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AEROGROUP INT'L, INC. v. MARLBORO FOOTWORKS

December 24, 1996

AEROGROUP INTERNATIONAL, INC., Plaintiff,
v.
MARLBORO FOOTWORKS, LTD., LAURENCE D. KOPLAN, STEVEN GOLDBERG, GREDICO FOOTWEAR LTD., TOWN SHOES LTD., BATA INDUSTRIES LTD, GOLDPORT ENTERPRISES, INC., MARLBORO FOOTWORKS LTD. (TAIWAN), MASATERU UEHARA, FREDERICK ATKINS, INC., WEISS & NEUMAN SHOE CO., MELVILLE CORPORATION, SHOE CARNIVAL, INC., and NATIONAL INDEPENDENT RETAILERS, INC., Defendants.



The opinion of the court was delivered by: COTE

 DENISE COTE, District Judge:

 On April 17, 1996, plaintiff Aerogroup International, Inc. ("Aerogroup"), filed this action alleging violations of several provisions of the Lanham Act, 15 U.S.C. §§ 1114(1), 1120, 1125(a), and 1125(c); the Patent Act, 35 U.S.C. § 271; and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) ("RICO"). Plaintiff also brings various state-law claims. *fn2" All claims center around alleged violations of plaintiff's intellectual property rights in certain shoes. Defendants Town Shoes Limited ("Town Shoes") and Gredico Footwear, Ltd. ("Gredico"), Canadian corporations who sell shoes exclusively in Canada, now move to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(6), Fed. R. Civ. P. *fn3" For the reasons given below, the motions are granted.

 I. BACKGROUND

 Aerogroup

 Aerogroup is a New Jersey corporation with its principal place of business in New Jersey, and it is authorized to do business in New York. Aerogroup is in the business of purchasing and distributing shoes to customers throughout the United States (including New York) and internationally. One of the brands of shoes distributed by Aerogroup is "Aerosoles," which plaintiff describes as a lightweight, flexible women's shoe. Aerosoles are manufactured in various factories throughout Europe and Sri Lanka. Aerogroup claims intellectual property rights in connection with the Aerosoles shoe.

 For the past three years, sales of Aerosoles at retail have averaged in excess of $ 140,000,000.00 a year, and plaintiff has incurred expenses averaging in excess of $ 1,500,000.00 a year in advertising Aerosoles shoes. Plaintiff, through its exclusive Canadian distributor, is also a large seller and distributor of Aerosoles shoes in Canada.

 Plaintiff also causes the manufacture of "unbranded" or "private label" shoes, which plaintiff refers to as "first cost footwear," at a factory located in the People's Republic of China (the "Chinese factory"). According to plaintiff, the first cost footwear is

 
similar to, but of a lesser quality of design, manufacture and materials than, the Aerosoles Footwear, is of a lower cost and sales price, and is produced and distributed by plaintiff to serve a different, lower priced market than the Aerosoles Footwear.

 Marlboro

 Defendant Marlboro Footworks Ltd. ("Marlboro") is a Massachusetts corporation with its principal place of business in Massachusetts. Acting as a buying agent, Marlboro is in the business of importing, selling, and distributing shoes from the Far East to the United States and Canada. The other corporate defendants are businesses for whom Marlboro has ordered shoes. According to plaintiff, since 1993 Marlboro and other defendants and nonparties conspired and have acted to infringe the plaintiff's intellectual property rights in Aerosoles shoes by manufacturing inferior copies of them at the same Chinese factory which manufactures plaintiff's private label shoes, and selling them to consumers in the United States and Canada.

 Town Shoes

 Town Shoes, a shoe retailer, owns 16 stores which use the name Town Shoes, and 20 stores which use the name The Shoe Company. All the stores are in Canada. Town Shoes does not have an office in the United States, does not sell shoes in the United States, does not advertise in U.S. publications, does not have employees in the United States, and does not ship goods into the United States. Town Shoes representatives have attended shoe shows in the United States, including shows in Las Vegas, Chicago, and four times a year in New York. Town Shoes purchases shoes from American distributors.

 In September or October of 1995, Town Shoes ordered 2,749 pairs of "Active Air" women's shoes from N.I.R., an American wholesaler which is an Illinois corporation. Because of the size of the order, N.I.R. transferred it to Marlboro. The shoes were shipped directly from Asia to Canada, and Town Shoes paid the factories directly. When actually delivered, the shoes were named "Airsupply" rather than "Active Air." In March 1996, Town Shoes called Marlboro and N.I.R. to request additional shoes, but the only shoes available were 600 pairs of Airsupply shoes from N.I.R.'s inventory. Those shoes were delivered by truck to Town Shoes from the United States. *fn4" Plaintiff contends that the two orders of Airsupply shoes infringe plaintiff's intellectual property rights in its Aerosoles shoes.

 According to Town Shoes, the Airsupply shoes at issue in this case were advertised for sale only once -- in a flyer which was placed in The Toronto Star and other local newspapers in Canada. Town Shoes chose the postal codes to which the insert would be delivered, and all of them were in Canada. Moreover, the inserts were only placed in newspapers for home delivery, not those sent to newsstands. Therefore, all of the advertising relating to the shoes at issue in this case took place exclusively in Canada.

 Aerogroup alleges that the Airsupply shoes were first shown to Town Shoes at the Las Vegas shoe show in August 1995 and that Town Shoes' president met with Marlboro representatives again in December 1995 at the New York shoe show. Aerogroup contends that Town Shoes chose the "Airsupply" name for the shoes. This allegation is based on the fact that Steven Goldberg, whose company works as a consultant for Marlboro, testified in his deposition that usually the customers choose the box and sock liner labels. Town Shoes denies that it chose the design of the Airsupply boxes or sock liner labels. For the purposes of this motion, the Court will assume that Town Shoes participated in the selection of an infringing trade dress.

 Aerogroup alleges that the radio stations on which Town Shoes advertises can be heard in Buffalo, New York, and that some of the Canadian newspapers in which Town Shoes advertises have a circulation in the United States. Aerogroup submitted an affidavit from an employee of its Canadian distributor who contacted the Canadian radio stations on which Town Shoes advertises and was told that they can be heard in Buffalo, New York. *fn5" The employee also contacted several of the Canadian publications in which Town Shoes advertises and was told by some of them that they have American subscribers, including some in New York. *fn6" Aerogroup notes that Town Shoes is a member of the American (or National) Shoe Retailers Association and at one time was a member of the Footwear Fashion Association of New York.

 Gredico

 Gredico is a Canadian corporation with its principal place of business in Ontario, Canada. Gredico is in the business of importing, buying at wholesale, and selling and distributing shoes at wholesale and retail throughout Canada. In its Complaint, Aerogroup alleges that Gredico is Marlboro's representative, agent, or distributor in Canada. Marlboro sells to or procures for Gredico lightweight, flexible women's shoes bearing the label "Easy Step." The plaintiff contends that these shoes infringe its rights in Aerosoles. On or about December 22, 1995, Gredico requested that the Easy Step logo contain "a single swoosh." The Aerosoles' logo contains a "swoosh" that resembles a flat and wide inverted "S" which curves back and forth three times. On or about March 25, 1996, an employee of plaintiff's New York law firm telephoned Gredico and inquired where and how to obtain Easy Step shoes in the United States. The Gredico representative advised the caller to telephone Marlboro.

 Plaintiff also alleges that in its advertising, Gredico pastes Easy Step labels into Aerosoles shoes and displays the shoes with the slogan: "The comfortable shoe you know at a comfortable price." Plaintiff alleges that this refers to plaintiff's Aerosoles and evidences Gredico's desire to trade on the reputation of the Aerosoles shoe. The only example of this type of advertising cited by Aerogroup is an advertisement which appeared in the December 1995 issue of a Canadian trade magazine, the Canadian Footwear Journal (the "Journal "). It is undisputed that the Journal has subscribers in the United States and New York.

 Finally, Aerogroup submits an affidavit from a former employee of Gredico who worked there for eight years until early 1995, which asserts that Gredico "solicits sales in New York," attends shoe shows hosted by the Fashion Footwear Association of New York ("FFANY"), and "exhibits its footwear line to retail buyers and other customers, sometimes on its own, and sometimes in conjunction with its suppliers, either at the shoe show location itself or at a nearby hotel suite." In December 1995, for example, Gredico attended the FFANY shoe show in New York City and exhibited its shoes to buyers and other customers in a New York City hotel suite. Gredico also attended the August 1995 and February 1996 shoe shows in Las Vegas, to exhibit its shoes either at the shows or a hotel suite.

 II. STANDARD

 In a diversity case or a case arising under a federal law which does not provide for service of process on a party outside the state, the issue of personal jurisdiction must be determined according to the law of the forum state. Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 105-110, 98 L. Ed. 2d 415, 108 S. Ct. 404 (1987); Hubbell Inc. v. Pass & Seymour, Inc., 883 F. Supp. 955, 961 (S.D.N.Y. 1995). It is well established that on a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, "the plaintiff bears the burden of showing that the court has jurisdiction over the defendant." Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir.), cert. denied, 65 U.S.L.W. 3391 (U.S. Dec. 2, 1996) (No. 96-472). The plaintiff's burden depends on the procedural posture of the litigation. Where there has been no discovery, "a plaintiff may defeat a motion to dismiss based on legally sufficient allegations of jurisdiction." Id. But where there has been discovery regarding personal jurisdiction, the plaintiff's burden is to make a prima facie showing which includes an averment of facts that, if given credit by the ultimate trier of fact, would be sufficient to establish jurisdiction over the defendant. Id. at 567.

 Aerogroup and Town Shoes have conducted discovery on the issue of personal jurisdiction. Accordingly, with respect to Town Shoes' motion, Aerogroup bears the burden of averring sufficient facts to confer jurisdiction over Town Shoes. Aerogroup has had ample opportunity to engage in jurisdiction-related discovery with Gredico, but has not availed itself of this opportunity. Moreover, Aerogroup had full discovery of Marlboro and the action between Aerogroup and Marlboro -- which is the principle action in this matter -- has already been fully tried on the merits. I therefore find that Aerogroup is required to make a prima facie showing for jurisdiction over Gredico as well as Town Shoes. *fn8"

 Aerogroup asserts jurisdiction over Town Shoes and Gredico under two theories. First, under New York's long-arm statute, Civil Practice Law & Rules ("CPLR") § 302(a)(2), Aerogroup argues that both Town Shoes and Gredico have committed a tort in New York. Second, Aerogroup argues that Town Shoes and Gredico are subject to national service of process personal jurisdiction under Rule 4(k)(2), Fed. R. Civ. P. *fn9"

 III. DISCUSSION

 A. New York's Long-Arm Statute

 CPLR § 302(a)(2) provides, in relevant part, that

 
a court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent . . . commits a tortious act within the state. . . .

 (Emphasis supplied). Plaintiff correctly argues that for CPLR § 302(a)(2) purposes, a Lanham Act violation sufficient to confer personal jurisdiction need only amount to an attempt to "pass off" a good as that of the plaintiff's -- no actual sale is required. See Hubbell, 883 F. Supp. at 961 (citing cases). The reason for this rule is that in cases of trademark infringement, the wrong takes place not where the deceptive labels are affixed to the goods or where the goods are wrapped in the misleading packages, but where the passing off occurs, that is, where the goods are offered for sale or sold. Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633, 639 (2d Cir.), cert. denied, 352 U.S. 871, 1 L. Ed. 2d 76, 77 S. Ct. 96 (1956); Pilates Inc. v. Pilates Inst., Inc., 891 F. Supp. 175, 180 (S.D.N.Y. 1995) (finding jurisdiction under § 302(a)(2) where defendant mailed materials soliciting orders into New York); Taurus Int'l, Inc. v. Titan Wheel Int'l, Inc., 892 F. Supp. 79, 81-82 (S.D.N.Y. 1995).

 Town Shoes

 The only possible tortious acts in New York involving Town Shoes are (1) the fact that some of the radio stations, newspapers, and magazines in which Town Shoes advertises reach into New York; and (2) ...


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