The ruling, made in September last year, relates to an action brought by behavioural marketing company Gator (now re-named Claria Corporation). Gator is well known in the internet community for its software, which delivers pop-up ads on behalf of its clients to third-party web sites without permission from the operators of those sites.
The software examines keywords, URLs and search terms in use on the user's browser and then selects which ads to display to that user. These ads often refer to competitors of the site being visited.
On this occasion the Gator software targeted the web site of Maine-based clothing and out-door equipment retailer LL Bean, delivering ads that offered Gator users visiting the site a coupon for rival retailer Eddie Bauer. In March 2001 LL Bean sent a letter to Gator, requesting that the company stop the pop-up ads, and hinting at possible legal action if the ads continued, aimed at protecting the retailer's trade mark.
In response, Gator filed a declaratory action with a Californian district court, asking the court to confirm, among other things, that the software did not infringe on any LL Bean trade mark.
LL Bean then asked the court to dismiss the action on the basis that, as the company had no premises in California, paid no taxes in the state and was not authorised to operate there, the court did not have jurisdiction over LL Bean.
In November 2001 the district court granted that request. Gator appealed, and in September last year a three-judge panel for the Ninth Circuit Court of Appeals overruled the district court, finding that it did have jurisdiction over LL Bean when the number of purchases, e-mail contacts, catalogue requests and on-line accounts held or made by Californians were taken into account.
According to Senior Judge Warren Ferguson:
"Businesses who structure their activities to take full advantage of the opportunities that virtual commerce offers can reasonably anticipate that these same activities will potentially subject them to suit in the locales that they have targeted".
That much was nothing new; but the case is now to be reheard by the full court – known as an "en banc" panel. Judge Ferguson had previously acknowledged that it was a "close question" as to whether or not LL Bean's marketing activities directed at California consumers were sufficiently systematic and continuous to support general jurisdiction, albeit he and his two colleagues concluded that they were.