Last year, Washington sports ball maker Baden Sports Inc. sued Japanese ball maker Kabushiki Kaisha Molten and Nevada-based Molten U.S.A., Inc., for patent infringement and unfair competition under the Lanham Act and Consumer Protection Act. Baden’s unfair competition claims are based on defendants’ alleged misrepresentations about the qualities of their basketballs’ design. (Yesterday, Baden amended its complaint and dropped its CPA claim.)
Kabushiki Kaisha Molten (Molten Japan) moved to dismiss for lack of personal jurisdiction and inappropriate venue on the alleged basis that it had no contacts with Washington. Plaintiff responded that Molten Japan had sufficient contacts through its wholly-owned subsidiary, Molten USA.
On January 18, Judge Marsha Pechman agreed with plaintiff. She found the court had jurisdiction over Molten Japan by attributing the subsidiary’s contacts with Washington to the parent. The court was particularly persuaded by Molten USA’s statement on its website that it was created for the purpose of selling Molten brand products in the United States.
The court found that Molten USA had sufficient Washington contacts because Molten USA has ongoing relationships and accounts with “team dealers” in Washington; Molten USA sends catalogs to team dealers in Washington; a team dealer in Redmond, Washington, purchased 45 Molten basketballs from Molten USA; and Molten basketballs are available for purchase in Washington through the Internet.
The court also found that Baden’s claims arose out of and related to the activities of Molten Japan (through its agent, Molten USA) in Washington. In particular, the court found “[t]he advertising, offering for sale, and sale of the allegedly infringing basketballs in Washington give rise to Baden’s claims for patent infringement and unfair competition.”
Finally, the court was not persuaded that the inconvenience to Molten Japan was significant enough to render jurisdiction in the Western District unreasonable.
The lesson here is clear: a foreign corporation that does business in a state through a U.S. subsidiary risks subjecting itself to that state’s jurisdiction. Transacting business through a subsidiary may not be enough to protect the parent.