The Software IP Report
E.D. Va. Asserts Personal Jurisdiction Over Foreign Web Site Providers
By Charles Bieneman
Categories: Patent Civil Procedure, The Software IP Report
Courts sometimes assert personal jurisdiction over foreign defendants who did not specifically target the jurisdiction when establishing a website accessible from within it, and who may have conducted only a relatively miniscule amount of business in the jurisdiction. In a recent example, a Virginia court held that it had personal jurisdiction over two European corporations and a Swiss citizen operating an adult entertainment website having 16 registered users in Virginia out of a total of 1.8 million. Bright Imperial Ltd. v. RT Mediasolutions s.r.o., No. 1:11-cv-935 (E.D. Va. May 18, 2012).
The plaintiff brought anti-cybersquatting, trademark infringement, and other federal causes of action, as well as state law claims, against the defendants. After initially denying the defendants’ motion to dismiss for lack of personal jurisdiction, the court reconsidered the motion following jurisdictional discovery.
Virginia’s long-arm statute was “intended to permit jurisdiction whenever the Constitution would do so.” Therefore, the court turned to the “minimum contacts” analysis under which defendants who had “purposefully availed” themselves of a forum could be subject to personal jurisdiction. For the Internet context, the Fourth Circuit has adopted the “sliding scale” test of Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997). Under that test, as adopted and modified in ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707 (4th Cir. 2002):
a State may, consistent with due process, exercise judicial power over a person outside of the State when that person (1) directs electronic activity into the State, (2) with the manifested intent of engaging in business or other interactions within the State, and (3) that activity creates, in a person within the State, a potential cause of action cognizable in the State’s courts.
The court found that the first prong of the test was satisfied because the defendants’ website had been accessed in Virginia, and the third prong was satisfied because potential causes of action had arisen from the website being accessed in Virginia. Thus, the court focused on whether the defendants had exhibited “the manifested intent” to do business in Virginia.
The court acknowledged that 16 users conducting 56 transactions constituted a relatively low volume of business relative to the defendants’ website’s overall usage. However, the court thought that the numbers in absolute terms were not insignificant. Further, the defendants maintained an ongoing relationship with registered users, including storing content for a user once the user had paid for it, and sending regular e-mails in English. Although it was “certainly a close call,” based on “the number and nature of contacts” the plaintiffs had succeeded in establishing personal jurisdiction by a preponderance of the evidence.
Further, the court found that even if personal jurisdiction were improper in Virginia, a basis for personal jurisdiction in the United States lay in Federal Rule of Civil Procedure 4(k)(2), which provides that:
For a claim that arises under federal law, serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant if:
(A) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction; and
(B) exercising jurisdiction is consistent with the United States Constitution and laws.
Thus, if there were no jurisdiction in Virginia, the court could consider whether the defendants had sufficient minimum contacts with the United States as a whole in order to establish personal jurisdiction. Defendants’ website had 577 users, and a total of 2,002 transactions, in the United States States. The website allowed users to upload their own video, and provided pages in English; even though the only currency expressed was Euros, users could easily find online conversion services. The website’s terms and conditions were only in German, but this was not likely to deter users from accessing its content. Therefore, even though the website did not “focus . . . on the United States, this inquiry alone cannot prevent the exercise of jurisdiction when the Defendants so manifestly intended to profit from United States citizens and the website’s focus did not substantially impede the Defendants’ ability to profit from citizens in this forum.”
An individual defendant was also subject to the personal jurisdiction of the court. The claims against him were not based solely on his role as a corporate officer. The evidence showed that he personally registered the website address and directed infringing activities. He could not be immune from jurisdiction just because his contacts with Virginia were ostensibly on behalf of a corporation. Alternatively, the court noted that “Virginia law permits veil-piercing when an individual is actually an alter ego of a corporation.” Thus, the individual was subject to personal jurisdiction either because he personally committed torts in Virginia, or as an alter ego of the defendant corporations.
In the age of the Internet, the arm of the law is long indeed.