IP Law Daily, TRADEMARK—2d Cir.: Dismissal of American Girl’s trademark claims against Chinese websites reversed, (Sep 18, 2024)

By Thomas K. Lauletta, J.D.

American Girl established that New York’s long-arm statute applied to the Chinese defendants’ transactions in New York.

The U.S. Court of Appeals for the Second Circuit has reversed a Manhattan district court opinion which held that plaintiff American Girl failed to show that the New York state’s long-arm statute applied to Chinese website operators because it was not shown that any of the defendants’ allegedly counterfeit products were actually shipped to New York. The appellate court held that the district court erred to require a shipment of products in New York; the New York long-arm statute was triggered by the defendants’ transactions to sell their products in New York. Finding that the defendants had at least minimum contact with New York, and that the exercise of jurisdiction would comport with “fair pay and substantial justice,” the appellate court held that the exercising of personal jurisdiction over the defendants would not violate the Due Process protection of the U.S. Constitution (American Girl, LLC v. Zembrka, No. 21-1381 (2d Cir. Sept. 17, 2024)).

Plaintiff-Appellant American Girl is a well-known manufacturer of dolls, doll books, and doll accessories. Defendants-Appellees Zembrka, www.zembrka.com, and www.daibh-idh.com (“Zembrka”), are located in, and operate from, the People’s Republic of China. American Girl sued Zembrka in the Southern District of New York, alleging that through their interactive websites, they sold, in New York, counterfeit and infringing versions of American Girl trademarked products and prominently used American Girl marks on the Zembrka websites. American Girl’s complaint asserted multiple claims for trademark counterfeiting and trademark infringement. The complaint predicated personal jurisdiction over Zembrka on New York’s long-arm statute (C.P.L.R. §302(a)(1) and §3(ii)). At the time it filed its complaint, American Girl applied for and was subsequently granted a temporary restraining order, which enjoined Zembrka from marketing, manufacturing, or distributing counterfeit American Girl products or from advertising counterfeit or confusingly similar American Girl marks.

The district court stated that even though “the facial evidence of infringement” was so persuasive, it dismissed the plaintiff’s complaint on the grounds that the New York long-arm statute did not apply to assert personal jurisdiction over the defendants. The was so, the district court ruled, because the plaintiff did not show that the defendants actually shipped their products to New York, a requirement under the New York statute.

The Plaintiff’s appeal. Based on evidence acquired after the district court opinion, American Girl argued for personal jurisdiction of Zembrka based on evidence that Zembrka maintained interactive websites through which customers, including those located in New York, could place orders by inputting their billing and payment information, shipping addresses, and contact information, and that customers were then sent confirmations of their orders. Although American Girl presented evidence that the orders were placed with Zembrka, no products were shipped presumably because Zembrka was alerted to the temporary restraining order and the instant litigation.

Second Circuit’s interpretation of the New York statute. On appeal, the appellate court stated that the primary issue was whether American Girl established that Zembrka transacted business in New York for purposes of New York’s long-arm statute §302(1)(a). The court noted that this statute used a two-prong inquiry to establish jurisdiction: (1) did the defendant conduct sufficient activities to have conducted business in the state; and (2) did the claims arise from the transactions. The court noted that Section 302 is a “single act statute” and proof of one transaction in New York is sufficient to invoke jurisdiction.

The appellate court found that the evidence presented by American Girl, as well as admissions made by Zembrka’s counsel, showed that a Zembrka customer had successfully placed orders on the defendants’ website for counterfeit products to be shipped to New York. This customer received email confirmation from Zembrka—emails that included the customer’s New York shipping address—stating “Order confirmed” and “We’re getting your order ready to be dispatched. We will notify you when it has been shipped.” The court stated that this activity constituted transacting business in New York under the statute.

The appellate court ruled that the district court had erred in its conclusion that Zembrka had not transacted business under § 302(a)(1) because there was no evidence that it actually shipped ordered and paid-for goods to New York. The appellate court stated that the New York statute only requires a “transaction,” which may or may not include the shipping of goods. Here, the evidence established that the defendant “conducted sufficient activities to have transacted business in the state,” and that the claims arose from the transactions. Accordingly, the court ruled that American Girl met its burden of establishing personal jurisdiction over Zembrka under the New York statute.

Due Process. After the appellate court concluded that the New York statute applied, it considered whether exercising personal jurisdiction over Zembrka would violate the due process protections of the U.S. Constitution. The court ruled that the exercise jurisdiction here would not violate due process because Zembrka had at least minimum contacts with New York and that exercising jurisdiction would “comport with fair play and substantial justice.”

Court action. The appellate court reversed the district court’s order dismissing the complaint for lack of personal jurisdiction and remanded the case for further proceedings consistent with its opinion.

The case in No. 21-1381.

Attorneys: Kerry Brenae Brownlee (Epstein Drangel LLP) for American Girl, LLC. Ruoting Men (Glacier Law LLP) for Zembrka dba www.zembrka.com, and www.daibhidh.com.

Companies: American Girl, LLC; Zembrka

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