United States: E-Commerce – Jurisdictional Issues In The United States

"It is increasingly clear that modern businesses no longer require an actual physical presence in a state in order to engage in commercial activity there. With the advent of ‘e-commerce,’ businesses may set up shop, so to speak, without ever actually setting foot in the state where they intend to sell their wares ... Businesses who structure their activities to take full advantage of the opportunities that virtual commerce offers can reasonably anticipate that these same activities will potentially subject them to suit in the locales they have targeted."¹

This is a lesson that many merchants conducting business via the Internet are learning—and are learning it the hard way, by being forced to face litigation in jurisdictions where they would otherwise not have had to before the rapid expansion of the Internet. This paper will address jurisdictional issues involving E-Commerce that are unique to the U.S. legal system, as well as examine jurisdictional trends throughout the United States.

According to a January 2004 estimate, U.S. online sales were anticipated to reach $65 billion by the end of 2004, with growth expected to continue at a compound annual rate of 17% through 2008 to $230 billion. This study also estimated that online growth in the United States was expected to increase 14% in 2005 This figure is equivalent to 30% of the U.S. population. Many believe that by 2008, approximately one-half of the U.S. population will make at least one online purchase a year.

In addition, the average person is spending more money on online purchases. In 2003, the average online shopper in the Unites States spent $540. In 2004, that figure increased to $585 per person. Current trends indicate that the average amount will increase to $780 per person by 2008.

Notably, these figures take into account only online purchases in the United States. Given the broad appeal of the Internet, it is likely that these figures could be duplicated worldwide.

As the previous figures demonstrate, online purchases are rapidly becoming a preferred means of shopping. While presently not on par with traditional brick-and-mortar establishments, in the not-so-distant future, online retail sales may surpass sales from the more traditional retail methods. Additionally, online retailing in the United States is a multibillion-dollar industry where an unsuspecting online retailer could face jurisdictional issues in all 50 states. Therefore, it is increasingly important for online merchants and retailers to understand the basics of U.S. jurisdiction before embarking on an E-Commerce venture.

Jurisdiction is the power of a court to render a decision that will be recognized and enforced by authorities and other courts. There are two types of jurisdiction: jurisdiction over the parties (personal jurisdiction) and subject matter jurisdiction. A court must have both subject matter and personal jurisdiction before it can consider the case.² Because matters involving online transactions typically satisfy subject matter jurisdiction requirements, this section will focus on personal jurisdiction.

Personal jurisdiction is the power of a court to adjudicate the personal legal rights of parties properly brought before it.³ Due process of law requires that a defendant voluntarily appear or be served with process before the defendant can be personally bound by the court’s jurisdiction.⁴

To establish personal jurisdiction over a nonresident defendant, the plaintiff must satisfy both constitutional due process requirements and the requirements of the given state’s longarm statute.⁵ Many state longarm statutes authorize a court to exercise jurisdiction over a nonresident defendant on any basis not inconsistent with the U.S. Constitution or the state constitution.⁶ Accordingly, jurisdiction over a nonresident defendant satisfies the constitutional requirements if the defendant has sufficient "minimum contacts" with the state, such that maintenance of the suit does not offend "traditional notions of fair play and substantial justice."⁷ Once the court determines that there are sufficient "minimum contacts" with the forum state, a defendant then becomes subject to either the specific or general jurisdiction of the court.⁸

General jurisdiction is asserted if the nonresident defendant conducts "substantial" or "continuous and systematic" activities in the state, whether those activities give rise to the plaintiff’s complaint.⁹ A finding of general jurisdiction requires a higher level of "contacts" with the forum state.¹⁰ However, general jurisdiction is not unlimited. Even if a defendant is engaged in "continuous and systematic" business activity with the forum state or its residents, due process requires the exercise of jurisdiction in every case be reasonable.¹¹

Specific jurisdiction, on the other hand, is proper if the case arises out of certain forum-related acts or if the defendant’s out-of-state activities were purposefully directed toward a state resident and caused injury.¹² When exercising either general or specific jurisdiction over a nonresident defendant, the overriding principle is that the defendant must have purposefully availed itself of the "privilege of conducting activities in the forum state, thus invoking the benefits and protections of its laws."¹³ The purposeful availment requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of "random," "fortuitous" or "attenuated" contacts.¹⁴

As with general jurisdiction, the assertion of specific jurisdiction over a nonresident defendant must be reasonable to comport with constitutional due process requirements. Acts that have satisfied the "purposeful availment" requirement include directing a magazine article at the forum residents¹⁵; placing goods into the stream of commerce¹⁶; and nationwide advertising.¹⁷

The benchmark case dealing with Internet jurisdiction is Zippo Manufacturing v. Zippo Dot Com, 952 F. Supp.2d 1119 (W.D. Pa. 1997). In order to understand the rationale used by the court in determining the appropriateness of asserting personal jurisdiction over an out-of-state defendant based primarily on Internet contacts, it is helpful to look at the facts surrounding the Zippo case. Zippo Manufacturing is a Pennsylvania corporation that manufactures, among other things, "Zippo" lighters. Zippo Manufacturing holds the trademark on the name "ZIPPO." Zippo Dot Com Inc. is a California corporation that operates a Web site and an Internet news service, and held the rights to the domain names ZIPPO.COM, ZIPPO.NET and ZIPPONEWS.COM.¹⁸ Zippo Manufacturing brought suit against Zippo Dot Com, alleging that it had violated the Federal Trademark Act and various other Pennsylvania state intellectual property laws. Zippo Dot Com moved to dismiss the action on the grounds that the court lacked personal jurisdiction.

In analyzing personal jurisdiction, the court noted that Zippo Dot Com’s contacts with Pennsylvania occurred almost exclusively over the Internet.¹⁹ The court found that Zippo Dot Com had no offices, employees or agents in the state.²⁰ The only advertising conducted by Zippo Dot Com involved information posted on its Web page.²¹ Of its approximately 140,000 subscribers, approximately 2 percent were Pennsylvania residents.²² Finally, the court found that Zippo Dot Com had entered into agreements with seven Internet service providers to permit their subscribers access to the news service. Two of the seven subscribers were located in the Western District of Pennsylvania.

The court then went on to analyze whether these contacts, again primarily Internet-based, supported a finding of "minimum contacts," such that the assertion of personal jurisdiction was proper. The court found that the Internet made it possible to conduct business throughout the world entirely from a desktop. Because of the way the Internet is changing the nature of commerce, the court determined that a new rule was necessary to evaluate "minimum contacts" over the Internet. The court ruled that the "likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet. The court went on to find that "at one end of the spectrum are situations where a defendant clearly does business over the Internet. . . at the opposite end are situations where a defendant has simply posted information on an Internet Web site [that] is accessible to users in foreign jurisdictions."²³

Accordingly, the court developed a sliding scale to determine personal jurisdiction over nonresident defendants. At the extreme end, a Web site that is fully interactive and acts as a virtual storefront suggests that jurisdiction will almost always be proper. At the other end, a completely passive Web site that simply provides information to the end user, without any opportunity for interaction with the site owner, suggests the contacts will likely never be sufficient for a finding of jurisdiction. For cases in the middle of the spectrum, (i.e., where the user just exchanges information with the Web site), the court found that "the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site."²⁴

Each state is free to set its own requirements for personal jurisdiction subject to constitutional limits of due process. Therefore, a survey of decisions from the different circuit courts is useful to determine the amount of contact a particular state requires in order to properly assert personal jurisdiction over a nonresident defendant. What follows is a survey of the leading cases from each circuit. The survey focuses on whether the Zippo test was followed and there were contacts necessary to support a finding of personal jurisdiction over nonresident defendants.

i. Personal Jurisdiction Not Exercised

The court refused to find personal jurisdiction in a case involving a claim brought by New Hampshire residents for injuries suffered when the husband slipped in a hotel room at the Aruba Marriott Resort.²⁵ The court found that the evidence with respect to the Web site was insufficient to sustain a finding of specific jurisdiction, and turned its attention to whether it could exercise general jurisdiction. In so doing, the court recognized the existence of the Zippo analysis and stated that it "is most helpful when the [W]eb site at issue fits neatly into one of the extremes at either end of the spectrum." However, the Marriot International Web site was characterized as falling into the intermediate category, leading the court to find that the critical issue to be analyzed was "the nature and quality of commercial activity actually conducted by an entity over the Internet in the forum state."

In a suit brought by a Massachusetts plaintiff against the Ohio law firm of Baker & Hostetler LLP (B & H), plaintiff argued that B & H was subject to personal jurisdiction based on its passive Web site, its listing on an interactive Martindale-Hubbell Internet service, and the fact that both Web sites were accessible by Internet users in Massachusetts.²⁶

The court ultimately held that it could not exercise personal jurisdiction over B & H for two reasons. First, the B & H Web site was passive, in that it only posted information for those who were interested and made no mention of any ties to Massachusetts. Secondly, there was "no case holding that personal jurisdiction exists over a law firm simply because it is a participant in a legal search engine such as www.lawyers.com. Any other result would belie common sense and the power of the Internet as a research tool."²⁷

ii. Personal Jurisdiction Exercised

In an action brought in the District of Massachusetts, Digital Equipment Corporation (Digital), a Massachusetts corporation, alleged that AltaVista Technology Incorporated (ATI), a California corporation, engaged in trademark infringement by allowing its trademarked name to appear on the ATI Web site.²⁸ Although the court did not specifically adopt the Zippo test, it did note that the following jurisdictional facts were sufficient to support a finding of specific personal jurisdiction: "ATI operates a Web site accessible to Massachusetts computer users; it solicits advertising and its own products through the site; it made at least three sales to Massachusetts residents of software products in the course of and related to its operation of a Web site; [and] finally, [that] Digital alleges ATI’s Web site has infringed its trademark and caused considerable confusion in Massachusetts."²⁹ Thus, the court focused not only on the interactivity provided by the Web site, but also on whether ATI used the Web site to conduct commercial or infringing activity with the forum state.

In a defamation action brought in the same district, the court found it proper to exercise specific personal jurisdiction over a nonresident defendant, noting that the defendant knew that the allegedly defamatory postings on its Web site were read by Massachusetts residents.³⁰ Accordingly, the court found it foreseeable that defendant would be haled into court in Massachusetts. Again, the court’s focus appeared to be on the interactivity of Massachusetts residents with the Web site and the defamatory nature of the exchange of information that occurred on the defendant’s Web site.

i. Personal Jurisdiction Not Exercised

In a trademark infringement action, the U.S. District Court for the Southern District of New York found it improper to exercise personal jurisdiction where the operator of a New York jazz club filed suit against the operator of a Missouri club alleging the defendant’s Web site infringed the plaintiff’s trademark.³¹

The court held that asserting personal jurisdiction over the defendant would violate due process and also stated that "[c]reating a site, like placing a product into the stream of commerce, may be felt nationwide – or even worldwide – but, without more, it is not an act purposefully directed toward the forum state."³² Because the plaintiff failed to allege that defendant actively sought to encourage New York residents to access his Web site, exercise of personal jurisdiction was improper.

The District Court of Connecticut also found it improper to exercise personal jurisdiction over the defendant in a trademark infringement action where the allegedly infringing Web site was found to be passive in nature.³³

ii. Personal Jurisdiction Exercised

In an action brought by a Connecticut corporation against a Massachusetts corporation for trademark infringement, the court for the District of Connecticut held it was proper to exercise specific jurisdiction.³⁴ The plaintiff alleged that defendant infringed on its trademarked name in relation to both its domain name and its toll-free number. In support of its finding that exercise of specific jurisdiction was proper, the court held that the defendant had purposefully availed itself of the privilege of doing business in Connecticut by directing its advertising activities via the Internet and its toll-free number "toward not only the state of Connecticut, but to all states. The Internet, as well as the toll-free numbers, are designed to communicate with people and their businesses in every state."³⁵ The court also noted that advertisements on the Internet can not only reach as many as 10,000 Internet users in Connecticut alone, but that once posted on the Internet, such advertisements are continuously available to any individual using the Internet.

In another trademark infringement action brought by a New York corporation against a Georgia corporation, the defendant argued that mere publication of a page on the Internet, without more, was insufficient to demonstrate that it purposefully availed itself of conducting business in New York.³⁶ In finding to the contrary, the court noted that the defendant had additional contacts with New York in that it had signed up six New York subscribers to the services advertised on its home page. The service agreements with those subscribers required the defendant to mail software packages and agreements to those New York subscribers. Additionally, the court noted that the defendant received a total of $150 per month from those subscribers, thus enabling the defendant to avail itself of a commercial benefit in New York.

i. Personal Jurisdiction Not Exercised

The court did not find it proper to exercise personal jurisdiction over a Spanish corporation, which was sued by a New Jersey toy retailer for allegedly maintaining an infringing Web site.³⁷ While the court cited the Zippo analysis, it also noted that several Courts of Appeal decisions had adopted purposeful availment requirements that it deemed consistent with the principles articulated in Zippo. These requirements had one common thread–intent.

In declining to exercise personal jurisdiction over the Spanish corporation, the court noted that the defendant’s Web sites, while commercial and interactive, did not appear to have been designed or intended to reach customers in New Jersey, as evidenced by the following facts: the Web sites were entirely in Spanish, prices for its merchandise were in pesetas or euros, and its merchandise could be shipped only to addresses within Spain.

The U.S. District Court for the District of New Jersey declined to exercise personal jurisdiction over an Italian corporation being sued for personal injuries sustained by a New Jersey resident who stayed in a hotel owned by defendant.³⁸ Although the defendant did not conduct any business in New Jersey, it did have a Web site on which it posted pictures of hotel rooms, descriptions of hotel facilities, information of numbers of rooms and telephone numbers. Using the Zippo analysis, the court found the Web site to be passive in nature, as its purpose was merely to provide information about its hotels as an advertisement, not as a means of conducting business.

ii. Personal Jurisdiction Exercised

The Zippo case itself was decided in the Third Circuit, and involved a trademark infringement action by a Pennsylvania plaintiff against a California defendant company. Applying the framework that it created, the court ultimately held that the exercise of specific jurisdiction was proper because the defendant had about 3,000 California subscribers who regularly downloaded messages containing the purported infringing trademarks.³⁹ Defendant was found to have purposefully availed itself of Pennsylvania law by processing the applications of Pennsylvania residents and assigning them passwords to the Web site. As such, defendant was found to have made a conscious decision to do business in Pennsylvania.⁴⁰

d) Fourth Circuit (West Virginia, Virginia, North Carolina, South Carolina and Maryland)

i. Personal Jurisdiction Not Exercised

In ALS Scan Inc. v. Digital Service Consultants Inc., 293 F.3d 707 (4th Cir. 2002), the Fourth Circuit "adopt[ed] and adapt[ed] the Zippo model," formulating a test whereby assertion of personal jurisdiction over a nonresident defendant was proper when that person "directs electronic activity into the state, with the manifested intent of engaging in business or other interactions within the state, and that activity creates, in a person within the state, a potential cause of action cognizable in the state’s courts."⁴¹ The case arose when a Maryland corporation filed suit for copyright infringement against a Georgia-based Internet service provider (ISP), with the primary issue being whether the defendant ISP subjected itself to personal jurisdiction in Maryland by enabling a Web site owner to publish the allegedly infringing photographs.⁴²

Applying its newly formulated standard, the court held that the exercise of personal jurisdiction over the defendant would be improper because it could not be said that the defendant had purposefully availed itself of the privilege of conducting business in Maryland. The court reasoned that the defendant’s act of providing a bandwidth to the alleged infringer, which enabled the creation of a Web site, was a passive act, stating that it "did not select or knowingly transmit infringing photographs specifically to Maryland with the intent of engaging in business or any other transaction in Maryland."⁴³

Applying the ALS Scan test, a Virginia court in the Fourth Circuit found that it could not exercise personal jurisdiction over Connecticut defendants in a defamation action where the defendants posted allegedly defamatory articles on the Internet.⁴⁴ The court noted, "[s]omething more than posting and accessibility" is necessary to demonstrate purposeful availment, "[t]he [defendant] newspapers must, through the Internet postings, manifest an intent to target and focus on Virginia readers."⁴⁵ Referencing the specific facts of the case, the court determined that the Web sites and articles in question were aimed at a Connecticut audience, and thus defendants did not post the allegedly defamatory materials on the Internet with the intent of targeting Virginia readers.⁴⁶

ii. Personal Jurisdiction Exercised

In a more recent decision, the District Court of Maryland found that the exercise of personal jurisdiction over a Texas defendant in a breach of contract and copyright and trademark infringement action was proper.⁴⁷ In its analysis, the court relied upon the ALS Scan three-prong approach and the sliding scale from Zippo to hold that when a Web site is neither purely passive nor fully interactive, courts look to the level of interaction and commercial nature of the exchange of information.⁴⁸ The court based its decision to exercise personal jurisdiction on the fact that the defendant did engage in business in Maryland, despite the fact that sales to consumers in Maryland amounted to only .02 percent of its sales.

i. Personal Jurisdiction Not Exercised

In Mink v. AAAA Development LLC, 190 F.3d 333 (5th Cir. 1999), the Fifth Circuit applied the Zippo analysis in determining whether it was proper to exercise specific personal jurisdiction over a nonresident defendant. Plaintiff, a Texas resident, sued the defendant, a Vermont corporation, alleging conspiracy to copy his computer program in violation of federal copyright and patent pending rights.

Applying the Zippo analysis, the court held the Web site was insufficient to subject the defendant to personal jurisdiction because even though the site was accessible in Texas, the Web site merely posted information about defendant’s products and services, provided users with a printable mail-in order form, gave a toll-free telephone number, and listed a mailing and e-mail address. More notably, orders were not taken through the Web site. As such, the Web site was classified as "[nothing] more than a passive advertisement, which is not grounds for the exercise of personal jurisdiction."⁴⁹

Furthermore, in Revell v. Lidov, 317 F.3d 467 (5th Cir. 2002), a defamation action arising from allegedly defamatory content on a Web site, the court applied the Zippo analysis to hold that an exercise of personal jurisdiction was improper. The action arose out of the defendant’s article being posted on a different defendant’s Internet bulletin board. With respect to the owner of the Web site containing the bulletin board, the court noted that once the information was posted on the Web site, anyone could access the site, read what was posted and add information. Accordingly, the court held that defendant’s Web site was more passive, instead of truly interactive, because information could only be sent to, and posted on, the Web site.⁵⁰ As such, the defendant’s maintenance of the Web site did not constitute substantial contacts with the forum state such that the exercise of general personal jurisdiction was proper.

ii. Personal Jurisdiction Exercised

In American Eyewear Inc. v. Peeper’s Sunglasses & Accessories Inc., 106 F.Supp.2d 895 (N.D. Tex. 2000), a trademark action in the Northern District of Texas, an eyewear seller located in Texas sued a Minnesota seller of eyewear products that allegedly violated the Texan seller’s trademark by using it as its domain name. Applying the Zippo analysis, the court noted that the defendant’s Web site fell within the middle of the continuum, in that users could exchange information with a host computer and communicate with the company running the Web site. The court ultimately held that it would be proper to assert personal jurisdiction over the defendant, noting that the defendant knowingly entered into contracts with Texas residents for commercial gain by selling its products via the Web site.⁵¹

The court for the Western District of Texas, in a copyright infringement case, found it proper to exercise general personal jurisdiction over a California corporation that operated an allegedly copyright infringing Web site.⁵² The Texan owner of an adult Web site filed suit against the California corporation that owned a Web site that provided a picture viewing service. Applying Zippo, the court relied on the fact that the defendant corporation sold its picture viewing services to approximately 695 Texas residents. The court stated that "[t]he company has repeatedly and consistently chosen to sell its services to Texas residents and should therefore have been on notice that it is subject to suit in Texas."⁵³ Accordingly, the court held that the "high level of interactivity and the commercial nature of the Web site are sufficient to establish minimum contacts."⁵⁴

i. Personal Jurisdiction Not Exercised

In McGill Technology Ltd. v. Gourmet Technologies Inc., 300 F.Supp.2d 501 (E.D. Mich. 2004), the Eastern District of Michigan Court found it improper to exercise general personal jurisdiction where the plaintiff, incorporated in the United Kingdom, filed an action for patent infringement against defendant, a New York corporation, that operated a Web site through which users could purchase its products.

The court held that it would be improper to exercise general jurisdiction over the defendant where its only contact with Michigan was the interactive Web site, which generated only a single sale of $4,000 into Michigan and was unrelated to plaintiff’s alleged injury.

ii. Personal Jurisdiction Exercised

In an action for trademark infringement filed by a Michigan corporation against a Pennsylvania corporation, the Sixth Circuit found it proper to exercise specific personal jurisdiction.⁵⁵ The court cited to Zippo for the proposition that "a defendant purposefully avails itself of the privilege of acting in a state through its Web site if the Web site is interactive to a degree that reveals specifically intended interaction with residents of the state."⁵⁶ Accordingly, the court found aspects of the Web site supported purposeful availment, such as providing passwords to Michigan residents who purchase services to access test results via the Web site and posting a chart that included a geographical breakdown of data that expressly included Michigan.

In Bird v. Parsons, 289 F.3d 865 (6th Cir. 2002), the court referred to the Zippo reasoning in the context of its own three-part test for determining whether exercising personal jurisdiction is proper. Bird involved a suit for copyright and trademark infringement brought by an Ohio resident against a nonresident corporation that operated a Web site where individuals could register domain names. Based on the aforementioned reasoning, the court concluded that "by maintaining a Web site on which Ohio residents can register domain names and by allegedly accepting the business of 4,666 Ohio residents, the [defendants] have satisfied the purposeful-availment requirement."⁵⁷ Relying upon Zippo, the court stated that "[a]lthough it is unclear whether registrants who use [defendant’s] Web site do so on a repeated basis, the proffered evidence that [defendant] regularly chooses to do business with Ohio residents is sufficient to constitute purposeful availment."⁵⁸

i. Personal Jurisdiction Not Exercised

In a products liability action in which the wife of an Indiana man who died after being crushed by a forklift sued the Danish manufacturer, the Seventh Circuit held that the defendant’s maintenance of a Web site was insufficient to confer specific personal jurisdiction.⁵⁹ The defendant’s Web site contained English translations, was accessible throughout the United States, and provided contact information and descriptions of its various product lines. However, the Web site did not allow consumers to order products.

Although the court never specifically cited the Zippo sliding scale, it stated "[p]remising personal jurisdiction on the maintenance of a Web site, without requiring some level of ‘interactivity’ between the defendant and consumers in the forum state, would create almost universal personal jurisdiction because of the virtually unlimited accessibility of Web sites across the country."⁶⁰ The court determined that it need not consider what level of "interactivity" would be sufficient to confer personal jurisdiction based on the operation of an interactive Web site because "[t]he exercise of personal jurisdiction based on the operation of a ‘passive’ Web site is impermissible because the defendant is not directing its business activities toward consumers in the forum state in particular."⁶¹

In Hy Cite Corp. v. Badbusinessbureau.com LLC, 297 F.Supp.2d 1154 (W.D. Wis. 2004), where plaintiff filed a suit for defamation and trademark infringement resulting from postings on a Web site, the District Court for the Western District of Wisconsin declined to adopt the Zippo sliding scale. However, the court noted the Zippo sliding scale may be taken into consideration in determining whether to exercise personal jurisdiction.⁶² A Wisconsin plaintiff sued a West Indies defendant after allegedly defamatory and infringing material was posted on the defendant’s Web site, which was essentially a forum for consumer complaints about various businesses.

The court declined to adopt the Zippo sliding scale for two reasons. First, it was not clear why a Web site’s level of interactivity should be determinative on the issue of personal jurisdiction without some evidence of intent on the defendant’s part. Second, the Zippo court never explained under what authority it was adopting its specialized test for the Internet, or why such a test was necessary. However, even though the court stated the Zippo test as a substitute for minimum contacts, this does not mean that a Web site’s level of interactivity is irrelevant in deciding whether the exercise of jurisdiction is appropriate.

The court determined there were insufficient grounds for exercising general jurisdiction, while noting defendant’s one sale in Wisconsin was not enough to hale the defendant into court. Additionally, the court declined to exercise specific jurisdiction because the defendant had not purposefully availed itself of the privilege of conducting business in Wisconsin. To support this finding, the court noted that there was no evidence that defendant had received any donations from Wisconsin citizens or that any Wisconsin businesses advertised on its Web site, or had done anything to target Wisconsin consumers (including sending mailings or unsolicited e-mails or advertising for its site within Wisconsin).

ii. Personal Jurisdiction Exercised

In Euromarket Designs, Inc. v. Crate & Barrel Ltd., 96 F.Supp.2d 824 (N.D. Ill. 2000), plaintiff, an Illinois corporation, sued defendant, an Ireland corporation, for trademark infringement from a Web site that the defendant operated. The allegedly infringing Web site allowed individuals to both view and purchase goods (priced in U.S. dollars) and allowed users to select the United States as their shipping and/or billing address⁶³.

Unlike the District Court in Hy Cite, the District Court for the Northern District of Illinois adopted the Zippo sliding scale. In this case, the court found that the plaintiff had alleged sufficient minimum contacts on the part of the defendant such that it was proper to exercise personal jurisdiction, noting that defendant’s Web site clearly fell into the first category of interactive Web sites under the Zippo analysis. The court stated the defendant "purposefully and deliberately designed and now maintains a Web site with a high level of interactivity, enabling customers to browse through an online catalog and place orders via the Internet."⁶⁴

In another case in the Northern District of Illinois, the court once again applied the Zippo sliding scale and held that the defendant’s Web site was sufficiently interactive to support an exercise of personal jurisdiction.⁶⁵ This patent infringement action arose out of the sale of allegedly infringing products on defendant’s Web site. The court found the Web site was sufficiently interactive to create purposeful minimum contacts, pointing to the fact that the Web site encouraged users to order the products by transmitting detailed information to the Web site, including the quantity of products desired, the preferred method of shipping, and the shipping and billing addresses.

i. Personal Jurisdiction Not Exercised

The District Court for the Eastern District of Missouri did not exercise personal jurisdiction over the California defendant in a trademark infringement action where the defendant owned an Internet domain name that allegedly infringed on plaintiff’s trademark.⁶⁶ In holding the exercise of personal jurisdiction over defendant would not satisfy due process, the court analyzed a multitude of other cases involving personal jurisdiction and a nonresident defendant’s Web site.

Accordingly, the court essentially adopted the Zippo analysis, and based on the following facts, decided it would be generally improper to exercise personal jurisdiction over defendant: defendant’s Web site included photographs of classic cars, and nonresident Internet users could not purchase such cars or exchange information with defendant via the Web site (although such information was accessible to Missouri Internet users) and no one contacted defendant about buying cars, which suggests no business transactions with a Missouri user.

In Lindgren v. GDT, LLC, 312 F.Supp.2d 1125 (S.D. Iowa 2004), the District Court for the Southern District of Iowa held, a California defendant in a trademark infringement action lacked sufficient contacts with Iowa to allow it to exercise personal jurisdiction. The court noted the Eighth Circuit recently adopted the Zippo analytical framework and considered how to categorize defendant’s Web site on the Zippo sliding scale. In determining that defendant’s Web site fell in the middle of the Zippo sliding scale, the court noted the Web site consisted of primarily single point-of-sale transactions – instead of continuous or long-term contracts – and, while the site allowed visitors to establish an online account, the account was created solely for convenience.

Ultimately, the court found that defendant did not have sufficient contacts with Iowa to justify an exercise of personal jurisdiction, and stated "[t]here [was] no evidence that [defendant] took any purposeful action toward Iowa – it did not direct any paid advertising to Iowa or solicit Iowa residents to visit its Web site. It merely processed the orders from Iowa customers who visited its site."⁶⁷ Interestingly, the court found that Internet sales were made in California (the defendant’s state of residence), which suggests such sales are an insufficient basis for personal jurisdiction in Iowa. This appears to differ from the analysis of other circuits, which considered commercial transactions conducted via the Internet between a nonresident defendant and residents of the forum state sufficient for personal jurisdiction over a nonresident defendant.

ii. Personal Jurisdiction Exercised

In Lakin v. Prudential Securities Inc., 348 F.3d 704 (8th Cir. 2003), the Eighth Circuit expressly adopted the Zippo analytical framework. The plaintiffs, Missouri residents, argued that the defendant, a Georgia corporation, had sufficient contacts with Missouri such that general personal jurisdiction was proper. Plaintiff argued that one of the bases for jurisdiction was that the defendant maintained a Web site on which its services were offered to Missouri residents.

The court noted the Zippo sliding scale was ill-suited in a general jurisdiction analysis. Accordingly, the court decided to first apply Zippo and then look at the quantity of the contacts with Missouri residents. The court determined that the defendant’s Web site fell in the middle category of the Zippo continuum and stated "a sophisticated, interactive Web site in which a user can exchange information with the host computer. Not only can Missouri consumers review detailed company, service and financial information about [defendant corporation], they can also exchange electronic mail, establish and access secure online accounts and calculate home-mortgage rates."⁶⁸ In addition, the court noted the 24-hour availability of the Web site made it possible for defendants to have continuous and systematic contacts with the Missouri residents that traditional foreign corporations could never have.

Subsequently, the court considered the quantity of contacts that the defendant had with Missouri residents through its Web site. However, the court found no such evidence because the lower court granted the defendant’s motion to dismiss for lack of personal jurisdiction without first allowing the parties to conduct jurisdictional discovery. Accordingly, the court determined the lower court abused its discretion by not considering such evidence.

In a case out of the District of North Dakota, the court applied Zippo and held the exercise of personal jurisdiction over a Minnesota defendant in an action for copyright infringement comported with due process. Defendant’s Web site was found to have a very high level of interactivity in that it "solicit[ed] users to purchase goods, allow[ed] users to browse through designs, and place orders via the Internet."⁶⁹ As such, the court held that defendant’s contacts were sufficient to confer personal jurisdiction because defendant had clearly done business over the Internet, and that a plain reading of Zippo reveals personal jurisdiction is proper.

i. Personal Jurisdiction Not Exercised

In Cybersell Inc. v. Cybersell Inc., 130 F.3d 414 (9th Cir. 1997), the Ninth Circuit, while citing to Zippo, held that a Florida corporation’s use of an Arizona plaintiff’s mark on its Web site did not support personal jurisdiction. The court noted that the defendant conducted no commercial activity in Arizona because "[a]ll that it did was post an essentially passive home page on the Web" using a name that the plaintiff was in the process of registering as a federal service mark.⁷⁰ The court also noted that although anyone, anywhere could access the defendant’s home page, the defendant did not encourage Arizona residents to access its site and there was no evidence that any part of the defendant’s business was sought or conducted in Arizona.

ii. Personal Jurisdiction Exercised

In 2003, Gator.com Corp. v. L.L. Bean, Inc., 341 F.3d 1072 (9th Cir. 2003), the court expressly adopted Zippo to find that a Maine retailer had sufficient contacts with California to allow the exercise of general jurisdiction, based upon the interactive aspects of the defendant’s Web site and the defendant’s extensive marketing and sales in California. Through the defendant’s Web site, California residents were able to view and purchase products as well as interact with the defendant’s customer service representatives.

Applying the Zippo sliding scale, the court determined that the defendant’s contacts with California were sufficient to confer general jurisdiction, noting that the Web site was highly interactive and very extensive, stating that the defendant "clearly does business over the Internet."⁷¹

i. Personal Jurisdiction Not Exercised

In Soma Medical Int’l v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir. 1999), the Tenth Circuit adopted Zippo in making its determination with respect to general jurisdiction, but made no mention of it in the analysis of specific jurisdiction. The Utah plaintiff in the case argued that the court should exercise personal jurisdiction over the British defendant based on the defendant’s Web site. In response to the defendant’s motion to dismiss for lack of personal jurisdiction, the plaintiff alleged that defendant "maintains an Internet Web site offering information concerning [defendant’s] services and soliciting business from all over the planet, which allows access from anywhere, including Utah."⁷² In response to this allegation, the court held there were insufficient grounds for general jurisdiction over a nonresident defendant because defendant’s Web site was passive in nature and merely posed information.

ii. Personal Jurisdiction Exercised

In Intercon Inc. v. Bell Atlantic Internet Solutions Inc., 205 F.3d 1244 (10th Cir. 2000), where an Oklahoma Internet service provider filed a lawsuit against a Delaware provider of dial-up Internet service, the Tenth Circuit held the exercise of personal jurisdiction over the Oklahoma defendant was proper. Uniquely, the defendant mistakenly routed its customers’ e-mail to the wrong domain, thus using plaintiff’s server. Subsequently, plaintiff’s mail server experienced severe slowdowns due to thousands of unauthorized messages routed through it by defendant. The court cited Zippo as one of many cases that have held that the use of a computer or network service in a particular state may create contacts sufficient to establish personal jurisdiction. The court held that the exercise of specific jurisdiction was proper and noted defendant’s continued transmission through plaintiff’s e-mail server was knowing and intentional because plaintiff notified the defendant that e-mail was going to an incorrect domain name, and the defendant failed to correct the problem until attorneys got involved. Accordingly, the court found that defendant’s activities and their consequences had a substantial enough connection with Oklahoma to warrant exercising personal jurisdiction.

Moreover, in Stewart v. Hennesey, 214 F.Supp.2d 1198 (D. Utah 2002), the U.S. District Court for the District of Utah applied the Zippo analytical framework to determine whether specific jurisdiction existed, but refrained from considering general jurisdiction. The court held specific jurisdiction was proper over the nonresident defendant and noted the exceptionally interactive design of the Web site in light of the advertisements, video clips, employment opportunities and ability to make online purchases.

i. Personal Jurisdiction Not Exercised

In Butler v. Beer Across America, 83 F.Supp.2d 1261 (N.D. Ala. 2000), the U.S. District Court for the Northern District of Alabama found it could not exercise personal jurisdiction over an Illinois defendant in a claim for damages arising from the sale of beer to an Alabama minor. The claim arose out of the defendant’s sale and shipment of beer to the minor via its Web site.

Expressly adopting Zippo, the court stated that defendant’s Web site "clearly does not even anticipate the regular exchange of information across the Internet, much less provide for such interaction. Rather, it is closer to an electronic version of a postal reply card…"⁷³ Notably, the court based this holding on the idea that a finding to the contrary would be a departure from many other cases, which have asserted personal jurisdiction over a nonresident defendant with a Web site that allows residents of the forum state to purchase defendant’s products via the Internet.

In 2004, the U.S. District Court for the Southern District of Florida held it could not exercise personal jurisdiction over a Michigan defendant in a defamation action where the defendant allegedly published defamatory information concerning the Florida plaintiff’s business on its Web site. (Alternate Energy Corp. v. Redstone, 328 F.Supp.2d 1379 (S.D. Fla. 2004)) The court noted that the defendant sold no merchandise through his Web site, but rather only offered information. It also noted that a small percentage of the subscribers to the defendant’s site were residents of the forum state. The court followed the Fifth Circuit and held that selling subscriptions to view an informational Web site does not constitute sufficient commercial activity to justify an exercise of personal jurisdiction.

ii. Personal Jurisdiction Exercised

In Nida Corp. v. Nida, 118 F.Supp.2d 1223 (M.D. Fla. 2000), a trademark infringement action brought by plaintiff, a corporation with its principal place of business in Florida, against defendant, a California resident, for maintaining a Web site with an address that allegedly infringed on the plaintiff’s trademark, the U.S. District Court for the Middle District of Florida held an exercise of specific personal jurisdiction was proper – relying upon Zippo.

The court reasoned "simply registering someone else’s trademark as a domain name and posting a Web site on the Internet is not sufficient to subject a party domiciled in one state to jurisdiction in another."⁷⁴ Citing the Ninth Circuit Cybersell case, the court stated that "there must be ‘something more’ to demonstrate that the defendant directed his activity toward the forum state."⁷⁵ In this case, the court found that "something more" to be the fact that defendant engaged in a scheme to register plaintiff’s trademarks as his domain names in order to extort money.⁷⁶

i. Personal Jurisdiction Exercised

In GTE New Media Services, Inc. v. Ameritech Corp., 21 F.Supp.2d 27 (D.D.C. 1998), where an antitrust action was brought under the Clayton Act against nonresident defendants, the District Court found that it was proper to exercise personal jurisdiction. Plaintiff alleged that defendants illegally conspired to monopolize the Internet Yellow Pages market by controlling certain key Internet access points. The D.C. courts apply a three-part test to establish personal jurisdiction over a nonresident defendant, requiring that the plaintiff demonstrate that it suffered tortious injury in the District of Columbia, the injury was caused by defendant’s act or omission outside of the District of Columbia, and that the defendant either regularly does or solicits business, engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in the district.

Under the third prong of this test, the court adopted Zippo as a test to determine whether the defendant satisfies the "persistent course of conduct" plus factor.⁷⁷ Specifically, the court stated that "[i]n determining whether the exercise of personal jurisdiction is warranted when jurisdiction is premised on Internet-related contacts, many courts focus on the level of interactivity and commercial nature between the defendant’s Internet contacts and the forum district."⁷⁸ Ultimately, the court determined that the defendants’ contact fell in the "middle ground," characterizing the Internet contact as an interactive Web site seeking information from users that would later be used for commercial gain. Specifically, the court stated that the nonresident defendants owned or maintained a Web site, which was both "highly interactive with the users in the District of Columbia and significantly commercial in ‘quality’ and ‘nature’ [to] warrant the exercise of personal jurisdiction.⁷⁹

In Blumenthal v. Drudge, 992 F.Supp. 44 (D.D.C. 1998), a defamation action centered on a statement published on the Internet by a defendant residing in California, the district court held that it was proper to exercise personal jurisdiction. The defendant’s Web site was essentially a gossip column focusing on gossip from Hollywood and Washington, D.C. In determining whether the plaintiff’s had shown a "persistent course of conduct" on the part of the defendant in the District of Columbia, the court relied on Zippo, focusing on whether the maintenance of a home page allows browsers to interact directly with the Web site on some level. However, the court stated that non-Internet related contacts between the defendant and the forum state must also exist. Ultimately, the court found that the defendant’s Web site was interactive, being both accessible to and used by District of Columbia residents, and that defendant had also engaged in non-Internet contact by traveling to the District of Columbia twice (once to promote the Web site at issue).

Although it is clear that the U.S. courts have not established a uniform method for determining personal jurisdiction based on Internet contacts, it is just as clear that the key issue in the jurisdictional arena is the nature and quality of those contacts. The stronger the contacts, the more likely a court will be to assert personal jurisdiction over a nonresident defendant. Therefore, this is an issue that a merchant must keep in mind when setting up a Web site. A merchant must weigh the potential benefits of a completely interactive Web site against the potential downside of being subject to personal jurisdiction nationwide. On the other hand, a merchant can establish a passive, information-only Web site and be protected from personal jurisdiction, but be forced to accept a smaller profit from the Web site. This is an issue that each merchant, based on its particular needs and goals, must decide for itself.

1. L.L. Bean v. Gator.Com, 2003 DJDAR 10023 (9th Cir. 2003).

2. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999).

3. International Shoe Co. v. State of Washington, 326 U.S. 310 (1945).

4. Id.

5. Id.

6. See, Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 404 (9th Cir. 1997) (Arizona longarm statute); L.L. Bean v. Gator.Com, 2003 DJDAR 10023 (California longarm statute); McGill Technology Ltd. v. Gourmet Technologies, Incl,300 F.Supp.2d 501 (E.D. Mich. 2004) (Michigan longarm statute); Mink v. AAAA Development LLC., 190 F.3d 333 (5th Cir. 1999) (Texas longarm statute).

7. International Shoe Co. v. State of Washington, 326 U.S. 310 (1945).

8. See, Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985); Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408 (1984).

9. Helicopteros Nacionales de Columbia, S.A.v. Hall, 466 U.S. 408 (1984).

10. Data Disc, Inc. v. Systems Technology Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir.1977); and Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560 570-571 (2nd Cir. 1996).

11. Amoco Egypt Oil Co. v. Leonis Navigation Co., 1 F.3d 848, 851(9th Cir. 1993).

12. Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985).

13. Hanson v. Denckla, 357 U.S. 235 (1958).

14. Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985).

15. Calder v. Jones, 465 U.S. 783 (1984).

16. World Wide Volkswagen v. Woodson, 444 U.S. 286 (1980).

17. United States SEC v. Carrillo, 115 F.3d 1540, 1545 (11th Cir. 1997).

18. Id.

19. Zippo v. Zippo Dot Com, 952 F.Supp.2d 1119 (W.D. Pa. 1997)/

20. Id.

21. Id.

22. Id.

23. Id.

24. Id.

25. Dagesse v. Plant Hotel N.V., 113 F.Supp.2d 211 (D.N.H. 2000)

26. Comer v. Comer, 295 F.Supp.2d 201, # (D. Mass. 2003)

27. Id.

28. Digital Equipment Corp. v. Alta Vista Technology Inc., 960 F.Supp. 456 (D. Mass. 1997).

29. Id.

30. Abiomed Inc. v. Turnbull, 2005 U.S. Dist. LEXIS 14602 (D. Mass. 2005).

31. Bensusan Restaurant Corp. v. King, 937 F.Supp. 295 (S.D.N.Y. 1996).

32. Id.

33. American Homecare Federation, Inc. v. Paragon Scientific Corp., 27 F.Supp.2d 109 (D. Conn. 1998).

34. Inset Systems Inc. v. Instruction Set, Inc., 937 F.Supp. 161 (D. Conn. 1996).

35. Id.

36. American Network Inc. v. Access America/Connect Atlanta, Inc., 975 F.Supp. 494 (S.D.N.Y. 1997).

37. Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446 (3rd Cir. 2003).

38. Webber v. Jolly Hotels, 977 F.Supp. 327 (D.N.J. 1997).

39. Id.

40. Id.

41. ALS Scan, Inc. v. Digital Service Consultants, Inc., 293 F.3d 707 (4th Cir. 2002).

42. Id.

43. Id.

44. Young v. New Haven Advocate, 315 F.3d 256 (4th Cir. 2002).

45. Id.

46. Id.

47. Young Again Products, Inc. v. Acord, 307 F.Supp.2d 713 (D. Md. 2004).

48. Id.

49. Mink v. AAAA Development LLC, 190 F.3d 333 (5th Cir. 1999),

50. Revell v. Lidov, 317 F.3d 467 (5th Cir. 2002),

51. American Eyewear, Inc. v. Peeper’s Sunglasses& Accessories, Inc., 106 F.Supp.2d 895 (N.D. Tex.2000)

52. Sefton v. Jew, 201 F.Supp.2d 730 (W.D. Tex. 2001).

53. Id.

54. Id.

55. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883 (6th Cir. 2002).

56. Id.

57. Id.

58. Id.

59. Jennings v. AC Hydraulic A/S, 383 F.3d 546 (7th Cir. 2004).

60. Id.

61. Id.

62. Hy Cite Corp. v. Badbusinessbureau.com LLC, 297 F.Supp.2d 1154 (W.D. Wis. 2004).

63. Id.

64. Euromarket Designs, Inc. v. Crate & Barrel Ltd., 96 F.Supp.2d 824 (N.D. Ill. 2000)

65. Litmer v. PDQUSA.com, 326 F.Supp.2d 952 (N.D. Ind. 2004).

66. Enterprise Rent-A-Car Co. v. Stowell, 137 F.Supp.2d 1151 (E.D. Mo. 2001).

67. Id.

68. Id.

69. Id.

70. Id.

71. Id.

72. Id.

73. Id.

74. Id.

75. Id.

76. Id.

77. Id.

78. Id.

79. Id.

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