Posts tagged with "personal jurisdiction"

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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?

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In a previous blog, “Selling Over the Internet May Require Knowing the Law in All 50 States,” I considered a real life situation that exposed an Internet business owner based in New Mexico, who sold cigarettes throughout the United States, to a lawsuit filed in Illinois.  There, the U.S. Court of Appeals for the Seventh Circuit found that the seller had purposely directed its wares into Illinois, so that sufficient contact with the state existed to give a federal court personal jurisdiction to hear the case.  ( .)  You may well ask, “Is there any limit to that kind of ‘long-arm’ jurisdictional reach?”  Another recent decision, also by the Seventh Circuit, helps draw some useful distinctions and define some of the limits to a court’s jurisdiction in this highly mobile, Internet era.

A large Chicago-based medical company that provided on-site anesthesia services in various cities throughout the USA (“Mobile/Chicago”) also owned a federally registered trademark,  MOBILE ANESTHESIOLOGISTS.   In 2003, Mobile/Chicago registered the domain name .  In 2008, a doctor (“Mobile/Houston”), who offered similar anesthesia services in the Houston area, launched his website using the domain name .

Not much difference between the phrases “mobile anesthesia” and “mobile anesthesiologists,” right?  Not surprisingly, Mobile/Chicago sued Mobile/Houston in Illinois under the federal Anti-Cybersquatting Consumer Protection Act (the “ACCPA”) alleging that the Houston doctor was using a domain name that was confusingly similar to its registered trademark.  Never addressing the question as to whether the doctor’s mark was confusingly similar to that of Mobile/Chicago, the Seventh Circuit upheld the trial court’s decision to dismiss the case for lack of personal jurisdiction over the defendant.  The full text of the opinion can be found at .

What factors existed to cause such a different outcome to that which resulted in the cigarette case?  Although the Mobile/Houston website could be viewed by Illinois residents, the site made clear that the services were being offered only in the Houston area.  Furthermore, the doctor was licensed only in Texas, where his professional activities all took place.  His contacts to Illinois consisted of his visiting there for vacation and the fact that some professional organizations of which he was a member were located in Illinois.

The Circuit Court did not view these kinds of activities as of sufficient connection to the state to give an Illinois court the authority to assert personal jurisdiction over the doctor.  Nor was the fact that Mobile/Chicago had sent a “cease and desist” letter enough to show that the doctor’s continued operation of his website was an intentional directing of tortuous activities to Illinois.

Thus, while the outcome of this case gives some guidance as to what kinds of activities would be insufficient for a court to obtain personal jurisdiction over a defendant located in another state, the decision did not address the underlying substantive issue of whether mobile anesthesia” and “mobile anesthesiologists” were so similar as to violate the ACCPA.  I wonder whether the Houston doctor really should draw much comfort from the fact that at least, as to the actual defense of his choice of domain name, the matter would be heard on his home turf should Mobile/Illinois decide to continue pursuit of its claim.