Craft producers from breweries and distilleries to cheese and sausage makers should sit up and take notice of this recent opinion out of the Western District of Michigan.
The case involves a run of the mill trademark dispute between Mor-Dall Enterprises (the company behind Dark Horse Brewing out in Marshall, MI) and Dark Horse Distillery out of Kansas City (you can probably guess what the issues of alleged infringement are just from that sentence).
The dispute isn’t the disturbing issue. Trademark fights between craft companies have sadly become commonplace. What’s interesting and problematic is an argument that was made in this case that forced a company from Kansas that doesn’t sell its craft spirits in Michigan to defend the action in Michigan, and not where it would normally have to be sued, in Kansas.
Normally, in order for a company to be haled into a court in another state, it has to have sufficient minimum contacts through business or other activities within that state to justify being sued there. When things were brick and mortar and business was done with trucks and retail stores, this wasn’t too hard to figure out. The internet has made it interesting, and a bit problematic for companies since websites with information can be viewed in any state even though a company might not sell to that particular state.
The argument in this case applied a legal standard holding that a defendant purposefully avails itself of the privilege of acting in a state through its website if the “website is interactive to a degree that reveals specifically intended interaction with residents of the state.” The standard applies a sliding scale where at one end a company does business over the internet and can be sued in the state because of its online sales there and at the other end where it simply has a passive website with information accessible to users.
The plaintiffs in this case argued that the distillery’s website was interactive because it:
1. Had a pass through where someone had to validate that they were 21;
2. Has a link on its website to another company’s website where people can purchase the distillers spirits; and
3. Invites visitors to contact the distillery staff about scheduling tours or renting an event space at the distillery.
The Court agreed and found that the second point – a link to a third party vendor’s website to buy the product – was the crux of the issue:
Considering all the evidence together, Plaintiff has established a prima facie case of purposeful availment. The Court holds, therefore, that to allow a defendant to escape personal jurisdiction in a particular forum simply because its interactive website redirects customers to a third-party vendor’s site to complete a sale would undermine the “traditional notions of fair play and substantial justice” that protect both plaintiffs and defendants. … Here, Defendant’s website solicits customers from around the country, including Michigan, to buy its products and have those products shipped into the customer’s state. For the reasons stated above, the Court holds that Defendant operates an interactive website … such that Defendant “clearly does business over the Internet.”
And now we have to worry about any link on any company’s website re-directing a craft enthusiast to some third-party’s website to buy and ship a product.
But the distillery isn’t taking this lying down, Dark Horse has filed a request for an immediate appeal and consideration of the issue.
For now, the operating tip is simple, if you’d rather not defend a suit where you aren’t selling your products, don’t link to a third-party vendor’s website if they sell where you do not… at least until we find out about the appeal.