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Richter v. Instar Enterprises International

January 23, 2009

PAT RICHTER, PLAINTIFF,
v.
INSTAR ENTERPRISES INTERNATIONAL, INC., DEFENDANT.



The opinion of the court was delivered by: Frederick J. Kapala, District Judge

MEMORANDUM OPINION AND ORDER

On February 21, 2008, plaintiff, Pat Richter, filed a seven-count complaint against defendant, INSTAR Enterprises International, alleging that defendant reproduced, distributed and displayed plaintiff's artwork without permission in violation of the Copyright Act, 17 U.S.C. § 501. Plaintiff is an artist who has created numerous works of visual art for which she has obtained federal copyright registrations. Plaintiff alleges that defendant, a New Jersey corporation with its principal place of business in New Jersey, displayed and sold decals*fn1 of plaintiff's work through its interactive website. Plaintiff also alleges that defendant sells decals and designs to customers in Illinois through its website. On May 21, 2008, defendant filed a motion to dismiss for lack of personal jurisdiction and improper venue pursuant to Federal Rule of Civil Procedure 12(b). Fed. R. Civ. P. 12(b)(2)-(3).

I. BACKGROUND

In support of its motion, defendant offers the affidavit of Gary Rogers, the Vice President of INSTAR Enterprises. According to Rogers, defendant is a small company with four employees that does not have a place of business or agent in Illinois, and is not licensed to do business here. In 2007, defendant's total sales were approximately $900,000. Rogers avers that it is highly unlikely more than one tenth of one percent of defendant's business comes from Illinois. Rogers does not deny that at some point, plaintiff's designs were placed on defendant's website. According to Rogers, defendant obtained decals of plaintiff's works from a company called Tile Art, a licensee of plaintiff. On November 16, 2007, Rogers received a phone call from plaintiff's husband, David Richter, who told Rogers that he had seen several decals of plaintiff's work at a craft show at Arlington Racetrack, in Illinois, and did not believe defendant had the right to sell the decals. In response, Rogers removed the decals from the website that same day. Upon review of defendant's database, Rogers surmised that defendant had sold 239 decals of plaintiff's works, none of which was either billed to or shipped to Illinois. Rogers avers that the decals Richter saw at Arlington Racetrack were sold to a customer in Minnesota, who transferred them to a customer in Wisconsin, who attached them to furniture and brought them to Illinois.

In her response to defendant's motion, plaintiff has submitted David Richter's affidavit. Richter is the Vice President of Pat Richter Gallery, Inc. According to Mr. Richter, in early November 2007, he saw plaintiff's works on display and for sale at an art show at Arlington Racetrack, and learned that the decals of the works were purchased from defendant. Thereafter, Mr. Richter learned that unauthorized copies of plaintiff's work were also on display at craft shows in Villa Park, Illinois and Rockford, Illinois. The salespeople of these works informed Richter that they had received the decals in question from defendant. Richter then visited defendant's website, which he accessed from his computer in Boone County, Illinois. When he searched for plaintiff's work, he found no fewer than eight electronic image copies of plaintiff's works that defendant was offering for sale. Richter noted that defendant's website was fully interactive and allowed customers to purchase items, including plaintiff's works, from its website. Richter has seen works made from defendant's decals at half a dozen art and craft shows in the northern part of Illinois.

In its motion, defendant argues that this court lacks personal jurisdiction because defendant does not have a place of business or agent in Illinois, its sales to this state are de minimus, and its interactive website is not sufficient to confer jurisdiction. Plaintiff responds that personal jurisdiction is proper because defendant has contributed to acts of infringement within the state, and sold and offered products for sale in Illinois. Because the court finds it does not have personal jurisdiction over defendant, it does not proceed to consider defendant's arguments as to venue.

II. DISCUSSION

"[W]hen the district court rules on a defendant's motion to dismiss based on the submission of written materials, without the benefit of an evidentiary hearing, . . . the plaintiff need only make out a prima facie case of personal jurisdiction." Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003) (quotation marks omitted). This burden is not a heavy one. Rual Trade Ltd. v Viva Trade LLC, 549 F. Supp. 2d 1067, 1073 (E.D. Wis. 2008). "In evaluating whether the prima facie standard has been satisfied, the plaintiff 'is entitled to the resolution in its favor of all disputes concerning relevant facts presented in the record.'" Id. However, "the court accepts as true any facts contained in the defendants' affidavits that remain unrefuted by the plaintiffs." First Nat'l Bank v. El Camino Res., Ltd., 447 F. Supp. 2d 902, 905 (N.D. Ill. 2006) (quotation marks omitted).

In a federal question case, such as this one, personal jurisdiction has the reach set out in Federal Rule of Civil Procedure 4(k). Rule 4(k)(1) provides the district court with jurisdiction over the person of a defendant "who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located." Fed. R. Civ. P. 4(k)(1)(A). Rule 4(k)(2) further extends personal jurisdiction in federal question cases if the defendant is "not subject to jurisdiction in any state's courts of general jurisdiction" and "exercising jurisdiction is consistent with the United States Constitution and laws." Fed. R. Civ. P. 4(k)(2)(A)-(B). In this case, because defendant is subject to jurisdiction in the state courts of New Jersey,*fn2 Rule 4(k)(2) does not apply. Thus, in order for this court to have personal jurisdiction, defendant must be subject to the jurisdiction of a court of general jurisdiction in Illinois.

The Illinois long-arm statute, 735 ILCS 5/2-209, permits its courts to exercise jurisdiction on any basis permitted by the Illinois and United States Constitutions. Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 714 (7th Cir. 2002) (quotation marks omitted); see also 735 ILCS 5/2-209(c). "[I]n almost all cases, when federal due process concerns regarding personal jurisdiction are satisfied, so are Illinois due process concerns regarding personal jurisdiction." Keller v. Henderson, 359 Ill. App. 3d 605, 620 (2005); see also Sabados v. Planned Parenthood of Greater Ind., 378 Ill. App. 3d 243, 247 n.2 (2007). Because neither case law, nor the parties, have indicated that the analyses diverge in this case, the court proceeds to the federal analysis. See Citadel Group Ltd. v. Wash. Reg'l Med. Ctr., 536 F.3d 757, 761 (7th Cir. 2008).

Defendants may be subject to either specific or general jurisdiction. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1277 (7th Cir. 1997). General jurisdiction is for suits neither arising out of nor related to the defendant's contacts with the State, and is permitted only where the defendant conducts continuous and systematic general business within the forum state. Id. Specific jurisdiction, meanwhile, "refers to jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum." Id. (quotation marks omitted).

A. General Jurisdiction

In order to expose itself to the general jurisdiction of the courts of Illinois, a defendant's business contacts in Illinois must be intentional, continuous, and substantial rather than inadvertent, trivial, or sporadic, continue up to the time of suit, and evidence a purpose on the part of the defendant to avail himself of the protection of the laws of Illinois. See Asset Allocation & Mgmt. Co. v. W. Employers Ins. Co., 892 F.2d 566, 570 (7th Cir. 1989); Publ'ns Int'l, Ltd. v. Burke/Triolo, Inc., 121 F. Supp. 2d 1178, 1182 (N.D. Ill. 2000). In determining whether general jurisdiction exists, courts examine the following factors: (1) whether defendants maintain offices or employees in Illinois; (2) whether defendants send agents into Illinois to conduct business; (3) whether defendants have designated an agent for service of process in Illinois; (4) whether defendants advertise or solicit business in Illinois; and (5) the extent to which defendants conduct business in Illinois. Travelers Cas. & Sur. Co. v. Interclaim (Bermuda) Ltd., 304 F. Supp. 2d 1018, 1024 (N.D. Ill. 2004) (citing Interlease Aviation Investors II (Aloha) L.L.C. v. Vanguard Airlines, Inc., 262 F. Supp. 2d 898, 906-07 (N.D. Ill. 2003)).

In this case, almost all of these factors clearly weigh against general jurisdiction. Defendant does not maintain offices in Illinois or have employees in Illinois. It does not send agents into Illinois, or have a registered agent in Illinois. Moreover, it is undisputed that defendant does not advertise or solicit in Illinois in any way other than allowing Illinois residents to access defendant's website. As to the final factor- the extent to which defendant conducts business within the state-plaintiff points to three facts: defendant sells products in Illinois, defendant operates a fully interactive website that can be accessed by customers in Illinois, and defendant's products are routinely on display or for sale at local art and craft shows in Illinois. However, for the following reasons, these contacts fail to support general jurisdiction.

1. Sales

Although sales in a state may indicate the extent to which defendant does business in a state, the fact that a party has made a sale to the forum state does not necessarily justify general jurisdiction there. Rather, the party's sales must be substantial. Where a defendant's sales in a state represent both a small percentage of a defendant's total sales and a small volume of sales over all, its contact with the forum state cannot be said to be substantial. See Tate & Lyle Sucralose, Inc. v. Hebei Sukeri Sci. & Tech. Co., No. 06-2102, 2006 WL 3391421, at *4 (C.D. Ill. Nov. 22, 2006) (holding that sales amounting to only .1% of defendant's total revenue not enough to merit general jurisdiction); McGill v. Gigantex Techs. Co., No. 05C5892, 2005 WL 3436403, at *3 (N.D. Ill. Dec. 12, 2005) (holding that there was not general jurisdiction over defendant where sales to Illinois were a "very small percentage of its total sales"); Berndorf Belt Sys., Inc. v. Harwood Rubber Prods., Inc., No. 01 C 2202, 2001 WL 800090, at *2 (N.D. Ill. July 16, 2001) (finding that where defendant generated only a small percentage of its annual receipts from Illinois-based companies, that alone was not sufficient for general jurisdiction). In this case, defendant's sales to Illinois represent approximately one tenth of one percent of defendant's overall sales. These sales cannot be said to be substantial or continuous. As a result, although defendant does not deny that it makes sales in Illinois, the minuscule amount of those sales indicates that the extent to which defendant does business in Illinois is small and general jurisdiction does not exist.

2. Website

The existence of defendant's interactive website does not change this result. The type of internet activity that is sufficient to establish personal jurisdiction remains an emerging area of jurisprudence in Illinois. See Linehan v. Golden Nugget, No. 05 C 7030, 2008 WL 4181743, at *5 (N.D. Ill. Sept. 5, 2008); Howard v. Mo. Bone & Joint Ctr., Inc., 373 Ill. App. 3d 738, 743 (2007). Many courts in Illinois and in this Circuit have followed a sliding scale analysis. See George S. May Int'l Co. v. Xcentric Ventures, LLC, 409 F. Supp. 2d 1052, 1057-58 (N.D. Ill. 2006); Jackson v. Cal. Newspapers P'ship, 406 F. Supp. 2d 893, 897 (N.D. Ill. 2005); Publ'ns Int'l, 121 F. Supp. 2d at 1182; Berthold Types Ltd. v. European Mikrograf Corp., 102 F. Supp. 2d 928, 932 (N.D. Ill. 2000); Euromarket Designs Inc. v. Crate & Barrel Ltd., 96 F. Supp. 2d 824, 837 (N.D. Ill. 2000); see also Larochelle v. Allamian, 361 Ill. App. 3d 217, 225 (2005); Bombliss v. Cornelson, 355 Ill. App. 3d 1107, 1114 (2005) This approach, first set out in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997), measures the likelihood that personal jurisdiction can be constitutionally exercised by the nature and quality of commercial activity that an entity conducts over the internet. Accordingly, while the operation of a passive website that posts information available to the forum state's residents is clearly not enough to merit personal jurisdiction over a ...


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