August 3, 2016
A recent ruling shows how easy it can be for a company that markets its services via a website to find itself a defendant in a United States federal court. In a trademark infringement case brought over competing claims to the “LifeAlert” trademark, a federal judge ruled on December 29, 2008, that the Canadian defendant could be sued in a California federal court. (fn1) This was despite the fact that the defendant, which marketed living will products and services over the Internet, had no physical presence in California and had never completed any transactions with a California resident via its website. (fn2)
The standard rules for determining whether a court has jurisdiction over a website operator
In general, a court can only exercise jurisdiction over a defendant, if the defendant has the requisite “minimum” level of “contacts” with the particular state in which the court sits. (fn3) Foreign or out-of-state website operators may never have any physical contacts with the state in question. So in cases involving website operators, judges instead use a “sliding scale” analysis, and look at the nature and extent of the commercial activity that the defendant conducts over the Internet with the state where the court sits. (fn4)
At one end of this sliding scale are passive websites, that only make information available to those who are interested in it. Such websites cannot be sued in every state that information from the site is accessed — but may have to be sued in their home state or country. At the other end of the scale are interactive websites through which the defendant knowingly conducts regular business with the state in question. These clearly can justify a court in that state’s exercise of jurisdiction. (fn5) In the LifeAlert case, because the defendant had not engaged in commercial transactions with anyone in California, under these rules, the court found that an exercise of jurisdiction over the defendant would have been inappropriate.
The broader jurisdictional rules applied to foreign defendants
Instead, the court in the LifeAlert case found that jurisdiction was appropriate by resorting to two lesser-known rules. First, the judge applied a rule that effectively only applies to foreign defendants — Federal Rule of Procedure 4(k)(2). Under this rule, a federal court can assert jurisdiction over a defendant if: (i) the case involves a cause of action based on federal law; (ii) no other state court of general jurisdiction in the U.S. has jurisdiction over the defendant, and (iii) the judge finds that the defendant has sufficient nationwide contacts with the U.S.