Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 12

Gucci America, Inc. v. Wang Huoqing
United States District Court, Northern District of California, ___ F.Supp.3d ___ (2011).
FACTS Gucci America, Inc., is a New York corporation headquartered in New York City. Gucci manufactures and distributes high-quality luxury goods, including footwear, belts, sunglasses, handbags, and wallets, which are sold worldwide. In connection with its products, Gucci uses twenty-one federally registered trademarks (trademark law will be discussed in Chapter 5). Gucci also operates a number of boutiques, some of which are located in California. Wang Huoqing, a resident of the People's Republic of China, operates numerous Web sites. When Gucci discovered that Huoqing's Web sites offered for sale counterfeit goods-products that bear Gucci's trademarks but are not genuine Gucci articles-it hired a private investigator in San Jose, California, to buy goods from the Web sites. The investigator purchased a wallet that was labeled Gucci but was counterfeit. Gucci filed a trademark infringement lawsuit against Huoqing in a federal district court in California seeking damages and an injunction to prevent further infringement. Huoqing was notified of the lawsuit via e-mail (see service of process on page 36) but did not appear in court. Gucci asked the court to enter a default judgment-that is, a judgment entered when the defendant fails to appear-but the court first had to determine whether it had personal jurisdiction over Huoqing based on the Internet sales.
ISSUE Can a U.S. federal court exercise personal jurisdiction over a resident of China whose only contact with the United States was through an interactive Web site that advertised and sold counterfeit goods?
DECISION Yes. The United States District Court for the Northern District of California held that it had personal jurisdiction over the foreign defendant, Huoqing. The court entered a default judgment against Huoqing and granted Gucci an injunction.
REASON The court reasoned that the due process clause allows a federal court to exercise jurisdiction over a defendant who has had sufficient minimum contacts with the court's forum-the place where the court exercises jurisdiction. Specific jurisdiction exists when (1) the nonresident defendant engages in some act or transaction with the forum "by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or results from the defendant's forum-related activities; and (3) exercise of jurisdiction must be reasonable." To determine whether Huoqing had purposefully conducted business activities in Gucci's district through his Web sites, the court used a sliding-scale analysis. Under this analysis, passive Web sites do not create sufficient contacts for such a finding, but interactive sites may create sufficient contacts. Huoqing's Web sites were fully interactive. In addition, Gucci presented evidence that Huoqing had advertised and sold the counterfeited goods within the court's district, and that he had made one actual sale within the district-the sale to Gucci's private investigator.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that Gucci had not presented evidence that Huoqing had made one actual sale through his Web site to a resident (the private investigator) of the court's district. Would the court still have found that it had personal jurisdiction over Huoqing? Why or why not?