International Cannabis Litigation: Colorado Court Finds No Personal Jurisdiction in Trademark Battle

28 Aug International Cannabis Litigation: Colorado Court Finds No Personal Jurisdiction in Trademark Battle

The District of Colorado recently dismissed a lawsuit against a Dutch cannabis company for lack of personal jurisdiction in a case that highlights two issues common to international litigation. Growcentia, Inc. v. Jemie B.V., Case No. 20-cv-2619-WJM-NYW (D. Colo. Aug. 10, 2021). The first concerns service of process (the complaint and summons) on foreign corporations under the Hague Convention. The second concerns whether a foreign cannabis corporation may be required to defend itself in the jurisdiction where plaintiff filed the lawsuit.

The lawsuit itself concerns trademark infringement. Plaintiff produces “science-based solutions for cannabis and hemp cultivators” under the MAMMOTH product line and recently introduced a fungicide and pesticide, CANNCONTROL. Plaintiff sells CANNCONTROL with the MAMMOTH mark. Defendant is a Dutch limited liability company with its principal place of business in the Netherlands. (For background on cannabis in the Netherlands, see here, here, and here).

According to Defendant, it does not manufacture, sell, advertise, distribute or market products to anyone in the United States. But Defendant claims to own several “CANNA” and “CANNA-formative” trademarks for goods and services in the cannabis industry. In July 2020, Defendant issued Plaintiff a letter demanding that Plaintiff abandon its “CANNCONTROL” trademark application and never seek to register or use the name or mark or any other mark or domain name using “CANN” or “CANNA” for goods or services related to see or plant cultivation, nutrition, growth, or care. After receiving the letter, Plaintiff filed an action seeking a declaratory judgment of non-infringement of trademark.

By virtue of its letter, Defendant apparently does not want Plaintiff selling products under the CANNCONTROL name. But rather than litigate the question, Defendant moved to dismiss the case for improper service and lack of personal jurisdiction.

Defendant first argued Plaintiff had not properly served the lawsuit as required by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (“Hague Convention”). Lawyers involved in international disputes regularly make use of the Hague Convention. (See here and here for a few of our articles on the Hague Convention). For our non-litigious readers, the Hague Convention is a treaty executed by many—but not all—countries that explains the rules and procedures of how to serve process of a foreign lawsuit within that country. What is important to know is that the rules are not the same for every country. Some countries adopted the Hague Convention in its entirety while others adopted only certain portions or impose different or additional procedures and restrictions. And some countries have not adopted it all.

The court disposed of the challenge to service under the Hague Convention by essentially avoiding analysis. The court explained that even if service were improper, its ruling would simply be to tell Plaintiff to go serve the summons and complaint again – and to do it right. And once that occurred, the court reasoned, it would have to wrestle with the other ground for dismissal (lack of personal jurisdiction). So judicial efficiency favored addressing the personal jurisdiction question first: if the court lacked jurisdiction over the Defendant, the service question would not matter.

Turning to personal jurisdiction, the standard “test,” used in virtually every question of specific jurisdiction, uses nebulous language. First, courts ask whether a defendant has “such minimum contacts” with forum (here the District of Colorado) that the defendant “should reasonably anticipated being haled int court” there. Next, if there are sufficient minimum contacts, courts consider whether exercising jurisdiction would “offend traditional notions of fair play and substantial justice.” This language derives from a long history of U.S. Supreme Court decisions. Although the language does not provide a bright-line rule, years of judicial decisions applying these principles offer guidance in most situations.

The personal jurisdiction analysis is heavily fact dependent. The court first noted that the only direct contact the Defendant has had with Colorado is the cease-and-desist letter it sent Plaintiff. Is this enough? No, said the court, relying on a Tenth Circuit case holding that a cease-and-desist letter, without more, is not enough for the court to exercise jurisdiction and compel the Dutch company to defend a lawsuit filed against it in Colorado federal court.

The court next considered whether Defendant had other indirect contacts with Colorado that—together with the letter—might make it fair to require Defendant to appear and defend against Plaintiff’s claims. Plaintiff pointed to Defendant’s trademark licensee, Hortisol USA, and argued that Defendant may be haled into Colorado because Hortisol advertises, markets, and sells products across the United States. This was not enough, said the court, because the record before it did not reflect any corporate relationship between the two companies. Instead, there existed only an arms-length confidential and exclusive trademark license and sales agreement governed by Dutch law. And the companies maintained separate corporate identities and independent business operations. Based on these facts, the court could not find that Hortisol was the Defendant’s “domestic counterpart” or Defendant’s “U.S. based extension”.

Plaintiff further argued that Hortisol’s advertising and sales linked Defendant to Colorado.  The court did not agree because such advertising targeted the U.S. as a whole and not Colorado specifically. Plaintiff also argued a “stream of commerce” theory in which exercising jurisdiction is proper because Defendant placed its CANNA products into the stream of commerce with the expectation they would be sold in Colorado. (Sidenote: The stream of commerce theory derives from a decades-old U.S. Supreme Court case). The court did not agree and cited a recent Tenth Circuit opinion holding that there must be a “particular focus” by the Defendant on the forum state to satisfy the purposeful-availment requirement of the stream of commerce theory. It is not enough that a defendant “might have predicted” its good would end up in Colorado.

Finally, Plaintiff argued that enforcement actions brought by Defendant in other jurisdictions outside of Colorado. The problem, however, is that none of those actions established Defendant’s ties to this dispute or to the State of Colorado.

So the court dismissed the lawsuit for lack of personal jurisdiction. Although perhaps too bad for the Plaintiff, let’s remember that it brought the suit seeking a declaration of non-infringement. So if Defendant is serious about protecting its alleged intellectual property, it is going to have file a lawsuit to do so.

For more coverage of cannabis trademark and other intellectual property litigation, check out a few recent posts: