A Single Pair of Counterfeit Shorts Sets Up Personal Jurisdiction Slam Dunk Over Foreign Online Retailer in NBA Trademark Dispute
Photo Source: Daniel Lobo, Playoffs, FLICKR (Apr. 19, 2017) (CC0 1.0)
By: Anna D’Eramo* Posted: 04/11/2023
The white silhouette of a dribbling basketball player with a red and blue background has long identified the National Basketball Association (“NBA”).[1] Despite its recognizability, it can be hard to tell when NBA-branded merchandise sold online is legitimate.[2] A routine online search in September 2020 by NBA Properties, Inc. (“NBA Properties”) uncovered counterfeit NBA merchandise sold by HANWJH, a China-based online retailer.[3] After the NBA Properties investigator ordered a pair of counterfeit shorts to Illinois, it filed an intellectual property complaint in the Northern District of Illinois.[4] The court granted a temporary restraining order and preliminary injunction.[5] When HANWJH missed the deadline to answer the complaint, the company moved to dismiss for lack of personal jurisdiction.[6]
Personal Jurisdiction All-Star: International Shoe
International Shoe v. Washington[7] established the test for personal jurisdiction over parties, namely corporations, that maintain operations outside the state where litigation proceedings are heard (the “forum state”).[8] The Supreme Court held personal jurisdiction is proper where the defendant’s minimum contacts with the forum state are enough that maintenance of the lawsuit does not offend “traditional notions of fair play and substantial justice.”[9] In other words, the defendant’s involvement with the state is considerable enough that exercising jurisdiction over the defendant is reasonable.[10] Courts have found that minimum contacts range from continuous operations to a single act.[11]
HANWJH Shoots and Misses in Motion to Dismiss
In their motion to dismiss for lack of personal jurisdiction, HANWJH argued the company had no connections to Illinois and that the only transaction made to Illinois was the NBA Properties investigator’s “sham” purchase.[12] HANWJH reasoned that operating a website and a single transaction was insufficient to establish jurisdiction.[13] In addition, the company claimed the burden of litigating the matter in Illinois outweighed the state’s interest in overseeing and resolving the claim.[14] However, the Northern District of Illinois (“District Court”) rejected these arguments, finding HANWJH’s offering to ship and subsequent shipment of a product to Illinois enough to constitute minimum contacts.[15] In addition, an intentional sale of a counterfeit product does not violate traditional notions of fair play and substantial justice.[16] After the District Court entered a final judgment in September 2021, HANWJH appealed to the 7th Circuit.[17]
7th Circuit Scores Easy Layup Establishing Personal Jurisdiction
In similar cases, the 7th Circuit has held that an online retailer who can reasonably foresee a product’s sale in a forum should anticipate jurisdiction there.[18] The court found HANWJH acted purposefully when the company’s online store asserted the ability and willingness to deliver to Illinois.[19] The court affirmed that even one transaction creates a basis for personal jurisdiction, and a buyer’s motivations behind the purchase are irrelevant.[20] HANWJH’s availability for business with Illinois residents and its subsequent sale and delivery to the state proved its minimum contacts were related to the overarching intellectual property litigation.[21] Lastly, the 7th Circuit focused on NBA Properties’ interest in trademark protection and Illinois’s interest in protecting consumers as reasons why the lawsuit would not offend traditional notions of fair play and substantial justice.[22] Meeting each International Shoe element, the 7th Circuit affirmed the District Court judgment.[23]
Though HANWJH lost the personal jurisdiction game twice, it decided to shoot its shot one last time with the Supreme Court.[24] HANWJH maintained its argument that an accessible website accessible and a single sale to the forum state do not adequately establish personal jurisdiction.[25] Unfortunately, the final buzzer on the personal jurisdiction game rang in January 2023 when the Supreme Court denied HANWJH’s petition for writ of certiorari, sending the company back to Illinois to answer for its counterfeit products.[26]
*Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2024, Villanova University Charles Widger School of Law
[1] See NBA Logo And Its History, Logo My Way, https://blog.logomyway.com/history-nba-logo-design/#:~:text=The%20NBA%20Logo%20is%20Jerry,the%20nature%20of%20the%20sport. (last accessed Mar. 22, 2023) (describing NBA logo, which has been used since 1969).
[2] See id. (commenting on popularity of logo, resulting in large merchandise sales); see also Laura Lamansky, SCOTUS Correctly Denies Cert. For NBA Trademark Infringement Case, Michael Best (Jan. 12, 2023), https://insights.michaelbest.com/post/102i52d/scotus-correctly-denies-cert-for-nba-trademark-infringement-case#page=1 (observing increase in counterfeit products from China harms approved distributors)
[3] See Terms of Use, NBA, https://www.nba.com/termsofuse (last updated Feb. 20, 2023) (listing all items of intellectual property owned by NBA Properties, including that of NBA, NBA Leagues, and NBA Teams); see also NBA Props. v. HANWJH, 46 F.4th 614, 617 (7th Cir. 2022) (asserting over 200 infringing NBA products sold by HANWJH on its Amazon site), cert. denied, 143 S. Ct. 577 (2023).
[4] See NBA Props. v. HANWJH, 46 F.4th at 617 (recounting product was delivered to Illinois on October 6, 2020); see also id. at 618 (claiming trademark infringement and counterfeiting and false designation of origin).
[5] See NBA Props., Inc. v. P’ships & Unincorporated Ass’ns, 549 F. Supp. 3d 790, 793 (adding NBA Properties sought to serve defendants via email under Rule 4(f)(3) of the Federal Rules of Civil Procedure), aff’d, 46 F.4th 614 (7th Cir. 2022), cert. denied, 143 S. Ct. 577 (2023).
[6] See id. (observing motion to dismiss for lack of jurisdiction is reason for case in Illinois Northern District Court).
[7] Int’l Shoe v. Wash., 326 U.S. 310 (1945).
[8] See id. at 313 (describing facts of case, where Appellant was Delaware corporation that engaged in business in several states, including Washington but had no office, contracts, or merchandise in state).
[9] See id. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)) (declaring new test for personal jurisdiction when the defendant is not present in the forum state).
[10] See David W. Ichel, Has Shoe Run Its Course?, Judicature (2019), https://judicature.duke.edu/articles/has-shoe-run-its-course/ (commenting on personal jurisdiction analysis that resulted from International Shoe).
[11] See id. (noting wide-range of contacts that can result in proper personal jurisdiction); see, e.g., Quikrete Cos. v. Nomix Corp., 705 F.Supp. 568, 573–74 (N.D. Ga. 1989) (pointing to numerous communications sent into Georgia with intent to interfere with contracts and business relationships as basis for continuing acts constituting minimum contacts), aff’d, 34 F.3d 1078 (Fed. Cir. 1994); see, e.g., McGee v. Int’l Life Insurance, Co., 355 U.S. 220, 223–24 (1957) (finding one life insurance contract with California resident created substantial connection to state establishing minimum contacts).
[12] See NBA Props. v. HANWJH, 46 F.4th 614, 618 (providing defendant’s rationale for improper personal jurisdiction, adding lack of property in Illinois and advertising or marketing in Illinois as further justification).
[13] See id. (arguing these actions did not constitute business activity expressly aimed at Illinois).
[14] See id. (citing why jurisdiction would offend “traditional notions of fair play and substantial justice” part of International Shoe test).
[15] See id. at 619 (holding retailer’s willingness to do business and subsequent transactions with residents of forum state establishes grants basis for personal jurisdiction).
[16] See id. at 619–20 (observing HANWJH provided no support to meet this part of test).
[17] See id. at 620 (noting HANWJH failed to object to motion for default judgment).
[18] See id. at 623 (recounting in earlier case court viewed purchase online delivered to forum can initiate personal jurisdiction).
[19] See id. at 624 (observing that HANWJH would fill and ship order upon placing order).
[20] See id. at 624–25 (rejecting HANWJH’s attempt to use bright-line test, rather directing focus to whether defendant purposefully directed conduct at state). NBA Properties’ interest in the pair of shorts has no bearing on establishing whether HANWJH directed business at Illinois. Id. (arguing focus centers on HANWJH’s activity at forum, not NBA Properties’ conduct).
[21] See id. at 625–27 (adding that likelihood of confusion is element under intellectual property law, and NBA Properties investigator’s lack of actual confusion in purchasing counterfeit shorts is not necessary).
[22] See id. at 627 (adding HANWJH included no unusual burden from defending suit in Illinois).
[23] See id. (summarizing reason for affirming District Court).
[24] See Petition for Writ of Certiorari at i, HANWJH v. NBA Props., Inc., 143 S. Ct. 577 (No. 22-467) (listing questions petitioned to Supreme Court).
[25] See id. at 7–15 (describing rationale for petition).
[26] See HANWJH v. NBA Props., Inc., 143 S. Ct. 577, 577 (2023) (noting denial for petition for writ of certiorari); see also Lamansky, supra note 2 (commenting that with denial, original ruling that personal jurisdiction was proper stands).
