Court Finds Venue Proper for Infringement Claim Brought Against Small Internet Reseller Based on Sales Through Amazon.com Storefront

Authored by D. Brian Kacedon, Douglas W. Meier, and John C. Paul

For many companies, the Internet has become the predominant point of sale for their products as websites make it easy for anybody to become an online retailer. Companies should consider, however, whether those online sales may subject them to jurisdiction for potential patent-infringement claims in a larger number of courts. A recent order¹ from a district court in Georgia summarizes a number of issues surrounding jurisdiction based on selling products online.

The plaintiff in that case, Fusionbrands, Inc., manufactures and sells a silicone egg poacher under the trademarked name PoachPod. Fusionbrands sued the defendant, Suburban Bowery of Suffern, claiming that Suburban Bowery infringed Fusionbrands' PoachPod patents and trademarks. In a letter to the court, Suburban Bowery's owner admitted to buying 1,000 PoachPods and selling them through his own website as well as through a storefront on Amazon.com. He stated that he sold the product to two customers through his own website. One of those two customers was a legal secretary of Fusionbrands' counsel who made the purchase as part of the case, which Fusionbrands conceded. In his letter to the court, however, the Suburban Bowery owner did not address Fusionbrands' claim that Suburban Bowery sold the products through an Amazon.com storefront or that those sales totaled over $6,000. Thus, the court accepted as true the plaintiff's allegations that at least some of those sales were in the Northern District of Georgia.

In addition to this letter to the court, Suburban Bowery later filed a motion to dismiss for improper venue or, alternatively, to transfer the case to the Southern District of New York.

The Fusionbrands Decision

The district court first analyzed venue. At the outset, it rejected Fusionbrands' claim that by merely having an Amazon.com storefront, Suburban Bowery could properly be sued in the court's district (or, for that matter, any district in the United States). The court explained that the venue statute specifically applying to copyright and patent cases provides venue either (1) in the district "where the defendant resides" or (2) in the district "where the defendant has committed acts of infringement and has a regular and established place of business."

Similarly, the court also rejected the contention that infringing acts by the defendant in the forum were enough to establish venue. If that were enough, it would render the extra requirement of a "regular and established place of business" in the second prong of the venue statute superfluous. Thus, to establish that venue was proper, the plaintiff needed to demonstrate that the defendant either "resided" in the district or committed infringing acts and had a regular and established place of business in the district.

The court thus began its analysis by determining whether the defendant "resided" in the district as required by the venue statute. A corporation's residency for venue purposes is any judicial district in which the corporation is subject to the court's personal jurisdiction for the civil action in question. Recognizing that Federal Circuit law governs the issue of jurisdiction for patent cases, the court looked to the Federal Circuit's test for jurisdiction. For personal jurisdiction to exist, the Federal Circuit requires that two factors be met: (1) the forum state's long-arm statute must permit service of process on the defendant and (2) the assertion of personal jurisdiction must not violate due process.

With respect to the first factor, the court looked to Georgia's long-arm statute. That statute allows personal jurisdiction over any nonresident who transacts any business in Georgia. The court found that the defendant transacted business within Georgia because, as the court had previously explained, it must accept plaintiff's allegation that sales of the infringing product occurred within its district.

With respect to the second factor, the court noted that personal jurisdiction consistent with constitutional due process can be established through either general jurisdiction or specific jurisdiction. General jurisdiction arises when a defendant maintains continuous and systematic contacts with the forum state even when the claim has no relation to those contacts. Specific jurisdiction, on the other hand, arises out of, or relates to, the claim for relief even if those contacts are isolated and sporadic.

Beginning with general jurisdiction, the court found that the defendant's activities were insufficient to justify general personal jurisdiction because the plaintiff demonstrated only that the defendant sold PoachPod in the court's district, and nothing more. As the Supreme Court has said, "mere purchases made in the forum State, even if occurring at regular intervals, are not enough to warrant a State's assertion of general jurisdiction over a nonresident corporation in a cause of action not related to those purchase transactions."

Turning next to specific jurisdiction, the court explained that specific jurisdiction is available when: (1) a defendant purposefully directs its activities at the forum; (2) the asserted claim arises out of, or relates to, those activities; and (3) assertion of personal jurisdiction is reasonable and fair.

The court recognized that the Internet has provided a unique context for the "purposefully directed" prong of the specific-jurisdiction analysis. Citing to other cases on the issue, the court explained that, at one end of the spectrum are situations where a defendant clearly does business over the Internet. On the other end are passive websites that simply convey information to its visitors, who, due to the nature of the Internet, can be anywhere in the world. In the middle are websites that allow some interaction among their visitors but are not purely commercial in nature. The court, relying on the plaintiff's unrebutted claim of sales through an Amazon.com storefront of over $6,000, found that this case falls into the first category, where a defendant clearly does business over the Internet.

The court found that second specific-jurisdiction factor was satisfied because the sale of the PoachPod was the basis for Fusionbrands' infringement claim. Therefore, the asserted claims clearly arose from the activities directed at the forum.

On the final specific-jurisdiction factor, the court likewise found that that the assertion of jurisdiction was reasonable and fair. Specifically, the Supreme Court has recognized that where a defendant has been found to have purposefully directed his activities at forum residents, the defendant must present a "compelling case" to defeat jurisdiction. Suburban Bowery had not made the required compelling case.

Having determined that venue was proper (and therefore denying the defendant's motion to dismiss for lack of venue) because the defendant "resided" in the district within the meaning of the venue statute, the court next looked at the defendant's motion to transfer the case to the Southern District of New York. For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district where it might have been brought. There are many factors relevant to this venue-transfer analysis: (1) the convenience of the witnesses; (2) the location of relevant documents and the relative ease of access to sources of proof; (3) the convenience of the parties; (4) the locus of operative facts; (5) the availability of process to compel the attendance of unwilling witnesses; (6) the relative means of the parties; (7) a forum's familiarity with the governing law; (8) the weight accorded a plaintiff's choice of forum; and (9) trial efficiency and the interests of justice, based on the totality of the circumstances.

On the convenience of the witnesses and parties, the defendant had not produced any evidence about the location of the potential expert witnesses and customers who might testify on the merits of the case, and it would be equally inconvenient for the plaintiff to travel to New York as it would be for the defendant to travel to Georgia. As a result, these factors weighed against transfer.

On the location of relevant documents, the defendant had not presented any evidence of what the relevant documents might be, how expansive the document list is, or why transporting the necessary documents would be prohibitively expensive or inconvenient. As a result, this factor weighed against transfer.

On the relative means of the parties, the court noted that both plaintiff and defendant are small business owners with no major difference in their available resources. As a result, this factor was neutral.

On the weight accorded to a plaintiff's choice of forum, the court recognized that a plaintiff's choice should not be disturbed unless it is clearly outweighed by other considerations and that a plaintiff's home forum is where the plaintiff had filed. As a result, this factor weighed heavily against transfer.

On trial efficiency and interest of justice, the court found that the defendant had not presented any evidence to support its argument that a transfer was necessary because the defendant may want or need to implead a third-party defendant. As a result, this factor did not weigh in favor of transfer.

On the remaining factors, the defendant had conceded that those factors do not weigh in its favor.

Taking all these factors together, the district court found that the defendant had not shown that a transfer was warranted.

Strategy and Conclusion

The Fusionbrands order serves as a reminder of the various aspects that come into play when selling products over the Internet. It also serves as a good guide for an analysis of some of the issues relating to jurisdiction and venue.

Endnotes
¹ The Fusionbrands order can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2013/Fusionbrands_v_Suburban_Bowery.pdf.

Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.