Maritz, Inc. v. Cybergold, Inc.

Maritz v. Cybergold
	United States District Court for the Eastern District of Missouri, Eastern Division
Full case name	Maritz, Inc. v. Cybergold, Inc.
Date decided	August 19, 1996
Citations	947 F. Supp. 1328
Judge sitting	E. Richard Webber
Case holding
	The motion of defendant to dismiss for lack of personal jurisdiction and improper venue is DENIED
Keywords
	Personal jurisdiction, The Lanham Act, Trademark infringement, Long-arm jurisdiction

Last updated May 02, 2019

Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996),^[1] was a personal jurisdiction case in which the United States District Court for the Eastern District of Missouri ruled that operator of website, for which server was located in California, was subject to personal jurisdiction in Missouri under "commission of a tortious act" provision of Missouri's long-arm statute, §506.500 RSMo^[2]. The case was brought before the court by Marits, Inc. alleging that the Cybergold's use of mark for advertising internet site was a trademark infringement. Cybergold moved to dismiss the suit for lack of personal jurisdiction, but the court found that the operational nature of the Internet based service provided a connection for Cybergold to be sued in Missouri.

The United States District Court for the Eastern District of Missouri is a trial level federal district court based in St. Louis, Missouri, with jurisdiction over fifty counties in the eastern half of Missouri. The court is one of ninety-four district-level courts which make up the first tier of the U.S. federal judicial system. Judges of this court preside over civil and criminal trials on federal matters that originate within the borders of its jurisdiction. It is organized into three divisions, with court held in St. Louis, Hannibal, and Cape Girardeau.

A website or Web site is a collection of related network web resources, such as web pages, multimedia content, which are typically identified with a common domain name, and published on at least one web server. Notable examples are wikipedia.org, google.com, and amazon.com.

Personal jurisdiction is a court's jurisdiction over the parties to a lawsuit, as opposed to subject-matter jurisdiction, which is jurisdiction over the law and facts involved in the suit. If a court does not have personal jurisdiction over a party, its rulings or decrees cannot be enforced upon that party, except by comity; i.e., to the extent that the sovereign which has jurisdiction over the party allows the court to enforce them upon that party. A court that has personal jurisdiction has both the authority to rule on the law and facts of a suit and the power to enforce its decision upon a party to the suit. In some cases, territorial jurisdiction may also constrain a court's reach, such as preventing hearing of a case concerning events occurring on foreign territory between two citizens of the home jurisdiction.

Background

Factual background

Cybergold Inc., the defendant, was a California based corporation. The company created a website, www.cybergold.com, to promote its upcoming Internet service. The service consisted in maintain a mailing list of internet users who were willing to receive mailing in areas of their particular interest. Some of those users could be located in the state of Missouri. Cybergold provided to the users in its mail list an electronic mailbox and was planning forward advertisements for products and services that matched the users' interests to those electronic mailboxes. Cybergold business model considered to charge advertisers and to provide users with incentives to view the advertisements. At the time of the law suit, the service was not yet operational. The plaintiff asserted that Cybergold's website acted as a state-wide advertisement for CyberGold's forthcoming internet service and that through this website CyberGold was actively soliciting advertising customers from Missouri. Cybergold had no other contacts with the state of Missouri.^[1]

A defendant is a person accused of committing a crime in criminal prosecution or a person against whom some type of civil relief is being sought in a civil case.

Maritz, Inc., the plaintiff, was a Missouri based corporation. It offered an identical online service through its own website at www.goldmail.com. Maritz apparently announced its "GoldMail" online marketing services prior to Cybergold's operation of its competing website.^[1]

Maritz is a sales and marketing services company that designs and operates employee recognition and reward programs, sales channel incentive programs, and customer loyalty programs. It also plans corporate trade shows, meetings and events, and offers a customer experience technology platform.

A plaintiff is the party who initiates a lawsuit before a court. By doing so, the plaintiff seeks a legal remedy; if this search is successful, the court will issue judgment in favor of the plaintiff and make the appropriate court order. "Plaintiff" is the term used in civil cases in most English-speaking jurisdictions, the notable exception being England and Wales, where a plaintiff has, since the introduction of the Civil Procedure Rules in 1999, been known as a "claimant", but that term also has other meanings. In criminal cases, the prosecutor brings the case against the defendant, but the key complaining party is often called the "complainant".

Since Cybergold has set up its website, the website was accessed through internet users located in Missouri at least 311 times – 180 of the 311 times were by Maritz and its employees.^[1]

Proceeding background

Maritz brought the action before its home forum of Missouri alleging that California-based Cybergold was engaged in trademark infringement and unfair competition in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)^[3] by using the mark "CyberGold", which was confusingly similar to its mark "GoldMail" for identical online services. Cybergold filed a motion to dismiss for lack of personal jurisdiction and improper venue pursuant to the Federal Rule of Civil Procedure 12(b)(2).^[4]

Trademark infringement is a violation of the exclusive rights attached to a trademark without the authorization of the trademark owner or any licensees. Infringement may occur when one party, the "infringer", uses a trademark which is identical or confusingly similar to a trademark owned by another party, in relation to products or services which are identical or similar to the products or services which the registration covers. An owner of a trademark may commence civil legal proceedings against a party which infringes its registered trademark. In the United States, the Trademark Counterfeiting Act of 1984 criminalized the intentional trade in counterfeit goods and services.

Unfair competition in commercial law is a deceptive business practice that causes economic harm to other businesses or to consumers. It includes a number of areas of law involving acts by one competitor or group of competitors which harm another in the field, and which may give rise to criminal offenses and civil causes of action.

In trademark law, confusing similarity is a test used during the examination process to determine whether a trademark conflicts with another, earlier mark, and also in trademark infringement proceedings to determine whether the use of a mark infringes a registered trademark.

Issues

Whether the court of Missouri had personal jurisdiction on the basis that Cybergold's use of alleged mark on its online services, which can be reached by consumers in Missouri through Internet.

Holding

The court denied Cybergold's motion to dismiss for lack of personal jurisdiction and improper venue, finding that the Missouri Court had personal jurisdiction over the case.

Court's reasoning

Whether the Court can exercise personal jurisdiction over defendant requires a two-part inquiry. The Court first examines whether personal jurisdiction exists under Missouri's long-arm statute. Next, the Court must determine whether the exercise of personal jurisdiction is consistent with due process.^[1]

Missouri's long-arm statute

The Court ruled that the "commission of a tortious act" provision of Missouri's long-arm statute permitted jurisdiction over a defendant corporation where the sole basis for jurisdiction was an extraterritorial act of tortious interference with a contract which produced an effect in the State of Missouri. A violation of the Lanham Act is tortious in nature. The alleged activity had effect in Missouri as it caused economic injury to plaintiff. Thus, long-arm statute reaches defendant in this case.^[1]

Due process

The due process requirement can be justified if there is "minimum contacts" between the nonresident defendant and the forum state. The court applied five-part test^[1]:

the nature and quality of the contacts with the forum state – Although CyberGold characterized its activity as merely maintaining a "passive website," its intent was to reach all internet users, regardless of geographic location. CyberGold's website automatically and indiscriminately responded to each and every Internet user who accesses its website. CyberGold had consciously decided to transmit advertising information to all internet users, knowing that such information will be transmitted globally. CyberGold's contacts were of such a quality and nature, albeit a very new quality and nature for personal jurisdiction jurisprudence, that they favored the exercise of personal jurisdiction over defendant.
the quantity of those contacts – CyberGold had transmitted information regarding its services into Missouri approximately 131 times suggesting that it is purposefully availing itself of privilege of conducting activities in Missouri.
the relation of the cause of action to the contacts – the cause of action was the alleged plaintiff's injury that arose from the defendant use of its mark on its website.
the interest of the forum state in providing a forum for its residents – the State of Missouri had an interest in resolving this case and determining whether a Missouri corporation's trademark is being infringed in violation of a federal statute. The court reasoned that there was an interstate judicial system's interest in obtaining the most efficient resolution of controversies, and a shared interest of the several States in furthering fundamental substantive social policies.
the convenience of the parties – the defendant was not so burdened by defending itself in that forum under traditional notions of fair play and substantial justice.

Effect on internet advertising

If the Maritz court's reasoning is adopted by other U.S. courts, nonresident defendants could be pulled into any court in the United States to defend trademark suits simply because they maintained a promotional website that could be and actually was accessed by a resident of the forum. Thus, even if the nonresident corporation refused to pursue business opportunities within the forum and had no contact other than Internet hits on its website, it could nevertheless be subject to jurisdiction there. Moreover, widespread forum shopping would likely occur, as plaintiffs conceivably could search for the forum whose laws are most amenable to their case so long as that forum had Internet users who accessed the defendant's website.^[5]

Related Research Articles

Forum shopping is a colloquial term for the practice of litigants having their legal case heard in the court thought most likely to provide a favorable judgment. Some jurisdictions have, for example, become known as "plaintiff-friendly" and so have attracted litigation even when there is little or no connection between the legal issues and the jurisdiction in which they are to be litigated.

Trespass to chattels is a tort whereby the infringing party has intentionally interfered with another person's lawful possession of a chattel. The interference can be any physical contact with the chattel in a quantifiable way, or any dispossession of the chattel. As opposed to the greater wrong of conversion, trespass to chattels is argued to be actionable per se.

International Shoe Co. v. Washington, 326 U.S. 310 (1945), was a landmark decision of the Supreme Court of the United States in which the Court held that a party, particularly a corporation, may be subject to the jurisdiction of a state court if it has "minimum contacts" with that state. The ruling has important consequences for corporations involved in interstate commerce, their payments to state unemployment compensation funds, limits on the power of states imposed by the Due Process Clause of the Fourteenth Amendment, the sufficiency of service of process, and, especially, personal jurisdiction.

Long-arm jurisdiction is the ability of local courts to exercise jurisdiction over foreign defendants, whether on a statutory basis or through a court's inherent jurisdiction. This jurisdiction permits a court to hear a case against a defendant and enter a binding judgment against a defendant residing outside the jurisdiction concerned.

Ligue contre le racisme et l'antisémitisme et Union des étudiants juifs de France c. Yahoo! Inc. et Société Yahoo! France is a French court case decided by the Tribunal de grande instance of Paris in 2000. The case concerned the sale of memorabilia from the Nazi period by Internet auction and the application of national laws to the Internet. Some observers have claimed that the judgement creates a universal competence for French courts to decide Internet cases.

World-Wide Volkswagen Corp v. Woodson, 444 U.S. 286 (1980), is a United States Supreme Court case involving strict products liability, personal injury and various procedural issues and considerations. The 1980 opinion, written by Justice Byron White, is included in the first-year civil procedure curriculum at nearly every American law school for its focus on personal jurisdiction.

Personal jurisdiction in Internet cases refers to a growing set of judicial precedents in American courts where personal jurisdiction has been asserted upon defendants based solely on their Internet activities. Personal jurisdiction in American civil procedure law is premised on the notion that a defendant should not be subject to the decisions of a foreign or out of state court, without having "purposely availed" himself of the benefits that the forum state has to offer. Generally, the doctrine is grounded on two main principles: courts should protect defendants from the undue burden of facing litigation in an unlimited number of possibly remote jurisdictions, and courts should prevent states from infringing on the sovereignty of other states by limiting the circumstances under which defendants can be "haled" into court.

International litigation, sometimes called transnational litigation, is the practice of litigation in connection with disputes among businesses or individuals residing or based in different countries.

<i>Dudnikov v. Chalk & Vermilion Fine Arts, Inc.</i>

Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, was decided by the Tenth Circuit in January 2008. The Tenth Circuit overturned a dismissal granted by the District Court upon a motion to dismiss for lack of personal jurisdiction under FRCP12(b)(2). Dudnikov addresses the issues that arise regarding personal jurisdiction and the internet, applying standards set by the Supreme Court of the United States in a line of cases that progressively defined the doctrine and its scope in light of the Fourteenth Amendment.

In re DoubleClick Inc. Privacy Litigation, 154 F. Supp. 2d 497 ("DoubleClick"), had Internet users initiate proceedings against DoubleClick, alleging that DoubleClick's placement of web cookies on computer hard drives of Internet users who accessed DoubleClick-affiliated web sites constituted violations of three federal laws: The Stored Communications Act, the Wiretap Statute and the Computer Fraud and Abuse Act.

Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, was a decision by the United States District Court for the Western District of Pennsylvania in which the Court found personal jurisdiction over a defendant providing Internet services. The case is a landmark opinion regarding Internet jurisdiction, and it is one of the most frequently cited Cyberlaw opinions.

Cybersell, Inc. v. Cybersell, Inc. was a trademark infringement case based on the use of an internet service mark. The United States District Court for the District of Arizona was asked to review whether the allegedly infringing use of a service mark in a home page on the World Wide Web suffices for personal jurisdiction in the state where the holder of the mark has its principal place of business. The Cybersell holding illustrated that passive websites do not establish personal jurisdiction outside the state in which they are based.

Bensusan Restaurant Corp. v. King, 126 F.3d 25, is a 1997 United States Court of Appeals for the Second Circuit case that helped define the parameters of personal jurisdiction in the Internet context, specifically for passive websites that only advertise local services. The opinion, written by Judge Ellsworth Van Graafeiland, affirmed the United States District Court for the Southern District of New York's holding that defendant Richard B. King's Internet website did not satisfy New York's long-arm statute requirements for plaintiff Bensusan Restaurant Corporation to bring a trademark infringement suit in New York. The District Court's decision also likened creating a website to merely placing a product into the stream of commerce, and held that such an act was insufficient to satisfy due process and personal jurisdiction requirements.

Pavlovich v. Superior Court, 29 Cal. 4th 262, is a California Supreme Court case in which the court declined to find personal jurisdiction over a non-resident defendant who had no personal contacts with California. The Court found that the posting of a misappropriated trade secret on a Web site which could result in harm to California residents was not sufficient to show he had purposely availed himself of the forum state by expressly aiming his conduct at residents of California.

Penguin Group (USA) Inc. v. American Buddha, 640 F.3d 497, was a case in which United States Court of Appeals for the Second Circuit reversed the decision of the United States District Court for the Southern District of New York, which had granted American Buddha's motion to dismiss Penguin Group (USA) Inc. ("Penguin")'s copyright infringement action for lack of personal jurisdiction. The appellate court remanded the case for further proceedings.

Mavrix Photo, Inc. v. Brand Technologies, Inc., 647 F.3d 1218, is a case in American intellectual property law involving personal jurisdiction in the context of internet contacts.

Illinois v. Hemi Group, LLC, 622 F.3d 754, was a personal jurisdiction case in which the United States Court of Appeals for the Seventh Circuit affirmed the United States District Court for the Central District of Illinois' ruling finding personal jurisdiction based on Internet transactions. In the initial filing, the state of Illinois sued Hemi Group LLC (Hemi) for selling cigarettes to Illinois residents over the Internet in violation of state law and for failing to report those sales in violation of federal law. Hemi moved to dismiss the suit for lack of personal jurisdiction, but the district court found that the Internet transactions provided a basis for Hemi to be sued in Illinois.

Boschetto v. Hansing, 539 F.3d 1011 is a diversity jurisdiction case brought by California resident, Paul Boschetto ("Boschetto") against certain private corporations with their principal place of business in Wisconsin. The case involved the determination of the question whether the sale of an item via the internet consumer-to-consumer trading portal, eBay, by the defendants in Wisconsin to the plaintiff in California, was sufficient to confer personal jurisdiction over a non-resident defendant in the buyer's forum state. At the first instance, the United States District Court for the Northern District of California decided against Boschetto and held that a lone “eBay sale consummated with a California purchaser, was insufficient to establish jurisdiction over any of the defendants.” Boschetto appealed against the decision to the United States Court of Appeals for the Ninth Circuit. The appellate court affirmed the decision of the district court and denied relief to Boschetto. The Court became the first federal appellate court to address whether personal jurisdiction in a forum state could be established when an out-of-state resident makes use of an intermediary website accessible by forum-state citizens.

Hearst Corp. v. Goldberger was a case out of the U.S. District Court for the Southern District of New York in which the court developed a reasoned framework to determine the proper exercise of personal jurisdiction in cases involving activity in cyberspace. The court determined that it lacked jurisdiction over an out-of-state defendant whose website was accessible to New York residents.

References

1 2 3 4 5 6 7 Maritz, Inc. v. Cybergold, Inc., 947F. Supp.1328 (E.D. Mo. 1996). This article incorporates text from this source, which is in the public domain.
↑ "Missouri Long Arm" . Retrieved 6 April 2015.
↑ "Lanham Act" . Retrieved 6 April 2015.
↑ "Federal Rule of Civil Procedure 12" . Retrieved 6 April 2015.
↑ Epps, Brian K. (1997). "Recent Developments Recent Developments: Marits, Inc. v. CyberGold, Inc.: The Expansion of Personal Jurisdiction in the Modern Age of Internet Advertising". Georgia Law Review (Fall). Retrieved 6 April 2015.

External links

Text of Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996) is available from: CourtListener Google Scholar Justia
Tests for Personal Jurisdiction
Motion to Dismiss
Maritz Inc. v. Cybergold, Inc. – Summary prepared by Devashish Bharuka

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[opinion-1] 1 2 3 4 5 6 7 Maritz, Inc. v. Cybergold, Inc., 947F. Supp.1328 (E.D. Mo. 1996). This article incorporates text from this source, which is in the public domain.

[statue-2] "Missouri Long Arm" . Retrieved 6 April 2015.

[act-3] "Lanham Act" . Retrieved 6 April 2015.

[rule-4] "Federal Rule of Civil Procedure 12" . Retrieved 6 April 2015.

[article-5] Epps, Brian K. (1997). "Recent Developments Recent Developments: Marits, Inc. v. CyberGold, Inc.: The Expansion of Personal Jurisdiction in the Modern Age of Internet Advertising". Georgia Law Review (Fall). Retrieved 6 April 2015.