Energy Brands Inc. v. Spiritual Brands, Inc.
2008 U.S. Dist. LEXIS 54789, 571 F. Supp. 2d 458, 2008 WL 2747276 (2008)
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Rule of Law:
Under New York's long-arm statute, personal jurisdiction over a non-domiciliary defendant is established if the defendant transacts business within the state by making sales through an active, commercial website to state residents. Jurisdiction is also proper if the defendant commits a tortious act (such as trademark infringement) outside the state that causes a reasonably foreseeable injury within the state, provided the defendant derives substantial revenue from interstate commerce.
Facts:
- Glacéau, a New York corporation, has produced and sold 'smartwater' since 1996 and also sells a line of 'vitaminwater' products with names like 'Balance,' 'Defense,' and 'Focus.'
- Spiritual Brands, a Florida corporation with its principal Elicko Taieb, a Florida domiciliary, launched a purified bottled water product called 'Spiritual Water' in September 2007.
- Spiritual Brands' products featured names similar to Glacéau's, such as 'Balance,' 'Defense,' and 'Focus.'
- From October through December 2007, Spiritual Brands operated an interactive website through which it sold its products directly to consumers.
- During this period, Spiritual Brands sold and shipped twenty-nine bottles of Spiritual Water to fourteen different customers in New York State, for a total of $158.53.
- In November 2007, before the lawsuit was filed, a private investigator for Glacéau purchased Spiritual Water for delivery to New York via the website.
- Spiritual Brands' website featured customer testimonials from individuals identifying themselves as being from New York and advertised an event 'coming soon' to New York, New York.
Procedural Posture:
- Energy Brands Inc. (d/b/a Glacéau) filed a complaint against Spiritual Brands, Inc. and its principal, Elicko Taieb, in the U.S. District Court for the Southern District of New York.
- The complaint alleged trade dress infringement and unfair competition.
- Defendants Spiritual Brands and Taieb filed a motion to dismiss the complaint for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2).
- Plaintiff Glacéau opposed the motion and requested sanctions and costs.
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Issue:
Does a New York court have personal jurisdiction over a non-domiciliary Florida corporation and its principal when their only contacts with New York consist of selling a small number of allegedly infringing products to New York residents through an interactive website and other online activities targeting the state?
Opinions:
Majority - Chin, District Judge
Yes, the court can exercise personal jurisdiction over the defendants. Personal jurisdiction is proper under two independent sections of New York's long-arm statute. First, under C.P.L.R. § 302(a)(1), defendants 'transacted business' in New York by purposely availing themselves of the New York market. Their website was 'active' and commercial, not passive, as it allowed for the exchange of information to complete at least a dozen sales to New York consumers. Even a single purposeful transaction is sufficient, and the trademark infringement claim arises directly from these sales. Second, under C.P.L.R. § 302(a)(3)(ii), jurisdiction is proper because defendants committed a tortious act (trademark infringement) outside New York that caused injury (lost sales and customer confusion) inside New York. Defendants should have reasonably expected consequences in New York given their direct sales, New York-specific testimonials, and advertisements for a New York event. While the revenue from New York sales was small, it is sufficient for a prima facie showing, especially since defendants failed to provide complete revenue information.
Analysis:
This case illustrates the modern application of personal jurisdiction principles to e-commerce. It reinforces the 'sliding scale' test for websites, confirming that even a small volume of sales through an interactive site constitutes 'transacting business' sufficient for jurisdiction. The decision signals that companies purposefully selling products online cannot evade lawsuits in states where they make sales, regardless of how minimal those sales are. This precedent is significant for internet-based businesses, as it lowers the threshold for being subject to jurisdiction in any forum where they actively solicit and complete commercial transactions.
