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Court Lacks Jurisdiction Over Defendant In Lawsuit Against Alleged Trademark Troll

Tuesday, February 12, 2013

An alleged trademark troll that demanded that a plaintiff based in Virginia purchase a license to use a contested trademark did not, merely by making its licensing demand, direct its activities towards Virginia in a manner that would bring it within the court's personal jurisdiction, the U.S. District Court for the Eastern District of Virginia held Feb. 5 (People Express Airlines Inc. v. 200 Kelsey Associates L.L.C., E.D. Va., No. 4:12-cv-00061-MSD-DEM, 2/5/13).

The two parties met only once and that meeting took place in New York, not in Virginia, the court noted. Moreover, the parties exchanged only a handful of e-mail messages with each other with regard to the license demand. Based on these facts, “there is simply not enough to support a finding that [the defendant] purposefully availed itself of the privilege of doing business in Virginia,” the court said.

The court also determined that an alleged offer to sell a domain name does not constitute purposeful availment, and the court thus determined that it could not exercise personal jurisdiction over the defendant. 

Mark in Question Made Famous By Third Party

The mark in question, “PEOPLExpress,” was actually made famous by People Express Airlines Inc. of Newark, N.J., which began service in 1981 and which was absorbed by Continental Airlines in 1987. The mark was abandoned at that time.

A new company, People Express Airlines Inc. of Newport News, Va., intended to begin using the mark for its own airline company, and in 2011 it filed an intent-to-use application with the Patent and Trademark Office. People Express had hoped to commence passenger service in the summer of 2012. However, it ran into difficulties securing the rights to the mark.

The PTO informed People Express that a prior intent-to-use application had been filed in 2009 by 200 Kelsey Associates L.L.C. of New Jersey. The 2009 application was in fact the second intent-to-use application filed by 200 Kelsey with respect to the mark.

Its first application was filed in 2005, and the later application was filed just five days before the first application was to become abandoned due to 200 Kelsey's failure to file a statement of use. The PTO has granted 200 Kelsey an extension of time to file a statement of use with respect to its second application, and People Express was concerned that if future extensions were to be granted then the mark could be tied up by 200 Kelsey until 2014.

People Express alleged that 200 Kelsey was a trademark troll that habitually filed intent-to-use applications for marks that it did not in fact intend to use in commerce. Rather, according to People Express, 200 Kelsey continually extends its applications and then, if another party seeks to register the same mark, it demands that they enter into licensing agreements and pay royalties.

People Express alleged that 200 Kelsey also registers domain names for the marks in question, and that it then cybersquats on these domain names with the hope of selling them for a large profit to a company that has a legitimate interest in using the mark for commercial purposes. 200 Kelsey registered the domain name peopleexpressairline.com in 2005, and it registered peopleexpressair.com in 2009.

People Express contacted 200 Kelsey after learning of its intent-to-use application. People Express claimed that 200 Kelsey was unwilling to consider anything other than a licensing agreement that would allow the airline to use the mark while 200 Kelsey retained the rights to the mark.

This proposal was unsatisfactory to People Express, and in 2010 it initiated the instant proceeding against 200 Kelsey. The complaint sought a declaratory judgment that its mark did not infringe 200 Kelsey's rights, and it also asserted one claim of cybersquatting under the Lanham Trademark Act of 1946 and one claim of unfair trade practices.

Kelsey 200 moved for dismissal, arguing that it was not subject to the court's personal jurisdiction. 

Single Contact With Forum Can Support Jurisdiction

200 Kelsey argued that the court lacked personal jurisdiction over the company because it did not have any meaningful contacts with the forum. The court agreed.

Consulting Engineers Corp. v. Geometric Ltd., 561 F.3d 273 (4th Cir. 2009), set forth a three-prong test for determining whether a court can exercise personal jurisdiction over a nonresident defendant.

Under the test, a court must: (1) determine the extent to which the defendant purposefully availed itself of the privileges of conducting activities in the forum; (2) determine whether the plaintiff's claims arise out of those activities; and (3) determine whether the court's exercise of personal jurisdiction is constitutionally reasonable.

Geometric also set forth a list of nonexclusive factors that courts should look at when evaluating whether the defendant availed itself of the forum. Some of those factors consider the defendant's physical presence in the forum, and others assess whether the defendant engaged in activities that are directed towards the forum. The final factor considers “the nature quality and extent of the parties communications about the business being transacted.”

“PeopleExpress is correct that 'even a single contact may be sufficient to create jurisdiction if the cause of action arises out of that single contact,” the court said, quoting Carefirst of Maryland Inc. v. Carefirst Pregnancy Centers Inc., 334 F.3d 390, 397, 67 U.S.P.Q.2d 1243 (4th Cir. 2003). 

Contact With Forum Initiated by People Express

But in the case at hand there were simply no contacts that 200 Kelsey had with the forum that would subject the company to jurisdiction, Judge Mark S. Davis determined. Not only did 200 Kelsey have no physical presence in Virginia, but it has also not even engaged in business directed at Virginia.

People Express argued that 200 Kelsey had engaged in two actions that should subject it to the court's jurisdiction: 200 Kelsey's demand that People Express license the mark, and its offer to sell the domain names constituted purposefully availment of the forum. The court disagreed.

For one thing, “both PEOPLExpress and 200 Kelsey agree (although with varying degrees of emphasis), that 200 Kelsey's license demand was in response to an inquiry initiated by PEOPLExpress after it learned of 200 Kelsey's prior pending intent-to-use application,” the court said. “The Fourth Circuit has expressly held that, although it may not treat such fact as dispositive, a court may accord 'special weight' to the fact that one party initiated contact with the other,” the court said, quoting CFA Instruments v. Instruments of Chartered Financial Analysts of India, 551 F.3d 285, 292 n.15 (4th Cir. 2009).

Given that no other facts established a connection between 200 Kelsey and the forum, “the Court does accord significant weight to the fact that the complained of demand occurred not only outside of Virginia, but solely in response to contact initiated by PEOPLExpress,” the court said.

A single voicemail and a number of e-mail messages between the parties could also not establish purposeful availment under the seventh Geometric factor, the court said. “Even construing these communications in the light most favorable to PEOPLExpress, the Court finds that they do not support a finding that 200 Kelsey purposefully directed its efforts toward PEOPLExpress,” the court said. It also found that the single face-to-face meeting between the parties, which took place in New York, was unhelpful for purposes of demonstrating purposeful availment towards Virginia.

The court granted 200 Kelsey's motion based on the finding that it could not exercise personal jurisdiction over the company.

Jeffrey Dennis Wilson of the Byers Law Group, Norfolk, Va., represented People Express. Paul David Anders of Richmond, Va., represented 200 Kelsey.

ByTamlin H. Bason

Text is available at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/PeopleExpress2013Feb5(1).pdf. 

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