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AQUA PRODUCTS, INC. v. SMARTPOOL

August 17, 2005.

AQUA PRODUCTS, INC., Plaintiff,
v.
SMARTPOOL, INC., MAYTRONICS, INC., RICHARD HOLSTEIN, and JOSEPH DYBROFSKY Defendants.



The opinion of the court was delivered by: GEORGE DANIELS, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff, Aqua Products Inc., brings suit asserting, inter alia, patent and trademark infringement and related state law claims. Defendant Maytronics, Inc. filed counterclaims, seeking declaratory judgment that plaintiff's patents were invalid or not infringed.*fn1

Defendants Smartpool, Inc., Richard Holstein, and Joseph Dybrofsky moved to dismiss the complaint for lack of personal jurisdiction and improper venue pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3). In the alternative, defendants Smartpool, Inc., and Holstein moved to transfer this action to the District Court of New Jersey under 28 U.S.C. § 1404(a). Defendants' motion to dismiss for lack of personal jurisdiction is granted.

  BACKGROUND

  Plaintiff, Aqua Products Inc., is a company organized under the laws of the state of Delaware with its principal place of business in New Jersey. Plaintiff manufactures and sells a variety of robotic pool cleaners. The corporate defendants in this action, Smartpool Inc. and Maytronics Inc., are plaintiff's competitors in the pool-cleaning industry. Defendant Smartpool Inc. is a Delaware corporation with its principal place of business in New Jersey, while Maytronics Inc. is incorporated in and principally operates from Israel. Defendant Richard Holstein, a citizen of New Jersey, is the president of Smartpool Inc. and defendant Joseph Dybrofsky, a citizen of Toronto, Canada, is the majority shareholder and a director.

  For over 20 years, plaintiff has developed and sold robotic pool cleaners for residential and commercial markets. On August 8, 2000 and June 1, 2004 plaintiff patented technology to improve the performance and speed of their products and has trademarked various phrases involving the company name to distinguish its goods in the marketplace.*fn2 Plaintiff alleges that over the years, competitors, including the defendants, have sought to copy Aqua Products' patented technology and unlawfully trade on the goodwill and consumer recognition of the company's trademarks.

  Specifically, plaintiff seeks injunctive relief and damages for: patent infringement in violation of 35 U.S.C. §§ 271 and 281, cyberpiracy in violation of 15 U.S.C. § 1125(d), trademark infringement in violation of 15 U.S.C. § 1114, false designation of origin in violation of 15 U.S.C. § 1125(a), dilution of business reputation in violation of 15 U.S.C. § 1125(c), and the use of false, misleading descriptions, or representations of fact in violation of 15 U.S.C. § 1125(a). Plaintiff's state law claims against defendants include: defendant's use of deceptive trade practices and false advertising in violation of New York State General Business Law §§ 349 and 350, and common law claims of unfair competition. Plaintiff asserts that this Court may exercise personal jurisdiction over the defendants because they are doing business in this district pursuant to section 301 of the New York Civil Practice Laws and Rules ("CPLR") and transacting business in this district pursuant to section 302 of the CPLR. Defendants Smartpool Inc., Richard Holstein, and Joseph Dybrofsky argue that their contacts with the state of New York are insufficient to confer personal jurisdiction over them under the state's general and specific jurisdictional statutes. Specifically, defendant Smartpool alleges that the company does not have any employees, agents, or offices within the state of New York. Smartpool further maintains that it neither owns, uses or possesses any storage places, any place of business, a telephone number, or subsidiaries within the state of New York, nor is it listed in the New York telephone directory or licensed to do business in the state. Smartpool asserts that all sales contracts are concluded outside of New York and all financial, business, and product documents relating to Smartpool are located in New Jersey.

  Defendant Smartpool does, however, concede that it: (1) maintains a website with an email address, advertising some of the products offered by Smartpool, which non-New Jersey residents may access but may not conclude sales; (2) uses an independent sales representative based in Pennsylvania who promotes and sells Smartpool's products throughout the entire Northeast region, including retailers and independent distributors in New York, as part of a non-exclusive agreement with Smartpool; and (3) maintains a bank account in New York, Smartpool also concedes that approximately two percent (2%) of their total annual gross revenue stems from the sale of company products to New York retailers and distributors. Despite these admissions, Smartpool argues that its contacts with the state of New York are insufficient to warrant the exercise of either general or specific jurisdiction because: (1) it does not engage in continuous and systematic business activities here and; (2) it does not transact business here within the meaning of New York's long arm statute.

  Defendants Richard Holstein and Joseph Dybrofsky also argue that their contacts with the state of New York do not permit the Court to exercise personal jurisdiction over them. Holstein and Dybrofsky neither work in New York, nor are they domiciled within the state. Holstein works full-time in New Jersey as the president of defendant Smartpool, Inc. Dybrofsky, a resident of Toronto, Canada, is the majority stockholder and a director of defendant Smartpool, Inc. He is neither employed by Smartpool at its New Jersey headquarters nor any other office. Holstein and Dybrofsky further deny plaintiff's allegations that they aided and abetted in the commission of infringing acts on behalf of Smartpool, Inc. or that they serve as alter egos of the corporate defendant.*fn3

  Defendants argue in the alternative, that even if the exercise of personal jurisdiction is appropriate, venue is improper and that this action should therefore be transferred to the District of New Jersey.

  DISCUSSION

  Under Federal Rule of Civil Procedure 12(b)(2), a party may move to dismiss a complaint if the court lacks personal jurisdiction over the defendant. See Fed.R.Civ.P. 12(b)(2). The burden of establishing personal jurisdiction lies with the party that is attempting to assert such jurisdiction. See Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999). In deciding a motion to dismiss, a court must construe all pleading and affidavits in the light most favorable to the plaintiff. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 163 F.2d 55, 57 (2d Cir. 1985). Absent an evidentiary hearing, the plaintiff need only make a prima facie showing, by pleadings and supporting affidavits, that the court possesses the requisite jurisdiction over the defendant. See Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999).

  To determine whether personal jurisdiction exists over a nonresident defendant, the Court must look to the forum state's jurisdictional statutes. See Beacon Enterprise, Inc., v. Menzies, 715 F.2d 757, 762 (2d Cir. 1983). If the exercise of personal jurisdiction is appropriate under state law — in this case, New York's Civil Practice Law and Rules (CPLR) section 301 or 302 — then the court must decide whether the exercise of that jurisdiction is consistent with federal due process requirements. See Bank Brussels Lambert, 171 F.3d at 784. Under due process requirements, the court's exercise of personal jurisdiction over a defendant is proper only if that defendant has some minimum contacts with the forum state and the assertion of personal jurisdiction does not "offend traditional notions of fair play and substantial justice." See Fort Knox Music, Corp. v. Baptiste, 203 F.3d 193, 196 (2d Cir. 2000) (quoting Calder v. Jones, 465 U.S. 783, 788 (1984)). Where a lawsuit relates to patent infringement, it is governed by the law of the Federal Circuit. See Hildebrand v. Steck Mfg. Co., Inc., 279 F.3d 1351, 1354 (Fed. Cir. 2002). However, in determining whether a federal court has personal jurisdiction over a defendant, even when the cause of action is purely federal, federal courts apply the relevant state statute. See Graphic Controls Corp. v. Utah Medical Products, 149 F.3d 1382, 1385 n. 2 (Fed. Cir. 1998).

  A. General Jurisdiction Under CPLR § 301, a foreign defendant is subject to general personal jurisdiction if it is "doing business" in New York. See Wiwa v. Royal Dutch Petreloeum Co., 226 F.3d 88, 95 (2d Cir. 2000). Judicial interpretation of section 301 further provides that "a non-domiciliary subjects herself to personal jurisdiction in New York with respect to any cause of action if she is engaged in such a continuous and systematic course of doing business here as to warrant a finding of her presence in this jurisdiction." See Beacon Enters., 715 F.2d at 762 (internal quotations omitted). To fall within the purview of section 301, foreign defendants must do more ...


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