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NEOMEDIA TECHNOLOGIES, INC. v. AIRCLIC

April 15, 2004.

NEOMEDIA TECHNOLOGIES, INC., a Delaware corporation, Plaintiff,
v.
AIRCLIC, INC., a Delaware corporation; SCANBUY INC., a New York corporation; and LSCAN TECHNOLOGIES, INC., a Delaware corporation, DEFENDANTS



The opinion of the court was delivered by: CHARLES KOCORAS, District Judge

MEMORANDUM OPINION

This matter comes before the court on Defendants AirClic, Inc.'s ("AirClic") and Scanbuy, Inc.'s ("Scanbuy") motions to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(2) and (3), or in the alternative to transfer the action. For the reasons set forth below, the motions to dismiss are granted.

BACKGROUND

  Because this is a motion to dismiss, we initially accept all well pleaded facts and allegations in the complaint as true and construe all inferences in favor of the Plaintiff. Thompson v. Illinois Dep't of Prof l Regulation. 300 F.3d 750, 753 (7th Cir. 2002). However, since personal jurisdiction is a ground for dismissal, we may consider affidavits from the parties. Turnock v. Cope, 816 F.3d 332, 333 (7th Cir. 1987). We will resolve factual disputes in the pleadings in favor of the Plaintiff, but take as true those facts propounded by the Defendants' affidavits that are unrefuted by the Plaintiff. RAR, Inc. v. Turner Diesel Ltd., 107 F.3d 1272, 1275 (7th Cir. 1997).

  Plaintiff NeoMedia Technologies, Inc. ("NeoMedia") is a Delaware corporation with a place of business in Lisle, Illinois. NeoMedia is in the business of providing electronic services that, inter alia, allow information concerning physical objects and documents to be accessed over the Internet by scanning bar-codes affixed to the particular document or object. NeoMedia owns four patents relating to this bar-code scanning process. AirClic is a Delaware corporation with its principal place of business in Newtown, Pennsylvania. Scanbuy is a Delaware corporation with its principal place of business in New York City. Both AirClic and Scanbuy offer services and products that allow information to be accessed over the Internet through the scanning of bar-codes. On January 26, 2004, NeoMedia filed a complaint in this court contending that AirClic, Scanbuy, and a third defendant*fn1 infringed on its patents.

  In its complaint, NeoMedia bases its jurisdictional claims on allegations that AirClic and Scanbuy are registered to transact business in Illinois, do transact business in Illinois and this district, and have committed patent infringement within this district. After reviewing affidavits submitted by AirClic and Scanbuy, it appears that their connections to Illinois are significantly less robust than as asserted in NeoMedia's complaint. Neither corporation is licensed or registered in, nor has any offices, customers, facilities, or assets in Illinois. AirClic and Scanbuy have not sold products to Illinois customers, solicited business here, or conducted commercial activities in the state. NeoMedia cannot point to a specific act of infringement within Illinois by either defendant.

  This does not mean that the connections between AirClic, Scanbuy and Illinois are nonexistent. Both corporations have websites that allow Illinois users to electronically submit contact information and later receive information about their products and services. Scanbuy's website contains a hyperlink to a firm that allegedly sold an infringing product to an Illinois resident. At the time the lawsuit was filed, Scanbuy's website listed that its Vice President for Business Development was based in Illinois. AirClic has strategic partnerships with Illinois corporations, has attended trade shows in Chicago, and had an employee living in Illinois.

  AirClic and Scanbuy now move to dismiss NeoMedia's complaint on for lack of personal jurisdiction and improper venue. In the alternative, they request that we transfer the case to other venues. LEGAL STANDARD

  "The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits." Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990) (quoting Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.2d 583, 586 (7th Cir. 1989)). A complaint need only specify "the bare minimum facts necessary to put the defendant on notice of the claim so that he can file an answer." Higgs v. Carver. 286 F.3d 437, 439 (7th Cir. 2002) (citing Beanstalk Group. Inc. v. AM General Corp., 283 F.3d 856, 863 (7th Cir. 2002)). Dismissal is proper only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson. 355 U.S. 41, 45-46 (1957). With these principles in mind, we now address the motion before us.

  DISCUSSION

  Because this is a patent infringement case, we apply Federal Circuit law to determine whether personal jurisdiction may be exercised over a defendant. Hildebrand v. Steck Mfg. Co., Inc., 279 F.3d 1351, 1354 (Fed. Cir. 2002). To survive a motion to dismiss, a plaintiff need only make a prima facie showing that the defendants are subject to personal jurisdiction. Electronics For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003). Determining if a court can exercise personal jurisdiction over a nonresident defendant entails two inquiries: whether the forum state's "long-arm" statute permits service of process and whether the assertion of jurisdiction would be inconsistent with due process. Electronics. 340 F.3d at 349. The Illinois "long-arm" statute, 735 ILCS 5/2-209(c), permits Illinois courts to exercise personal jurisdiction over a defendant on any basis allowed under the due process clauses of the federal and Illinois Constitutions. Central States. Southeast and Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 939 (7th Cir. 2000). While the two constitutions do not necessarily contain the same guarantees of due process, Rollins v. Ellwood, 141 Ill.2d 244 (Ill. 1990), the Seventh Circuit has repeatedly suggested that "there is no operative difference between the limits imposed by the Illinois Constitution and the federal limitations on personal jurisdiction." Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 715 (7th Cir. 2002).

  The federal test for determining personal jurisdiction begins with the now familiar requirement that the defendant must have "purposefully established minimum contacts within the forum state," Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985), "such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington. 326 U.S. 310, 316 (1946) (citation omitted). Under this "minimum contacts" test, a defendant may be subject to either specific or general jurisdiction. LSI Indus., Inc. v. Hubbell Lighting. Inc., 232 F.3d 1369, 1375 (Fed. Cir. 2000). General jurisdiction arises when a defendant maintains "continuous and systematic" contacts with the forum state even when the cause of action has no relation to those contacts. Id. (citing Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984)).*fn2 Specific jurisdiction "arises out of ` or "relates to" the cause of action even if those contacts are "isolated and sporadic." LSI Indus. at 1375 (citing Burger King at 472-473). Establishing specific jurisdiction requires the plaintiff to demonstrate that the defendant "should reasonably anticipate being haled into court [in the forum State]," Burger King at 474 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)), because through "some act" the defendant has "purposefully availed itself of the privilege of conducting activities" there. Burger King at 475 (quoting Hanson v. Denekia, 357 U.S. 235, 253 (1958)). In addition, the assertion of specific jurisdiction over the defendant must be "reasonable and fair". HollyAnne Corp. v. TFT, Inc., 199 F.3d 1304, 1307 (Fed. Cir. 1999). Because NeoMedia's primary arguments for jurisdiction are based on AirClic's and Scanbuy's websites, we will first examine the relationship between a defendant's Internet activity and personal jurisdiction. Courts in this district have espoused a "sliding scale" approach, first formulated in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1123-24 (W.D.Pa. 1997), that classifies particular Internet activity into one of three categories. See Infosys Inc. v. Billingnetwork.com, Inc., 2003 WL 22012687 (N.D. Ill. 2003); Berthold Types Limited v. European Mikrograf Corp., 102 F. Supp.2d 928 (N.D. Ill. 2000); Ty Inc. v. Clark, 2000 WL 51816 (N.D. Ill. 2000). On one end of the Zippo spectrum is the "active" website, where the defendant clearly transacts business over the Internet through its website, such as entering contracts with the user for the sale of goods (Amazon.com is a well known example). Courts "can appropriately exercise personal jurisdiction over those defendants who fall into [this] category by actively conducting business on the Internet." Berthold at 932. At the opposite end of the Zippo scale is the "passive" website, one in which a defendant has posted information on the Internet, but does not facilitate further online communication or interaction. Courts cannot exercise personal jurisdiction over defendants in this category "who simply operate passive web sites that merely provide information or advertisements without more," Id. at 933. There exists the potential for jurisdiction in the "middle ground" or "hybrid" category, which is occupied by interactive websites where the user can exchange information with the defendant operator. Zippo at 1124. "In these cases, the exercise of jurisdiction is determined by examining the interactivity and commercial nature of the exchange of information that occurs on the [website.]" Id. The parties are in agreement that AirClic's and Scanbuy's websites belong in this middle category. However, because the defendants' websites contain different features, their impact (as well as each defendant's other relevant contact with Illinois) on personal jurisdiction will be analyzed separately below.

  Before examining each defendant's website and susceptibility to jurisdiction in Illinois, it should be noted that courts in this district have used the Zippo framework for determining general jurisdiction (Infosys), specific jurisdiction (Berthold), or both (Ty). However, in reviewing Northern District cases involving "middle ground" websites, Judge Zagel has remarked that he found "no case where general jurisdiction was conferred on the basis of an interactive website in the absence of non-website factors evidencing intent for a particular product or website to reach a particular state." Infosys at *4.*fn3 Because all websites could be said to continuously and systematically contact every state-or for that matter any country-by their natural accessability over the Internet, Judge Zagel's observation suggests that in the context ...


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