On August 27, 2021, the federal Ninth Circuit Court of Appeals ruled in an international trademark dispute where U.S. jurisdiction hinged on Federal Rule of Civil Procedure 4(k)(2). Reversing the trial court, the Ninth Circuit ruled that personal jurisdiction existed over an Australian skin care product company, based in part on that company’s actions on social media. (Ayla, LLC v. Alya Skin Pty. Ltd., No. 20-16214, — F.4th —- (Aug. 27, 2021) (2021 WL 3823624).)
The case involves two companies that sell skin care products. One, Ayla, LLC, is a California-based company that owned three registered U.S. trademarks for “AYLA” in connection with on-site beauty services, online retail beauty products and cosmetics services, and cosmetics. Ayla filed a federal trademark infringement case in federal court in California against the other company, Alya Skin Pty. Ltd, which is an Australian-based company that:
- Has no retail stores, offices or branches,
- Has no officers, directors, or employees,
- Has no bank accounts, or real property in the United States.
- Does not sell its products “in any retail store in the United States,”
- Reports “less than 10% of its sales have been to the United States”
- Reports “less than 2% of its sales have been to California”
- Has contracted with “a third-party logistics company” in Hayden, Idaho named Dollar Fulfilment “to fulfill all of [Alya Skin’s] shipments outside of Australia and New Zealand.”
The federal trial court found that the plaintiff had not met the test for jurisdiction under F.R.C.P. 4(k)(2): “Personal jurisdiction is proper under Rule 4(k)(2) when (1) the action arises under federal law, (2) “the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction,” and (3) the court’s exercise of jurisdiction comports with due process.” Everyone agreed that the federal trademark claim satisfied the first element.
As for the second element, the Ninth Circuit agreed with the trial court Alya Skin was not subject to the court’s “general jurisdiction” because “neither Alya Skin’s principal place of business nor its place of incorporation is in the United States, and Alya Skin cannot be considered ‘at home’ in the United States.” The question then turned on whether plaintiff Ayla could show specific jurisdiction in this case:
Specific jurisdiction exists over nonresident Alya Skin (1) if the company “performed some act or consummated some transaction” by which it “purposefully directed its activit[ies]” toward the United States or “purposefully availed itself of the privilege of conducting business” in the United States, (2) if Ayla’s Lanham Act and unfair competition claims “arise out of or result from” Alya Skin’s “forum-related activities,” and (3) if the exercise of jurisdiction is reasonable.
(Citation omitted). The plaintiff provided evidence that:
- The Alya Skin website listed United States dollars as the default currency
- The website advertises two- to four-day delivery to the United States, two- to five-day delivery to New Zealand and Australia, and five- to ten-day delivery outside of those countries.
- Alya Skin posted advertisements for a “Black Friday” sale [an American tradition] on its social media page.
- Alya Skin advertised in a social media post: “ATTENTION USA BABES WE NOW ACCEPT afterpay.”
- Alya Skin’s website, which states that its products have been featured in American magazines
- Alya Skin “appear[ed] to have hired social media influencers” who live in the United States.
The Ninth Circuit found that the “ATTENTION USA BABES” social media post was evidence that “Alya Skin targeted its promotional materials specifically towards the United States. This post was an intentional, explicit appeal to American consumers and no others.” That court also found that the “Black Friday” advertisement “provides further support for the conclusion that Alya Skin’s marketing targeted the United States.”
The court also looked at sales through the company’s social media sites
Alya Skin offers its products directly for sale to the United States on its website. Though some of its sales to the United States may have occurred through third-party [social media] websites, . . . Alya Skin operates those social media accounts.
The court ruled that Alya Skin’s choice of a distribution center in Idaho demonstrated that Alya Skin
contemplated not only that performance would occur in the forum, but also that the location of the distributor could help Alya Skin better serve the American market and grow its American contacts. By contracting with a distribution center in the United States, Alya Skin could offer two- to four-day shipping within the United States, whereas delivery to most other parts of the world would take five to ten days.
Therefore, the Ninth Circuit held, because “the extent of Alya Skin’s contacts with the United States is substantial,” jurisdiction was appropriate.
Social media is a global medium, but its effects can be local. If you have a transactional website or transactional social media accounts, consider:
- Do you use a default currency for pricing?
- Do you use any advertising or social media that focuses on any particular country or location?
- Do you advertise in any local media?
- Have you contracted with any social media influencers? Where are they located?
The more of these elements you check off for the U.S., the more likely you may be subject to jurisdiction of U.S. courts.