Plixer International, Inc. v. Scrutinizer GMBH

Court of Appeals for the First Circuit
905 F.3d 1 (2018)

ELI5:

Rule of Law:

A foreign corporation that operates a highly interactive website to knowingly and continuously conduct a substantial volume of business with customers throughout the United States has purposefully availed itself of the U.S. forum, making the exercise of specific personal jurisdiction consistent with the Due Process Clause.

Facts:

Plixer International, Inc. (Plixer), a Maine corporation, has used the mark 'Scrutinizer' since at least November 2005 and filed for a U.S. registered trademark in July 2015.
Scrutinizer GmbH (Scrutinizer) is a German corporation with its principal place of business in Germany, which operates a globally accessible, interactive, English-language website offering software analysis services.
From January 2014 to June 2017, Scrutinizer sold its services to 156 U.S. customers across thirty states, generating revenue equivalent to nearly $200,000.
Scrutinizer's website is globally accessible, provides no indication that it is not intended for U.S. consumers, and the company took no steps to block or limit access by U.S. users.
Scrutinizer has no physical presence in the United States, such as an office, phone number, or agent for service of process, and does not direct advertising specifically at the U.S.
Scrutinizer's standard contracts contain forum-selection and choice-of-law clauses designating German courts and law.
In January 2017, after Plixer initiated this lawsuit, Scrutinizer filed an application for a U.S. trademark for the name 'Scrutinizer'.

Procedural Posture:

Plixer International, Inc. sued Scrutinizer GmbH in the U.S. District Court for the District of Maine for trademark infringement.
Plixer asserted specific personal jurisdiction under Federal Rule of Civil Procedure 4(k)(2) based on Scrutinizer's aggregated nationwide contacts.
After Scrutinizer filed a motion to dismiss for lack of personal jurisdiction, the district court allowed limited jurisdictional discovery.
The district court, upon prima facie review, found it could constitutionally exercise specific personal jurisdiction over Scrutinizer and denied the motion to dismiss.
The district court then granted Scrutinizer's motion to certify the jurisdictional question for an interlocutory appeal.
The U.S. Court of Appeals for the First Circuit granted Scrutinizer's petition to appeal the interlocutory order, with Scrutinizer as the appellant and Plixer as the appellee.

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Issue:

Does the exercise of specific personal jurisdiction over a foreign corporation, based on its operation of an interactive website and substantial, continuous sales to customers throughout the United States, offend the Due Process Clause of the Fifth Amendment?

Opinions:

Majority - Lynch, Circuit Judge.

No, the exercise of specific personal jurisdiction does not offend the Due Process Clause. A foreign defendant's 'regular flow or regular course of sales' in the United States is sufficient to show purposeful availment of the U.S. forum. The court's jurisdiction analysis involves three prongs: relatedness, purposeful availment, and reasonableness. Scrutinizer conceded relatedness. The court found purposeful availment because Scrutinizer used its interactive website to engage in sizeable and continuing commerce with U.S. customers knowingly and voluntarily. This is not a 'stream-of-commerce' case where a manufacturer loses control of its product; Scrutinizer directly controlled its sales to U.S. customers and could have taken steps to block U.S. users but did not. The court rejected the need for 'specific targeting' of the U.S. market, following Justice Breyer's controlling concurrence in J. McIntyre Mach., Ltd. v. Nicastro, which held that existing precedent focusing on a 'regular flow' of sales was sufficient. The court also found the exercise of jurisdiction was reasonable by analyzing the five 'gestalt' factors. While litigating in a foreign system is burdensome, Scrutinizer's substantial U.S. business diminishes this burden, and the U.S. has a strong interest in adjudicating domestic trademark disputes.

Analysis:

This decision provides important guidance on applying personal jurisdiction principles to foreign e-commerce businesses under Federal Rule of Civil Procedure 4(k)(2). It clarifies that a substantial and continuous course of online sales into the United States, without any specific marketing aimed at the U.S., can satisfy the 'purposeful availment' prong of the minimum contacts test. The court's reliance on Justice Breyer's concurrence in Nicastro solidifies the 'regular flow of sales' standard over the stricter 'specific targeting' test proposed by the Nicastro plurality. This holding signals to foreign companies that they cannot avoid U.S. jurisdiction if they knowingly and substantially profit from the U.S. market via a globally accessible website.

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