Web sites’ non-internet activities can determine jurisdiction, says US court

The case was brought by New Jersey-based Toys R Us, which sued Step Two, a Spanish corporation that owns and franchises toy stores, alleging trade mark infringement, cybersquatting and unfair competition.

In 1999, Toys R Us acquired Imaginarium Toy Centers, a company which operated a network of stores selling educational toys and games.

That company was the owner of the Imaginarium trade mark, registered in the US in 1989, and used it to market and sell a line of products in its stores. Following the acquisition, Toys R Us became the owner of the Imaginarium stores and trade mark.

Step Two, however, registered the word Imaginarium as a trade mark in Spain in 1991. When it started expanding its stores, it registered the Imaginarium trade mark in a number of other countries.

Both Toys R Us and Step Two have the same logo, sell the same type of merchandise, and have registered the domain names imagimarium.com and imaginarium.es respectively, for their on-line stores. Toys R Us has also registered several other domain names that include the Imaginarium mark.

In February 2001, Toys R Us sued Step Two in a New Jersey federal court, claiming that the company infringed trade mark and copyright laws and engaged in unfair business practices by using the Imaginarium marks on its web sites.

The judge, however, dismissed the case, claiming that the Spanish company did not have substantial business contacts with the US, and therefore could not be sued there.

Step Two's web sites, the court found, are written entirely in Spanish, the prices are displayed in pesetas and euros, and they do not appear to have been designed to reach customers in New Jersey.

Toys R Us took the case to the 3rd Circuit Court of Appeals. In a unanimous decision, the three-judge panel found that the federal court got it wrong.

They accepted that, even when a web site is commercial and interactive, its operator cannot be sued in a particular state, unless there is evidence that the business has "purposefully availed" itself of conducting commercial activity in that state.

However, they found that the lower court should not have denied jurisdiction before taking consideration of Step Two's off-line activities, such as contracts and business plans for purchases, sales and marketing.

This information, the Court of Appeals said, could reveal whether the company's activities – including, but not limited to its web site – were aimed at US consumers.

"This information", the court ruled, "would speak to an essential element of the personal jurisdiction calculus", according to Law.com.

The decision grants Toys R Us the right to reinstate its lawsuit. The company can now consider in court Step Two's non-internet activities to determine whether jurisdiction exists over the alleged internet-based infringement the of Toys R Us trade marks.