It is hereby ordered that the order so appealed from is unanimously affirmed without costs.
Memorandum: Plaintiffs commenced this action seeking, inter alia, to enjoin defendants from making any conveyance, agreement or transaction that conflicts with a covenant in a 1982 agreement between plaintiff National Urban Ventures, Inc. (formerly known as Lehr's Greenhouse Restaurant of New York, Inc.) and defendants. We conclude that Supreme Court properly granted defendants' motion for summary judgment dismissing the complaint. Contrary to plaintiffs' contention, the covenant contained in the 1982 agreement did not run with the land, and thus the action is time-barred.
"Restrictive covenants are also commonly categorized as negative easements. They restrain servient landowners from making otherwise lawful uses of their property . . . However, the law has long favored free and unencumbered use of real property, and covenants restricting use are strictly construed against those seeking to enforce them" ( Witter v Taggart, 78 NY2d 234, 237-238). "Subject to a few exceptions not important at this time, there is now in this State a settled rule of law that a covenant to do an affirmative act, as distinguished from a covenant merely negative in effect, does not run with the land" ( Guaranty Trust Co. of N.Y. v New York Queens County Ry. Co., 253 NY 190, 204 [1930], rearg denied 254 NY 126, appeal dismissed 282 US 803). Where, however, a covenant runs with the land, the covenant will be enforceable against any subsequent purchaser of the land ( see generally Neponsit Prop. Owners' Assn. v Emigrant Indus. Sav. Bank, 278 NY 248, 254-255 [1938], rearg denied 278 NY 704). Here, plaintiffs seek to enforce an affirmative covenant in the 1982 agreement. We note in addition that defendants established that there was no apparent intent for the covenant to run with the land, and plaintiffs failed to raise a triable issue of fact with respect to intent ( see generally 328 Owners Corp. v 330 W. 86 Oaks Corp., 8 NY3d 372, 382-383; Village of Philadelphia v FortisUS Energy Corp., 48 AD3d 1193, 1194-1195).
Because the covenant does not run with the land, the issue before us is whether plaintiffs timely commenced this action seeking to enforce it. As defendants correctly contend, "[i]t is a familiar principle of law that[,] where no time is fixed in a contract, the law may imply a reasonable time" for, in this case, seeking to enforce a covenant ( Webster's Red Seal Pubis, v Gilberton World-Wide Pubis., 67 AD2d 339, 343, aff'd 53 NY2d 643; see Savasta v 470 Newport Assoc., 82 NY2d 763, 765, rearg denied 82 NY2d 889; Sharper v Harlem Teams for Self-Help, 257 AD2d 329, 332). The length of time that is reasonable "will depend upon the facts and circumstances of the particular case" ( Sharper, 257 AD2d at 332). We have previously held, in a similar action involving Niagara Falls Urban Renewal Agency, a defendant in this action, that a delay of 17 years before seeking to enforce a covenant was unreasonable as a matter of law ( see Bainbridge-Wythe Partnership v Niagara Falls Urban Renewal Agency, 294 AD2d 806, lv denied 98 NY2d 613). We thus conclude that this action to enforce the covenant in the 1982 agreement was not commenced within a reasonable time.
ies at residents of California and therefore satisfies the first prong of the
Akro test.
Abbyy Production's actions also satisfy the second prong of the Akro test, that the claims arise out of or relate to the purposefully directed activities, because Nuance's infringement claims relate to Abbyy Production's importation of goods into California. Nuance alleges in its complaint that Abbyy Production directly infringes and infringes by inducement by "importing into this country" certain software products including at least the FineReader line of products. The Abbyy defendants did not dispute this in their declarations before the district court. Nevertheless, Appellees now argue, without citation, that Abbyy Production by definition cannot import products within the meaning of § 271(a) because Abbyy Production has no physical presence in California. To the contrary, the record shows that Abbyy Production provided copies of the accused software products to Abbyy USA, a California entity. By operation of the Agreement, Abbyy Production retains ownership in the accused software even after that software enters California. Greater than ninety-five percent of the profits in California flow to Abbyy Production. Under these facts, Abbyy Production has sufficient presence in the forum for importation under 35 U.S.C. § 271(a). Cf. MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1376-77 (Fed. Cir. 2005) (affirming summary judgment of no direct infringement by defendant where defendant manufactured accused product overseas, sold those products to another party overseas, who then employed yet another party to package and send the products free-on-board to a U.S. entity, where title passed to the U.S. entity.)
Abbyy Production also runs afoul of the Supreme Court's and this court's stream of commerce jurisprudence. In World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), the Supreme Court stated that a defendant could purposefully avail itself of a forum by "deliver[ing] its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum [s]tate." In Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), a plurality of four justices concluded that something more was required — " an action of the defendant purposefully directed toward the forum state." Id. at 112, 107 S.Ct. 1026. The cited examples of purposeful direction included "marketing through a distributor . . . in the forum [s]tate" and "providing regular advice to customers." Id. Four other justices considered the showing of additional conduct unnecessary. Id. at 117, 107 S.Ct. 1026.
In Beverly Hills Fan, this court addressed the stream of commerce theory in the context of intellectual property interests, reversing a district court's dismissal on personal jurisdiction grounds of a foreign manufacturer and an out-of-state distributor. 21 F.3d at 1560, 1566. Although the foreign manufacturer had no license for doing business in the forum, no assets, employees, or agents for service of process in the forum, and no direct sales in the forum, this court found the exercise of jurisdiction proper because the manufacturer purposefully shipped products through an established distribution channel with the expectation that those products would be sold in the forum. Id. at 1564-67. The court declined to address whether the exercise of personal jurisdiction requires something more than the mere act of placing a product in the stream of commerce with the expectation that it would be purchased in the forum state, finding that the plaintiff made the required jurisdictional showing under either version of the stream of commerce theory. Id. at 1566.
Nuance has also made this required jurisdictional showing. Abbyy Production purposefully ships the accused software products into California through an established distribution channel, with the expectation that copies of those products will be sold in California. Unlike Beverly Hills Fan, which involved the more attenuated connection of an out-of-state distributor, see id. at 1559-60, Nuance brought suit in the same forum in which Abbyy Production's distributor, Abbyy USA, is located. Moreover, under the Agreement, Abbyy Production has agreed to furnish Abbyy USA with new versions and updates of the Software, technical support, and oral and written consultations. The Supreme Court has endorsed precisely this sort of purposeful activity as reinforcing the proper exercise of jurisdiction. See Asahi, 480 U.S. at 112, 107 S.Ct. 1026.
Although Appellees argue that Abbyy Production is merely licensing the rights to software in exchange for royalty payments, this distinction is irrelevant for jurisdictional purposes. Abbyy Production has purposefully imported the accused products into California, made those products available for sale through an established distribution chain, and the cause of action for patent infringement is alleged to arise out of these activities. No more is required for specific jurisdiction. See Burger King Corp., 471 U.S. at 472-73, 105 S.Ct. 2174; Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774-75, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984); Beverly Hills Fan, 21 F.3d at 1565.
With respect to the third prong of the Akro test, Appellees contend that assertion of jurisdiction over Abbyy Production would be unfair, relying principally on Asahi In Asahi the Supreme Court held that a California court's otherwise constitutional exercise of jurisdiction was unreasonable because of the substantial burdens on a foreign defendant. 480 U.S. at 115, 107 S.Ct. 1026. However, Asahi involved an upstream supplier who did not create, control, or employ the distribution system that brought its goods (tire valves) to California. Id. at 112-13, 107 S.Ct. 1026. In contrast, Abbyy Production established a distribution system with Abbyy USA that was intended to deliver products to the U.S. market via a commonly owned California entity. Abbyy Production knew the destination of its products, and its conduct and connections with the forum state were such that it should have reasonably have anticipated being brought into court there. See World-Wide Volkswagen, 444 U.S. at 292, 100 S.Ct. 559. Additionally, Abbyy Production and Abbyy USA share the same counsel and operate under a consolidated Global Management Team. These relationships should ameliorate any possible burden of litigating in California. See Patent Rights Prot. Grp., LLC v. Video Gaming Techs., Inc., 603 F.3d 1364, 1370 (Fed. Cir. 2010). Because the exercise of jurisdiction over Abbyy Production would not violate due process, and because California's long-arm statute is coextensive with federal due process, this court concludes that the district court erred when it declined to exercise personal jurisdiction over Abbyy Production.
Nuance also challenges the district court's dismissal of Abbyy Software on personal jurisdiction grounds. Nuance contends that Abbyy Software purposefully directs its activities at residents of California through the importation and sale of infringing products via distribution channels it controls; while Appellees maintain that Abbyy Software is simply a holding company that neither imports nor sells goods in California or elsewhere.
The limited evidence of record supports Nuance's contention that Abbyy Software functions as more than a holding company. Abbyy Software's website portrays Abbyy as a single company with offices in many countries, including the United States. The CEO of Abbyy Software, who expressed a desire to return to the U.S. market, is both the founder of the Abbyy companies and the Chairman of Abbyy's Global Management Team, which includes among its members the CEOs of Abbyy USA and Abbyy Production. Abbyy Software's website lists multiple California entities as customers of the accused products, including Hewlett-Packard, Alameda County, and Los Angeles County. Abbyy Software's website also promotes the sale of these products in California by providing the names and contact information for retail stores located in California as well as online stores that sell the FineReader product.
Similar facts have been held to establish a prima facie case of jurisdiction. For example, in Cardsoft, Inc. v. Verifone Holdings, Inc., No. 08-098, 2009 WL 361069, at *l-2 (E.D.Tex. Feb. 10, 2009), the district court held that a prima facie showing for the exercise of personal jurisdiction had been made over a foreign entity that alleged it was merely a holding company. The district court in that case noted that the company advertised the accused products on its website, shared an overlapping management team with its domestic subsidiary, and enjoyed revenues from the sales of allegedly infringing products. Id. at *1.
Nevertheless, the extent of Abbyy Software's involvement remains uncertain. Abbyy Software does not directly sell products through its website or otherwise. The record does not show at this point that Abbyy Software receives revenue from the sale of the accused software. Abbyy Production, not Abbyy Software, appears to develop the accused software and import master copies of that software into California. While the Global Management Team and the statements in the Trade Secret Magazine article suggest that Abbyy Software exerts some control over its subsidiaries, the record is unclear about the degree to which Abbyy Software intentionally established distribution channels that it knew, or could have foreseen, terminated in California. Thus, on this record, this court cannot determine that Abbyy Software purposefully availed itself of the privilege of conducting activities in California by some affirmative act or conduct, and that Nuance's claims arise out of those activities.
In the alternative, Nuance appeals the de facto denial of its request for jurisdictional discovery. "We review the district court's denial of discovery, an issue not unique to patent law, for abuse of discretion, applying the law of the regional circuit." Autogenomics Inc. v. Oxford Gene Tech. Ltd. 566 F.3d 1012, 1021-22 (Fed. Cir. 2009) applying Ninth Circuit law (citing Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006)). In the Ninth Circuit, "discovery should ordinarily be granted where pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary." Laub v. U.S. Dep't of the Interior, 342 F.3d 1080, 1093 (9th Cir. 2003) (quoting Butcher's Union Local No. 498 v. SDC Inv., Inc., 788 F.2d 535, 540 (9th Cir. 1986)). On the other hand, a trial court may deny jurisdictional discovery" when it is clear that further discovery would not demonstrate facts sufficient to constitute a basis for jurisdiction,'" Am. W. Airlines, Inc. v. GPA Group, Ltd., 877 F.2d 793, 801 (9th Cir. 1989) (quoting Wells Fargo Co. v. Wells Fargo Express Co., 556 F.2d 406, 430 n. 24 (9th Cir. 1977)), or where the request for discovery is "based on little more than a hunch that it might yield jurisdictionally relevant facts," Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008) (citing Butcher's Union, 788 F.2d at 540). "A decision to deny discovery will not be disturbed except upon the clearest showing that the denial of discovery results in actual and substantial prejudice to the complaining litigant." Laub, 342 F.3d at 1093 (citation and quotation marks omitted). "Prejudice is established if there is a reasonable probability that the outcome would have been different had discovery been allowed." Id.
The district court de facto denied Nuance's request for jurisdictional discovery by not addressing it in its dismissal order. See Nuance Commc'ns, 2009 WL 2707390. Yet Nuance's request for jurisdictional discovery is not "based on a mere hunch." See Patent Rights Prot. Grp., 603 F.3d at 1372. Rather, the request is supported by, inter alia, Abbyy Software's website and the Trade Secret Magazine article, which suggest that Abbyy Software controls the actions of its subsidiaries. Although the proffered documents may be insufficient in themselves to establish a prima face case, this incomplete record nevertheless supports the need for additional discovery to determine the merits of personal jurisdiction over Abbyy Software.
Appellees argue that Nuance's request for discovery was informal and untimely. However, Nuance incorporated its request for jurisdictional discovery into its opposition to the Abbyy defendants' motion to dismiss. J.A. 215 ("[I]f the Court requires additional evidence to resolve this matter, Nuance, in the alternative requests a continuance of the hearing date pending limited jurisdictional discovery.") Nuance had also served the Abbyy defendants with written discovery at the earliest possible opportunity, concomitant with its filing of the Amended Complaint. This markedly contrasts with the impermissible "eleventh-hour" discovery request made in Sopcak v. Northern Mountain Helicopter Service, 52 F.3d 817, 819 (9th Cir. 1995), where the plaintiff failed to conduct discovery during the nine-month period between the filing of the complaint and the court's dismissal order. Appellees also argue that Nuance did not specify material disputed issues of fact warranting discovery. To the contrary, in its opposition brief, Nuance specifically questioned Abbyy Software and Abbyy Production's control over Abbyy USA, as well as the veracity of the Abbyy declarants' statements in view of seemingly contradictory statements from the declarants' employers. "[D]iscovery should ordinarily be granted where pertinent facts bearing on the question of jurisdiction are controverted. . . ." Laub, 342 F.3d at 1093 (citation omitted). Accordingly, this court holds that the district court abused its discretion by dismissing Abbyy Software without jurisdictional discovery.
III.
"Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirements of service of summons must be satisfied." Omni Capital Int'l Ltd. v. Rudolf Wolff Co., 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987). The Federal Rules of Civil Procedure authorize the service of process made in this case. When decided without an evidentiary hearing, a district court's holding as to sufficiency of service receives no deference. In re Focus Media Inc., 387 F.3d 1077, 1081 (9th Cir. 2004); United States v. Ziegler Bolt Parts Co., 111 F.3d 878, 880 (Fed. Cir. 1997).
Fed.R.Civ.P. 4(h)(2) states that a foreign corporation served outside the United States must be served "in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery under (f)(2)(C)(i)." Rule 4(f) states that an individual in a foreign country may be served as follows:
(1) by any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents;
(2) if there is no internationally agreed means, or if an international agreement allows but does not specify other means, by a method that is reasonably calculated to give notice:
(A) as prescribed by the foreign country's law for service in that country in an action in its courts of general jurisdiction;
(B) as the foreign authority directs in response to a letter rogatory or letter of request; or
(C) unless prohibited by the foreign country's law, by:
(i) delivering a copy of the summons and of the complaint to the individual personally; or
(ii) using any form of mail that the clerk addresses and sends to the individual and that requires a signed receipt; or
(3) by other means not prohibited by international agreement, as the court orders.
Fed.R.Civ.P. 4(f).
The Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, Nov. 15, 1965 (Hague Service Convention), (1969) 20 U.S.T. 361, T.I.A.S. No. 6638, referenced in Rule 4(f)(1) above, is a multinational treaty that governs service of summons on persons in signatory foreign countries. Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698, 108 S.Ct. 2104, 100 L.Ed.2d 722 (1988). Each member state must establish a "central authority" for receiving and processing requests for service upon defendants residing within the state. Id. at 698-99, 108 S.Ct. 2104. Once a central authority receives a request in the proper form, it must serve the documents by a method prescribed by the internal law of the receiving state or by a method designated by the requester and compatible with that law. Id., at 699, 108 S.Ct. 2104. A signatory to the Convention may also consent to other methods of service within its boundaries, see 20 U.S.T. 361, T.I.A.S. No. 6638, Arts. 8, 10, but the Russian Federation has objected to service under these provisions.
The district court granted the Abbyy defendants' motion to dismiss for failure to serve Abbyy Production in accordance with the Hague Convention. Although Nuance did not attempt to serve Abbyy Production through the central authority of the Russian Federation, the record indicates that Nuance could not have done so. According to a Bureau of Consular Affairs circular published by the U.S. State Department on Russia Judicial Assistance, "requests sent [via diplomatic channels or] directly by litigants to the Russian Central Authority under the Hague Service Convention are returned unexecuted." J.A. 316. Further, the State Department warns that "in the absence of a direct channel for U.S. judicial assistance, U.S. courts and litigants will explore other methods to effect service of process," such as service via an agent of the Russian Federation. J.A. 317. This resulted because the Russian Federation "unilaterally suspended all judicial cooperation with the United States in civil and commercial matters in 2003." J.A. 316.
While the State Department's website alone suggests that service via the Hague Convention would not have been possible, Nuance also submitted the declaration of Celeste Ingalls, Director of Operations of Crowe Foreign Services. She declared that "the Russian Federation does not consider the Hague Service Convention to be in effect between the Russian Federation and the United States, making service via the Hague Service Convention in the Russian Federation not possible." J.A. 222. While Appellees argue that service must have been attempted under the Hague Convention before alternative service methods can be employed, this court disagrees. Rule 4 "was not intended to burden plaintiffs with the [S]isyphean task of attempting service through the Hague Convention procedures when a member state has categorically refused" to effect service. See Arista Records LLC v. Media Servs. LLC, No. 06-15319, 2008 WL 563470, at *1 (S.D.N.Y. Feb.25, 2008). Indeed, numerous courts have found alternate service methods appropriate without a prior attempt to serve through the Hague Convention. See, e.g., In re LDK Solar Sec. Litig., No. 07-05182, 2008 WL 2415186, at *2 (N.D.Cal. June 12, 2008); In re Potash Antitrust Litig., 667 F.Supp.2d 907, 931 (N.D.Ill. 2009); Arista Records, 2008 WL 563470, at *1-2. This court holds that the district court erred in requiring service of Abbyy Production under the Hague Service Convention.
Nuance served Abbyy Production in Moscow by personal delivery. Appellees contend that Rule 4 broadly prohibits personal service on a foreign corporation out-side the United States, since Rule 4(h)(2) states that service may be made on a corporation outside the United States "in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery under (f)(2)(C)(i)." Nuance counters that personal service is appropriate if made under Rule 4(f)(2)(A), which provides for service "as prescribed by the foreign country's law for service in that country in an action in its courts of general jurisdiction."
The Ninth Circuit has observed that "courts have applied Rule 4(f)(2)(A) to approve personal service carried out in accordance with foreign law." Brockmeyer v. May, 383 F.3d 798, 806 (9th Cir. 2004). Indeed, numerous courts have upheld personal service on a foreign corporation under Rule 4(f)(2)(A). For example, in Joescan, Inc. v. LMI Technologies, Inc., No. 07-5323, 2007 WL 2253319, at *1 (W.D.Wash. Aug.2, 2007), the district court found that although not effected through the Canadian Central Authority under the Hague Convention, personal service on a Canadian company in Canada was proper because defendants were served in accordance with Canadian law. Similarly, in Cosmetech International, LLC v. Der Kwei Enterprise and Co., Ltd., 943 F.Supp. 311, 316 (S.D.N.Y. 1996), the court upheld service on a Taiwanese corporation by personal service on its manager in accordance with Taiwanese law. Thus, a corporation can be served by personal delivery under Rules 4(h)(2) and 4(f)(2)(A), provided that personal delivery is prescribed by the foreign country's laws for service in that country in an action in its courts of general jurisdiction.
Although contested by the parties, this court does not opine on whether the laws of the Russian Federation permit Nuance to personally serve Abbyy Production in its courts of general jurisdiction. Nor do we opine on the effect of the Russian Federation's objection to service of documents by methods listed in Articles 8 and 10 of the Hague Service Convention, which generally covers service by postal channels and through judicial officers or diplomatic and consular agents. See 20 U.S.T. 361, T.I.A.S. No. 6638, Art. 10.
Under Rule 4(f)(3), federal courts have discretionary authority to direct service "by other means not prohibited by international agreements." Fed.R.Civ.P. 4(f)(3); Brockmeyer, 383 F.3d at 805 (emphasis omitted). "Rule 4(f)(3) is not subsumed within or in any way dominated by Rule 4(f)'s other subsections; it stands independently, on equal footing." Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1015 (9th Cir. 2002). The Advisory Committee Note to Rule 4 explains that Rule 4(f)(3) is particularly appropriate where a signatory to the Hague Service Convention has "refused to cooperate for substantive reasons." Fed.R.Civ.P. 4, Advisory Committee Note to Subdivision (f) (1993). The Advisory Committee Note further explains that service under 4(f)(3) might be justified when the foreign country's central authority "refuses to serve a complaint seeking punitive damages or to enforce the antitrust laws of the United States." Id.
Courts have authorized a wide variety of alternative methods of service under Rule 4(f)(3). See Rio Props., 284 F.3d at 1016-19. One of these, substituted service, was expressly requested by Nuance in opposing the Abbyy defendants' motion to dismiss. Federal courts in California have authorized substituted service under Rule 4(f)(3) on California entities for foreign defendants, including foreign corporations. In Rio Properties, 284 F.3d at 1016-19, the Ninth Circuit affirmed court-ordered alternative service methods on a Costa Rican business entity under Rules 4(f)(3) and 4(h)(2). In addition to service via email, the district court ordered substitute service through the mail both to the U.S. office of the defendant's international courier and on the defendant's California based attorney. Id. at 1013. In In re LDK, 2008 WL 2415186, at *1, *4, the Northern District of California authorized service of process in the California office of a Chinese corporation under Rule 4(f)(3) as a substitute for service on individuals residing in China and for service on another Chinese company. China is a party to the Hague Convention. Id. at *1.
Substituted service under Rule 4(f)(3) has also been specifically used to serve litigants from the Russian Federation in multiple U.S. courts. See, e.g., In re Potash, 667 F.Supp.2d at 931-32 (directing substitute service of Russian defendants by four alternative methods including service on U.S. affiliate); Arista Records, 2008 WL 563470, at *1 (directing substitute service of process on Russian corporation's attorneys in New York City under Rule 4(f)(3)); RSM Prod. Corp. v. Fridman, No. 06-11512, 2007 WL 2295907, at *3 (S.D.N.Y. Aug.10, 2007) (directing substitute service of process on Russian defendant's attorneys in New York City).
Appellees nevertheless contend, without citation to any case, that Rule 4(f)(3) only authorizes service outside the United States. However, as described above, the Northern District of California has directed substituted service under Rule 4(f)(3) within California, and the Ninth Circuit has affirmed court-directed service within the United States. See, e.g., Rio Props., 284 F.3d at 1017-19; In re LDK, 2008 WL 2415186, at *1. "Defendants have provided no explanation for why transmittal abroad would be required in the present case, when federal law plainly permits service on Defendants' domestic subsidiaries or domestic counsel." In re Cathode Ray Tube Antitrust Litig., No. 07-5944, 2008 WL 4104341, at *1 (N.D.Cal. Sept.3, 2008).
Appellees also argue that Nuance did not show that Abbyy USA is Abbyy Production's "general manager" under Cal. Corp. Code § 2110, which allegedly fore-closes substituted service. This argument confuses service of process under Rule 4(f)(3), which provides for court-directed service "by any means not prohibited by international agreement," with service under Rule 4(e)(1), which does not require a court-order and provides for service by "following state law." Under California law, a foreign corporation may be served by serving that corporation's "general manager in [the] state." See Gray v. Mazda Motor of Am., 560 F.Supp.2d 928, 929-30 (C.D.Cal. 2008). However, this does not foreclose substituted service on others under Rule 4(f)(3). See Rio Props., 284 F.3d at 1017 ("Without hesitation, we conclude that each alternative method of service of process ordered by the district court was constitutionally acceptable.")
Appellees further argue that this court lacks jurisdiction to determine whether Abbyy USA may be served as Abbyy Production's general manager, since Nuance never attempted to serve Abbyy USA as the substitute for Abbyy Production. To the contrary, attempted service is not a prerequisite. "As obvious from its plain language, service under Rule 4(f)(3) must be (1) directed by the court; and (2) not prohibited by international agreement. No other limitations are evident from the text." Rio Props., 284 F.3d at 1014 (emphasis added).
The court-ordered method of service must still be reasonable and comport with constitutional notions of due process. To meet this requirement, the method of service crafted by the court must be "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Cent. Hanover Bank Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950). This court finds that substitute service on Abbyy USA would satisfy this standard, as it is reasonably calculated to apprise Abbyy Production of the pendency of the action and afford it an opportunity to respond. Indeed, the Trade Secret Magazine article reveals that Abbyy USA was effectively passing information about this lawsuit to Abbyy Production even before Nuance attempted to serve Abbyy Production. "Dismissal is not appropriate when there is a reasonable prospect that service may yet be obtained." Chapman v. Teamsters Local 853, No. 07-1527, 2007 WL 3231736, at *3 (N.D.Cal. Oct.30, 2007). On remand, the district court should therefore allow alternate service as it deems appropriate, including at least substitute service, pursuant to Rule 4(f)(3), of Abbyy Production by substitute service on Abbyy USA.
Nuance also appeals the district court's sua sponte dismissal of Abbyy Software under Rule 12(b)(5) for improper service of process. The district court's opinion did not include any analysis of Nuance's service on Abbyy Software separate and apart from its analysis of Abbyy Production. See Nuance Commc'ns, 2009 WL 2707390, at *2. Prior to Abbyy Software's dismissal, none of the parties provided any argument regarding sufficiency of service of process on Abbyy Software.
The district court erred by dismissing Abbyy Software for improper service on its own initiative. See Hemispherx Biopharma, Inc. v. Johannesburg Consol. Invs., 553 F.3d 1351, 1359 (11th Cir. 2008) ("Once a defendant has waived any objection to insufficient service of process, `the court may not, either upon the defendant's motion or its own initiative,' dismiss on that ground.") (internal citations omitted); Chute v. Walker, 281 F.3d 314, 319-20 (1st Cir. 2002). Dismissal of Abbyy Software was particularly problematic because the district court denied Nuance any opportunity to show that its service was proper. See Sanders v. Sw. Bell Tel, L.P., 544 F.3d 1101, 1111 (10th Cir. 2008) (reversing the district court's sua sponte dismissal for improper service of process under Rule 4(m) because the court did not give the plaintiffs notice and an opportunity to be heard). Dismissal was also particularly problematic because the district court discusses only service in Russia, which is irrelevant to service on Abbyy Software, a Cypriot entity. See Nuance Commc'ns, 2009 WL 2707390, at *1-2. Accordingly, this court reverses the district court's dismissal of Abbyy Software for improper service of process under Rule 12(b)(5). Further, under Rules 12(g) and 12(h)(1), the Abbyy defendants have waived this defense by failing to raise it in their first motion under Rule 12(b). See Rates Tech. Inc. v. Nortel Networks Corp., 399 F.3d 1302, 1307 (Fed. Cir. 2005) (advising that a litigant must exercise great diligence in challenging service of process, as this defense is waived at the time "the first significant defensive move is made").
IV.
On review of the record, this court concludes that the district court erred when it declined to exercise jurisdiction over Abbyy Production and abused its discretion when it denied Nuance's request for jurisdictional discovery. This court further concludes that the district court erred when it dismissed the Abbyy defendants for improper service of process. This court vacates the district court's judgment and remands for further proceedings consistent with this opinion.
REVERSED-IN-PART, VACATED-IN-PART, and REMANDED.
COSTS
Each party shall bear its own costs.