Zippo Mfg. Co. v. Zippo Dot Com

Brief Fact Summary.

California internet company is sued in Pennsylvania for trademark infringement.

Synopsis of Rule of Law.

A court can exercise personal jurisdiction over a nonresident defendant, even if the defendant’s only activity in the forum state is internet based, if the defendant is shown to have intentionally conducted business with forum state residents.

Facts.

Defendant Zippo.com, a California based company, offered paid subscriptions to its online news content. People would sign up on the site and then be given a password. Defendant Zippo.com had no physical locations or any other place of business in Pennsylvania. The only connection Defendant Zippo.com had to Pennsylvania was that its website was accessible to state residents. 3,000 of Defendant Zippo.com’s total 140,000 subscribers lived in Pennsylvania and it contracted with seven internet service providers to allow Pennsylvania users access to its online content. Plaintiff Zippo Mfg. Co., a Pennsylvania company that sold tobacco lighters, brought suit against Defendant Zippo.com for federal and state trademark law infringement based on Defendant’s use of the word “Zippo”.

Issue.

Can a court exercise personal jurisdiction over a nonresident defendant if the defendant’s only activity in the forum state occurs via the internet?

Held.

Yes, a court can exercise personal jurisdiction over a nonresident defendant if the defendant’s internet based activity in the forum state shows intentional effort to conduct business with state residents. Defendant Zippo.com’s motion to dismiss denied.

Discussion.

1. A sliding scale is used to determine whether a defendant’s commercial based activities are sufficient to establish personal jurisdiction.
2. Sliding scale falls in line with the three-prong test governing specific personal jurisdiction over a nonresident defendant, stating that a court has personal jurisdiction if (1) the defendant has sufficient minimum contacts with the forum state, (2) the suit arises from those contacts, (3) the exercise of personal jurisdiction is reasonable.
3. Reasoning behind this test is that if a defendant does business in a form state they can expect to be sued in that state
4. In this case of internet activity, proper exercise of personal jurisdiction is directly proportional to the nature and quality of the defendant’s commercial activity.
5. At one end personal jurisdiction is proper if the defendant has contracts with the forum state’s residents and knowingly and repeatedly sends data to them.
6. At the other end of the scale, personal jurisdiction is not proper if the defendant runs a passive website that only provides information to site users.
7. Interactive websites that allow users to provide their information to the site’s host fall on the middle of the scale and personal jurisdiction depends on (1) the commercial nature of the information exchange and (2) the site’s level of interactivity.
8. The reasoning for the sliding scale approach is similar to that of the three-prong test used to determine specific jurisdiction.
9. Defendant Zippo.com had contracts with 3,000 residents that required them to electronically provide data to those residents.
10. Defendant Zippo.com processed information before issuing passwords, thus showing it was aware it had Pennsylvania users.
11. Defendant Zippo.com also had contracts with internet providers in the state to allow users in Pennsylvania to have access to its content.
12. The activity of Defendant Zippo.com amounts to doing business in Pennsylvania, falling on the side of the scale where the exercise of personal jurisdiction is clearly proper.