Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Okla.: German distributor subject to jurisdiction in trademark infringement suit, (Nov 9, 2015)

By Linda O’Brien, J.D., LL.M.

Personal jurisdiction existed over a German distributor of radio remote controls in Oklahoma in an action by an Oklahoma City-based manufacturer, alleging Lanham Act unfair competition and trademark infringement claims, the federal district court in Oklahoma City, Oklahoma has decided (Hetronic International, Inc. v. Hetronic Germany GmbH, November 6, 2015, Cauthron, R.).

Hetronic International designs and manufactures radio remote controls for use in heavy industrial equipment. Hetronic entered into a distribution agreement with Hetronic Germany (‘H-Germany”) and Hydronic-Steuersysteme-GmbH (“Hydronic”) to assemble and distribute its radio remote controls in Germany and other central eastern European countries. Hetronic terminated the distribution agreement after discovering that Hydronic’s chief executive officer Albert Fuchs schemed to compete with Hetronic in the United States by selling Hetronic systems independently and placing Hetronic’s name on counterfeit parts.

In June 2014, Hetronic filed suit against H-Germany, Hydronic, Fuchs, and Fuch’s holding company, ABI Holding GmbH, alleging in part claims for breach of contract, trademark infringement, and unfair competition under the Lanham Act. The defendants sought dismissal based on lack of personal jurisdiction and failure to state a claim.

Personal jurisdiction. The court determined that personal jurisdiction existed over Fuchs and ABI, since they directed their activities at the United States and Hetronic’s injuries arose out of those activities. According to the court, Fuchs formed ABI and Arbitron Germany GmbH in order to sell products in the United States. He traveled to the United States to try to obtain certifications from the Federal Communications Commission (FCC), engaged a Massachusetts company to obtain the FCC certifications, and met with a former Hetronic executive to seek advice on how to compete with Hetronic. ABI purposefully availed itself to the United States by filing a trademark application for Arbitron and seeking market research and consulting services from a U.S. company in order to directly compete with Hetronic.

Fuch’s argument that state law barred claims against him as a mere shareholder and officer in a potentially liable company was rejected. The court noted that the plaintiff did not assert an individual claim against Fuchs as a shareholder to fall within the state statute. Rather, the complaint asserted that ABI was an alter-ego of a shareholder and officer. Moreover, Hetronic alleged that Fuchs formed Arbitron to unfairly compete with Hetronic, came to the United States to obtain FCC certifications, knowingly induced Arbitron to infringe the Hetronic trademarks and trade dress, and falsely designated the origin of Arbitron products.

Trademark infringement. Additionally, the plaintiff provided sufficient factual allegations to state a claim for contributory trademark infringement. Hetronic alleged that Fuchs and ABI supplied H-Germany, Hydronic, and Abitron with the means to infringe Hetronic’s trademarks. The defendants’ argument that the plaintiff’s contributory infringement claim failed because the defendants could not be both infringers and contributory infringers was rejected. Under Federal Rule of Civil Procedure 8, the plaintiff was allowed to bring claims for direct infringement and contributory infringement in the alternative, the court noted.

Lanham Act. Finally, the court concluded that the plaintiff plausibly set forth sufficient factual allegations to support its unfair competition claim against the defendants.

The case is No. 5:14-cv-00650-C.

Attorneys: John N. Hermes (McAfee & Taft) for Hetronic International Inc. Anton J. Rupert (Crowe & Dunlevy) for Hetronic Germany GmbH, Hydronic-Steuersysteme-GmbH, ABI Holding GmbH, Abitron Germany GmbH and Abitron Austria GmbH.

Companies: Hetronic International Inc.; Hetronic Germany GmbH; Hydronic-Steuersysteme-GmbH; ABI Holding GmbH; Abitron Germany GmbH; Abitron Austria GmbH

Cases: FranchisingDistribution OklahomaNews