Intellectual Property - Trademark - The World in U.S. Courts: Winter 2019

March.11.2019

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Personal Jurisdiction to Support Preliminary Injunction Against Dubai- and Belarus-Based Defendants in Trademark Infringement Suit Based on Three Purchases of Cryptocurrency in New York

Alibaba Group Holding Limited v. Alibabacoin Foundation, US District Court for the Southern District of New York, October 22, 2019

The parent of the Alibaba web services conglomerate sued various Dubai- and Belarus-based companies and individuals for trademark infringement, alleging improper use of Alibaba marks to promote a cryptocurrency called AlibabaCoin. Alibaba sought a preliminary injunction, which requires at least a “reasonable probability” that the Court could assert personal jurisdiction over the defendants. The Court explained that jurisdiction would be proper if consistent with New York law and the Due Process Clause of the US Constitution.

The key New York provision authorizes jurisdiction over parties that “transact business” in the state, a requirement that has been defined potentially to be satisfied by even one commercial contact with a New York resident if “purposeful and there is a substantial relationship between the transaction and the claim asserted.” Jurisdictional discovery revealed at least three transactions in which a New York resident purchased AlibabaCoin. The defendants argued that these purchases were not New York transactions but rather “ledger entries made in Minsk, Belarus, following observation of changes in ‘blockchain’ data outside the United States.” The Court rejected this description, concluding instead that the purchases should be deemed to have occurred “where the buyer clicks the button that commits her to the terms of sale.” The defendants next argued that any contacts with New York residents could not have been “purposeful” since the fact of a New York purchaser was a matter of happenstance. The Court also rejected this argument, citing authority finding purposeful conduct in the electronic transmission of files in response to an order and the maintenance of an interactive website that could be accessed in the US. Finally, the Court rejected the defendants’ argument that isolated contacts could not support specific personal jurisdiction over transactions with residents of other States, observing that jurisdiction attaches not only to claims arising out of a defendant’s contacts with the forum but also claims that are “related” to those contacts. While at some point Alibaba would be required to establish personal jurisdiction over each defendant, the Court concluded that it had met the “reasonable probability” standard for a preliminary injunction through evidence that the defendants collectively were responsible for the sale and marketing of AlibabaCoin and had blurred their own distinct roles in promotional materials.

The Court explained that satisfaction of New York’s requirements for the assertion of personal jurisdiction meant that Due Process requirements of minimum contacts and a relation between those contacts and the plaintiff’s claims were also met. Due Process does, however, impose an independent “reasonableness” requirement, and the Court found this was satisfied by Alibaba’s and New York’s interest in litigating the matter and the defendants’ failure to demonstrate that litigation in the US would pose an extraordinary burden for them.

[Editor’s note: The Alibaba Group case is also discussed in the Personal Jurisdiction/Forum non Conveniens section of this report.]

Alleged Trademark Infringement on Non-US Websites and Failure to Plead Effect on US Commerce Doom Lanham Act Claim

Levy v. Adidas AG, US District Court for the Central District of California, November 13, 2018

The plaintiff Levy sued the US subsidiary of the sports mega-brand Adidas for infringement of a US trademark. The Court observed that Levy’s citations of allegedly infringing promotional materials all came from Adidas websites outside the US, with the complaint’s only “explicit” reference to conduct in the US the allegation that “[t]he foregoing depictions on Adidas’ sales web sites shows that Adidas has sold and is marketing and selling its products bearing the Marks directly to consumers, as well as to retailers, who in turn have sold and are selling that clothing to consumers within and outside the US.”

The Court explained that suits for trademark infringement under the Lanham Act may apply to extraterritorial conduct in limit circumstances, where:

(1) the alleged violations create some effect on American foreign commerce;
(2) the effect is sufficiently great to present a cognizable injury to the plaintiffs under the Lanham Act; and
(3) the interests of and links to American foreign commerce are sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.

The Court found this test not met as regards alleged infringement appearing on non-US websites. It noted that only “some” effect on US commerce need be shown, with the first and second requirements above usually satisfied in such case where infringement has occurred outside the US and infringing goods were imported into the US, causing monetary or reputational injury to a US plaintiff. However, Levy’s naked allegation that the value of his trademark has been injured, with no “details” of that injury, were improperly “conclusory” and inadequate to satisfy his pleading burden.

Lanham Act Claim Proceeds Based Solely on Use of Allegedly Infringing Trademark at Trade Fair in Germany Attended by Major US Buyers

Luv N’ Care, Ltd. v. Laurain, US District Court for the Western District of Louisiana, November 29, 2018

The parties both sell silicone feeding mats for young children. As relevant here, the counterclaim-plaintiff, a company referred to as EZPZ, sued Luv N’ Care (LNC) for trademark infringement and other claims under the Lanham Act. LNC argued that it was entitled to summary judgment on the claim because it engaged in no allegedly infringing conduct in the US—specifically, that it advertised the allegedly infringing product at a trade fair in Germany and had “never advertised, promoted, marketed, packaged, used, offered for sale, or sold any product” in the US market—and the Lanham Act thus could not apply. EZPZ responded that the trade fair was attended by major US buyers, and that established the likelihood of significant sales warranting discovery of the facts.

The Court agreed that the Lanham Act could apply to conduct outside the US only in limited circumstances, notably where such conduct had “some” effect on US commerce. The Court stated that the statute’s extraterritorial application would generally be guided by consideration of three factors: “the citizenship of the defendant, the effect on US commerce, and the existence of a conflict with [non-US] law.” In reaching its decision, however, the Court focused just on the inference if major US buyers were present at a trade show in Germany it was plausible that “some” effect on US commerce occurred as a result. The court thus declined to enter judgment for LNC motion and set the matter for further litigation.

German Company’s Use of a US Affiliate as its Distributor of an Allegedly Infringing Product Supports Assertion of Personal Jurisdiction

T.R.P. Company, Inc. v. Similasan AG, US District Court for the District of Nevada, November 27, 2018

T.R.P. sued Similasan, a German company, for trademark infringement. Similasan moved to dismiss the complaint on grounds that it had insufficient contacts with the US to support the assertion of personal jurisdiction over it consistent with the Due Process Clause of the US Constitution.

The Court stated that a trademark infringement claim would be treated as a tort for purposes of the jurisdictional analysis, and thus the plaintiff must show that Similasan “purposefully directed” its activities toward the forum, that its claims “arise out of or relate to” those contacts, and that the assertion of jurisdiction otherwise would be “reasonable.” Moreover, because a federal trademark infringement claim had been brought and Similasan had identified no US State in which it claimed sufficient contacts to be sued, the Due Process inquiry under Federal Rule of Civil Procedure 4(k) would look to the German company’s contacts with the US as a whole.

The Court stated that the “purposeful direction” requirement would be judged under the “Calder effects test,” which requires a plaintiff to show that the defendant “(1) committed an intentional act; (2) expressly aimed at the forum state; and (3) the defendant knew that the brunt of the harm was likely to be suffered in the forum state.” The “intentional” nature of Similasan’s alleged infringement was found through the denial of trademark protection for the company’s product because of T.R.P.’s preexisting mark. Targeting of the US (requirements (2) and (3)) was found through the German company’s designation of an affiliate as its US distributor.

The requirement that the plaintiff’s claim arise from or relate to the defendant’s contacts with the forum was construed to mean that the plaintiff’s claim would not have arisen “but for” the defendant’s conduct, and the Court found this requirement easily satisfied as well.

Finally, the Court found the exercise of personal jurisdiction over Similasan to be reasonable, concluding that every relevant factor supported that determination. In so doing it focused on Similasan’s substantial focus on the US, the relatively modest burden imposed on it by the litigation (especially in light of the presence in the US of Similasan’s distributor-affiliate), and the fact that no forum could litigate the matter more efficiently given the location of the witnesses and the progress of the case.

[Editor’s Note: The T.R.P. case is also discussed in the Personal Jurisdiction/Forum non Conveniens section of this report]

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