Preliminary Injunction Granted to Alibaba Against AlibabaCoin Cryptocurrency Operators

By Steve Brachmann
October 26, 2018

On Monday, October 22nd, U.S. District Judge J. Paul Oetken of the Southern District of New York entered an opinion and order in a trademark case brought by Chinese e-commerce giant Alibaba against a group of companies operating in Dubai and Belarus involved in marketing a cryptocurrency known as AlibabaCoin. Judge Oetken’s order granted Alibaba’s motion enjoining the defendants from using Alibaba’s protected marks in the U.S., including in connection with goods and services provided over the Internet to U.S. consumers. Another motion filed by Alibaba to compel documents from the defendants was denied as moot.

Alibaba first filed this trademark suit against Alibabacoin Foundation and other defendants this April, alleging that the defendants published materials promoting their cryptocurrency product which impermissibly use Alibaba’s trademarks. Alibaba contended that such use was designed to connect AlibabaCoin with Alibaba in the mind of consumers.

Although the court initially entered a temporary restraining order barring the defendants’ use of the Alibaba marks, Judge Oetken entered an order denying Alibaba’s motion for a preliminary injunction on April 30th of this year because the court didn’t have personal jurisdiction over the defendants in the case. In arguing for the injunction, Alibaba contended that the Southern New York federal court had specific personal jurisdiction under N.Y. C.P.L.R. § 302(a)(1) because Alibabacoin both operated a highly interactive website accessible to New York residents and contracted with a New York City-based company to host a wallet website. Judge Oetken determined that those arguments failed because Alibaba didn’t establish a reasonable probability that the websites were actually used to effect transactions with New York customers nor did the company establish that Alibabacoin’s contract with the NYC-based third-party web-hosting company created an articulable nexus for a trademark infringement claim.

During discovery in this case, Alibabacoin produced a list of email addresses associated with individuals who have invested in the company’s cryptocurrency. An investigation of these email addresses revealed that at least one email address belonged to “an individual who overwhelmingly appears to be a New York resident” connected to three Alibabacoin transactions. The court determined that this new evidence cured the defect in Alibaba’s specific personal jurisdiction argument.

In response, Alibabacoin argued that the transactions didn’t occur in the U.S. but rather consisted of changes in ledger entries made in Belarus’ capital city of Minsk. The court found this argument unpersuasive, providing an example of a user making an online purchase from an out-of-state vendor, holding that “it would strain common usage to say that the transaction occurs at the potentially remote location of the servers that process the buyer’s banking activities and not at the location where the buyer clicks the button that commits her to the terms of sale.” Alibabacoin next argued that its role in the New York-based transactions wasn’t purposeful, claiming that, as an out-of-state vendor, it didn’t act intentionally with respect to an in-state resident’s purchasing decision. Judge Oetken found this claim both questionable and contrary to precedent as set by a series of earlier Southern New York decisions. Finally, Alibabacoin argued that Alibaba’s trademark and false advertising claims lacked a substantial relationship with the transactions in question but the court found that this argument construed the nexus requirement too narrowly in light of the Second Circuit precedent set in 2010’s Chloé v. Queen Bee of Beverly Hills, LLC.

Ultimately, Alibaba’s evidence regarding a New York resident’s purchase of AlibabaCoin through a website operated by the defendants demonstrated a reasonable probability that defendants transacted business in New York within the meaning of the appropriate statute. Defendants argued that the exercise of personal jurisdiction over them in this case would run afoul of the reasonable requirement found in the U.S. Constitution’s Due Process Clause given that Alibaba is a Cayman Islands entity. The court rejected this argument, finding no evidence that New York litigation would create a great inconvenience for litigants with an obvious familiarity with Internet communication. Finally, leading to the grant of preliminary injunction, the court found that Alibaba proved a reasonable likelihood of success on the merits because it holds a registered trademark protecting exclusive use of the term “Alibaba” in connection with “computer software for use in exchanging information via global computer networks and online from a computer database and the internet” and the defendants have used that term in connection with their online commercial ventures in a way that is likely to cause confusion.

The Author

Steve Brachmann

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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There are currently 1 Comment comments.

  1. LazyCubicleMonkey October 30, 2018 1:13 am

    So how will this be enforced against a decentralized cryptocurrency?