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Saper Law Secures Dismissal of Case in Guinness World Records Limited versus World Records Academy, scores win for Internet Businesses.
By Saper Law | October 24, 2009
When Guinness World Records Limited, publishers of The Guinness Book of World Records, sued a competitor for trademark infringement, that competitor, World Records Academy, LLC, enlisted the help of Saper Law Offices to defend the suit. Quickly, Saper Law filed a motion to dismiss for lack of personal jurisdiction, and after supplementary filings on the issue, Saper Law won dismissal of the suit. In so doing, World Records Academy earned an interesting legal victory when the Court determined that email solicitations sent to Illinois residents, resulting in just three Illinois sales, were not sufficient grounds on which to base personal jurisdiction. For a more detailed explanation of the case, please keep reading below…On October 20, 2009, Saper Law secured the dismissal of a lawsuit filed against its client, World Records Academy, by Guinness World Records Limited. The suit by the well-known records book publisher had alleged trademark infringement under the Lanham Act, among a number of other federal and state claims, against a small competitor.
The facts of the case presented a unique twist to the traditional Zippo test[1] used by the 7th Circuit (and many other jurisdictions) to determine whether personal jurisdiction may be based on a defendant’s operation of a website accessible within the forum. Using this test, a defendant’s website is classified as either “active,” “interactive,” or “passive.”
Personal jurisdiction is proper if it is based on the operation of an “active” website, where commercial transactions take place directly through a company’s website – for example, Amazon.com and Overstock.com are both “active” websites. However, personal jurisdiction cannot be based on the operation of a “passive” website, which merely posts information about a company’s products or services for the general public. A company’s website that provides its location and phone number, for example, is a “passive” website.
The middle, or “interactive,” classification is a hybrid of the previous two categories, and is used for websites where a visitor is able to have some type of interaction with the host website, such as contacting the company directly through the website and therefore facilitating communication regarding the company’s products with a potential customer. Personal jurisdiction may or may not be proper based upon an “interactive” website, depending upon the level of activity between a visitor to the site and the host. (The greater the amount of commercial activity conducted via a company’s website, the more likely it is that personal jurisdiction is proper.)
The twist in this case, however, dealt not solely with World Records Academy’s website, but with their email solicitations, sent outside of the company’s website, that reached Illinois residents and produced three sales.
Saper Law argued first, that the company’s website was passive, because no commercial communications took place directly through the website, but rather via email accounts outside of the website. Second, it was argued that World Records Academy’s emails to Illinois residents simply could not serve as a basis for personal jurisdiction in the forum because World Records Academy did not have the “minimum contacts” with Illinois as required by law.[2]
While it was true that that the email solicitations produced three sales in Illinois, those three sales accounted for just 1% of World Records Academy’s gross U.S. sales. Moreover, the alleged injuries Guinness had claimed as a result of trademark infringement were wholly unrelated to these three sales in Illinois. It was a stretch to say that World Records Academy, a Delaware corporation based in Romania, could anticipate being brought into court in Illinois for trademark infringement claim not even related to those sales.
Judge Milton Shadur agreed with these arguments. Differentiating the e-mail solicitations made by World Records Academy from that of an actual door-to-door salesman’s pitch, the Court held that World Records Academy’s electronic solicitations were simply not enough to subject it to jurisdiction in the state:
There is, however, an important difference – evidenced here – between [] a hypothetical salesman, who operates on a continuing basis within the forum but generates very few sales (perhaps a reflection of his poor salesmanship or of the lack of quality of his company’s wares), and [World Record] Academy’s comparably minimal sales results derived solely from its electronic penetration of the forum market.
The Court also stated that the Northern District of Illinois was “truly a forum non conveniens” to World Records Academy, a company incorporated in Delaware and based outside the country:
For the issues posed by this litigation…to be litigated fairly, the forum ought to be one in which the parties have at least a comparable…opportunity to do effective battle. That certainly does not appear to apply to the Northern District of Illinois…
Finally, while not addressing the merits of Guinness’s trademark claims, the Court did provide a bit of insight to its position on the claims:
Guinness may assertedly possess powerful trademarks, but whether those can extend its ability to monopolize the words “world records” – words that regularly appear on sports pages and elsewhere – is, at the least, highly questionable.
The dismissal marks a victory for internet-only based companies who now have a clearer picture of what activities can and cannot subject them to personal jurisdiction for a lawsuit in a given state. Now, more than ever, it is important for business owners and their attorneys to become familiar with the terminology and laws used in jurisdictional disputes based on Internet contacts, such as this one.
For more information on the issues presented by this case, or to retain Saper Law to represent your business, contact Saper Law at: 312.527.4100 or email dsaper at saperlaw.com.
[1] Zippo Manuf. Co. v. Zippo Dot Com, 952 F. Supp. 1119 (W.D. Penn. 1997)
[2] Richter v. Instar Enters. Int’l, Inc., 594 F. Supp. 2d 1000 (N.D.Ill. 2009)
Topics: Internet Law, News |
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