In Shippitsa Ltd. v. Slack, No. 18-CV-1036, 2019 U.S. Dist. LEXIS 121994 (N.D. Tex. July 23, 2019), a federal district court reiterated the standards applicable to determining whether there is personal jurisdiction over a foreign defendant in the context of online web businesses and allegations of trademark infringement,. The court found that under federal law, the Cyprus-incorporated and -headquartered defendant’s interactive website allowing the commercial exchange of information with Texas customers was sufficient for the exercise of personal jurisdiction over that defendant in Texas.
Shippitsa is a Scottish manufacturer of a weight loss dietary supplement known as “Phen375.” Shippitsa relies on an extensive “affiliate marketing network system,” comprised of advertisers, affiliates (who host websites with content such as product reviews), and “an affiliate network marketing company, which acts as an intermediary between the advertisers and the affiliates.”[1] After entering into contracts with advertisers and affiliates, Shippitsa makes its product information and marks available to them.
After the expiration of a contract, Shippitsa’s product continued to be advertised on certain websites, although without Shippitsa’s permission. Users clicking on those websites were directed to a competitor’s website selling a similarly-labeled product.
Shippitsa sued several parties for trademark infringement, false designation or origin, trademark dilution, cybersquatting, and violations of the Racketeer Influenced and Corrupt Organizations Act. One of the parties sued by Shippitsa, Wolfson Berg, is a company incorporated and headquartered in Cyprus. Wolfson Berg moved to dismiss the complaint based on lack of personal jurisdiction.
A US court can exercise personal jurisdiction over a foreign defendant and allow the case to proceed if a two-part test is satisfied: (1) defendant must have purposefully availed itself of the benefits and protections of the forum state by establishing “minimum contacts” with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend “traditional notions of fair play and substantial justice.”[2] Further, “[t]o comport with due process, the defendant’s conduct in connection with the forum state must be such that it ‘should reasonably anticipate being haled into court’ in the forum state.”[3] There are two types of personal jurisdiction. In the case of general jurisdiction, a party’s contacts must be “continuous and systematic,” in which case the particular cause of action need not arise out of those contacts. For the purposes of specific jurisdiction, the ligation must result from alleged injuries that ‘arise out of or relate to’ the defendant’s activities directed at the forum.”
The plaintiff in Shippitsa argued that there was a basis for specific personal jurisdiction because the defendant, Wolfson Berg, sold its trademark-infringing products in Texas, and also because it operated interactive websites through which it sold the products to Texas residents. The court explained that contacts based on online activities are based on a “sliding scale,” which “prescribes different outcomes to the personal jurisdiction question depending on which of following three categories the website falls into: (1) where a website is nothing more than a passive advertisement, the court must decline to exercise personal jurisdiction;(2) where a website facilitates contractual relationships and the knowing and repeated transmission of computer files over the internet, personal jurisdiction is proper; and (3) where a website falls somewhere in between, “the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information that occurs on the [w]ebsite.”[4]
In this case, the court found that Wolfson Berg’s “websites can support the exercise of personal jurisdiction because they were sufficiently interactive and facilitated the exchange of commercial information.”[5] The court noted several features of the website that made it “interactive,”:
- They permitted users to submit orders online.
- They allowed users to chat with sales agents.
- They allowed purchasers to track their orders online.
This decision highlights the standards applicable to online
businesses that may be interacting with customers in the US.
[1] 2019 U.S. Dist. LEXIS 121994, *2.
[2] Id., *6.
[3] Id., *7.
[4] Id., *10-*11.
[5] Id., *11.
