No matter what size a business may be, the Internet allows that business to reach a very large market.  While this kind of reach is amazing, intoxicating and can be very lucrative, it does not come without its pitfalls.  In a series of blogs, I have been examining one such pitfall, namely the business owner being faced with the greater chance of being called upon to defend its activities in a court far from home.  Needless to say, if an owner must bring a case or defend itself away from home, it will be faced with added expenses, inconvenience and unfamiliarity with local law.  Two of my recent blogs have examined some issues of the potential for nationwide exposure to litigation when business is conducted on the web.  Here I examine what factors a court may consider when deciding whether to assert jurisdiction over the defendant, and, once jurisdiction is found, some clues as to whether the defendant is likely to be held liable.

Before the wide acceptance of the Internet, a locally focused business would have to concentrate its efforts on its local market and thus could more easily become familiar with the relevant rules and regulations that would govern its business practices. As discussed in any earlier blog concerning nationwide cigarette sales, an e-business owner may need to know the rules of the road in all 50 states.  In Illinois v Hemi Group, LLC , the Seventh Circuit Court of Appeals concluded that Hemi, located in New Mexico, had sufficient voluntary contacts with Illinois residents, in addition to its interactive website, so that the state government could assert a claim that Hemi had failed to file reports of Illinois cigarette sales.  The decision of the trial court to assert jurisdiction was affirmed and the matter sent back for trial on Illinois’ claim.

By contrast, in Mobile Anesthesiologists Chicago LLC v Anesthesia Associates of Houston Metroplex, the Seventh Circuit did not find that a Houston anesthesiologist had sufficient contact with Illinois to allow an Illinois plaintiff to bring a federal Anti-Cybersquatting Consumer Protection Act (the “ACCPA”) claim based on the Houston doctor having selected a domain name very similar to that adopted and registered as a federal trademark by the plaintiff. .  However, although the Houston doctor only practiced medicine in Texas and thus was able to avoid being sued in Illinois, it appeared from the facts that the Illinois plaintiff, a large company, could nevertheless bring its domain name cybersquatting claim in Texas so that the locality of the doctor’s practice would not insulate him from ultimately answering for his domain name choice.

The third case, also reviewed by the Seventh Circuit, involves a well-known Internet player, namely, GoDaddy, the domain name registration company, who was found to have sufficient contacts with Illinois so that it was fair for it to be called upon to defend itself there.

The facts of uBid, Inc. v the GoDaddy Group, Inc., also involved an ACCPA claim.  uBid alleged that GoDaddy violated the ACCPA when it allowed third parties freely to register domain names confusingly similar to those of the trademarks and domain names of uBid, and thus profited in bad faith from sales when confused web surfers visited those parked pages.

The fact that GoDaddy took great pains to restrict its physical presence to Arizona (incorporation, headquarters, servers and employees all located there) did not insulate it from the Illinois court’s broad reach.  The Seventh Circuit looked at a myriad of factors such as:  GoDaddy’s nationwide and local advertising campaigns, which were not limited to the web but included advertising during Super Bowl broadcasts, celebrity endorsements and advertisements in the home parks of the Chicago Clubs, White Sox, Chicago Bulls and Blackhawks.  The result of GoDaddy’s aggressive campaign was to gain hundreds of thousands of Illinois customers and millions of dollars in profits from them.

In the end, no argument offered by GoDaddy was persuasive to limit its exposure to litigation in Illinois.  In overruling the trial court’s dismissal of uBid’s claim on the basis of finding a lack of personal jurisdiction, the Seventh Circuit’s opinion strongly hinted as to why GoDaddy could be held liable.  In reversing the trial court, the Seventh circuit said, “GoDaddy has continuously and deliberately exploited the Illinois market for domain name registration and has profited handsomely from it.  Now GoDaddy is being called to account for alleged harm to an Illinois resident arising directly from the services GoDaddy provides to its Illinois customers, at least two of whom registered domain names that contributed to the alleged harm.  There is no unfairness in requiring GoDaddy to defend that lawsuit in the courts of the state where, through the very activity giving rise to the suit, it continues to gain so much.”  While GoDaddy will certainly have its day in court to argue why it should not be held liable, having lost this round, it has a harder argument to make on uBid’s substantive claims.

Because policing your domain name can be as important as trying to protect your trademarks, do these cases give any comfort as to your ability to protect your domain name?  Appearing on the Internet gives businesses potentially access to a huge market at a relatively low cost, but are there other prices to be paid?