Zippo Manufacturing Co. v. Zippo Dot Com, Inc.

A Pennsylvania manufacturer of well-known cigarette lighters brought a trademark infringement

action against a California Internet news service company that used the domain name
Zippo.com. Defendant operated a World Wide website hosted on a California server which was
available to Pennsylvanian residents. The defendant's Web site displayed an advertisement and
an application form that customers could fill out to subscribe to the defendant's news service,
permitting a customer to submit an application, provide a credit card number or have credit
approved, and receive a password for access to the defendant's news service.
Defendant had entered into subscription contracts with some 3000 Pennsylvanians (which
represented 2% of its clientele).The court held that defendant had purposefully availed itself of
the benefits of Pennsylvania law and the Pennsylvania economy so that the forum could exercise
jurisdiction consistent with the International Shoe criteria.

The Zippo court explained that the International Shoe principles require application according to
a "sliding scale" that measures the nature and quality of the commercial activity of the defendant
on the Internet. For purposes of analysis, this sliding scale can be divided into three levels: the
passive Web site, the intermediate Web site and the interactive Web site.

It further held “Our review of the available cases and materials reveals 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 . This sliding scale is consistent
with well developed personal jurisdiction principles. At one end of the spectrum are situation
where a defendant clearly does business over the . If the defendant enters into contracts with
residents of a foreign jurisdiction that involve the knowing and repeated transmission of
computer files over the , personal jurisdiction is proper. (Compuserve v. Patterson) At the opposite
end are situations where a defendant has simply posted information on an 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. (Bensusan) 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. (Maritz v. Cybergold).”
 
The Zippo court found that the case clearly involved a category three interactive Web site, thus
permitting the forum to exercise long-arm jurisdiction consistent with due process principles. In
support of this finding, the court noted the following: first, the defendant entered contracts
interactively with three thousand Pennsylvania residents; second, the defendant issued passwords
to those three thousand subscribers, thus beginning performance of the contracts; and third, the
defendant entered into contracts with seven Internet providers to serve customers in the forum.
These contacts put the Web site into the interactive category and satisfied the principles of
International Shoe. These electronic activities demonstrated that the defendant targeted or
directed its activities toward the forum; thus, the defendant had purposefully availed itself of the
benefits of the forum law and economy and reasonably should have anticipated being haled into
the forum to defend itself.

Moreover, the court rejected the proposition that the contacts were insignificant, noting that the
test has always been the "nature and quality," not the quantity, of the contacts and recognizing
that the reasonableness prong of the International Shoe test had also been easily met.
The Zippo opinion is probably the most persuasive and influential opinion and the leading
authority on the subject of cyberspace.