Personal jurisdiction and the online marketplace
Generally, in the US, personal jurisdiction over a party based in whole or in part on an Internet website accessible within the jurisdiction is a factual determination related to the interactivity of the website. For example, the mere accessibility of a website from within the jurisdiction is not sufficient.
On the other hand, a website that allows a resident of the jurisdiction to take additional action, such as purchasing goods for shipment, requesting catalogues, signing up for membership or similar activities, may amount to sufficient contact for proper exercise of personal jurisdiction over a party.
In Chloe, the plaintiffs, luxury goods company Chloe SA and its exclusive licensee and division Chloe NA in the US, brought suit in the Southern District of New York against several defendants, including Ubaldelli, a principal and operator of the online retailer Queen Bee of Beverly Hills, LLC. The defendants sold counterfeit goods, including a Chloe-branded handbag, through their website.
Queen Bee’s website allowed the goods to be viewed and purchased either by telephone or by placing an order online through PayPal. Chloe directed an administrative assistant at its US law firm to place an online order for a Chloe-branded handbag from the site to be shipped to an address in the Bronx, New York. The handbag was shipped from Ubaldelli’s Beverly Hills address to New York and was determined by Chloe to be counterfeit.
“Generally, in the US, personal jurisdiction over a party based in whole or in part on an Internet website accessible within the jurisdiction is a factual determination related to the interactivity of the website. For example, the mere accessibility of a website from within the jurisdiction is not sufficient.”
Additionally, Queen Bee sold goods from a show room in Beverly Hills, California, shipped goods from California and Alabama, conducted ‘trunk shows’ across the country, and offered to sell and ship designer handbags anywhere within continental US. Specifically, the defendants sold a substantial quantity of counterfeit Chloe-branded products to other states and made at least 52 sales of non-Chloe merchandise in New York. But the shipment of the Chloe handbag to the administrative assistant was the only sale of Chloe-branded merchandise within the state.
Defendant Ubaldelli moved for summary judgment for lack of personal jurisdiction, arguing in part that a single sale to the state did not amount to the minimum contacts necessary to vest jurisdiction. The district court agreed and granted Ubaldelli’s motion.
On appeal, the Second Circuit reversed, finding the “totality of all [Ubaldelli’s] contacts” with New York sufficient to properly exercise jurisdiction over him. Notably, the court declared that “this case involves an update to our jurisprudence on personal jurisdiction in the age of internet commerce”.
The court held that “on the basis of the facts contained in the record…the single act of an out-of-state defendant employee shipping an item into New York, combined with his employer’s extensive business activity involving New York, gives rise to personal jurisdiction”.
The court emphasised that the sales of non-Chloe goods sufficiently “relate to” the plaintiff ’s claim, stating that the district court construed the relevant contacts “too narrowly”. As a result, the single shipment could not be considered a “one-off” transaction. The court went further to suggest that under New York’s case law, the single act may be enough, by itself, to subject the defendant to jurisdiction, though it declined to specifically decide that issue.
The court similarly declined to address how a “manufactured contact”, made by an agent or investigator of the plaintiff, is to be treated for purposes of infringement claims, but was clear that a “manufactured contact” is relevant to the jurisdiction analysis.
This “update” to personal jurisdiction jurisprudence in connection with the online marketplace provides substantial support to trademark owners’ ability to bring online sellers of counterfeit goods into court. And as a practical matter, it gives useful guidance as to the relevance of purchases made by a plaintiff ’s agent or investigator, whether made for the purposes of determining authenticity or not, in support of personal jurisdiction over an out-of-state defendant.
Robert Kenney is a partner at Birch, Stewart, Kolasch & Birch, LLP. He can be contacted at: rjk@bskb.com
Katie Peden is an associate at Birch, Stewart, Kolasch & Birch, LLP. She can be contacted at: katherine.m.peden@bskb.com
