April 28, 2011
A recent decision of the U.S. Court of Appeals for the Seventh Circuit gives further guidance on establishing personal jurisdiction in Illinois by virtue of Internet websites, particularly in Lanham Act cases. The case is be2 LLC v. Ivanov, No.10-2980.
The plaintiffs, be2 LLC and its parent company be2 Holding, A.G., operate an Internet matchmaking service. Plaintiff be2 LLC brought suit for trademark infringement in the Northern District of Illinois against Nikolay Ivanov, a resident of New Jersey and the alleged co-founder and CEO of a website operating under the domain name of be2.net. When Ivanov did not respond to the complaint or appear at a status hearing, the court entered default judgment and awarded damages. Following entry of the final default judgment, Ivanov appeared through counsel and filed a motion to vacate the judgment based on a lack of personal jurisdiction. The district court found that Ivanov’s testimony on the motion was not credible, which "undercut dramatically" the contention of lack of sufficient contacts with Illinois. As a result, the court denied the motion. Ivanov subsequently appealed to the Seventh Circuit.
On appeal, the court performed a "minimum contacts" analysis under the Supreme Court's decision in International Shoe Co. v. Washington. Under the "purposeful availment" inquiry, the court reviewed Ivanov's sufficiency of contacts with Illinois by determining whether "Ivanov purposely exploited the Illinois market."
The court held that owning or operating a website that is accessible in Illinois is not alone sufficient to establish purposeful availment. Plaintiffs established that twenty people with Illinois addresses created profiles on the be2.net website, but even this was not sufficient to establish purposeful availment of the Illinois forum. To avail himself of the privilege of doing business in the state, the defendant must go beyond simply operating an accessible website, and must target or exploit the market in that state. The court found twenty to be a "miniscule" number of registrants, insufficient to establish that Ivanov "exploited" the Illinois market. As a result, the court reversed the judgment of the district court, and remanded with instructions to dismiss the case for lack of personal jurisdiction.
The be2 decision is instructive for litigants seeking to establish or avoid personal jurisdiction in Lanham Act and other cases that involve alleged liability via web presence.
For more information, please contact Fitch Even partner Joseph Nabor, the author of this alert.