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Course: Computers Outline Winter 2002
School: unknown
Year: 2002
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Personal Jurisdiction Based on an Internet Web Site

        Personal jurisdiction should be applied carefully to web pages in order to promote progress. Granting personal jurisdiction based on the presence of an Internet web site is potentially problematic as this might lead to world-wide personal jurisdiction for people and businesses that maintain a web site on the Internet. Therefore, exercising personal jurisdiction on the basis of merely maintaining a web site on the Internet, a medium that by its very nature defies territorial boundaries, is contradictory to the very principles of Due Process inherent in any exercise of personal jurisdiction. Furthermore, allowing the exercise of personal jurisdiction based on the existence of a web site might provide a strong disincentive on Internet use, thus limiting the freedom of use and retarding the development of Internet web pages. Many, if not all, of the numerous District Court and Circuit Court cases that deal with personal jurisdiction on the Internet have acknowledged this fear.

        However, the Internet is quickly becoming a powerful communications and business tool due to its virtually unrestricted freedom of use. The freedom of use inherent in the Internet also means that there are few regulations and laws that prevent the misuse of this powerful tool. Consumers and businesses must be protected from unscrupulous individuals that conduct business over the Internet. Thus, it is important that the courts be allowed to exercise personal jurisdiction over a non-resident defendant who maintains an Internet web page when appropriate.

        This paper will discuss a framework of analysis that has been established through recent cases to deal with the exercise of personal jurisdiction based on an Internet site. This framework focuses on the "interactivity" of web site as the determining factor in deciding whether the exercise of personal jurisdiction is appropriate. Although this framework has some appeal, it bears very little relation to the reality of the Internet. The framework amounts to a reactionary response to the problem of applying old precedent to a new technology. Focusing on interactivity will merely retard the development of new technology on the internet. Instead, decisions regarding personal jurisdiction should focus more on the real world consequences of maintaining a particular web site on the internet, particularly in the field of trademark infringement.

I) Introduction to the Internet and Web Page Technology

        The Internet has quickly developed into a "decentralized, global medium of communications."1 The most popular interactive use of the Internet is know as the "World Wide Web". The World Wide Web allows users to remotely access a computer. Users can then view the contents of, and even copy data from, that computer via the use of a "web page" or "web site".

        Typically, individuals, institutions and corporations maintain web pages on the Internet. A web page is physically located on someone's host computer (often called a "server"). Web pages can be accessed by other individuals who are connected to the host computer via the Internet. Once a web page is accessed, the user can gather information from the web page and, in some instances, retrieve computer files. If the web page is coupled with some sort of communications interface, such as "online chat" or "e-mail", a form of 2-way information exchange can occur.

        Internet users access web pages through the web pages' domain names. A domain name usually has some connection or bears some relationship to the content of the web site to which it refers. This is particularly desirable of web pages maintained by corporations who want users to easily predict the domain name of the corporation's web site.2 Users of the Internet need not always know the domain name of the web page they wish to access. This is because there are numerous "search engines" available on the Internet that allow users to search for web pages based on topic, key-words and content.

II) Doctrines in the exercise of personal jurisdiction.

        Personal jurisdiction is absolutely required, along with subject matter jurisdiction, before a court can adjudicate a case. To determine if personal jurisdiction exists over a defendant, the court must apply a two-step analysis. The court must first determine if the forum state's long arm statute is applicable, and subsequently, whether the exercise of personal jurisdiction comports with the Due Process Clause of the 14th Amendment of the United States Constitution.3

        State long-arm statutes essentially dictate whether the court can exercise personal jurisdiction over a non-resident defendants. However, the exercise of personal jurisdiction must abide by the restrictions of the Due Process Clause. Long-arm statutes are often coextensive with the Due Process Clause, although some states do impose some additional requirements.4

            A) The Due Process Clause limits the exercise of personal jurisdiction.

        The Due Process Clause places Constitutional limits on the exercise of personal jurisdiction. The courts have determined that there are two types of personal jurisdiction that can be asserted over a defendant: specific personal jurisdiction and general personal jurisdiction. Which type of personal jurisdiction is asserted depends on the specifics of the case.

                        1) General personal jurisdiction.

        Courts may assert general personal jurisdiction only where the non-resident defendant maintains routine, continuous, or systematic business contacts in the forum.5 In situations where the nature of the business contacts rise to the level necessary for general jurisdiction, the events that give rise to the suit need not have any connection with the business contacts for the exercise of personal jurisdiction to be appropriate. The extent of business contacts with the forum state required for the exercise of general jurisdiction is much greater than what is required for the exercise of specific jurisdiction.6

        It is very doubtful that the mere transfer of information over the Internet via a web site can ever be sufficient to establish the business contacts necessary for general personal jurisdiction.7 However, at least one case has held that an internet web page can contribute, in combination with many other activities, toward a finding of general jurisdiction.8

                        2) Specific personal jurisdiction.

        Specific personal jurisdiction over a non-resident defendant is exercised when the cause of action arises out of the defendant's forum-related activities. The Due Process Clause places limitations on the exercise of specific personal jurisdiction. These limitations serve to protect the rights and interests of non-resident defendants.

        A non-resident defendant cannot be sued in a forum unless that defendant has established "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice."9 Inherent within the minimum contacts test is the notion that the defendant must have "purposely availed itself of the privileges of conducting activities within the forum State." and that the exercise of jurisdiction is reasonable under the circumstances.10

        The Supreme Court further refined the concept of purposeful availment by indicating that merely placing a product into the "stream of commerce" was not an act purposely directed toward the forum state and, therefore, was insufficient to fulfill the requirement of purposeful availment.11

III) Most courts determine whether personal jurisdiction is proper based on an internet site by examining the site's level of interactivity.

        The Court in Zippo Manufacturing Co. v. Zippo Dot Com, Inc.,12 established a system whereby the level of interactivity of a Internet site is the determinative factor in deciding whether the exercise of personal jurisdiction is appropriate. In Zippo, the plaintiff alleged trademark dilution and infringement based on the defendant's internet site domain name.13 In determining whether the exercise of jurisdiction based on the Internet site was proper, the court devised a system based on three basic types of Internet sites:

1) Passive: where the level of interactivity is low and information is merely posted on the site and made available to those who are interested. Personal jurisdiction based on the site is not proper.
2) Active: where the site is highly interactive and is used to enter into contracts and conduct business with residents of the jurisdiction over the Internet. Personal jurisdiction based on the site is proper.
3) Middle ground: where the site occupies some middle ground where the siit is not entirely passive but it has not been used to transact business. In these cases, the exercise of jurisdiction is determined by evaluating the level of interactivity of the internet site.
14

Most courts follow the reasoning of Zippo and use this system based on site interactivity to decide issues of personal jurisdiction.

        Many courts decline to find jurisdiction based on a purely "passive" web site.15 One typical case that exemplifies this type of reasoning with regards to passive web sites is Cybersell, Inc. v. Cybersell, Inc.16

        The Cybersell case involved a trademark infringement action based on a web site's domain name. The Court denied the exercise of personal jurisdiction based solely on the Defendant's web site. In denying personal jurisdiction, the Court noted that the web site was the only contact the Defendant had with the forum state and that the web site was not interactive, but rather contained only advertisements. Furthermore, the court noted that no forum residents accessed the web site other than the plaintiff and that the defendant entered into no contracts in the forum state. Therefore, the Circuit Court held that merely using the "Cybersell" trademark on an essentially passive web site did not constitute sufficient minimum contacts to establish purposeful availment.

 

        Most courts will find personal jurisdiction appropriate where the site was clearly "active" and was used to transact business.17 One typical case that exemplifies this type of reasoning with regards to active web sites is CompuServe Inc. v. Patterson.18

        The court in CompuServe held that personal jurisdiction over the defendant based on communications conducted over the Internet was appropriate. Compuserve involved a trademark infringement action based on a contract (a shareware registration agreement) that was negotiated between the plaintiff and the defendant using e-mail and the transfer of files from the defendant to the plaintiff's web site. After the contract was signed, CompuServe began selling a product similar to that of the plaintiff. The plaintiff, Patterson, got upset, and sent an e-mail to Compuserve stating that CompuServe was infringing his trademark. CompuServe asked for a declaratory judgment that it was not infringing on the defendant's trademark. The court found that the defendant's Internet contacts with the plaintiff and the residents of Ohio were not fortuitous, but rather a purposeful availment of the laws of Ohio and its commercial market. Therefore, the court in Compuserve held that the existence of a contract negotiated over the internet, in combination with the defendant's use of the internet as a marketing tool for its products, provided a  sufficient basis for the exercise of personal jurisdiction over the defendant.

        Those courts that have addressed internet sites that fall into the "middle ground" have reached varying results. There is little common analysis other than an effort to measure the illusive variable of "interactivity".19 One typical case that exemplifies the type of reasoning involved in trying to asses the interactivity of a web site that falls in this middle ground is Bensusan Restaurant Corp. v. King.20

        The Bensusan case involved a trademark infringement action brought by the Blue Note jazz club in New York City against a Missouri night club of the same name. The trademark infringement action was based on the contacts provided by a web site that is accessible to the general public and contains ample use of the "Blue Note" trademark, detailed information about the nightclub, a calendar of events, ticketing information and a telephone number for purchasing tickets by phone. The Court held that maintaining the web site in question, without something more, is not an act purposely directed toward the forum state. Therefore, the exercise of specific personal jurisdiction is improper. The District Court noted that residents of New York would have to take "several affirmative steps" in order to access the offending web site, although the steps required would be no more than are required to access any other web site. Furthermore, a consumer would have to telephone the box office in Missouri to purchase tickets and then travel to the club in Missouri in order to retrieve the tickets to the shows.

        The District Court reasoned that "the mere fact that a person can gain information on the allegedly infringing product is not the equivalent of a person advertising, promoting, selling or otherwise making an effort to target its product in [the forum state]". Therefore, the District Court analogized to the "stream of commerce" cases and held that there was an insufficient basis for the exercise of personal jurisdiction over the defendant since the defendant did not purposely avail itself of the laws of the forum state. The Second Circuit affirmed the District Court's holding on appeal. However, unlike the District Court, the Circuit Court did not address due process issues. Instead, the Circuit Court's holding focused exclusively on the reach of New York's long arm statute. Also of import: web page indicated that it was "created to provide information for Columbia, MO area individuals only" and no national toll-free # was indicated.

IV) Discussion: Recurring theme in cases: "Interactivity" of web site as determining factor in finding of personal jurisdiction.

        As conducting serious business transactions over the Internet becomes commonplace, the concept of personal jurisdiction must keep pace in order to protect the rights of consumers and businesses. The cases and articles I have encountered are fixated on the notion that the "interactivity" of the web site is a crucial determining factor in finding personal jurisdiction (originally discussed in the often cited case of Zippo Mfg. Co. v. Zippo Dot Com, Inc.). The more interactive technologies a site uses and the more people that access the site, the more likely the court will find jurisdiction. Therefore, the majority of courts and commentators all seem to agree on the following framework: 1) that a purely passive web site should not be sufficient for the finding of personal jurisdiction, 2) An active site that has been used to conduct "business" in the forum should be sufficient and 3) Any other situations that occur should be analyzed based on the interactivity of the web site.

        Focusing on interactivity ignores the global nature of the internet and retards the development of the Internet as a business tool. One cannot deny that a clear established doctrine outlining when jurisdiction should be found based on an internet web site would be beneficial to the ongoing progress of the Internet as a business tool. However, courts should not focus on the interactivity, and consequently the technology used, in the web site as a determinant of appropriateness for a finding of personal jurisdiction. Doing so will only lead to a reactionary response that will stifle the use of new technology in web sites and will promote overall fear of conducting business on the internet. In fact, the current scheme focusing on interactivity has prompted many commentators to suggest that businesses and individuals limit the interactivity of their web sites by including all sorts of disclaimers and filters and by specifically excluding the use of certain interactive communication technologies in order to avoid the imposing threat of litigation. However, this is nothing more than reactionary response to a perceived threat of litigation.

        Courts should instead base their findings of personal jurisdiction on the actual consequences of the activities conducted through the respective web sites. Although a web site that was clearly used to transact business in the forum state should always be sufficient to allow personal jurisdiction, in all other situations the interactivity of a web site simply should not play a determining role. Otherwise one will encounter perverse situations such as that in 3D Systems, Inc. v. Aarotech Laboratories, Inc.,21 where the first corporation had a purely passive web site while the second corporation had an e-mail based interactive web site accessible in the forum state and only the latter was subject to personal jurisdiction. Particularly in cases involving trademark infringement, the interactivity of the web site should not be a crucial determining factor. In many situations, a purely passive web site that is accessed by numerous individuals within a state and makes ample use of the offending trademark can be more harmful that a highly interactive web site that is accessed by no one in the state and which goes to great lengths not to be associated with the trademark in question.

        Courts should adopt a strategy that focuses on the consequences of the Internet activities such as in Maritz v. Cybergold,22 which involved (gasp!!) the defendant's essentially passive web site. The Court found personal jurisdiction over the defendant based on the state's long arm statute and Due Process requirements. Maritz involved a trademark infringement and unfair competition action. The Court focussed on the fact that the web site had been accessed by numerous residents of the state where the plaintiff was located and that therefore, the tortious nature of the trademark infringement would be felt in the state. Thus, although the Court addressed the issue of contacts with the forum states, it focused on the consequences of those contacts rather than purely on the nature of the contacts. A few cases in the trademark arena have followed such an approach as have a few cases involving libelous actions.23

V) Conclusion.

        Fear of global jurisdictional consequences dictate that courts proceed with delicacy in addressing personal jurisdiction based on a web site. On the other hand, the Internet is quickly becoming bazaar for business and the consumer must be protected. Further, the sooner we have a concrete and clear doctrine defining the limits of personal jurisdiction, the sooner the hackers can proceed with setting up web pages that promote e-commerce. However, the current trend promoted by both judges and commentators, of focusing on the interactive nature of the web site in question rather than the actual "nature" of the contacts relative to their consequences, simply promotes the stagnation of business development over the internet.

        A finding of personal jurisdiction requires that the defendant must have "purposely availed itself of the privileges of conducting activities within the forum State." and that the exercise of jurisdiction is reasonable under the circumstances.24 This does not not necessarily mean that the interactivity of a web site be analyzed, but rather, that the nature of the contacts via the internet be carefully scrutinized, including their consequences.

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1. Andrew E. Costa, Minimum Contacts in Cyberspace: A Taxonomy of the Case Law, 35 Hous. L. Rev. 453, 463 (1998) (quoting ACLU v. Reno, 929 F. Supp. 824, 831 (E.D. Pa. 1996).

2. Id. at 464.

3. See Core-Vent Corp. v. Nobel Industries, 11 F.3d 1482, 1484 (9th Cir. 1993).

4. The NY long arm statute is typical: McKinney's CPLR S 302: Personal jurisdiction by acts of non-domiciliaries:
(a) Acts which are the basis of jurisdiction.  As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:
  1. transacts any business within the state or contracts anywhere to supply goods or services in the state;  or
  2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act;  or
  3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of
 character arising from the act, if he
   (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
   (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce;  or
  4. owns, uses or possesses any real property situated within the state.

 

5. See Helicopteros Nacionales de Columbia S.A. v. Hall, 466 U.S. 408 (1984).

6. See  Keeton v. Hustler Magazine, Inc., 465 U.S. 770.

7. See California Software, Inc. v. Reliability Research, Inc., 631 F.Supp. 1356, 1360-61 (C.D. Cal. 1986).

8. See Haelan Products, Inc. v. Beso Biological Research, Inc., 43 U.S.P.Q.2d 1672 (E.D.La.1997).

9. See International Shoe Co. v. Washington, 326 U.S. 310 (1945).

10. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980): Hanson v. Deckla, 357 U.S. 235 (1958).

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

12. Zippo Manufacturing Co. v. Zippo Dot Com, Inc.952 F.Supp. 1119 (W.D.Pa.1997).

13. See  Id. at 1121.

14. See  Zippo, supra note 12 at 1124.

15. See Cybersell, Inc. v. Cybersell, Inc., 103 F.3d 414 (9th Cir. 1997); Graphic Controls Corp. v. Utah Medical Products, 1997 WL 276232 (W.D.N.Y.1997), aff'd 149 F.3d 1382 (Fed.Cir.1998); IDS Life Ins. Co. v. SunAmerica, Inc., 958 F.Supp. 1258, 1268 (N.D.Ill.1997), vacated in part on other grounds, 136 F.3d 537 (7th Cir.1998); Patriot Systems, Inc. v. C-Cubed Corp., 21 F.Supp.2d 1318 (D.Utah 1998); No Mayo- San Francisco v. Memminger, 1998 WL 544974 (N.D.Cal.1998); CFOs 2 Go, Inc. v. CFO 2 Go, Inc., 1998 WL 320821 (N.D.Cal.1998); SF Hotel Company v. Energy Investments, 985 F.Supp. 1032 (D.Kan.1997); Weber v. Jolly Hotels, 977 F.Supp. 327, 333 (D.N.J.1997); Smith v. Hobby Lobby Stores, Inc., 968 F.Supp. 1356 (W.D.Ark.1997); Transcraft Corp. v. Doonan Trailer Corp., 45 U.S.P.Q.2d 1097, 1997 WL 733905 (N.D.Ill.1997); Hearst Corp. v. Goldberger, 1997 WL 97097 (S.D.N.Y.1997).

16. Cybersell, Inc. v. Cybersell, Inc., 103 F.3d 414 (9th Cir. 1997).

17. See CompuServe Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996); Zippo, supra note 12 at 1125-26 (defendant formed contracts with approximately 3,000 individuals as well as several Internet access providers in the forum state); Thompson v. Handa- Lopez, Inc., 998 F.Supp. 738 (W.D.Tex.1998) (defendant operated casino game through an Internet site and entered into contract with plaintiff to gamble).

18. CompuServe Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996).

19. See Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996), aff'd, 126 F.3d 25 (2d Cir. 1997);GTE New Media Services Inc. v. Ameritech Corp., 21 F.Supp.2d 27  (D.D.C.1998); Vitullo v. Velocity Powerboats, Inc., 1998 WL 246152  (N.D.Ill.1998); Edberg v. Neogen, 17 F.Supp.2d 104 (D.Conn.1998); Scherr v. Abrahams, 1998 WL 299678 (N.D.Ill.1998); Superguide Corp. v. Kegan, 987 F.Supp. 481 (W.D.N.C.1997);  E-Data Corp. v. Micropatent Corp., 989 F.Supp. 173 (D.Conn.1997); CD Solutions v. Tooker, 965 F.Supp. 17 (N.D.Tex.1997); Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1328 (E.D.Mo.1996).

20. Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996), aff'd, 126 F.3d 25 (2d Cir. 1997).

21. 3D Systems, Inc. v. Aarotech Laboratories, Inc., et.al., 160 F.3d 1373 (Fed. Cir. 1998).

22. Maritz v. Cybergold, 947 F.Supp. 1328 (E.D.Mo 1996).

23. See Panavision v. Toeppen, 141 F.3d 1316 (9th Cir.1998) (trademark infringement case); Blumenthal v. Drudge, 992 F.Supp. 44 (D.D.C.1998) (defamatory statements on Internet site); Telco Communications v. An Apple A Day, 977 F.Supp. 404 (E.D.Va.1997) (defamatory statements on Internet site); EDIAS Software v. BASIS International, 947 F.Supp. 413 (D.Ariz.1996) (defamatory statements on Internet site).

24. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980): Hanson v. Deckla, 357 U.S. 235 (1958).

 

 

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