This is why in cases involving the online sales of products that allegedly infringe on the plaintiff/manufacturer’s trademarks, the manufacturer often decides to file the lawsuit in the state where the manufacturer is headquartered (rather than where the online seller defendant is purportedly located). Where the manufacturer wants to file is called the “forum state.”
When it comes to an online seller selling to consumers on a commercial website (e.g., www.ABCretailer.com), federal district courts usually hold that the online seller defendant is subject to personal jurisdiction in the forum state if there is evidence (or unrebutted allegations) that the online seller has sold allegedly infringing products to consumers in that forum state through its commercial website. “Personal jurisdiction” means that the court can fairly exercise power over the defendant's online seller because the online seller has certain “minimum contacts” with the forum state where the court is located.
Federal district courts also find personal jurisdiction even when the online seller defendant exclusively sold products through an online marketplace (like Amazon) rather than its own commercial website, and even when the defendant has sold only a small quantity of allegedly infringing products into the forum state.
However, federal courts of appeal (the courts that sit above the federal district courts) have largely not weighed in on the question of personal jurisdiction in these instances. A minority of federal district courts have required a significantly greater showing, sometimes even requiring the plaintiff manufacturer to show that the online seller defendant has “especially targeted” the forum state over other states with its online marketplace sales for personal jurisdiction to exist.
This late summer, however, the Seventh Circuit weighed in on this issue.
The Seventh Circuit recently issued a decision that, although unpublished, falls heavily on the side of the lower federal district courts that have required only minimal sales into the forum state.
In NBA Props. v. HANWJH, No. 21-2909, 2022 U.S. App. 22738 (7th Cir. Aug. 16, 2022), the plaintiff sued an out-of-state defendant in Illinois Federal District Court for trademark infringement and counterfeiting based on the defendant’s sales of allegedly infringing products on Amazon. The defendant argued that personal jurisdiction was lacking (i.e. that the online seller should not have been sued in Illinois) because it had sold only a single (allegedly) infringing product into Illinois, and that sale had been made to one of the plaintiff’s investigators who purchased from the defendant’s Amazon storefront before the plaintiff filed suit.
However, the Seventh Circuit held that the defendant’s single sale caused it to be subject to specific personal jurisdiction in Illinois on the plaintiff’s claims because:
(1) by allowing its products to be purchased by consumers in Illinois and then selling a product in Illinois through its third-party Amazon storefront, the defendant sufficiently “purposefully directed” activities toward Illinois that gave rise to the plaintiff’s claims;
(2) even a single sale was enough because there is no “bright-line rule that a single transaction cannot be sufficient to establish jurisdiction”; and
(3) it did not matter that the product was purchased by the plaintiff’s agent investigator rather than an unrelated consumer because the defendant had set up its sales activity so that anyone in Illinois could buy from the defendant. See id. at *21-22 (rejecting the argument that the defendant’s sale into Illinois was the “unilateral act of the plaintiff” because the defendant “shipped a product to the forum only after it had structured its sales activity in such a manner as to invite orders from Illinois and developed the capacity to fill them . . . . It cannot now point to its customers in Illinois and tell us, ‘It was all their idea.’”).
This decision is important in that it further helps manufacturers maintain their home court advantage even when the defendant online seller’s sales to the forum state are only through an online marketplace and seemingly small in quantity.
To read the full decision click here.
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