Corporation X manufactures high-tech fabrics. Corporation Y manufactures clothing for use in outdoor activities such as hiking, climbing, and skiing. X is a citizen of State A, where it has its headquarters (its principal place of business) and its factory. Y is a citizen of State B, where it has its own headquarters (which are its principal place of business) and factory.
X maintains a website, which any member of the public can access. X sells no products through its website. However, the website describes X’s products, and it invites wholesalers and manufacturers to contact X by telephone or email to make purchases. X has never sold its products to anyone in State B, and it has had no additional contacts with State B.
Y also maintains a website, which is also accessible to the public. Y sells its products directly to consumers through the website, and Y has sold and shipped its products to customers in every state of the United States.
X manufactures a line of fabrics with a special coating. The coating uses nanotechnology to repel water and resist stains. X has registered the trademark “NanoResist” for this product. Y would like to introduce a new line of clothing made from this fabric, and it would like to use the NanoResist trademark to help sell this clothing. Y’s representative finds X’s telephone number through X’s website, and calls X to set up a meeting. Representatives of X and Y later meet at X’s headquarters to discuss the transaction.
After this meeting, Y believes that it has reached a verbal licensing agreement with X, permitting Y to use the NanoResist trademark. Accordingly, before the final written agreement is signed, Y puts a notice on its website that reads, “New Products, Now with NanoResist Technology!”Y also pays a marketing agency to prepare a new advertising campaign for its NanoResist fabrics.
However, before the agreement can be put in writing, X insists on renegotiating the price that Y must pay to use the NanoResist trademark. Y refuses, claiming that the parties had already reached a binding verbal agreement. In response, X refuses to sell any fabrics to Y, and Y is forced to withdraw the NanoResist notice from its website and cancel the associated advertising campaign.
Y then sues X in the U.S. District Court for the District of State B, alleging breach of contract and seeking $200,000 in damages. State B’s long-arm statute allows personal jurisdiction to the extent permitted by the U.S. Constitution.
Y properly serves X with the summons and complaint. X then moves to dismiss for lack of personal jurisdiction, and the judge denies the motion. The case proceeds to trial, and the jury returns a verdict for Y. X files a proper appeal, and argues that the judge should have granted its motion to dismiss.
QuestionDid the judge commit error in denying X’s motion to dismiss? Explain.
Did the judge commit error in denying X’s motion to dismiss? Explain.