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EUROMARKET DESIGNS, INC. v. CRATE & BARREL LIMITED

May 16, 2000

EUROMARKET DESIGNS, INC. D/B/A CRATE & BARREL, PLAINTIFF,
V.
CRATE & BARREL LIMITED, MIRIAM PETERS AND POINT BLANK MULTIMEDIA, DEFENDANTS.



The opinion of the court was delivered by: Morton Denlow, United States Magistrate Judge.

    MEMORANDUM OPINION AND ORDER

Cyberselling is here to stay. The Internet makes it possible for persons worldwide to buy, sell and ship goods to or from anywhere in the world from their own living room using a computer and an Internet hook-up.*fn1 Courts and legislatures must keep pace with the ever changing world of cyberspace. This opinion addresses the issue of whether an Irish retailer with an interactive website allowing Illinois residents to order goods from Illinois for shipment to a foreign address can be sued in Illinois by an Illinois company for violation of the Lanham Act.

Plaintiff Euromarket Designs, Inc., d/b/a Crate & Barrel ("Crate & Barrel") filed a three-count complaint alleging trademark violations under the Lanham Act, 15 U.S.C. § 1051 et seq., and the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS § 510/2 et seq. arising out of the alleged use of the Crate & Barrel mark by Defendant Crate & Barrel Limited ("Limited" or "Defendant"). Defendants Limited, Miriam Peters ("Peters"), and Point Blank Multimedia ("Point Blank") bring this motion to dismiss for lack of subject matter jurisdiction or personal jurisdiction pursuant to Federal Rules of Civil Procedure 12(b)(1) and (2). In the alternative, Defendants move to stay the proceedings pending the disposition of related litigation in Ireland and the United Kingdom.

At oral argument on April 20, 2000, the claims against Miriam Peters and Point Blank Multimedia were dismissed, without prejudice, on Plaintiff's oral motion. Therefore, the issue to be decided is whether to dismiss the action for lack of subject matter or personal jurisdiction as to Limited. For the reasons set forth below, the Court denies Limited's motion to dismiss and motion to stay proceedings because the Court has both subject matter jurisdiction over the dispute and personal jurisdiction over Limited.

I. FACTUAL BACKGROUND

A. Crate & Barrel, Plaintiff

Plaintiff Crate & Barrel is an Illinois corporation with its principal place of business in Northbrook, Illinois. (Pl.Comp. ¶ 1). Plaintiff has used the name and mark "Crate&Barrel" exclusively for more than 35 years in connection with its business as a retailer selling housewares and furniture. (Pl.Comp. ¶ 8). Plaintiff is the owner of federal trademark and service mark registrations for both "Crate&Barrel" and "CRATE AND BARREL," and also owns a large number of foreign registrations for the marks, including registrations in Ireland, the United Kingdom, and the European Community. (Id.). Plaintiff has characterized its name and mark as "one of the most famous, celebrated, and well-regarded." (Pl.Comp. ¶ 9).

In addition to extensive advertising and sales in the United States and abroad, Plaintiff has developed and registered an interactive website on the Internet at the domain name "www.crateandbarrel.com." (Pl.Comp. ¶ 14). The website contains information about Crate & Barrel products and other business information. (Pl.Comp. ¶ 10). Website visitors worldwide may purchase products from Plaintiff using the website. (Id.).

B. Crate & Barrel Limited, Defendant

Peters, an Irish citizen residing in Dublin, Ireland, is Director and Company Secretary of Limited. (D.Mot. to Dismiss, Ex. A). According to Plaintiff, Peters visited Illinois, saw the Crate & Barrel store in Oak Brook, Illinois, and returned to Ireland to open a retail store of the same name. The Plaintiff's characterization of these events has been controverted by Peters in one of her affidavits, where she claims that "the name Crate & Barrel Limited was selected based on the suggestion of a friend in Ireland." (D. Reply Memo., Ex. A ¶ 6).

After the Crate & Barrel retail store was opened in Ireland, Limited also created and registered an Internet website at the domain name "www.crateandbarrel-ie. com." (Pl.'s Compl. ¶ 16 and Ex. 4). The website identifies itself as Crate & Barrel, and allows website visitors worldwide to both view and purchase the same household goods and furniture sold in the retail store. (Pl.Supp.Memo, Ex. A). The goods sold by Limited are similar to the types of goods offered for sale by plaintiff.

On its website, Limited's goods were priced in U.S. dollars until the commencement of this suit. (Pl.Memo., Ex. 8). After the suit was filed, Limited changed the valuation of its goods to Irish pounds and added the statement "Goods Sold Only in the Republic of Ireland" to the opening page of its website. (D.Supp.Submissions, Ex. C). Despite this statement, website users who wish to purchase goods are given the opportunity to select the United States as part of both their shipping and billing addresses. (Pl.Supp.Memo., Ex. A6). On the website pages containing the fields in which users are to enter their shipping and billing address information, the fields are clearly organized for a United States-format address. (Id.). There is an entry window for the shipping/billing city, state, and zip code — a format unique to the United States. (Id.). The entry window for shipping/billing state contains a pull-down menu of the United States. (Id.).

Limited has made and maintained connections with the United States, and Illinois, in several ways. First, Limited has purchased goods from vendors in Lisle, Chicago, and Hicksville, Illinois, and has made purchases from other vendors located in America. (Pl.Supp.Memo., Ex. D). Second, Limited, through its Director Miriam Peters, has participated in trade shows in the United States, including Chicago, Illinois, in order to promote its business. (Pl.Supp.Memo., Ex. E). Third, Limited advertises in publications, such as British Homes and Gardens and the Irish Times, that are circulated in the United States and specifically in Illinois. (Pl. Supp.Memo., Ex. C1). Finally, in a transaction instigated by personnel at Plaintiff's law firm, Limited sold goods to an Illinois resident, April Wagner, who placed an order on Limited's website for a set of beaded coasters. (Pl.Supp.Memo., Ex. A3). Ms. Wagner entered an Illinois billing address, and had the package sent to an address in Dublin, Ireland. (Pl.Supp. Memo., Ex. 6). The item's packaging clearly indicated that the sender was "Crate & Barrel." (Pl.Supp.Memo., Ex. A10).

C. Related Litigation

Plaintiff has also filed suit against Defendants in the United Kingdom and the Republic of Ireland. (D.Mot. to Dismiss Ex. C and D). Trademark infringement is at least one of the claims in each of the suits. (Id.) Plaintiff characterizes the suits as "just beginning; they are nowhere near a final decision," but Defendant characterizes them differently, claiming that the "proceedings in the United Kingdom case have already closed and a trial date has been set for October 2000." (Pl.Memo. at 13; D.Mot. to Dismiss at 8).

II. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

Plaintiff alleges that this Court has subject matter jurisdiction over this action under the Lanham Act, 15 U.S.C. § 1121, and under 28 U.S.C. § 1331, 1332, and 1338. Federal Rule of Civil Procedure 12(b)(1) provides for dismissal of claims when the district court lacks subject matter jurisdiction. "In considering a motion to dismiss for lack of subject matter jurisdiction, the district court must accept the complaint's well-pleaded factual allegations as true and draw reasonable inferences from those allegations in the plaintiff's favor." United Transp. Union v. Gateway W. Ry. Co., 78 F.3d 1208, 1210 (7th Cir. 1996). In addition to the complaint, it is also proper to consider evidentiary materials addressed to the jurisdictional question at the dismissal stage. Id. "Once the jurisdictional allegations have been controverted [by the defendant], it is the plaintiff's burden to come forward with additional evidence to support a claim of jurisdiction." MCI Telecomms. Corp. v. Illinois Bell Tel. Co., 1998 WL 156678 *2 (N.D.Ill. March 31, 1998) (citing Seglin v. Esau, 769 F.2d 1274, 1277 (7th Cir. 1985)).

A. THE LANHAM ACT

The Lanham Act ("Act") provides original jurisdiction to the district courts over all trademark actions. 15 U.S.C. § 1121. The Act provides a civil action against "any person who shall, without consent of the registrant, use in commerce any reproduction, counterfeit copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods . . . with which such use is likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 1114(1)(a).

The Act further provides:

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact which —
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act.

15 U.S.C. § 1125(a).

Thus, there are two essential requirements a plaintiff must allege to survive a 12(b)(1) motion to dismiss for lack of subject matter jurisdiction: 1) the trademark violation was in connection with any goods or services and 2) the defendant used the trademark in commerce. Juno Online Services, L.P. v. Juno Lighting, Inc., 979 F. Supp. 684, 691 (N.D.Ill. 1997). The determination is a fact specific inquiry. The Court addresses each in turn.

1. The Alleged Trademark Violation Was In Connection With Goods

The Court finds that Limited used the "Crate & Barrel" trademark in connection with goods. Although at one time, the trademark violation required that the defendant cause "goods or services to enter into commerce," in 1988 the Act was amended, and the "[d]efendant is no longer required actually to cause goods or services to be placed into the stream of commerce." Juno, 979 F. Supp. at 691.

2. The "Use In Commerce" Requirement

Limited's use of the Internet satisfies the "use in commerce" requirement of the Lanham Act. Commerce is broadly defined by the Lanham Act as "all commerce which may lawfully be regulated by Congress." 15 U.S.C. § 1127. Webster is illuminating in this area, telling us that commerce is "the buying and selling of goods." WEBSTER'S II NEW RIVERSIDE UNIVERSITY DICTIONARY 286 (1994).

"Use in commerce" is defined in 15 U.S.C. § 1127 as follows:

The term "use in commerce" means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this Chapter, a mark shall be deemed to be in use in commerce —

(1) on goods when —

(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and
(B) the goods are sold or transported in commerce, and
(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the service.

The question, therefore, is (a) whether Limited used Plaintiff's mark in commerce by placing it on goods, their containers, the displays associated with them, or their tags or labels and (b) whether the goods were sold or transported in commerce.

The Supreme Court, in the landmark case Steele v. Bulova Watch Co., 344 U.S. 280, 283, 73 S.Ct. 252, 254, 97 L.Ed. 319 (1952), has held that the "in commerce" requirement must be construed liberally because the Lanham Act "confers broad jurisdictional powers upon the courts of the United States."

In Intermatic Inc. v. Toeppen, 947 F. Supp. 1227, 1239 (N.D.Ill. 1996) this Court held that the defendant's use of the Internet satisfied the "in commerce" requirement when the defendant registered a domain name identical to the plaintiff's trademark name and used it on the Internet with the intention of reselling it to the plaintiff or some other party, a practice commonly known as cyber-squatting. Even though the defendant had no intention of selling goods or services that were similar to the plaintiff's, the fact that he had used the Internet, and that Internet communications transmit instantaneously on a worldwide basis, this Court held that "there is little question that the `in commerce' requirement would be met in a typical Internet message, be it trademark infringement or false advertising." Id. (citing 1 Gilson, Trademark Protection and Practice § 5.11[2], p. 5-234 (1996)).

In a similar case against the same defendant, the Ninth Circuit adopted this Court's reasoning and found that the defendant's actions of registering a domain name combined with the attempt to resell the domain name to the trademark holder of the same name constituted a commercial use under the Lanham Act. Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1325 (9th Cir. 1998). Although the court agreed that the mere registration of a trademark as a domain name without more is not a commercial use of the trademark, the court found Toeppen's actions went far beyond mere registration. Toeppen's "business" was to register trademarks as domain names through Network Solutions, Inc. ("NSI") for $100, and then sell them to the rightful trademark owners, preventing the trademark owners from doing business on the Internet unless they pay Toeppen's fee, which ranged between $10,000 and $15,000. Id. at 1319.

Similarly, maintaining an interactive website that sends out information regarding the defendant's upcoming services and solicits names for mailing lists constitutes advertisement and solicitation, thus meeting the "use in commerce" test under the Lanham Act. Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. at 1335. The fact that the defendant's business was not fully operational did not sway the court's opinion, holding that a Lanham Act claim can exist even before a defendant actually opens for business, as long as the acts of the defendant are imminent and impending. Id.

In this case, the facts are more compelling in favor of finding that Defendant's acts constitute "use in commerce." Accepting Plaintiff's factual allegations as true and drawing inferences in favor of Plaintiff, as the Court is required to do for the purposes of analyzing a motion to dismiss, Defendant has gone far beyond merely registering a trademark as a domain name on the Internet; Limited has actually entered into a sales contract with at least one Illinois customer over the Internet using the Crate & Barrel trademark. By anyone's definition of commerce, entering into a sales contract, wherever the goods may be shipped, constitutes use in commerce. Plaintiff has met its burden of supporting its allegations. Limited satisfied both sections of 15 U.S.C. § 1127 because it (a) used Plaintiff's mark in commerce by placing it on goods, their containers, the displays associated with them, and their tags or labels and (b) sold and transported the goods in commerce.

First, Limited placed Plaintiff's mark on displays associated with Limited's goods. Plaintiff's mark permeates Limited's entire website. Plaintiff's mark is being used as Limited's domain name, which was originally "www.crateandbarrel.ie.com" and is now "www.createandbarrel.ie.com"*fn2 Plaintiff's mark is also being used as the name of the website, and appears prominently on most pages of the website, including the home page. Plaintiff alleges that the mark's font on Limited's website and retail store in Ireland is identical to that used by Plaintiff, its owner.

Second, Limited placed Plaintiff's mark on the tags or labels for Limited's goods. Limited sold goods to an Illinois resident and a member of Plaintiff's firm, April Wagner, for delivery in Ireland. In purchasing the goods on Limited's Internet site, Ms. Wagner entered an Illinois billing address and an Irish shipping address. The order was completed using Ms. Wagner's credit card, and the goods were shipped to the Irish address, constituting a "sale and transportation of goods in commerce." Plaintiff's mark "Crate & Barrel" appeared on the label of this package.

Defendant's argument that, because a package was not shipped to Illinois, it's use of Plaintiff's mark did not rise to a sufficient level to be considered "use in commerce" is without merit. Defendant entered into a sales contract with an Illinois resident. Defendant collected revenues from an Illinois resident. Sales and collection of revenue are a vital part of commerce by anyone's definition. Given the modern realities of the Internet, faxes, discount air fares, international company employee transfers, and the increasingly mobile nature of individuals, it is entirely foreseeable that goods will be sold to one individual and shipped to another in a foreign state or country. Simply ...


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