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Single T-Shirt Sale Can’t Clothe Bare-Bones Personal Jurisdiction Claim

The US Court of Appeals for the Eighth Circuit affirmed a district court’s dismissal of a trademark infringement suit for lack of personal jurisdiction, finding that the trademark owner failed to allege that the alleged infringer could reasonably anticipate being hauled into court in Missouri. Brothers and Sisters in Christ, LLC v. Zazzle, Inc., Case No. 21-1917 (8th Cir. Aug. 2, 2022) (Smith, Benton, Kelly, JJ.)

Brothers and Sisters in Christ (BASIC) is a Missouri-based clothing company that owns the trademark “love happens.” Zazzle is a California-based online retailer. BASIC sued Zazzle in a Missouri district court for trademark infringement, alleging that Zazzle used its nationally available website to advertise and sell goods in Missouri. BASIC further alleged that in 2019, Zazzle sold and shipped a t-shirt bearing a purportedly infringing “love happens” logo to at least one Missouri resident. The district court granted Zazzle’s motion to dismiss for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). BASIC appealed.

Reviewing the issue de novo, the Eighth Circuit affirmed the dismissal. The Court explained that because the Lanham Act does not authorize nationwide personal jurisdiction, the Court was required to apply Missouri’s long-arm statute and the federal due process clause. Given that Missouri’s long-arm statute authorizes personal jurisdiction over defendants who engage in, among other things, the transaction of any business or the commission of a tortious act within the state, the Court’s inquiry focused on whether exercising personal jurisdiction over Zazzle comported with the due process clause. Because BASIC did not allege that Zazzle was subject to general personal jurisdiction in Missouri (i.e., BASIC did not allege that Zazzle was “essentially at home” in the forum state), the question instead turned on whether BASIC had sufficiently pled facts to support a claim of specific personal jurisdiction.

The Eighth Circuit explained that specific personal jurisdiction existed over Zazzle for the purposes of BASIC’s trademark infringement claims if Zazzle had certain minimum contacts with the forum state and BASIC’s claims arose out of or related to those contacts. For specific jurisdiction to apply, the underlying controversy must be connected to the defendant’s activities in the forum state; unconnected activities directed to the forum state, no matter how numerous or systematic, cannot convey specific personal jurisdiction. The Court used a five-factor test previously set forth in Whaley v. Esebag to conduct its analysis: “(1) the nature and quality of [defendant’s] contacts with the forum state; (2) the quantity of such contacts; (3) the relation of the cause of action to the contacts; (4) the interest of the forum state in providing a forum for its residents; and (5) convenience of the parties.”

The Eighth Circuit found that the behavior alleged by BASIC (Zazzle’s operation of a national website that sells and ships goods to Missouri combined with a single specific instance of an allegedly infringing t-shirt being sold and shipped to a Missouri consumer) was insufficient to support a specific jurisdiction claim. Zazzle’s website availability and sales unrelated to the use [...]

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Epic Punitive Damages Award Violates Due Process

Addressing the appropriateness of three separate damages awards totaling $520 million, the US Court of Appeals for the Seventh Circuit affirmed the lower court’s award of $140 million in compensatory damages, but found that $280 million in punitive damages does not meet the Due Process Clause of the Fourteenth Amendment. Epic Systems Corp. v. Tata Consultancy Services Ltd., Case Nos. 19-1528, 19-1613 (Aug. 20, 2020) (Kanne, J.).

Epic Systems is a leading developer of electronic health record software, which it licenses to top hospitals in the United States. Each customer-licensed module is specific to the customer’s needs and can be customized to ensure proper integration with the customer’s systems. In order to facilitate customization and updates to the software, Epic provides a web portal called “UserWeb,” which provides access to various resources including administrative guides, training materials, software updates and forums. UserWeb also contains confidential information about the health-record software itself, and as such, Epic restricts access to the UserWeb portal via credentialed logins. Those with access are also required to keep all UserWeb information confidential.

In 2003, Kaiser Permanente—the largest managed healthcare organization in the United States—obtained a license to use Epic’s software. Due to the size and complexity of integrating and maintaining the software, Kaiser hired Tata Consultancy Services (TCS) to help with updates and integration. TCS has its own electronic health record software, Med Mantra, which was known to Epic. Accordingly, Kaiser imposed numerous rules for TCS to follow in order to maintain the confidentiality of Epic’s software. TCS employees claimed that they could perform their required tasks faster if they had full access to UserWeb, which Kaiser repeatedly asked Epic to grant to TCS. Epic repeatedly declined this request.

Undeterred, TCS was able to find another way into Epic’s UserWeb. TCS hired an employee who had full access to UserWeb, which he gained from working for a different organization that also helped manage Kaiser’s integration of Epic’s software. While in his previous position, the employee had falsely claimed to be a Kaiser employee, thus allowing him full access to UserWeb. The employee shared these credentials with numerous TCS employees, who then had unfettered access to UserWeb, which contained confidential information relating to Epic’s healthcare software.

TCS used this information to generate a “comparative analysis” document, an 11-page spreadsheet that compares TCS’s software, Med Mantra, to Epic’s software. TCS wanted to sell Med Mantra directly to Kaiser, and the first step was to be sure that “key gaps” in the Med Mantra software were addressed before the attempted sale. After viewing a presentation that included the comparative analysis document, one TCS employee alerted Kaiser and Epic to the existence of the document and the fact that TCS had gained access to UserWeb.

A few months later, Epic filed suit against TCS, alleging that TCS used fraudulent means to access and steal Epic’s trade secrets and other confidential information. After a trial, the jury returned a verdict in favor of Epic on all claims. During the damages trial, [...]

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