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The high court unanimously ruled that unlike traditional common law infringement, the prohibitions against trademark dilution are not motivated by an interest in protecting consumers. The FTDA's legislative history states that the 'statute's purpose is to protect famous trademarks from subsequent uses that blur the mark's distinctiveness or tarnish or disparage it, even absent a likelihood of confusion.' Here, however, the plaintiff showed only the 'likelihood' of harm while the statute 'unambiguously requires an actual dilution showing.' A conclusion, the court remarked, which is 'confirmed by the FTDA's 'dilution' definition itself, '1127.' The court further noted that a plaintiff does not also need to prove the consequences of dilution, such as an actual loss of sales or profits. The court took issue with the Fourth Circuit's decision in Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel Development, 170 F.3d 449 (1999) to the extent it suggests otherwise, but agreed with the Fourth Circuit's conclusion that, 'at least where the marks at issue are not identical, the mere fact that consumers mentally associate the junior user's mark with a famous mark is not sufficient to establish actionable dilution.'

Web activity justifies a request for jurisdictional discovery

The Third Circuit has granted a plaintiff's request for jurisdictional discovery, finding that while jurisdiction over the operator of an Internet Web site cannot be maintained unless there is also proof that the company has 'purposefully availed' itself of doing business in that state, courts must be also consider a defendant's non-Internet activities 'as part of the 'purposeful availment' calculus' and that sometimes a plaintiff must be given a chance to build just such a case for jurisdiction. Toys 'R' Us, Inc. v. Step Two S.A., No. 01-3390 (Jan. 28, 2003).

A retail toy-store chain based in New Jersey claimed that a Spanish company was using its Internet Web sites to engage in trademark infringement, unfair competition, misuse of the trademark notice symbol, and unlawful 'cybersquatting.' The defendant does not operate any stores, maintain any offices or bank accounts, or have any employees anywhere in the United States. It also claimed that it never directed any advertising or marketing efforts at the United States, but the defendant did maintain a sales presence over the Internet. The district court dismissed plaintiff's complaint for lack of jurisdiction, finding that because the defendant did not do any business in the United States, the court could not exercise personal jurisdiction over the company.

The Third Circuit found that the district court improperly denied plaintiff's request for discovery, which could have uncovered additional facts relating to the defendant's non-Internet activity that would justify exercising jurisdiction. The court noted that the request for jurisdictional discovery was 'specific, non-frivolous, and a logical follow-up' based on information known to the plaintiff. Considering the allegations as to the defendant's mimicry of the plaintiff's 'ventures on the Internet and its copy-cat marketing efforts, it would be reasonable to allow more detailed discovery into [the defendant's] business plans for purchases, sales, and marketing.' The court reasoned that allowing limited discovery on these issues would reveal the defendant's business activities in the United States, and 'would speak to an essential element of the personal jurisdiction calculus.' The court recognized and relied on case law holding that where a defendant is clearly doing business through its Web site in the forum state, and where the claim relates to or arises out of use of the Web site, personal jurisdiction exists. The instant decision, however, is the first time that the Circuit has considered the standard for personal jurisdiction based upon a defendant's operation of a commercially interactive Web site.

NY appellate court establishes pleading standard for accounting fraud

The New York Appellate Division, 1st Department has clarified the pleading standards for claims against accountants whose certifications of the accuracy of a corporation's financial statements contain alleged misrepresentations. Houbigant Inc. v. Deloitte & Touche LLP, 2003 N.Y. Slip Op. 10324 (Jan 21, 2003).

The plaintiff owned trademarks for perfumes and licensed the marketing and sales of the scents to a now bankrupt licensee. The plaintiff filed suit against the licensee's accounting firm, alleging that when the firm certified the accuracy of the licensee's financial statements, it knew, but failed to acknowledge that the financial statements actually contained numerous serious irregularities and inaccuracies, which it knew could have a material impact on the accuracy of the financial statements' recitation of the corporation's net worth. The trial court dismissed the suit and the plaintiff appealed.

The appellate court reinstated the fraud and aiding and abetting claims against the accounting firm, finding that the complaint was sufficient to adequately plead the misrepresentation and scienter elements of fraud. The court reasoned that requiring a showing that an accountant's 'knowingly false statement' and 'direct participation' in the fraud on a dismissal motion would improperly apply a summary judgment standard to the dismissal determination. 'Keeping in mind the difficulty of establishing in a pleading exactly what the accounting firm knew when certifying its client's financial statements, it should be sufficient that the complaint contains some rational basis for inferring that the alleged misrepresentation was knowingly made. Indeed, to require anything beyond that would be particularly undesirable at this time, when it has been widely acknowledged that our society is experiencing a proliferation of frauds perpetrated by officers of large corporations, for their own personal gain, unchecked by the 'impartial' auditors they hired,' the court concluded.

Federal courts may not consider state law in work-product privilege claims

In an unpublished opinion, the Third Circuit has held that federal judges should never consider state law when analyzing a claim of privilege under the work-product doctrine, because work product is governed by a uniform federal standard. Coregis Insurance Co. v. Law Offices of Carole F. Kafrissen, No. 01-4517 (Jan. 27, 2003).

In a counterclaim to a legal malpractice suit, the defendant alleged that her insurer acted in bad faith by settling a claim against her without her knowledge or consent and in a way that harmed her reputation. In discovery, the defendant requested that the insurance company provide the entire claims file it held on the underlying malpractice claim. The insurer refused to provide a memo prepared by a claims representative and five other documents referred to in that memo, claiming that they were protected under both the work-product doctrine and the attorney-client privilege. Applying state law, the district court ordered the documents to be turned over.

The Third Circuit reversed. The appeals court stated that state law is irrelevant when a claim of privilege under the work-product doctrine is raised in federal court since the privilege is directly addressed in Rule 26(b)(3) of the Federal Rules of Civil Procedure. Under the federal rule, the party seeking discovery of documents 'created in the anticipation of litigation' must show a 'substantial need' for the materials in the preparation of its case. The demanding party must also show it would be 'unable without undue hardship to obtain the substantial equivalent of the materials by other means.' Even if those two requirements are met, the federal courts will still withhold documents that would disclose 'mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the lawsuit.' Here, the documents in question were created by an insurer or its representatives in anticipation of coverage litigation. The court stated that disclosure was not appropriate 'because the documents anticipate coverage litigation and relate primarily to the mental impressions and legal opinions on how to proceed with the coverage litigation.' The court further reasoned that because the documents in question related to the litigation and not the underlying insurance claim, there was substantial need to produce the documents.

Receipt of right-to-sue letter does not begin limitation period

The Third Circuit has rejected the Equal Employment Opportunity Commission's position that the 90-day limitation period to file a disability discrimination claim does not begin to run until a plaintiff actually receives a 'right to sue' letter from the EEOC. Ebbert v. DaimlerChrysler Corp., No. 02-1503 (Feb 4, 2003).

An auto assembly plant worker was injured in a motor vehicle accident and suffered a spinal cord injury causing complete paralysis from the waist down. She sought accommodation from her employer and was refused. She filed a charge of disability discrimination with the EEOC, and after a series of miscommunications between the employee and the EEOC, a third right-to-sue letter was sent to and received by the plaintiff, who filed the instant suit. The district court dismissed the suit after finding that the plaintiff had 'actual notice' of her rights before the third letter as a result of the answers she was given in telephone calls to the EEOC. The court found that the plaintiff was not diligent in pursuing her claim and concluded that she was therefore not entitled to 'equitable tolling' of the statute of limitations. The EEOC joined in the plaintiff's appeal and asked for a bright-line rule stating that the 90-day limitations period not begin to run until a plaintiff actually receives a 'right to sue' letter.

The Third Circuit reinstated the complaint, but rejected the EEOC's request. The court stated that the start of the limitations period, like the end, is a matter to be judicially decided. 'The EEOC attempts to control the circumstances under which federal courts cannot dismiss complaints for late filing. Such power cannot be within the scope of the procedural regulations.' The court reasoned that while the EEOC 'has broad procedural powers for the administrative stage of discrimination complaints,' the court could not conclude that it was the intent of Congress to extend this authority beyond the administrative stage into the judicial proceedings. 'Judges deciding motions to dismiss complaints as untimely filed are thus the sole arbiters. To say that they do not have the authority to decide timeliness, therefore, would be anomalous.'

Minor prospectus error doesn't nullify IPO registration

The Second Circuit has ruled that a relatively minor discrepancy between an initial public offering's printed and electronic prospectuses does not mean the securities fail to meet registration requirements. In addition, investors can have standing to sue for false and misleading statements under '11 of the Securities Act of 1933 even though they did not purchase shares at the initial offering. Demaria v. Anderson, No. 01-7505 (Jan. 28, 2003).

A bar graph in a company's printed prospectus reported its online publishing revenue and net losses. However, a table in the company's electronic (or EDGAR) filing with the Securities and Exchange Commission misidentified the company's online publishing net losses as publishing revenue. The EDGAR filing also failed, in one section, to show net losses. Shortly after the company went public it reported the losses, then over the next three months, the price of its stock dropped precipitously. The plaintiffs claimed the discrepancy between the printed and electronic prospectus meant the shares were unregistered. They also sued under '11 of the 1933 act, charging that the company failed to include financial information for the fiscal quarter leading up to the IPO. The district court dismissed the complaint, concluding that the shares were registered and that the registration statement was not false and misleading under '11.

The Second Circuit affirmed. The court rejected the plaintiffs' argument that the shares were unregistered 'because it rests on an erroneous interpretation of the regulations pertaining to SEC filings.' Title 17 C.F.R. '232.304 ('Rule 304') outlines the rules and regulations for EDGAR filings. Rule 304(a) states that where 'graphic, image or audio material cannot be produced in an electronic filing,' the electronic filing should contain a 'fair and accurate' description of that material. And Rule 304(b)(1) states that the graphic, image or audio material 'in the version of the document delivered to investors shall be deemed part of the electronic filing.' In an amicus brief, the SEC explained to the court that the purpose of Rule 304(b) is 'to assure that graphic material is subject to civil liability that relates to false or misleading statements in the registration statements.' Consequently, the court reasoned, the 'plaintiffs' assertion that Rule 304(b) liability is contingent upon satisfaction of Rule 304(a)'s 'fair and accurate' requirement makes no sense.' The court opined that as here, 'where the only claimed error in an electronically filed prospectus is an inaccurate summary of the graphic, audio or visual material contained in the Printed Prospectus,' the printed prospectus conforms to the registration statement, and there can be no claim under '12(a)(1) of the act.

The court also ruled that simply because the plaintiffs had purchased their shares in the aftermarket, after the initial offering, they were still eligible to make claims under '11, which allows a suit by 'any person acquiring' a security pursuant to materially false registration statement. The court found no 'reason why 'any' as used in Section 11 should not be read as the equivalent of 'every' such that every person who acquires a security issued pursuant to an allegedly defective registration statement has standing to sue under Section 11.' But even though the plaintiffs had standing to sue under '11, the court dismissed the action find that reading the prospectus as a whole, would not have misled a reasonable investor as to the company's revenue potential. The prospectus, plainly stated that the company 'had a history of net losses,' and they did not 'paint an unrealistically optimistic picture' of the future.

A retail toy-store chain based in New Jersey claimed that a Spanish company was using its Internet Web sites to engage in trademark infringement, unfair competition, misuse of the trademark notice symbol, and unlawful 'cybersquatting.' The defendant does not operate any stores, maintain any offices or bank accounts, or have any employees anywhere in the United States. It also claimed that it never directed any advertising or marketing efforts at the United States, but the defendant did maintain a sales presence over the Internet. The district court dismissed plaintiff's complaint for lack of jurisdiction, finding that because the defendant did not do any business in the United States, the court could not exercise personal jurisdiction over the company.

The Third Circuit found that the district court improperly denied plaintiff's request for discovery, which could have uncovered additional facts relating to the defendant's non-Internet activity that would justify exercising jurisdiction. The court noted that the request for jurisdictional discovery was 'specific, non-frivolous, and a logical follow-up' based on information known to the plaintiff. Considering the allegations as to the defendant's mimicry of the plaintiff's 'ventures on the Internet and its copy-cat marketing efforts, it would be reasonable to allow more detailed discovery into [the defendant's] business plans for purchases, sales, and marketing.' The court reasoned that allowing limited discovery on these issues would reveal the defendant's business activities in the United States, and 'would speak to an essential element of the personal jurisdiction calculus.' The court recognized and relied on case law holding that where a defendant is clearly doing business through its Web site in the forum state, and where the claim relates to or arises out of use of the Web site, personal jurisdiction exists. The instant decision, however, is the first time that the Circuit has considered the standard for personal jurisdiction based upon a defendant's operation of a commercially interactive Web site.

Supreme Court holds that 'actual dilution' to mark needed to sustain claim

The U.S. Supreme Court has ruled that in order to sustain an action under the Federal Trademark Dilution Act of 1995, a plaintiff must show 'actual dilution' to its trademark, not the mere likelihood of harm. The Court noted that mere 'mental association' in the mind of consumers between two marks does not amount to dilution, but that trademark holders do not have to actually prove they actually lost sales or profit. Moseley v. Victoria Secret Catalogue Inc., No. 01-1015 (March 4, 2003).

A major lingerie retailer, Victoria's Secret, claimed an Elizabethtown, KY adult store named Victor's Little Secret violated the FTDA arguing that the name was likely to 'blur and erode the distinctiveness' of its own trademark, which is widely recognized from catalogs and stores.

The high court unanimously ruled that unlike traditional common law infringement, the prohibitions against trademark dilution are not motivated by an interest in protecting consumers. The FTDA's legislative history states that the 'statute's purpose is to protect famous trademarks from subsequent uses that blur the mark's distinctiveness or tarnish or disparage it, even absent a likelihood of confusion.' Here, however, the plaintiff showed only the 'likelihood' of harm while the statute 'unambiguously requires an actual dilution showing.' A conclusion, the court remarked, which is 'confirmed by the FTDA's 'dilution' definition itself, '1127.' The court further noted that a plaintiff does not also need to prove the consequences of dilution, such as an actual loss of sales or profits. The court took issue with the Fourth Circuit's decision in Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel Development , 170 F.3d 449 (1999) to the extent it suggests otherwise, but agreed with the Fourth Circuit's conclusion that, 'at least where the marks at issue are not identical, the mere fact that consumers mentally associate the junior user's mark with a famous mark is not sufficient to establish actionable dilution.'

Web activity justifies a request for jurisdictional discovery

The Third Circuit has granted a plaintiff's request for jurisdictional discovery, finding that while jurisdiction over the operator of an Internet Web site cannot be maintained unless there is also proof that the company has 'purposefully availed' itself of doing business in that state, courts must be also consider a defendant's non-Internet activities 'as part of the 'purposeful availment' calculus' and that sometimes a plaintiff must be given a chance to build just such a case for jurisdiction. Toys 'R' Us, Inc. v. Step Two S.A., No. 01-3390 (Jan. 28, 2003).

A retail toy-store chain based in New Jersey claimed that a Spanish company was using its Internet Web sites to engage in trademark infringement, unfair competition, misuse of the trademark notice symbol, and unlawful 'cybersquatting.' The defendant does not operate any stores, maintain any offices or bank accounts, or have any employees anywhere in the United States. It also claimed that it never directed any advertising or marketing efforts at the United States, but the defendant did maintain a sales presence over the Internet. The district court dismissed plaintiff's complaint for lack of jurisdiction, finding that because the defendant did not do any business in the United States, the court could not exercise personal jurisdiction over the company.

The Third Circuit found that the district court improperly denied plaintiff's request for discovery, which could have uncovered additional facts relating to the defendant's non-Internet activity that would justify exercising jurisdiction. The court noted that the request for jurisdictional discovery was 'specific, non-frivolous, and a logical follow-up' based on information known to the plaintiff. Considering the allegations as to the defendant's mimicry of the plaintiff's 'ventures on the Internet and its copy-cat marketing efforts, it would be reasonable to allow more detailed discovery into [the defendant's] business plans for purchases, sales, and marketing.' The court reasoned that allowing limited discovery on these issues would reveal the defendant's business activities in the United States, and 'would speak to an essential element of the personal jurisdiction calculus.' The court recognized and relied on case law holding that where a defendant is clearly doing business through its Web site in the forum state, and where the claim relates to or arises out of use of the Web site, personal jurisdiction exists. The instant decision, however, is the first time that the Circuit has considered the standard for personal jurisdiction based upon a defendant's operation of a commercially interactive Web site.

NY appellate court establishes pleading standard for accounting fraud

The New York Appellate Division, 1st Department has clarified the pleading standards for claims against accountants whose certifications of the accuracy of a corporation's financial statements contain alleged misrepresentations. Houbigant Inc. v. Deloitte & Touche LLP , 2003 N.Y. Slip Op. 10324 (Jan 21, 2003).

The plaintiff owned trademarks for perfumes and licensed the marketing and sales of the scents to a now bankrupt licensee. The plaintiff filed suit against the licensee's accounting firm, alleging that when the firm certified the accuracy of the licensee's financial statements, it knew, but failed to acknowledge that the financial statements actually contained numerous serious irregularities and inaccuracies, which it knew could have a material impact on the accuracy of the financial statements' recitation of the corporation's net worth. The trial court dismissed the suit and the plaintiff appealed.

The appellate court reinstated the fraud and aiding and abetting claims against the accounting firm, finding that the complaint was sufficient to adequately plead the misrepresentation and scienter elements of fraud. The court reasoned that requiring a showing that an accountant's 'knowingly false statement' and 'direct participation' in the fraud on a dismissal motion would improperly apply a summary judgment standard to the dismissal determination. 'Keeping in mind the difficulty of establishing in a pleading exactly what the accounting firm knew when certifying its client's financial statements, it should be sufficient that the complaint contains some rational basis for inferring that the alleged misrepresentation was knowingly made. Indeed, to require anything beyond that would be particularly undesirable at this time, when it has been widely acknowledged that our society is experiencing a proliferation of frauds perpetrated by officers of large corporations, for their own personal gain, unchecked by the 'impartial' auditors they hired,' the court concluded.

Federal courts may not consider state law in work-product privilege claims

In an unpublished opinion, the Third Circuit has held that federal judges should never consider state law when analyzing a claim of privilege under the work-product doctrine, because work product is governed by a uniform federal standard. Coregis Insurance Co. v. Law Offices of Carole F. Kafrissen, No. 01-4517 (Jan. 27, 2003).

In a counterclaim to a legal malpractice suit, the defendant alleged that her insurer acted in bad faith by settling a claim against her without her knowledge or consent and in a way that harmed her reputation. In discovery, the defendant requested that the insurance company provide the entire claims file it held on the underlying malpractice claim. The insurer refused to provide a memo prepared by a claims representative and five other documents referred to in that memo, claiming that they were protected under both the work-product doctrine and the attorney-client privilege. Applying state law, the district court ordered the documents to be turned over.

The Third Circuit reversed. The appeals court stated that state law is irrelevant when a claim of privilege under the work-product doctrine is raised in federal court since the privilege is directly addressed in Rule 26(b)(3) of the Federal Rules of Civil Procedure. Under the federal rule, the party seeking discovery of documents 'created in the anticipation of litigation' must show a 'substantial need' for the materials in the preparation of its case. The demanding party must also show it would be 'unable without undue hardship to obtain the substantial equivalent of the materials by other means.' Even if those two requirements are met, the federal courts will still withhold documents that would disclose 'mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the lawsuit.' Here, the documents in question were created by an insurer or its representatives in anticipation of coverage litigation. The court stated that disclosure was not appropriate 'because the documents anticipate coverage litigation and relate primarily to the mental impressions and legal opinions on how to proceed with the coverage litigation.' The court further reasoned that because the documents in question related to the litigation and not the underlying insurance claim, there was substantial need to produce the documents.

Receipt of right-to-sue letter does not begin limitation period

The Third Circuit has rejected the Equal Employment Opportunity Commission's position that the 90-day limitation period to file a disability discrimination claim does not begin to run until a plaintiff actually receives a 'right to sue' letter from the EEOC. Ebbert v. DaimlerChrysler Corp., No. 02-1503 (Feb 4, 2003).

An auto assembly plant worker was injured in a motor vehicle accident and suffered a spinal cord injury causing complete paralysis from the waist down. She sought accommodation from her employer and was refused. She filed a charge of disability discrimination with the EEOC, and after a series of miscommunications between the employee and the EEOC, a third right-to-sue letter was sent to and received by the plaintiff, who filed the instant suit. The district court dismissed the suit after finding that the plaintiff had 'actual notice' of her rights before the third letter as a result of the answers she was given in telephone calls to the EEOC. The court found that the plaintiff was not diligent in pursuing her claim and concluded that she was therefore not entitled to 'equitable tolling' of the statute of limitations. The EEOC joined in the plaintiff's appeal and asked for a bright-line rule stating that the 90-day limitations period not begin to run until a plaintiff actually receives a 'right to sue' letter.

The Third Circuit reinstated the complaint, but rejected the EEOC's request. The court stated that the start of the limitations period, like the end, is a matter to be judicially decided. 'The EEOC attempts to control the circumstances under which federal courts cannot dismiss complaints for late filing. Such power cannot be within the scope of the procedural regulations.' The court reasoned that while the EEOC 'has broad procedural powers for the administrative stage of discrimination complaints,' the court could not conclude that it was the intent of Congress to extend this authority beyond the administrative stage into the judicial proceedings. 'Judges deciding motions to dismiss complaints as untimely filed are thus the sole arbiters. To say that they do not have the authority to decide timeliness, therefore, would be anomalous.'

Minor prospectus error doesn't nullify IPO registration

The Second Circuit has ruled that a relatively minor discrepancy between an initial public offering's printed and electronic prospectuses does not mean the securities fail to meet registration requirements. In addition, investors can have standing to sue for false and misleading statements under '11 of the Securities Act of 1933 even though they did not purchase shares at the initial offering. Demaria v. Anderson, No. 01-7505 (Jan. 28, 2003).

A bar graph in a company's printed prospectus reported its online publishing revenue and net losses. However, a table in the company's electronic (or EDGAR) filing with the Securities and Exchange Commission misidentified the company's online publishing net losses as publishing revenue. The EDGAR filing also failed, in one section, to show net losses. Shortly after the company went public it reported the losses, then over the next three months, the price of its stock dropped precipitously. The plaintiffs claimed the discrepancy between the printed and electronic prospectus meant the shares were unregistered. They also sued under '11 of the 1933 act, charging that the company failed to include financial information for the fiscal quarter leading up to the IPO. The district court dismissed the complaint, concluding that the shares were registered and that the registration statement was not false and misleading under '11.

The Second Circuit affirmed. The court rejected the plaintiffs' argument that the shares were unregistered 'because it rests on an erroneous interpretation of the regulations pertaining to SEC filings.' Title 17 C.F.R. '232.304 ('Rule 304') outlines the rules and regulations for EDGAR filings. Rule 304(a) states that where 'graphic, image or audio material cannot be produced in an electronic filing,' the electronic filing should contain a 'fair and accurate' description of that material. And Rule 304(b)(1) states that the graphic, image or audio material 'in the version of the document delivered to investors shall be deemed part of the electronic filing.' In an amicus brief, the SEC explained to the court that the purpose of Rule 304(b) is 'to assure that graphic material is subject to civil liability that relates to false or misleading statements in the registration statements.' Consequently, the court reasoned, the 'plaintiffs' assertion that Rule 304(b) liability is contingent upon satisfaction of Rule 304(a)'s 'fair and accurate' requirement makes no sense.' The court opined that as here, 'where the only claimed error in an electronically filed prospectus is an inaccurate summary of the graphic, audio or visual material contained in the Printed Prospectus,' the printed prospectus conforms to the registration statement, and there can be no claim under '12(a)(1) of the act.

The court also ruled that simply because the plaintiffs had purchased their shares in the aftermarket, after the initial offering, they were still eligible to make claims under '11, which allows a suit by 'any person acquiring' a security pursuant to materially false registration statement. The court found no 'reason why 'any' as used in Section 11 should not be read as the equivalent of 'every' such that every person who acquires a security issued pursuant to an allegedly defective registration statement has standing to sue under Section 11.' But even though the plaintiffs had standing to sue under '11, the court dismissed the action find that reading the prospectus as a whole, would not have misled a reasonable investor as to the company's revenue potential. The prospectus, plainly stated that the company 'had a history of net losses,' and they did not 'paint an unrealistically optimistic picture' of the future.

Toys 'R' Us, Inc.

A retail toy-store chain based in New Jersey claimed that a Spanish company was using its Internet Web sites to engage in trademark infringement, unfair competition, misuse of the trademark notice symbol, and unlawful 'cybersquatting.' The defendant does not operate any stores, maintain any offices or bank accounts, or have any employees anywhere in the United States. It also claimed that it never directed any advertising or marketing efforts at the United States, but the defendant did maintain a sales presence over the Internet. The district court dismissed plaintiff's complaint for lack of jurisdiction, finding that because the defendant did not do any business in the United States, the court could not exercise personal jurisdiction over the company.

The Third Circuit found that the district court improperly denied plaintiff's request for discovery, which could have uncovered additional facts relating to the defendant's non-Internet activity that would justify exercising jurisdiction. The court noted that the request for jurisdictional discovery was 'specific, non-frivolous, and a logical follow-up' based on information known to the plaintiff. Considering the allegations as to the defendant's mimicry of the plaintiff's 'ventures on the Internet and its copy-cat marketing efforts, it would be reasonable to allow more detailed discovery into [the defendant's] business plans for purchases, sales, and marketing.' The court reasoned that allowing limited discovery on these issues would reveal the defendant's business activities in the United States, and 'would speak to an essential element of the personal jurisdiction calculus.' The court recognized and relied on case law holding that where a defendant is clearly doing business through its Web site in the forum state, and where the claim relates to or arises out of use of the Web site, personal jurisdiction exists. The instant decision, however, is the first time that the Circuit has considered the standard for personal jurisdiction based upon a defendant's operation of a commercially interactive Web site.