The case was brought by New Jersey-based Toys R Us, which sued
Step Two, a Spanish corporation that owns and franchises toy
stores, alleging trade mark infringement, cybersquatting and unfair
competition.
In 1999, Toys R Us acquired Imaginarium Toy Centers, a company
which operated a network of stores selling educational toys and
games.
That company was the owner of the Imaginarium trade mark,
registered in the US in 1989, and used it to market and sell a line
of products in its stores. Following the acquisition, Toys R Us
became the owner of the Imaginarium stores and trade mark.
Step Two, however, registered the word Imaginarium as a trade
mark in Spain in 1991. When it started expanding its stores, it
registered the Imaginarium trade mark in a number of other
countries.
Both Toys R Us and Step Two have the same logo, sell the same
type of merchandise, and have registered the domain names
imagimarium.com and imaginarium.es respectively, for their on-line
stores. Toys R Us has also registered several other domain names
that include the Imaginarium mark.
In February 2001, Toys R Us sued Step Two in a New Jersey
federal court, claiming that the company infringed trade mark and
copyright laws and engaged in unfair business practices by using
the Imaginarium marks on its web sites.
The judge, however, dismissed the case, claiming that the
Spanish company did not have substantial business contacts with the
US, and therefore could not be sued there.
Step Two's web sites, the court found, are written entirely in
Spanish, the prices are displayed in pesetas and euros, and they do
not appear to have been designed to reach customers in New
Jersey.
Toys R Us took the case to the 3rd Circuit Court of Appeals. In
a unanimous decision, the three-judge panel found that the federal
court got it wrong.
They accepted that, even when a web site is commercial and
interactive, its operator cannot be sued in a particular state,
unless there is evidence that the business has "purposefully
availed" itself of conducting commercial activity in that
state.
However, they found that the lower court should not have denied
jurisdiction before taking consideration of Step Two's off-line
activities, such as contracts and business plans for purchases,
sales and marketing.
This information, the Court of Appeals said, could reveal
whether the company's activities – including, but not limited to
its web site – were aimed at US consumers.
"This information", the court ruled, "would speak to an
essential element of the personal jurisdiction calculus", according
to Law.com.
The decision grants Toys R Us the right to reinstate its
lawsuit. The company can now consider in court Step Two's
non-internet activities to determine whether jurisdiction exists
over the alleged internet-based infringement the of Toys R Us trade
marks.
