claims that Van Dijk violated the Non-Compete Agreement.

         1.

         If the Court were to focus only on the fact that Van Dijk signed the Non-Compete Agreement, it would not find that Van Dijk purposefully availed himself to the benefits of Michigan. As the Supreme Court has explained, “If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985). This rule applies with particular force here because the Non-Compete Agreement might well have been between Van Dijk and Genworks' subsidiary in the Netherlands. (See R. 13, PID 158 (“This agreement is made and entered into between Genworks International or its local subsidiary . . . . To deliver these terms to us [from Europe], please send . . . to Genworks BV” (emphasis added)).)

         But “a contract is ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.” Burger King, 471 U.S. at 479 (internal quotation marks omitted). Thus, in assessing purposeful availment, courts are to focus on “prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing.” Id.

         An examination of “the real object of the business transaction” suggests personal availment. Reading the Non-Compete Agreement in the light most favorable to Genworks, Genworks and Van Dijk contemplated an ongoing relationship. As stated in the agreement: “Recipient has indicated a desire to receive confidential, proprietary, and/or trade-secret data or information (‘the Information') from Genworks in order to enable Recipient's enhanced use of the GDL KBE development environment.” (R. 13, PID 158.) And it is reasonable to infer that the parties in fact had an ongoing relationship. According to Cooper, Van Dijk was given source code for Proprietary GDL only because he signed the Non-Compete Agreement. (R. 13, PID 184.) Cooper also avers, “In reliance upon Defendant's acceptance of the terms set forth in the SLA, [Non-Compete Agreement], [Contributor Agreement], and AGPL, the Defendant and I engaged each other in numerous communications.” (R. 13, PID 192.) Cooper suggests that some of these communications were about Proprietary GDL: “[Van Dijk] made heavy use of the Proprietary GDL. This conclusion is supported by the fact that many of his communications referenced the SMLib geometry kernel which was only available in the Proprietary GDL.” (R.13, PID 188.) Moreover, the record strongly suggests that Van Dijk was well aware that Cooper resided in Michigan when they discussed GDL Software.

         Viewing all of this in the light most favorable to Genworks, Van Dijk repeatedly tapped a source of confidential information that he knew was located in Michigan. And, under the Non-Compete Agreement, each time Van Dijk did so, he was obliged to keep the information secret and not use it to compete with Genworks. This suggests that personal jurisdiction over Genworks' claims that Van Dijk breached the Non-Compete Agreement is proper. See Burger King, 471 U.S. at 475-76 (“[W]here the defendant ‘deliberately' . . . has created ‘continuing obligations' between himself and residents of the forum, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by ‘the benefits and protections' of the forum's laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well.” (citations omitted)); SunCoke Energy Inc. v. MAN Ferrostaal Aktiengesellschaft, 563 F.3d 211, 218 (6th Cir. 2009) (White, J., concurring) (“By the very terms of the agreement, defendant knew it was contracting with a company in Tennessee, understood the value of the confidential information to this Tennessee company, and anticipated a course of dealing that would involve accessing information located in Tennessee, protecting that information for the benefit of a Tennessee company, and returning the information to Tennessee.”).

         One other fact also favors a finding of purposeful availment: the Non-Compete Agreement included a choice-of-law provision that gave Van Dijk some warning that Genworks might sue him in Michigan: “These terms will be governed by the laws of the State of Michigan, USA, or Dutch Law as applied in The Netherlands, according to the preference of Genworks on a per-case basis” (R. 13, PID 158 (emphasis added)). See Burger King, 471 U.S. at 482 (finding Florida choice-of-law provision “reinforced” the defendant's “deliberate affiliation with [Florida] and the reasonable foreseeability of possible litigation there”).

         In short, without knowing more about the “quality” of Van Dijk's communications with Cooper, MAG IAS Holdings, 854 F.3d at 901, and having to draw reasonable inferences in Genworks' favor, the Court narrowly finds that Genworks has made a prima facie showing that Van Dijk purposefully availed himself of a Michigan resource.

         Van Dijk argues that there was no purposeful availment because it was Cooper who “demand[ed]” that he sign the Non-Compete Agreement. (See R. 20, PID 363.) While Cooper may have required Van Dijk to sign the agreement, the inference this Court must draw is that Copper made that demand because, as the Non-Compete Agreement says, “[Van Dijk] indicated a desire to receive confidential, proprietary, and/or trade-secret data or information . . . from Genworks.” Thus, it is fair to infer that it was Van Dijk's interest in Genworks that led to the Non-Compete Agreement, i.e., that Van Dijk sought out an ongoing relationship with a Michigan company. See Burger King, 471 U.S. at 473 (“[W]e have emphasized that parties who ‘reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State for the consequences of their activities.”).

         Van Dijk also claims that this case is “on all fours” with International Technologies Consultants, Inc. v. Euroglas S.A., 107 F.3d 386 (6th Cir. 1997). There, a Michigan company had negotiated a contract with a Swiss company to design a European glass factory. Id. at 389, 394. When the Swiss company terminated the parties' agreement, the Michigan company sought the return of the proprietary plans that it had developed. Id. at 390. The Swiss company declined, and the Michigan company sued in a federal court in Michigan. Id. at 387, 390. The Sixth Circuit found that requiring the Swiss company to defend a lawsuit in Michigan would not comport with due process. Id. at 394, 396.

         There are material differences between the facts of Euroglas and the facts of this case. Most significantly, the contract in Euroglas included a provision that “placed ‘[j]urisdiction for [the] contract [in] Berne, Switzerland.'” Id. at 393. The Sixth Circuit relied heavily on this fact. It explained, “having agreed that jurisdiction for the contract should be Berne, Switzerland, the plaintiff's current preference for Michigan merits relatively little weight.” Id. at 394. And in considering Michigan's interest in the litigation, the Court again referenced the jurisdiction provision: “it is far from clear how well the interests of Michigan would be served by telling foreign purchasers of goods and services that if they sign a contract with a corporation domiciled in Michigan, they run the risk of being haled into court in that state even if the contract provides for jurisdiction elsewhere.” Id. Indeed, it appears that the jurisdiction provision, coupled with the defendants' presence outside the United States, is what drove the Sixth Circuit's analysis: only after concluding that it would be unreasonable to require the defendants to litigate in Michigan did the Court turn to the question of purposeful availment. See Id. at 394. Here, there is no forum-selection clause. But there is a choice-of-law provision. And that provision favors a finding of minimum contacts.

         Van Dijk also relies on Euroglas and Calphalon Corp. v. Rowlette, 228 F.3d 718 (6th Cir. 2000), to argue that his contacts with Michigan were not purposeful but happenstance. (R. 15, PID 232.) In Euroglas, the Court thought that the European defendants' communications with the Michigan company via “letter, telephone, and facsimile” did not amount to purposeful availment. See 107 F.3d at 395. The Court explained: “Such communications have no talismanic qualities and the only reason the communications in question here were directed to Michigan was that [the plaintiff] found it convenient to be present there.” Id. From the defendants' perspective, said the Court, “it was purely fortuitous that [the plaintiff] happened to have a Michigan address.” Id.

         The reasoning of Calphalon is similar. There, Calphalon, an Ohio corporation, sued Rowlette, its sales representative for a region around South Dakota, in an Ohio court (Calphalon wanted a declaration that it did not owe commissions). 228 F.3d at 720-21. Rowlette had communicated with Calphalon via “telephone, fax, and mail” and had made at ...


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