In an order last week, Judge Oetken granted a preliminary injunction to prevent the purveyors of the cryptocurrency “AlibabaCoin” from continuing to use the marks of Alibaba Group, the global e-commerce company based in China.  According to Alibaba Group, defendants “published a variety of promotional materials that impermissibly use Alibaba’s trademarks in an effort to align AlibabaCoin with Alibaba in the minds of potential consumers.”

Notably, Judge Oetken addressed whether cryptocurrency transactions purportedly occurring in Belarus could be subject to personal jurisdiction in New York by analogizing cryptocurrency to debit card transactions:

Defendants nowhere dispute that Alibaba has presented evidence that at least one New York resident has purchased AlibabaCoin on at least three occasions. Instead, they argue that these sales “did not occur in the United States” because they “consist of ledger entries made in Minsk, Belarus, following observation of changes in ‘blockchain’ data outside the United States.”  This argument is unpersuasive. When an individual uses her debit card to make an online purchase from an out-of-state vendor, for example, 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. Certainly, Defendants have pointed to no authority interpreting New York’s long-arm statute in such a counterintuitive way.

Defendants next argue that Alibaba has failed to show that their role in the transactions at issue was “purposeful.” How could it be their doing, Defendants ask, if “unbeknownst to [them],” New York-based users of their website chose to effectuate cryptocurrency sales by initiating “data exchanges” with Defendants’ out-of-state electronic “apparatus”?  Defendants’ argument appears to boil down to the questionable claim that an out-of-state vendor selling intangible goods and services online has not acted intentionally with respect to an in-state buyer’s subsequent purchase decision. Such a proposition, predictably enough, runs contrary to precedent.

For additional coverage of cryptocurrency, blockchain, and related issues, check out Steptoe’s Blockchain Blog here.