Theos Medical Systems, Inc. v. Nytone Medical Products, Inc.

Background

Theos Medical Systems, Inc. alleged that Nytone Medical Products, Inc., a competitor in the bedwetting-alarm market, made false advertising claims including that its products were “FDA Approved,” “Top Doctor Rated,” and supported by “500,000+ success stories.” Theos also alleged that Nytone used “Chummie,” a Theos trademark, as an Amazon search term. Theos asserted claims under the federal Lanham Act and California statutes and sought injunctive relief, at least $1 million in damages, additional damages, attorney’s fees, and costs.

Nytone was served with process but did not respond or appear. The clerk entered Nytone’s default. Theos then moved for default judgment and alternatively asked the court to transfer the case to the District of Utah. Theos argued that Nytone’s internet activities and alleged California sales supported venue and specific personal jurisdiction in California.

Reassignment to a District Judge

Theos consented to proceed before a magistrate judge, but Nytone did not. Because all parties had not consented to magistrate-judge jurisdiction, the court ordered the clerk to reassign the case to a district judge. The signed document also contained a report and recommendation on Theos’s motion.

Personal Jurisdiction

The court first found that Nytone had been properly served. It then considered whether California could exercise specific personal jurisdiction over Nytone. Specific personal jurisdiction requires a connection between the defendant, the forum state, and the lawsuit. For the alleged online false advertising and trademark-related conduct, the court applied the requirement that Nytone purposefully direct its conduct toward California.

The court concluded that Theos did not meet that requirement. Allegations that Nytone advertised on websites and search engines accessible around the world, including in California, did not by themselves show that Nytone expressly aimed its conduct at California. The court also found insufficient Theos’s arguments based on Nytone’s interactive website, use of “Chummie,” and estimated share of the California market. Theos acknowledged that its assertions about California targeting and California sales were based on inference, and its only evidence of an actual California sale was a purchase made by Theos’s chief executive officer during the investigation. The court stated that a plaintiff cannot create personal jurisdiction through its own investigative purchase.

The court distinguished a prior case in which California-specific advertising and communications with a California plaintiff supported jurisdiction. Here, the record did not show direct marketing to California, a California-specific focus, or evidence that Nytone knew Theos was based in California and targeted the state. Because Theos failed to establish personal jurisdiction, the court did not address the remaining jurisdiction factors or the factors governing default judgment.

Transfer

Theos alternatively requested transfer to the District of Utah. The court explained that a federal court may transfer a case even when it lacks personal jurisdiction over the defendant if transfer serves the interest of justice. Theos argued that the Utah federal court had personal jurisdiction over Nytone because Nytone was based there. Finding no apparent frivolousness or bad faith in Theos’s claims, the court concluded that transfer to the District of Utah was appropriate.

Recommendation and Next Steps

The report and recommendation recommended that Theos’s motion for default judgment be denied and that the matter be transferred to the United States District Court for the District of Utah. Theos was ordered to serve Nytone with the report and recommendation and file proof of service. Any party could file objections within 14 days after being served.