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Tri Coastal Design Group, Inc. v. Merestone Merchandise

May 3, 2006

TRI-COASTAL DESIGN GROUP, INC. PLAINTIFF,
v.
MERESTONE MERCHANDISE, INC., DOROTHY CAO, AND DOES 1-20 DEFENDANTS.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge

OPINION & ORDER

Plaintiff Tri-Coastal Design Group, Inc. ("Tri-Coastal") brought this action against defendants Merestone Merchandise, Inc. ("Merestone"), Dorothy Cao, and Does 1-20 alleging:

(i) false designation of origin and unfair competition in violation of 15 U.S.C. Section 1125(a); (ii) common law trademark infringement; (iii) common law unfair competition; (iv) violation of New York General Business Law Sections 360-1 and 349; (v) copyright infringement in violation of 17 U.S.C. Section 501; and (vi) common law copyright infringement. Merestone and Cao (the "Defendants") now move to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(2) and (3) or, in the alternative, to transfer venue to the Central District of California under 28 U.S.C. Section 1404. For the reasons set forth below, the Defendants' Rule 12(b)(2) motion is GRANTED and I do not reach the Rule 12(b)(3) ground for dismissal. The action shall be transferred to the Central District of California.

I. BACKGROUND

Tri-Coastal is a corporation organized and existing under the laws of the State of New Jersey. See 03/15/2006 Decl. of Michael Mastrangelo, President and Chief Executive Officer of Tri-Coastal ("Mastrangelo Decl.") ¶ 2. The corporation operates principally out of New York and New Jersey, and also maintains a small sales office in California. See id. Tri-Coastal manufactures moderately priced handbags and cosmetic bags, and distributes them to department stores, specialty stores, discount department stores, and mass merchandisers. See id. ¶ 3.

A division of Tri-Coastal, Loop Design, creates original illustrations and two-dimensional works of art for use on, among other items, handbags and cosmetic bags. See id. ¶ 4. Two such works created in 2003, entitled CHANDELIER and GEMS (the "Works"), were registered with the United States Copyright Office. See id. Tri-Coastal was assigned all rights and interest in the Works, including the Copyrights. See id. ¶ 5. Tri-Coastal uses the Works on handbags and cosmetic bags, and has promoted and sold these bags under its registered trademark, TRANSVERSION, since about May 1, 2004. See id.

Merestone is a corporation organized and existing under the laws of California. See 02/24/2006 Decl. of Dorothy Cao, Chief Executive Officer of Merestone ("Cao Decl. I") ¶ 2. The corporation has its only place of business in Irwindale, California. See id. ¶ 4. Merestone designs and sells fashion accessories, and also sells cosmetics. See id. ¶ 2. It sells its products to retailers such as J.C. Penney. See 03/30/2006 Supplemental Decl. of Dorothy Cao ("Cao Decl. II") ¶ 8. Dorothy Cao has been the Chief Executive Officer of Merestone since 2002. See Cao Decl. I ¶ 3. She resides in California. See id. ¶ 16(a).

Merestone does not have a bank account, or a subsidiary company, or property in New York, nor does it have a mailing address or designated agent for service of process here. See id. ¶ 4. It does not offer any of its products for sale in New York, whether through print, television, radio, the Internet, or other media. See id. ¶ 5. Moreover, it has never had an office, showroom, sales agent, factory, warehouse, or other business facility in New York, nor has it ever advertised in, directed advertising at, or maintained any toll free numbers here. See id.

Merestone maintains a web site located at http://www.merestonegroup.com/. See Cao Decl. II ¶ 4. The site lists the corporation's street address, telephone and fax numbers, and its administrative contact person's e-mail address. See id. No goods can be purchased or ordered from this web site, nor does Merestone own or maintain any other web site over which its goods can be purchased or ordered. See id. ¶¶ 4-5.

Contact information for Merestone and some of its officers is also listed on a web page of a web site maintained by a trade show organizer known as ECRM.*fn1 See id. ¶ 6; Print-out of Web Page from ECRM Web Site ("ECRM Web Page"), Ex. 2 to 03/31/2006 Defs.' Reply Mem. to Pl.'s Opp'n to Mot. to Dismiss ("Defs.' Reply Mem."). In addition to the contact information, the web page briefly describes the goods and product lines Merestone sells. See ECRM Web Page, Ex. 2 to Defs.' Reply Mem. ECRM requires all attendees of its trade shows to provide it with their contact information and a short description of their products, which it lists at its own discretion on its web site. See Cao Decl. II ¶ 6. Merestone does not host, own, or operate the ECRM web site and has no control over its content. See id.

Merestone products are offered for sale online at web sites operated by third parties such as J.C. Penney, e-Bay, MSN, and 4 Half Price. See Print-outs of Web Pages from Third Party Web Sites ("Third Party Web Pages"), Exs. G-J to 03/20/2006 Pl.'s Mem. in Opp'n to Mot. to Dismiss ("Pl.'s Mem."). Merestone has no ownership interest in these sites, nor did it authorize any sales over these sites. See Cao Decl. II ¶ 7. It receives no economic benefit from the sales, and has no knowledge or control of the resale of its goods by third parties over their web sites. See id. Finally, and for what its worth, the Merestone products sold on these web sites are not the ones at issue in this litigation. See Third Party Web Pages, Exs. G-J to Pl.'s Mem.

In or about August 2005, Merestone made a one-time sale of handbags printed with designs that were substantially similar to the CHANDELIER and GEMS images (the "Merestone Bags"). See id. ¶¶ 10-11; Color Copies of the Works, Ex. B to Compl.; Color Copies of the Merestone Bags, Ex. C to Compl. The sale was made to the Marmax Group ("Marmax"), the purchasing arm of the retail chains TJ Maxx and Marshalls, which had approached Merestone to design and manufacture the bags. See Cao Decl. ¶¶ 10, 13. The negotiations, design work, payment for, and delivery of the bags to Marmax occurred in California. See id. ¶ 11. Merestone was unaware that there might be copyright or trade dress issues associated with Marmax's order, nor did it have any reason to believe that Marmax had no right to requisition the bags given their past course of dealing. See id. ¶ 13. Further, Merestone, so far as I can determine, had no reason to believe, at any time during its negotiations for the Merestone Bags with Marmax, that these items would be sold in New York. See id. ¶ 12. Merestone and Marmax are entirely unrelated corporations, and Merestone derived no economic benefit from Marmax's subsequent resale of the bags. See id. ¶¶ 10, 15.

In or about the beginning of November 2005, Tri-Coastal purchased a selection of the Merestone Bags at two different New York locations of Marshalls department store. See Mastrangelo Decl. ΒΆ 7. On or about November 11, 2005, Tri-Coastal sent Merestone a letter in which it claimed that the bags infringed Tri-Coastal's trade dress and demanded that Merestone cease and desist from ...


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