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JILT 1998 (3) - J T Westermeier


Article Contents

1.

Introduction

2.

Jurisdiction over Non-resident Defendants

3.

Jurisdiction & the Internet

4.

Internet Case Personal Jurisdiction Categories

4.1

Insufficient Contacts

4.2

Sufficient Quality & Quality of Contact

4.3

Systematic & Continuous or Persistent Contact

4.4

The Three Category Continuum

4.5

Worldwide Exposure

4.6

Forum Shopping

4.7

Need for Lex Internet

5.

Conclusion

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Personal Jurisdiction: Today´s Hot Issue in E-Commerce

J.T. Westermeier
Fenwick & West LLP
Washington, D.C., USA
jtw@fwpa.com


1. Introduction

The Internet is a giant global network.[1] Web sites on the World Wide Web are like storefronts with exposures that are worldwide in scope and inherently accessible. Anyone with access to the Internet anywhere in the world can easily access and interact with the World Wide Web. Because the Internet transcends geographic borders commercial use of the Internet or other Internet-based activities may be sufficient to confer nationwide and even international jurisdiction.

Jurisdiction gives rise to numerous other questions because there are no laws or borders on the Internet. There is no 'Lex Internet.'[2] What laws apply to an electronic commerce transaction consummated over the Internet? Are the click-wrap agreements used in electronic commerce enforceable? What consumer laws, privacy laws, advertising laws, taxes, export/import laws and other laws apply to Internet-based transactions? Jurisdiction is fundamental to these concerns.

Below we will examine how courts in the United States and some other countries have dealt with these jurisdictional issues respecting Internet activities. There has been substantial litigation in the United States respecting the exercise of personal jurisdiction over non-resident defendants who have established Web sites and participated in other Internet activities. Different courts have reached different conclusions as to how far their jurisdiction extends in cases involving the Internet.

2. Jurisdiction over Non-resident Defendants

Personal jurisdiction has been defined as 'the power of the court over the person of a defendant.' The court must have personal jurisdiction over the parties and subject matter jurisdiction over the claims involved in the matter to enter an enforceable judgment against the parties in the litigation. The United States Supreme Court has divided personal jurisdiction into two forms of personal jurisdiction - general jurisdiction and specific jurisdiction.[3] A court may exercise general jurisdiction when a defendant's overall contacts with a forum are 'systematic and continuous,' regardless of the connection between the cause of action and the nature of the defendant's contact with the forum.[4] On the other hand, specific jurisdiction generally exists where the plaintiff's cause of action arises out of or relates to defendant's contacts with the forum. Other parts of the world apply similar jurisdictional provisions.[5]

To determine whether a court may exercise personal jurisdiction over a defendant, courts in the United States traditionally apply a two-step analysis. First, the court determines whether the defendant is amenable to suit under the state's long-arm statute. Second, the court determines whether the court's exercise of personal jurisdiction meets the constitutional due process requirement.[6 ] With respect to the Due Process Clause, the Supreme Court has stated that jurisdiction must be based on some 'affirmative' action purposefully directed toward the forum state.[7] These traditional approaches to determine personal jurisdiction are applicable to Internet disputes and Internet activities.

Most states in the United States have enacted 'long-arm' statutes. These statutes allow courts to 'reach out' and obtain jurisdiction over non-resident defendants where the defendant's contacts with the forum meet certain statutory defined requirements. Long-arm jurisdiction seeks to hold foreign defendants accountable for the consequences of their actions in other forums.

If a defendant's conduct is covered by a state's long-arm statute then the court must determine whether the exercise of jurisdiction comports with the due process requirements of the U.S. Constitution. The defendants must have sufficient minimum contacts with the forum to render the exercise of jurisdiction reasonably consistent with 'traditional notions of fair play and substantial justice.'[8 ]

The minimum contacts analysis involves three parts:

1) The non-resident defendant must do some act or consummate some transactions with the forum or perform some act by which he purposely avails himself of the privilege of conducting activities in the forum thereby invoking the benefits and protection of the forum.

2) The claims must arise out of or result from defendant's forum related activities.

3) There must be substantial enough connection or nexus between defendant's acts and the forum state to make the exercise of jurisdiction be reasonable.[9]

The reasonableness test has protected defendants from unfairly having to litigate in foreign forums where such litigation has been shown to be inconvenient and unfair to the defendant. Courts consider the burden on the defendant of litigating in another state, the interest of the forum state in applying its laws, the plaintiffs interest in obtaining relief, and the interest of other states in securing the most efficient resolution of controversies.

3. Jurisdiction and the Internet

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"However, different courts have reached different conclusions as to how far their jurisdiction extends in cases involving the Internet."

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Numerous cases have been decided across jurisdictions within the United States respecting the exercise of personal jurisdiction over a non-resident defendant based on Internet and Web activities. These cases, including a number of Federal Circuit appellate rulings of U.S. Circuit Courts, have applied traditional approaches to evaluating personal jurisdiction questions involving the Internet. However, different courts have reached different conclusions as to how far their jurisdiction extends in cases involving the Internet.

These cases are generally classified into three categories. The probability that personal jurisdiction may be constitutionally exercised under these traditional principles is 'directly proportionate to the nature and quality of commercial activity that an entity conducts over Internet.' Zippo Mfg. Co. v. Zippo, 952 F. Supp. 1119, 1123 (W.D. Pa 1996).

The first category is at one end of the spectrum. This category covers situations where the defendant clearly does business over the Internet. Courts have had no trouble exercising personal jurisdiction over non-resident defendants in this category because such business is consistent with 'systematic and continuous contacts' necessary for exercising general jurisdiction. This category, for example, involves the knowing and repeated transmission of computer files over the Internet or in other words, 'persistent' conduct.

The second category is the middle ground in the spectrum. It is occupied by cases where 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. This category is the most uncertain and therefore most troublesome.

The third category involves the posting of information or advertisements on the Web site which is accessible to users in foreign jurisdictions: but not enough by itself to subject non-resident defendants to personal jurisdiction. Most courts in the United States have not exercised personal jurisdiction based on the mere operation of a passive Web site or just posting information on a Web site, including general advertisements unless there is 'something more.' The 'something more' that courts have found, in exercising personal jurisdiction, has varied among courts. Generally, the level of 'activity' of a site has not had to rise to a very significant level before courts have exercised personal jurisdiction as long as the activity is focused at the forum where jurisdiction is sought.

United States courts have recognized the international implications of their rulings on personal jurisdiction based on Internet activities. For example, in Weber v. Jolly Hotels, 977 F. Supp. 327, 333 (D.N.J. 1997), the district court noted that personal jurisdiction is not exercised in the case of a mere passive Web site, without more, because 'a finding of jurisdiction. . . based on an Internet Web site would mean there would be nationwide (indeed, worldwide) personal jurisdiction over anyone who establishes an Internet Web site.' In an Internet context there most be 'something more' than an Internet advertisement alone to indicate that the defendant purposefully (albeit electronically) directed his activity in a substantial way to the forum state. Blumenthal v. Drudge, 992 F. Supp. 44 (D.D.C. 1998), citing Cybersell, Inc. v. Cybercell, Inc., 130 F. 3d 414 (9th Cir. 1997).

4. Internet Case Personal Jurisdiction Categories

4.1 Insufficient Contacts (Category 1)

The cases below are examples of cases where the courts have found the contacts by a non-resident defendant to be insufficient for jurisdiction.

(1) Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997). Here the plaintiff is an Arizona corporation that advertises for commercial services over the Internet. The defendant is a Florida corporation that offers Web page construction services over the Internet. The Arizona plaintiff alleged that the Florida defendant had infringed its federally registered trademark and should be subject to the personal jurisdiction of the Federal court in Arizona because cyberspace is without borders and a Web site, such as defendant's, which advertises a product or service is necessarily intended for use on a worldwide basis. The defendant created a Web page at http://www.cybsellcom/cybsell/index.htm. The home page has a logo at the top with 'CyberSell' over a depiction of the planet earth, with the caption underneath 'Professional Services for the World Wide Web' and a local telephone number. E-mail communications with the defendant's Web site were solicited. While the defendant changed its corporate name in response to a demand letter from the plaintiff the plaintiff discovered that the defendant was still using 'Welcome to CyberSell' on its web page and then filed suit against the Florida defendant in Arizona. The defendant filed a motion to dismiss for lack of personal jurisdiction.

The Ninth Circuit applied the following three-part test to determining whether a district court may exercise specific jurisdiction over the non-resident Florida defendant:

(1) The nonresident defendant must do some act or consummate some transactions with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections[;]

(2) the claims must be one which arises out of or results from the defendant's forum-related activities[; and]

(3) exercise of jurisdiction must be reasonable.

The Ninth Circuit concluded that the Florida defendant had conducted no commercial activity over the Internet in Arizona. All that the Florida defendant was found to have done was to have posted an 'essentially' passive home page on the Web, using the name 'Cybersell.' While the Ninth Circuit acknowledged that 'anyone, anywhere could access that home page' and thereby learn about the services offered by the Florida defendant the Ninth Circuit determined that this fact alone was not enough to find that the Florida defendant had deliberately directed its merchandising efforts toward Arizona residents.

Under the circumstances, the Ninth Circuit determined that the Florida defendant's activities over the Internet and Web were insufficient to establish 'purposeful availment.' In so ruling the Ninth Circuit observed, that if there was not a requirement for purposeful availment beyond merely establishing a Web page on the Internet every complaint arising out of alleged trademark infringement on the Internet would automatically result in personal jurisdiction wherever the plaintiff's principal place of business is located.

(2) Bensusan Restaurant Corporation v. King, 126 F. 3d 25 (2d Cir. 1997). Here the Second Circuit affirmed the district court's ruling finding that the operator of the Blue Note jazz club in New York City in this trademark action lacked personal jurisdiction over King, the operator of the Blue Note cabaret in Columbia Missouri, under New York's long-arm statute. The Court of Appeals determined that Bensusan failed to allege that King or his agents committed a tortious act in New York as required for the exercise of personal jurisdiction.

While the Court of Appeals noted that attempting to apply established trademark law in the fast-moving world of Internet is somewhat like trying to board a moving bus the Court of Appeals believes the question of personal jurisdiction is determinable by well-established doctrines of personal jurisdiction. Here the Internet and Web activities giving rise to Bensusan's lawsuit included the authorization and creation of King's Web site, the use of the words 'Blue Note' and the Blue Note logo on the site, and the creation of a hyperlink to Bensusan's Web site. These activities were performed by persons physically present in Missouri and not in New York. Neither the general access, 'passive' Web site by itself nor linkage to Plaintiff's Web site were enough to confer personal jurisdiction under New York's long-arm statute. The Court of Appeals did not find it necessary to address the due process considerations because the personal jurisdiction question had been determined based on the lack of long-arm jurisdiction.

(3) Hearst Corp. v. Goldberger, 1997 WL 97097 (S.D.N.Y. 1997). Here the district court declined to exercise personal jurisdiction over the defendant because his Internet Web site was accessible to, and had been electronically 'visited' by, computer users in New York. The district court determined Goldberger was not doing business in New York analogizing the Web site to an advertisement in a national magazine.

The district court determined that neither Goldberger's ESQWIRE Internet Web site nor his e-mails to New York were sufficient for the district court to exercise personal jurisdiction over Goldberger. Hearst Corporation is the owner and publisher of the ESQUIRE magazine. Hearst brought this trademark infringement action against Goldberger after he established an Internet domain name and Web site, 'ESQWIRE.COM'.

Goldberger intended to use his Web site to offer law office infrastructure network services to attorneys. Goldberger resides in Cherry Hill, New Jersey. The court found that Goldberger's ESQWIRE Internet site is analogous to an advertisement in a national publication and thus does not constitute sufficient contacts for personal jurisdiction. The district court determined that the e-mails are analogous to telephone communications with or letters to people in New York. These isolated e-mails after the lawsuit commenced were also insufficient for personal jurisdiction. The mere creation of a Web site does not give rise to personal jurisdiction in a foreign forum.

In so ruling, the court believes a contrary decision would be tantamount to a declaration that this court and every court throughout the world may assert personal jurisdiction over all information providers on the global World Wide Web.

(4) IDS Life Insurance Co. v. Sun America, Inc., 958 F. Supp 1258 (N.D. Ill. 1997). Here the district court declined to exercise personal jurisdiction over SunAmerica. The mere maintenance of the Web site, along with the other 'sporadic' contacts, did not rise to the level of 'systematic and continuous' contact with the forum for purposes of exercising personal jurisdiction.

(5) Weber v. Jolly Hotels, 977 F. Supp 327 (D.N.J. 1997). Here the defendant is an Italian corporation. The plaintiff was injured while a guest at one of defendant's hotels in Italy. Defendant did not conduct any business in New Jersey. But it does provide 'photographs of hotel rooms, descriptions of hotel facilities, information about numbers of rooms and telephone numbers' on the Internet.

The court agreed that such advertising on the Internet falls under the same rubric as advertising in a national magazine, and does not constitute 'continuous and substantial' contacts with the forum state. In so ruling, the district court determined that 'advertising on the Internet is not tantamount to directing activity at or to purposefully availing oneself of a particular forum.' Id. at 334.

The court found 'that exercising jurisdiction over a defendant who merely advertises its services or products on the Internet would violate the Due Process Clause of the Fourteenth Amendment.

(6) Smith v. Hobby Lobby Stores , 968 F. Supp. 1356 (W.D. Ark. 1997). Here the district court declined to exercise personal jurisdiction over a Hong Kong defendant who advertised in a trade journal posted on the Internet without any sales of goods or services occurring in Arkansas.

The case concerned the wrongful death of Mary Smith from a fire allegedly started by an artificial Christmas tree sold by Hobby Stores and manufactured by the Hong Kong defendant. Hobby Stores has its home office in Oklahoma and several stores in Arkansas. The Hong Kong defendant had no contacts to Arkansas, and dealt with Hobby Store only in Oklahoma. Hobby Stores tried to join the Hong Kong defendant into the action under a third-party complaint. Hobby Stores claimed that the Hong Kong defendant's Web site, accessible from Arkansas, created the sufficient minimum contacts for the court to exercise personal jurisdiction. While the Hong Kong defendant had placed an advertisement on a Web site, it conducted no business through the Web site. It did not contract to sell any goods or services to any citizens of Arkansas over the Internet site.

(7) Mallinckrodt Medical, Inc. v. Sonus Pharmaceuticals, Inc., 989 F. Supp. 265 (D.D.C. 1998). Here the non-resident defendant published a defamatory statement on America Online accusing the plaintiff MBI of patent infringement. The posted information was available to AOL subscribers in the District of Columbia. In addition, Sonus also sent a message from Seattle to Virginia over America Online, a private subscriber service, which was posted on AOL's electronic bulletin boards. This information was accessible to AOL subscribers in the District of Columbia.

This conduct by Sonus was not enough to subject Sonus to personal jurisdiction in the District of Columbia. The court determined such posting on AOL is not an act purposefully or foreseeably aimed at the District of Columbia.

(8) Blackburn v. Walker Oriental Rug Galleries, 1998 U.S. Dist. LEXIS 4517 (E.D. Pa 1998). Here the plaintiff created an Internet Web site, at the Internet address, www.wholesalerug.com. Wholesale's Web site contained graphic material illustrating the various types of rugs sold by the plaintiff, accompanied by text describing each rug. Plaintiff claims the defendants copied parts of Wholesale's Web site in violation of the federal copyright laws.

The court found that the nature of defendants' contacts with the forum fell into the passive web category. Defendants' Web site, like plaintiff's web site, is an advertisement. Advertising on the Web, without more, does not form continuous and substantial contacts with the forum.

The court also determined that the link provided to allow readers to send a message by e-mail alone is not enough to demonstrate the nature and quality of the commercial activity of jurisdiction. The Web site was only passive and did not serve as sufficient contacts to establish personal jurisdiction.

(9) Transcript Corp. v. Doonan Trailer Corp., 1997 U.S. Dist. LEXIS 18687 (N.D. Ill., Nov. 17, 1997). The district court determined there were insufficient contacts to exercise personal jurisdiction over Doonan Trailer Corp. in Illinois. In this trademark infringement action there was no basis to show that Transcript's use of its trademark was concentrated in Illinois such that injuries to its trademark would be focused in Illinois. Doonan's Web site presents a general advertisement and is accessible worldwide. Here the court found there was no particular focus on Illinois.

(10) CD Solutions, Inc. v. Tooker, 965 F. Supp. 17 (N.D. Tx. 1997). The district court declined to exercise personal jurisdiction over the defendant in Texas and transferred the case to the District Court of Oregon where defendant resides. The dispute arises by virtue of CD Solutions using 'cds.com' as a domain name. Both parties use the 'cds' mark and both advertise and sell their services over the Internet. Defendants own a CDS trademark and sent CD Solutions a cease and desist letter to stop using the 'cds.com' domain name. CDS filed a declaratory judgment seeking to invalidate the mark. The court held that the defendant's contacts with Texas are insufficient to support the exercise of personal jurisdiction. In so ruling the court observed the issue of whether CD Solutions' use of the 'cds.com' domain name does not arise from or relate to defendants' contacts with Texas. The court determined the case should, as matter of the court's discretion, be transferred to Oregon.

(11) No Mayo-San Francisco v. Memminger, 1998 U.S. Dist. LEXIS 13154 (N.D. Ca. 1998). Here the court granted defendants motion to dismiss for lack of personal jurisdiction. Memminger established a site on the World Wide Web which incorporated 'no mayo' as part of his Internet site address, 'nomayo.com.' Memminger resided in Hawaiian. The defendants are not California residents. The court determined that merely registering someone else's trademark as a domain name and posting it on a Web site on the Internet are not sufficient to subject a party domiciled in one state to jurisdiction in another. There must be 'something more' to demonstrate that the defendant purposefully directed his activity in a substantial way toward the forum. The 'something more' was found to be missing in this case.

4.2 Sufficient Quality and Quantity of Contact

(1) Panavision International, L.P. v. Toeppen, 141 F. 3d 1316 (9th Cir. 1998). Here the Ninth Circuit held the registration of an Internet domain name coupled with a subjective scheme having an effect in California was sufficient contact for the court to exercise personal jurisdiction over the non-resident defendant. The 'something more' in this cyber squatter case amounted to evidence the defendant actually intended an effect in California.

Toeppen, an Illinois resident, registered two of plaintiff's trademarks as Internet domain names, and used one of the domain names ('Panavision.com') to establish a Web site displaying aerial views of Pana, Illinois. Toeppen offered to sell his interests in the domain names to Panavision.

The court held that, although it had no general jurisdiction over Toeppen, it had specific jurisdiction. The court applied the Ninth Circuit three-part test for specific jurisdiction to determine whether:

(1) some act or transaction of defendant's with the forum amounts to purposefully availing himself of the privilege of conducting activities in the forum, invoking benefits and protections of its laws;
(2) the claim arises out of forum-related activities; and
(3) the court's exercise of jurisdiction is reasonable.

The court found that plaintiff's claim was akin to a tort claim. The court reasoned that Toeppen aimed his allegedly infringing acts at California and knew that the harm would be felt in California, Panavision's principal place of business. Therefore, personal jurisdiction was deemed to have been properly exercised because Toeppen's activities outside of California were intended to, and did, cause damages in California.

(2) Zippo Mfg Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997). Here the district court found that Zippo Dot Com had purposefully availed itself in Pennsylvania by virtue of Zippo Dot Com's interactive Web site and contracts with 3000 individuals and seven Internet providers in Pennsylvania allowing them to down load the electronic messages that formed the bases of the lawsuit. By conducting electronic commerce with Pennsylvania residents, the non-resident California corporation was determined to have purposefully availed itself of doing business in Pennsylvania.

(3) Inset Systems, Inc. v. Instruction Set, Inc ., 937 F. Supp. 161 (D. Conn. 1996). Here the district court determined that Inset obtained personal jurisdiction over ISI in Connecticut. Jurisdiction was affirmed based on ISI's use of Inset's 800 telephone number and Internet-directed advertising to Connecticut merely by virtue of the fact that there were 10,000 Internet users in Connecticut at the time. This ruling is often criticized for lack of any significant critical analysis of the quantity and quality of the contacts.

(4) Hasbro, Inc. v. Clue Computing, Inc., 994 F. Supp. 34 (D. Mass. 1997). Here Hasbro claimed that Clue Computing, a one-man company in Colorado, had infringed upon its trademark through the use of its World Wide Web site at the address of 'clue.com.' The court determined that there were sufficient contacts for the Massachusetts court to exercise personal jurisdiction.

Key facts were that the defendant advertised on his Web site that his company provided services for clients anywhere on the planet. And under the 'effects doctrine' the dilution of Hasbro's mark pursuant to its trademark dilution claims relating to its famous 'clue' mark for its board game was felt in Massachusetts. And that the defendant had purposely chose to conduct business under the 'clue.com' domain name.

(5) Resuscitation Technologies, Inc. v. Continental Health Care Corp., 1997 U.S. Dist. LEXIS 3523 (S.D. Ind. March 24, 1997). The district court exercised personal jurisdiction over the defendants based on the extent of interactive electronic communications and other communications. One of the defendants learned about RTI, an Indiana-based company, by its Web site. RTI's Web site indicated it was a medical device company and was in need of capital. There were 80 electronic mail messages back and forth as well as documents faxed back and forth and conference telephone calls concerning the formation and financing of a new business. Even though the defendants never were physically in Indiana the level of Internet activity was significant and it was focused on Indiana. While the Court notes that one or two inquiries about some Indiana goods or services would not support local jurisdiction. Here the level of activity was on the quality and quantity of activities with the Indiana company.

(6) Maritz, Inc. v. CyberGold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996). The district court determined that through CyberGold's World Wide Web site maintained on a server in Berkeley, California, CyberGold had consciously determined to transmit advertising information to all Internet users, knowing that such information would be transmitted globally. CyberGold's service included maintaining a mailing list of customers and providing to each customer, via electronic mailbox, ads tailored to the customer's particular areas of interest. The lower court's analysis was specifically referenced in the Ninth Circuit's Cybersell ruling, supra. Here the court noted there were 131 electronic transmissions to Missouri. The CyberGold contacts were found to be of such a quality and nature, so as to favor the exercise of personal jurisdiction over the California defendant that operated its Web site outside Missouri.

The court also found that CyberGold's activities would be subject to the Missouri long-arm-statute. The court had no problem concluding the CyberGold's commission of a 'tortious act' outside of Missouri had caused the plaintiff to incur economic harm in Missouri, which is what brought Cybergold within the scope of the Missouri long-arm statute. The court next considered whether exercising personal jurisdiction was consistent with due process. It considered:

(1) the nature and quality of contacts with the forum state;
(2) quantity of contacts;
(3) relation of the cause of action to the contacts;
(4) interest of forum state in providing a forum for its residents; and
(5) convenience of the parties. The court defined the question with respect to the nature of the Internet and Web activities as follows:

'Whether maintaining a web site . . .which can be accessed by any Internet user, and which appears to be maintained for the purpose of, and in anticipation of, being accessed and used by any and all Internet users, including those residing in Missouri, amounts to promotional activities or active solicitations such as to provide the minimum contacts necessary for exercising personal jurisdiction over a non-resident corporation.'

The court observed that by establishing the Web site, CyberGold had done all that was necessary to reach a global audience. Furthermore, CyberGold clearly anticipated that Internet users would access its Web Site and be put on its mailing list. The Web site was programmed to automatically respond to those who accessed it, and CyberGold actively and consciously sought to transmit advertising information to all visitors. Therefore, the court held that CyberGold's contacts were of 'such quality and nature for personal jurisdiction jurisprudence,' as to favor the exercise of jurisdiction.

(7) State of Minnesota v. Granite Gate Resorts, Inc. 568 N.W. 2d 715 (Minn. Ct. App. 1997), aff'd, 576 N.W. 2d 747 (Minn. 1998), the court determined that the Minnesota Attorney General had jurisdiction to prosecute in Minnesota the Nevada defendant that operated the WagerNet Web site for purposes of gambling. Broader jurisdiction, as here, may be exercised with criminal activities conducted over the Internet.

Here the Minnesota Attorney General brought a consumer protection suit alleging deceptive trade practices, false advertising, and consumer fraud. The Nevada Defendant operated a sports wagering web site, on which it represented (incorrectly) that betting through its Internet service was legal. Defendant bragged to its advertisers that their advertisements would be seen across the country, and would be 'accessible to 2 million customers.' Defendant's mailing list included Minnesota residents. During a two-week period, at least 248 Minnesota residents accessed the site, and two Minnesota residents were found to be among the top 500 users of the service. Defendant kept track of access to its Web site and knew that many of its customers were from Minnesota. The Web site warned customers that defendant had the right to sue them in their home state or Nevada, over any disputes regarding their wagering accounts.

WageNet was really operated by Global Gaming Services, ltd., based in the country of Belize. Although the Belize company was not a party defendant to the action the fact that it was a foreign corporation based outside the United States would not have changed the court's analysis of personal jurisdiction.

The court used the Eighth Circuit's five-factor due process test, considering:

(1) the quantity of the contacts;
(2) the nature and quality of those contacts;
(3) the connection of the cause with those contacts,
(4) interest of the state in providing a forum; and
(5) convenience of the parties.

With regard to the quantity of contacts, citing Inset as authority, the court held that by placing advertising on the Internet, defendant knowingly made the Web site available, continuously and indefinitely, to any Internet user in the world, including users in Minnesota. According to the court, it was therefore not unforeseen that defendant would have to defend a suit in Minnesota. The court noted that exercising personal jurisdiction was also warranted because defendant warned its customers that it might sue them in their home forums. The nature and quality of defendant's contacts also favored the exercise of jurisdiction. Defendant maintained a Web site in anticipation of it being accessed and used by any and all Internet users, including Minnesota users. The court characterized these activities as rising to the level of 'promotional activity or active solicitation' sufficient for minimum contacts.

Finally, the court held that the exercise of personal jurisdiction was warranted because defendant's Internet and Web activities were closely connected with the cause, i.e., consumer protection; Minnesota has a strong interest in providing a forum for this type of action; and Minnesota was much more convenient for the parties.

(8) American Network Inc. v. Access America/Connect Atlanta, Inc., 975 F. Supp. 494 (S.D.N.Y. 1997). The district court determined it had personal jurisdiction over a Georgia Internet service provider and denied the motion to transfer the action to a more convenient forum. America Network brought a trademark infringement action against Access America claiming that a mark used by Access America, 'AmericaNet,' infringes the mark American Networks owns, 'American Net.' One service offered by Access America was offered 'across the U.S.' Access America has 7500 customers worldwide, including six in New York. These six customers pay Access America $150.00 per month in the aggregate. Access America sends software and an agreement to sign to new customers. Based on these contacts with New York it was foreseeable to defendant that by publishing the offending trademark on its Web site it would have New York consequences and that the defendant could reasonably anticipate being hauled into court in New York. There was purposeful availment in the New York forum as part of a nationwide market and consequences in the New York forum. The court acknowledged that merely having a Web page in Georgia that was accessible by New Yorkers would not be enough for personal jurisdiction. Here there was personal availment, a nexus between the contacts and the lawsuit and reasonable foreseeability. The motion to transfer was denied because defendant failed to meet its heavy burden of showing that transfer is warranted.

(9) Hall v. La Ronde, 1997 Cal. App. LEXIS 633 (August 7, 1997). The court of appeals reversed the trial court's judgment of dismissal for lack of personal jurisdiction. Hall, a California resident, entered into a contract with LaRonde, a New York State resident. Hall contacted LaRonde by electronic mail. Hall agreed to integrate his software into LaRonde's software package. LaRonde suggested various modifications to Hall's software which Hall made. LaRonde agreed to pay Hall $1.00 for every license of LaRonde's software, incorporating Hall's software, sold. All of the negotiations were conducted by e-mail and telephone. Hall was paid $2,633.60 in payment from LaRonde. The Court of Appeals held that the use of electronic mail and telephone were sufficient to establish minimum contact with California to support personal jurisdiction. The Court noted the speed and ease of electronic communications which has increased the number of transactions that are consummated without either party leaving their office. Here the continuing relationship and continuing royalties contemplated by the contract established more than a random or attenuated relationship.

(10) Telco Communications v. An-Apple-A-Day, 977 F. Supp. 404 (E. D. Va. 1997). The district court determined that defendant's Web page along with the other contacts with Virginia was enough to exercise personal jurisdiction. Here the defendants allegedly posted defamatory press releases regarding plaintiffs on a passive Internet site. The tortious injury was done in Virginia and personal jurisdiction was exercisable under Virginia's long arm statute.

(11) Heroes, Inc. v. Heroes Foundation, 958 F. Supp. 1 (D.D.C. 1996). Here the district court determined that defendants' Web page, soliciting contributions and providing a toll-free telephone number, and using the allegedly infringing trademark and logo, along with other contacts resulted in 'persistent' contact with the District of Columbia permitting the exercise of personal jurisdiction over the defendant. The defendant had also placed an ad in the Washington Post newspaper.

(12) Cody v. Ward, 1997 U.S. Dist. LEXIS 1496 (D. Conn. Feb. 4, 1997). Here the court determined the California defendants telephone and email transmissions to a Connecticut plaintiff for the purpose of inducing the plaintiff to purchase securities was enough to exercise personal jurisdiction.

4.3 Systematic and Continuous or Persistent Contact

(1) CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996). Here the Sixth Circuit held that personal jurisdiction under Ohio's long-arm statute was established over a Texas CompuServe subscriber based on his signing a subscriber agreement with CompuServe and having loaded shareware into the CompuServe system in Ohio for others to use and purchase. The case arose from Patterson's claims of trademark infringement against CompuServe. Patterson placed, marketed and sold his software exclusively on CompuServe. During the course of his relationship with CompuServe Patterson electronically transmitted thirty-two master software files to CompuServe, which CompuServe stored and displayed to its subscribers. In effect, Patterson used CompuServe as a distribution center in Ohio to market and distribute Patterson's software. Thus, the Court of Appeals reasoned any common law trademarks which Patterson may have by virtue of trademark usage were arguably created in Ohio. The Court of Appeals found that Patterson's relationship with CompuServe was a critical indicator that Patterson had purposefully availed himself of doing business in Ohio. The Court of Appeals concluded that exercising personal jurisdiction over Patterson in Ohio would be reasonable under the circumstances.

(2) EDIAS Software International, L.L.C. v. BASIS International Ltd., 947 F. Supp. 413 (D. Ariz. 1996). Here the district court exercised personal jurisdiction in action concerning advertising and defamatory statements BASIS, a New Mexico company, allegedly sent concerning EDIAS, an Arizona company, over the Internet through e-mail, its Web page, and forums. Here the minimum contracts included Internet use as well as a contract between BASIS and EDIAS and other Arizona customers, and BASIS employees had physically visited Arizona during the course of the business relationship with EDIAS. With these additional activities and contact it was not difficult for the court tot exercise personal jurisdiction over the non-resident defendant.

(3) Blumenthal v. Drudge , 992 F. Supp. 44 (D.D.C. 1998). The district court determined that personal jurisdiction in D.C. over Matt Drudge, a California resident, could be exercised because of:

(1) the interactivity of the Web site between defendant Drudge and D.C. residents;
(2) the regular distribution of the Drudge Report via AOL, email and the World Wide Web to D.C. residents;
(3) Drudge's solicitation of receipt of contributions from D.C residents;
(4) the availability of Drudge's Web Site to D.C. residents 24 hours a day;
(5) defendant Drudge's interview with C-SPAN; and
(6) defendant Drudge's contacts with D.C. residents who provide gossip for the Drudge Report.

Here the Drudge Report was distributed to subscribers by email, Drudge's own Web site, Hotwired magazine and AOL's service. The court determined Drudge had engaged in a persistent course of contact in D.C.

(4) Parks Inn International, Inc. v. Pacific Plaza Hotels, Inc., 5 F. Supp. 2d 762 (D. Ariz. 1998). The parties disputed whether Defendants' advertisements in Internet web sites accessible to Arizona residents - which advertisement used the mark 'park plaza' -constitute, in and of themselves, 'purposeful availment.' The court allowed the plaintiff to conduct discovery on the jurisdictional issue. The defendant objected to plaintiff's interrogatory requesting to identify Arizona residents who visited the Web site, claiming that email addresses do not identify the physical location and/or state from which the email originates. Based on other contacts with Arizona the court concluded that defendants have expressly directed their tortious actions using the allegedly infringing mark to Arizona.

4.4 The Three Category Continuum

Most courts in the United States appear to have adopted and applied the continuum of three case categories to analyze personal jurisdiction questions involving the Internet. The problem is these three categories do not appear to be applied consistently. As the district court noted in Transcript Corp. v. Doonan Trailer Corp.[10] determining whether the minimum contacts for personal jurisdiction exist is not likely to be answered easily in black and white. Rather the greys will dominate and among the greys there will be innumerable shades.

4.5 Worldwide Exposure

The Playboy Enterprises, Inc. v. Chuckleberry Publishing, Inc., 939 F. Supp. 1032 (S.D.N.Y. 1996), case illustrates the scope of jurisdiction relating to Internet and Web activities in a contempt proceeding. It is not a personal jurisdiction case but it speaks to the type of remedies courts may impose on commercial Internet activities. Here the district court granted Playboy's motion for a finding of contempt. It is an important ruling concerning the jurisdiction issues pertaining to Internet. Playboy alleged that the defendant violated a 1981 judgment and injunction order by operating an Internet site from Italy under the PLAYMEN label.

The 1981 court-ordered injunction enjoined the defendant from publishing, printing, distributing or selling in the United States an English language male sophisticated magazine under the name PLAYMEN. The publication of PLAYMEN in Italy is legal. The Internet site made available images of the cover of the Italian PLAYMEN magazine as well as other explicit photographic images from the magazine. They can be accessed at the Internet address 'http://www.playmen.it'. The site address indicates that the computer is in Italy. The PLAYMEN Internet site is available to anyone in the United States.

The primary issue before the court was whether distribution or selling occurred in the United States when it established an Internet site containing pictorial images under the PLAYMEN name. The court retained jurisdiction over the defendant for purposes of enforcing the 1981 injunction. The defendant argued that the injunction did not prohibit Internet publishing since Internet and the World Wide Web did not exist as such in 1981 and were not contemplated or covered by the Order.

The court reasoned that the injunction applies to modern technology because to rule otherwise would allow defendant to contravene the clear intent of the injunction noting that injunctions entered before the recent explosion of computer technology must continue to have meaning.

The contempt order required the defendant to:

(1) either shut down its Internet site completely or refrain from accepting any new subscriptions from customers residing in the United States;

(2) invalidate the user names and passwords to the Internet site previously purchased by United States customers;

(3) refund to United States customers the remaining unused portions of their subscriptions;

(4) remit to Playboy all gross profits earned from subscriptions to its PLAYMEN Pro Internet service by customers in the United States;

(5) remit to Playboy all gross profits earned from the sale of goods and services advertised on its PLAYMEN Internet service to customers in the United States;

(6) revise its Internet site to indicate that all subscription requests from potential United States customers will be denied; and

(7) remit to Playboy its costs and attorney's fees incurred in connection with seeking the contempt order.

The next case is Alton v. Wang, 941 F. Supp. 66 (W.D. Va. 1996). There the district court declined to exercise personal jurisdiction over Wang in a declaratory judgment action brought by Alton to prevent Wang from further interfering with the publication of Alton's book. The publisher for the book was located in Massachusetts. Wang was a Chinese citizen and had never been to Virginia. Wang objected to the publication of the book on the grounds that publication would disclose his trade secrets. Wang sent a series of e-mail messages and letters to Alton in Virginia and Alton likewise sent a number of e-mail messages and letters to Wang from Virginia. The court determined that such repeated correspondence did not satisfy the minimum contacts required for due process. None of Wang's acts took place in Virginia. The economic losses from the delay in publishing the book as a result of the dispute occurred in Massachusetts, not Virginia. No tortious injury occurred in Virginia. Accordingly, the action was dismissed for lack of personal jurisdiction.

The Jolly Hotels and Hobby Lobby Stores cases demonstrate how plaintiffs in the United States are attempting to use Internet activities to extend personal jurisdiction to entities outside the United States. Companies outside the United States need to be sensitive to potential exposure to litigation in the U.S. based on Internet activities.

Several foreign cases reinforce these personal jurisdiction precepts. In Concert Concept, 5 U 659/97 97 O 193/96, Landgericht Berlin (district Court of Berlin), the German court held that a U.S. company was subject to German jurisdiction in a trademark dispute involving an Internet domain name since the domain names are accessible from Germany. Then, in Mecklermedia v. D.C. Congress, Ch. 40, 1 All ER 148 (1997), an American company and its U.S. subsidiary sued a German company under English law for 'passing off.' The court exercised jurisdiction in part based on the defendant's use of the Internet.

4.6 Forum Shopping

The broad jurisdictional exposure raises concerns about forum shopping. Establishing personal jurisdiction based on Internet and Web activities can subject defendants to numerous forums that they would not otherwise be subject, and possible different results as the result of the forum shopping options available.

The United States v. Thomas, 74 F. 3d 701 (6th Cir. 1996), ruling reflects some of these concerns. The Sixth Circuit affirmed the conviction and sentences against Mr. and Mrs. Thomas for their operation of an electronic bulletin board in violation of the Federal obscenity laws. The Thomas's operated their computer bulletin board system from their home in California. It included e-mail, chat lines, public messages, and files that members of the bulletin board could access, transfer and download to their own computers and printers.

The Thomas' purchased sexually explicit magazines and converted pictures from the magazines into computer files stored in the Graphic Interchange Format. To obtain a password to the sexually explicit descriptions of the computer files and other adult material for sale an application had to be completed and approved. A postal inspector in Memphis, Tennessee, using an assumed name, accessed the bulletin board referred to as 'the Nastiest Place on Earth' and downloaded and ordered pornographic materials from the bulletin board.

Based on these materials a search warrant was issued in California and the Thomas's were indicted in Tennessee for various criminal violations for among other claims, for knowingly transporting obscene computer-generated materials interstate commerce. In defense, the Thomas's argued that the federal criminal statute pertaining to trafficking in pornographic materials does not apply to intangible computer files or to computer transmission. The Thomas's contended that the downloaded images were merely an intangible string of bits that only became intelligible after they were decoded.

The Court of Appeals disagreed with the Thomas' argument noting that the manner in which the images moved does not affect their ability to be viewed on a computer screen in Tennessee or their ability to be printed out in hard copy in that distant location the criminal statute was intended to stem the transportation of obscene material in interstate commerce regardless of the means used to effect that end. The jury was properly instructed to apply the community standards of the geographic area where the materials are sent, i.e., Memphis, Tennessee. No need for the court to adopt a new definition of 'community' for use in obscenity prosecutions involving electronic bulletin boards was shown. The ruling does, however, underscore the importance of compliance with the most stringent laws applicable to images generated from a computer system.

The lack of a global 'Lex Internet' is likely to encourage forum shopping. This is especially likely if the rulings around the world related to Internet issues vary greatly from jurisdiction to jurisdiction.

4.7 Need for Lex Internet

Global electronic commerce could be greatly enhanced by having 'harmonious' laws around the world dealing with jurisdiction and other aspects of the Internet and electronic commerce. Global electronic commerce cries out for certainty and uniformity. The world needs a worldwide 'harmonious' legal infrastructure to support commercial activities over the Internet. The world needs a Lex Internet to reap the benefits of electronic commerce on a global basis.

5. Conclusion

Personal jurisdiction may be exercised over non-resident defendants in the United States and internationally based on Internet and Web activities. 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 Internet. The jurisdiction cases fall into three categories. At one end of the spectrum are the cases where a party merely establishes a passive Web site or posts information or advertising on a Web site. The cases at this end of the spectrum do not involve enough activity directed at the forum to allow the forum court to exercise personal jurisdiction. But if 'something more' is involved it is likely that jurisdiction will be exercised over the non-resident defendant. Presence on the Internet could subject e-commerce merchants and Internet users to foreign jurisdiction around the world even if products are not sold in these foreign jurisdictions. In the United States the level of activity that must be involved with the forum for jurisdiction to attach is relatively low. Conducting electronic commerce transactions with customers over the Internet is likely to subject the Internet merchant to personal jurisdiction wherever their customers are located. The more persistent the commercial activities involving such forums the more likely it is that personal jurisdiction in such forums will occur. The potential for worldwide jurisdiction is very likely. The world needs a Lex Internet - a harmonious set of national laws and treaties dealing with the Internet and electronic commerce to provide certainty and uniformity in the face of being subject to worldwide jurisdiction.

Footnotes

1. Blumental v. Drudge, 992 F. Supp. 44, n6 (D..D.C. 1998), citing ACLU v Reno, 929 F. Supp. 824, 830 (E.D. Pa. 1996), aff'd, 117 S. Ct. 2329 (1997).

2. See Hoogiveen & Oosting, 'On-Line Licensing Contracts: the Dutch View On International Licensing Contracts Concluded Through The Internet.' World Intellectual Property Report, 345-46 (October 1998). The authors discuss the desirability of a Lex Internet for contracting on the Internet.

3. See Heliocpteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984).

4. Id at 414 n. 9.

5. Zammit & Herscha, 'International Jurisdiction and Commercial Use of the Internet,' Computer Law Strategist at 1, 6 (September 1998).

6. Id at 1.

7. Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 112 (1987).

8. International Shoe Co. v. Washington, 326 U.S. 310 (1945); Hanson v. Denckla, 357 U.S. 235 (1958).

9. Calder v Jones, 465 U.S. 783 (1985). See Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985); Asahi Metal Indus Co., Ltd. v. Superior Court, 480 U.S. 102 (1987).

10. 1997 U.S. Dist. LEXIS 18687 (N.D. Ill., Nov. 17, 1997)


This is a Work in Progress article published on 30 October 1998.

Citation: Westermeier J T, 'Personal Jurisdiction: Today´s Hot Issue in E-Commerce', 1998 (3) The Journal of Information, Law and Technology (JILT). <http://elj.warwick.ac.uk/jilt/98-3/westermeier.html>. New citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/1998_3/westermeier/>


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