Trying to figure out whether a suit can be brought in one's home state can be a key factor in whether a company has the resources or the will to bring a case at all.  Obtaining jurisdiction in one's home state can also often be a substantial factor influencing the outcome of the case and, especially, encouraging settlement from out-of-state parties who will have to pursue the case in another state.  A recent New Jersey District Court reviewed the Third Circuit standards applied to address this issue.

In Piano Wellness, LLC v. Williams (D. N.J. Dec. 21, 2001), Plaintiff, Piano Wellness (located in New Jersey), alleged that Defendant, Williams adopted the KEYBOARDWELLNESS.COM trademark infringing Piano Wellness' registered trademarks PIANO WELLNESS SEMINAR and KEYBOARD WELLNESS SEMINAR as well as its common law marks PIANO WELLNESS and KEYBOARDWELLNESS.  Williams, a citizen of Georgia, argued that the New Jersey court did not have jurisdiction over her since her website was "passive" in that it acted primarily as a bill board, she had no employees in New Jersey and never conducted business through the website in New Jersey.  However, the owner of the Plaintiff and the Defendants had prior business dealings with each other in New Jersey that ended in 2008.

The Three-Prong Test.  In determining whether a trademark owner can pursue an alleged infringer in the owner's home state, the courts must determine whether there is either "general" or "specific" jurisdiction over the alleged infringer.  In analyzing this case, the Court quickly found that it did not have general jurisdiction since the Defendant's general contacts with the State of New Jersey had not been recent.

Figuring out whether specific jurisdiction exists is, however, a little more involved.  In the Third Circuit, the courts apply a three part test as follows:

1.  Whether the Defendant purposefully directed its activities at the State of New Jersey;
2.  Whether the litigation arises out of or relates to at least one of those activities; and
3.  If the answers to the first two questions are "yes," then whether the exercise of jurisdiction "comports with fair play and substantial justice."

Passive Website Not Enough.  In this case, the Defendant's website was passive.  No portion of it was interactive.  While the website was, of course, accessible to New Jersey residents, the Defendant did not do anything to encourage New Jersey residents to visit the website and there was no evidence that any New Jersey residents had, in fact, visited the website.  As the Court stated, the "mere operation of a passive website, which could be accessed worldwide, is not in itself sufficient to demonstrate that Defendant purposefully directed an act toward New Jersey."  So based on the passive website alone, the first prong of the three part test would not have been satisfied.

Cease and Desist Letters Not Enough.  However, the passive website alone was not the only contact that the Defendant had with New Jersey.  According to the decision, the Defendant had allegedly sent threatening letters to the Plaintiff in New Jersey.  Nonetheless, the Court found that there was no evidence that the subject matter of those letters related to the trademarks in this case.  Moreover, the court found that the sending of a cease and desist letter is not, by itself, sufficient to obtain specific jurisdiction.

But in twist worth of a paperback novel, the Court found that there was sufficient basis for personal jurisdiction.  The Court concluded that the Defendant's active involvement in business in New Jersey with the Plaintiff prior to 2008 was sufficient for specific jurisdiction even if it was insufficient for the purposes of exercising general jurisdiction.

Having satisfied the first prong of the test, the Court next considered whether the Defendant's pre-2008 activities related to the Plaintiff's claims in this case.  According to the decision, the Defendant had started the KEYBOARDWELLNESS.COM business back in 2005 to engaged in a business similar to the joint business previously conducted by the Defendant and Plaintiff together.  This was enough for the Court to conclude that the Plaintiff's claims were related to the prior activities of the Defendant which were directed at New Jersey.

Fair Play & Substantial Justice Factors.  Finally, under the last prong of the test, the Court had to evaluate whether its exercise of jurisdiction over this case would "offend traditional notions of fair play and substantial justice."'  The Court enumerated the following factors that are considered in evaluating this standard:

1. The burden on the Defendant;
2. The forum state's interest in adjudicating the dispute;
3. The Plaintiff's interest in obtaining the most efficient resolution of controversies;
4. The interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and
5. The shared interest of the several States in "furthering fundamental substantive social policies."

Lets face it, for most people, this is not a standard that is easily understood or applied.  This makes it not terribly helpful to business people trying to evaluate what to do when faced with a potential out-of-state infringer.  How, for example, is a business person supposed to figure out whether it will "further fundamental substantive social policy" when deciding how to arrange his or her affairs?  Fortunately, however, the standard is accompanied by a default rule that makes it a little easier to apply.  That rule is this:

1.  If minimum contacts are sufficient to otherwise justify jurisdiction (i.e., if the first two prongs of the three prong test are satisfied), then jurisdiction will be denied only in rare cases; and
2.  It is the Defendant's burden to make a compelling case that the Court's exercise of jurisdiction would be unreasonable.

In this case, the Defendant was unable to overcome this burden and the Court found that it had specific jurisdiction over the Defendant.  Thus, Williams, the Georgia resident would have to defend against the case in New Jersey.

Key Things to Remember.  Some key things to remember from this case are:

1.  The mere operation of a passive website accessible worldwide will not, in and of itself, subject the operator to jurisdiction in a state where the website is accessible;

2.  The mere sending of cease and desist letters are also not enough to subject the sender to jurisdiction in the home state of the recipient.