Cases Finding Jurisdiction on the Basis of Internet Contacts
Cases addressing the question of cyber-jurisdiction have gone both ways. Some cases imply that cyber-contacts can form the basis, though perhaps not the sole basis, for jurisdiction.
One of the earliest cases was California Software Incorporated v. Reliability Research, Inc., 631 F. Supp. 1356 (C.D. Cal. 1986), in which a Nevada computer bulletin board operator was held subject to jurisdiction in California because allegedly defamatory messages posted on the board could be accessed in California. However, the case also discussed other contacts between the defendant and California that contributed to the Court's decision to assert jurisdiction. The court stated: "Through the use of computers, corporations can now transact business and communicate with individuals in several states simultaneously . . . . [W]hile modem technology has made nationwide commercial transactions simpler and more feasible, even for small businesses, it must broaden correspondingly the permissible scope of jurisdiction exercisable by the courts."
One of the few truly international jurisdiction cases was Godfrey v. Halam-Baker, reported in the August 13, 1994 edition of The Financial Times. British physicist Laurence Godfrey sued fellow physicist Philip Halam-Baker for defamatory statements allegedly transmitted via the Internet from Germany and Switzerland, and read by colleagues of Godfrey in Britain. Unfortunately for those hoping for guidance in such matters, the case settled out of court in early 1995, leaving the novel jurisdictional and choice of law questions unresolved.
In a criminal case, the operators of a BBS in California were indicted for transporting obscene material in interstate commerce, including child pornography. United States v. Thomas, 74 F.3d 701 (6th Cir. 1996), cert. denied, 117 S. Ct. 74 (1996). Jurisdiction was found to exist in the Western District of Tennessee, because the prosecution was based on materials received from the BBS by a postal inspector in Memphis. The court based its decision on the fact that the material was distributed in Memphis, and that the Memphis community was therefore affected by the material. The precedential value of the Thomas case to future civil litigation involving on-line jurisdiction is uncertain, both because it is a criminal case, and because it involves child pornography, an area in which courts do not want to seem "soft."
CompuServe v. Patterson, 89 F.3d 1257 (6th Cir. 1996) is perhaps the most often-cited case in this area. A Houston attorney, software developer and CompuServe user had entered into an agreement with the on-line service for the distribution of his shareware. He sued CompuServe, alleging that it was infringing on some of his common law trademarks. CompuServe initiated a declaratory judgment action in the Federal District Court in Ohio, seeking a judgment of no infringement. The District Court dismissed the case, finding that the dispute did not arise directly out of Patterson's user agreement with CompuServe, and that Patterson did not otherwise have sufficient contacts with Ohio to justify asserting jurisdiction. (Patterson had never visited Ohio, and had entered into all agreements with CompuServe on-line from his computer in Texas.) The Court of Appeals for the Sixth Circuit, however, reversed and remanded the case. The Court found that sufficient contacts did exist to assert jurisdiction because Patterson had entered into contracts with CompuServe (albeit from his computer in Houston) that specifically stated they were to be governed by Ohio law, and because Patterson had "purposefully availed" himself of the privilege of doing business in Ohio by transmitting his software to CompuServe's systems located in Ohio. The court specifically stated that it found jurisdiction to exist because Patterson had both entered into a contract with CompuServe in Ohio and had put his wares into Ohio's stream of commerce. The court did note, however, that it was not prepared to hold that jurisdiction would exist for CompuServe to sue any regular subscriber in Ohio, nor could Patterson be sued in any state in which his software was purchased or used.
A fundamental question regarding jurisdiction on the Internet is whether a defendant's mere presence on the Internet is sufficient for asserting jurisdiction. Some of the early (and even some of the later) cases answer this question in the affirmative, but as will be seen, the current trend appears to be toward a more nuanced approach.
Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996), was one such ruling. In this case, Inset sued Instruction Set (ISI), which had set up a web site called "inset.com," alleging that the web site's domain name infringed upon Inset's trademark. The Court found that asserting jurisdiction over the defendant was consistent with Due Process concerns because the availability of the web site in Connecticut (as well as the other forty-nine states) indicated to the Court that ISI was actively soliciting business in Connecticut.
Maritz, Inc. v. CyberGold, Inc., 947 F. Supp. 1328 (1996), a federal case in Missouri, took an approach similar to the Inset court. In this case, CyberGold maintained a web site which advertised its upcoming (not yet functional) on-line service (much as in Hearst v. Goldberger, a case in which jurisdiction was found to be lacking – see Cases Which Hold that Internet Contacts are Insufficient to Convey Jurisdiction). The site provided web surfers with information about the new service, and automatically sent additional information to any user who clicked on a link requesting more information. The Court found that this was sufficient to confer jurisdiction, since "CyberGold has consciously decided to transmit advertising information to all internet users, knowing that such information will be transmitted globally." As in the Inset case, the CyberGold Court never considered the extent, if any, to which CyberGold had purposefully availed itself of Missouri's laws, nor did it consider the fact that any and every web site (even if it contained no links or interactivity whatsoever) transmits information globally. Under this reasoning, it would appear that CyberGold would be subject to suit anywhere in the world that someone had read the web site and requested more information.
For these reasons, it is likely that the Maritz case, as well as the Inset case and other cases (such as Heroes, Inc. v. Heroes Foundation, 958 F. Supp. 1 (D. D.C. 1996)) which suggest that the existence of a web site alone is sufficient to confer general jurisdiction over the web site operator, will prove to be detours on the road to a coherent view of personal jurisdiction on the Internet. More recent cases tend to take a more nuanced approach, which, as the following cases will show, entail examining whether the cause of action arose from the web site, whether the web site is "active" or "passive," and the degree to which the web operator purposely availed themselves of the laws of the forum in which jurisdiction is asserted. Still, not all courts are following what appears to the be the dominant trend. For instance, in Telco Communications v. An Apple a Day, 977 F. Supp. 404 (E.D. Va. 1997), a federal court in Virginia expressly adopted the Inset view, stating that "the Court finds that posting a Web site advertisement or solicitation constitutes a persistent course of conduct, and that two or three press releases rise to the level of regularly doing or soliciting business. . .." In that case, the defendant had only placed passive advertising and press releases on their web site. A more moderate approach was taken in Digital Equipment Corporation v. AltaVista Technology, Inc., 960 F. Supp. 456 (D. Mass 1997). In that case, the Court expressly declined to determine whether any web activity, absent commercial use, advertising, sales, or contracts within the forum state, could be sufficient to assert personal jurisdiction. Instead, the Court determined that jurisdiction was appropriate in this case based upon a combination of factors: the defendant had entered into a contract with the plaintiff, based in Massachusetts, which included a clause that stated it would be governed by Massachusetts law; it was this contract (and the alleged breach of it) that gave rise to the litigation; the defendant's web site was accessible in Massachusetts; the defendant solicited advertising and its own products in Massachusetts; the defendant had made sales in Massachusetts through its web site; and the defendant was alleged to have caused trademark infringement and confusion in Massachusetts.
Courts have not been hesitant to find jurisdiction in so-called "cybersquatting" cases. These cases involve individuals who deliberately register a domain name similar to the trademark of another entity, with the goal of turning a quick profit by selling the domain name to the trademark holder. In these situations, the cybersquatter may have no contacts whatsoever with the jurisdiction in which the trademark holder sues, and may in fact not be using the domain name for anything at all. However, courts have generally found that if the trademark holder brings suit in a jurisdiction in which it does business, the conduct of the cybersquatter will be held to have been specifically directed toward that jurisdiction, since the purpose of the conduct was to extract a payment from the trademark holder. Panavision v. Toeppen, 938 F. Supp. 616 (C.D. Cal. 1996). The Ninth Circuit's decision in the appeal of Panavision, 141 F.3d 1316 (9th Cir. 1998), does a particularly good job of laying out the standards for personal jurisdiction as they apply in the Internet context. First, the Court noted that the mere fact that a defendant maintains a web site that is accessible in a particular jurisdiction, without more, is insufficient to convey general jurisdiction, which, under the standards of Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104 S. Ct. 1868 (1984), requires "substantial" or "continuous and systematic" activities in the jurisdiction. This finding meshes nicely with the decisions finding no jurisdiction in McDonough v. Fallon McElligot, Inc. and S.F Hotel Company, L.P. v. Energy Investments, Inc., discussed in Cases Which Hold that Internet Contacts are Insufficient to Convey Jurisdiction. But the Ninth Circuit did find "specific" jurisdiction, which requires 3 elements: purposeful availment by the defendant of the privilege of conducting activities in the forum, a claim arising out of the defendant's forum-related activities, and "reasonableness" in the exercise of jurisdiction. Contrasting the Cybersell case (in which jurisdiction was found to be lacking, see Cases Which Hold that Internet Contacts are Insufficient to Convey Jurisdiction), the Court found that the purposeful availment requirement was met by the fact that Toeppen allegedly intended to extort money from Panavision, which he knew was based in California. The same reasoning lead to the conclusion that the case had arisen out of Toeppen's forum-related activities. Finally, the Court found, listing seven different factors, that the burden on Toeppen to litigate in California was not unreasonable. (No doubt, the Court's sympathies towards Toeppen were not enhanced by Toeppen's letter to Panavision, which allegedly stated that he had the right to use the Panavision domain name, and that "If your attorney has advised you otherwise, he is trying to screw you. He wants to blaze new trails in the legal frontier at your expense. Why do you want to fund your attorney's purchase of a new boat (or whatever) when you can facilitate the acquisition of ‘Panavision.com' cheaply and simply instead?")
In another "cybersquatting" case, the manufacturer of Zippo lighters, Zippo Manufacturing Co., sued an Internet news service which had registered the domain names "zippo.com", "zippo.net", and "zippo-news.com." Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997). The Court held that jurisdictional questions on the Internet should be considered on a sliding scale, with passive sites that merely post information at one end (the end least appropriate for asserting jurisdiction), and more interactive sites over which business is conducted at the other end (where jurisdiction is appropriate). In addition, the Court noted that it was more appropriate to assert jurisdiction when the activity alleged to confer jurisdiction is also the activity about which the lawsuit is concerned. Based on this reasoning, the Court found that it was appropriate to assert jurisdiction over Dot Com, because it had actually conducted business with thousands of Pennsylvania residents.
Hasbro, Inc. v. Clue Computing, Inc., 994 F. Supp. 34 (D. Mass. 1997) appeared at first glance to be another cybersquatting case: Hasbro, the maker of the well-known "Clue" board game, sued to regain control of the domain name "clue.com," which was being used by Clue Computing. However, Clue Computing was a legitimate business that had chosen to operate under the name Clue and to use the domain name "clue.com" for reasons wholly unrelated to the game. Clue Computing operated out of Colorado, but Hasbro brought suit in federal court in Massachusetts. Adopting reasoning similar to that of the Zippo case (and citing to the Zippo decision), the Court concluded that it was appropriate to exercise jurisdiction because the trademark infringement case did arise directly from the web site itself, because Clue Computing had purposely availed itself of Massachusetts's laws by using an interactive web site that solicited business from Massachusetts (the site proclaimed that Clue would travel anywhere to service clients, including Antarctica), because Clue had actually earned 35-50% of its 1995 revenues from a client based in Massachusetts, and because Clue advertised on its web site that it had worked for this Massachusetts-based company.
American Network, Inc. v. Access America/Connect Atlanta, Inc., 975 F. Supp. 494 (S.D.N.Y. 1997) walks a fine line between the expansive view of jurisdiction found in cases such as Inset and CyberGold, and the more extensive analysis given by courts in the cybersquatter cases. In this case, the dispute was over the domain name "america.net." The defendant was based in Georgia, and operated its america.net site from a server in Georgia. The Court did not state that the existence of the potentially infringing site alone was sufficient to convey jurisdiction, but instead cited the fact that the defendant had additional contacts with New York, in that it has six New York subscribers for its service, had sent software and agreements to these New York subscribers, and was collecting a total of $150 per month from these subscribers. Accordingly, the New York federal court determined that it did have jurisdiction.
Although the case did not find that Internet contacts alone were sufficient to create jurisdiction, Playboy Enterprises, Inc. v. Chuckleberry Publishing, Inc., 939 F. Supp. 1032 (S.D.N.Y. 1996), provides some interesting insights into the issues surrounding jurisdiction on the Internet. This case stemmed from a fifteen year old injunction which had prevented an Italian publisher from publishing or distributing in the United States any of its "male entertainment" magazines and products under the name "PLAYMEN." In 1996, Playboy discovered that the Italian company had created an Internet site featuring the PLAYMEN name which was accessible from the United States and offered images from the PLAYMEN magazine for download by users. The Court did not need to decide whether it would have jurisdiction based solely on the Internet contacts, because the case was brought as a contempt motion in the fifteen year old case, in which jurisdiction had already been established. The Court decided that the fact that the Internet was not contemplated by the parties at the time of the original order was irrelevant, because the original injunction was sufficiently broad so as to prohibit the United States distribution of all PLAYMEN products, regardless of the medium by which they were distributed. The Court also found that the fact that the images were residing only on servers in Italy, and had to be "pulled" to the United States by users was irrelevant, because the publisher's invitation to United States users to download images was, in itself, a violation of the terms of the injunction.
Cases in which a state is the plaintiff present a slightly different twist, as policy issues, tacitly or explicitly, may play a greater role in courts' decisions. At least one state has taken an aggressive approach to jurisdiction on the Internet. The Attorney General of Minnesota issued a policy statement that "Persons outside of Minnesota who transmit information via the Internet knowing that such information will be disseminated in Minnesota are subject to jurisdiction in Minnesota courts for violations of state criminal and civil laws." However, in a memorandum discussing the legal basis for the policy, the Attorney General only cites criminal precedents, most particularly a Minnesota statute which states that a person may be prosecuted under Minnesota criminal laws if he or she "Being without the state, intentionally causes a result within the state prohibited by the criminal laws of this state." The memorandum seems to be concerned primarily with asserting jurisdiction over gambling which occurs on the Internet. A complete copy of the Minnesota Attorney General's memorandum on Internet jurisdiction is available at their web site, and can be accessed by clicking here. The policy was recently tested in court. In Minnesota v. Granite Gate Resorts, Inc., 65 USLW 2440, 1996 WL 767431 (D. Minn. Dec. 10, 1996), a court in Minnesota ruled that it did have jurisdiction over an Internet service provider based in Las Vegas, Nevada which advertised for an on-line gambling service based in Belize called WagerNet. Relying on the Inset case, the Court found that Granite Gate had deliberately caused its advertisements to be accessible in Minnesota, and deliberately solicited business from Minnesota customers by virtue of the fact that its site on the World Wide Web was designed to attract business from all over the world. Based on these facts, the court found that Granite Gate had purposely availed itself of the privileges of conducting business in Minnesota, and could therefore reasonably have anticipated being subjected to the Minnesota's laws and jurisdiction. Citing the later Zippo, Chuckleberry, and CyberGold cases (discussed above), the Minnesota Court of Appeals affirmed, 568 N.W.2d 715 (Minn. Ct. of App. 1997). The case came before the Minnesota Supreme Court, which did not issue an opinion, but affirmed. 576 N.W.2d 747 (Minn. Sup. Ct. 1998). However, the Supreme Court did note that its members were evenly divided on the issue, suggesting that the Attorney General's string of wins throughout the Minnesota court system may not be as unassailable as would appear at first glance.
A particularly interesting case is People by Vacco v. Lipsitz, 663 N.Y.S.2d 468 (N.Y. Sup. 1997), a criminal case in which a defendant in New York was charged with using fraudulent sales practices to sell magazine subscriptions over the Internet. Since the defendant operated his business in New York, he could not successfully argue that the New York courts lacked jurisdiction over him personally. The defendant therefore contended that the State of New York had no power to pass or enforce laws which regulate the Internet, since, under the Commerce Clause of the U.S. Constitution, the federal government has the exclusive right to regulate interstate commerce, and any activities taking place over the Internet are of an inherently interstate character. In other words, he conceded that the court had personal jurisdiction, but argued that it lacked subject matter jurisdiction. The court rejected this argument, finding that the consumer protection laws at issue "were not designed nor aimed at regulating conduct outside this State's borders." Accordingly, the court decided that "there is no compelling reason to find that local legal officials must take a ‘hands off' approach just because a crook or a con artist is technologically sophisticated enough to sell on the Internet . . .. It should be sufficient that the laws sought to be applied, even if they might tangentially implicate interstate commerce, are ‘media neutral' and otherwise pass constitutional muster." The Court explicitly considered the decision of a New York federal court, issued just five days earlier, in which a New York statute criminalizing the dissemination of obscene materials to minors over computer systems was held unconstitutional under the Commerce Clause. (See American Libraries Association, et. al., v. Pataki, et. al., discussed in Cases Which Hold that Internet Contacts are Insufficient to Convey Jurisdiction). The Lipsitz Court distinguished that case on its facts because it involved a statute that was explicitly directed at regulating activities on the Internet.
It is becoming increasingly clear that, in appropriate circumstances,
the fact that a defendant never physically had any presence in a particular
locale is not fatal to the proper exercise of a court's jurisdiction.
For instance, in Hall v. LaRonde, 66 Cal. Rptr.2d 399 (1997), a California
appellate court observed that "The speed and ease of such [electronic]
communications has increased the number of transactions that are consummated
without either party leaving the office. There is no reason why the requisite
minimum contacts cannot be electronic." The court therefore held that
it did have jurisdiction over a New York-based defendant who had entered
into a contract with a California-based plaintiff by e-mail, and who had
agreed to make royalty payments to the plaintiff in California on an ongoing
basis.
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