uBID, INC. v. GODADDY GROUP, INC. No. 09-3927.
623 F.3d 421 (2010)
uBID, INC., Plaintiff-Appellant, v. The GODADDY GROUP, INC., et al., Defendants-Appellees.
United States Court of Appeals, Seventh Circuit.
Decided September 29, 2010.
Tonia Ouellette Klausner (argued), Wilson, Sonsini, Goodrich & Rosati, New York, NY, for Defendants-Appellees.
Before FLAUM, MANION, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge.
Plaintiff uBID, Inc. is a Chicago-based company that auctions the excess inventory of manufacturers and retailers over the Internet. It brought suit in Illinois against The GoDaddy Group, Inc., which operates the well-known domain name registration site GoDaddy.com. In its complaint, uBID alleged that GoDaddy violated the Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d), by intentionally registering domain names that are confusingly similar to uBID's trademarks and domain names for the purpose of profiting from uBID's marks and exploiting web surfers' confusion by selling advertising for those confusingly similar websites. The district court dismissed the case for lack of personal jurisdiction, holding that GoDaddy, which is headquartered in Arizona, lacked sufficient contacts with Illinois to be sued there. See uBID, Inc. v. GoDaddy Group, Inc.,
Factual and Procedural Background
At this early stage in the litigation, and without the benefit of an evidentiary hearing, the bears only the burden of making a prima facie case for personal jurisdiction. We take the's asserted facts as true
GoDaddy, which has offered registration services since 2000, has tried to restrict its physical presence to Arizona. Its computer servers, which handle most of the work of registering and maintaining the domains that GoDaddy's customers buy, are all located in Arizona. GoDaddy is incorporated and headquartered in Arizona, and the vast majority of its offices and employees are located in Arizona.
While GoDaddy has taken pains to limit its physical presence to Arizona, its virtual presence in the rest of the country cannot be ignored. GoDaddy has imprinted itself on the national consumer consciousness with a series of television advertisements featuring the "GoDaddy Girls"—celebrities who invite viewers to register a domain name at a low price. In recent years these ads have aired throughout the country with great frequency, including during the last six Super Bowl broadcasts. The company's advertising extends well beyond television. Potential customers who might step away from the television during GoDaddy's ads can still see the company's logo stamped on driver Danica Patrick's race car and golfer Anna Rawson's hat. In Illinois, GoDaddy has put up billboards in the home ballparks of the Chicago Cubs and White Sox, and fans who attend Chicago Bulls or Blackhawks games or races at the Chicagoland Speedway have been treated to GoDaddy ads as well.
This nationwide advertising campaign has paid dividends for GoDaddy from the Illinois market. In 2008, the company counted its Illinois customers in the hundreds of thousands, and those customers delivered many millions of dollars in revenue to GoDaddy that year. (GoDaddy asked that the exact numbers be kept confidential. The orders of magnitude are sufficient for our purposes.) There is no evidence that GoDaddy's business in Illinois has fallen off since then.
GoDaddy's customers, including those in Illinois, buy a variety of services. Some buy domain names and build websites under those domain names. Others buy domain names and do nothing with them, but allow GoDaddy and its partner, Google, to place ads on the websites (known as "parked pages") and to collect fees when visitors click on the ads. Still others buy domain names and pay GoDaddy a further fee, which allows the buyers themselves to take a share of the ad revenues from their parked pages (known as "cash parking").
According to uBID's complaint, some of GoDaddy's customers engage in a form of cybersquatting. They allegedly buy and park their domain names not to build websites there in the future, but rather to profit merely by owning them. These GoDaddy customers register domain names that are confusingly similar to existing domain names, and they hope either to sell the similar domain to the original site's owner for a premium or to generate fees from wayward web surfers who click on a link to their site and then click on ads, leading the advertisers to pay GoDaddy, Google, and the GoDaddy customer. According to uBID's allegations, GoDaddy also wants confused consumers to click on its customers' parked pages, instead of uBID's website, because more clicks on the confusingly-named parked pages mean more revenue for GoDaddy, too. Complaint ¶¶ 2, 20-25.
In its complaint, uBID alleges that this practice has harmed the value of its trademarks,
GoDaddy responded to uBID's suit with a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction. The district court granted GoDaddy's motion. The court rejected uBID's argument that GoDaddy was subject to both general and specific personal jurisdiction in Illinois. Defining GoDaddy's contacts with Illinois to include only the two Illinois-registered domain names listed in uBID's complaint, the court held that those contacts were "created at the initiative of Illinois residents" and could not be attributed to GoDaddy. Moreover, the court held, because GoDaddy enters into thousands of contracts with thousands of customers across the country, GoDaddy "should not reasonably expect" to be subject to personal jurisdiction in each of those customers' states.
In this federal question case where federal statutes do not authorize nationwide service of process, a federal court in Illinois may exercise personal jurisdiction over GoDaddy if it would be permitted to do so under the Illinois long-arm statute. See Fed.R.Civ.P. 4(k)(1)(A). A state's exercise of personal jurisdiction is also subject to the demands of the Fourteenth Amendment's due process clause. Because Illinois permits personal jurisdiction if it would be authorized by either the Illinois Constitution or the United States Constitution, the state statutory and federal constitutional requirements merge. See State of Illinois v. Hemi Group LLC, 622 F.3d at 756-57; Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir.2010), citing 735 Ill. Comp. Stat. 5/2-209(c).
Personal jurisdiction can be either general or specific, depending on the extent of the defendant's contacts with the forum state. If the defendant's contacts are so extensive that it is subject to general personal jurisdiction, then it can be sued in the forum state for any cause of action arising in any place. More limited contacts may subject the defendant only to specific personal jurisdiction, in which case the plaintiff must show that its claims against the defendant arise out of the defendant's constitutionally sufficient contacts with the state. In either case, the ultimate constitutional standard is whether the defendant had "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington,
I. General Jurisdiction
A defendant is subject to general jurisdiction when it has "continuous and systematic general business contacts" with the forum state. See Helicopteros Nacionales de Colombia, S.A. v. Hall,
GoDaddy's contacts with Illinois do not satisfy this standard. Although its contacts are extensive and deliberate, they are limited to the marketing and sale of registrations for Internet domain names, as well as contracts with many Illinois customers and the hosting of websites accessible from Illinois. It would be unfair to require GoDaddy to answer in Illinois for any conceivable claim that any conceivable plaintiff might have against it. See Tamburo, 601 F.3d at 701 (maintenance of public website is not sufficient, without more, to establish general jurisdiction). Imagine an Illinois visitor to GoDaddy's headquarters in Arizona who slipped, fell, and then sued for the injury, or a GoDaddy employee who worked in Arizona, was fired, moved to Illinois, and then sued for wrongful termination. There is no reason for GoDaddy to expect, as it goes about its business of selling domain names in Illinois, that it is thereby exposing itself to such lawsuits in Illinois. The district court correctly found that GoDaddy is not subject to general jurisdiction in Illinois.
II. Specific Jurisdiction
Though insufficient to support personal jurisdiction for all claims, a defendant's contacts with a state will often support jurisdiction for a claim that is sufficiently related to the defendant's activities in the state. The ultimate constitutional standard for the exercise of specific jurisdiction has been the same since the Supreme Court first abandoned strict territorial jurisdiction: is it fair and reasonable to call the defendant into the state's courts to answer the plaintiff's claim? See International Shoe, 326 U.S. at 317, 66 S.Ct. 154 (the demands of due process "may be met by such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there"); accord, Burger King Corp. v. Rudzewicz,
In applying this broad standard, the Supreme Court has found that the contacts supporting specific jurisdiction can take many different forms. See, e.g., International Shoe, 326 U.S. at 314-15, 66 S.Ct. 154 (defendant employed salesmen or agents in the forum state and shipped physical merchandise to forum state buyers); Burger King, 471 U.S. at 474-75, 105 S.Ct. 2174 (defendant did not physically enter the forum but "purposefully avail[ed]" itself of the benefit and protection of the forum state's laws by entering into long-term business franchise contract with resident of forum); Calder v. Jones,
A. Defendant's Contacts with Illinois
Because of GoDaddy's extensive marketing in Illinois and sales to Illinois customers, including two who allegedly cyber-squatted on domain names similar to uBID's, the Supreme Court's analysis of specific jurisdiction in Keeton v. Hustler Magazine, Inc.,
As in every personal jurisdiction case since International Shoe, the outcome in Keeton turned on whether the relationship between the plaintiff's claim and the defendant's contacts with the state made it fair to call the defendant into court there. The Supreme Court found that the magazine had "continuously and deliberately exploited the New Hampshire market" by regularly circulating its magazine to New Hampshire residents. Id. at 781, 104 S.Ct. 1473. The plaintiff's claim for libel arose "out of the very activity" the magazine was conducting in the state, a close enough relationship that it was reasonable to expect the magazine to answer the plaintiff's suit in that state. Id. at 779-80, 104 S.Ct. 1473. Because the magazine produced "a national publication aimed at a nationwide audience," there was "no unfairness in calling it to answer for the contents of that publication wherever a substantial number of copies are regularly sold and distributed." Id. at 781, 104 S.Ct. 1473.
The same reasoning applies here. GoDaddy has thoroughly, deliberately, and successfully exploited the Illinois market. Its attempt to portray itself either as a local Arizona outfit or as a mindless collection of servers is unconvincing. This is a company that, like the national magazine in Keeton, has conducted extensive national advertising and made significant national sales. GoDaddy has aired many television advertisements on national networks, including six straight years of Super Bowl ads. It has engaged in extensive venue advertising and celebrity and sports sponsorships. All of this marketing has 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. These contacts establish GoDaddy's minimum contacts with the state for claims sufficiently related to those contacts.
It is true that there is no evidence that GoDaddy specifically targets Illinois customers in its advertising. The same could have been said of the defendant in Keeton v. Hustler Magazine, and those arguments did not prevail. Instead, what mattered was that the magazine had purposefully directed its business activities toward New Hampshire just as it had toward all other states. See 465 U.S. at 774, 104 S.Ct. 1473 (describing district court's findings). Consistent with the reasoning of Keeton, it is easy to infer that GoDaddy's national marketing campaign is intended to reach as large an audience as possible, including the 13 million potential customers in the nation's fifth most populous state. In fact, we need not infer: there is evidence in this case that GoDaddy (or its agent) has placed physical ads in particular Illinois venues. The evidence shows that this marketing campaign has already created substantial business for GoDaddy in Illinois. There was no such evidence in the cases GoDaddy cites. See, e.g., Singletary v. B.R.X., Inc.,
No more persuasive is GoDaddy's argument that its sales to Illinois residents are automated transactions unilaterally initiated by those residents. GoDaddy tells us that its customers enter into most transactions without any human action on GoDaddy's end. But of course the customers who buy domain names from GoDaddy are not simply typing their credit card numbers into a web form and hoping they get something in return. GoDaddy itself set the system up this way. It cannot now point to its hundreds of thousands of customers in Illinois and tell us, "It was all their idea." See State of Illinois v. Hemi Group, 622 F.3d at 758-59 (misleading to describe internet sales as "unilateral" on part of customers where seller took significant steps both before and after sales). GoDaddy is aware that it earns many millions of dollars annually from Illinois customers, and it cannot be unhappy to have had such success in the state. Its contacts
Nor should GoDaddy's unusual business model complicate an otherwise straightforward case for sufficient minimum contacts. As Keeton v. Hustler shows, a typical business that operates on a national scale with GoDaddy's sales in Illinois, GoDaddy's customer base in Illinois, and GoDaddy's blanket of advertising in Illinois would unquestionably be subject to personal jurisdiction there for claims arising from its business activities that reach into the state. It would be reasonable for such a company to expect to be sued there. GoDaddy's way of doing business allows it to avoid the type of physical presence that makes these questions easier when dealing with non-Internet companies that operate on a similar scale. But the fact that GoDaddy can make millions of dollars and recruit hundreds of thousands of customers without the equivalent of International Shoe's sales representatives, Ford's dealerships, or Coca-Cola's distributors is not decisive under the flexible jurisdictional analysis that the Supreme Court has applied consistently. What matters is that GoDaddy purposefully availed itself of the Illinois market for its services through its deliberate and continuous exploitation of that market.
B. The Relationship Between Defendant's Contacts and Plaintiff's Claim
Mere minimum contacts, however, are not sufficient to establish specific personal jurisdiction. As the Supreme Court has emphasized, it is essential not only that the defendant have minimum contacts with the forum state but also that the plaintiff's claim against the defendant "arise out of or relate to" those contacts. Burger King, 471 U.S. at 472-73, 105 S.Ct. 2174, quoting Helicopteros Nacionales, 466 U.S. at 414, 104 S.Ct. 1868; Tamburo, 601 F.3d at 708. GoDaddy argues that all of its contacts with Illinois are irrelevant to the constitutional analysis because they are unrelated to uBID's lawsuit. This argument fails because it misunderstands the reason why due process requires that the claim and the contacts be related.
On this relationship, our opinion in RAR, Inc. v. Turner Diesel, Ltd.,
The Third Circuit's opinion in O'Connor v. Sandy Lane Hotel Co.,
On this understanding of relatedness, neither but-for causation nor proximate causation is a satisfactory guide. But-for causation would be "vastly overinclusive," haling defendants into court in the forum state even if they gained nothing from those contacts. The tacit quid pro quo would break down. See O'Connor, 496 F.3d at 322-23. On the other hand, requiring proximate causation between contacts and claim would exclude too many claims like the one in O'Connor, where the defendant's contacts with Pennsylvania proved little about the plaintiff's negligence claim, but undoubtedly gave the defendant fair warning that the very business it sought in Pennsylvania might injure a Pennsylvania resident. See id. at 323-24. The precise causal relationship between contacts and claim was not important; what was required was that the relationship be "intimate enough to keep the quid pro quo proportional and personal jurisdiction reasonably foreseeable." Id. at 323. The Third Circuit's approach follows carefully the Supreme Court's guidance on the question of relatedness. See International Shoe, 326 U.S. at 319, 66 S.Ct. 154 (identifying exchange of protection of laws of forum state for obligation to respond there, and authorizing jurisdiction where the obligations to respond "arise out of or are connected with the activities within the state"); Burger King, 471 U.S. at 475-76, 105 S.Ct. 2174. It is also consistent with our own precedent on this subject. See RAR, 107 F.3d at 1278 (rejecting "but-for" causation in contract case, and recognizing that the "line will not always be a bright one").
The relationship between GoDaddy's Illinois contacts and uBID's claims is close
The concept of a geographical nexus is harder to apply to cases like this one, where the alleged wrong can fairly be characterized as occurring anywhere the Internet is accessible. In other words, uBID has the same claim against GoDaddy whether the customer who registered < ubidd.com > or another similar domain name did so from Illinois, from Wyoming, or from China. One conclusion we might draw from this fact is that a physical geographical nexus is simply less important in cases where the alleged harm occurred over the Internet. Such a conclusion would not necessarily be inconsistent with due process. After all, the geographical relationship between claim and contacts is only one facet of the constitutional inquiry. The plaintiff must still prove that the defendant had constitutionally sufficient contacts with the forum and that the defendant's contacts were temporally and substantively related to the lawsuit. Without that showing, the mere fact that the defendant allegedly caused harm by conducting business or advertising over the Internet is not adequate to establish jurisdiction in the plaintiff's chosen forum state. See, e.g., GTE New Media Services Inc. v. BellSouth Corp.,
Due process does not require us to slice GoDaddy's alleged wrongdoing so finely. When customers go to GoDaddy.com and register for GoDaddy's parked page or cash parking services, they pay a fee with the expectation that they will get what they've paid for. At that point, GoDaddy is contractually obligated to commit the wrong alleged by uBID. Where GoDaddy chooses to locate the servers that complete the task is irrelevant. The claim brought by uBID in Illinois arises directly out of GoDaddy's registration of the infringing domain names bought by customers it has solicited in Illinois and many other states. The claim bears a sufficient relationship to GoDaddy's business activities in Illinois to expect GoDaddy to defend itself in Illinois without violating the due process clause.
C. A Final Look at Fairness
Before concluding the analysis, we must still satisfy ourselves that the exercise of specific jurisdiction over GoDaddy in Illinois would not offend traditional notions of "fair play and substantial justice." Burger King, 471 U.S. at 476, 105 S.Ct. 2174, quoting International Shoe, 326 U.S. at 320, 66 S.Ct. 154. The concerns that the Supreme Court has identified for this final inquiry are the burden on the defendant, the forum state's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, the interstate judicial system's interest in efficiently resolving controversies, and the shared interest of the states in furthering fundamental substantive social policies. See id.
Some of these concerns counsel in favor of allowing Illinois to exercise personal jurisdiction in this case; none point the other way. The burden of defending a lawsuit in Illinois is minimal for GoDaddy, a corporation with a broad enough reach to operate and market its services on a national scale. Though uBID is also a successful, sophisticated corporation, a finding that GoDaddy is not subject to personal jurisdiction in a forum it has so thoroughly exploited would create significant barriers to effective relief for similarly situated plaintiffs with more limited resources. We must also be mindful of Illinois's significant interest in providing a forum for its residents to seek relief when they suffer harm in Illinois from a wrong that occurred at least in part in Illinois. Along those lines, we do not view the presence of uBID's headquarters in Illinois as necessary to establish personal jurisdiction here, but we can agree with our concurring colleague at least to the extent that uBID's presence does not weaken an already-sufficient case for personal jurisdiction but actually strengthens the case for the fairness of jurisdiction in Illinois.
We share our concurring colleague's concern about adopting an overly expansive test of jurisdiction for internet-based commerce. See also State of Illinois v. Hemi Group, 622 F.3d at 760; Jennings v. AC Hydraulic A/S,
We recognize that our analysis here does not provide crisp, bright lines for district courts and litigants, but this is a field of law where the Supreme Court has repeatedly refused opportunities to draw such bright lines. See, e.g., Burger King, 471 U.S. at 486 & n. 29, 105 S.Ct. 2174 (standard of "`fair play and substantial justice' necessarily requires determinations `in which few answers will be written "in black and white. The greys are dominant and even among them the shades are innumerable."'"), quoting Kulko v. California Superior Court,
Accordingly, we REVERSE the district court's judgment dismissing the suit for lack of personal jurisdiction and REMAND for further proceedings.
MANION, Circuit Judge, concurring.
I agree with the court that personal jurisdiction in Illinois is proper. I write separately because under the facts of this case, I would apply a more limited formula for connecting GoDaddy's contacts in Illinois with uBID's claim. In my view, personal jurisdiction in Illinois is proper for the simple reason that uBID is headquartered in Illinois, and that is where GoDaddy has directed, and uBID will be affected by, the harm at issue.
This is a difficult case, in a difficult area of the law. Our case law centers on ambiguous tests and turns on varying facts that prevent courts and practitioners from discerning bright lines. Looking at the same set of cases with the same set of facts, reasonable minds can disagree about whether and how a certain combination of facts suffices to establish personal jurisdiction. This is such a case.
There are three contacts that tie GoDaddy to Illinois: one, its advertising at sporting events in Illinois; two, its website service contracts with hundreds of thousands of Illinois residents; and three, the advertising it places on "parked pages" with domain names that infringe on uBID's trademark. Following Keeton v. Hustler Magazine, Inc.,
The court's formula for connecting GoDaddy's contacts in Illinois with uBID's claim is, in my view, unnecessarily broad. uBID's claim is not that GoDaddy's conduct violates the Act when it merely registers an infringing domain name. In fact, such a claim would not be actionable under the Act, which limits liability to damages "for the registration or maintenance of a domain name" where there is "a showing of bad faith intent to profit from such registration or maintenance of the domain name." Id. § 1114(2)(D)(iii) (emphasis added). Rather, uBID claims that GoDaddy is acting as a cybersquatter or typosquatter, depending on what derivative of uBID's domain name is used. In this capacity it takes these infringing domain names, puts up a parked page, and on the parked pages places links and advertisements to other websites—advertisements that GoDaddy exclusively controls. Most of these links and advertisements are for uBID's competitors. For example, when someone mistakenly searches for uBID by typing "youbid," he is directed to a parked page covered with advertisements for uBID's competitors. When the person clicks on one of the advertisements, GoDaddy generates revenue for itself.
According to uBID, GoDaddy engages in a heightened form of cybersquatting, by trafficking these infringing domain names and placing advertising on them to generate revenue for itself. In this way, GoDaddy has monetized the infringing domain names and violated the Act. Complaint ¶ 32. According to uBID, GoDaddy's behavior has taken three forms: one, it has trafficked in these deceptive domain names, even when it knew they were identical or confusingly similar to uBID's protected and valuable marks; two, it has offered to sell or otherwise assign the deceptive domains for financial gain; and three, it has trafficked in and used these deceptive domain names to divert customers from uBID's website. Id. ¶¶ 41-43. In sum, GoDaddy is engaged in cybersquatting. Of course, GoDaddy denies all of this.
The problem with cybersquatting websites is well-documented. J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 25:77 (4th ed. 2010). These websites and domain names do not exist for a legitimate purpose. Instead, the owners wait for a company like uBID to buy the infringing domain name, and in the meantime GoDaddy as their licensee helps siphon customers away from uBID by drawing the typo-prone to uBID's competitors. Understood in this way, the claim uBID has against GoDaddy does not relate to GoDaddy's contracts with hundreds of thousands of Illinois residents, nor does it arise out of its advertising at sporting events. Instead, the claim centers on how GoDaddy's actions with these infringing domain names constitutes cybersquatting.
By viewing the claim this way, the Keeton analysis does not govern. Rather, the analysis from Calder v. Jones,
Using the analysis from Calder fits with the harm GoDaddy alleges and accords with the way we and other circuits have analyzed personal jurisdiction in these sorts of cases involving the internet.
Second, this intentional conduct is aimed at Illinois. uBID's claim is that GoDaddy is engaged in cybersquatting and typosquatting. Both activities are done around and in reference to a legitimate and valuable domain name. Cybersquatters register these domain names to force "the rightful owners of the marks to pay for the right to engage in electronic commerce under their own brand name." Virtual Works, Inc. v. Volkswagen of America,
Third, uBID's claim is that GoDaddy engaged in cybersquatting. If this is proven, these would not be random, fortuitous, or attenuated acts: rather, these are intentional, deliberate, and targeted acts against uBID. GoDaddy knew the harm was directed at Illinois: it knew that uBID, domiciled in Illinois, owned the UBID.com domain name, and it knew that these pages infringed on that name. What is more, it trafficked and profited from the domain names until uBID sought to buy them or stop them through the courts.
The fact that uBID is incorporated in Illinois and the natural and deliberate impact GoDaddy's actions will have on uBID is in Illinois distinguishes Illinois from every other state where GoDaddy simply advertises and has customers. And GoDaddy's intentional acts directed at uBID and their effect on uBID are what allow Illinois's long-arm statute to reach GoDaddy. See Lovelady, 544 F.3d at 1288; Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club Ltd. P'ship,
Again, this is not a well-developed area of the law, and reasonable minds can disagree on what facts are important, the way a harm should be framed, and the analysis to use. While I agree with much of the court's analysis, I write separately to emphasize that uBID is headquartered in Illinois, which is what I see as the critical link between GoDaddy's actions and finding it subject to personal jurisdiction in Illinois: given the nature of the complaint we should apply the analysis from Calder v. Jones.
For these reasons, I respectfully concur in the court's judgment.
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