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HSIN TEN ENTERPRISE USA, INC. v. CLARK ENTERPRISES

December 29, 2000

HSIN TEN ENTERPRISE USA, INC., PLAINTIFF,
V.
CLARK ENTERPRISES AND CLIFFORD D. CLARK, DEFENDANTS.



The opinion of the court was delivered by: Scheindlin, District Judge.

  OPINION AND ORDER

Hsin Ten Enterprise USA, Inc. ("Hsin Ten") has sued Clark Enterprises and Clifford D. Clark, asserting claims of patent and trademark infringement, as well as state law claims. Defendants now move to dismiss the Amended Complaint for lack of personal jurisdiction and improper venue, pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3). For the foregoing reasons, defendants' motion is granted in part and denied in part.

I. LEGAL STANDARD

In deciding a motion to dismiss pursuant to Rule 12(b)(2), a "court must assume all of the plaintiff's factual allegations are true, and all `doubts are resolved in the plaintiffs favor, notwithstanding a controverting presentation by the moving party.'" Nader v. Getschaw, No. 99 Civ. 11556, 2000 WL 1471553, at *2 (S.D.N.Y. Sept. 29, 2000) (quoting A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993)). The plaintiff bears the burden of establishing that the court has jurisdiction over the defendants. See Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999). However, at this early stage in the proceedings, where no evidentiary hearing has been held, the plaintiff need make only a prima facie showing of jurisdiction. See Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999). Moreover, a court may consider matters outside the pleadings without converting the motion to dismiss into a motion for summary judgment.*fn1 See Dan-Dee Int'l, Ltd. v. KMart Corp., 99 Civ. 11689, 2000 WL 1346865, at *2 (S.D.N.Y. Sept. 19, 2000); see also Bank Brussels Lambert, 171 F.3d at 784 (stating that prima facie showing of jurisdiction can be satisfied with allegations in plaintiff's affidavits and supporting materials).

II. BACKGROUND

A. Allegations of the Amended Complaint

Hsin Ten is a New York corporation with its principal place of business in Farmingdale, New York. See Amended Complaint ¶ 1. Hsin Ten entered into an exclusive licensing agreement ("the Licensing Agreement") with Skylite Industry Co. Ltd. ("Skylite"), granting Hsin Ten the exclusive right to manufacture, use and sell aerobic exercise machines under two patents issued to Skylite.*fn2 See id. ¶ 10. Hsin Ten also owns the "The Chi Machine" trademark and markets and sells an "electric massage apparatus" bearing that mark. Id. ¶ 11-12. Plaintiff alleges that because of its extensive sales and advertising, the "The Chi Machine" mark is associated with plaintiff's electric massage apparatuses. See id. ¶ 13.

Clark Enterprises ("Clark") is a Kansas company with its principal offices in Salina, Kansas. See id. ¶ 2. It maintains no established place of business anywhere other than Salina, Kansas. See Clark Aff. ¶ 5. Clark is a sole proprietorship of Clifford Clark, who resides in Salina, Kansas. See Amended Complaint ¶¶ 2, 3. In or about January 2000, Clark began marketing an aerobic exercise machine (the "Exercise Machine") in direct competition with Hsin Ten's "The Chi Machine" brand aerobic exercise machines. See 10/23/00 Acevedo Decl. ¶ 6. Plaintiff alleges that Clark calls its machine "The Chi Exerciser 2000."*fn3 See id.

Plaintiff asserts five claims against defendants. Claims I and II allege that defendants' Exercise Machine infringes the two patents for which plaintiff is the exclusive licensee. See Amended Complaint ¶¶ 16-19. Claim III alleges that defendants' use of the "Chi" trademark is likely to cause confusion as to the source of the Exercise Machines, and therefore, constitutes trademark infringement. See id. ¶ 21. Claims IV and V assert that defendants' use of the "Chi" trademark constitutes unfair competition under New York common law, and deceptive acts and practices in violation of N.Y. Gen. Bus. §§ 349, 350 (McKinney 1988), respectively. See id. ¶¶ 23, 25.

B. Jurisdictional Allegations

Clark enlists representatives to promote and sell its Exercise Machines. See 10/23/00 Acevedo Decl. ¶ 7. These representatives appear at trade shows, fairs, mall locations and clinics throughout the United States, and receive commissions for each Exercise Machine sold. See id. Additionally, representatives receive bonuses for each Exercise Machine sold by another representative as a result of a referral. See id. This year, Clark representatives have offered the Exercise Machine at two New York trade shows — in Amherst, New York and Syracuse, New York. See 10/19/00 Letter from John E. Gibson, counsel for defendants, to plaintiff's counsel Martin G. Raskin ("10/19/00 Gibson Letter"), Ex. 8 to Raskin Decl., at 2.

Clark also utilizes Internet websites (the "Websites") to market the Exercise Machine.*fn4 See 10/23/00 Acevedo Decl. ¶ 8. The Exercise Machines may be purchased on the Websites either by completing an order form online, or by printing an order form and submitting it to Clark via mail or facsimile. See id. ¶ 9. The Websites also provide customers a help service by which customers may e-mail Clark with questions and receive responses from an online representative. See id.

Furthermore, the Websites advertise Clark's affiliate referral system. See id. ¶ 10. Once an individual purchases an Exercise Machine, she may submit an application to become an "Independent Affiliate". Clark has received five "Independent Affiliate" applications from New York residents, none of whom reside within the Southern District of New York. See 10/23/00 Letter from John E. Gibson to Martin G. Raskin ("10/23/00 Gibson letter"), Ex. 10 to Raskin Decl., at 1.

III. DISCUSSION

A. Standing

While neither plaintiff nor defendants have addressed whether plaintiff, as an exclusive licensee of Skylite's patents, has standing to sue for patent infringement, it is well-established that "[a]s a general rule, . . . a patentee should be joined, either voluntarily or involuntarily, in any infringement suit brought by an exclusive licensee." Prima Tek II, L.L.C., v. A-Roo Co., 222 F.3d 1372, 1377 (Fed. Cir. 2000); see also Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1130-31 (Fed.Cir. 1995) ("A licensee may obtain sufficient rights in the patent to be entitled to seek relief from infringement, but to do so, it ordinarily must join the patent owner."). "The policy underlying the requirement to join the owner when an exclusive licensee brings suit is to prevent the possibility of two suits on the same patent against a single infringer." Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed.Cir. 1991).

However, this general rule is subject to an exception where the patentee made an assignment of "all substantial rights under the patent." Prima Tek II, 222 F.3d at 1377; Vaupel, 944 F.2d at 876; Adams v. Westminster Int'l Co., No. 98 Civ. 2489, 1999 WL 596272, at *1 (S.D.N.Y. Aug. 9, 1999). Transfer of the exclusive right to sue for patent infringement is "particularly dispositive" and will generally permit an exclusive licensee to sue without joining the patentee as a co-plaintiff. Vaupel, 944 F.2d at 875-76.

In the Licensing Agreement, Skylite granted to Hsin Ten "the exclusive right and license worldwide except for the country of Japan to manufacture, use and sell the Exerciser covered by" the two patents issued to Skylite. See Licensing Agreement, Ex. 1 to 12/27/00 Acevedo Decl., at 1. Additionally, the Licensing Agreement contains a section concerning suits against infringers:

Each party shall notify the other party of any suspected infringement of the letters patents in the licensed territory and shall inform the other party of any evidence of such infringement(s). LICENSEE [Hsin Ten] shall have the first right to institute suit for infringement(s) in the licensed territory so long as this Agreement remains exclusive. LICENSOR [Skylite] agrees to join as a party plaintiff in any such lawsuit initiated by LICENSEE, if requested by LICENSEE, with all costs, attorneys' fees, and expenses to be paid by LICENSEE. LICENSEE shall be entitled to any recovery of damages for infringement, both past and present damages, of the letters patents resulting from a lawsuit brought by LICENSEE or LICENSOR. Neither party may settle with an infringer without the prior approval of the other party if such settlement would affect the rights of the other party under the letters patents.

Id. at 1-2.*fn6

B. Personal Jurisdiction

Personal jurisdiction in a federal court is determined by looking to the law of the forum state. See Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). The relevant statute here is New York's long-arm statute, N.Y.C.P.L.R. § 302(a) (McKinney's 1990).*fn7 If jurisdiction is appropriate under state law, a court must then determine whether the exercise of that jurisdiction satisfies the requirements of due process. See Bank Brussels Lambert, 171 F.3d at 784.

Hsin Ten contends that this Court has jurisdiction over defendants pursuant to sections 302(a)(1) and 302(a)(2). See Pl. Opp. at 9. Because I conclude that jurisdiction is appropriate under ...


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