supplier's state can exercise personal jurisdiction over reverse passing off claim

Sarah's Hat Boxes, L.L.C. v. Patch Me Up, L.L.C., 2013 WL 1563557 (D.N.H.), 2013 DNH 058

SHB sued defendants for violating the Lanham Act and the New Hampshire Consumer Protection Act, as well as tortious interference, alleging that they stole business from SHB by making false claims on their website about the source, quality, and patent status of the hat boxes listed for sale.

Since 2006, SHB’s hat boxes have been designed, made, and shipped from its office in New Hampshire, though most sales are made online.  Patch Me Up (PMU) began operating in 2000.  It sells spa products and began buying SHB’s hat boxes in 2009 to use them as packaging for the spa products.  L’Artisane Box is a division of PMU that sells hat boxes online.  The principal place of business for both is California, where the individual defendants reside.

PMU bought hat boxes wholesale, telling SHB that it intended to use the boxes as packaging.  It bought about 900 boxes; at the bottom of 9 out of 11 invoices, SHB wrote that the buyer agreed to suit in New Hampshire in any contract-related dispute.  PMU asked SHB not to put its mark on the boxes, and instead SHB printed “Patch Me Up” on some boxes at PMU’s request.

PMU asked SHB for the name of its New Hampshire-based web designer, which SHB provided.  In 2012, PMU asked the designer to create a website for L'Artisane Box that would be identical to the SHB website; the designer refused and proposed an alternative design, which PMU rejected.  Later that year, SHB learned that PMU had revised its website to include a link to L’Artisane Box and a reference to hat boxes offered through that entity.  The L’Artisane Box website has many photos of hat boxes purchased from SHB.  The text accompanying the photos claimed that “Her [one individual defendant’s] decorative hatboxes are one-of-a-kind patented boxes, which have received wide recognition and acclaim.... They come with a signed and numbered certificate of authenticity.... We are the manufacturers and can give you the best price and shipping available, period.... We have been in the press, many magazines, radio, newspapers, and TV.”  The website also claimed that the hat boxes are “patented,” have “copyright design,” and “design patent[s] pending.” SHB alleged that these claims were false because the defendants had never designed a hat box, made a hat box, copyrighted or patented a hat box, or won any awards for hat boxes.

PMU and L’Artisane Box took a booth at the International Gift Show in San Francisco and placed SHB boxes prominently around the booth and didn’t display any other boxes.  SHB discovered that defendants were advertising SHB hat boxes as designed and made by L’Artisane Box, SHB demanded that they stop misrepresenting the origin of the boxes.  (From what I can tell by a quick look at the website, defendants add decorations to some of the boxes and could, under most applications of Dastar, legitimately claim to be the source and probably even the manufacturers of those, but it’s not immediately clear to me whether defendants make the challenged claims with respect to all the boxes and not just the altered ones.)

SHB further alleged that defendants offer hat boxes at prices below those charged by SHB, and intend to fill the orders with boxes not made by SHB even though the ads incorporate SHB boxes.  SHB also alleged that those other boxes would be inferior, not handmade, not made in the US, and not made with eco-friendly/nontoxic materials (as advertised).

SHB then alleged that several New Hampshire consumers attempted to purchase SHB-made boxes from L’Artisane Box, but defendants provided excuses for not fulfilling the orders—once because one box was allegedly discontinued and they were behind on orders on the other box, and once “citing trouble with production machinery.”

The court found personal jurisdiction over PMU (and its division L’Artisane Box), as well as over the named defendants because each had sufficient minimum contacts with New Hampshire. “The harm SHB alleges arose directly from the defendants' decision to contact SHB in New Hampshire to purchase hat boxes and to use SHB's hat boxes from New Hampshire to prepare the allegedly false marketing.”  Plus, even without the negotiations, purchase orders, and contact with the web designer, the L’Artisane Box website targeted New Hampshire residents and listed cities and towns in New Hampshire as places where it sells boxes; the court accepted SHB’s argument that listing these cities and towns was designed to make the L’Artisane Box website appear in New Hampshire consumers’ search results.

The court didn’t have to consider the boilerplate forum selection clause at the bottom of the invoices, because plaintiffs established purposeful availment regardless.  Defendants knew SHB was a New Hampshire corporation when they placed their orders and could have forseen being haled into court in the state.  Exercising jurisdiction also comported with “fair play and substantial justice.”  The burden of litigating in New Hampshire fell short of constitutional significance; litigating in California would pose an equal burden to SHB.  New Hampshire also had a reasonable interest in protecting its businesses.

The court then turned to whether SHB stated a claim under the Lanham Act.  Falsity/misleadingness, SHB’s knowledge of PMU’s intent to rebrand the boxes under PMU’s own label, and lack of distinctiveness were all factual issues that couldn’t be decided on the pleadings.  SHB argued that the false “patented” claim would mislead consumers into thinking that PMU was the only source of SHB hat boxes; though it knew that defendants were going to rebrand and resell the boxes, it didn’t consent to the way defendants advertised the boxes.  This was enough on a motion to dismiss. This also meant the state law consumer protection claims survived.

However, the tortious interference claim failed: SHB alleged that defendants’ intentional misrepresentations caused SHB to “lose customer orders and suffer damages because the public perceived that defendants were manufacturers of SHB's pictured boxes as well as the owner of copyrights, patents and awards on the boxes.” There was no allegation of existing or specific prospective contractual relationships with third parties.