Zippo Manufacturing v. Zippo Dot Com – Information Technology Law

Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997).

Nature of the Case

In this landmark information technology law case, Zippo Dot Com (D) moved to dismiss Zippo Mfg. Co.’s (P) trademark infringement and dilution complaint for lack of personal jurisdiction and improper venue or, in the alternative, to transfer the case.

Facts

The plaintiff is a Pennsylvania corporation with its principal place of business in Bradford, Pennsylvania. The company manufactures ‘Zippo’ tobacco lighters.

The defendant is a California corporation with its principal place of business in Sunnyvale, California. It operates an internet website and news service and has obtained the exclusive right to use the domain names ‘zippo.com’, ‘zippo.net’ and ‘zipponews.com’. Defendant’s contacts with Pennsylvania have occurred almost exclusively through the internet.

The defendant’s advertising for its service to Pennsylvania residents involves posting information about its service on its website, which is accessible to Pennsylvania residents via the internet. Defendant has approximately 140,000 paying subscribers worldwide of which approximately two percent are Pennsylvania residents.

The trademark claim is for the defendant’s use of the word ‘Zippo’ in the domain names it holds, in numerous locations in its website, and in the heading of internet newsgroup messages posted by subscribers. When an internet user views or downloads a newsgroup message posted by a subscriber, the word ‘Zippo’ appears in the “Organization” section of the heading. Plaintiff claims that some of the messages contain adult oriented subject matter.

Issue

Is the likelihood that an exercise of personal jurisdiction will be deemed constitutional directly proportionate to the nature and quality of commercial activity the party conducts via the internet?

Holding and Rule of Law

Yes. The likelihood that an exercise of personal jurisdiction is constitutional is directly proportionate to the nature and quality of commercial activity the party conducts via the internet.

When a defendant raises the court’s lack of personal jurisdiction as a defense, the burden falls upon the plaintiff to come forward with sufficient facts to establish that jurisdiction is proper. The plaintiff meets this burden by making a prima facie showing of sufficient contacts between the defendant and the forum state.

Authority to exercise personal jurisdiction is conferred by state law and the extent to which a court may exercise that authority is governed by the Due Process Clause of the Fourteenth Amendment.

Pennsylvania’s long arm statute authorizes the court to exercise jurisdiction over non-resident defendants upon contracting to supply services or things within the state. The constitutional limitations on the exercise of personal jurisdiction differ depending upon whether a court seeks to exercise general or specific jurisdiction over a non-resident defendant.

General jurisdiction permits a court to exercise personal jurisdiction over a non-resident defendant for non-forum related activities when the defendant has engaged in systematic and continuous activities in the forum state. In the absence of general jurisdiction, specific jurisdiction permits a court to exercise personal jurisdiction over a non-resident defendant for forum-related activities where the relationship between the defendant and the forum falls within the ‘minimum contacts’ framework of International Shoe Co. v. Washington and its progeny.

A three-pronged test has emerged for determining whether the exercise of specific personal jurisdiction over a non-resident defendant is appropriate:

the defendant must have sufficient ‘minimum contacts’ with the forum state,
the claim asserted against the defendant must arise out of those contacts, and
the exercise of jurisdiction must be reasonable.

In this case the defendant contracted to supply internet news services to approximately 3,000 Pennsylvania residents and entered into agreements with seven internet access providers in Pennsylvania. Even if the defendant’s conduct did not satisfy a specific provision of the statute, we would nevertheless be authorized under Pennsylvania law to exercise jurisdiction to the fullest extent allowed under the Constitution of the United States.

The likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the internet.

A passive website that does little more than make information available to those who are interested in it is not grounds for the exercise personal jurisdiction. The middle ground is occupied by interactive websites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the website.

When an entity intentionally reaches beyond its boundaries to conduct business with foreign residents, the exercise of specific jurisdiction is proper. The defendant has not merely posted information on a website that is accessible to Pennsylvania residents who are connected to the internet. It has done more than create an interactive website through which it exchanges information with Pennsylvania residents in hopes of using that information for commercial gain later.

The defendant’s business constitutes purposeful availment of doing business in Pennsylvania. The company has done more than advertise on the internet in Pennsylvania. It has sold passwords to approximately 3,000 subscribers in Pennsylvania and entered into seven contracts with internet access providers to furnish its services to their customers in the state.

The defendant argues that its contacts with Pennsylvania residents are merely fortuitous because Pennsylvanians happened to find its website or heard about its news service elsewhere and decided to subscribe. This argument misconstrues the concept of fortuitous contacts. The defendant chose to process Pennsylvania residents’ applications and to assign them passwords. It knew the result of these contracts would be the transmission of electronic messages into Pennsylvania. The transmission of these files was entirely within its control.

When a defendant makes a conscious decision to conduct business with the residents of a forum state, it has clear notice that it is subject to suit there.

A cause of action for trademark infringement occurs where the passing off occurs. Trademark infringement is a tort-like injury and a substantial amount of the injury from the alleged infringement was likely to occur within the home state of the plaintiff. Both a significant amount of the alleged infringement and dilution and the resulting injury have occurred in Pennsylvania.

We disagree with the defendant’s contention that the exercise of jurisdiction would be unreasonable in this case. Pennsylvania has a strong interest in adjudicating disputes involving the alleged infringement of trademarks owned by resident corporations. The defendant consciously chose to conduct business in Pennsylvania, pursuing profits from the actions that are now in question. Due process is not a territorial shield to interstate obligations that have been voluntarily assumed.

Disposition

Judgment for plaintiff – personal jurisdiction over the defendant is valid.