American Eyewear Inc., based in Texas, claimed that a Minnesota company, Peepers Inc., infringed its “Peepers” trademark by doing web sales of sunglasses from the domain name peepers.com. The Minnesota company tried to argue that the Texas court had no jurisdiction to hear the case. This was rejected by Judge Sidney Fitzwater.
Fitzwater found that the only significant contact between Peepers and residents of Texas occurred via the web site at Peepers.com which is hosted on New York servers. However, the site was taking orders daily from Texans. Also, the judge observed that Peepers follows up sales with e-mail messages to its customers and allows them to create customer accounts.
He believed this was enough to give his Texas court jurisdiction using the common US test that aims to define whether a site is “active” or “passive” in its communication with distant customers. This in itself is not unusual.
However, the judge went on to suggest how the site might have avoided the jurisdiction of the Texas courts, by taking such steps as:
- “Incorporating into its web site purchase order form a ‘click wrap agreement’ that contained a choice of venue clause;
- Including a disclaimer that it would not sell products in Texas; or
- Simply disabling the site so that it would not accept orders from, or allowing shipments to, Texas residents.”
The ‘click wrap agreement’ referred to is basically a list of the merchant’s terms and conditions which are presented to the customer. The customer must click an ‘accept’ button (or equivalent) or else the order cannot continue. The terms could have stated that, for example, only Minnesota law would apply.
Suggesting that a disclaimer or a click wrap agreement might be sufficient for such a web site to avoid jurisdiction in another US state is unusual. For further information, see our guide on Jurisdiction.
