Toys "R" Us, Inc. v. Step Two, S.A

Toys "R" Us, Inc. v. Step Two, S.A.

Court	United States Court of Appeals for the Third Circuit
Full case name	Toys "R" Us, Inc., et al. v. Step Two, S.A, et al.
Decided	January 27, 2003
Citation(s)	318 F.3d 446 (3rd Cir, 2003)
Case history
Appealed from	United States District Court for the District of New Jersey
Court membership
Judges sitting	Samuel Alito, Julio M. Fuentes, Louis F. Oberdorfer
Case opinions
Court determined that Toys "R" Us be allowed jurisdictional discovery to determine whether jurisdiction was applicable. The case was to be remanded, allowing for new information provided by said jurisdictional discovery.
Decision by	Judge Oberdorfer
Keywords
Minimum contact, Personal jurisdiction

Toys "R" Us, Inc. v. Step Two, S.A was a case in the United States Court of Appeals for the Third Circuit which set precedent in this circuit for its application of the "Zippo" test in determining the validity of a claim to personal jurisdiction based on the interactivity of a website.^[1] This case was presented as an appeal to a ruling from the District Court which denied Toys "R" Us' request for jurisdictional discovery and dismissed the case over lack of personal jurisdiction. The appellate court held that the denial of jurisdictional discovery was in error, and remanded the case to be reconsidered once this discovery took place.

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In a previous project I went to the hobby store and picked up some F-class rocket motors, to try launching a rocket, made out of pool noodles. Now these motors are amazing, but the catch is they’re $17 each. So in this project let’s see if we can use powdered sugar and kitty litter, to make a homemade version, that will rocket up over 2,000 feet high, and cost less than $0.50 make. To start this project we’ll need powdered sugar, potassium nitrate, and a cheap bag of kitty litter. We’re also going to need 3/4” PVC tubing and a 3/4” oak dowel. This is schedule 40 PVC, and you can see I’ve cut the tube into sections 5” long, exactly. The dowel is twice as long as that, and you can see if we push it inside the tube, it’s actually a pretty good fit. This will be a ramming rod, and a template as well. And the markings you see on the stick are designed to make the simplest form of an “E45 equivalent” rocket motor. The markings are actually in reverse order to how we’re going to build it, but you’ll see why it needs to be that way in just a minute. Alright, let’s get ready to make the rocket fuel, and to start off we’re going to need a small blender that we’re not afraid to damage. I found this one at a local thrift shop for $5, and the first thing we have to do is measure out 65 grams of potassium nitrate. I typically get mine as a special brand of stump remover, and it’s a pretty fine grain to begin with, but you can see that after blending it up for about 20 seconds, it becomes a fluffy white powder, that looks a lot like powdered sugar. Now speaking of powdered sugar, we’re going to need some of that next. So let’s zero out our scale, and add exactly 35 grams of sugar to the mix. At this point the powder is a pyrotechnic composition that could ignite with too much heat, so instead of mixing this up with the blender, we’re going to have to shake it by hand for about 3 minutes. This should give it enough time to blend completely, and that’s important because we need this white mix to be as intimate as possible. Alright, our rocket fuel is finished, so let’s transfer it to another container to free up the blender, because now it’s time to bring out the kitty litter. This 7 lb bag was only $0.98, and surprisingly, the cheap kind is the best kind, because it doesn’t have any fragrances or dyes added to it. It’s just a big bag full of bentonite clay, which is probably why the stuff is as cheap as dirt. Alright let’s throw a handful of clay into the blender for 10-20 seconds so it grinds into a power. Holding the blender at a bit of an angle helps mix it better, and reduces the load, on the motor as well. Now when it’s time to remove the lid, it’s important to wear a mask, or do it outside. Because you can see the powder is so fine it escapes like a gas, and its not really good to breathe this stuff in. Ok, we’ve got everything we need, so let’s get to work putting it all together. Place one of the PVC casings on a slab of concrete, and drop in a third of a tablespoon of kitty litter. Now let’s make sure we keep the tube firmly on the concrete so the clay doesn’t spill out the bottom, then slide the oak ramming rod inside, and smack the top firmly with a rubber mallet. It’s going to need about 5-10 good whacks, to compact it as tight as we need it. And you can see it will make a nice little clay plug, at the bottom of the tube. Let’s repeat this process 2 more times until the plug is 3/4” thick, which you can see is conveniently indicated by the marking on the stick. If too much clay gets packed in, no worries. You can just twist the dowel around a few times to loosen the top layer, then pour out the extra clay until it lines up perfectly. At this point, we’re ready to add the white mix. This stuff is extremely light and fluffy, so it’s important to push the ram rod down, very slowly. Once it’s compacted by hand though, we can ram it with the mallet, just like we did the clay, until the rammed “white mix” lines up perfectly with the next marking. The last step for this simple motor is a kitty litter end cap. This will be 3/4” thick as well, the same as the one we made before. But here you can see there’s still a little room left in the tube, and you’ll see what that’s for in another project video. Ok our rocket motor is just about finished. The only thing left to do is make the nozzle. For these motors I use a 7/32” drill bit, which happens to be the exact length and width we need to turn this rammed powder tube, into a core burning rocket. Now to gauge the depth on how far in to drill, we can use the markings on the ram rod to measure exactly where the white mix ends, then mark the drill bit at the point where it lines up with the clay. Now it’s really important to drill this out very slowly and carefully because, remember, this is a rocket motor, and you don’t want to set it off by accident. I’m drilling mine out by hand, so it’s easy to control any heat generated, from the friction. When the marking on the bit lines up with the bottom of the casing, the rocket motor is finished and should look something like this. Now to test the power of these motors I went way out into the dessert, miles and miles away from any people, property or anything flammable. When this one lit off I was blown away by what it could do. The motor, just shot up 2,300 feet high. And of course if we’ve got rockets going that high, we’re going to need a way to deploy, some kind of a recovery system. So the next step, is to give our rocket motors a built in time delay, and a parachute ejection charge. The 100 gram batch in this video is enough to make two “E45 equivalent” motors, with about 20 grams of propellent left over. Which is what I mix with baking soda, to slow the burn, and create a 5 second delay. So watch for those modifications in another video. Well now you know how to repurpose some simple household items, into powerful hobby rocket motors, for less than $0.50 each. Just make sure you have the right permits, location, and common sense before you try launching them. Well that’s it for now. If you liked this project, perhaps you’ll like some of my others. Check them out at www.thekingofrandom.com If you are even considering the thought of trying to build one of these, please promise me you’ll do one thing first. Get on google and do a search for local rocket clubs. They don’t cost much, and they’ll have the best idea of how to keep you out of trouble with the FAA, and make sure nobody gets hurt. Having said all that, I hope you felt the same excitement for this project that I did. I’ve spent 4 years playing with different variations of sugar motors to get to this point, so I’m super excited to finally be able to present this to you. Now going forward, you can expect to see a few more rocket related videos, and then we’re getting into metal melting projects, so please make sure you’re subscribed to my channel because I’d really like to see you around for those project videos. I’ll talk to you then.

Background

Imaginarium Toy Centers, Inc. was a U.S. toy company in the 1980s and 1990s that owned U.S. trademarks for the name "Imaginarium". Step Two, a Spanish educational toy company, independently owned and operated a franchise of toy stores called Imaginarium throughout Spain as well as nine other countries. Step Two also owned the "Imaginarium" trademark, albeit in Spain as well as the other countries where their stores were located.

During the mid-1990s, Imaginarium Toy Centers and Step Two began registering domains that advertised and sold toys in their respective Imaginarium lines.^[1] By 2000, Step Two had registered the domain names imaginarium.es, imaginariumworld.com, imaginarium-world.com, imaginariumnet.com, imaginariumnet.net, imaginariumnet.org.^[1] In August 1999, Toys "R" Us purchased Imaginarium Toy Centers, acquiring all of the trademarks and web domains they had previously registered.^[1]^[2]

While Step Two maintained no advertising, franchises, or businesses in the United States, similarities existed in logo design and the line of products offered by Toys "R" Us and Step Two under their respective Imaginarium trademarks, such as the similarity of the blue rectangular logo at the website imaginarium.es. Also, Step Two's stores allegedly had the same "unique facade" as Toys R Us’ Imaginarium stores.^[3] Step Two did have contact with the United States since some of the toys sold in their stores were bought from American vendors. Additionally, Step Two's president, Felix Tena, traveled annually to New York for the New York Toy Fair. Step Two also maintained a set of websites based on their Imaginarium trademark.

On February 7, 2001, Toys "R" Us filed a complaint alleging that Step Two's Imaginarium websites infringed upon Toys "R" Us' US trademark for Imaginarium. Both this court case and the District Court case summarized below arose from this allegation.

District Court case

The complaint filed by Toys "R" Us on February 7, 2001, was submitted in a New Jersey court and cited both the Lanham Act as well as New Jersey law. On April 10, 2001, Step Two filed to dismiss this complaint over lack of personal jurisdiction in New Jersey. Toys "R" Us opposed the dismissal and requested jurisdictional discovery.^[1] At the time of the suit, the Imaginarium sites maintained by Step Two were exclusively in the Spanish language and the price of items were shown only in local currencies (pesetas or euros). Moreover, items available online were only supposed to be shipped to countries where stores were actually located.^[4]

At the hearing on July 30, 2001, Toys "R" Us argued that the federal district court in New Jersey had personal jurisdiction based on the interactive nature of Step Two's websites. Furthermore, they had evidence of two New Jersey residents (both on the Toys "R" Us legal team) ordering and receiving items bought from the site. Lastly, the Spanish language of the site enabled Spanish-speakers in the United States to access the site and was purposefully directing itself towards an American audience.^[4] The court held that the premise of an interactive website alone did not qualify for personal jurisdiction. Should that hold true, all interactive websites would be open to jurisdiction in all territories with internet access. Neither the language of the site, nor evidence of the transactions between Step Two and New Jersey were accepted by the court as proof of deliberate actions of Step Two in the United States. Specifically, the circumstances surrounding the transactions made in New Jersey to receive goods from the websites came under scrutiny. One Toys "R" Us employee in New Jersey originated the order and had it shipped to another Toys "R" Us employee in Madrid before he forwarded it to New Jersey as a personal package. The court ruled that such a transaction did not prove jurisdiction over Step Two.^[4] In conclusion, the court denied Toys "R" Us' judicial discovery and granted the dismissal. Toys "R" Us appealed on August 28, 2001.^[1]

Legal analysis

Issue

The focus of the court in this case was on two aspects:^[1]

Whether personal jurisdiction in New Jersey should be given over Step Two in its maintenance of the allegedly infringing website, and, if not
Whether the district court's denial of jurisdictional discovery was appropriate or not.

Personal jurisdiction

Zippo Test

Like many of the courts before it, the circuit court applied the Zippo test to determine whether the interactivity of Step Two's website opened it to personal jurisdiction in New Jersey. From the arguments in the proceedings, Step Two's website, while falling in the middle ground of the test as an interactive website, did not deliberately conduct business in the target state. With regards to evaluating defendant's minimum contacts with the forum jurisdiction the court conceded that while the online activities of Step Two did not qualify for personal jurisdiction, the contact and activity of Step Two outside of the Internet context must also be taken into account.^[5] Minimum contacts is required to establish jurisdiction under due process clause of the Fifth Amendment.^[5]

Jurisdictional discovery

The court determined that the motive behind Toys "R" Us filing a request for judicial discovery was to investigate whether the activities conducted by Step Two both on- and offline could subject them to either personal jurisdiction or the long-arm jurisdiction of the court. They believed that the district court erred in denying this request for judicial discovery, claiming that they focused too narrowly on just the information related to the infringing website (instead of Step Two as a whole), and, in doing so, excluded possible evidence that might show "something more" to satisfy minimum contacts for personal jurisdiction.^[1]

Ruling

While the limited evidence offered by Toys "R" Us did not sufficiently establish personal jurisdiction over Step Two, this court believed that more evidence was likely to be uncovered through jurisdictional discovery. The circuit court disagreed with the reasoning of the district court that the case should be focused only on the actions and infringement of the website, and not the actions of Step Two's personnel outside of the website in question. The circuit court determined that the request for discovery was justified as a means to further determine whether or not the actions and business plans of Step Two (as a whole) fall under the personal jurisdiction or long-arm jurisdiction of the court. The court therefore reversed the district court's denial for jurisdictional discovery, vacated the motion to dismiss, and "remand[ed] the case for limited jurisdictional discovery guided by the foregoing analysis, and for reconsideration of jurisdiction with the benefit of the product of that discovery".^[1]

References

^ ^a ^b ^c ^d ^e ^f ^g ^h ⁱ Toys "R" Us, Inc. v. Step Two, SA, 318 F.3d 446 (3rd Cir. 2003).
^ "Toys "R" Us", FundingUniverse.com Retrieved 2012-02-29
^ "Imaginarium (U.S.) v. Imaginarium (Spain) – Personal Jurisdiction". schwimmerlegal.com. January 30, 2003. Retrieved April 30, 2012.
^ ^a ^b ^c Matuschak, Mark G. (September 7, 2001), "US Federal Court Lacks Jurisdiction over Spanish Company Whose Web Site is Not Purposefully Directed at the U.S", WilmerHale. Retrieved 2012-02-29
^ ^a ^b Jesse Anderson, "TOYS "R" US, THE THIRD CIRCUIT, AND A STANDARD FOR JURISDICTIONAL DISCOVERY INVOLVING INTERNET ACTIVITIES"

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