IP Law Daily, TRADEMARK—6th Cir.: Media digitization company was subject to personal jurisdiction through website sales to Tennessee residents, (May 9, 2024)

By Patricia K. Ruiz, J.D.

The court found purposeful availment despite the defendants’ earning less than 1% of revenue from Tennessee customers.

A divided panel of the U.S. Court of Appeals for the Sixth Circuit has reversed a decision by the U.S. District Court for the Eastern District of Tennessee dismissing a trademark infringement case for lack of personal jurisdiction. The Sixth Circuit found that the defendant companies purposefully availed themselves of Tennessee as a venue when they held themselves out publicly as welcoming Tennessee sales and conducted a regular course of business in the state (AMB Media, LLC v. OneMB, LLC , No. 23-5607 (6th Cir. May 8, 2024)).

Background. AMB Media, LLC, is a Tennessee-based company in the business of digitizing physical media. It provides a service called LEGACYBOX for customers to digitally preserve their home movies, photos, and other media. This involves a multi-step process—(1) AMB sends the customer a LEGACYBOX kid containing a prepaid shipping label, a box to fill with physical media, and barcodes to track sent items; (2) the customer fills the box and returns it to AMB, which digitizes the media; (3) AMB ships the box, now containing the physical media and a digital copy of some kind, back to the customer. AMB owns federal trademarks on the terms Legacybox and LEGACYBOX in connection with its offered goods and services.

The defendants are Arizona-based LLCs that offer a similar service, selling products through a website, which contains reviews from Tennessee customers. Between January 2020 and October 2022, defendant OneMB, an LLC doing business as “digmypics MemoryBox” acquired 59 customers in Tennessee, grossing $16,862 in revenue from those customers. This represents less than one percent of OneMB’s business over that timeframe.

Infringement suit. In November 2020, OneMB filed a trademark application for the use of the phrase DIGMYPICS MEMORYBOX in connection with its digitizing services. AMB opposed the application, alleging the proposed trademark infringes upon its LEGACYBOX marks due to the similarity of the marks, the analogous services offered by both companies, and the customer confusion that is likely to result. In August 2022, AMB filed suit in the Eastern District of Tennessee alleging the defendants’ conduct violates the Lanham Act, common law trademark and unfair competition law, and the Tennessee Consumer Protection Act. The defendants moved to dismiss on several grounds, including the purported lack of personal jurisdiction. The court dismissed the case for lack of jurisdiction, finding the defendants had not purposefully availed themselves of Tennessee as a forum and were not subject to suit there. AMB timely appealed.

Three-part standard for personal jurisdiction. On appeal, the Sixth Circuit stated that, because Tennessee’s long-arm statute extends to the fullest extent permitted by the U.S. Constitution, it needed only to address whether exercising personal jurisdiction over the defendants is consistent with federal due process requirements. The parties agree that the defendants are not subject to general jurisdiction in Tennessee. The Sixth Circuit developed a three-part standard to assess specific personal jurisdiction: (1) the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the foreign state; (2) the claims must arise out of or relate to the defendant’s contacts with the forum; (3) the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forums state to make the exercise of jurisdiction over the defendant reasonable.

Purposeful availment. The Sixth Circuit found that the defendants chose to repeatedly serve Tennessee customers without taking any steps to limit the reach of their website or block its use by those customers. Despite the defendants’ arguments that looking at direct sales to Tennessee customers holds the defendants responsible for the unilateral actions of a third party—the customer—the Sixth Circuit found that, instead, it recognizes that a company’s shipment of its product to a given forum is a relevant contact in the jurisdictional analysis. When, as in the instant case, a defendant creates repeated contacts through a regular course of business, it has purposefully availed itself of that forum’s jurisdiction.

Relatedness. Next, the Sixth Circuit found that AMB’s trademark-based claims arise out of or relate to the defendants’ contacts with Tennessee. Because the claims allege harm caused by the defendants’ sale of products, they clearly arise out of and relate to the defendants’ conduct of selling those same products to Tennessee residents. The constitutional requirement of “an affiliation between the forum and the underlying controversy” is satisfied because the alleged harm of consumer confusion from defendants’ use of their mark in Tennessee and elsewhere is suffered in AMB’s Tennessee place of business.

Substantial connection with forum state. Finally, because AMB established its prima facie case regarding purposeful availment and relatedness, the Sixth Circuit found that an inference arises that the third factor—a substantial enough connection with the forum state to make the exercise of jurisdiction reasonable—is also present. Despite the defendants’ policy argument that longstanding precedent establishes that a company’s choice to welcome customers from and regularly sell products into a state subjects the company to that state’s jurisdiction, the Sixth Circuit responded that crafting an e-commerce exception to that standard would permit web-based companies to reap the benefits of a nationwide market while foreclosing customers’ ability to seek redress where injured.

Dissenting opinion. Circuit Judge Alice Batchelder filed a dissenting opinion to express her view that the defendants did not purposely avail themselves of doing business in Tennessee. In Judge Batchelder’s view, sales to Tennessee residents over a two-year period amounting to less than one percent of the defendant’s annual revenue was not enough to establish a regular course of business in the state. Instead, OneMB held itself out as a nationwide company, “and the contacts it had with Tennessee were not more than random, fortuitous, or attenuated.” Second, according to Judge Batchelder the majority erred in its analysis of purposeful avialment “by looking to the actions of customers rather than the conduct of companies, requiring website-based companies to shield themselves from customers by limiting website access.”

The Case is No. 23-5607.

Judge: Stranch, J.

Attorneys: Edward A. Paltzik (Bochner PLLC) for AMB Media, LLC. Matthew S. Vesterdahl (Gordon Rees Scully Mansukhani, LLP) for OneMB, LLC.

Companies: AMB Media, LLC; OneMB, LLC; Red Mountain Media Group, LLC

Cases: Trademark TechnologyInternet KentuckyNews MichiganNews OhioNews TennesseeNews GCNNews