United States: Minimum Internet Contacts:Personal Jurisdiction And The World Wide Web

Is a company that operates a website on the Internet subject to personal jurisdiction in every forum in which Internet users access the site? Imagine, for example, that an Illinois company based in Chicago advertises its widget product line over the World Wide Web, and is later sued for trademark infringement based on the logo for its widget products. Does this company thereby subject itself to personal jurisdiction in Alaska, because it so happens that Internet users in Anchorage accessed the company’s website displaying the logo? What if this same company does not advertise its widget products over the Internet, but instead allows for the sale of its widgets via a hyperlink from a thirdparty website? Does this company now subject itself to personal jurisdiction in Montana for a patent infringement dispute because someone in Billings purchased a single widget through the hyperlink? Surprisingly, these Internet contacts alone may suffice to warrant the exercise of personal jurisdiction, and companies that maintain websites or otherwise market themselves via the Internet must be aware of these jurisdictional ramifications.

Before turning to Internet-specific jurisprudence, it is necessary to briefly review certain basic principles of personal jurisdiction. Determining whether a court can exercise personal jurisdiction over a nonresident defendant entails two inquiries: (1) whether the forum state’s long-arm statute permits service of process; and (2) whether the assertion of jurisdiction comports with due process. See, e.g., LGF, LLC v. Zapata Corp., 78 F. Supp. 2d 731, 735 (N.D. Ill. 1999). However, as in most states, the Illinois long-arm statute permits Illinois courts to exercise personal jurisdiction over a defendant on any basis allowed under the due process clauses of either the United States or Illinois Constitutions. Because of this, the jurisdictional analysis collapses into a single due process inquiry.

For an exercise of personal jurisdiction to satisfy due process, the defendant must have sufficient minimum contacts with the forum such that maintenance of the suit does not offend "traditional notions of fair play and substantial justice." This determination depends on whether the plaintiff asserts general or specific jurisdiction against the defendant. General jurisdiction arises when a defendant maintains continuous and systematic contacts with the forum state, even though the cause of action may not have any relation to those contacts. Specific jurisdiction, by contrast, arises where the cause of action relates to the defendant’s contacts with the forum state, regardless of whether those contacts are isolated and sporadic. With both general and specific jurisdiction, a defendant must "reasonably anticipate being haled into court in the forum state" by "purposely avail[ing] itself of the privilege of conducting activities there." As will be demonstrated below, the operation of websites and other Internet-related activities elicits consequences for the exercise of both general and specific jurisdiction.

Simply registering a domain name for a website is not sufficient to create jurisdiction without something else. This "something else" is precisely what courts are grappling with. What level of interaction with an Internet website is required to rise to the level of "minimum contacts" such that a defendant maintaining that website has purposefully availed itself of the laws of the forum state?

In most cases dealing with the effect of Internet activity on personal jurisdiction, courts have adopted and applied some form of the approach first put forth in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997).¹ This approach is known as the "sliding scale." Whether a defendant’s Internet activity constitutes the requisite contacts to warrant the imposition of personal jurisdiction depends upon where the particular website falls on the sliding scale.

There are three main categories into which Internet activity falls: (1) those in which the defendant transacts business in foreign jurisdictions over the Internet and, thereby, subjects itself to personal jurisdiction ("active website"); (2) those in which the defendant posts information on the website, but has no further communication with potential customers via the Internet and, thereby, does not subject itself to jurisdiction ("passive website"); and (3) those in which the defendant operates a website that allows the defendant and potential customers to communicate regarding the defendant’s goods or services ("interactive website"). While the exercise of personal jurisdiction is relatively clear and uniform in the first two categories, cases falling in the third (or middle) category present more difficulty and less than uniform outcomes.

The first "sliding scale" category consists of situations where a defendant does business over the Internet and thereby subjects itself to personal jurisdiction. If, for example, the defendant enters into contracts with residents of a foreign jurisdiction over the Internet, general jurisdiction is proper. If, by contrast, the defendant sells infringing products to residents of a foreign jurisdiction over the Internet, specific jurisdiction is proper. These websites are clearly active, allowing for the transaction of business between the end user and the website host.

In Euromarket Designs, Inc. v. Crate and Barrel Ltd., for example, the court found that the defendant’s website conducted business over the Internet and, therefore, the defendant had sufficient contacts with Illinois to exercise jurisdiction. In this case, the defendant was an Irish corporation that operated stores in Ireland and a website for the purpose of selling its goods. Prominently displayed on both the store and on the website was the defendant’s name, "Crate and Barrel." The plaintiff, an Illinois corporation, sued the defendant, maintaining that the defendant infringed its "Crate and Barrel" trademark.

Although the defendant was located in Ireland, its website included goods priced in U.S. dollars and the billing and shipping city, state and zip code format was unique to the United States. The court determined that the retailer "deliberately designed and now maintains a website with a high level of interactivity … enabling customers to browse through an online catalog and place orders via the Internet." The court noted that the "website actively solicits all users, including residents of Illinois, to purchase goods." The court then held that the defendant purposefully availed itself of Illinois customers and of the protections of Illinois laws and, therefore, was subject to personal jurisdiction in Illinois.

Similarly, in Brach’s Confections, Inc. v. Keller, the court found that the defendant in that trademark infringement case conducted business over the Internet so as to justify the exercise of personal jurisdiction over the nonresident defendant. Although the defendant was a New Jersey company that did not maintain operations in Illinois, the court concluded that the exercise of personal jurisdiction was appropriate because the defendant used its website to contract with at least four Illinois citizens for the sale of goods.

The second category, as noted above, arises where a defendant simply posts information on an Internet website that is accessible to users in foreign jurisdictions. A passive website that does little more than make information available to those who are interested is not grounds, in and of itself, for the exercise of either general or specific jurisdiction. As expressed in Zapata, "[a]n opposite finding would lead to the conclusion that there should be worldwide personal jurisdiction over anyone and everyone who establishes an Internet website, which is clearly inappropriate."

Falling into this category are cases like Haemoscope Corp. v. Pentapharm AG, where the court refused to exercise personal jurisdiction over a nonresident defendant on the basis of a passive website. In this trademark infringement case, the website offered general information about the nonresident defendant company and its products and services. The website, however, did not allow users to purchase the defendant’s products, did not contain pricing information and did not even allow users to download or request a catalog. Although the website allowed users to request additional information about the defendant company by submitting an online form, the court noted that the site "does little more than make information available to those who are interested …."

Based on these minimum Internet contacts, the court held that the nonresident defendant was not subject to either general or specific jurisdiction. According to the court, a passive website "is not pervasive or extensive enough contacts to constitute continuous and systematic general business contacts with the forum." Moreover, even though the trademark infringement claims related directly to the website, the court held that "a passive website is insufficient to satisfy the minimum contacts requirement."

The same result was reached in David White Instr., LLC v. TLZ, Inc. The website in this patent infringement case did not provide for the sale of the allegedly infringing products over the Internet, and no information was exchanged between a user and the website host other than a list of local retailers when the user entered his zip code. According to the court, the site was merely "an advertisement that tells the consumer where Toolz’s products can be found." The court then expressed that "national advertisements (including those on the Internet) are insufficient to subject a defendant to jurisdiction in Illinois."

The third category is occupied by interactive websites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the website. Also relevant to this analysis is whether or not a website is specifically targeted towards a particular forum.²

For example, in Zapata, the court found personal jurisdiction over a nonresident defendant operating an interactive website. The plaintiff was an Illinois business that provided online trading, stocks, commodity futures and option research and financial news, and had a trademark registration of "ZAP." The defendant, a Delaware corporation with its principal place of business in Texas, developed a website structured as a portal, through which it offered a list of connections to other sites by way of hyperlinks. The defendant’s site linked users to these related sites at no charge. Furthermore, users could sign up for the defendant’s mailing list.

In deciding the issue of personal jurisdiction, the court found that the defendant’s website was interactive because it contained a contact page where a user could send e-mail to the defendant in addition to joining its mailing list. The court next looked at the level of interactivity of the information exchanged over the site. It found that twenty-five Illinois residents were on the defendant’s mailing list and that the defendant created the site for the purpose of developing contacts with Internet users; this act illustrated the defendant’s choice to enter and establish contact with Illinois residents. Based on these contacts, the court concluded that the exercise of personal jurisdiction over the defendant was proper.

In NeoMedia Technologies, Inc. v. Airclic Inc., the court reached an opposite conclusion. In this patent infringement case, two nonresident defendants maintained separate websites. The first defendant’s website allowed users to electronically submit contact information and later receive information about the defendant’s products and services. The second defendant’s site allowed this same level of interactivity, but also utilized hyperlinks to other websites that sold the infringing product. The court determined that both websites fell into the "interactive" or "hybrid" category under the sliding scale, but analyzed the sites separately given the distinct content.

With respect to the first defendant, the court held that it could not exercise jurisdiction based on the website contacts. First, the court noted that "[n]othing on AirClic’s website is specifically targeted at Illinois consumers." Second, the court added that the plaintiff failed to demonstrate that any of AirClic’s products or services reached Illinois, either via its website or otherwise. Therefore, according to the court, the website "did not reach the level of commercial interactivity required under [the "sliding scale" approach] for personal jurisdiction."

With respect to the second defendant, the court again held that it could not exercise jurisdiction based on the additional interactivity of hyperlinks to other websites that sell the infringing products. With respect to this contact, the court stated:

Inclusion of hyperlinks, accordingly, does not tip the scales in favor of conferring personal jurisdiction for interactive websites.

The sliding scale approach utilized in cases involving Internet activities is not a significant shift from traditional constructs of personal jurisdiction. The likelihood that personal jurisdiction can be constitutionally exercised is proportionate to the nature and quality of the contacts that a defendant conducts over the Internet. This "minimum Internet contacts" rationale allows courts to exercise personal jurisdiction over those defendants who fall into the first category by actively conducting business over the Internet and, at the same time, precludes courts from exercising jurisdiction over defendants who fall into the passive category of supplying information to potential customers. This rationale also embraces the reality of middle-rung cases, where further case-specific analysis is necessary to make a determination. Given this jurisprudence, a company must be aware when it endeavors to create a website on the Internet that the level of interactivity built into the site may directly affect the possibility that the company could later be sued in any location reached by the website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.