An interesting issue of contract law emerged from a patent dispute in the Southern District of New York in mid-October. Perry Street Software, Inc. v. Jedi Technologies, Inc. involved a motion to compel arbitration involving dating apps, patents, and Terms of Service.
Jedi Technologies holds a patent used by many dating mobile applications. Perry Street owns two properties in that space, called SCRUFF and JACK’D. Lawyers for Jedi claim to have found their patent being infringed by the SCRUFF app, and sent Perry Street a demand letter with screenshots documenting the alleged infringement.
Evidently Perry Street did a good job examining the screenshots, because they were able to ascertain through geolocation (and a clumsy username, “jediscruff”) that Jedi’s lawyer in the matter had installed SCRUFF on his own phone. According to Perry Street, he would have had to agree to the app’s Terms of Service (TOS) to do so — and thus purportedly bound his client to mandatory arbitration of the intellectual property dispute. So, this part of the Perry Street v. Jedi litigation has nothing to do with patents, but rather whether the conduct of Jedi’s attorney would bind Jedi to the TOS.
After narrowing down the issues, the only question left for the court was whether Jedi effectively entered into an agreement to arbitrate when the attorney downloaded the app. If the company did not agree, then the parties would proceed with the litigation.
The court noted other cases holding that merely retaining an attorney doesn’t make the attorney an agent who could bind the client to any agreement. An agent could agree on behalf of its client/principals if the client expressly authorizes the agent to enter into agreements on their behalf. (For example, settlement authority: “you can offer them up to $x.”) That was the only way that the company could be bound by its attorney’s agreeing to a TOS.
Jedi further argued that its lawyer had an obligation to download the app in order to comply with Rule 11 of the Federal Rules of Civil Procedure — the rule against bringing a frivolous lawsuit or otherwise engaging in conduct that has no basis in law or fact. For patent cases, in particular, Jedi said the attorney had to investigate the purportedly infringing app, and could not simply rely on his client’s assessment of the infringement before commencing the lawsuit. A good argument, the court agreed — but they had failed to put in a declaration from the attorney stating that he had downloaded the app in order to comply with Rule 11. Absent such declaration, there was no evidence to back up the otherwise good argument — and without such evidence, the court had no way to know why the lawyer went onto the dating site.
Wrapping it up, the judge issued a 30-day temporary injunction for Jedi to re-package its response to Perry Street’s motion to compel.
This ruling struck me as an unusual one. It’s as if the judge was saying to Jedi, “You quoted the right law, but you haven’t given me the right facts. I bet you can pull together the right facts for this.” I’ve found that judges would prefer to address the merits of a case, rather than throw it out over a technicality that could be fixed (and once fixed, to be re-filed, starting from scratch and resolving nothing).
