Test Buys Don’t Create Personal Jurisdiction Over Amazon Merchant–Oceanside v. Instock

June 12, 2023 · by · in E-Commerce, Trademark

Blogging personal jurisdiction cases isn’t that much fun for me. Nevertheless, this ruling caught my eye.

This is an enforcement action over the trademark “Detoxify.” (I’m skipping the obvious trademarkability problems with a descriptive word like this). The defendant is an Amazon merchant allegedly selling items bearing the mark. The defendant is located in New York and objects to personal jurisdiction in California.

With respect to specific jurisdiction and Constitutional due process, the court applies the following test:

(1) the nonresident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof, (2) the claim must be one which arises out of or relates to the defendant’s forum-related activities, and (3) the exercise of jurisdiction must comport with fair play and substantial justice…

In cases involving tortious conduct such as trademark infringement, courts typically employ the purposeful direction analysis. In the Ninth Circuit, the purposeful direction analysis is governed by a three-part “effects test” derived from Calder v. Jones, 465 U.S. 783 (1984). Under the effects test, “the defendant allegedly must have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.”

Intentional Act. The plaintiff properly alleged this.

Express Aiming. “While sales to a large state such as California are certainly a foreseeable result of selling products online to a national marketplace, express aiming is not satisfied where the defendant’s connection to the forum state is merely a foreseeable result of the defendant’s conduct.”

To get around this, the plaintiff highlighted the following conduct:

  • The defendant made Amazon marketplace sales. The court responds: “Defendant’s online sales to a national marketplace do not constitute the kind of California-focused conduct necessary to show express aiming.”
  • Test buys in California. The court responds: “a plaintiff cannot manufacture personal jurisdiction in a trademark case by purchasing the accused product in the forum state.” (Other jurisdictions are more open to test buys than this court).
  • Defendant’s website made California Consumer Privacy Act (CCPA) disclosures. The court responds: “including potentially applicable privacy laws on its website does not necessarily show that a defendant expressly aimed its sales at a particular state.”
  • The plaintiff suffered goodwill injury in its home state of California. The court says the Supreme Court eliminated this consideration in Walden v. Fiore.

The defendant uses Fulfillment by Amazon. The court says “the fact that Defendant had the ‘willingness’ and ‘capacity’ to send products to any state in the country—including
California—via Amazon’s fulfillment service, does not show that Defendant expressly aimed any conduct at California specifically.”

The court summarizes:

Plaintiff has not established that there is either general or specific jurisdiction over Defendant in California. Plaintiff has not shown that Defendant has “continuous and systematic general business contacts,” such that it can be sued there for any act it has committed anywhere in the world. And while Plaintiff has made out a prima facie case that Defendant committed intentional acts that may have caused harm to Plaintiff in California, it has not made a prima facie case that Defendant expressly aimed those acts at California.

Implications

Overall, this is a defendant-favorable personal jurisdiction ruling. Courts historically preferred to keep cases where the plaintiffs choose to bring them, but several Supreme Court cases in the 2010s (like the Walden case) have seemingly narrowed personal jurisdiction in ways that might change the outcomes.

This ruling has some application to the Schedule A Defendants cases (the SAD Scheme) I’ve been writing about. It raises further questions about whether Amazon merchants are subject to personal jurisdiction in the venue of the plaintiff’s choosing. Here, the court swats down most of the factual bases that SAD Scheme plaintiffs allege to justify personal jurisdiction. Accordingly, judges should be carefully scrutinizing SAD Scheme cases to confirm the defendants are subject to personal jurisdiction. Unfortunately, because those cases are largely handled ex parte, the judges aren’t raising this concern on their own and defendants aren’t around to raise it either. That’s one of several significant concerns about SAD Scheme cases.

The plaintiff has appealed this case to the Ninth Circuit. One to watch.

Case citation: Oceanside Health Products LLC v. Instock Goodies Inc., 2023 WL 3781649 (C.D. Cal. May 2, 2023).