NBA Properties, Incorporated v. HANWJH
Decided August 16, 2022 (2022)
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Rule of Law:
Specific personal jurisdiction over an out-of-state online retailer selling infringing products can be established when the retailer purposefully directs its activities at the forum state by making its products available for sale and shipping to residents, even if only a single plaintiff-initiated purchase occurs, and the litigation arises from those forum-related sales.
Facts:
- NBA Properties, Inc., the owner and exclusive licensee of NBA trademarks, filed a complaint against several online retailers, including HANWJH.
- HANWJH, a China-based online retailer, sold products allegedly infringing NBA trademarks via Amazon.com.
- HANWJH offered 41 different basketball shorts in five different size options through its Amazon store, making them available for purchase and shipment to Illinois.
- On September 16, 2020, an investigator for NBA Properties accessed HANWJH’s online Amazon store and purchased a pair of shorts, designating an address in Illinois for delivery.
- On October 6, 2020, the purchased product was delivered to the designated Illinois address.
- HANWJH stated in an affidavit that it had never sold any other product to any consumer in Illinois and had no offices, employees, property, bank accounts, or other commercial dealings with Illinois.
Procedural Posture:
- NBA Properties filed a complaint on December 18, 2020, in the United States District Court for the Northern District of Illinois, Eastern Division, alleging trademark infringement and false designation of origin under the Lanham Act against HANWJH and other defendants.
- The district court granted NBA Properties a temporary restraining order and preliminary injunction, which included a temporary asset restraint on HANWJH’s bank account.
- NBA Properties moved for a default under Federal Rule of Civil Procedure 55(a) and for default judgment under Rule 55(b)(2), asserting HANWJH had been served but had not answered or defended the suit.
- HANWJH moved to dismiss the complaint for lack of personal jurisdiction and to lift the injunction, arguing it lacked sufficient connections with Illinois.
- The district court denied HANWJH’s motion to dismiss, finding personal jurisdiction proper, and simultaneously entered a default against HANWJH under Rule 55(a).
- The district court ordered that any objections to the motion for default judgment be filed no later than July 26, 2021.
- On July 26, 2021, HANWJH appealed the denial of the motion to dismiss to the United States Court of Appeals for the Seventh Circuit.
- After the Seventh Circuit ordered supplemental briefing on appellate jurisdiction, HANWJH voluntarily dismissed its appeal.
- Because HANWJH did not object to the motion for default judgment, the district court entered a final judgment on September 20, 2021, which HANWJH then timely appealed to the United States Court of Appeals for the Seventh Circuit.
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Issue:
Does specific personal jurisdiction exist over an out-of-state online retailer that, through a third-party website, offers to ship and sells a single allegedly infringing product to an investigator in the forum state for the purpose of litigation, when the retailer has no other physical ties to that state?
Opinions:
Majority - Ripple, Circuit Judge
Yes, specific personal jurisdiction exists over HANWJH because it purposefully directed its activities at Illinois by offering and shipping an allegedly infringing product to the forum state, and the trademark infringement litigation directly arises from those forum-related sales, thereby comporting with traditional notions of fair play and substantial justice. The court affirmed the district court’s denial of HANWJH’s motion to dismiss for lack of personal jurisdiction, applying the three-part test for specific personal jurisdiction under the Due Process Clause. First, regarding purposeful direction, the court found that HANWJH established an online store via Amazon.com, unequivocally asserting a willingness to ship goods to Illinois, and then intentionally shipped an infringing product to an Illinois address. This act, consistent with Curry v. Revolution Laboratories, LLC and Illinois v. Hemi Group LLC, demonstrated that HANWJH 'knowingly did do business with Illinois residents.' The court rejected HANWJH’s argument that NBA Properties 'manufactured' jurisdiction, clarifying that the plaintiff’s motivations are irrelevant to assessing whether the defendant structured its activities to target the forum market. It also dismissed the contention that a single transaction cannot establish jurisdiction, citing Supreme Court precedent against 'talismanic jurisdictional formulas' (Burger King Corp. v. Rudzewicz) and distinguishing Matlin v. Spin Master Corp. on the grounds that in Matlin, the single sale was unrelated to the litigation and occurred after the lawsuit was filed, whereas here the infringing product listing and sale occurred pre-litigation and caused the likelihood of confusion underlying the suit. Second, the court found the litigation to be sufficiently related to HANWJH’s Illinois contacts. The Lanham Act provides a cause of action for trademark infringement based on a likelihood of confusion, not requiring actual confusion or a specific type of purchaser. HANWJH’s listing for sale and shipment of the infringing product to Illinois directly related to the harm of likelihood of confusion. The court explicitly rejected the Fifth Circuit's contrary view in Getagadget, LLC v. Jet Creations Inc., emphasizing the 'arising out of or related to' standard from Ford Motor Co. v. Montana Eighth Judicial District Court. Finally, the court determined that exercising jurisdiction would not offend traditional notions of fair play and substantial justice. HANWJH, as the party seeking to defeat jurisdiction, failed to present a compelling case that jurisdiction would be unreasonable. The court reasoned that it is not unfair to require a seller to defend in a state where it structured its business to serve consumers, and Illinois has an interest in protecting its consumers from fraudulent merchandise, while NBA Properties has an interest in protecting its trademark in Illinois. HANWJH alleged no unusual burden in defending the suit in Illinois.
Analysis:
This case significantly clarifies the application of specific personal jurisdiction over foreign online retailers in the context of intellectual property infringement. By affirming that even a single, plaintiff-initiated, pre-litigation sale of an infringing product can establish sufficient minimum contacts, the Seventh Circuit provides important guidance on how courts should address e-commerce disputes where physical presence is minimal. The decision reinforces the principle that structuring an online business to serve a particular state's market constitutes purposeful direction, irrespective of sales volume or the plaintiff's investigative motives. This precedent makes it easier for trademark holders to pursue legal action against foreign counterfeiters in U.S. courts, thereby bolstering intellectual property protection in the digital age and helping to protect consumers from fraudulent goods.
