TY INC. V. CLARK (2000 U.S. Dist. LEXIS 383)

Case Number: 99 C 5532
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION
2000 U.S. Dist. LEXIS 383
January 13, 2000, Decided

   JUDGES: David H. Coar, United States District Judge.

   OPINIONBY: David H. Coar

   For the following reasons, plaintiff Ty Inc.'s action for trademark infringement, unfair competition, trademark
   dilution, common law trademark infringement, consumer fraud and deceptive business and trade practices,
   against defendants Max Clark and Expedient I.T. Solutions Ltd., is dismissed without prejudice because of lack
   of personal jurisdiction.

   Background

   The plaintiff, Ty Inc. ("plaintiff" or "Ty") is a Delaware corporation with its principal place of business in
   Westmont, Illinois. (Complaint P 1). Ty is the creator of the world famous plush stuffed toys named "Beanie
   Babies." Ty markets these Beanie Babies throughout the world and sells them through authorized dealers.
   (Complaint P 6). Since their introduction in 1994, Beanie Babies have become extremely  [*2]  popular, with
   sales over one billion dollars. (Complaint PP 6, 9). Ty has obtained a federal registration from the United States
   Patent and Trademark Office for the marks "Ty" (Reg. Nos. 1,722,141 and 2,118,114) and "Beanie Babies"
   (Reg. No. 1,049,196). (Complaint P 7).

   One aspect of Ty's marketing strategy for Beanie Babies and related products is Ty's web site on the Internet,
   which contains the domain names, "www.beaniebabies.com" and "www.ty.com." (Complaint P 8).

   One of the defendants, Expedient I.T. Solutions Ltd. ("EIS") is a private English corporation with its principal
   place of business in Cheshire, England. (Complaint P 2). Max Clark ("Clark"), an individual who also resides in
   Cheshire, England, has the primary responsibility for the control, management, operation and maintenance of
   the affairs of EIS (jointly referred to as "defendants"). (Complaint P 3). EIS and Clark acquired a registration
   for the Internet domain name "beaniebabiesuk.com" through Network Solutions, Inc. ("NSI"). n1 (Complaint
   P11). Through this domain name, the defendants established an Internet web site with the URL
   "http://www.beaniebabiesuk.com." This Internet web site is accessible to Internet  [*3]  users in Illinois and
   throughout the world. (Complaint P 12).
 
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   n1 Network Solutions, Inc. has contracted with the National Science Foundation to provide registration
   services for all Internet domain names. Once a domain name is registered to one user, it may not be used by
   another.
 
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   The defendants' Internet web site "beaniebabiesuk.com" is hosted by the Internet service provider, Simple
   Network Communications, Inc. ("SimpleNet"), a California corporation located in San Diego. Internet users
   seeking access to the "beaniebabiesuk.com" web site have been directed to two domain name servers
   operated by SimpleNet in San Diego, California. (Complaint P 14). Therefore, one could argue, the
   "beaniebabies.com" web site is located in the State of California. (Id.).

   On the "beaniebabiesuk.com" web site, the defendants offer for sale, among other things, the majority of Ty's
   Beanie Babies toy products. (Complaint P 5). The defendants display images of Ty's Beanie Babies toys on the
   web site. (Complaint P 16). The defendants  [*4]  also market and offer for sale on the web site a variety of
   British products, such as British candies, British baskets filled with teas and crackers, British foods and
   preserves, and chine tea cups and tea pots. (Complaint P 15).

   Ty alleges that the defendants have solicited orders for Beanie Babies toy products and have represented that
   they accept United States currency for payment. (Complaint P 17). On the web site, the defendants provide a
   price list of all the Beanie Babie models they offer. (Pl. Ex. B). An icon on the web site also allows consumers
   to click on an icon to send e-mail messages to the defendants to obtain specific information about any
   product on the web site. (Pl. Ex. B). However, a closer examination of the web site reveals that the
   defendants do not take orders over the web site itself. Instead, consumers must print out a order form on the
   web site and then either fax, telephone, or send their order to ESI. (Pl's Ex. B).

   Ty brings a six-count complaint against the defendants, alleging trademark infringement, unfair competition,
   trademark dilution, common law trademark infringement, Illinois consumer fraud and deceptive business
   practices, and Illinois uniform  [*5]  deceptive trade practices. (Complaint PP 19 - 45). The court requested
   that the plaintiff brief the court on the issues regarding venue.

   Analysis

   The plaintiff begins its argument by citing the Federal Venue Statute,  28 U.S.C. § 1391(b), which provides:

 
        A civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as
        otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if
        all defendants reside in the same State; (2) a judicial district in which a substantial part of the
        events or omissions giving rise to the claim occurred, or a substantial part of property that is the
        subject of the action is situated, or (3) a judicial district in which any defendant may be found, if
        there is no district in which the action may otherwise be brought.

   The plaintiff argues that venue in the Northern District of Illinois is appropriate for this action, pursuant to 28
   U.S.C. § 1391(b)(2), because a substantial part of the events or omissions giving rise to the plaintiff's claims
   occurred in this District and a substantial part of property that is the subject  [*6]  of this action--Ty's
   trademarks--is situated in this District. (Pl's Mem., p. 3). However, in the plaintiff's argument for venue, the
   plaintiff assumes that this court has personal jurisdiction over the defendants. (Pl's Mem., p. 3). As a review of
   the case law will show, this is not an assumption the plaintiff can make.

    As there is no federal statute governing personal jurisdiction in this case, this court has authority to exercise
   personal jurisdiction as conferred by state law. Fed.R.Civ.P. 4(e). The extent to which the court may exercise
   that authority is governed by the Due Process Clause of the Fourteenth Amendment of the United States
   Constitution. Kulko v. Superior Court of California, 436 U.S. 84, 91, 98 S. Ct. 1690, 1696, 56 L. Ed. 2d 132
   (1978).

    The State of Illinois' long-arm jurisdiction statute is codified under 735 Ill. Comp. Stat. 5/2-209. In particular,
   the statute covers individuals or corporations who transact any business within Illinois, commit a tortious act
   within Illinois, or do business within Illinois. 735 Ill. Comp. Stat. 5/2-209(a)(1), (a)(2), (b)(4). It seems that
   the plaintiff is arguing that the defendants, through the use of the web  [*7]  site "www.beaniebabiesuk.com,"
   transact business within Illinois and have committed a tortious act.

   However, there are constitutional limitations on the exercise of personal jurisdiction, depending upon whether
   general or specific jurisdiction over a non-resident defendant is sought. Mink v. AAAA Development LLC, 190
   F.3d 333, 335-36 (5th Cir. 1999); Panavision International, L.P. v. Toeppen, 141 F.3d 1316, 1319 (9th Cir.
   1998); Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 416 (9th Cir. 1997). General jurisdiction allows 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. Helicopteros Nacionales
   de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16, 104 S. Ct. 1868, 1872-73, 80 L. Ed. 2d 404 (1984). Specific
   jurisdiction allows 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, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945).  [*8]
   Mink, 190 F.3d at 336.

   A significant number of Circuit who have addressed the issue of personal jurisdiction and Internet sites have
   relied on the three-category "sliding scale" model developed by the District Court in the Western District of
   Pennsylvania in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D.Penn., 1997). See,
   Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir. 1999); Mink, 190 F.3d at 336
   (5th Cir. 1999); Cybersell, 130 F.3d at 418-419 (9th Cir. 1997); Molnlycke Health Care AB v. Dumex Medical
   Surgical Products Ltd., 64 F. Supp. 2d 448, 451 (E.D.Penn. 1999). In Zippo, the court found that "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." Zippo, 952 F. Supp. 1119 at
   1124. The court presented the "sliding scale" as follows:

 
        At one end of the spectrum are situations where a defendant clearly does business over the
        Internet. If the defendant enters into  [*9]  contracts with residents of a foreign jurisdiction that
        involve the knowing and repeated transmission of computer files over the Internet, personal
        jurisdiction is proper. At the opposite end are situations where a defendant has simply posted
        information on an Internet Web site which is accessible to users in foreign jurisdictions. A passive
        Web site that does little more than make information available to those who are interested in it is
        not grounds for the exercise of personal jurisdiction. The middle ground is occupied by interactive
        Web sites 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 Web site. Zippo, 952 F. Supp. at 1124
        (citations omitted).

   The present case falls in the "middle ground" of the sliding scale model of Zippo. The defendants in the present
   case do not run a completely passive web site, for it is possible for consumers to e-mail the defendants
   questions about products and to receive information about placing orders, etc. However, at the same time,
   the defendants  [*10]  do not clearly do business over their web site, for they do not take orders nor enter
   into contracts over the web site. In fact, the defendants make it extremely clear on their web site that they
   do not conduct on-line transactions. (See Pl. Ex. B, "Section 3: Payment Arrangements"). Instead, the
   defendants have consumers print out an order form and either fax, telephone, or send their orders through
   traditional mail to the defendants' offices in Great Britain. (See Pl. Ex. Be, "Section 1: How to Order," "Beanie
   Baby Airmail Form").

   The Fifth Circuit, in an extremely similar case, found that personal jurisdiction could not be exercised over the
   defendant through its web site. In Mink v. AAAA Development, a copyright infringement case, the plaintiff, an
   individual in Texas, argued for personal jurisdiction over the defendant, a Vermont corporation, based upon the
   defendant's web site. The Fifth Circuit, using the Zippo sliding scale analysis, found that personal jurisdiction
   could not be exercised over the Vermont corporation for two reasons. First, the only exchange of information
   over the web site was informational e-mails between consumers and the company. Second, the web  [*11]
   site did not allow consumers to order or purchase products or services on-line. In fact, consumers were
   instructed by the web site to complete an order form and submit it by either fax or traditional mail. Mink, 190
   F.3d at 337. The Fifth Circuit found these activities were not enough to exercise personal jurisdiction, for
   there was no evidence that the defendant conducted business over the Internet by engaging in business
   transactions with forum residents or by entering into contracts over the Internet. Id. The present case is the
   exact same situation. n2
 
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   n2 While Mink was a copyright infringement case and the present case is a trademark case, courts have found
   that simply registering someone else's trademark as a domain name and posting a web site is not sufficient to
   subject a party to jurisdiction in another state. Instead, there must be "something more" to demonstrate that
   the defendants directed their activity toward the forum state. Panavision, 141 F.3d at 1322 (9th Cir. 1998);
   Cybersell, 130 F.3d at 418 (9th Cir. 1997). As the above discussion demonstrates, the defendants in the
   present situation have not done "something more" to direct their activity toward Illinois.
 
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   This court finds that personal jurisdiction over the defendants based upon the presence of their web site is
   not appropriate. Therefore, this case is dismissed without prejudice. n3
 
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   n3 In CompuServe, Inc. v. Patterson, the Sixth Circuit held that a Texas resident who had advertised his
   product through a computer information service located in Ohio was subject to personal jurisdiction in Ohio
   because the defendant had taken direct action to create that commercial connection with Ohio. 89 F.3d 1257,
   1264 (6th Cir. 1996). Therefore, one could argue in the present case that personal jurisdiction could be
   exercised over defendants in the Southern District of California, for the defendants contracted with SimpleNet,
   based in San Diego, California, to host their Internet web site. Thus, the defendants' web site is located in
   San Diego, California. (Complaint P 14).
 
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   Conclusion

   For the foregoing reasons, plaintiff Ty Inc.'s action for trademark infringement, unfair competition, trademark
   dilution,  [*13]  common law trademark infringement, consumer fraud and deceptive business and trade
   practices, against defendants Max Clark and Expedient I.T. Solutions Ltd., is dismissed without prejudice
   because of lack of personal jurisdiction.

   Enter:

   David H. Coar

   United States District Judge
 
   Dated: JAN 13 2000

   JUDGMENT IN A CIVIL CASE
 
   Decision by Court. This action came to trial or hearing before the Court. The issues have been tried or heard
   and a decision has been rendered.
 
   IT IS HEREBY ORDERED AND ADJUDGED that this action is dismissed without prejudice for lack of personal
   jurisdiction. This case is closed.
 
   Date: 1/13/2000