Southern District of New York Enjoins AlibabaCoin from Using Alibaba Trademark

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On October 22, 2018, the United States District Court for the Southern District of New York granted Chinese e-commerce company Alibaba’s application for a preliminary injunction against cryptocurrency startup Alibabacoin Foundation. The preliminary injunction entered in Alibaba Grp. Holding Ltd. v. Alibabacoin Found., No. 18 Civ. 2897, 2018 WL 5118638 (S.D.N.Y. Oct. 22, 2018) bars Alibabacoin Foundation from using Alibaba’s protected marks to promote its novel cryptocurrency known as AlibabaCoin or Alibaba Coin.

Alibaba alleged that the defendants, a group of Dubai- and Belarus-based individuals and companies, promoted the cryptocurrency “in an effort to align AlibabaCoin with Alibaba in the minds of potential consumers.” 2018 WL 5118638 at *1. Alibaba holds a registered trademark protecting its exclusive use of the term “Alibaba” vis-à-vis computer software used in e-commerce and online information exchange. Id. at *6.  Arguing that Alibabacoin Foundation’s use of the term had generated consumer confusion, Alibaba’s complaint alleged trademark infringement in violation of the Lanham Act, 15 U.S.C. 1051 et seq. Id. at *6.

The court agreed with Alibaba that the defendant’s use of the term “Alibaba” in promotional material had created confusion as to the cryptocurrency’s association with Alibaba. Concluding that Alibaba was likely to succeed on the merits of its Lanham Act infringement claim, the court found Alibaba was entitled to injunctive relief. Id. at *7.

Alibaba previously sought a preliminary injunction against Alibabacoin Foundation in the United States District Court for the Southern District of New York in April 2018. The court denied that application, holding that Alibaba had failed to establish a reasonable probability that the court had personal jurisdiction over the defendants. Alibaba Grp. Holding Ltd. v. Alibabacoin Found., No. 18 Civ. 2897, 2018 WL 2022626 (S.D.N.Y. Apr. 30, 2018). Alibaba was able to establish personal jurisdiction in its renewed application because it produced a list of email addresses associated with AlibabaCoin investors, including at least one belonging to a New York resident transacting in the state. 2018 WL 5118638 at *3. Analogizing the purchase of AlibabaCoins to online debit card transactions, the court reasoned 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” as opposed to the “location where the buyer clicks the button that commits her to the terms of sale.” Id. As a result, the court found that the newly discovered evidence of at least one New York resident purchasing AlibabaCoin through the defendants’ website created a reasonable probability that the defendants had transacted business in the state for the purposes of establishing personal jurisdiction. Id. at *4.

The court’s decision requires Alibabacoin Foundation to cease using any materials, terms, marks, designs, or words protected by Alibaba’s trademarks. Id. at *7. The cryptocurrency company, which claims it raised over 3.5 million in an Initial Coin Offering earlier this year, incorporates facial recognition technology into the hashing process for block-chain enabled payments.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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