“Close-Call” Involving Recurrent Online Sales Triggers Minimum Contacts, Specific Jurisdiction
In considering whether online sales satisfied the minimum contacts requirement of a due process analysis, the US Court of Appeals for the First Circuit affirmed a district court opinion that a foreign company subjected itself to specific personal jurisdiction in a trademark dispute where the foreign company had sizeable continued online sales to customers in the United States. Plixer Int’l v. Scrutinizer GmbH, Case No. 18-1195 (1st Cir. Sept. 13, 2018) (Lynch, J).
In 2016, Plixer, a Maine corporation, sued Scrutinizer, a German corporation, for trademark infringement in the US District Court for the District of Maine. Plixer owns the US trademark for “Scrutinizer” and had been using the mark for over a decade for its computer software and hardware related to malware infections and application performance problems. Plixer alleged that Scrutinizer’s use of the term “Scrutinizer” to sell services that help customers build better code caused “confusion, mistake, or deception as to the source” of Scrutinizer’s services, and that continued use of the trademark would infringe or dilute Plixer’s rights. Scrutinizer offered its services through an interactive, self-service, English-language website. Over a three-year period, Scrutinizer sold approximately $200,000 worth of services to 156 US customers. Its customers paid in euros and agreed to a German choice of law clause. The company did not have a US office, phone number or agent for service of process and did not send its employees to the United States on business.
The district court concluded that Scrutinizer purposefully availed itself of doing business in the United States through a significant number of recurrent online sales and thus the exercise of specific personal jurisdiction under Federal Rule of Civil Procedure 4(k)(2) was warranted. It also found that Scrutinizer did not carry its burden of showing that the exercise of personal jurisdiction was unreasonable. Scrutinizer appealed.
On appeal, the only question presented to the First Circuit was whether personal jurisdiction comported with due process. Since Plixer asserted specific personal jurisdiction over Scrutinizer, Plixer was required to show relatedness, purposeful availment and reasonableness to demonstrate that Scrutinizer had sufficient minimum contacts with the United States and that due process was satisfied. Scrutinizer conceded the relatedness prong of the analysis.
As to purposeful availment, the First Circuit concluded that sizeable continuing commerce with US customers in more than 30 states was sufficient to show purposeful availment. Because the Supreme Court of the United States has not provided clear guidance as to how online activities translate to minimum contacts, the First Circuit’s ruling was confined to the specific facts of the case. Purposeful availment requires that a company voluntarily conducted commerce within the forum, such that it was foreseeable that it could face litigation in US courts. The Court reasoned that merely making a website available in the United States would not necessarily subject a foreign company to personal jurisdiction. Scrutinizer, however, had made its website available globally, had designed its interactive website to work with English-speaking customers, and had accepted sales from US customers. Moreover, Scrutinizer had not attempted to restrict US users’ ability to access its website. Thus, the Court concluded that Scrutinizer purposefully and voluntarily intended to serve and profit from US customers over several years.
The First Circuit also agreed with the district court’s finding that the exercise of personal jurisdiction over Scrutinizer was not unreasonable. Reasonableness factors “play a larger role in cases . . . where the minimum contacts analysis is very close.” The Court reasoned that although litigating in a foreign legal system was inconvenient and more expensive for Scrutinizer, these factors were outweighed by Scrutinizer’s substantial business interests in the United States, and the United States’ interested in adjudicating a dispute involving US trademark law. The Court also found that Scrutinizer had not shown any travel burdens that were “special or unique,” and that modern technology could mitigate logistical challenges of litigating in the United States.