TM choice of law: P’s primary place of business determines which state’s law applies

Lontex
Corp. v. Nike, Inc., 2021 WL 3170600, No. 18-5623 (E.D. Pa. Jul. 27, 2021)

A
rare choice of law opinion involving competitors. This is a trademark
infringement claim but Lontex asserted claims under various state unfair trade
practices law. The court declined to allow it to do that and confined it to the
law of Pennsylvania, whose UTPCPL does not grant competitors standing. Thus,
Lontex was left with only common-law and federal trademark claims.

Following
the Restatement of Conflicts, courts consider: “the place where the injury
occurred; the place where the conduct causing the injury occurred; the
domicile, residence, nationality, place of incorporation and place of business
of the parties; and the place where the relationship, if any, between the
parties is centered.” Place of the injury is most important where “the injury
occurred in a single, clearly ascertainable, state” and less important where
“there may be little reason in logic or persuasiveness to say that one state
rather than another is the place of injury, or when…injury has occurred in
two or more states.” With respect to unfair competition specifically, it notes:

The effect of the loss, which is pecuniary in its nature,
will normally be felt most severely at the plaintiff’s headquarters or
principal place of business. But this place may have only a slight relationship
to the defendant’s activities and to the plaintiff’s loss of customers or
trade. The situation is essentially the same when misappropriation of the plaintiff’s
trade values is involved, except that the plaintiff may have suffered no
pecuniary loss but the defendant rather may have obtained an unfair profit. For
all these reasons, the place of injury does not play so important a role for
choice-of-law purposes in the case of false advertising and the
misappropriation of trade values as in the case of other kinds of torts.
Instead, the principal location of the defendant’s conduct is the contact that
will usually be given the greatest weight in determining the state whose local
law determines the rights and liabilities that arise from false advertising and
the misappropriation of trade values.

As
for the third factor, the plaintiff’s “principal place of business[] is the
single most important contact for determining the state of the applicable law
as to most issues in situations involving the multistate publication of matter
that…causes him financial injury.”

There
was a true conflict between the states’ unfair competition statutes because
other states did grant competitors standing.

Here,
the plaintiff’s principal place of business was the key, and that was
Pennsylvania.  Lontext argued that
“Illinois was the single state in which Lontex had the most pre-infringement
unit sales…but fell back to fourth place in the infringement period when Nike
flooded the Illinois market.” But that was no matter. “In a trademark
infringement case such as this, every state in which both parties do business
may have some relationship to the issues. There is evidence in this case that
the allegedly infringing products were sold in all 50 states.”

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