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Personal Jurisdiction in the Internet Age (Friday, August 29, 2014)

A party’s internet activity may affect whether the party is subject to a court’s jurisdiction.

Advanced Tactical Ordnance Systems, LLC v Real Action Paintball, Inc., 751 F.3d 796 (7th Cir. 2014), was a trademark infringement action, brought by Advanced Tactical against Action Paintball, Inc., and its president, K.T. Tran.

A PepperBall is a ball filled with a pepper-spray-like irritant. Police departments, private security firms, and similar organizations use these items.

Advanced Tactical manufactures and sells PepperBall branded items, including PepperBall projectile irritants. Its headquarters appears to be in Indiana, though it seemingly had at least one office in California. Advanced Tactical became the manufacturer and seller of PepperBall-branded items in 2012 after it acquired trademarks and other property in a foreclosure sale from a company called PepperBall Technologies Inc.

PepperBall Technologies had purchased its projectiles from at least two companies: Perfect Circle (half owner of Advanced Tactical) and a Mexican company called APON.

APON contacted Real Action Paintball Inc. to see if Real Action was interested in buying projectiles from APON. Real Action agreed and posted on its website (and sent an email announcement) that it had acquired the “machinery, recipes, and materials once used by PepperBall Technologies Inc.”

Advanced Tactical sent a cease-and-desist letter stating that it was neither associated nor affiliated with PepperBall Technologies, and that Real Action projectiles were not made by the current PepperBall Technologies. Advanced Tactical later filed suit in the District Court for the Northern District of Indiana.

The complaint alleged that personal jurisdiction was proper under Indiana’s long-arm statute. The district court agreed and granted Advanced Tactical a preliminary injunction. Real Action appealed.

The plaintiff bears the burden of establishing personal jurisdiction, and when the district court holds an evidentiary hearing to determine personal jurisdiction, the plaintiff must establish jurisdiction by a preponderance of the evidence. In order for the district court’s preliminary injunction to be valid, it had to have personal jurisdiction over Real Action.

The Lanham Act does not have a special federal rule for personal jurisdiction. Therefore, the court looked to the law of the forum.

Under the Indiana long-arm provision, analysis of personal jurisdiction ultimately focuses on whether the exercise of personal jurisdiction is consistent with the Federal Due Process Clause. In turn, due process is satisfied, so long as the defendant had certain minimum contacts with the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.

The relevant contacts center on the relations among the defendant, the forum, and the litigation. The defendant’s suit-related conduct must create a substantial connection with the forum, and must arise out of contacts that the defendant himself creates with the forum.

Real Action filled several orders for purchasers in Indiana. It knew that Advanced Tactical was an Indiana company and could foresee that the misleading emails and sales might harm Advanced Tactical in Indiana. Real Action sent at least two misleading email blasts to a list that included Indiana residents and it had an interactive website available to residents of Indiana. Real Action put customers on its email list when they made a purchase. Even so, none of these acts met the standards that the Supreme Court has set.

While Real Action fulfilled a few orders, Advanced Tactical provided no evidence that those sales had any connection with the litigation. More over, the 600-plus sales that Real Action made to Indiana residents before suit was filed did not advance the analysis because jurisdiction must rest on the litigation-specific conduct of the defendant in the proposed forum state. The only sales that would be relevant are those that were related to Real Action’s allegedly unlawful activity.

Advanced Tactical failed to connect the sales to Real Action’s litigation-specific activity, but even if it had, those few sales, without some evidence linking them to the allegedly tortious activity, would not make jurisdiction proper. Otherwise, a plaintiff could bring suit in any state where the defendant shipped at least one item.

As mentioned, Real Action knew that Advanced Tactical was an Indiana company and could foresee that its misleading emails and sales might harm Advanced Tactical in Indiana. The question whether harming a plaintiff in the forum state creates sufficient minimum contacts was deemed more complex.

The plaintiff cannot be the only link between the defendant and the forum. Yet, the district court also considered Real Action’s online activities—the sending of two allegedly misleading emails to a list of subscribers that included Indiana residents and the maintenance of an interactive website.

According to the appeals court, the traditional due process inquiry is not so difficult to apply to cases involving Internet contacts that courts need some sort of easier-to-apply categorical test.

The question was whether Real Action purposefully exploited the Indiana market beyond simply operating an interactive website accessible in Indiana and sending emails to people who may happen to live there.

The court pointed out that the fact that Real Action maintained an email list to send company-related emails did not show a relation between the company and Indiana. Such a relationship would be entirely fortuitous, depending on activities out of Real Action’s control. Similarly, any connection between the place where an email is opened and a lawsuit is entirely fortuitous.

Many companies allow consumers to sign up to an email list. The court was not prepared to hold that this practice alone demonstrated that Real Action made a substantial connection to each state associated with those addresses.

It could be different if there were evidence that Real Action had targeted residents of a state, perhaps through geographically-restricted online ads. In such a case the focus would be on the deliberate actions by the defendant to direct itself toward the forum state.

The court noted that the interactivity of a website was a “poor proxy” for adequate minimum contacts. Courts should be careful in resolving questions about personal jurisdiction involving online contacts to ensure that a defendant is not haled into court simply because the defendant owns or operates a website that is accessible in the forum state, even if that site is “interactive.”

Even if interactivity mattered, it was unclear how any interactivity of Real Action’s website affected the alleged trademark infringement. Real Action posted a notice (not interactive) on its website; that notice allegedly infringed Advanced Tactical’s trademark. But whether the notice amounted to infringement had nothing to do with interactivity.

The court observed having an “interactive website” should not subject a defendant up to personal jurisdiction in every spot on the planet where that interactive web-site is accessible. To hold otherwise would offend traditional notions of fair play and substantial justice.

The court of appeals remanded the case with instructions to vacate the judgment and dismiss the complaint for lack of personal jurisdiction.

In an earlier case, BE2 LLC v Nikolay Ivanov, 642 F.3d 555 (7th Cir. 2011), an online matchmaking service sued another for trademark infringement. The issue on appeal was whether the defendant’s Internet activity made him susceptible to personal jurisdiction in Illinois for claims arising from that activity.

A federal court sitting in Illinois could exercise jurisdiction over Ivanov only if authorized both by Illinois law and by the United States Constitution. The Illinois long-arm statute permits its courts to exercise personal jurisdiction on any basis permitted by the constitutions of both Illinois and the United States.

The inquiry was whether Ivanov purposely exploited the Illinois market. This “purposeful availment” requirement ensures that a defendant will not be sued in a jurisdiction solely as a result of random, fortuitous, or attenuated contacts or of the unilateral activity of another party or a third person.

The record did not show that Ivanov deliberately targeted or exploited the Illinois market. All that BE2 submitted regarding Ivanov’s activity related to Illinois was an Internet printout showing that 20 persons who listed Illinois addresses had at some point created free dating profiles on be2.net.

The appellate court failed to see evidence of interactions between Ivanov and the be2.net members with Illinois addresses. The court remanded the case with instructions to vacate the judgment and dismiss the complaint for lack of personal jurisdiction.

In Tile Unlimited, Inc. v. Blanke Corp., 2014 WL 2609189 (N.D. Ill. 2014), Tile Unlimited, Inc. filed a class action products liability lawsuit against, Virginia Tile, Inc., Blanke Corp. (“Blanke USA”), Blanke GmbH (“Blanke Germany”), and Interplast Kunststoff, GmbH (“Interplast”).

Blanke Germany and Interplast moved to dismiss. With respect to the evidence presented regarding Blanke Germany’s website—its design and the fact that Blanke Germany’s website had a link to Blanke USA’s website—the court noted that the Seventh Circuit had only recently rejected a contention that a website alone, even one that is “interactive” in the forum State, can satisfy the requirement for “adequate in-state contacts.” Advanced Tactical v. Real Action Paintball, Inc., 2014 WL 1849269, at *6 (citing to 7th Cir. May 9, 2014).

No evidence established that Blanke Germany’s website was “interactive,” that Blanke Germany had used the website to contact people in Illinois, or that anyone in Illinois had even accessed or visited the website. Accordingly, Tile Unlimited’s reliance on the website evidence did not support its contention regarding purposeful availment of doing business in Illinois.

Similarly, Tile Unlimited’s argument that Virginia Tile’s website listed two Illinois showrooms and warehouses, and had Blanke Corporation as a manufacturer whose products it distributed in Illinois, was irrelevant. First, a third party’s activities—here, Virginia Tile’s—are not considered when assessing whether a particular defendant’s contacts are sufficient.

No evidence established that Blanke Germany had any role in the content provided on Virginia Tile’s website. In fact, Blanke Germany was not even listed on the website.

Second, Tile Unlimited provided Virginia Tile’s website information from January 15, 2014, the date counsel “last visited” the website. Whatever information was on the website in 2014 had no bearing on Blanke Germany’s contacts with Illinois in 2008 when Tile Unlimited allegedly purchased Uni-Mat from Virginia Tile and when the product was installed.

In Telemedicine Solutions LLC v. Woundright Technologies, LLC, 2014 WL 1020936 (N.D. Ill. 2014), Telemedicine Solutions LLC and Defendant WoundRight Technologies, LLC sold electronic systems and products aimed at medical practitioners in the wound care field. Telemedicine’s system is called WoundRounds; Defendant’s was called WoundRight. In a twelve-count amended complaint, Telemedicine alleged that WoundRight had infringed and diluted Telemedicine’s trademark; engaged in unfair competition, cyberpiracy, and deceptive trade practices; disparaged and defamed Telemedicine; and tortiously interfered with Plaintiff’s prospective economic advantage. WoundRight moved to dismiss Plaintiff’s amended complaint for lack of personal jurisdiction.

The court accepted as true the factual allegations relevant to jurisdiction in the amended complaint, and drew all reasonable inferences in its favor. To the extent that WoundRight had submitted affidavits opposing jurisdiction or contradicting Telemedicine’s allegations, however, Telemedicine had to go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction.

WoundRight’s “WoundRight” electronic application (“app”) is intended for use on mobile devices, and is available from third-party websites that can be accessed from woundrightapp.com. WoundRight’s website can be accessed by customers anywhere in the United States.

WoundRight (like Telemedicine) maintains a presence on the Internet beyond its website. WoundRight uses social media, including Facebook and Twitter, to communicate with potential customers throughout the United States. WoundRight also uses social media channels to interact with individuals in a number of states, though it had not specifically targeted either its Facebook postings, or Twitter tweets to consumers in Illinois.

WoundRight at some point purchased a Google AdWords ad that appeared as the top result when a user searched Google for the term “woundrounds.” The text- only ad included a link to WoundRight’s website and read, “Considering WoundRounds? - Don’t waste your time[.] Try the latest wound care app for free!”

WoundRights’s alleged contacts within Illinois occurred almost exclusively via the Internet. The district court pointed out that the Seventh Circuit long has been hesitant to fashion a special jurisdictional test for Internet-based cases, and has concluded that using a separate test for Internet-based contacts would be inappropriate because the traditional minimum contacts analysis remains up to this more modern task.

Here, WoundRight maintained a website, used social media, attended industry conferences, and ran a Google ad. Telemedicine contended that these activities subjected WoundRight to personal jurisdiction in Illinois because it intentionally:

  1. used Telemedicine’s trade name and trademark as a search keyword in the Google ad with the intention of diverting Plaintiffs customers and potential customers to its own website;
  2. defamed Telemedicine and its product in the Google ad by suggesting that Telemedicine’s product is a waste of time;
  3. disparaged Telemedicine’s goods and/or services in the Google ad by indicating that they are a waste of time;
  4. adopted and used a confusingly similar name to Telemedicine’s trade name and trademark and misappropriated the goodwill associated with them; and
  5. attempted to create actual confusion to deceive customers, consumers, industry personnel, and the general public as to the source of WoundRight’s goods and/or services and their affiliation or connection with Telemedicine’s.

According to the court, these five alleged acts essentially collapsed into two actions on WoundRight’s part: running the Google ad and using the name and mark “WoundRight” across several platforms. The court looked to two earlier Seventh Circuit cases.

In uBid, Inc. v. The GoDaddy Group, LLC, 623 F.3d 421, 427 (7th Cir. 2010), which involved allegations of cybersquatting and trademark infringement, the court found the defendant’s actual contacts with Illinois met the constitutional standard for minimum contacts.

The court emphasized that plaintiffs seeking to establish personal jurisdiction on the basis of Internet contacts must still prove that the defendant had constitutionally sufficient contacts with the forum and that the defendant’s contacts were temporally and substantively related to the lawsuit. Without that showing, the mere fact that the defendant allegedly caused harm by conducting business or advertising over the Internet is not adequate to establish jurisdiction in the plaintiff’s chosen forum state.

In Mobile Anesthesiologists Chicago, LLC v. Anesthesia Associates of Houston Metroplex, P.A., 623 F.3d 440 (7th Cir. 2010), an anesthesiology business based in Chicago registered and used the website www.mobileanesthesiologists.com, and owned and used the federally registered trademark MOBILE ANESTHESIOLOGISTS. The defendant, a one-man anesthesiology practice based in Houston, Texas, registered the domain name www.mobileanestheia.com and provided anesthesiology services in the Houston area. After the defendant failed to respond to the plaintiff’s cease-and-desist letter, the plaintiff sued in Illinois under the federal anti-cybersquatting statute. The court found no personal jurisdiction.

The proper focus of the ‘minimum contacts’ inquiry in intentional-tort cases is the relationship among the defendant, the forum, and the litigation. That relationship was tenuous at best here. Telemedicine alleged that WoundRight intentionally used Telemedicine’s trade name and mark in a Google ad, thereby infringing on Telemedicine’s trademark, defaming and disparaging Telemedicine, and interfering with Telemedicine’s business. This was enough to satisfy the first element of the “express aiming” test. Telemedicine’s allegations failed to satisfy the second and third elements, however. Following the lead of the Seventh Circuit, the Court treated these two elements together.

The content of WoundRight’s Google ad had nothing to do with Illinois, and Telemedicine had not alleged that the ad was specifically aimed at Illinois, or even viewed by customers or potential customers in Illinois. The only connection between WoundRight’s allegedly tortious ad and Illinois was Telemedicine’s location there. The same is true of WoundRight’s use of the allegedly infringing and confusing “WoundRights” mark. The plaintiff cannot be the only link between the defendant and the forum, something more is required; mere injury to a forum resident is not a sufficient connection to the forum.

None of WoundRights’s alleged contacts - its website, Facebook page, Twitter feed, and conference-based marketing efforts - were targeted or aimed at Illinois, or prompted any more than happenstance interactions with Illinois residents or businesses. WoundRight had not distributed its product in Illinois, and it had not expressly sought to do so. Its affidavits demonstrated that it had not exploited or benefited from the Illinois market in any measurable way, a point that Telemedicine’s amended complaint implicitly conceded. This made Telemedicine more like the defendant anesthesiologist in Mobile Anesthesiologists, or the defendant CEO in BE2 than the defendant in uBid. The latter purposely exploited and benefited substantially from the Illinois market, whereas the former simply had incidental, de minimis, and constitutionally inadequate Internet contacts with Illinois. On the facts of the case, the court granted in part WoundRight’s motion to dismiss for lack of personal jurisdiction.

Conclusion.

While the law continues to develop, in the Seventh Circuit, more is required to establish personal jurisdiction than an interactive website or the use of social media.

· Michael R. Lied
· Howard & Howard Attorneys PLLC
· One Technology Plaza, 211 Fulton Street, Suite 600, Peoria, IL 61602
· (309) 999-6311
· MLied@howardandhoward.com

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