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Unique Industries, Inc. v. Sui & Sons International Trading Corp.

November 9, 2007


The opinion of the court was delivered by: Kenneth M. Karas, District Judge


Plaintiff Unique Industries, Inc., ("Unique") brings this action for patent and copyright infringement against Defendant Siu & Sons International Trading Corp. ("Siu"). Plaintiff alleges that Defendant infringed a number of Plaintiff's copyrighted and/or patented products, including piñatas, balloons, balloon weights, wrapping paper, and other party paper goods. Defendant moves to dismiss the Complaint for lack of personal jurisdiction, pursuant to Fed. R. Civ. P. 12(b)(2). Plaintiff argues that the Court has personal jurisdiction over Defendant, and in the event that the Court finds that personal jurisdiction is lacking, Plaintiff seeks limited jurisdictional discovery.

I. Background

The Parties to this action are both in the business of selling party supplies. Unique sells party supplies, such as piñatas, party hats, and decorations, to wholesalers, distributors, and retailers. Unique is incorporated in Pennsylvania and has its principal place of business in Pennsylvania.*fn1 (Compl. ¶ 1.) Siu, like Unique, also sells party supplies. Siu imports party goods from Asia and parts of Canada, and resells them, on a wholesale level, to retail stores. (Siu Decl. ¶ 4, Aug. 31, 2005 ("Siu I Decl.").) Siu does not sell directly to retail consumers. (Id.) Siu is incorporated in Canada and has its principal place of business in British Columbia, Canada. (Compl. ¶ 2.) Most of Siu's products are sold in Canada. (Siu I Decl. ¶ 6.)

Siu has thirty-nine customers in the United States, (Id.), and Siu's records show that they have only one customer in New York, Penny T-Shirt, whose principal is F.J. Penny Zahler ("Zahler"). Zahler is also Plaintiff's attorney's paralegal. (Id.; Zahler Decl. ¶ 1.) Penny TShirt's business relationship with Siu was limited to two discrete events. The first was a transaction which took place in June 2004, when Zahler, acting as Penny T-Shirt, made a one-time purchase valued at $338.40 from Siu's website, of which $59.76 was for accused products.*fn2 (Siu I Decl. ¶ 6.) The second interaction between Siu and Penny T-Shirt was during Christmas of that same year, when Penny T-Shirt received a 2005 calendar from Siu as "a normal marketing gift typically sent to customers." (Zahler Decl. ¶ 7.) Siu has no "officers, employees, or agents residing in New York State" (Siu I Decl. ¶ 9); "has never had any office, telephone, or telephone listing in New York State" (Id.); "is not registered or licensed to transact business in the State of New York" (Id. ¶ 10); "does not own or lease any plant, warehouse, or real property of any nature anywhere in the State of New York" (Id. ¶ 11); has no bank accounts in New York State (Id. ¶ 12); has never "borrowed or invested any money" in New York State (Id.); "has never commenced any legal action or proceeding or been named as a defendant in any action" in New York State (Id. ¶ 13); has not "designated anyone within the State of New York to accept legal service of process" (Id. ¶ 14); "has never attended, or otherwise had its products, including the accused products, displayed at any trade shows in the State of New York" (Id. ¶ 15); and "does not advertise any of its products, including the accused products, in any magazines, newspapers, trade journals, or other publications or in the broadcast media anywhere, including New York State" (Id. ¶ 16). Siu markets its products solely through catalogs, and claims that Penny T-Shirt is "the only New York entity" on Siu's mailing list. (Id. ¶ 17.) Unique disputes this, citing prior statements by Siu representatives that initially denied any New York sales. (Janet Dore Letter to the Court, June 20, 2005.) Indeed, it was only after Plaintiff identified the sales to Penny T-Shirt that Siu acknowledged those New York transactions.

Siu does, however, maintain a website which is accessible to anyone on the Internet.*fn3 (Id. ¶ 18.) Visitors to the site who do not register with Siu can only view general information about the company. (Id.) In order to view and purchase products online, a visitor must register by filling out an online form that requires the visitor to provide the "legal name of the customer, the store's name, the customer's address, and the customer's IRS number . . . a user ID and a password for use in signing in." (Id.) Siu states that Penny T-Shirt is the only registered customer from New York. (Id.)

Unique's Complaint alleges that Siu has infringed Unique's copyright and patents by marketing and selling particular products in the United States and internationally. (Compl. ¶¶ 7-11, 79.) After being served with the Complaint, Siu claims to have "stopped selling all of the accused products in both the United States and Canada." (Siu I Decl. ¶ 22.) In Siu's first letter to the Court requesting a pre-motion conference, Siu stated that it had not conducted any sale or other type of business transactions in New York, and that it did not sell any of the products named in the Complaint in the United States until January 2005. (Janet Dore Letter to the Court, June 20, 2005.) In response, Unique noted that there was at least one purchase made from New York -- the purchase made by Penny T-Shirt. (Gerard F. Dunne Letter to the Court, June 24, 2005.) Sui attributes its initial failure to account for the sale to Zahler to a data purge which removed all pre-2005 data from Sui's accounting system and on to backup systems. (Sui I Decl. ¶ 5.) After restoring its data, and conducting a search of all accounts since 1999, Siu maintained that there was only one sale to New York, the transaction initiated by Penny T-Shirt. (Def.'s Reply Mem. in Supp. of Mot. to Dismiss for Lack of Personal Jurisdiction at 1 ("Def.'s Reply Mem."); Siu Decl. ¶ 4, Sept. 29, 2005 ("Siu II Decl.").) Unique has questioned the truthfulness of Siu's alleged computer purge, because Zahler was able to access her purchase record online. (Zahler Decl. ¶¶ 4-6.) Siu explained that electronic purchase orders and internal financial records were stored on different systems, which is why the purge did not delete any electronic purchase order data, and why Zahler was able to access records of the sale but Defendant was unable to access those same records. (Siu II Decl. ¶ 4-5.) Sui now moves to dismiss for a lack of personal jurisdiction, and Unique seeks limited jurisdictional discovery.

II. Discussion

A. Standard of Review

A court may not hear a case involving a defendant over which it has no jurisdiction. See In re Ski Train Fire in Kaprun, Austria on Nov. 11, 2000, 230 F. Supp. 2d 403, 406 (S.D.N.Y. 2002). Indeed, a plaintiff has the ultimate burden of establishing, by a preponderance of the evidence, that the court maintains jurisdiction over the defendant. See Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999); see also Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). However, "[p]rior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith . . . legally sufficient allegations of jurisdiction, i.e., by making a prima facie showing of jurisdiction." Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir. 1998) (internal quotation marks and citations omitted); see also Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990) ("If the defendant is content to challenge only the sufficiency of the plaintiff's factual allegation, in effect demurring by filing a Rule 12(b)(2) motion, the plaintiff need persuade the court only that its factual allegations constitute a prima facie showing of jurisdiction."). "[A] prima facie showing of jurisdiction does not mean that plaintiff must show only some evidence that defendant is subject to jurisdiction; it means that plaintiff must plead facts which, if true, are sufficient in themselves to establish jurisdiction." Bellepointe, Inc. v. Kohl's Dep't Stores, Inc., 975 F. Supp. 562, 564 (S.D.N.Y. 1997). A plaintiff may "make this showing through [its] own affidavits and supporting materials[,] containing an averment of facts that, if credited . . . , would suffice to establish jurisdiction over the defendant." Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (internal quotation marks and citations omitted). While a court may consider materials beyond the pleadings, the court must credit a plaintiff's allegations in support of jurisdiction. See A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993) ("[W]here the issue is addressed on affidavits, all allegations are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor, notwithstanding a controverting presentation by the moving party."). The analysis differs, however, if the jurisdiction challenge involves discovery and a hearing: in such a case the plaintiff must demonstrate jurisdiction by a preponderance of the evidence. See Cutco Indus. v. Naughton, 806 F.2d 361, 364 (2d Cir. 1986); see also Ball, 902 F.2d at 197 (noting that when "defendant contests the plaintiff's factual allegations, then a hearing is required, at which the plaintiff must prove the existence of jurisdiction by a preponderance of the evidence").

No specific federal statute governs personal jurisdiction on copyright claims, so courts rely on the forum state's law to determine personal jurisdiction when the defendant, as here, is a foreign corporation. See PDK Labs v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997); Overseas Media, Inc. v. Skvortsov, 407 F. Supp. 2d 563, 567 (S.D.N.Y. 2006) (citing Blue Ribbon Pet Prods., Inc. v. Rolf C. Hagen (USA) Corp., 66 F. Supp. 2d 454, 459 (E.D.N.Y. 1999)). Therefore, New York law will determine whether this Court has personal jurisdiction over Defendant. See Sunward Elecs., Inc. v. McDonald, 362 F.3d 17, 22 (2d Cir. 2004) ("Because the Lanham Act does not provide for national service of process, the New York State long-arm statute governs this inquiry."); see also N.Y. C.P.L.R §§ 301-302. If Defendant is subject to personal jurisdiction under New York law, the Court would then determine whether "its assertion of jurisdiction pursuant to the forum state's laws comports with the requirement of due process" established by the Supreme Court in Int'l Shoe Co. v. Washington, 326 U.S. 310 (1945). See Allojet PLC v. Vantage Assocs., No. 04-CV-5223, 2005 WL 612848, at *5 (S.D.N.Y. Mar. 15, 2005).

B. Jurisdictional Analysis

Plaintiff primarily argues that Defendant should be subject to the specific personal jurisdiction provision of New York's long-arm statute, N.Y. C.P.L.R. § 302(a).*fn4 Section 302 permits the Court to exercise personal jurisdiction over a defendant "on a lesser showing of forum contacts [than necessary under the 'doing business' standard of Section 301] if the cause of action arises from those contacts." Overseas Media, 407 F. Supp. 2d at 571 (internal quotation marks omitted); see N.Y. C.P.L.R. § 302(a). Under Section 302, the Court has personal jurisdiction over a non-domiciliary if the non-domiciliary:

1) transacts any business within the state or contracts anywhere to supply goods or services in the state; or 2) commits a tortious act within the state . . . ; or 3) commits a tortious act without the state causing injury to person or property within the state . . . if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should ...

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