Sunshine Distrib. v. SPORTS AUTHORITY MICH.Sunshine Distrib. v. SPORTS AUTHORITY MICH.
SUNSHINE DISTRIBUTION, INC., Plaintiff,
v.
THE SPORTS AUTHORITY MICHIGAN, INC., J.D. Components Co., Ltd., and Razor U.S.A., LLC, Defendants.
United States District Court, E.D. Michigan, Southern Division.
*780 *781 Mark A. Cantor, Southfield, MI, for Plaintiff.
*782 Alexander Fraser, MacKinnon, Los Angeles, CA, Glenn E. Forbis, Bloomfield Hills, MI, Brian D. Sieve, Chicago, IL, for Defendant.
OPINION
DUGGAN, District Judge.
This is a trademark infringement and unfair competition action in which Plaintiff Sunshine Distribution, Inc., alleges that Defendants' use of its "Razor" name and mark in connection with the sale of scooters is confusingly similar to Plaintiff's "Razor" name and mark for inline skates and other accessories. Plaintiff has named the scooter manufacturer, J.D. Components Co., Ltd. ("J.D."), J.D.'s exclusive United States distributor, Razor U.S.A., LLC ("Razor"), and a local retailer, The Sports Authority of Michigan ("Sports Authority"), as defendants to this action. This matter is currently before the Court on Defendant J.D.'s motion to dismiss for lack of personal jurisdiction.[1] Oral argument regarding Defendant's motion to dismiss was heard on April 18, 2001.[2] For the reasons stated below, Defendant's motion to dismiss shall be denied.
Background
The following background represents the facts taken in a light most favorable to Plaintiff. On January 3, 1995, Plaintiff Sunshine Distribution, Inc., began using the marks "Razor" and "Razors" in connection with its inline skates sold within the United States. In addition to inline skates, Plaintiff uses the mark in conjunction with various inline skate accessories and clothing, such as protective gear, wheels, carrying straps, and bags. Plaintiff's Razor products are sold at various chain and speciality sporting goods stores.
Defendant J.D. Components Co., Ltd., is a Taiwanese corporation that has traditionally manufactured bicycle frames and other speciality components. In January of 1999, Defendant began manufacturing a "Razor" brand kick scooter using a mark that, according to Plaintiff, is confusingly similar to its Razor mark.
In March 1999, Defendant began selling its Razor scooters to The Sharper Image, a California-based retailer with speciality stores throughout the United States. The Sharper Image sells Defendant's Razor scooter through its stores, including its stores in Troy and Novi, Michigan, mailorder catalogs, and Internet website.
In February of 2000, Defendant filed a trademark application for its Razor mark in connection with platform trolleys, and in June and July of 2000, Defendant filed various "intent-to-use" trademark applications for its Razor mark in connection with, among other things, skates, skateboards, roller skates, clothing articles, protective helmets, non-motorized scooters for personal amusement, toy scooters, model scooters, rollerboards, structural parts for scooters, and platform trolleys.
In June of 2000, Razor U.S.A. was formed. On July 1, 2000, an oral agreement *783 was reached whereby Razor U.S.A. became Defendant's exclusive distributor for scooters and scooter-related products in North America. This oral agreement was confirmed by a written agreement dated August 18, 2000. Razor U.S.A. currently markets a number of Defendant's products throughout the United States. According to Defendant, despite its exclusive agreement with Razor U.S.A., it still sells Razor scooters directly to The Sharper Image per a pre-existing agreement.
The agreement between Defendant and Razor USA also granted Razor a perpetual royalty-free license to use all of Defendants' intellectual property rights, including trademarks, and the right to register such marks under their own name. On August 14, 2000, Razor U.S.A. filed an intent-to-use trademark application for the Razor mark in connection with sunglasses, video games, watches, backpacks, t-shirts, and caps.
Although one of Defendant's websites refers to Razor USA as its "North American Subsiduary[sic]" (Pl.'s Resp., Ex. J at 5), Defendant asserts that it owns no interest in Razor U.S.A. and has no control over Razor U.S.A.'s day-to-day business (Wang Dec. ¶ 10). Defendant admits, however, that its President, Shue Te Tsai, independently owns 60% of Razor U.S.A. (Wang Dec. ¶ 11).
Razor U.S.A. sells Defendant's Razor scooters to The Sports Authority Michigan, Inc., the operator of several retail sporting goods stores called "The Sports Authority" located throughout Michigan. The Sports Authority Michigan sells Defendant's Razor brand scooters to the public through its various stores, as well as an Internet website.
On December 19, 2000, Plaintiff filed this suit against Defendant, Razor U.S.A., and The Sports Authority Michigan, asserting a violation of the Lanham Act (Count I) and unfair competition (Count II). On February 5, 2001, Defendant filed a motion to dismiss pursuant to
Discussion
Plaintiff bears the burden of establishing personal jurisdiction over Defendant. Theunissen v. Matthews,
Plaintiff asserts two bases for personal jurisdiction over Defendant J.D. Components: (1) limited jurisdiction under Michigan's long-arm statute, MICH. COMP. LAWS § 600.715 and (2) the "national contacts" doctrine. Plaintiff relies upon the following facts in support of jurisdiction:
In 1999, Defendant sold scooters directly to Viza Motors, an Arizona company, and The Sharper Image, a California-based retailer, some of which were ultimately sold in Michigan.
*784 Defendant has entered into an exclusive distributor agreement with Razor U.S.A. in California.
Defendant has filed a number of trademark registrations with the United States Patent and Trademark Office.
Defendant hosts two interactive websites that provide information regarding the Razor scooter, allow users to e-mail Defendant and present warranty claims, and provide links to their authorized distributers.
Defendant places its website address on the scooter's packaging.
Defendant provides a warranty on its scooters.
Other non-party sporting goods stores sell Defendant's product in Michigan.
The task before this Court is to determine whether these contacts are sufficient to support an exercise of personal jurisdiction over Defendant.
1. Limited Jurisdiction Under Michigan's Long-Arm Statute
In determining whether personal jurisdiction exists over Defendant pursuant to Michigan's long-arm statute, this Court must apply "the law of the forum state, subject to the limits of the Due Process Clause of the Fourteenth Amendment." CompuServe Inc. v. Patterson,
Michigan's long-arm statute provides for limited personal jurisdiction over a nonresident corporate defendant when the cause of action arises out of any one of five designated relationships between the defendant and the state. See MICH. COMP. LAWS § 600.715. Plaintiff asserts that the aforementioned conduct by Defendant fulfills the "transaction of any business" prong of § 600.715(1).
The Michigan Supreme Court has observed that as used in the long-arm statute, "the term `any' means just what it says. It includes `each' and `every' [business transaction]." Aaronson v. Lindsay & Hauer Int'l, Ltd.,
Relying upon Elsey & Son v. American Engineering Fabrics, Inc.,
We believeM.C.L. § 600.715 ; M.S.A. § 27A.715 has been facially satisfied, particularly under subsection 5, because defendant entered into a contract for materials to be furnished in this state. We also believe that defendant's conduct was a prime generating cause of the effects resulting in Michigan. Defendant's certification of the material as satisfying Michigan testing requirements was a deliberate action calculated to make its product available to the Michigan market. It is obvious that plaintiff would not have purchased the product had defendant not certified it as meeting [Michigan Department of Transportation] requirements. Moreover, defendant must have contemplated being "haled" into a Michigan court in the event that the product failed the testing requirements. Defendant knew that the product was to be used in road construction in Michigan and that it needed to satisfy certain MDOT standards. *785 Finally, this was not a singular transaction, but the last of five transactions with plaintiff.
Id. (emphasis added). Nothing in Elsey stands for the broad proposition that the warranting of a product, in and of itself, constitutes the transaction of business within the state.
Unlike the Defendant in this case, the defendant in Elsey had directly entered into a contract with a Michigan company, to furnish building materials in Michigan, that met Michigan certification requirements. Furthermore, Elsey did not involve the "transaction of any business." Rather, Elsey involved "a contract for services to be performed or for materials to be furnished in the state." It involved materials that were certified as meeting Michigan Department of Transportation specifications and were shipped by Defendant to Michigan. "When shipped, the material was certified by defendant as meeting those specifications and was shipped from defendant's place of business in Massachusetts ... to ... Monroe County, Michigan." Id. at 147,
Plaintiff's reliance on the district court's decision in Kmart Corp. v. Key Industries, Inc.,
Plaintiff also asserts that Defendant's act of maintaining two web sites that are accessible to Michigan residents constitutes the transaction of business within the state. Courts generally determine whether personal jurisdiction is triggered in the Internet context "by examining the level of interactivity and commercial nature of the information found on the web site." Sports Auth. Mich., Inc. v. Justballs, Inc.,
The first category includes Internet sites that are highly interactive, allowing users to download, transmit, or exchange information with the defendant via the computer, including on-line contracts between the defendant and the plaintiff. Id. at 813 (citing CompuServe,
The second category includes passive websites, i.e., sites that merely provide information. Id. Courts have declined to exercise personal jurisdiction in cases involving merely passive websites. Id. (citing Cybersell, Inc. v. Cybersell, Inc.,
The third category involves a hybrid of the first two, "involving interactive web sites in which a user can exchange some *786 information with the host computer." Id. (citing Stomp, Inc. v. NeatO, LLC,
Plaintiff asserts that Defendant's websites exhibit a similar level of interactivity as the website in Justballs and therefore, provide a sufficient basis for this Court to exert personal jurisdiction over Defendant. This Court disagrees.
First, the defendant in Justballs sold its product exclusively over the Internet. Id. In fact, the district court stated that the one factor that "tip[ped] the balance in favor of exerting personal jurisdiction" in Justballs was the fact that the defendant's website allowed users to purchase products on-line. Id. at 814. It is undisputed that Defendant sells no product over the Internet. At most, Defendant provides users with a link to other sites from which its products may be purchased.
The district court in Justballs also found that the defendant had sold its product to Michigan citizens and more importantly, had targeted Michigan by offering goods that appealed directly to Michigan citizens, such as Detroit Lions, Detroit Tigers, and University of Michigan merchandise. Id. Nothing about Defendant's site or products is directly targeted toward Michigan consumers.
Instead, this Court finds Defendant's website more analogous to the website in Neogen Corp. The interactive functions of Defendant's websites consist solely of being able to e-mail Defendant and submit warranty claims. In this Court's opinion, such contacts do not constitute the transaction of business within Michigan; nor do such contacts support a conclusion that Defendant "`reached out' to Michigan in a way that suggests an intention to establish `continuing relationships and obligations.'" Neogen,
In summary, Plaintiff has failed to convince this Court that Defendant is transacting business within Michigan. Plaintiff has therefore failed to establish grounds upon which this Court can exercise personal jurisdiction over Defendant under Michigan's long-arm statute. Because Plaintiff has failed to establish jurisdiction under Michigan's long-arm statute, the Court need not engage in a due process inquiry.
2. The National Contacts Doctrine and the Lanham Act
Plaintiff also asserts that Defendant is subject to personal jurisdiction in this Court under the "national contacts" doctrine. The "national contacts" doctrine is premised upon the theory that where a federal statute authorizes nationwide service of process, the due process requirements of the Fifth Amendment are implicated, requiring sufficient contacts with the nation as a whole, rather than sufficient contacts with the foreign state. The key requirement under the national contacts theory is a federal statute authorizing nationwide service of process.
As several courts have recognized, the Lanham Act does not authorize nationwide service of process. See e.g., Chandler v. Barclays Bank P.L.C.,
Plaintiff argues that none of these cases addressed the specific provision relied upon by Plaintiff to serve Defendant in this case,
(e) Designation of resident for service of process and notices
If the applicant is not domiciled in the United States he shall designate by a written document filed in the Patent and Trademark Office the name and address of some person resident in the United States on whom may be served notices or process in proceedings affecting the mark. Such notices or process may be served upon the person so designated by leaving with him or mailing to him a copy thereof at the address specified in the last designations so filed. If the person so designated cannot be found at the address given in the last designation, such notice or process may be served upon the Director.
According to Plaintiff, this provision permits nationwide service of process.
Defendant, on the other hand, argues that
3. National Contacts and Federal Rule of Civil Procedure 4(k)(2)
Although the Court finds that Defendant's contacts with the United States do not confer personal jurisdiction upon this Court by virtue of the Lanham Act, the Court does find that such contacts make an exercise of personal jurisdiction under
If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service is also effective, with respect to claims arising under federal law, to establish personal jurisdiction over the person of any defendant who is not subject to the jurisdiction of the courts of general jurisdiction of any state. *788 As the Advisory Committee Notes explain,Rule 4(k)(2) was enacted in 1993 to:
[C]orrect[] a gap in the enforcement of federal law. Under the former rule, a problem was presented when the defendant was a non-resident of the United States having contacts with the United States sufficient to justify the application of United States law and to satisfy federal standards of forum selection, but having insufficient contact with any single state to support jurisdiction under state long-arm legislation or meet the requirements of the Fourteenth Amendment limitation on state court territorial jurisdiction. In such cases, the defendant was shielded from the enforcement of federal law by the fortuity of a favorable limitation on the power of state courts, which was incorporated into the federal practice by the former rule. In this respect, the revision responds to the suggestion of the Supreme Court made in Omni Capital Int'l. v. Rudolf Wolff & Co., Ltd.,484 U.S. 97 , 111,108 S.Ct. 404 ,98 L.Ed.2d 415 (1987).
As the United States Court of Appeals for the Fifth Circuit has explained:
Rule 4(k)(2) thus sanctions personal jurisdiction over foreign defendants for claims arising under federal law when the defendant has sufficient contacts with the nation as a whole to justify the imposition of United States law but without sufficient contacts to satisfy the due process concerns of the long-arm statute of any particular state.
World Tanker Carriers Corp. v. M/V Ya Mawlaya,
In essence,
Under
To succeed under
Furthermore, counsel for Defendant acknowledged at the hearing on April 18, 2001, that there was no greater likelihood that Defendant was subject to personal jurisdiction in any other state, including California, where Razor U.S.A. is located. According to counsel for Defendant, the same personal jurisdiction issue was previously asserted in a California action where the California court ultimately granted dismissal for lack of jurisdiction. As counsel for Defendant argued at the hearing, Defendant's involvement in the sale of scooters ended in Hong Kong and therefore, Plaintiff's only remedies, according to *789 counsel for Defendant, are an action in Taiwan or before the Patent and Trademark Office challenging Defendant's marks. The Court is satisfied, based upon counsel's representations at the hearing, that Defendant is not subject to personal jurisdiction in any state. See Swiss Am. Bank,
Therefore, the only inquiry left for this Court to determine is whether its exercise of personal jurisdiction over Defendant pursuant to
The Court is also satisfied that Defendant has purposefully availed itself of the American market. Defendant not only sought out and negotiated a licensing agreement with Razor U.S.A. to distribute its products throughout North America, including the United States, it essentially created Razor U.S.A. for this sole purpose. This arrangement constitutes "something more than mere awareness that the stream of commerce will sweep the product into the forum state." Tobin v. Astra Pharm. Prod., Inc.,
Furthermore, Defendant's product is only available through Razor U.S.A., its exclusive distributor. See id. at 544. Defendant "cannot expect to rely solely on the use of an independent distributor to insulate it from suit." Id. Defendant did not simply place its product into the stream of commerce; it purposefully sought out and created a United States distributor to exploit the United States market. Id. As the Sixth Circuit has recognized in a situation analogous to this one, "[i]f we were to accept defendant's argument on this point, a foreign manufacturer could insulate itself from liability in each of the fifty states simply by using an independent national distributor to market its products, a result we specifically rejected." Id.
Last, the Court must determine if its exercise of jurisdiction is reasonable in this case. Reasonableness is evaluated in relation to several factors, including: "the burden on the defendant of litigating in the forum, the interest of the forum state, the plaintiff's interest in obtaining convenient and effective relief, and the shared interest of the several states in furthering fundamental substantive social policies." Id. at 545 (citing World-Wide Volkswagen Corp. v. Woodson,
Defendant first asserts that the burden of litigating in this forum would be substantial because it would be forced to travel great distances and defend itself in a foreign tribunal. Defendant has already exhibited its familiarity with the United States's administrative and legal process *790 by filing a number of trademark registrations. Therefore, the Court finds Defendant's argument to be unpersuasive.
The Court also does not agree that forcing Defendant to appear in this Court would be contrary to international comity. This case involves the validity of United States Trademarks. The forum, i.e., the United States, obviously has in interest in enforcing its statutes. Furthermore, the Court is not convinced that Plaintiff can seek the effective and convenient relief it seeks in Taiwan, as suggested by Defendant.
The Court is satisfied that an exercise of personal jurisdiction by this Court is reasonable and therefore, consistent with due process. Accordingly, the Court finds that its exercise of personal jurisdiction over Defendant is proper pursuant to
Conclusion
For the reasons stated above, Defendant's motion to dismiss for lack of personal jurisdiction shall be denied.
An Order consistent with this Opinion shall issue forthwith.
NOTES
Notes
[1] Plaintiff has filed a "Notice of Objections to Unsupported and False Factual Representations Contained in Defendant J.D. Components Co., Ltd.'s Motion to Dismiss." As these same objections were discussed in Plaintiff's response to Defendant J.D.'s motion to dismiss, and any factual discrepancies must be viewed in a light most favorable to Plaintiff, the Court sees no need to address Plaintiff's Notice of Objections separately. See CompuServe, Inc. v. Patterson,
[2] For purposes of this Opinion only, the term "Defendant" shall refer exclusively to Defendant J.D. Components Co., Ltd.
[3] "In this case, plaintiff Sunshine brings a claim under Lanham Act, § 43(a) (
[4] The Court is aware that neither party cited or discussed the applicability of