Quincy Bioscience, LLC v. Bryk Enters.
| Decision Date | 13 April 2023 |
| Docket Number | 22-cv-658-jdp |
| Parties | QUINCY BIOSCIENCE, LLC, Plaintiff, v. BRYK ENTERPRISES, LLC, Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
Plaintiff Quincy Bioscience, LLC is suing defendant BRYK Enterprises LLC under multiple legal theories for making unauthorized sales of products branded with Quincy's PREVAGEN trademark. BRYK didn't answer the complaint, so Quincy moved for default judgment.
Before scheduling a hearing on Quincy's motion, the court directed Quincy to provide more information about its basis for exercising personal jurisdiction over BRYK in Wisconsin. The court concludes that Quincy has adequately addressed the jurisdictional issue. But Quincy's response exposes a problem with the merits of its claims for trademark infringement and unfair competition: the products alleged to have been sold by BRYK were genuine PREVAGEN products. The sales were unauthorized, in the sense that Quincy didn't want or authorize BRYK to make them, but whether those sales were unlawful is another matter. For the reasons explained below, the court will allow Quincy to proceed on a claim for false advertising under 15 U.S.C. § 1125(a)(1)(B), but all other claims will be dismissed. The court will schedule a default judgment hearing on the false advertising claim.
Quincy makes supplements for “the support of cognitive function,” and it sells those supplements under the PREVAGEN mark, which it owns and has used since 2007. Dkt. 1 ¶¶ 9, 11. Quincy alleges that BRYK sells products under the PREVAGEN mark on Amazon.com, even though BRYK is not an authorized seller. Dkt. 1, ¶¶ 28-31 and Dkt 16, ¶ 12.
Quincy originally asserted four claims under the Lanham Act: (1) counterfeiting, 15 U.S.C. § 1114(1)(a); (2) trademark mark infringement, § 1114 and § 1125(a)(1)(A); (3) false designation of origin and unfair competition, 15 U.S.C § 1125(a); and (4) false advertising, 15 U.S.C. § 1125(a)(1)(B). Quincy also asserted state-law claims for trademark infringement and counterfeiting, Wis.Stat. §§ 132.02 and 132.033. Quincy sought statutory damages, injunctive relief, and attorney fees.
All five claims were based on one of two theories of harm. First, Quincy said that some of the products sold by BRYK under Quincy's mark were not true PREVAGEN supplements and didn't contain the supplement's active ingredients, so the fake supplements would divert sales away from Quincy and harm the brand's reputation. Dkt. 1, ¶¶ 30, 50. Second, Quincy said that other products sold by BRYK under Quincy's mark were sold “in defective condition, including with outer box packaging completely missing, damaged or compromised.” Dkt. 1, ¶ 34. In a supplemental declaration, Quincy's vice president of sales clarified that that Quincy had identified “at least sixteen” PREVAGEN products that BRYK had sold “in defective condition.” Dkt. 27. “These included six products which arrived with no outer packaging whatsoever, an additional four products whose packaging was significantly damaged, and an additional six that did not include an accessory pill-minder shown and described in the Amazon listings from which the test orders were placed.” Id.
After Quincy moved for default judgment, the court issued two orders asking for more information about Quincy's basis for exercising personal jurisdiction over BRYK. A court may exercise personal jurisdiction if the plaintiff shows two things: (1) the defendant purposefully availed itself of the privilege of conducting business in the forum state or purposefully directed its activities at the state; and (2) the plaintiff's alleged injury arose out of the defendant's forum-related activities. Curry v. Revolution Labs., LLC, 949 F.3d 385, 398 (7th Cir. 2020).[1]Defects in personal jurisdiction are not waived by a failure to answer the complaint. See Swaim v. Moltan Co., 73 F.3d 711, 717 (7th Cir. 1996).
In the first order, the court observed that Quincy's complaint alleged generally that BRYK made “internet sales . . . directed to Wisconsin.” Dkt. 1, ¶ 6. But the complaint didn't identify any specific Wisconsin sales or other activities by BRYK that would establish the necessary minimum contacts with Wisconsin to authorize an exercise of personal jurisdiction over BRYK.[2] So the court gave BRYK an opportunity to supplement its personal jurisdiction allegations.
In response, Quincy submitted a declaration in which it said that it submitted 29 test orders to BRYK between May and August 2022. Dkt. 16, ¶¶ 4, 8. For reasons it didn't explain, Quincy asked BRYK to ship orders to states other than Wisconsin, id., even though Quincy is located in this state. But Quincy said that the billing address on the invoices was Wisconsin, and it attached a sample invoice. Dkt. 16-2.
Recent Seventh Circuit law says that a plaintiff can essentially manufacture personal jurisdiction by buying products from the defendant and having the products shipped to the plaintiff's home state. See NBA Properties, Inc. v. HANWJH, 46 F.4th 614 (7th Cir. 2022). The court reasoned as follows: Id. at 624.
But NBA Properties is distinguishable because the plaintiff in that case had the products shipped to the forum state. Quincy had the products shipped to other states. The court of appeals did not directly answer the question whether it is enough if the plaintiff lists a forumstate billing address on the order. Quincy cites district court decisions that relied on a customer's billing address in the forum state as a sufficient forum contact. See Euromarket Designs, Inc. v. Crate & Barrel Ltd., 96 F.Supp.2d 824, 838 (N.D. Ill. 2000); ICG America, Inc. v. Wine of the Month Club, Inc., No. 3:09-cv-133, 2009 WL 2843261, at *4 (D. Conn. Aug. 28, 2009).
The question is a close one, but the court is persuaded that fulfilling an order from a customer that identifies itself as based in the forum state is enough to show purposeful forum-directed contact. If the defendant makes sales to a customer that it knows is a resident of the forum state, it follows that the defendant can reasonably expect to be sued in that state on a claim that arises of out the sale of the product.
This conclusion doesn't resolve the personal jurisdiction issue because Quincy admitted in a supplemental declaration that the test orders it received from BRYK did not include counterfeit supplements. Rather, Quincy said that it is aware of a single counterfeit order sold by BRYK, and that order was sent to a different customer, who then sent it to plaintiff. Dkt. 16, ¶ 5. Plaintiff didn't allege that the customer had any contacts with Wisconsin, which was a problem because the plaintiff must show that there is a connection between its injury and the defendant's contacts with the state. See uBID, Inc. v. GoDaddy Group, Inc., 623 F.3d 421, 42930 (7th Cir. 2010). If the alleged counterfeit product was neither purchased by a Wisconsin resident nor shipped to that state, then the product cannot serve as the basis for an exercise of personal jurisdiction. As a result, this court issued a second order, this time directing Quincy to show cause why the case should not be dismissed for lack of personal jurisdiction. Dkt. 22.
In its response to that order, Quincy now agrees to dismiss its claims based on a counterfeiting theory without prejudice and to withdraw its request for damages. Dkt. 24. But it says that it should be permitted to proceed on its other claims, which are based on the theory that BRYK shipped PREVAGEN products in defective condition to a customer with a Wisconsin billing address. Id. The court will grant Quincy's request to dismiss the counterfeiting claims without prejudice. The remaining questions raised by Quincy's response are addressed in the analysis.
The court will address two issues in this order: (1) whether the court may exercise personal jurisdiction over BRYK on the claims arising out of PREVAGEN products that BRYK shipped in defective condition to a customer with a Wisconsin billing address; and (2) whether Quincy is entitled to relief on those claims.
As already noted, this court may exercise personal jurisdiction over BRYK on a particular claim if Quincy shows that: (1) BRYK purposefully availed itself of the privilege of doing business in Wisconsin; and (2) Quincy's claimed injury arises out of BRYK's contacts with Wisconsin. Curry, 949 F.3d at 398. Quincy has satisfied this standard for its claims based on PREVAGEN products that BRYK sold in defective condition. As for the first element, the court has concluded that fulfilling orders of a forum-state resident with a forum-state billing address is minimally sufficient under the facts of this case to show purposeful availment. As for the second element, Quincy alleges that some of the products it ordered using its Wisconsin billing address arrived in defective condition, so there is a sufficient connection between BRYK's Wisconsin contacts and Quincy's injury.
When a defendant has defaulted, the court must accept all the allegations in the plaintiff's complaint as true, except the allegations related to damages. Arwa Chiropractic P.C. v. Med-Care Diabetic & Medical Supplies, Inc., 961 F.3d 942, 948 (7th Cir. 2020). But this does not mean that a default establishes liability for any legal theory asserted in the complaint. See 10A Fed. Prac. & Proc....
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