Foreign Company’s Purposeful US Activities Blemishes Lack of Personal Jurisdiction Defense

By on September 9, 2021
Posted In Trademarks

The US Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of a complaint, finding that the foreign defendant was subject to specific personal jurisdiction in the United States in light of the defendant’s marketing, sales and operations, each of which reflected a significant focus on the United States. Ayla, LLC v. Alya Skin Pty. Ltd., Case No. 20-16214 (9th Cir. Aug. 27, 2021) (Rakoff, J.)

Ayla is a beauty and wellness brand based in the San Francisco area that offers skincare and hair products through retail and online sales, as well as health and personal care advice on its website. Ayla has three registered trademarks “for use of the ‘AYLA’ word mark in connection with on-site beauty services, online retail beauty products and cosmetics services, and cosmetics.” Alya Skin is a skincare company with its place of incorporation and principal place of business in Australia. Alya Skin sells and ships its products worldwide but about 10% of its total sales are made to the United States.

Alleging a “confusingly similar” mark on its products and advertisements, Ayla sued Alya Skin for trademark infringement and false designation of origin pursuant to the Lanham Act, as well as unfair competition under the California Business & Professions Code and California common law. Alya Skin moved to dismiss the lawsuit for lack of personal jurisdiction. The district court granted Alya Skin’s motion to dismiss, finding that it did not have personal jurisdiction. Ayla appealed.

On appeal, Ayla challenged the district court’s determination that it did not have nationwide jurisdiction over Alya Skin under Fed. R. Civ. Pro. 4(k)(2). The Ninth Circuit framed the issue on appeal as a question of whether the district court “erroneously held that the exercise of nationwide jurisdiction over Alya Skin does not comport with due process.” The Court noted that the due process analysis under 4(k)(2) is “nearly identical” to the traditional personal jurisdiction analysis but “rather than considering contacts between [the defendant] and the forum state, we consider contacts with the nation as a whole.” Because trademark infringement is “treated as tort-like for personal jurisdiction purposes,” the Court focused its specific jurisdiction analysis on whether Alya Skin “purposefully directed its activities toward the United States.”

The Ninth Circuit’s inquiry focused on a totality analysis surrounding Alya Skin’s marketing, sales and operations, each of which reflected a significant focus on the United States. The Court noted that Alya Skin promoted its allegedly infringing products specifically to US individuals through “significant advertising efforts.” These efforts included, for example, an Instagram post directly referencing the “USA,” Alya Skin’s advertising efforts during “Black Friday” and Alya Skin’s reference on its website that its products were featured in US magazines. Moreover, Alya Skin presented to consumers “that its products are FDA approved,” which the Court found to be “an appeal specifically to American consumers for whom the acronym ‘FDA’ has meaning.” The Court also noted that Alya Skin’s volume of sales reflected a purposeful direction toward the United States.

The Court also found that Alya Skin’s contract “with a fulfillment center located in Idaho to ship its products throughout the United States and elsewhere” was an “ongoing” contract, which “envisioned performance in the United States.” The Court stated that Alya Skin could “better serve the American market and grow its American contacts” by contracting with a US distribution center, and “Alya Skin could offer two- to four-day shipping within the United States, whereas delivery to most other parts of the world would take five to ten days.”

Taking all of the factors into account, the Ninth Circuit concluded that Alya Skin “purposefully directed its activities toward and availed itself of the protections and benefits of the United States.” The Court further explained that Ayla’s claims clearly “arise out of or result from” Alya Skin’s “forum-related activities” of selling alleged infringing products in the United States and further found that Alya Skin did not meet its burden to present a “compelling case” that “the exercise of jurisdiction [in the United States] would be unreasonable and therefore violate due process.” Accordingly, the Court found that Alya Skin was subject to specific personal jurisdiction in the United States.