IP Law Daily, TRADEMARK—7th Cir.: Counterfeit NBA products sold on Amazon subjected retailer to personal jurisdiction in Illinois, (Aug 17, 2022)

By Patricia K. Ruiz, J.D.

Though plaintiff’s counsel was the only person to place an order in the state, the retailer purposely directed its conduct at Illinois.

A China-based online retailer selling counterfeit products in its online stores, including on Amazon.com, is subject to personal jurisdiction in Illinois in a trademark infringement action, the U.S. Court of Appeals for the Seventh Circuit has held. The court reasoned that, even though the retailer only had one documented purchase in the state, it purposefully directed its conduct toward Illinois by structuring its business to easily serve customers in the state. Additionally, the court held that actual confusion is not necessary to sustain a Lanham Act claim, only the likelihood of consumer confusion (NBA Properties, Inc. v. HANWJH, August 16, 2022, Ripple, K.).

Sale of counterfeit products. NBA Properties, Inc., along with professional and collegiate sports associations who own or license trademarks related to their respective sports, (NBA Properties, collectively) filed an action in the federal district court in Chicago against several defendants, including HANWJH, a China-based online retailer, alleging that they infringed NBA Properties’ trademarks by selling counterfeit products in its online stores. After the deadline to answer expired, HANWJH moved to dismiss for lack of personal jurisdiction, arguing that NBA Properties unsuccessfully attempted to establish jurisdiction by ordering (and receiving) a HANWJH product in Illinois form HANWJH’s Amazon.com shop. The district court denied the motion and entered default judgment in favor of NBA. HANWJH appealed.

Establishing personal jurisdiction. The Seventh Circuit stated that specific personal jurisdiction over an online retailer is established when the retailer stands ready and willing to do business with residents of the forum and then knowingly does business with those residents. The test was satisfied by the fact that HANWJH admitted it both offered to ship and did ship products to Illinois. Reviewing the decision of the district court de novo, the court looked to whether the defendant’s contacts with the forum show it purposefully availed itself of the privilege of conducting business in the forum state or purposefully directed its activities at the state; whether the plaintiff’s alleged injury arose out of the defendant’s forum-related activities; and whether the exercise of personal jurisdiction comports with traditional notions of fair play and substantial justice.

Purposeful availment. As to the first prong, the court observed that minimum contacts can be formed even though a defendant sold its products only online through its website and third-party websites when the defendant (1) included the forum in the ship-to options from which the customer had to choose; (2) sent a customer an email confirming a shipping address in the forum; and (3) shipped product to an address in the forum. In response to arguments by HANWJH that one transaction does not make it subject to Illinois’ jurisdiction, the court responded that the focus is whether HANWJH purposefully directed its conduct at Illinois, not whether NBA Properties purchased enough goods to subject it to personal jurisdiction. Finding that HANWJH did direct its conduct at Illinois, the court reasoned that the company shipped a product to the forum only after it structured its sales activity in a manner as to invite orders from Illinois and developed the capacity to fill them. It cannot point to its customers in Illinois and say, “It was all their idea.”

Relatedness to Lanham Act claim. As to the second prong, the court noted that the requirement of relatedness is met when direct sales from the defendant in the forum state involve the infringing product. Under the Lanham Act, the holder of a registered mark has a civil action against anyone employing an imitation of it in commerce when such use is likely to cause confusion, or to cause mistake, or to deceive. HANWJH argued that because NBA Properties purchased one of its products, there was no confusion at play. The court found that it does not matter that counsel for NBA Properties purchased the goods, as actual confusion is not necessary. As such, held that the likelihood of confusion, as a basis for NBA Properties’ Lanham Act suit, is sufficiently related to HANWJH’s act of selling an infringing product to Illinois, the basis for personal jurisdiction.

Fair play and substantial justice. Having found minimum contacts to be established, the court turned to whether subjecting HANWJH to jurisdiction in Illinois offends traditional notions of fair play and substantial justice. HANWJH pointed to the fact that it is a foreign party with only one documented sale to the forum state and that NBA Properties has principal places of business in New York, Georgia, and California. It argued that Illinois’ interest in utilizing its judicial resources to adjudicate the dispute between two out-of-state parties is weak. However, the court found no unfairness in making a seller defend a suit in a state where it structured its business to easily serve the state’s consumers. Illinois has an interest in protecting its consumers from purchasing fraudulent merchandise, and NBA Properties has an interest in ensuring its trademark is protected against confusion in the Illinois market. Further, HANWJH alleged no unusual burden in defending the suit in Illinois.

Thus, the court held that HANWJH availed itself of the Illinois market in offering and shipping a product to the forum. Because of this purposeful direction and because the contacts are related to the suit, the company is subject to Illinois jurisdiction.

The Case is No. 21-2909.

Attorneys: Justin R. Gaudio (Greer, Burns & Crain) for NBA Properties, Inc. He Cheng (Glacier Law LLP) for HANWJH.

Companies: NBA Properties, Inc.; HANWJH

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