NOTE AND COMMENT: JURISDICTIONAL REACH ON THE INTERNET
Afsoon Hamid
I. Introduction
The Internet is changing the way businesses advertise and sell their products and services. One is no longer limited to the traditional advertising medium that once reached a limited number of people. Now, businesses can reach the world by advertising on the Internet. The advertisement is achieved by creation of a web site n1 that explains the business to customers who connect to it. Many businesses, however, are not aware of the risks associated with advertising and doing business on the Internet. As the world is logging onto the Internet to find products, the courts are struggling with defining the law on this new frontier. One of the major legal issues is the extent of personal jurisdiction in this vast cyberspace. n2 Must the web site owner be subjected to personal jurisdiction in any state that the information reaches? Since the information on the Internet reaches the entire world, must they be amenable to suit anywhere in the world?
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n1. The term "web site" refers to a collection of files that preserve information which businesses want their customers to view. The Technology Network - Techweb (visited Jan. 11, 1999) <http://www.techweb.com/encyclopedia>; Matisse Enzer, Glossary of Internet Terms (visited Jan. 11, 1999) <http://www.matisse.net/files/glossary.html>.
n2. The term "cyberspace" generally refers to the multitude of connected computer networks all over the world that make up the Internet. Id.
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This comment begins with the exploration of the traditional framework in obtaining personal jurisdiction over a non-resident defendant. It then examines recent cases specifically concerning personal jurisdiction on the Internet. A pattern emerges from these recent rulings that arranges into three distinct categories. Finally, this comment defines the categories and concepts that businesses should be aware of in minimizing the risk of being haled into a foreign jurisdiction to defend a suit for doing business on the Internet.
II. Jurisdictional Reach Over a Non-Resident Defendant
The traditional framework for obtaining jurisdiction over a non-resident defendant who is not physically present in the forum state or has not consented to the jurisdictional reach is through the forum state's long-arm statutes. n3 Depending on the circumstances, general or specific jurisdiction may be obtained. n4
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n3. Ziegler v. Indian River County, 64 F.3d 470 (9[su'th'] Cir. 1995).
n4. Id. at 473.
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General jurisdiction can be obtained over a non-resident defendant when he engages in a continuous and systematic activity in the forum state. n5 Specific jurisdiction can be obtained when a non-resident defendant purposefully avails himself of the privilege of conducting activities in the forum state, thereby invoking benefits and protections of its laws. n6 The claim must arise out of engaging in forum-related activity. n7 For example, in tort cases, jurisdiction may attach if the defendant commits a tort in the forum state, or commits a tort outside the state which results in an injury within the forum state. n8
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n5. Id.
n6. Hanson v. Denckla, 357 U.S. 235, 236 (1958).
n7. McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223 (1957).
n8. Ziegler, 64 F.3d at 473.
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In most states, the constitutionality of long-arm statutes is determined by the Due Process clause. n9 Due process is satisfied if the defendant has minimum contacts with the forum state "such that maintenance of the suit does not offend traditional notions of fair play and substantial justice." n10 Furthermore, the defendant's conduct and connection with the forum state must be such that he should "reasonably anticipate being haled into court there." n11 The exercise of jurisdiction, however, must be reasonable. n12
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n9. International Shoe Co. v. Washington, 326 U.S. 310 (1945).
n10. Id. at 320.
n11. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).
n12. Id. at 292.
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Once it is decided that a defendant purposefully established minimum contacts with the forum state, the reasonableness of the contacts may be considered in light of other factors: "'the burden on the defendant, the forum State's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and the shared interest of several States in furthering fundamental substantive social policies.'" n13
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n13. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985).
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III. Jurisdiction on the Internet
Internet jurisdictional law is in its infancy. The courts have continued to apply the long-arm statutes and the minimum contacts test in deciding jurisdictional issues on the Internet. In most Internet cases, jurisdictional reach is obtained through specific jurisdiction. Courts in different regions of the country have reacted differently to the legal problems of the Internet. In this cloud of inconsistencies, however, a pattern has emerged. In most cases, the nature, quality, and level of activity in conducting business are the determining factors as to whether or not a plaintiff can subject a defendant to the forum state jurisdiction. There is also a middle ground. The traits that subject a defendant to personal jurisdiction can be analyzed by dissecting some of the major cases in each area.
A. Cases Finding No Personal Jurisdiction
The analysis begins with defining Internet activity that will not hale the defendant into a foreign jurisdiction for defending suits. In Cybersell, Inc. v. Cybersell, Inc., n14 the court defined the outer limit of haling a defendant into a foreign jurisdiction for suits that arise out of Internet contacts. In that case, an Arizona corporation had registered the service mark "Cybersell" and had a web site with the same name. n15 It claimed that since the defendant, a Florida corporation, was infringing on their service mark, it was amenable to suit in Arizona. n16 The defendant was using the domain name n17 Cybsell.com on the Internet and his web site was proclaiming "Welcome to CyberSell." n18 The court held that simply maintaining a web page in Florida accessible to people in Arizona is not enough to hale the defendant into court in Arizona. n19 Internet advertisement alone is not enough. Furthermore, the defendant did not conduct any commercial activity over the Internet in Arizona; it did nothing to encourage people in Arizona to access its site or buy its merchandise. n20 Purposeful availment did not exist since the defendant, in Florida, entered into no contract in Arizona, made no sales in Arizona, received no telephone calls from Arizona, earned no income from Arizona, and sent no messages over the Internet to Arizona. n21
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n14. 130 F.3d 414 (9[su'th'] Cir.1997).
n15. Id. at 415.
n16. Id.
n17. The term "domain name" refers to the identifier of the web site that locates the Internet site. It is an address that usually ends with ".com," ".org," ".edu," ".net," or ".gov." The Technology Network - Techweb (visited Jan. 11, 1999) <http://www.techweb.com/encyclopedia>. Matisse Enzer, Glossary of Internet Terms (visited Jan. 11, 1999) <http://www.matisse.net/files/glossary.html>.
n18. 130 F.3d 414, 419 (9[su'th'] Cir. 1997).
n19. Id.
n20. Id.
n21. Id.
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In Bensusan Restaurant Corp. v. King, n22 the defendant, a Missouri live entertainment club, had a passive web page n23 that contained information about their calendar and ticketing. n24 The club had the same name as plaintiff's famous New York jazz club. n25 The defendant also had a hyperlink n26 to plaintiff's New York jazz club on its web page in Missouri. n27 The court held that access by a user in Missouri or defendant's hyperlink to New York does not subject him to suit in New York since the hyperlink was created by persons physically present in Missouri. n28 A passive web site that does little more than make information available to those who are interested will not warrant the exercise of personal jurisdiction. n29
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n22. 126 F.3d 25 (2d Cir. 1997).
n23. The term "passive web page" refers to a web site that contains web pages that only display information and do nothing further in their connection with the user. The Technology Network - Techweb (visited Jan. 11, 1999) <http://www.techweb.com/encyclopedia>. Matisse Enzer, Glossary of Internet Terms (visited Jan. 11, 1999) <http://www.matisse.net/files/glossary.html>.
n24. Bensusan, 126 F.3d at 27.
n25. Id. at 25.
n26. The term "hyperlink" refers to the link between two different web sites on the Internet. The user can usually link to another web site by highlighting the destination web site and selecting it. The Technology Network - Techweb (visited Jan. 11, 1999) <http://www.techweb.com/encyclopedia>. Matisse Enzer, Glossary of Internet Terms (visited Jan. 11, 1999) <http://www.matisse.net/files/glossary.html>.
n27. Bensusan, 126 F.3d at 27.
n28. Id. at 29.
n29. Id.
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Therefore, jurisdiction will not be gained over a defendant who is merely advertising on a passive web site on the Internet. n30 There has to be "something more" to show that the defendant purposefully directed his activities toward the forum state. n31 That "something more" can be achieved in different ways.
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n30. Cybersell, Inc. v. Cybersell, Inc. 130 F.3d 414, 419 (9[su'th'] Cir. 1997).
n31. Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1321 (9[su'th'] Cir. 1998).
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B. The Middle Ground
The middle ground is occupied by cases that examine interactivity on the Internet. In Maritz, Inc. v. Cybergold, Inc., n32 another trademark infringement case, the defendant posted advertisements on its California server about its upcoming mailing list on the Internet. n33 Each Internet user would be provided with a mailbox. n34 The service would forward to the user advertisements that matched the selected interests. n35 The court held that interactive web sites, where a user can exchange information with the host computer, occupy the middle ground. n36 The nature and quality of the interaction is significant. n37 In this case, it was imminent that the site would be fully operational in the near future, therefore, the exercise of jurisdiction was proper. n38
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n32. 947 F. Supp. 1328 (E.D. Mo. 1996).
n33. Id. at 1330.
n34. Id.
n35. Id.
n36. Id.
n37. Id. at 1332.
n38. Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328, 1335 (E.D. Mo. 1996).
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The substantiality of the contacts also carries weight. In Zippo Manufacturing Co. v. Zippo Dot Com, Inc., n39 the plaintiff, a Pennsylvania corporation with trademark rights to "zippo," sued the defendant, a California corporation who used the domain names zippo.com, zippo.net, and zipponews.com. n40 The defendant's web site contained company advertisement and an application for its Internet news service. n41 Even though the California corporation had no office or employees in Pennsylvania, two percent of the defendant's news service customers were Pennsylvania residents who had previously contracted with the defendant to obtain its services. n42 Subscribers to the defendant's news services were allowed to download n43 messages to their own computers after entering their supplied password. n44 The defendant also contracted with seven Internet Service Providers n45 ("ISP") in Pennsylvania. n46 In subjecting the defendant to personal jurisdiction in Pennsylvania, the court held that the defendant had done more than advertise in Pennsylvania. n47 The existence of contracts, processing applications, assigning passwords, deriving profit, and the Internet Service Provider contracts were substantial contacts with Pennsylvania. n48 The court noted that it was not unreasonable to subject them to Pennsylvania's jurisdiction. n49
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n39. 952 F. Supp. 1119 (W.D. Pa. 1997).
n40. Id.
n41. Id. at 1120.
n42. Id. at 1121.
n43. The term "download" refers to receiving a file into one's personal computer. The Technology Network - Techweb (visited Jan. 11, 1999) <http://www.techweb.com/encyclopedia>. Matisse Enzer, Glossary of Internet Terms (visited Jan. 11, 1999) <http://www.matisse.net/files/glossary.html>.
n44. Zippo, 952 F. Supp. at 1121.
n45. The term "Internet Service Provider" refers to an institution that provides access to the Internet and puts the user's files onto its servers. The Technology Network - Techweb (visited Jan. 11, 1999) <http://www.techweb.com/encyclopedia>. Matisse Enzer, Glossary of Internet Terms (visited Jan. 11, 1999) <http://www.matisse.net/files/glossary.html>.
n46. Zippo, 952 F. Supp. at 1121.
n47. Id. at 1126.
n48. Id.
n49. Id. at 1127.
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Therefore, the level of interactivity, the commercial nature, and the quality of the exchange of information that occurs on the web site are usually the determining factors in exercising jurisdiction over a non-resident. However, non-interactive web sites, where the user cannot exchange information with the supplier of information, will usually not result in the exercise of jurisdiction over a non-resident defendant.
C. Cases Finding Personal Jurisdiction
The purposeful availment requirement is satisfied if the defendant has taken deliberate action within the forum state or has created continuing obligations to forum residents. One of the major cases finding personal jurisdiction over the Internet is CompuServe, Inc. v. Patterson. n50 In that case, a Texas resident subscribed to Ohio's CompuServe, an ISP, and loaded his shareware software n51 into CompuServe's servers. n52 He entered into a contract with CompuServe to become a shareware provider and electronically transmitted thirty-two files to CompuServe's servers in Ohio. n53 The relationship was to be ongoing. n54 The court held that personal jurisdiction was properly exercised in Ohio since the contacts were substantial enough to reasonably anticipate being haled into a foreign jurisdiction. n55 The defendant himself created a connection with Ohio when he subscribed to CompuServe. n56 The relationship with CompuServe as a software provider and marketer was a crucial indicator that the Texas resident knowingly reached out to Ohio and benefited from Ohio's services. n57 The presence of a contract was significant and, as a result, was weighed against the defendant. n58 Furthermore, he repeatedly transmitted his software from Texas to Ohio. n59 These factors displayed a conscious reaching out to Ohio and showed that the parties were dealing with each other in a business sense rather than just accessing each other's information. n60
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n50. 89 F.3d 1257 (6[su'th'] Cir. 1996).
n51. The Term "shareware software" refers to software distributed to others on the Internet for use and purchase. The Technology Network - Techweb (visited Jan. 11, 1999) <http://www.techweb.com/encyclopedia>. Matisse Enzer, (visited Jan. 11, 1999) <http://www.matisse.net/files/glossary.html>.
n52. Patterson, 89 F.3d at 1260.
n53. Id. at 1261.
n54. Id. at 1265.
n55. Id. at 1264.
n56. Id.
n57. Patterson, 89 F.3d at 1264.
n58. Id.
n59. Id. at 1265.
n60. Id. at 1266.
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Once again, the level of interaction is a principal issue. In Thompson v. Handa-Lopez, Inc., n61 the defendant, a resident of California, operated an on-line casino on the Internet. n62 It advertised itself as the world's largest Internet casino. n63 The casino's servers were located in California. n64 The plaintiff, a Texas resident, entered into a contract with the defendant to play in the casino. n65 He won and later sued to recover his winnings in Texas. n66 The court held that jurisdiction existed in Texas even though the contract signed by the parties stated that disputes with the players were governed by the laws of California. n67 The defendant directed its advertising toward Texas by calling itself the world's largest. n68 The extensive interaction between the players and casino operators was a paramount factor. n69 Furthermore, the clause did not require a lawsuit be filed in California; it only mandated that disputes be governed by the laws of California. n70 Minimum contacts in Texas were, therefore, satisfied. n71
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n61. 998 F. Supp. 738 (W.D. Tex. 1998).
n62. Id. at 741.
n63. Id.
n64. Id.
n65. Id.
n66. Thompson, 998 F. Supp. at 741.
n67. Id. at 745.
n68. Id. at 743.
n69. Id. at 744.
n70. Id. at 745.
n71. Id.
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The focus may also be the place where the injury was felt. In Panavision International L.P. v. Toeppen, n72 an Illinois resident was accused of cyber pirating n73 the "panavision" trademark in California. n74 The plaintiff's principal place of business was in California. n75 The court did not have general jurisdiction over the defendant, since he was domiciled in Illinois and his activities were not continuous and systematic toward California. n76 However, specific jurisdiction existed. n77 The defendant satisfied the purposeful availment requirement because his efforts were purposefully and intentionally directed toward California residents. n78 He need not be physically present or have physical contacts with California. He engaged in a tort-like scheme to extort money from the California company by originally registering the domain name for $ 100 and selling back his registered trademark to the rightful owner at $ 13,000. n79 The injury would be felt in California; therefore, minimum contacts existed. n80 Although simply registering another person's trademark as a domain name is not sufficient to subject the defendant to a foreign jurisdiction, the tort-like scheme directed toward the forum state is enough for minimum contacts.
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n72. 141 F.3d 1316 (9[su'th'] Cir. 1998).
n73. The term "cyber pirate" refers to one who registers an established trademark as a domain name for himself and later sells it back to the rightful owner. The Technology Network - Techweb (visited Jan. 11, 1999) <http://www.techweb.com/encyclopedia>. Matisse Enzer, Glossary of Internet Terms (visited Jan. 11, 1999) <http://www.matisse.net/files/glossary.html>.
n74. Toeppen, 141 F.3d at 1319.
n75. Id. at 1316.
n76. Id. at 1320.
n77. Id. at 1324.
n78. Id. at 1323.
n79. Toeppen, 141 F.3d at 1318-19.
n80. Id. at 1316.
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The court answered the question of reasonableness of jurisdictional reach in that case. n81 Multiple factors weighed in favor of Panavision and the California forum. Requiring the defendant to litigate in California in an era of discount travel was not unreasonable. n82 California's need to resolve tortious conduct was found to be important. n83 The neutrality of plaintiff's burden, the neutrality of the location of evidence and witnesses due to advances in modern technology, and the interest of all states to resolve Internet issues were considered. n84 The court, therefore, held that haling a defendant from Illinois into a California court was not unreasonable under the circumstances. n85
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n81. Id. at 1322.
n82. Id. at 1323.
n83. Id.
n84. Toeppen, 141 F.3d at 1323.
n85. Id. at 1324.
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Some courts have emphasized the importance of responding to a solicitation and maintaining further communication. In Resuscitation Technologies, Inc. v. Continental Health Care Corp., n86 the plaintiff posted a message to the public indicating it was a start-up company in need of capital infusion. n87 The defendant responded to the posting by electronic mail, requesting further information about the venture. n88 After this initial contact, the parties communicated extensively by regular mail, electronic mail, fax, and telephone. n89 Confidential information was transferred back and forth through those mediums. n90 The court held that conducting electronic commerce with a forum's resident constitutes purposeful availment. n91 "Who started it" is not the issue. n92 Minimum contacts began with the solicitation on the Internet and continued in other forms. n93 Setting up an entity that would have a significant commercial impact in the forum state is enough to subject a defendant to a foreign jurisdiction. n94
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n86. 1997 WL 148567 (S.D. Ind. Mar. 24, 1997).
n87. Id.
n88. Id.
n89. Id. at *2.
n90. Id.
n91. Resuscitation, 1997 WL 148567, at *4.
n92. Id. at *5.
n93. Id.
n94. Id.
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Furthermore, the totality of communications could provide minimum contacts. In Edias Software International L.L.C. v. Basis International Ltd., n95 the defendant, a New Mexico corporation, signed contracts in New Mexico with the plaintiff, an Arizona company, to distribute its software in Europe. n96 After deciding not to do business with them anymore, the defendant informed its customers and employees of its intent via electronic mail. n97 It posted defamatory messages on CompuServe's web page regarding the plaintiff. n98 Even though negotiations did not take place in Arizona, in the course of their business, the companies regularly made phone calls and sent faxes or electronic mails to each other. n99 The defendant's company personnel visited Arizona. n100 The court held that specific jurisdiction could exist over a defendant who has no physical presence in the forum state. n101 The contract with an Arizona company, phone, fax, and e-mail to Arizona, sales to Arizona customers and visits there were sufficient. n102 Additionally, the court noted that libelous statements by a non-resident defendant further the basis for jurisdiction in the plaintiff's forum; therefore, the totality of communications between the two companies provided the minimum contacts necessary to subject the defendant to a suit in Arizona. n103
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n95. 947 F. Supp. 413 (D. Ariz. 1996).
n96. Id. at 414.
n97. Id. at 415.
n98. Id.
n99. Id. at 416.
n100. Edias, 947 F. Supp. at 416.
n101. Id. at 417.
n102. Id. at 422.
n103. Id. at 419.
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In Inset Systems, Inc. v. Instruction Set, Inc., n104 a Connecticut corporation with trademark rights to "Inset" brought an infringement suit against the defendant, a Massachusetts corporation, who obtained rights to the domain name Inset.com and used the telephone number 1-800-US-INSET to advertise its goods. n105 The court held that Internet advertising through the infringed domain name and the usage of a toll-free number to reach customers were sufficient to satisfy minimum contacts in Connecticut. n106 Purposefully directing advertising via the Internet and a toll-free number that reaches not only Connecticut, but all states, were enough. n107 The court found it fair to hale a Massachusetts resident to Connecticut since the distance between the two states is minimal. n108
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n104. 937 F. Supp. 161 (D. Conn. 1996).
n105. Id. at 162.
n106. Id. at 164.
n107. Id. at 165.
n108. Id.
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As expected, financial gain in the forum state has profound jurisdictional impact. In Heroes, Inc. v. Heroes Foundation, n109 a District of Columbia corporation plaintiff sued a New York corporation defendant. n110 The defendant solicited money for its foundation by appearing in the local newspaper of the District of Columbia, the forum state. n111 The plaintiff claimed that there was trademark dilution. n112 Forum residents made substantial contributions to the foundation because of the advertisement. n113 The court held that advertising in the local newspaper of the forum has a different effect than advertising in a national publication that might not be read by forum residents. n114 By soliciting in a local newspaper, the defendant purposefully availed itself of the privilege of conducting activities within the forum. n115 Consequently, the intentional focus on the forum state mattered.
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n109. 958 F. Supp. 1 (D.D.C. 1996).
n110. Id.
n111. Id. at 3.
n112. Id. at 2.
n113. Id. at 4.
n114. Heroes, 958 F. Supp. at 3.
n115. Id. at 4.
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Another major factor in finding jurisdiction however, was the defendant's web site. It requested donations and contained logos resembling the plaintiff's trademark. n116 The court held that the solicitation of donations on the Internet always makes the defendant available to District of Columbia residents. n117 Since money was involved, the defendant should have reasonably anticipated being haled into a District of Columbia court. n118
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n116. Id.
n117. Id. at 5.
n118. Id.
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IV. The Emerging Pattern
Generally, web sites that solely make information available to customers will not subject the owner to suit in a foreign jurisdiction. The courts have held that Internet advertising alone is not enough; "something more" is needed. The more passive the nature of the web site, the less chance there is of being haled into a foreign jurisdiction for suit.
The level of interactivity on the Internet between the plaintiff and the defendant is a paramount factor. The nature and quality of the interaction matters. In cases that fall in the middle ground, the totality of the communications will be examined. The courts will even consider non-Internet access.
Substantial interaction between the plaintiff and the defendant on the Internet gives rise to the exercise of jurisdiction. The existence of a contract between the parties usually demonstrates a high level of interaction. The contract can be formed on or outside the Internet. In some cases, maintaining further communication via e-mail and other forms of contact has given rise to the exercise of jurisdiction in some cases.
The intent of the defendant to avail itself of the business opportunities of the forum state is significant. Using another entity on the Internet as the marketer of one's products in another jurisdiction is a crucial indicator that the person has reached out to that other jurisdiction. Usually, purposefully directing advertising toward forum residents which results in financial gain (such as local advertising in the forum) is sufficient minimum contacts.
Tort-like schemes directed toward forum residents on the Internet have also been held sufficient since the injury is felt in the forum state. It is reasonable to hale the defendant into a foreign jurisdiction for such schemes because all states have an interest in maintaining the law on the Internet.
V. Conclusion
Businesses are utilizing the Internet as an essential advertising medium, but what they may not know is that the minimum contacts rule has made its way onto the Internet. Utilizing the Internet to attract customers can become a costly endeavor if a business does not understand what constitutes minimum contacts. The courts will examine the level, nature, and quality of interactions on the Internet in determining jurisdiction. Failure to understand the laws of the Internet could ultimately become the reason for haling businesses into another jurisdiction to defend themselves against lawsuits.