July 25, 2011
LES Insights
Authored by D. Brian Kacedon and John C. Paul
Clickthrough agreements—often encountered when installing software downloaded from the internet or purchased on discs from software companies—typically set forth the rarely reviewed terms of use for software used by the general public. To avoid the inconvenience of being hauled into court in another state or a foreign country based on sales to customers in that state or country, software providers will often draft their clickthrough agreements to include forum selection clauses that specify the venue and jurisdiction for resolution of disputes arising in connection with the software or service provided.
In a recent decision in VS Technologies, LLC v. Twitter, Inc.,1 No. 2:11-cv-00043 (E.D. Va. June 28, 2011), the U.S. District Court for the Eastern District of Virginia found that one such forum selection clause in the clickthrough agreement for Twitter's social networking software did not dictate jurisdiction for patent disputes relating to Twitter. The court reasoned that the clause did not expressly contemplate federal jurisdiction and, therefore, did not extend to patent disputes involving Twitter's software. Furthermore, the court refused to establish a blanket rule permitting online service providers to limit the venue in patent litigations based on the acceptance of clickthrough agreements by employees of opposing corporate parties.
Dinesh Agarwal patented a method and system for creating an interactive social network and assigned the patent to his Virginia corporation, VS Technologies, LLC. In January 2011, VS filed a patent infringement suit against Twitter, Inc. in the U.S. District Court for the Eastern District of Virginia, alleging that Twitter's social networking software infringed the patent. In its motion for transfer, Twitter argued that VS was bound by Twitter's forum selection clause because Agarwal agreed to its terms when he created a Twitter account in January 2010. Twitter's forum selection clause designated the Northern District of California as the sole venue for claims arising in connection with Twitter's online services.
According to Twitter, Agarwal's patent infringement claims arose "in connection with Twitter's online service," and, thus, the forum selection clause should limit the venue for those claims. To support its argument, Twitter cited recent opinions from other districts holding that the forum selection clause at issue in those cases governed a plaintiff's patent infringement suit. Twitter also argued that its forum selection clause—which required that claims "be brought solely in San Francisco County, California"—invoked federal jurisdiction because a federal district court resides in San Francisco. Finally, Twitter argued that because the forum selection clause expressly provides for venue in "such courts" of San Francisco County, the presence of the plural term "courts" demonstrates that the forum selection clause contemplated both state and federal courts.
The court was not persuaded that the forum selection clause encompassed patent disputes in federal courts, reasoning that Twitter's clickthrough agreement controlled a Twitter customer's "access to and use of" Twitter's services and website, not related patent infringement claims. Distinguishing the cases relied on by Twitter, the court pointed out that the clauses at issue in those cases, unlike Twitter's forum selection clause, expressly contemplated federal jurisdiction. Therefore, because VS's patent infringement claims were not based on VS Technologies' or Agarwal's "access to and use of" Twitter's online services, those claims were outside the scope of the Twitter forum selection clause.
The court also refrained from setting precedent that the acceptance of an online service provider's clickthrough agreement by an employee of an opposing corporate party in patent litigation limited the venue for such litigation to the venues set forth in the agreement's forum selection clause. The court reasoned that such precedent would "potentially foster satellite litigation in every patent case involving a social networking participant." Highlighting the dangers of granting Twitter's motion, the court stated that if it decided that a social networking market participant can limit the forum in which it can be sued for patent infringement via Terms of Service governing "access to and use of" that social networking market participant's website and services, foreseeably, other District Courts in similar cases will be called upon to decide whether other plaintiff's employees ever agreed to online Terms of Service, whether those Terms of Service contained a forum selection clause, whether any such forum selection clause was enforceable, and . . . whether that forum selection clause contemplated coverage of patent infringement claims."
Venue remains a battleground for parties seeking to avoid litigation outside their home state. VS Technologies illustrates how standard forum selection clauses are not universally applicable and that expressly including specific situations in forum selection clauses may increase likelihood that those clauses would apply to a broader range of situations.
1 The VS Technologies decision: http://www.scribd.com/doc/59077723/VSTech-Twitter-Order-Denying-Transfer.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm’s clients.
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