Toys “R” Us, Inc. v. Step Two, S.A.

Brief Fact Summary.

Toys “R” Us, Inc. (Toys) appealed when the federal district court denied Toys’ motion to seek discovery on personal jurisdiction of Step Two, S.A. and Imaginarium Net, S.L. (Step Two), a company that does not have any stores within the United States.

Synopsis of Rule of Law.

A federal court may not exercise jurisdiction over a foreign company with an interactive website unless the business has contacts with the forum.

Facts.

Toys “R” Us, Inc. (Toys) is a Delaware corporation with headquarters in New Jersey. Toys acquired Imaginarium Toys Inc. (Imaginarium) in 1999. Both Imaginarium and Toys began making online sales in the 1990s. Step Two, S.A. and Imaginarium Net, S.L. (Step Two) are Spanish companies that began making online sales under the Imaginarium mark in 1991. Step Two’s stores and merchandise are similar to Toys’, but Step Two does not have any stores in the United States. Step two pays no taxes in the United States nor does any advertising within the country. Step Two nonetheless purchases its merchandise from the U.S. and it’s president attends an annual toy fair within the U.S. Sep Two maintains an interactive website where customers can purchase products, and merchandise cannot be shipped outside of Spain. Toys sued Step Two for trademark infringement, unfair competition, and other state and federal violations. The district court denied Toy’s motion to seek discovery on personal jurisdiction of Step Two.

Issue.

Whether a federal court may exercise jurisdiction over a foreign company with an interactive website?

Held.

No. The district court’s denial of the discovery request is reversed. Discovery into Step Two’s non-internet contacts is permitted in order to show purposeful availment.

Discussion.

A federal court may not exercise personal jurisdiction over a foreign company with an interactive website unless the business has contacts with the forum. The company must purposely avail themselves of business within the state. This is satisfied when the website owner purposely targets the state or engages in transactions with state residents through the interactive website. A defendant’s non-internet contacts may be taken into consideration, however.