In a victory to trademark owners battling online counterfeiters, the U.S. Court of Appeals for the Second Circuit held that the sale and shipment into New York of one counterfeit product, coupled with defendant’s interactive website selling counterfeit goods, was sufficient to establish personal jurisdiction over the defendants in the trademark owner’s home state of New York. Chloé v. Queen Bee of Beverly Hills, LLC, Case No. 09-3361 (2d Cir., Aug. 5, 2010) (Hall, J.) In reversing the district court’s refusal to exercise jurisdiction over the defendant located in California, the 2d Circuit noted that its decision was “an update” to “jurisprudence on personal jurisdiction in the age of Internet commerce.”
Plaintiff Chloé is a French fashion house that sells, among other things, designer handbags and purses. Chloé owns the mark CHLOÉ for handbags. Plaintiff Chloé SA is the exclusive U.S. licensee of the CHLOÉ mark for all CHLOÉ-branded goods. After the plaintiff learned that defendant Queen Bee was selling counterfeit CHLOÉ-brand merchandise through Internet websites, an employee at the plaintiff’s law firm ordered an alleged CHLOÉ-brand purse through defendant’s website, which was determined to be counterfeit. The plaintiff sued Queen Bee and its principals in the Southern District of New York for trademark infringement and trademark counterfeiting.
Simone Ubaldelli, one of Queen Bee’s principals and a California resident, moved to dismiss the case against him on the basis that the court lacked personal jurisdiction. Ubaldelli argued that the lone sale and delivery of a counterfeit CHLOÉ purse to the plaintiff’s investigator was a “manufactured contact” that could not support personal jurisdiction in New York. The district court granted Ubaldelli’s motion. Although the evidence showed that Queen Bee had sold at least 52 separate products to New York customers, the court determined that personal jurisdiction did not exist because those products were sold under brands other than CHLOÉ, e.g., Gucci, Prada and Fendi. The court noted that the defendants’ sales of non-CHLOÉ brand merchandise constituted purposeful availment of New York for “some business activity,” but did not satisfy the minimum contacts requirement. The court explained that the defendants’ sales of non-CHLOÉ merchandise were insufficiently related to the plaintiff’s claims to exercise personal jurisdiction because those sales were not for the specific purpose of selling CHLOÉ-brand handbags, the activity upon which the plaintiffs’ complaint was based. Thus, the district court held that the defendants’ sale of a simple CHLOÉ-brand handbag to the plaintiffs’ investigator did not satisfy the minimum contacts required to exercise personal jurisdiction. The plaintiff appealed.
The Second Circuit reversed, finding that the district court had construed the nexus requirement for personal jurisdiction too narrowly when it determined that defendants’ relevant contacts with New York were limited to the single sale of a counterfeit CHLOÉ handbag. The Court explained that the nexus requirement “merely requires” a cause of action to “relate” to a defendant’s minimum contacts with the forum. Thus, the defendants’ sales of non CHLOÉ-brand merchandise to New York customers should have been considered as contacts. Further, the Court noted that the defendants’ sale of a counterfeit CHLOÉ handbag was not insignificant, as it showed “part of a larger business plan purposefully directed at New York consumers.”
Viewed in their totality, the Second Circuit found that the defendants’ “highly interactive” website that offered bags to New York customers and sales of more than 50 bags to New York customers constituted purposeful availment to satisfy the minimum contacts requirement of the constitution and the New York long-arm statute. The Second Circuit found jurisdiction to be appropriate in New York “because Queen Bee has developed and served a market for its products here.”
Recognizing that the defendants’ website was directed to consumers throughout the United States, the Court noted “that [although] Queen Bee’s business attempted to serve a nationwide market [that] does not diminish any purposeful contacts with Queen Bee’s New York consumers.”