2010-1100 Opp To Motion

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RON E. SHULMAN, State Bar No. 178263 [email protected] JULIE M. HOLLOWAY, State Bar No. 196942 [email protected] S. MICHAEL SONG State Bar No. 198656 [email protected] TUNG-ON KONG, State Bar No. 205871 [email protected] WILSON SONSINI GOODRICH & ROSATI Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: (650) 493-9300 Facsimile: (650) 565-5100

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M. CRAIG TYLER, Pro Hac Vice [email protected] WILSON SONSINI GOODRICH & ROSATI Professional Corporation 900 South Capital of Texas Highway Las Cimas IV, Fifth Floor Austin, Texas 78746-5546 Telephone: (512) 338.5400 Facsimile: (512) 338.5499

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Attorneys for Plaintiff NUANCE COMMUNICATIONS, INC.

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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NUANCE COMMUNICATIONS, INC.,

19 20 21 22

Plaintiff, v. ABBYY SOFTWARE HOUSE, et al. Defendant.

23 24 25 26 27 28 OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

) ) ) ) ) ) ) ) ) ) ) )

Case No.: C 08-02912 JSW MEJ NUANCE COMMUNICATIONS INC.’S OPPOSITION TO ABBYY SOFTWARE LTD.,’S AND ABBYY PRODUCTION LLC’S MOTION TO DISMISS Date: August 21, 2009 Time: 9:00 a.m. Court: Courtroom No. 11 Hon. Jeffrey S. White

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SUMMARY OF ARGUMENT

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Defendants ABBYY Software and ABBYY Production are present in and maintain

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significant contacts with California. According to their own public statements, ABBYY

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Software and ABBYY Production comprise the leadership of a single “international company”

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that has a “regional office” in Milpitas, California. ABBYY infringing products are found on the

6

shelf in retail outlets throughout the state and are sold by numerous California companies.

7

ABBYY Software and ABBYY Production’s activities in California result from their scheme to

8

“infiltrate” and “conquer” the United States market with infringing products. In fact, ABBYY

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Software and ABBYY Production have stated their intent to seek revenge against plaintiff

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Nuance for filing this litigation by increasing sales of infringing products in the United States.

11

Under these circumstances, the Court can properly exercise either general or specific

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jurisdiction over ABBYY Software and ABBYY Production. See International Shoe Co. v.

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Washington, 326 U.S. 310, 320 (1945). (“Presence in the state in this sense has never been

14

doubted when the activities of the corporation there have not only been continuous and

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systematic, but also give rise to the liabilities sued on, even though no consent to be sued or

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authorization to an agent to accept service of process has been given.”); Asahi Metal Industry

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Co. v. Superior Court of California, 480 U.S. 102, 109 (1987) (“The forum state does not exceed

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its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that

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delivers its products into the stream of commerce with the expectation that they will be

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purchased by customers in the forum State.”) (quoting World-Wide Volkswagon Corp. v.

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Woodson, 444 U.S. 286, 297-98 (1980)).

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In addition, Nuance properly served ABBYY Production in accordance with Rule

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4(f)(2)(C)(i) of the Federal Rules of Civil Procedure. ABBYY Production’s argument that

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Nuance did not properly effect service in accordance with the Hague Convention is inapposite

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because there is no agreed-upon means of service between the Russian Federation and the United

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States.

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TABLE OF CONTENTS

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Page

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I.

INTRODUCTION...............................................................................................................1

4

II.

STATEMENT OF THE ISSUES TO BE DECIDED.........................................................2

5

III.

STATEMENT OF FACTS..................................................................................................2

6

A.

ABBYY Defendants and Their Business ................................................................2

7

B.

ABBYY Defendants Comprise a Single “International Company”........................3

8

C.

Defendants ABBYY Software Ltd. and ABBYY Production LLC Intend to “Conquer” the United States with Infringing Products ...........................................3

D.

ABBYY Software and ABBYY Production’s Scheme to “Infiltrate” and “Conquer” the United States Has Resulted In Substantial Business Contacts in California.............................................................................................................4

E.

ABBYY Software and ABBYY Production Have a Regional Office In Milpitas, California .................................................................................................5

13

F.

Service of ABBYY Production LLC Was Proper...................................................6

14

G.

The Russian Federation Unilaterally Suspended All Judicial Cooperation With the United States in Civil and Commercial Matters.......................................6

9 10 11 12

15 IV.

ARGUMENT REGARDING PERSONAL JURISDICTION ............................................6

16 A.

Applicable Legal Standard ......................................................................................6

B.

The Court Can Properly Exercise General Jurisdiction Over ABBYY Software and ABBYY Production ..........................................................................7

C.

The Court Can Properly Exercise Specific Jurisdiction Over ABBYY Software and ABBYY Production ..........................................................................9

17 18 19 20 1)

ABBYY Software and ABBYY Production have purposefully directed their activities at California Residents.........................................10

2)

This Action Arises from ABBYY Software and ABBYY Production Activities Related to Infringing Products..................................................10

3)

Jurisdiction Over ABBYY Software and ABBYY Production Is Reasonable and Fair ..................................................................................11

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D.

ABBYY Software and ABBYY Production’s Arguments Against Personal Jurisdiction Are Spurious ......................................................................................11

26 V.

ARGUMENT REGARDING SERVICE OF SUMMONS...............................................13

27 A.

Nuance Properly Served ABBYY Production LLC..............................................13

28 B.

The Hague Convention Is Not an Agreed-Upon Method of Service in Russia ....................................................................................................................13 OPPOSITION TO MOTION TO DISMISS i Case No. C 08-02912 JSW MEJ

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C.

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ABBYY Production’s Motion To Dismiss Is Coordinated With ABBYY USA’s Soon-To-Be-Filed Request to Compel Supplemental Infringement Contentions............................................................................................................14

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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TABLE OF AUTHORITIES

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Page(s)

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CASES

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Akro Corp. v. Luker, 45 F.3d 1541, 1544 (Fed. Cir. 1995) ................................................... 6, 7, 9, 11

5 Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102 (1987) .............................. 9 6 Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558 (Fed. Cir. 1994) .................. 10, 11 7 Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) .................................................................. 7 8 9

Deprenyl Animal Heath, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343 (Fed. Cir. 2002) .......................................................................................................... 7

10

Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984) ...................... 7

11

Howard v. Everex Sys., Inc., 228 F. 3d 1057 (9th Cir. 2000) .......................................................... 9

12

Inamed Corp. v. Kuzmak, 249 F.3d 1356 (Fed. Cir. 2001) ............................................................. 6

13

International Shoe Co. v. Washington, 326 U.S. 310 (1945)...................................................... 7, 8

14

Kilpatrick v. Texas & P. Ry., 72 F. Supp. 635 (S.D.N.Y. 1947)................................................... 12

15

Patin v. Thoroughbred Power Boats, Inc., 294 F.3d 640 (5th Cir. 2002)....................................... 9

16

Systems Division, Inc. v. Teknek Electronics, Ltd, 2007 WL 3151697 (Fed. Cir. 2007).................................................................................................................................... 8

17 18

United Food & Commercial Workers Union v. Alpha Beta Co., 736 F.2d 1371 (9th Cir. 1984) .......................................................................................................................... 14

19

United States v. Toyota Motor Corp., 561 F. Supp. 354, 359 (C.D. Cal. 1983) ............................ 9

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Viam Corp. v. Iowa Export-Import Trading Co., 84 F.3d 424 (Fed. Cir. 1996)........................... 10

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Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694 (1988).......................................... 14

22

Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406 (9th Cir. 1977) ........................... 12

23

World-Wide Volkswagon Corp. v. Woodson, 444 U.S. 286, (1980) ............................................... 9

24

STATUTES

25

35 U.S.C. § 271 ............................................................................................................................... 2

26

Cal. Code Civ. P. § 410.10 .............................................................................................................. 7

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RULES

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Federal Rule of Civil Procedure 4........................................................................................... 13, 14 OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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Federal Rule of Civil Procedure 4(f)(2) .......................................................................................... 1

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Federal Rule of Civil Procedure 4(f)(2)(C)................................................................................... 13

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Federal Rule of Civil Procedure 4(f)(2)(C)(i) ............................................................................... 13

4

Federal Rule of Civil Procedure 4(f)(3) ........................................................................................ 14

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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I.

INTRODUCTION Defendants ABBYY Software Ltd. (“ABBYY Software”) and ABBYY Production LLC

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(“ABBYY Production”) seek dismissal of the claims against them on the basis of lack of

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personal jurisdiction. ABBYY Production also seeks dismissal on the basis of improper service.

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Their motion should be denied because it relies on the fiction that neither ABBYY Software nor

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ABBYY Production have contacts in California. Public admissions by and published articles

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quoting ABBYY Software Ltd. and ABBYY Production show that they have established and

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currently maintain significant business contacts in California that warrant the exercise of either

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general or specific jurisdiction: 

“ABBYY is an international company with 9 offices in different countries including . . . the United States [Milpitas, California].” Miller Decl., Ex. 7.



The ABBYY “Global Management Team” includes a high-ranking member based in Milpitas, California. Miller Decl., Ex. 12.

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

“In 1998 the company went out to conquer the West.” Miller Decl., Ex. 5.

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

“The founder of Abbyy David Yan[g] once failed at the American market, but did not leave the ambition of conquering it. Now he is going to make his return with new solutions.” Id.



“In the opinion of the company’s management, nothing is able to prevent the company now from conquering the US market.” Id.

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The presence of ABBYY Software and ABBYY Production in this forum is undeniable.

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They have purposefully directed significant business activities at California and the United States

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by, inter alia, selling, offering for sale and importing infringing products. Those same infringing

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products are at issue in this action.

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Regarding service, Nuance served ABBYY Production in accordance with the Federal

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Rules. ABBYY Production’s only complaint is that Nuance did not effect service in accordance

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with the Hague Convention. Its complaint is spurious because ABBYY Production’s home state,

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Russia, refuses to serve Hague Convention requests from the United States. The Federal Rules

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provide alternatives that account for such situations, including Rule 4(f)(2).

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Accordingly, the motion to dismiss should be denied. OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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II.

STATEMENT OF THE ISSUES TO BE DECIDED

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1.

ABBYY Production.

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Whether the Court can exercise general jurisdiction over ABBYY Software and

2.

Whether the Court can exercise specific jurisdiction over ABBYY Software and

ABBYY Production

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3.

Whether Nuance served process on ABBYY Production in accordance with the

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Federal Rules of Civil Procedure.

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III.

STATEMENT OF FACTS

10

A.

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Defendant ABBYY Software Ltd. (“ABBYY Software”) is a Cypriot entity. ABBYY

ABBYY Defendants and Their Business

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Software owns 100% of defendant ABBYY Production LLC (“ABBYY Production”), a Russian

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entity, and defendant ABBYY USA Software House, Inc. (“ABBYY USA”), a California

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corporation.1

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The ABBYY defendants develop and sell products accused of infringement, including

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FineReader, FlexiCapture, Recognition Server, PDF Transformer, Screenshot Reader, and

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Mobile OCR Engine products.2 See Miller Decl., Ex. 2. FineReader is an optical character

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recognition (“OCR”) and PDF conversion application that has captured ninety-five percent of the

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Russian market, over fifty percent of the European market, and less than thirty percent of the

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United States market. See Miller Decl., Exs. 3, 4-6.

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ABBYY press releases identify ABBYY USA as a subsidiary of “Abbyy Software House, a Russian company.” Miller Decl., Ex. 1. On the basis of those unambiguous statements, Nuance named ABBYY Software House as a defendant in this action and effected service of process on it. See Docket No. 99. Despite its press releases, ABBYY defendants now, for purposes of this litigation, claim that “Abbyy Software House ... does not exist.” Docket No. 106 at 2. 2

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ABBYY Software and ABBYY Production incorrectly state that “Nuance does not allege that either [ABBYY Software or ABBYY Production] committed any allegedly infringing act.” ABBYY Brief at 10. Nuance accused both ABBYY Software and ABBYY Production of infringement under 35 U.S.C. § 271. See Amended Complaint at ¶¶ 50, 55, 60, 65, 70, 75, 80, 85. OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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B.

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ABBYY Software operates its subsidiaries, including ABBYY Production and ABBYY

ABBYY Defendants Comprise a Single “International Company”

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USA, as regional offices of a single “international company.” In ABBYY Software’s own

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words: “ABBYY is an international company with 9 offices in different countries including

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Russia, Germany, the United States, Ukraine, the UK, Cyprus, Japan and Taiwan.” Miller

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Decl., Ex. 73 (emphasis added); see also Miller Decl., Ex. 9 (“Abbyy is an international

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company with over 880 employees worldwide.”). ABBYY Production, the Russian office, is

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responsible for developing and maintaining source code for most ABBYY products. Miller

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Decl., Ex. 10. ABBYY USA, the United States office, is responsible for sales and marketing of

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ABBYY products in the United States. Miller Decl., Ex. 11.

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All ABBYY offices are directed by the ABBYY “Global Management Team,” which is

12

led by David Yang, Founder and Chairman of the Board of ABBYY Software. Miller Decl., Ex.

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12. Second in command of the Global Management Team is Sergey Andreev, CEO of ABBYY

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Production. Miller Decl., Ex. 12. Thus, both ABBYY Software and ABBYY Production play

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key roles in the development and implementation of the “international company’s” global plans,

16

including the United States.

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C.

Defendants ABBYY Software Ltd. and ABBYY Production LLC Intend to “Conquer” the United States with Infringing Products

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Specifically with regard to the United States, ABBYY Software and ABBYY Production

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have made no secret regarding their “ambition of conquering” the market with infringing

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products. Miller Decl., Ex. 5. A February 2008 article regarding Messrs. Yang and Andreev

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states:

23



“The founder of Abbyy David Yan[g] once failed at the American market, but did not leave the ambition of conquering it. Now he is going to make his return with new solutions.” Miller Decl. Ex. 5 at 1 (emphasis added).



“In the opinion of the company’s management, nothing is able to prevent the company now from conquering the US market.” Id. at 3-4 (emphasis added).

24 25 26 27 28

3

The domain name www.abbyy.com is registered to ABBYY Software Ltd.. See Miller Decl., Ex. 8. OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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“The company intends not only to enter the US retail market, but also to infiltrate into two new markets in the next two years. ... ‘By the way, when we started to study the market of text recognition in these languages we learned that the US government agencies were the key buyers of the Arabic version – which provided us with even a better competitive advantage,’ Sergei Andreev believes.” Id. at 3-4 (emphasis added).

5 In the same article, ABBYY defendants characterize their ambition to “conquer” the 6 United States with infringing products as an act of revenge against Nuance for filing this 7 litigation: 8 9 10 11 12 13 14 15

Nowdays Abbyy is actively getting ready for the issue of FineReader software program to the American retail market. The company was forced to do so by its main American competitor – by the Nuance Communications Company, which in the end of last year filed a lawsuit against Abbyy claiming the latter used the company’s developments in its works. “They felt a threat on our behalf – and struck first. Now Americans demand us to present our software program code for examination by experts,” Sergei Andreev explains the situation. “We do not want to show it and we demand an independent expert examination. And we decided to enter the retail market so that their life does not seem so wonderful.” In the past the company thought that retail sales were unprofitable due to a high entrance price and the need to conduct advertisement campaigns. “However, when the competition inflicted the first blow, this became becoming a matter of principle, and the winner of the battle may win the whole US market, too. We are no strangers to battles with competition,” Andreev puts on a brave face. Id. at 3 (emphasis added).

16 D. 17

ABBYY Software and ABBYY Production’s Scheme to “Infiltrate” and “Conquer” the United States Has Resulted In Substantial Business Contacts in California

18 As reported in the February 2008 article quoted above, ABBYY Software and ABBYY 19 Production entered the United States no later than 1998 and have since only increased their 20 efforts to gain market share. See Miller Decl., Ex. 5 at 3. (“In 1998 the company went out to 21 conquer the West. ... The company started to conquer the West through scanner producers.”); 22 and Miller Decl., Ex. 5 at 3. (“Abbyy is actively getting ready for the issue of the FineReader 23 software program to the American retail market.”). According to press releases available on 24 ABBYY Software’s website (www.abbyy.com), the following California residents are customers 25 and/or licensees of infringing ABBYY products: Hewlett-Packard, Alameda County, Los 26 Angeles County, Hershey Technologies and Innovative Rehabilitation Technology, Inc. See 27 Miller Decl., Exs. 13 (Hewlett-Packard), 14 (Alameda County), 15 (Los Angeles County), 16 28 (Hershey Technologies), and 17 (Innovative Rehabilitation Technology, Inc.). OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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As to the retail market, ABBYY infringing products are available for purchase at the

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Fry’s Electronics Store in Palo Alto. See Smith Decl., ¶¶ 2-3, Ex. 1. In fact, the ABBYY

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Software website actively markets its products available in California: “You can buy Abbyy

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FineReader in [ten] online stores and in the following companies,” including CAF Technology

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(Irvine, California), Formtran (Lake Forest, California), Fry’s Electronics Retail Stores

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(statewide), Globetech (Rancho Cordova, California), Hershey Technologies (La Jolla,

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California), Ingram Micro (Irvine, California), Ocean Interface Co. (Walnut, California), Sabre

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Software Design, Inc (San Diego, California), Smartech Solution (San Jose, California), Teramar

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Technology (Carlsbad, California), and Wisetrend (Fremont, California). Miller Decl., Ex. 11

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In addition, the ABBYY website sells, offers for sale and facilitates download of infringing

11

software to customers in California. Miller Decl., Ex. 3.

12

E.

ABBYY Software and ABBYY Production Have a Regional Office In Milpitas, California

13 ABBYY Software and ABBYY Production maintain an office in Milpitas, California. 14 Miller Decl., Ex. 11.

Previously, they maintained an office in Fremont, California. See Miller

15 Decl., Exs. 13, 18 (“The ABBYY Group Headquarters are located in Moscow with offices in . . . 16 the United States (ABBYY USA, Fremont, California)”). The Milpitas office is home to another 17 high-ranking member of the ABBYY “Global Management Team,” Dean Tang. Miller Decl., 18 Ex. 12. Notwithstanding Mr. Tang’s presence in California, Mr. Andreev also participates in 19 efforts to sell ABBYY products in the United States. See Miller Decl., Ex. 1 (regarding a deal 20 between ABBYY USA and UMAX regarding FineReader, Mr. Andreev stated: “We are glad to 21 bundle our software with UMAX products”). 22 The United States office of ABBYY operates a website at www.abbyyusa.com. See 23 Miller Decl., Ex. 19. On that website, if a visitor clicks on the “Company” link to find 24 information regarding the company, the visitor is re-directed to the ABBYY Software website 25 (www.abbyy.com) and provided the above information regarding ABBYY the “international 26 company.” Miller Decl., Exs. 20, 21 In fact, a vast majority of the links on the ABBYY USA 27 website simply redirect visitors to the ABBYY Software site, including the links for “Products,” 28 “Downloads,” “Support,” and “Press [Releases].” Miller Decl., Exs. 22, 23, 24, 25. OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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F.

2

On May 7, 2009, ABBYY Production LLC received service of the Amended Complaint,

Service of ABBYY Production LLC Was Proper

3

Summons and Standing Orders of the Court. See Docket Entry No. 100. Service occurred at

4

Struenie 1, 11 Kasatkina Str., Moscow 129301 which is the address provided by ABBYY USA

5

in response to Interrogatory No. 7. Miller Decl., Ex. 10. Nadezhda Kolpakova, who identified

6

herself as a manager, received the documents in person from a local professional process server.

7

Docket Entry No. 100. Ms. Kolpakova also received versions of the same documents translated

8

into Russian. Declaration of Esha Bandyopadhyay, Ex. C.

9

G.

The Russian Federation Unilaterally Suspended All Judicial Cooperation With the United States in Civil and Commercial Matters

10 11

The United States Department of State website (http://travel.state.gov/law/info/

12

judicial/judicial_3831.html) states that service via the Hague Convention is not an agreed-upon

13

means for service of process on individuals in Russia:

14

In July 2003, Russia unilaterally suspended all judicial cooperation with the United States in civil and commercial matters. The Russian Federation refuses to serve letters of request from the United States for service of process presented under the terms of the 1965 Hague Service Convention or to execute letters rogatory requesting service of process transmitted via the diplomatic channel. The Russian Federation also declines to give consideration to U.S. requests to obtain evidence. While the Department of State is prepared to transmit letters rogatory for service or evidence to Russian authorities via the diplomatic channel, in the Department’s experience, all such requests are returned unexecuted. Likewise requests sent directly by litigants to the Russian Central Authority under the Hague Service Convention are returned unexecuted. (emphasis added)

15 16 17 18 19 20

Russia confirms that it “shall not apply the Convention in relation to [the United 21 States].” Miller Decl., Ex. 26.; see also Ingalls Decl. ¶ 3. 22 IV.

ARGUMENT REGARDING PERSONAL JURISDICTION

23 A.

Applicable Legal Standard

24 Personal jurisdiction over a foreign corporation is appropriate when the state’s long arm 25 statute permits the assertion of jurisdiction without violating federal due process. See Inamed 26 Corp. v. Kuzmak, 249 F.3d 1356, 1359 (Fed. Cir. 2001). California’s long arm statute is 27 coextensive with the limits of due process, thus, the only inquiry is whether or not the exercise of 28 jurisdiction comports with federal due process. See Akro Corp. v. Luker, 45 F.3d 1541, 1544 OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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(Fed. Cir. 1995); Cal. Code Civ. P. § 410.10. “‘[T]he constitutional touchstone’ of the

2

determination whether an exercise of personal jurisdiction comports with due process “remains

3

whether the defendant purposefully established ‘minimum contacts’ in the forum State.” Burger

4

King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (quoting International Shoe Co. v.

5

Washington, 326 U.S. 310, 316 (1945)).

6

The exercise of general jurisdiction is proper when a non-resident defendant is present in

7

the forum state. See International Shoe Co., 326 U.S. at 316-17. To determine a corporate

8

entity’s presence in the forum, “[w]e . . . must explore the nature of [the defendant’s] contacts

9

with the [forum State] to determine whether they constitute . . . continuous and systematic

10

general business contacts.” Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,

11

415-16 (1984).

12

The exercise of specific jurisdiction is proper when a non-resident defendant

13

purposefully establishes minimum contacts with the forum state, the cause of action arises out of

14

those contacts and jurisdiction is constitutionally reasonable. See Burger King Corp., 471 U.S.

15

at 472, 476-77. The Federal Circuit outlined a three prong test to determine if specific

16

jurisdiction exists: 1) whether defendant purposefully directed activities at residents of the

17

forum; 2) whether the claim arises out of or relates to those activities; and 3) whether assertion of

18

personal jurisdiction is reasonable and fair. See Akro, 45 F.3d at 1545-46.

19

Because the parties have not conducted discovery, plaintiff need “only to make a prima

20

facie showing” that the defendants were subject to personal jurisdiction. Deprenyl Animal

21

Heath, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343, 1347 (Fed. Cir. 2002). The

22

pleadings and affidavits are to be “construe[d] ... in the light most favorable to” plaintiff. Id.

23

B.

The Court Can Properly Exercise General Jurisdiction Over ABBYY Software and ABBYY Production

24 25

The Court has general jurisdiction over ABBYY Software and ABBYY Production

26

based on their continuous and systematic activities in the forum. Their activities include opening

27

a regional office in Freemont, later opening an office in Milpitas, stationing a high-ranking

28

member if ABBYY “Global Management Team” in the California office, entering into contracts OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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regarding infringing products with California residents (including Hewlett-Packard, Alameda

2

County, Los Angeles County, Hershey Technologies and Innovative Rehabilitation Technology,

3

Inc), engaging at least eleven California residents to resell or distribute ABBYY infringing

4

products, stocking the shelves of California retailers with infringing products, and selling

5

infringing products online (including via www.abbyy.com). Those activities have netted

6

approximately one quarter of the United States market.

7

Not only are ABBYY Software and ABBYY Production’s forum activities continuous

8

and systematic, those same activities have given rise to the causes of action in this lawsuit.

9

Under those circumstances, especially when viewed a light most favorable to Nuance, general

10

jurisdiction over all ABBYY defendants, including ABBYY Software and ABBYY Production,

11

is proper. See International Shoe, 326 U.S. at 320. (“Presence in the state in this sense has never

12

been doubted when the activities of the corporation there have not only been continuous and

13

systematic, but also give rise to the liabilities sued on, even though no consent to be sued or

14

authorization to an agent to accept service of process has been given.”).

15

ABBYY Software and ABBYY Production contend, for purposes of this litigation, that

16

they have no forum activities and imply that ABBYY USA is solely responsible for any and all

17

California activities. However, according to their own statements, ABBYY Software, ABBYY

18

Production and ABBYY USA are a single “international company” led by ABBYY Software

19

and ABBYY Production. The ambition of the “international company” is to “conquer” the

20

United States with infringing products. They created ABBYY USA in furtherance of that

21

scheme. ABBYY Software and ABBYY Production’s current attempt to evade the Court’s

22

jurisdiction indicates a specific intent to escape liability for their activities in the forum by using

23

their alter ego as a shield. Thus, the Court has general jurisdiction over ABBYY Software and

24

ABBYY Production because their alter ego, ABBYY USA, is present in the forum. See Systems

25

Div., Inc. v. Teknek Elecs., Ltd, No. 2007-1162, 2007 WL 3151697, at *5 (Fed. Cir. Oct. 26,

26

2007) (“The exercise of jurisdiction over an alter ego is compatible with due process because a

27

corporation and its alter ego are the same entity – thus, the jurisdictional contacts of one are the

28

jurisdictional contacts of the other for purposes of the International Shoe due process analysis.”); OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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1

Patin v. Thoroughbred Power Boats, Inc., 294 F.3d 640, 653 & n. 18 (5th Cir. 2002) (noting that

2

“federal courts have consistently acknowledged that it is compatible with due process for a court

3

to exercise personal jurisdiction over an individual or corporation that would not ordinarily be

4

subject to personal jurisdiction in that court when the individual or corporation is an alter ego or

5

successor of a corporation that would be subject to personal jurisdiction in that court.”); Howard

6

v. Everex Sys., Inc., 228 F.3d 1057, 1069 n. 17 (9th Cir. 2000) (“[W]here the parent totally

7

controls the actions of the subsidiary so that the subsidiary is the alter ego of the parent,

8

jurisdiction is appropriate over the parent as well.”).

9

Alternatively, general jurisdiction over ABBYY Software and ABBYY Production is

10

proper under an agency theory. ABBYY Software founded ABBYY USA for the purpose of

11

creating, controlling and employing the distribution system intended to bring infringing products

12

into the forum. ABBYY Production admits to exploiting that distribution system by engaging in

13

transactions of infringing products with ABBYY USA. In addition, ABBYY Software and

14

ABBYY Production have also actively promoted ABBYY USA’s sales in the forum. See United

15

States v. Toyota Motor Corp., 561 F. Supp. 354, 359 (C.D. Cal. 1983) (“The fact that Toyota

16

Japan’s products reach the United States market through a wholly-owned subsidiary, rather than

17

directly from the parent corporation, is inconsequential for due process purposes. Instead, due

18

process is satisfied so long as Toyota Japan knew and intended that its vehicles would be sold

19

here, and it actively promoted those sales.”); see also Asahi Metal Indus. Co. v. Superior Court

20

of California, 480 U.S. 102, 109 (1987) (“The forum state does not exceed its powers under the

21

Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products

22

into the stream of commerce with the expectation that they will be purchased by customers in the

23

forum State.”) (quoting World-Wide Volkswagon Corp. v. Woodson, 444 U.S. 286, 297-98

24

(1980)).

25

C.

The Court Can Properly Exercise Specific Jurisdiction Over ABBYY Software and ABBYY Production

26 27 28

The Court also has specific jurisdiction over ABBYY Software and ABBYY Production because each prong of the Akro test is satisfied. OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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1)

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ABBYY Software and ABBYY Production have purposefully directed their activities at California Residents

2 3

ABBYY Software and ABBYY Production have purposely directed activities at residents

4

of California, including license, sales, reseller and distributor agreements with many California

5

companies, as part of their scheme to “infiltrate” and “conquer” the United States market. As

6

stated by Mr. Andreev, the presence of ABBYY retail products on the shelf in California is an

7

act of revenge against Nuance by ABBYY Software and ABBYY Production.

8

Within the scheme to “infiltrate” and “conquer” the United States, ABBYY USA acts at

9

the direction of ABBYY Software and ABBYY Production. Any sales or offers to sell made by

10

ABBYY USA are within the scope of its authority as delegated by ABBYY Software and

11

ABBYY Production. See Viam Corp. v. Iowa Export-Import Trading Co., 84 F.3d 424, 429

12

(Fed. Cir. 1996) (holding that specific jurisdiction is appropriate over an Italian defendant

13

because the foreign defendant “purposefully directed its activities at the forum State” and its

14

domestic agent “purposefully initiated” the activities that resulted in the litigation); Beverly Hills

15

Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1566 (Fed. Cir. 1994) (“[D]efendants, acting in

16

consort, placed the [device] in the stream of commerce, they knew the likely destination of the

17

products, and their conduct and connections with the forum state were such that they should

18

reasonably have anticipated being brought into court there.”).

19

In addition, ABBYY Production, as the developer of infringing products, is subject to

20

specific jurisdiction because it admits to engaging in transactions with ABBYY USA, a

21

California resident. See Dimosthenous Decl. ¶ 12 and Tereshchenko Decl. ¶ 13. Those

22

transactions were made in furtherance of the scheme to infiltrate and conquer the United States

23

with infringing products and are clearly purposeful. See Viam, 84 F.3d at 430 (“Nor is it unfair

24

to refuse to allow a foreign manufacturer to insulate itself from the jurisdiction of the courts by

25

use of an exclusive distributor.”).

26

2)

This Action Arises from ABBYY Software and ABBYY Production Activities Related to Infringing Products

27 This action arises from and directly relates to ABBYY Software and ABBYY 28 Production’s forum activities regarding infringing products. Nuance is suing ABBYY OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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defendants for patent infringement related to the sale, offer for sale and importation of, inter alia,

2

FineReader products. Thus, specific transactions with California residents are at issue.

3

3)

Jurisdiction Over ABBYY Software and ABBYY Production Is Reasonable and Fair

4 5

Personal jurisdiction over ABBYY defendants is also reasonable and fair. This prong of

6

the Akro test places the burden on the party over whom jurisdiction is sought to “present a

7

compelling case that the presence of some other considerations would render jurisdiction

8

unreasonable.” Akro, 45 F.3d at 1545-46. Put succinctly, “such defeats of otherwise

9

constitutional personal jurisdiction ‘are limited to the rare situation in which the plaintiff’s

10

interest and the state’s interest in adjudicating the dispute in the forum are so attenuated that they

11

are clearly outweighed by the burden of subjecting the defendant to litigation within the forum.’”

12

Id. at 1549 (quoting Beverly Hills Fan, 21 F.3d at 1568) (emphasis added).

13

This is not one of those rare cases. Nuance’s interest in adjudicating this dispute is in

14

alignment with the state’s interest. See, e.g., Beverly Hills Fan, 21 F.3d at 1564-65 (stating that a

15

state has an interest in discouraging injuries that occur within the forum, including patent

16

infringement).

17

D.

ABBYY Software and ABBYY Production’s Arguments Against Personal Jurisdiction Are Spurious

18 19

ABBYY Software and ABBYY Production argue that the Court lacks general and

20

specific jurisdiction. The only factual support is provided by Marianos Dimosthenous (Director

21

of ABBYY Software) and Vadim Tereshchenko (CFO of ABBYY Production), who imply that

22

all ABBYY activities in California are attributable to ABBYY USA. Neither addresses their

23

employers’ public statements to the contrary, including:

24



“ABBYY is an international company with 9 offices in different countries including Russia, Germany, the United States [Milpitas, California], Ukraine, the UK, Cyprus, Japan and Taiwan.” Miller Decl., Ex. 7.



“Abbyy is an international company with over 880 employees worldwide.” Miller Decl., Ex. 9.



The ABBYY “Global Management Team” includes representatives from all Abbyy offices, including the offices in Cyprus, Russia and Milpitas. Miller Decl., Ex. 12.

25 26 27 28

OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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1



“In 1998 the company went out to conquer the West. ... The company started to conquer the West through scanner producers.”



“The founder of Abbyy David Yan[g] once failed at the American market, but did not leave the ambition of conquering it. Now he is going to make his return with new solutions.” p.1



“In the opinion of the company’s management, nothing is able to prevent the company now from conquering the US market.” P. 3-4.



“Abbyy is actively getting ready for the issue of the FineReader software program to the American retail market. The company was forced to do so by its main American competitor – by the Nuance Communications Company, which in the end of last year filed a lawsuit against Abbyy claiming the latter used the company’s developments in its works. ... And we decided to enter the retail market so that their life does not seem so wonderful.”

2 3 4 5 6 7 8 9 10 11 12 13 14

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Rather than address those statements, Messrs. Dimosthenous and Tereshchenko instead make the following vague and foundationless statement: ABBYY Software, ABBYY Production and ABBYY USA observe all corporate formalities. ... ABBYY Software holds the equity interest in both ABBYY Production and ABBYY USA. ABBYY Software “controls” ABBYY Production and ABBYY USA only to the extent the law permits a 100% equity owner to “control” its company.

15

That conclusory statement is not reliable because it conveys virtually zero probative facts. For

16

example, neither declaration identifies the specific facts “all corporation formalities” purportedly

17

observed, or the specific facts regarding ABBYY Software and ABBYY Production’s control

18

over ABBYY USA. Nor does either declaration explain the basis for the declarant’s

19

understanding of American law regarding corporate control. Accordingly, their declarations do

20

not provide any facts that defeat jurisdiction.

21

Nonetheless, if the Court requires additional evidence to resolve this matter, Nuance, in

22

the alternative, requests a continuance of the hearing date pending limited jurisdictional

23

discovery. The Court has broad discretion in deciding whether to allow jurisdictional discovery.

24

See Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 430 n. 24 (9th Cir. 1977).

25

Generally, the request for jurisdictional discovery “should be granted where pertinent facts

26

bearing on the questions of jurisdiction are controverted ... or where a more satisfactory showing

27

of the facts is necessary.” Id. quoting Kilpatrick v. Texas & P. Ry., 72 F. Supp. 635, 638

28

(S.D.N.Y. 1947). Nuance does not believe that any of the pertinent facts bearing on the question OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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of jurisdiction are legitimately controverted. However, if the Court would prefer additional

2

details, jurisdictional discovery would serve that end.

3

V.

ARGUMENT REGARDING SERVICE OF SUMMONS

4

A.

5

Nuance properly served ABBYY Production LLC in accordance with Federal Rule of

Nuance Properly Served ABBYY Production LLC

6

Civil Procedure 4(f)(2)(C)(i) by “delivering a copy of the summons and of the complaint to the

7

individual personally.” ABBYY USA identified the location of ABBY Production as “Struenie

8

1, 11 Kasatkina Str., Moscow 129301.” Miller Decl., Ex. 10. Nuance accomplished service via

9

a Russian process server. The documents served included the Amended Complaint, Summons,

10

the Civil Standing Orders of the Court, and Russian translations thereof. According to the return

11

of service filed by Nuance, ABBYY Production was served personally and in person by

12

providing the documents in person to Nadezhada Kolpakova, a manager at ABBYY Production.

13

See Docket No. 100.

14

B.

15

ABBYY Production argues that service was improper because Nuance did not follow

The Hague Convention Is Not an Agreed-Upon Method of Service in Russia

16

Hague Convention. ABBYY Production’s argument is incorrect. The Hague Convention is not

17

an agreed-upon means for service of process in Russia because the Russian Federation has

18

unilaterally suspended all judicial cooperation with the United States in civil matters. All Hague

19

Convention requests sent to the Russian Central Authority are returned unexecuted.

20

Under those circumstances, Federal Rule of Civil Procedure 4(f)(2)(C) provides that

21

service is effected by “delivering a copy of the summons and complaint to the individual

22

personally.” Nuance complied with Rule 4(f)(2)(C) by engaging a process server to provide the

23

summons, Amended Complaint, and standing orders of the Court (including Russian translations

24

thereof) to ABBYY Production at its place of business. The process server handed the

25

documents in person to a person who described herself as a manager. That manner of service

26

does not offend the law of Russia. See Ingalls Decl. ¶ 4.

27 28

Assuming, arguendo, that service did not comply with the technical requirements of the Federal Rules, the motion to dismiss should nonetheless be denied because Federal Rule of Civil OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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Procedure 4 is “a flexible rule that should be liberally construed so long as a party receives

2

sufficient notice of the complaint.” United Food & Commercial Workers Union v. Alpha Beta

3

Co., 736 F.2d 1371, 1382 (9th Cir. 1984) (upholding the district court’s refusal to dismiss for

4

improper service of process despite the incorrect identification of the deadline to answer in the

5

summons). Here, ABBYY Production does not dispute that it has notice of this action, nor does

6

ABBYY Production dispute that it received and understands the documents served by Nuance.

7

There is also no question that ABBYY Production has had notice of this action since at least

8

February 2008 when Mr. Andreev publicly stated that ABBYY Production and ABBYY

9

Software would seek revenge against Nuance for filing this action.

10

Alternatively, Nuance requests the Court order, pursuant to Rule 4(f)(3), that Nuance can

11

serve ABBYY Production via substitute service on ABBYY USA – its domestic agent. See, e.g.,

12

Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 707-08 (1988) (determining that

13

service on a foreign defendant’s domestic agent was sufficient because “the Due Process Clause

14

does not require an official transmittal of documents abroad every time there is service on a

15

foreign national.”). Substitute service in this manner is a reasonable under the circumstances

16

because, to the extent ABBYY Production is correct that that service is effective only if made

17

pursuant to the Hague Convention, then service on ABBYY Production is impossible due to

18

Russia’s unilateral decision to suspend all judicial cooperation with the United States. ABBYY

19

Production – a company whose infringing product holds a 30% market share in the United States

20

and whose CEO seeks to exact revenge on Nuance for this lawsuit-- cannot reasonably expect to

21

dodge service of summons.

22 23 24

C.

ABBYY Production’s Motion To Dismiss Is Coordinated With ABBYY USA’s Soon-To-Be-Filed Request to Compel Supplemental Infringement Contentions

ABBYY defendants appear to be attempting to leverage ABBYY Production’s status as a

25

Russian company not only to insulate ABBYY Production from liability, but to insulate

26

allegedly infringing source code from discovery in this action. ABBYY USA claims that it does

27

not have possession, custody or control of the source code and, therefore, cannot produce it.

28

ABBYY USA identifies ABBYY Production as the sole custodian of the source code. OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

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1

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Nuance is concerned because ABBYY USA will soon file a joint letter brief with

2

Magistrate Judge James regarding Nuance’s infringement contentions, which were served on

3

April 3, 2009. The premise of ABBYY USA’s motion is that the infringement contentions are

4

deficient because they does not provide citations to the confidential source code for the

5

infringing ABBYY products. According to ABBYY USA, when software products are accused

6

of infringement, the patentee must cite to the source code in its infringement contentions.

7

However, ABBYY Production claims that it is immune from service of process and third party

8

discovery due to Russia’s suspension of all judicial cooperation with the United States.

9

Thus, ABBYY USA seeks an order that Nuance must supplement its infringement

10

contentions with citations to source code, while ABBYY Production seeks an order dismissing it

11

from any obligations related to this action, including the obligation to produce the infringing

12

source code. The result advocated by ABBYY defendants would be unjust and unduly

13

prejudicial to Nuance. There is no legitimate question that ABBYY Software and ABBYY

14

Production are purposefully present in California. Accordingly, they should be subjected to

15

scrutiny rather than allowed to hide behind a domestic front that serves as nothing other than a

16

shield, especially because they themselves characterize their infringing activities are an act of

17

revenge against Nuance for filing this litigation.

18 19

Dated: July 10, 2009

WILSON SONSINI GOODRICH & ROSATI

20 By: /s/ Tung-On Kong Tung-On Kong

21 22

WILSON SONSINI GOODRICH & ROSATI Professional Corporation One Market Street Spear Tower, Suite 3300 San Francisco, CA 94105-1126 Telephone: (415) 947-2000 Facsimile: (415) 947-2099

23 24 25 26

Attorneys for Plaintiff NUANCE COMMUNICATIONS, INC.

27 28 OPPOSITION TO MOTION TO DISMISS Case No. C 08-02912 JSW MEJ

15