26 februar 2018

Marketing on the Internet: Can Norwegian companies be sued in a U.S. court when they offer goods for sale in the United States over the Internet?

Dagens omfattende markedsføring på internett gir en unik mulighet for bedriftene til å nå ut til hele verden på en billig og effektivt måte, uten hinder av fysiske sperringer. Dette gir også markedsføringsmuligheter for mindre profesjonelle aktører, som ikke nødvendigvis er klar over den juridiske sværen de beveger seg inn i. I denne artikkelen ser Vebjørn Innset Hurum (til daglig advokatfullmektig i Advokatfirmaet Selmer) som har en mastergrad i juss fra USA, på muligheten, for at norske bedrifter kan bli saksøkt i USA for varemerkeinngrep som følge av markedsføring på internett. 

Kilde: Visa
Trademark infringement is a remedy available for a trademark holder entitling him to compensation because his trademark is damaged by the existence of another mark. For such an infringement claim to succeed, the plaintiff must prove that there is likelihood of confusion between his mark and the defendant's mark. In a world where the Internet is making the boarders between the countries less significant for commerce than ever, buying goods in United States from a Norwegian website is not unusual. Even though this possibility opens the door to new commercial markets, it also opens the door for trademark infringement proceedings against Norwegian companies in a United States court. The issue assessed in this article is whether a Norwegian company can be sued, and if so on what terms, in a United States federal court for infringement of a U.S. trademark, because of their marketing on the Internet when the website is accessible in the United States. 

For a foreign company to be sued in a United States federal court, two fundamental requirements must be met: The court must have (1) subject matter jurisdiction over the defendant and (2) personal jurisdiction over the defendant.

The requirement of subject matter jurisdiction is fulfilled if there is diversity between the parties or if the issue at stake is a federal issue. The Lanham Act is a federal regulation of trademarks within the United States. Thus, the federal courts will always have subject matter jurisdiction in cases concerning the Lanham Act. In addition, according to 28 U.S.C § 1332(a) (2), the diversity requirement is met if one of the parties is from a U.S. state, and the other party is a citizen or subject of a foreign state. For example, if a travel agency in New York sues a Norwegian registred travel agency that operates in New York because of trademark infringement for their online advertising towards Newyorkers, the diversity requirement will be fulfilled.

There are two sub-categories for establishing personal jurisdiction: (1) general personal jurisdiction and (2) specific personal jurisdiction. General personal jurisdiction gives the court jurisdiction against the defendant regardless of the claim, and requires that the company in dispute has its principal place of business in the state or is incorporated in the state. Hence, general personal jurisdiction will usually not be applicable to foreigners, and will therefore not be assessed any further in this article. 

To establish specific personal jurisdiction over a foreign defendant, the elements of the long-arm statute of the particular U.S. state must be fulfilled.  In addition, suing the foreign defendant must satisfy the requirements of due process.

Requirement of due process consists of several elements: (1) the defendant must have minimum contacts with the state, (2) the cause of action must arise out of the parties' contacts with the forum state, and (3) the exercise of jurisdiction must be fair and reasonable. 

The due process requirement has shown to be the problematic requirement for establishing specific personal jurisdiction, and the question of sufficient contact with the forum state has often been challenged in the case law. Thus, the analysis below gives a closer look into the element of minimum contacts with the forum state in order to satisfy the requirement of due process. 

Minimum contacts requirement for exercising jurisdiction 

The first question in this assessment of due process is how much contact between the defendant's business and the forum state will be considered as sufficient in order for the court to have jurisdiction. 

Kilde: Rakuten
In Asahi Metal Industry Co. v. Superior Court (1987), the U.S. Supreme Court discussed what is required under the minimum contacts element. The case was between a plaintiff from California and a defendant from Japan. The Court held that the defendant from Japan could not be sued in California because it would not be reasonable. Excersising its jurisdiction would therefore be inconsistent with the requirements of the due process clause. The Court split evenly into two fractions in their reasoning regarding the minimum contact requirement. Both fractions of the Court agreed that if the defendant purposely entered the U.S. market, the requirement is fulfilled. However, four of the judges held that if a corporation is aware that its final product is being marketed in the forum state this should be sufficient for the court to have jurisdiction. On the other hand, the other four judges held that it must be an "intent or purpose to serve the market in the forum state, when a product is placed into the stream of commerce in the forum state". 

Based on the divided opinions in Ashai, it is unclear where exactly the line is to be drawn for the defendant to have had sufficient contacts with the forum. 

Advanced Tactical Ordnance v. Real Action: Internet marketing and trademark infringement

In 2014 the Court of Appeal for the 7th Circuit handed down its opinion in Advanced Tactical Ordnance v. Real Action, a case concerning the jurisdiction of a federal district court concerning a matter originating in another state. The question before the court was whether the marketing through email announcements and website was sufficient to satisfy the requirement for a minimum contact with the state of Indiana.

Kilde: Southern Police Equipment
The company Advanced Tactical Ordnance owned the trademark "PepperBall", whereas Real Action, a California company, advertised through email that their website sold machinery and materials used by "PepperBall". Advanced filed a preliminary injunction against Real Action for trademark infringement in the U.S. District Court for the Northern District of Indiana. The Court concluded that Real Action had personal jurisdiction in Indiana and that Advanced Tactical was entitled to a preliminary injunction.

The 7th Circuit started by emphasizing that there are no cases from Supreme Court which deal with how online commercial activity shall be considered under the minimum contacts analysis. In other words, there was only limited guidance for the court in the case law. The court then moved to analyse the specific online activity by Real Action in the case. Regarding the e-mails announcements the court stated:
"As a practical matter, email does not exist in any location at all; it bounces from one server to another, it starts wherever the account-holder is sitting when she clicks the "send" button, and it winds up wherever the recipient happens to be at that instant. The connection between the place where an email is opened and a lawsuit is entirely fortuitous. We note as well that it is exceedingly common in today's world for a company to allow consumers to sign up for an email list. We are not prepared to hold that this alone demonstrates that a defendant made a substantial connection to each state (or country) associated with those persons' "snail mail" addresses."
Here, the court seems to be afraid of coming to a conclusion that makes the rule too broad, so that almost all kinds of advertising can lead to a company possibly being sued in a U.S. court. I can agree with the court that a rule based on where an email is opened seems too arbitrary. On the other hand, the last component of the specific personal jurisdiction rule - fair and reasonable exercise of jurisdiction - indicates that the threshold for minimum contacts does not have to be set high, as it would hardly be fair and reasonable for a company to be sued if the company had no control over where the email is opened. 

The court also offered some thoughts on what could be sufficient to satisfy the criteria:
"It may be different if there were evidence that a defendant in some way targeted residents of a specific state, perhaps through geographically-restricted online ads. But in such a case the focus would not be on the users who signed up, but instead on the deliberate actions by the defendant to target or direct itself toward the forum state. Advanced Tactical introduced no such evidence in the district court and makes no such argument on appeal." 
This reasoning by the court opens the door to a rule where geographically limited email announcements can be sufficient to satisfy the minimum contacts requirement. This, however, seems to be in line with the rule from Asahi, and is based on the intent of the company. Considering that the company in such cases purposefully submitts itself to doing business in the U.S, it does not seem unfair or unreasonable that it may be sued in a U.S. Court.

The plaintiff, Advanced Tactical, also argued that the interactivity on the website, which could be accessed within the state, also supported the conclusion that Real Action had sufficient contact with the state of Indiana. The court, however, was not convinced by this argument:
"The interactivity of a website is also a poor proxy for adequate in-state contacts. We have warned that "[c]ourts should be careful in resolving questions about personal jurisdiction involving online contacts to ensure that a defendant is not haled into court simply because the defendant owns or operates a website that is accessible in the forum state, even if that site is 'interactive. ... This makes sense; the operation of an interactive website does not show that the defendant has formed a contact with the forum state. And, without the defendant's creating a sufficient connection (or "minimum contacts") with the forum state itself, personal jurisdiction is not proper."
In the cited paragraph above, the court clearly rejects the argument about interactivity of a website. The court's rationale seems to be that even though a company runs a website, which is accessible in the forum state, it is not given that the website will affect the commerce within the state. To establish connection between the Internet site and the forum it has to be proven that commerce is made through the website and that it has a connection to the forum state. However, as the court itself stated, it can be difficult to prove where such sale actually happened if the access to the website is not geographically limited. For example, if a Norwegian sportswear company has accessible interactive websites in both Norway and United States, and the customer prior to ordering products online visited both websites, the question raises; is it possible to sue the company in United States? Following the rationale from Asahi and Advanced Tactical Ordnance, it will be highly dependent on whether one can prove that the company purposely made its website available in United States.

Where do we go from here? 

Nettreklame for MoneyMutual
Kilde: Minnesota Lawyer
To my knowledge, there are no cases where a federal court has exercised jurisdiction over a foreign defendant based on online commercial activity in the United States. However, a case from Minnesota Supreme Court might indicate how federal courts will handle similar cases of international jurisdiction in trademark cases. In Rilley v. MoneyMutual, LLC  (2016), the question was whether a Nevada company could be sued in Minnesota for false online advertising of money lending. 

A central part of the court's reasoning was whether the Nevada company had sufficiently contact with Minnesota, so it could be sued there. The Minnesota Supreme Court held that by sending thousands of emails to Minnesotans and trying to get them to buy payday loans, and requesting personal information from them, the company had purposely entered the Minnesota market. Regarding the minimum contact requirement the court stated: 
"MoneyMutual sent over 1,000 emails to known Minnesotans, soliciting them to apply for payday loans. These emails were the culmination of transactions between MoneyMutual and Minnesota residents through which Minnesota residents provided their personal information to MoneyMutual in return for being matched with a payday lender. By engaging in these transactions and knowingly matching Minnesota residents with payday lenders, MoneyMutual purposefully availed itself of the Minnesota market and Minnesota forum and should have "reasonably anticipate[d] being haled into court" in Minnesota".
The court found the emails mentioned in the above paragraph to be sufficient contact with the forum state. In addition, MoneyMutual had targeted the Minnesota market by using Google AdWords specific to Minnesota. This kind of specific advertisement was as well on its own sufficient to satisfy the minimum contacts element according to the court. 

Even though the parties of the case were residents of different states within the United States, it shows a rationale which might be adopted by the federal courts in international cases in the future. If a Norwegian winter sportswear company, having a similar trademark to a United States sportswear company, sends a certain amount of emails to New Yorkers trying to sell them their products, a federal court in New York is likely to hold that the minimum contact requirement is met. The same goes for specifically targeted use of online advertisement. 

But what if the website is not only accessible in United States; what is then required to be sufficiently in contact with the New York market? Could a website which expressly uses phrases like "we ship our products all around the world" be sufficient? What about "we ship to the U.S"? And can it be sufficient that the products actually are shipped without any specific annoucentment? The evaluation of the contacts with the forum state will always be specific to the case, and will always have to consider all the circumstances, but the advertisement will probably have to be even more specific and targeted towards the forum state than otherwise in order to fulfil the minimum contacts requirement in such case. At least for now.  

Today, it is certain that the sole opportunity of selling commodities over the Internet in the U.S. market is not sufficient for a company to be sued in the U.S. However, any company advertising specifically towards the U.S. market will run a risk of crossing the line, and becoming a subject of the U.S. courts' jurisdiction, even though it is difficult to conclude where exactly that line is drawn.

Considering that many states have ratified the Madrid System for International Registration of Marks (the Madrid Protocol), questions of trademark law are already international in many aspects. In the future, it is not unlikely that the courts in more and more countries will consider themselves as the right forum for international trademark infringement lawsuits based on Internet marketing. Hence, Norwegian companies doing business in the U.S. should follow the evolvement of the rules on specific personal jurisdiction in connection with the use of Internet as a marketing forum. 

Similar questions regarding jurisdiction over a foreign defendant in trademark cases have been raised in Europe, where the Brüssels I-regulation states that a person domiciled within the EU may be sued "in the courts for the place where the harmful event occurred or may occur". Norway is not a member of EU and is therefore not bound by Brüssel I. However, Norway has ratified the Lugano Convention from 2007. This convention has the same provisions to the EU regulation for members of the EEA. To seek harmonization within the internal market courts in EEA, states will interpret the Lugano convention by looking to case law from ECJ. However, the EU case law on this question calls for another blog post.

Vebjørn Innset Hurum

Ingen kommentarer:

Legg inn en kommentar