IP Law Daily, TRADEMARK—W.D.N.C.: Dutch firm must correct misrepresentations made to Dutch court in concurrent international litigation, (Jun 29, 2023)

By Ursula Furi-Perry, J.D., MBA

Consideration of principles of international comity weighed against enjoining a party from proceeding with foreign litigation, but prior misrepresentations made to the foreign court needed to be corrected.

In a dispute between a North Carolina cybersecurity firm and its former Netherlands-based partner, involving claims in both federal court in the United States and different courts in the Netherlands, the federal district court in Asheville, North Carolina, held that consideration of principles of international comity weighed against enjoining the Dutch company from proceeding with the foreign litigation. An antisuit injunction would effectively restrict the foreign court’s ability to exercise its jurisdiction, the court noted, which would convey a lack of confidence in the foreign court; moreover, the foreign court could issue a similar injunction, causing both actions to be paralyzed. Although the court denied U.S. company’s motion for antisuit injunction, it ordered the Dutch company to correct certain misrepresentations made to the Dutch court, which were material and significant, creating a risk of inconsistent, conflicting, and erroneous judgments which will neutralize or negate the court’s rulings (dmarcian, Inc. v. DMARC Advisor BV, June 27, 2023, Reidinger, M.).

Background. The litigation involves a dispute between a North Carolina cybersecurity firm, dmarcian, Inc. (“dmarcian”) and its former Netherlands-based partner, DMARC Advisor, BV, formerly known as demarcian Europe, B.V. (“DMARC”). The parties had entered into an agreement, not reduced in writing, to sell dmarcian’s software—which helps users authenticate incoming emails—in Europe and Africa. Disagreements arose in 2019, prompting DMARC to file two lawsuits in the Netherlands and dmarcian to file a suit in the United States. Dmarcian asserted claims for breach of contract, copyright infringement, trademark infringement and false designation of origin under the Lanham Act, misappropriation of trade secrets under the Defend Trade Secrets Act and the North Carolina Trade Secrets Act, and various state law claims. DMARC moved to dismiss for lack of personal jurisdiction and forum non conveniens and demarcian moved for a preliminary injunction. On May 26, 2021, the court issued an order denying DMARC’s motion to dismiss and granting dmarcian’s motion for a preliminary injunction. In August 2021, the court issued an order finding DMARC in contempt of the preliminary injunction’s trademark prohibitions and an order denying DMARC’s motion for a stay pending appeal. DMARC appealed all three orders.

In February 2023, the U.S. Court of Appeals for the Fourth Circuit ruled that the district court did not err in exercising jurisdiction over the Dutch firm and enjoining it from providing software services to customers outside of Europe and Africa, making changes to the American firm’s copyrighted software, using the American firm’s trademarks, or making public statements about the American firm, pending resolution of the case on the merits. The district court also did not abuse its discretion in holding the Dutch company in contempt for violating the preliminary injunction’s trademark prohibitions. However, the amount of sanctions—$335,000 for 67 days of violative conduct—was vacated and remanded for the district court to explain how the $5,000 per day sanction was “rationally related” to the harm suffered by the American company.

Meanwhile, after various investigations and interim proceedings, the case continued in the Rotterdam District Court in the Netherlands, and dmarcian sought to stay the Rotterdam proceedings in favor of the U.S. case, which was opposed by DMARC. As part of its opposition, DMARC submitted its counsel’s pleading notes, which claimed: “Unlike in Dutch procedural law, a plaintiff in the United States can start a case and gradually adjust his claims and basis. Therefore, it cannot be said that, translated to Dutch proportions, [dmarcian] in the United States on March 12, 2021, a case on the merits has begun.” In 2022, the Rotterdam Court denied dmarcian’s request to stay and granted preliminary and interim relief to DMARC. In May 2023, the Hague Appellate Court reversed those judgments, holding that the claims could not be allowed at that point, nor were they allowed at the time of the judgment. Returning to the North Carolina district court, dmarcian filed a motion for antisuit injunction and a motion to require correction of misrepresentations made to the Dutch court.

Antisuit injunction. The district court, as a threshold matter, noted that the parties in the U.S. litigation were not exactly the same as the parties in the Dutch case. Moreover, the claims differed: while dmarcian asserted intellectual property claims under U.S. laws in the current matter, including claims for copyright infringement, trademark infringement, and false designation, the claims in the Dutch litigation centered on Dutch, Bulgarian, and E.U. copyright laws and Dutch contract and tort law.

As the Fourth Circuit had not adopted a particular standard, the court noted a circuit split in determining whether a foreign antisuit injunction should issue: while some circuits took a conservative approach, others chose a more liberal one that placed only modest emphasis on international comity. Ultimately, the court held that consideration of principles of international comity weighed against enjoining DMARC from proceeding with the Rotterdam Court litigation. An antisuit injunction would effectively restrict the foreign court’s ability to exercise its jurisdiction, the court noted, which would convey a lack of confidence in the foreign court; moreover, the foreign court could issue a similar injunction, causing both actions to be paralyzed. The court rejected dmarcian’s argument that factors considered in the liberal approach should be weighed more heavily, noting that those factors do not outweigh the important principles of comity.

Additionally, dmarcian asked the court to require DMARC to correct certain misrepresentations made to the Dutch Court regarding the status of the U.S. case, including misrepresentations by the party’s counsel that the filing of the U.S. complaint in March 2021 sought only interim injunctive relief and therefore did not begin a case on the merits. The court found those misrepresentations to be material and significant, noting that they created a risk of inconsistent, conflicting, and erroneous judgments which will neutralize or negate its rulings. Those false and misleading statements caused the Dutch court to conclude that dmarcian’s complaint sought only provisional relief, the court held, and therefore did not constitute a commencement of proceedings on the merits.

Conclusion. The court denied dmarcian’s motion for antisuit injunction, but ordered DMARC to correct the misrepresentations made to the Dutch court in writing.

The Case is No. 1:21-cv-00067-MR.

Attorneys: David A. Dorey (Blank Rome LLP) for dmarcian, Inc. Pressly M. Millen (Womble Bond Dickinson [US] LLP) for DMARC Advisor BV f/k/a Dmarcian Europe BV.

Companies: dmarcian, Inc.; DMARC Advisor BV f/k/a Dmarcian Europe BV

Cases: Copyright Trademark TechnologyInternet TradeSecrets NorthCarolinaNews