14 November 2000. Thanks to Derek Fawcus.

See related files: http://cryptome.org/cryptout.htm#DVD-DeCSS

PATRICK J. WOOD, ESQ.; SBN 191403
McGLASHAN & SARRAIL
Professional Corporation
177 Bovet Road, Sixth Floor
San Mateo, CA 94402
Telephone: (650) 341-2585
Fax: (650) 341-1395

Attorneys for Defendant
DEREK FAWCUS

Defendant DEREK FAWCUS (hereafter "FAWCUS") hereby submits this Memorandum of Points and Authorities in Support of his Motion to Quash Service of Summons for Lack of Personal Jurisdiction.

Defendant FAWCUS is a foreign national residing in Scotland who is alleged to have republished the misappropriated trade secrets of two Japanese companies. Jurisdiction cannot properly be asserted by a California court over this Defendant. Any attempt to assert California's jurisdiction over FAWCUS will greatly expand the "effects" doctrine as a method to assert specific jurisdiction over an individual. The injury alleged by Plaintiff in its Complaint occurred in Japan, not California. A Japanese company was the sole licensing authority to license the DVD encryption software "CSS" during the period in which the acts alleged in the Complaint occurred. Plaintiff did not obtain the right to license CSS until after the alleged damage of this case had already occurred. Then, only two weeks after Plaintiff obtained the right to license DVD software and began its licensing operation from Morgan Hill, California, it filed this lawsuit relating to alleged damages occurring while the licensing authority (and ownership of CSS) firmly resided in Japan. This is a case of a plaintiff's attempt to manufacture jurisdiction over a defendant with no relation to the State of California.

A. Nature of Action

This is a First Amendment case where the Plaintiff, DVD CCA, a California trade association currently licensing DVD products, seeks to enjoin up to 500 Defendants from republishing a piece of computer code identified as DeCSS.

Plaintiff claims that it is entitled to restrain Defendants' right to republish speech by alleging that the code, DeCSS, is a misappropriated trade secret. Plaintiff speculates that an individual named Jon Johanson authored DeCSS by misappropriating trade secrets and that the other Defendants subsequently republished DeCSS with actual or constructive knowledge that DeCSS contained misappropriated trade secrets. Plaintiff makes no specific allegation in the Complaint concerning this Defendant. FAWCUS' only mention in the pleadings is as "DOE 73." Other "DOE" defendants are linked by Plaintiff to specific web pages or other alleged conduct. However, no such specific allegation is plead as to FAWCUS.

B. Summary of Facts Relating to Jurisdiction

Plaintiff DVD CCA is a Delaware corporation with offices located in Morgan Hill, California (Complaint 4). Plaintiff is the sole licensing entity which grants licenses to CSS, a technology used to encrypt DVDs (Complaint 44). Plaintiff took over the licensing of CSS in "mid-December 1999" (Complaint 44) from the previous sole licensing entity granting licensing to CSS, Matsushita Industrial Co., Ltd. (hereafter "Matsushita") (Plaintiff's Declaration of John J. Hoy in Support of Plaintiff's Application for Temporary Restraining Order, 10) ("hereafter Hoy Declaration).

CSS was developed by Toshiba Corporation (hereafter "Toshiba") and Matsushita, both Japanese corporations with their principal places of business located in Japan (Fawcus Declaration 3). Matsushita operated as the sole licensing entity for CSS during October 1996 through "mid-December" 1999 solely through a contact in Osaka, Japan (Fawcus Declaration 4,5) .

FAWCUS is a foreign national. (Fawcus Declaration 1). He is a British citizen residing in Edinburgh, Scotland. (Fawcus Declaration 1). He has never solicited business in California, designated a registered agent for service of process in California, maintained a place of business in California, maintained a telephone listing in California, maintained a bank account in California, or even visited the State of California for any reason. (Fawcus Declaration 2).

FAWCUS has no jurisdictional connection with the State of California, or the United States for that matter.

The Complaint alleges that FAWCUS, a Scotsman, compromised the proprietary CSS information of Toshiba and Matsushita, two Japanese Companies, during a time when all CSS licensing was done through a contact in Osaka, Japan. There is simply no connection with the State of California. Any facade that FAWCUS has a connection with the State of California has been manufactured by Plaintiff, in an curious form of personal jurisdiction forum shopping.

The due process clause of the Fourteenth Amendment prohibits state courts from exercising jurisdiction over an individual with which the state has no contacts, ties, or relations. World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 294.

The general rule governing personal jurisdiction is that for a state to exercise personal jurisdiction over a nonresident defendant, the defendant must have certain minimum contacts with the forum state such that maintenance of the suit does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington (1945) 326 U.S. 310, 316; see Jewish Defense Organization, Inc. v. Superior Court (1999) 72 Cal.App.4th 1045, 1054.

The constitutional touchstone of the determination whether an exercise of personal jurisdiction comports with due process is whether the defendant purposefully established minimum contacts in the forum state. Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 474; see World-Wide Volkswagen Corp. 444 U.S. at 291.

There are two types of jurisdiction over the person, general and special. Cornelison v. Chaney (1976) 16 Cal.3d 143, 147-48; Brown v. Watson (1989) 207 Cal.App.3d 1306, 1312. As is demonstrated below, the courts of the State of California cannot properly assert either general or specific jurisdiction over FAWCUS.

A. This Court Lacks General Jurisdiction Over FAWCUS.

In order to establish general jurisdiction over a non-resident defendant, a plaintiff must, at a minimum, demonstrate that the nonresident defendant has engaged in commercial activities impacting California on a "substantial, continuous and systematic" basis. Perkins v. Benguet Mining Consolidated Mining Co., (1952) 342 U.S. 437, 446-47; Cornelison 16 Cal.3d at 147.

FAWCUS is a foreign national. He is a British citizen residing in Edinburgh, Scotland. He has never solicited business in California, designated a registered agent for service of process in California, maintained a place of business in California, maintained a telephone listing in California, maintained a bank account in California, or even visited the State of California for any reason. Therefore, there is no basis to support this Court exerting general jurisdiction over FAWCUS.

With general jurisdiction lacking, the Court can only exert jurisdiction over FAWCUS if it finds that FAWCUS' activities give rise to specific jurisdiction.

B. This Court Lacks Specific Jurisdiction Over FAWCUS.

The California Supreme Court has adopted a three-part test to determine whether specific jurisdiction exists over a defendant in a particular matter. First, the defendant must have purposefully availed himself of the forum's benefits by establishing contacts with the forum state. Second, the claims must arise out of, or be related to the alleged contacts with the forum state. Third, the forum's exercise of jurisdiction in the particular case must comport with "traditional notions of fair play and substantial justice." Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 446-47, citing Burger King Corp. 471 U.S. at 473-74. None of the above three requirements are met here.

1. FAWCUS Never purposefully Availed Himself of California - The "Effects" of the Acts Alleged in the Complaint were Felt in Japan, if Anywhere, and Not in the State of California.

Courts have recognized the "effects" test to determine whether a defendant has "purposefully availed" himself of the benefits of a forum state. Ziegler v. Indian River County (9th Cir. 1995) 64 F.3d 470, 473; Calder v. Jones (1984) 465 U.S. 783.

Personal jurisdiction lies when a defendant has engaged in (1) intentional actions (2) expressly aimed at the forum state (3) causing harm, the brunt of which is suffered - and which the defendant knows is likely to be suffered - in the forum state. Panavision International, L.P. v. Toeppen (9th Cir. 1998) 141 F.3d 1316, 1321, citing Calder v. Jones (1984) 465 U.S. 783.

In this case, there is no doubt that the Complaint alleges intentional action. However, the actions were certainly not expressly aimed at California, nor was the brunt of the harm likely to be suffered in California. Rather, the conduct alleged in the Complaint was "expressly aimed," if anywhere, at Japan, not California. And the brunt of any harm was "likely to be suffered" by the then-owners and licensors of CSS, Toshiba and Matsushita. As is further detailed below, assertion of jurisdiction over this Defendant would be an expansion of the "effect" doctrine developed in Calder and Panavision.

Calder established the "effects test." In Calder, the United States Supreme Court found jurisdiction proper in California when a professional entertainer brought suit in California claiming that she had been libeled by the National Enquirer, a national publication, based upon an article written in Florida and published nationwide. The Court reasoned that because the story concerned the "California activities of a California resident," and because the brunt of the harm, in terms of emotional distress and professional reputation, were felt by the entertainer in California, jurisdiction was proper in California. Calder v. Jones (1984) 465 U.S. 783, 785, 788-89.

Panavision further clarified Calder's "effects test." In Panavision, Panavision, the owner of the marks "Panavision" and "Panaflex" brought an action for trademark violations based upon the defendant's registration of those marks as his own internet domain names. Panavision's principle place of business was located in California, and the defendant was an Illinois resident. The court reasoned that the brunt of the harm to Panavision was felt in California, where it was principally located. The court also introduced as an element of the "effects test" that the defendant must know that the plaintiff "would likely suffer harm" in California. Panavision International, L.P. v. Toeppen (9th Cir. 1998) 141 F.3d 1316, 1321-22. The court found that jurisdiction was proper in California because the defendant knew that Panavision's principal place of business was located in California, and knew that Panavision's business market was also primarily located in California. Id.

The present case, as noted above, differs substantially from both Calder and Panavision. Both Calder and Panavision involved defendants who were United States residents. Here, FAWCUS is a resident of Scotland. Both Calder and Panavision involved acts directed at a singular plaintiff located in California. Here, the alleged acts were directed, if at all, not at Plaintiff, but at its Japanese predecessors-in-interest. Both Calder and Panavision involved acts that specifically harmed the respective plaintiffs in a concrete fashion. For example, in Panavision, the brunt of the harm was felt by the company, Panavision, at its principal place of business, California. Here, there is no company in California to feel the brunt of the harm.⁽¹⁾ If anything, the alleged acts affected a worldwide economic market of commerce. As California markedly participates in all significant worldwide economic markets, an assertion of jurisdiction here would set the stage for California courts to exert jurisdiction over all controversies that affect any worldwide economic market, whether or not the controversy specifically relates to California.

If one sorts through the allegations of the Complaint, it becomes clear that what Plaintiff has alleged is that a Scotsman engaged in activities that caused "effects" in Japan, and after the alleged acts were complete, Plaintiff contracted with the Japanese licensing company to conduct the licensing in California. Defendant caused no effects in California. If any effects were felt at all in California, they were caused by Plaintiff.

2. The Alleged Controversy Does Not Arise From Contacts With California.

The United States Supreme Court requires that for a state court to exert jurisdiction, the Plaintiff's claim must "arise out of" or be "related to" Defendant's forum activities. See Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 477-78. There must at least be a "substantial nexus" between the defendant, the forum and the litigation. Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 447-48, 457-58.

For example, in Cornelison v. Chaney (1976) 16 Cal.3d 143, 149-150, such a "nexus" with the State of California existed when a trucker who was en route to California to deliver goods caused an accident in Nevada. In Cornelison, then, even though the activity did not occur in California, it was enough that the trucker was headed to California to deliver goods. By analogy to this case, FAWCUS' alleged "delivery" would have begun in Scotland and ended in Japan - California was neither a stop along the way, nor did FAWCUS' journey continue beyond Japan to California. If anything, this was an interaction between parties located in Scotland and Japan. California was never involved. If any injury occurred, it occurred in Japan and was brought here only by Plaintiff's actions (by contracting, after the fact, to license CSS from California), not Defendant's actions.

3. Exercising Jurisdiction Over FAWCUS in California Would Fly in the face of "Traditional Notions of Fair Play and Substantial Justice."

Even if the above two requirements were somehow deemed satisfied, it flies in the face of "traditional notions of fair play and substantial justice" for this Court to exert jurisdiction over FAWCUS. The "fair play" and "substantial justice" determination is to be made on a case-by-case basis, the test being whether California has a sufficient relationship with FAWCUS and the litigation to make it reasonable to require him to defend the action in this Court. See Burger King Corp. 471 U.S. at 476-77. The California Supreme Court has held that courts should weigh the following factors: (1) The burden on the defendant, (2) the interests of the forum State, (3) plaintiff's interest in obtaining relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies. Vons Companies, Inc. 14 Cal.4th at 476, citing Asahi Metal Industry Co. v. Superior Court (1987) 480 U.S. 103, 113. Moreover, the United States Supreme Court has directed state courts to exercise great care in exerting jurisdiction over foreign nationals. Asahi Metal Industry Co. v. Superior Court (1987) 480 U.S. 103, 114-15.

a. Weighing the Factors - Exerting Jurisdiction over FAWCUS Based upon Plaintiff's Manufacture of Personal Jurisdiction Falls Squarely Outside the Traditional Notions of Fair Play and Substantial Justice.

If we weigh the Vons factors, it becomes clear that for this Court to exercise jurisdiction over FAWCUS would contravene basic due process. As to the first factor - the burden on the defendant - FAWCUS is a resident of Scotland and will be forced to suffer the "unique burdens" placed upon a foreign national required to defend himself in a foreign legal system. Asahi Metal Industry Co. 480 U.S. at 114.

As to the second factor - plaintiff's interest in obtaining relief - notwithstanding Plaintiff's status as a trade association, Plaintiff was not one of the parties injured by the acts alleged in the Complaint. The injured parties were Toshiba and Matsushita. Of course, Plaintiff has also alleged that it contracted with the injured parties to grant to Plaintiff the rights to enforce the CSS licensing agreement (Complaint 44). But this was all done after the alleged acts in the Complaint, and it certainly cannot be said that FAWCUS knew that the Japanese companies would later transfer their rights to a California trade association.

Both the third and fourth factors suppose a defendant who resides in the United States, and direct that the interests of the forum state in the litigation be balanced against the interests of the defendant's state in the litigation. Here, Defendant lives in Scotland, and the injury occurred in Japan, if at all. Any balancing of interests should occur between Britain and Japan.

b. The United States Supreme Court Has Directed State Courts to Take Special Care When Stretching Their Courts' Jurisdiction to Foreign Nationals.

The United States Supreme Court has recognized that unique burdens are placed upon a foreign national who is required to defend himself in a foreign legal system, and the fact that a defendant is a foreign national should have significant weight in assessing the reasonableness of stretching the long arm of personal jurisdiction over national borders. Asahi Metal Industry Co. 480 U.S. at 114 (holding that jurisdiction was not justified in the case before it, which involved a claim for indemnification by a Taiwanese corporation against a Japanese company).

The Court in Asahi Metal also cautioned that great care and reserve should be exercised by state courts when extending American notions of personal jurisdiction into the international field. Thus, a court, in ruling on a motion to quash, should consider the procedural and substantive policies of other nations whose interests are affected by the assertion of jurisdiction by a state court. Further, a state court should make a careful inquiry into the reasonableness of asserting jurisdiction in such a case, and make certain that the court does not place serious burdens upon a foreign national defendant when the plaintiff and forum state have minimal interests in a particular foreign national defendant. Id.

4. Plaintiff has the Burden of Proof to Establish Fact of Jurisdiction.

A Plaintiff bears the burden of proof to establish the facts of jurisdiction by a preponderance of the evidence. Vons Companies, Inc. 14 Cal.4th at 449.

This is not a case where a defendant's acts caused effects in California. It is a case where a Plaintiff has tried to manufacture effects in California by moving a licensing operation within this Court's jurisdiction after the alleged damage had already occurred, if anywhere, in Japan.

For the reasons presented in this Memorandum, Defendant FAWCUS respectfully requests that the Court quash the service of summons in this matter as to FAWCUS for this Court's lack of personal jurisdiction over him.

Dated: November ______, 2000 McGLASHAN & SARRAIL

Professional Corporation

By:__________________________

PATRICK J. WOOD

Attorneys for Defendant

DEREK FAWCUS

1. By contracting to license CSS from California after the alleged acts, Plaintiff has, in essence, attempted to bootstrap jurisdiction over this Defendant where none exists based upon FAWCUS' own activities. The very nature of "purposeful availment" is that a Defendant must purposefully act with an aim toward California. Such is not the case here.

PATRICK J. WOOD, ESQ.; SBN 191403
McGLASHAN & SARRAIL
Professional Corporation
177 Bovet Road, Sixth Floor
San Mateo, CA 94402
Telephone: (650) 341-2585
Fax: (650) 341-1395

Attorneys for Defendant
DEREK FAWCUS

I, DEREK FAWCUS, declare:

1. I am a defendant in the above-entitled action and am competent to testify to the following facts. The facts contained herein are known to me of my own personal knowledge, except those made under information and belief, and as to those facts, I believe them to be true.

1. I am a British citizen. I reside in Edinburgh, Scotland.

2. I have never solicited business in California, designated a registered agent for service of process in California, maintained a place of business in California, maintained a telephone listing in California, maintained a bank account in California, or even visited the State of California for any reason.

3. I am informed and believe that the Content Scrambling System (CSS), used to "encrypt" data in the DVD video format was developed by Toshiba Corporation and Matsushita Electric Industrial Co., Ltd., both Japanese corporations with their principal places of business located in Japan.

4. I am informed and believe that during the period of October 1996 through approximately mid-December 1999, the sole authority to grant licenses to the CSS technology in the DVD video format rested with Matsushita Electric Industrial Co., Ltd., a Japanese corporation with its principal places of business located in Japan.

5. I am informed and believe that the sole contact to obtain a license to the CSS technology in the DVD video format during the period of October 1996 through approximately mid-December 1999, was Mr. Susumu Yamaguchi, Matsushita Electric Industrial Co., Ltd., Osaka, Japan.

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Dated: November ______, 2000 __________________________

DEREK FAWCUS