Aquavit Pharmaceuticals, Inc. v. U-Bio Med, Inc.

Background

Aquavit Pharmaceuticals, Inc. sued U-Bio Med, Inc., Global Medi Products, and Nyun Shi Eum, also identified as Nyun-Sik Eum, in an action involving a licensing agreement, trademarks, advertising, and related claims. Global Medi Products did not appear or respond to the Complaint. U-Bio Med and Nyun Shi Eum moved to dismiss for lack of personal jurisdiction.

The parties entered into an Exclusive Worldwide Licensing Agreement in 2013. The agreement allowed Aquavit, the licensee, to market and reproduce the defendants’ injection device. It required Aquavit to pay annual royalties based on device sales and allowed Aquavit either to purchase devices from the defendants or manufacture them itself. The agreement also required the parties to submit disputes to state and federal courts in Manhattan and waive objections to personal jurisdiction there.

Aquavit alleged that it purchased devices from the defendants, marketed them under the name AQUAGOLD, and paid the defendants more than $200,000. Aquavit later alleged that the defendants marketed a device called Tappy Tok-Tok, used AQUAGOLD promotional materials and marks, and made statements online and to customers and distributors that harmed Aquavit’s business. Aquavit asserted claims including breach of contract, trademark infringement and false advertising under the Lanham Act, tortious interference, defamation, unfair competition, and deceptive business practices.

Arguments and Legal Standard

The defendants argued that the licensing agreement was unenforceable because Aquavit was not required to purchase or sell any minimum number of devices. They contended that the agreement therefore lacked mutual consideration, meaning that both sides were not bound to provide something in return for the other side’s performance. They also argued that the alleged infringing activity did not establish jurisdiction under New York’s long-arm statute.

On a motion under Federal Rule of Civil Procedure 12(b)(2), which challenges personal jurisdiction, the plaintiff must show a basis for the court’s authority over the defendants. Because the motion was decided from the pleadings without discovery, Aquavit needed to make only a prima facie showing, meaning that it alleged facts that, if true, would establish jurisdiction. The court accepted Aquavit’s well-pleaded factual allegations as true for purposes of the motion.

Court’s Analysis

The court held that Aquavit had made the required showing that the licensing agreement was enforceable. The court explained that, under New York law, an agreement that initially lacks mutual consideration can become binding through the parties’ later performance.

The court relied on Aquavit’s allegations that it purchased devices from the defendants under the agreement and took active steps to market the devices and increase demand. Those actions were sufficient to cure any initial lack of mutual consideration, even if Aquavit had not been required at the outset to buy or sell a minimum quantity. The court rejected the defendants’ contrary reading of the case law.

Because the agreement was enforceable, its forum-selection and jurisdiction provision applied. The defendants had agreed to submit disputes covered by the agreement to the state and federal courts in Manhattan and had waived objections that they were not subject to those courts’ personal jurisdiction. The court therefore found personal jurisdiction based on the agreement.

The court did not decide whether jurisdiction also existed under New York’s long-arm statute. It stated that personal jurisdiction had already been established through the agreement, making resolution of the alternative statutory basis unnecessary. The court also noted that the defendants’ argument about the relationship between the New York sale and Aquavit’s claims confused the jurisdictional question with the merits of the trademark claims; the defendants had not moved to dismiss for failure to state a claim.

Disposition

Judge Valerie Caproni denied the defendants’ motion to dismiss for lack of personal jurisdiction. The Clerk of Court was directed to terminate the pending motion. The opinion did not resolve the merits of Aquavit’s underlying claims.