Gibson sued Viacom and JHS over a ukulele bearing the image of SpongeBob Squarepants formed in a V shape that allegedly infringed Gibson’s Flying V guitar body shape. Viacom licensed the SpongeBob character to JHS, which made the ukulele; Viacom was dismissed from the case for failure to state a claim and JHS remained.
The alleged infringement principally took place on www.jhs.co.uk, www.worldwidemusic.co.uk, eBay, www.Strings.ie, www.rakuten.com, and hobgoblin.com. JHS moved to dismiss for lack of subject matter jurisdiction, because all of the allegedly infringing activity occurred outside the US. The court agreed.
For the Lanham Act to reach infringing activity abroad, “first, there must be some effect on American foreign commerce; second, the effect must be sufficiently great to present a cognizable injury to plaintiffs under the federal statute; and third, the interests of and links to American foreign commerce must be sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.” Gibson argued that there had been infringing activity in the US, because US consumers could buy the products from various online retailers. The court disagreed. The only evidence of sales to US consumers came from seven ukuleles sold to plaintiffs’ counsel by companies other than JHS, with no direct sales from JHS or any authorized dealers to any US consumers.
Gibson also didn’t provide evidence of an effect on American commerce. “Although Gibson suggests that the availability of infringing items on websites hosted overseas could impact its business in a variety of countries around the world, it has not asserted any facts or proffered any evidence to show such an impact.” Even if JHS could be held accountable for third party retailers’ activities, that wouldn’t support the exercise of jurisdiction. The third party retailers identified were all based overseas and/or directed to overseas consumers. Strings.ie uses the slogan “Ireland’s No. 1 String Supplier,” while Rankuten.com identifies itself as “Japan’s # 1 shopping site” and charges in yen, and each ad on eBay listed prices in British pounds. “While a U.S. consumer actively seeking a product may be able to purchase it abroad and have it shipped to the United States, the overseas location and orientation of the online retailers tend to diminish the likely effect on U.S. commerce and therefore the appropriateness of exercising jurisdiction.”
Gibson argued that it would suffer harm in the US because consumers buying the product abroad would bring it into the US, resulting in confusion among US consumers, or that online resellers would sell to American consumers. Both theories were too attenuated to be cognizable theories of injury, and Gibson had no evidence of them.
As for the US’s interest compared to those of other nations, the court found that asserting extraterritorial authority had the potential to create conflict with UK trademark law, since Gibson’s applications for UK trademarks in its V-styled body and headstock had been withdrawn. “Given Gibson’s apparent interest in obtaining trademarks in the United Kingdom, an order by this court concerning use of the same designs in the UK creates a risk of conflict with further UK trademark proceedings on the designs.” Also, JHS was a UK corporation without meaningful relevant operations in the US, and without Viacom in the case this factor weighed against extraterritorial jurisdiction.
Then the court examined the extent to which an order by a U.S. court can be expected to achieve compliance with the Lanham Act. Gibson’s principal concerns related not to JHS’s conduct but to that of online retailers selling allegedly infringing products, but Gibson didn’t show that JHS controlled them. The only evidence was a communication from one internet retailer indicating that it wouldn’t ship the product because it had been warned by its supplier, presumably JHS, to limit sales to specific countries. “[E]ven if the these retailers are engaging in infringing behavior, the court is not in a position to induce compliance by these companies.”
The relative significance of effects on US commerce as opposed to commerce elsewhere also weighed against exercising jurisdiction, as did the lack of evidence of any intent to harm US commerce—JHS’s license from Viacom specifically excluded US sales, indicating an intent to avoid US commerce. In terms of foreseeability, it was arguable that JHS could foresee retailers selling products within the US, since many of these companies distribute globally, and Gibson sent JHS a C&D but JHS failed to act; that did weigh in favor of exercising jurisdiction. But that wasn’t enough.
Overall, there wasn’t sufficient reason to exercise jurisdiction.