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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
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`BIG GUY’S PINBALL, LLC,
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`Plaintiff,
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`Case No. 14-CV-14185
`Hon. Victoria A. Roberts
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`v.
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`JIMMY LIPHAM,
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`Defendant.
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`_______________________________/
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`ORDER DENYING MOTION TO DISMISS FOR LACK OF PERSONAL
`JURISDICTION, DENYING MOTION TO DISMISS FOR IMPROPER VENUE,
`DENYING MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM, AND
`DENYING MOTION TO TRANSFER VENUE (DOC. #20)
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`I.
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`BACKGROUND
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`Plaintiff Big Guy’s Pinball, LLC (“BGP”), a limited liability company incorporated in
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`and with its principal place of business in Michigan, brought this action against Defendant
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`Jimmy Lipham (“Lipham”), a resident of Georgia, for copyright infringement and unfair
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`competition (Count I), violation of the Michigan Uniform Trade Secrets Act, M.C.L. 445.1901 et
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`seq. (Count II), and tortious interference with business relationships and/or business expectations
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`(Count III).
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`Lipham moved to dismiss for: (1) lack of personal jurisdiction; (2) improper venue; and
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`(3) failure to state a claim upon which relief can be granted. In the alternative, he moved to
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`transfer venue. Lipham’s motions to dismiss and to transfer venue are based on his out-of-state
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`defendant status. Lipham’s motion to dismiss for failure to state a claim rests on his contention
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`that BGP violated the GNU General Public License (“GPL”) which governs the usage of Free
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`Software, a “collaborative ecosystem based on principles of reciprocity.” Lipham argues that
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`1
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`2:14-cv-14185-VAR-RSW Doc # 40 Filed 07/10/15 Pg 2 of 11 Pg ID 481
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`because BGP did not follow the requirements of the GPL, he did nothing wrong by uploading the
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`modified software. He requests that the Court recognize an equitable defense to the copyright
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`infringement allegations under this “novel” theory. BGP opposes all of Lipham’s motions. Oral
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`argument was heard on July 8th, 2015.
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`The Court finds that it may exercise personal jurisdiction over Lipham under Michigan’s
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`long-arm statute and that the exercise of personal jurisdiction does not violate federal due
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`process. Venue is proper, because Lipham is subject to personal jurisdiction in this forum. And,
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`the Court declines to transfer venue to the Northern District of Georgia; Lipham does not meet
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`his burden to overcome the substantial deference given to BGP’s choice of forum. Lastly, BGP’s
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`claim will not be dismissed for failure to state a claim upon which relief can be granted. BGP
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`does state a proper claim, and this Court cannot consider the merit of Lipham’s equitable defense
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`argument.
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`A.
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`STATEMENT OF FACTS
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`BGP holds a copyright in proprietary software known as “Nucore,” which emulates the
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`functions of obsolete hardware used in Pinball 2000 pinball games. BGP first published Nucore
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`for public download in March 2009 via its website and sold the software both on optical compact
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`disks and as downloadable files.
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`In July 2013, digital copies of Nucore were downloaded from BGP’s website by an
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`internet user with an IP address identified as belonging to Lipham. A security file stored within
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`Nucore recorded the user’s entries. BGP alleges that Lipham downloaded Nucore, removed the
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`security keys that prevented unauthorized sharing, and uploaded a modified version of Nucore
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`under the name of “Pinbox” to his own website called “PlayPinBox.com.” The Nucore
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`2
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`2:14-cv-14185-VAR-RSW Doc # 40 Filed 07/10/15 Pg 3 of 11 Pg ID 482
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`alternative was available for free download. BGP obtained subpoenas which revealed Lipham to
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`be both the IP address user and the website domain owner.
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`II.
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`ANALYSIS
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`A. THIS COURT MAY EXERCISE LIMITED PERSONAL JURISDICTION
`OVER LIPHAM, AND THE EXERCISE DOES NOT VIOLATE THE DUE
`PROCESS CLAUSE OF THE UNITED STATES CONSTITUTION.
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`To avoid dismissal where there has been no evidentiary hearing, a plaintiff must only
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`present a prima facie case for jurisdiction. Audi AG & Volkswagen of Am., Inc. v. D'Amato, 341
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`F. Supp. 2d 734, 741 (E.D. Mich. 2004). The Court must consider all affidavits and pleadings in
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`the light most favorable to the plaintiffs and not weigh the assertions of the party seeking
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`dismissal. Id. The Court may exercise personal jurisdiction over a defendant if both the
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`defendant is subject to service of process under Michigan’s long-arm statute and the exercise of
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`jurisdiction would not deny the defendant due process. Michigan Coal. of Radioactive Material
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`Users, Inc. v. Griepentrog, 954 F.2d 1174, 1176 (6th Cir. 1992). Because Michigan’s long-arm
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`statute, M.C.L. § 600.705, extends to the limits of federal due process, this Court must determine
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`only whether the exercise of personal jurisdiction over Lipham would violate Lipham’s due
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`process rights. Id.
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`Due process requires the plaintiff to establish that the defendant has minimum contacts
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`with the forum state sufficient to comport with “traditional notions of fair play and substantial
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`justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).
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`The Sixth Circuit sets forth three criteria that must be met for a court to exercise personal
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`jurisdiction over a non-resident defendant:
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`First, the defendant must purposefully avail himself of the privilege of acting in the
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`forum state or causing a consequence in the forum state. Second, the cause of action must
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`3
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`2:14-cv-14185-VAR-RSW Doc # 40 Filed 07/10/15 Pg 4 of 11 Pg ID 483
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`arise from the defendant's activities there. Finally, the acts of the defendant or
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`consequences caused by the defendant must have a substantial enough connection with
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`the forum state to make the exercise of jurisdiction over the defendant reasonable.
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`341 F. Supp. 2d at 742 (quoting Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 150 (6th
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`Cir.1997)).
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`1. LIPHAM PURPOSEFULLY AVAILED HIMSELF OF CAUSING
`CONSEQUENCES IN MICHIGAN.
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`The “purposeful availment” requirement protects a defendant from being forced to
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`litigate in a forum due to “‘random,’ ‘fortuitous’ or ‘attenuated’” contacts. Burger King Corp. v.
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`Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528 (1985). The defendant’s
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`conduct and connection with the forum state must be of the nature that the defendant could
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`reasonably anticipate being sued in that forum. Id. at 474. “Purposeful availment” is satisfied
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`when a defendant deliberately engages in conduct that can be “properly regarded as a prime
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`generating cause of the effects resulting in Michigan.” 341 F. Supp. 2d at 742. Lipham’s
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`deliberate actions aimed at Michigan-based BGP amounted to an intentional tort, which satisfies
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`the purposeful availment requirement under the “effects test” that the Supreme Court adopted in
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`Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984).
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`a. THE “EFFECTS TEST”
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`In Calder, the Court held that a valid basis for personal jurisdiction over an out-of-state
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`defendant existed on the theory that the defendants intended to, and did, cause tortious injury to
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`the plaintiff in the forum state, even though the defendants did not have sufficient minimum
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`contacts with the forum state. Id. at 788-89. For the “effects test” to apply, BGP must show that
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`(1) BGP felt the brunt of the injury in Michigan, (2) Lipham used BGP’s copyrighted material
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`4
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`2:14-cv-14185-VAR-RSW Doc # 40 Filed 07/10/15 Pg 5 of 11 Pg ID 484
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`intentionally or deliberately, and (3) Lipham expressly aimed his actions at Michigan. Ford
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`Motor Co. v. Great Domains, Inc., 141 F. Supp. 2d 763, 774 (E.D. Mich. 2001).
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`The facts that BGP alleges, which the Court must accept as true, satisfy the elements
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`required for application of the “effects test.” First, BGP demonstrates that it felt the brunt of the
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`injury resulting from Lipham’s actions in Michigan. BGP is incorporated in Michigan and has its
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`primary place of business in Michigan. Naturally, Michigan is the state in which BGP has felt the
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`copyright infringement.
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`Second, BGP alleges that Lipham deliberately and intentionally downloaded Nucore and
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`uploaded a modified version of the software available for free download on his website. Lipham
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`argues that he never intended to infringe on BGP’s copyright, but his argument rests on a theory
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`that there should be an equitable defense to actions which otherwise constitute copyright
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`infringement. Since the merit of Lipham’s equitable defense argument cannot be considered at
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`this stage, BGP satisfies its requirement to show that Lipham’s actions were deliberate or
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`intentional.
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`Third, BGP has shown that Lipham’s acts were expressly aimed at Michigan. Lipham’s
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`deliberate actions resulting in copyright infringement were expressly aimed at BGP, a Michigan-
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`based corporation that has its headquarters in Michigan. Two of BGP’s co-founders also reside
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`in Michigan. Whether Lipham had actual knowledge that BGP was located in Michigan does not
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`matter. If Lipham was ignorant of this fact, that ignorance does not protect him from litigating in
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`the state where he caused consequences resulting in tortious injury. Taking BGP’s allegations as
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`true, Lipham could have reasonably anticipated being sued in Michigan. Having shown that the
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`“effects test” applies, the “purposeful availment” requirement is satisfied.
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`5
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`2. THE CAUSE OF ACTION ARISES FROM LIPHAM’S FORUM-
`RELATED ACTIVITIES.
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`The second criterion regarding exercising personal jurisdiction over an out-of-state
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`defendant is whether the cause of action arises from the defendant’s forum-related activities.
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`BGP is suing Lipham for copyright infringement and unfair competition (Count I), violation of
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`the Michigan Uniform Trade Secrets Act, M.C.L. 445.1901 et seq. (Count II), and tortious
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`interference with business relationships and/or business expectances (Count III). These claims
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`center around Lipham’s alleged infringement of BGP’s copyright. Taking BGP’s allegations as
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`true, Lipham took deliberate actions that resulted in tortious injury to BGP in Michigan.
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`Therefore, this cause of action arises from Lipham’s forum-related activities.
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`3. EXERCISE OF PERSONAL JURISDICTION OVER LIPHAM IS
`REASONABLE.
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`When the first two criteria for a prima facie case are met, an inference arises that
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`exercising personal jurisdiction over the defendant is reasonable. CompuServe, Inc. v. Patterson,
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`89 F.3d 1257, 1268 (6th Cir. 1996). But, this Court must still consider several factors when
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`determining the reasonableness of exercising jurisdiction, namely “the burden on the defendant,
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`the interest of the forum state, the plaintiff's interest in obtaining relief, and the interest of other
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`states in securing the most efficient resolution of controversies.’” Id. (citing American Greetings
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`Corp., 839 F.2d at 1169–70). In Audi AG & Volkswagen of Am., Inc. v. D'Amato, the Court
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`found that the plaintiff’s interest in obtaining relief, coupled with Michigan’s interest in
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`protecting companies that principally reside in Michigan from trademark infringement,
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`significantly outweighed whatever burden the defendant faced. 341 F. Supp. 2d at 748. Certainly,
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`Michigan’s interest in protecting Michigan-based companies from copyright infringement is as
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`compelling as its interest in protecting them from trademark infringement. And, BGP
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`6
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`demonstrates a strong interest in obtaining relief. Balancing these two interests against Lipham’s
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`interest in avoiding inconvenience, the Court concludes that the exercise of personal jurisdiction
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`over Lipham is reasonable.
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`The three criteria established by the Sixth Circuit for exercising personal jurisdiction over
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`an out-of-state defendant have been met.
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`B. VENUE IS PROPER IN MICHIGAN.
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`Lipham argues that BGP’s claims should be dismissed for improper venue under Rule
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`12(b)(3). Venue in copyright infringement cases is proper in any district in which the defendant
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`is subject to personal jurisdiction. And venue will not be transferred, because Lipham does not
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`meet his burden to overcome the substantial deference to BGP’s choice of forum.
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`Venue for copyright infringement claims is governed by 28 U.S.C. § 1400(a), which
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`states:
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`Civil actions, suits, or proceedings arising under any Act of Congress relating to
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`copyrights or exclusive rights in mask works or designs may be instituted in the district in
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`which the defendant or his agent resides or may be found.
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`28 U.S.C. § 1400(a). The general rule of construction of § 1400(a) is that a defendant “may be
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`found” in any district where he is subject to personal jurisdiction. Brink v. Ecologic, Inc., 987 F.
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`Supp. 958, 965 (E.D. Mich. 1997). Lipham argues that this interpretation only applies to
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`corporations, citing Blue Compass Corp. v. Polish Masters of Am., 777 F. Supp. 4 (D. Vt. 1991)
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`as precedent. But § 1400(a) does not distinguish between corporate and non-corporate
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`defendants. Further, Blue Compass appears to be the single case that makes this distinction
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`among the vast majority of decisions holding that a defendant “may be found” in any district in
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`which he is subject to personal jurisdiction. Quality Improvement Consultants, Inc. v. Williams,
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`7
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`2:14-cv-14185-VAR-RSW Doc # 40 Filed 07/10/15 Pg 8 of 11 Pg ID 487
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`No. CIV.02-3994(JEL/JGL), 2003 WL 543393, at *7-8 (D. Minn. Feb. 24, 2003). Lipham is
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`subject to personal jurisdiction in the Eastern District of Michigan. Therefore, applying the well-
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`established rule of construction of § 1400(a), Lipham may be “found” in the Eastern District of
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`Michigan; venue is proper.
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`1. LIPHAM DOES NOT MEET HIS BURDEN TO OVERCOME THE
`SUBSTANTIAL DEFERENCE GIVEN TO BGP’S CHOICE OF
`FORUM. ACCORDINGLY, VENUE WILL NOT BE TRANSFERRED.
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`In the alternative, Lipham argues that venue should be transferred to the Northern District
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`of Georgia for the convenience of the parties and witnesses under 28 U.S.C. § 1404(a). District
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`courts have wide discretion to transfer an action under § 1404(a) in order to “prevent waste of
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`time, energy and money, and to protect litigants, witnesses and the public against unnecessary
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`inconvenience and expense.” Helder v. Hitachi Power Tools, USA Ltd., 764 F.Supp. 93, 95–96
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`(E.D.Mich.1991) (citing Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945
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`(1964)). § 1404(a) provides that “[f]or the convenience of parties and witnesses, in the interest of
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`justice, a district court may transfer any civil action to any other district or division where it
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`might have been brought.” The movant bears the burden to demonstrate by a preponderance of
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`the evidence that “fairness and practicality strongly favor the forum to which transfer is sought.”
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`Id. (citing Thomas v. Home Depot, U.S.A., Inc., 131 F.Supp.2d 934, 936 (E.D.Mich.2001).
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`This action could have been brought in Lipham’s proposed venue, because Lipham
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`resides in the Northern District of Georgia. Therefore, to determine whether a transfer of venue
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`is appropriate, the Court considers the following factors: (1) the convenience of the parties; (2)
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`the convenience of the witnesses; (3) the relative ease of access to sources of proof; (4) the
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`availability of process to compel attendance of unwilling witnesses; (5) the cost of obtaining
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`willing witnesses; (6) the practical problems associated with trying the case most expeditiously
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`and inexpensively; and (7) the interest of justice. Thomas v. Home Depot, U.S.A., Inc., 131 F.
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`Supp. 2d 934, 936 (E.D. Mich. 2001). Because the evidence in this case is documentary and can
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`easily be stored and transported electronically, the factors that are most pertinent are those
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`related to the convenience of the parties and witnesses.
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`Courts must give a plaintiff's choice of forum substantial deference. 341 F. Supp. 2d at
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`749. In Audi AG & Volkswagen of Am., Inc. v. D'Amato, the court found that the plaintiffs’
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`choice of forum in the Eastern District of Michigan was entitled to substantial deference because
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`the plaintiffs principally resided in the district and had substantial connections to the district. Id.
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`at 750. Similarly, the two co-founders of BGP principally reside in the Eastern District of
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`Michigan and therefore have substantial connections to the forum. And, a state generally has a
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`“manifest interest” in providing its residents with a convenient forum for redressing injuries
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`inflicted by out-of-state actors. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 105 S. Ct.
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`2174, 2182, 85 L. Ed. 2d 528 (1985).
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`While Lipham contends that Michigan is an inconvenient venue, he does not show that it
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`would be more inconvenient for him to litigate in Michigan than it would be for BGP to litigate
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`in Georgia. Lipham merely states that travel from Georgia to Michigan “is not convenient” for
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`him. The Court will not transfer venue if the result is “simply to shift the inconvenience from one
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`party to another.” Audi AG & Volkswagen of Am., Inc. v. Izumi, 204 F. Supp. 2d 1014, 1023
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`(E.D. Mich. 2002).
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` Lipham also argues that venue should be transferred to Georgia for the convenience of a
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`key witness, Mr. Steve Ellenoff, the third co-founder of BGP who resides in Georgia. Witnesses'
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`convenience is “one of the most important factors in determining whether to grant a motion to
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`change venue under § 1404(a).” 341 F. Supp. 2d at 750. Lipham did not identify Mr. Ellenoff as
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`a witness in his original motion but only addressed him as a potential witness in his reply brief.
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`Lipham does not assert definitive plans to call Mr. Ellenoff as a witness and fails to specify what
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`the subject matter of Mr. Ellenoff’s testimony would be. Lipham does not cite concerns over
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`costs or other practical difficulties in compelling Mr. Ellenoff to give testimony; he merely
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`concludes that a Georgia venue is “[o]bviously…more convenient” because Mr. Ellenoff resides
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`there. The two co-founders of BGP who plan to testify reside in Michigan and would find the
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`Eastern District of Michigan more convenient. Therefore, both parties can point to convenience
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`of witnesses as a reason to choose one venue or the other. Lipham does not meet the burden to
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`show by a preponderance of the evidence that fairness and practicality strongly favor a Georgia
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`venue. In light of both BGP’s connections to the forum and Michigan’s interest in protecting
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`Michigan-based companies from tortious injury, transfer of venue is not appropriate.
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`C. BGP STATES A CLAIM FOR WHICH RELIEF MAY BE GRANTED.
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`Lipham argues that BGP’s claim should be dismissed for failure to state a claim for
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`which relief can be granted under Fed. R. Civ. P. 12(b)(6). The purpose of a motion under Fed.
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`R. Civ. P. 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is
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`entitled to legal relief even if everything alleged in the complaint is true. Mayer v. Mylod, 988
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`F.2d 635, 638 (6th Cir. 1993) (citing Nishiyama v. Dickson County, Tennessee, 814 F.2d 277,
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`279 (6th Cir.1987)). But Lipham does not attack the legal sufficiency of BGP’s complaint.
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`Rather, his argument rests on his theory that BGP’s violation of the GPL provides an equitable
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`defense to his actions that otherwise constitute copyright infringement.
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`The Court cannot consider the merit of Lipham’s argument, since BGP only has to state a
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`claim for which relief can be granted at this stage. BGP claims that Lipham committed copyright
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`infringement in violation of 17 U.S.C. § 101 et seq.To state a claim under 17 U.S.C. § 101 et
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`seq., a plaintiff must allege that the defendant violated at least one of the five exclusive rights
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`granted to copyright holders under 17 U.S.C. § 106. 17 U.S.C.A. § 501 (West 2002). BGP has
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`specifically alleged that Lipham violated BGP’s copyright by downloading a copy of Nucore,
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`creating a derivative program that was essentially an exact copy of Nucore, and uploading the
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`derivative program to his website in order to distribute it freely to any Internet user. Therefore,
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`BGP has alleged that Lipham violated at least the exclusive right to “prepare derivative works
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`based upon the copyrighted work.” 17 U.S.C.A. § 106 (West 2002). BGP properly states a claim
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`for which relief may be granted.
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`III. CONCLUSION
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`Lipham is subject to personal jurisdiction in the Eastern District of Michigan. It follows
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`that venue is proper. Venue should not be transferred, because Lipham does not meet the burden
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`to demonstrate that fairness and practicality strongly favor transfer. Lastly, Lipham’s motion to
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`dismiss for failure to state a claim is unfounded.
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`The Court DENIES all of Lipham’s motions.
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`IT IS ORDERED.
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`S/Victoria A. Roberts
`Victoria A. Roberts
`United States District Judge
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`Dated: July 10, 2015
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`The undersigned certifies that a copy of this
`document was served on the attorneys of record
`by electronic means or U.S. Mail on July 10,
`2015.
`s/Linda Vertriest
`Deputy Clerk
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`11