District Court Finds Specific Jurisdiction over Out of State Defendant That Continuously Used Plaintiff's Trademark on Website After Receipt of Demand Letter
The U.S. District Court for the District of Kansas denied a defendant’s motion to dismiss the trademark infringement, unfair competition, and dilution claims brought by plaintiff Advisors Excel, LLC (“AE”). The court concluded that although it did not have general jurisdiction over the defendant, it had specific jurisdiction because the defendant’s actions of continuously using AE’s trademark on a website after receipt of a demand letter constituted purposeful availment of the forum.
Defendant Allegedly Used Plaintiff’s Marks on Its Website
AE is a Kansas-based independent field marketing organization that provides services to advisors in the insurance and annuity industries. AE owns a federal registration for the “AE Mark” at issue. Defendant Senior Advisory Group, LLC (“SAG”) is an Arizona corporation and wholesaler of annuity and life insurance products and services, with approximately 568 independent financial advisors throughout the nation, including three advisors in Kansas. SAG operates a website, which contains hyperlinks to other sites and free educational materials. SAG also maintains a YouTube channel with educational videos. SAG has only traveled to Kansas once.
AE alleged that SAG used the AE Mark in SAG’s promotional materials, as well as on its website and YouTube channel. AE contended that this unauthorized use led to consumer confusion and harmed AE’s goodwill and reputation, trade name, and trademark. After SAG continued its unauthorized use of the AE Mark after receipt of AE’s demand letter, AE brought suit in federal district court in the district of Kansas. SAG moved to dismiss for lack of personal jurisdiction.
Factors Weigh Against General Jurisdiction
SAG argued that it was not subject to general jurisdiction because it did not have substantial contacts with the state, nor did it direct its advertising or activities toward the state. To determine whether SAG had substantial contacts with the forum, the court considered four factors (the “Trierweiler factors”):
(1) whether the corporation solicits business in the state through [a] local office or agents; (2) whether the corporation sends agents into the state on a regular basis to solicit business; (3) the extent to which the corporation holds itself out as doing business in the forum state, through advertisements, listings or bank accounts; and (4) the volume of business conducted in the state by the corporation.
It was undisputed that SAG did not maintain a local office or agents in Kansas, nor did it send agents to the state on a regular basis to solicit business. Addressing the third Trierweiler factor, AE contended that SAG held itself out as doing business in Kansas through the presence of its website. However, the court explained that the proper inquiry for determining whether maintenance of a website qualifies as substantial contacts with a forum for general jurisdiction purposes is whether the defendant “‘actually and deliberately used its website to conduct commercial transactions on a sustained basis with a substantial number of residents of the forum.’” Advisors Excel at 8 (quoting Shrader v. Biddinger, 633 F.3d 1235, 1243 (10th Cir. 2011)) (emphasis in original). SAG’s website provided a process for obtaining instant approval of E&O insurance, and AE argued that the commercial nature of the website was evidence that SAG conducted business in the forum state. However, to obtain the E&O insurance, a website user would have to link to a third party’s site, and SAG did not receive any monetary benefit for providing this link to the third-party’s site. SAG also offered free educational videos, e-Books, and webinars on the website, which AE contended constituted commercial activity. While the court acknowledged that Internet sales to residents of a forum can subject the seller to general jurisdiction in that forum, AE failed to establish that SAG had ever sold a product to a resident in Kansas, let alone on a sustained basis to a substantial number of residents. Nor did AE show that the operation of the SAG website constituted a physical presence in the state. As such, the court concluded that the third factor weighed in favor of SAG.
Finally, with respect to the fourth Trierweiler factor, AE alleged that SAG’s ongoing relationship with its three Kansas advisors and with the Kansas office of Aviva Life and Annuity Company established the required volume of business for the court to exercise general jurisdiction. However, SAG countered that its Kansas advisors comprise only 0.52 percent of its total number of independent advisors, and generate only 0.30 percent of SAG’s total revenue. The court explained that such small percentages of business contacts do not meet the substantial contacts requirement of general jurisdiction. Furthermore, SAG contended that all of its business with Aviva was conducted with Aviva’s offices in Iowa. The court ultimately concluded that this factor, along with the other Trierweiler factors, weighed against a finding of general jurisdiction.
However, the court found that it had specific jurisdiction over SAG. Specific jurisdiction exists if a defendant purposefully avails its actions to the residents of a forum, and the litigation arises from or relates to those actions. In the instant case, AE alleged that SAG purposefully availed itself of the forum because it used the trademark of a Kansas company that was the underlying cause of the litigation, as well as operated a website available to the residents of Kansas.
“The Tenth Circuit applies an ‘effects test,’ allowing the exercise of jurisdiction when there is a prima facie showing that defendant (1) intentionally acted (2) in a manner expressly aimed at Kansas with (3) knowledge that the brunt of the injury would be felt in Kansas.” Advisors Excel at 14; see also Dudnikov v. Chalk & Vermillion Fine Arts, Inc., 514 F.3d 1063, 1072 (10th Cir. 2008). Courts consider both the quality and quantity of a defendant’s actions, and in the context of the Internet, specifically consider whether the defendant intentionally directed its website at the forum. In the Tenth Circuit, maintenance of a website which can be accessed by forum residents, without something more, does not subject the defendant to personal jurisdiction.
The court agreed with SAG that SAG’s website was not sufficiently interactive to establish personal jurisdiction. The court explained that “[t]o establish a prima facie case of specific jurisdiction, plaintiff must show that Kansas was the focal point of the website and YouTube postings that utilized the AE Mark.” Advisors Excel at 16. However, the court agreed with AE that SAG’s continued use of the AE Mark after receipt of AE’s demand letter was evidence of purposeful activities aimed at the forum. Specifically, once the demand letter was received, SAG should have anticipated that it would cause harm to AE in the forum, and therefore be subject to jurisdiction in the forum. The court thus concluded that the continued use of the mark by SAG constituted purposeful availment, which supported a finding of specific jurisdiction. The court found that the nexus between SAG’s actions and the exercise of personal jurisdiction was satisfied, and that SAG’s use could cause consumer confusion and harm to AE’s goodwill and reputation.
Due to its finding of specific jurisdiction, and because SAG did not dispute the reasonableness of personal jurisdiction in Kansas, the court denied SAG’s motion to dismiss for lack of personal jurisdiction.
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