IP Law Daily British nutrition company not subject to personal jurisdiction in California copyright suit
Thursday, November 2, 2017

British nutrition company not subject to personal jurisdiction in California copyright suit

By Joseph Arshawsky, J.D.

Acerchem UK Limited ("Acerchem") was not subject to personal jurisdiction in a California copyright infringement action brought by Axiom Foods, Inc. ("Axiom") and Growing Naturals, LLC ("GN"), the U.S. Court of Appeals for the Ninth Circuit has ruled. Applying the "effects" test, the court concluded that Acerchem committed an intentional act by adding Axiom’s logos to a newsletter and sending it to a list of email recipients, but Acerchem did not expressly aim its intentional act at the forum state of California, and "individualized targeting" of a California company was no longer sufficient to support personal jurisdiction under the Supreme Court’s Walden decision (Axiom Foods, Inc. v. Acerchem International, Inc., November 1, 2017, Per Curiam).

Axiom is a California corporation that supplies organic and chemical-free products. GN is an Arizona company that develops and sells natural food products. GN partners with Axiom to produce and sell goods containing Axioms product, including in California. Acerchem, which sells health and nutritional products, maintains its principal place of business in the United Kingdom and does not conduct business in the United States. On November 20, 2014, an employee of Acerchem sent a newsletter to 343 email addresses, using Axiom’s and GN’s "As Good as Whey" and "Non-GMO" logos. Most of the newsletter’s recipients were in Western Europe, and no more than ten recipients were in California. After Axiom and GN registered the copyright for their logos, they filed suit against Acerchem for copyright infringement. The district court dismissed the case for lack of personal jurisdiction, and Axiom and GN appealed. The Ninth Circuit affirmed the dismissal.

Personal jurisdiction. The court held that the jurisdictional analyses under California state law and federal due process are the same. The court’s analysis focused heavily on the impact of the U.S. Supreme Court’s recent decision in Walden v. Fiore, 134 S.Ct. 1115 (2014). Following Walden, the court announced that two principles animate the "defendant-focused" inquiry. First, the relationship between the nonresident defendant, the forum, and the litigation "must arise out of contacts that the ‘defendant himself ‘creates with the forum State." Second, the minimum contacts analysis examines "the defendant’s contacts with the forum State itself, not the defendant’s contacts with persons who reside there." Therefore, "a defendant’s relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction."

The court also reiterated three requirements for the exercise of specific jurisdiction: (1) the defendant must either "purposefully direct his activities" toward the forum or "purposefully avail himself of the privileges of conducting business in the forum;" (2) the claim must arise out of or relate to the forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice; it must be reasonable.

Expressly aimed vs. individualized targeting. This case sounds in tort, therefore the court applied the purposeful direction test. Axiom and GN had to prove that the defendant must have "(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." The first prong was easily satisfied when the Acerchem employee added Axiom’s and GN’s logos to the newsletter and sent it to a list of recipients.

Previous Ninth Circuit precedent held that "individualized targeting" satisfies the express aiming requirement. A theory of individualized targeting alleges that a defendant "engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state." Walden required more. In Walden, the Supreme Court rejected the Ninth Circuit’s conclusion that the defendants’ knowledge of the plaintiffs’ strong forum connections, plus the foreseeable harm the plaintiffs suffered in the forum, comprised sufficient minimum contacts. Instead, the Supreme Court made clear that the court must look to the defendant’s "own contacts" with the forum, not to the defendant’s knowledge of a plaintiff’s connection to a forum. Accordingly, following Walden, the Ninth Circuit held that while a theory of individualized targeting may remain relevant to the minimum contacts inquiry, it will not on its own, support the exercise of specific jurisdiction.

Here, Acerchem’s "suit related conduct" did not create a substantial connection with California. Any California contacts Acerchem created by sending a single newsletter to 55 recipients of unknown residence are too "attenuated" and "isolated" to support personal jurisdiction. The foreseeability of injury is not a "sufficient benchmark." No more than ten of the recipients were physically located in California. "It can hardly be said that "California was the focal point both of the newsletter and of the harm suffered." The alleged infringement barely connected Acerchem to California residents, much less to California itself. Therefore, the Ninth Circuit affirmed the dismissal for lack of jurisdiction.

Federal long arm jurisdiction. The court also refused to exercise jurisdiction based on Rule 4(k)(2). At best, the contacts between Acerchem and the United States as a whole can only be described as "scant, fleeting, and attenuated."

The case is No. 15-56450.

Attorneys: Jim D. Bauch (Lapidus & Lapidus, PLC) for Axiom Foods, Inc. and Growing Naturals, LLC. Henry L. Self, III (Lavely & Singer PC) for Acerchem Uk Ltd.

Companies: Axiom Foods, Inc.; Growing Naturals, LLC; Acerchem Uk Ltd.; Acerchem International, Inc.

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