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October 8, 2010Client Alert

The Seventh Circuit Finds Personal Jurisdiction Over Out-of-State Internet Company

Last week, the Seventh Circuit held that a company could be subject to suit outside of its home state even if its physical presence is almost entirely limited to that home state. uBid, Inc. ("uBid") filed suit against GoDaddy Group, Inc ("GoDaddy"), alleging a cybersquatting violation for intentionally registering domain names that were confusingly similar to uBid’s trademark and domain name. The district court dismissed the case, finding that GoDaddy was not subject to personal jurisdiction in Illinois. The Seventh Circuit reversed, finding that despite GoDaddy’s wholly physical presence in Arizona, "its virtual presence cannot be ignored," and that Illinois did have personal jurisdiction over GoDaddy.

The Seventh Circuit determined that GoDaddy did not meet the "demanding standard" of general jurisdiction because its contact in Illinois was limited to the marketing and sale of registration for Internet domain names, and "it would be unfair to require GoDaddy to answer in Illinois for any conceivable claim that any conceivable plaintiff might have against it," as allowed under general jurisdiction.

However, the Court did find that GoDaddy was subject to specific personal jurisdiction because its contacts and activities in Illinois were sufficiently related to the claim against it. The Court looked to GoDaddy’s extensive national advertising and its significant national sales. The Court suggested it was irrelevant that there were no Illinois-specific contacts because GoDaddy’s activities "successfully reached Illinois consumers, who have flocked to GoDaddy by the hundreds of thousands and have sent many millions of dollars to the company each year." The Court further noted that GoDaddy had in fact placed physical ads in Illinois venues, and its marketing campaign has created substantial Illinois business for GoDaddy.

The Court reasoned that "the contacts alleged in uBID’s complaint and the wrongs alleged in uBID’s complaint are so intimately related that GoDaddy cannot reasonably have been surprised to find itself sued in Illinois." The Court held that “due process is not violated when a defendant is called to account for the alleged consequence of its deliberate exploitation of the market in the forum state."

The Seventh Circuit’s decision has implications for any business that markets itself through a website – in other words, the majority of businesses in today’s global economy. The GoDaddy decision is another in a recent string of cases, see, e.g., the Second Circuit’s decision in Chloe v. Queen Bee of Beverly Hills, LLC, in which the court supported the exercise of personal jurisdiction over an out-of-state business based, in part, on the company’s use of the Internet and its boundless access to potential markets.

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