Personal Jurisdiction and the Internet
By Steven P. Means
Over the last few years, the Internet has revolutionized the way the
world does business. The Internet - described as "an international
network of interconnected computers, currently used by approximately 40
million people worldwide"1 now allows
businesses to transcend traditional geographical boundaries and market
themselves worldwide via cyberspace. As one writer states:
"The Internet has been heralded ... as the ultimate marketing tool of
the computer age. Now all a company has to do is set up an electronic
'page' on the Internet and potential customers in the millions may
come... The cost of an Internet site can be a fraction of other
advertising channels."2
Can a Wisconsin business that has no
out-of-state operations be sued anyplace where its Internet Web page can
be accessed? Like many questions in the law, the answer to this one is
maybe. |
However, as with any technological advance, the expanding use of the
Internet has created a unique set of legal issues. This article
addresses one issue: the impact that posting a World Wide Web site or
"page" on the Internet has on a court's ability, in a civil action, to
assert personal jurisdiction over a nonresident defendant consistent
with constitutional due process.
This article summarizes current legal standards concerning due
process limits on a court's ability to assert personal jurisdiction over
a nonresident defendant, briefly describes the World Wide Web and its
use by businesses, and discusses recent caselaw addressing the impact
that posting a World Wide Web page on the Internet can have on issues of
personal jurisdiction.
Personal jurisdiction standards
Personal jurisdiction refers to the ability of a given court
to render a valid and binding personal judgment against a particular
party. Before a court may assert personal jurisdiction over the
defendant in a civil action, a two-step inquiry is required. First, the
state in which the court sits must authorize the exercise of personal
jurisdiction pursuant to a "long-arm" statute, which describes in detail
the grounds upon which courts of that state may assert personal
jurisdiction over a nonresident defendant.3
The second step in this inquiry asks whether the exercise of personal
jurisdiction satisfies due process requirements of the U.S.
Constitution.4
Traditionally, due process allowed a court to assert personal
jurisdiction only over those defendants that were physically present in
the state when they were served with process.5 However, in International Shoe v.
Washington the U.S. Supreme Court held that due process did not
require physical presence at the time of service, provided that the
defendant had established "certain minimum contacts with [the forum
state] such that the maintenance of the suit does not offend traditional
notions of fair play and substantial justice."6 Over time, the "minimum contacts" standard has
been interpreted to allow personal jurisdiction wherever a defendant
might reasonably anticipate being sued.7
As technology has changed the nature of interstate commerce, the
concepts of "minimum contacts" and personal jurisdiction have likewise
continued to expand. For example, in the 1957 U.S. Supreme Court case
McGee v.
International Life Ins. Co., the "minimum contacts" required by
due process were satisfied where a defendant's only contacts with the
forum state were by mail.8 In 1985 the U.S.
Supreme Court in Burger King v.
Rudzewicz stated, "it is an inescapable fact of modern
commercial life that a substantial amount of business is transacted
solely by mail and wire communications across state lines, thus
obviating the need for physical presence within a State in which
business is conducted. So long as a commercial actor's efforts are
'purposefully directed' toward residents of another State, we have
consistently rejected the notion that an absence of physical contacts
can defeat personal jurisdiction there."9
In 1996 the Sixth Circuit, in CompuServe v.
Patterson,10 upheld a finding of
personal jurisdiction in a case where the defendant's only contacts with
the forum state were by computer and over the Internet. In that case,
Patterson had subscribed to the online service of CompuServe, an
Ohio-based company. In addition to using the online service as a
subscriber, Patterson also transmitted various computer files to
CompuServe and marketed original software to other CompuServe
subscribers through a shareware service.
After Patterson accused CompuServe of trademark infringement related
to some of his software products, CompuServe commenced a declaratory
judgment action in Ohio. In rejecting the claim that Ohio lacked
personal jurisdiction, the Sixth Circuit held that, by engaging in such
computer-related activities, Patterson had established sufficient
minimum contacts by "purposefully avail[ing] himself of the privilege of
doing business in Ohio," thereby satisfying the minimum contacts
requirement of due process.11
The World Wide Web
A number of recent decisions have addressed the question of whether
the availability of a World Wide Web site within a particular
jurisdiction can, by itself, satisfy the minimum contacts
requirement.
The World Wide Web "consists of a vast number of documents stored in
different computers all over the world" that can be accessed over the
Internet.12 The more elaborate documents on
the World Wide Web are referred to as Web pages or sites. Most
businesses that market their services on the Internet do so with a Web
page that can be accessed by other Internet users worldwide.
Web pages allow businesses to market their goods and services to a
much larger clientele. However, having a
Web page also creates a presence of sorts in every location where the
Internet can be accessed. This presence has, in turn, opened the door to
arguments for personal jurisdiction in states where the Web page has
been accessed. Recently, courts have begun to struggle with applying the
law of personal jurisdiction in the context of cutting-edge
technological developments.
As might be expected, the few cases to address these issues have not
always been consistent. However, a number of general rules appear to be
emerging. First, most courts agree that merely having a Web page will
not subject a defendant to personal jurisdiction wherever the page may
be accessed. Although a Web page can be considered as one of several
factors that comprise a minimum contacts analysis, there must be
something more.
Second, the "something more" may consist of the particular content
and features of the Web page at issue, including whether the Web page
includes any express solicitation and has interactive features that
allow direct communication with those accessing the Web page.
Finally, courts appear to consider a Web page's popularity and
success in deciding whether minimum contacts have been established. For
example, courts often consider how many hits a Web page has received
from the forum state, and how many contracts have been established with
residents of the forum state due to the Web page advertisement.
A Web page as a single factor
The U.S. Court of Appeals for the Ninth Circuit recently held that a
Web site does not, by itself, subject the owner of a business to
litigation in the courts of every state in which the site can be
accessed.13 Thus, in Cybersell Inc. v.
Cybersell Inc., a Florida corporation that advertised by using
a Web page on the Internet could not be sued for trademark infringement
in an Arizona federal court, despite the fact that the Web page was
accessed in Arizona by the party claiming infringement.
In rejecting the claim of personal jurisdiction under the facts in
that case, the court in Cybersell noted that "no court has ever
held that an Internet advertisement alone is sufficient to subject the
advertiser to jurisdiction in the plaintiff's home state."14 In holding that a Web page was not, in itself,
sufficient to impose jurisdiction on a defendant, the court noted that
the defendant in that case lacked any other contacts with Arizona, and
had not, therefore, purposefully availed itself of the privilege of
conducting activities in Arizona.
The Ninth Circuit's holding that a Web page does not, by
itself, establish minimum contacts is consistent with prior cases
addressing similar issues. For example, in Bensusan Restaurant Corp.
v. King,15 a federal district
court likewise held that the Missouri owner of a jazz club known as "The
Blue Note" could not be sued in New York for trademark infringement
merely because he posted a site on the World Wide Web to promote his
club. It reasoned that creating a Web site was similar to placing a
product into the stream of commerce. Although a potential impact
anywhere is arguably foreseeable, it is not an act purposefully directed
at any particular state.16
Although Cybersell and Bensusan represent an
emerging majority view, contrary precedent does exist. In Inset Systems Inc.
v. Instruction Set Inc., another federal district court held
that posting a Web page did create minimum contacts.17 Rather than the stream of commerce analogy used
in Bensusan, the court reasoned that a Web page was akin to a
television advertisement that is "available continuously to any Internet
user."18
Although the sufficiency of a Web page, by itself, still is an open
issue, it is clear that, at a minimum, a Web page will be one factor to
consider as part of the minimum contacts analysis. Thus, in Heroes Inc. v. Heroes
Foundation,19 the court upheld
personal jurisdiction in the District of Columbia based upon the use of
a Web page plus a newspaper advertisement published in a local
paper.
Content and interactive features
Web pages vary in the extent to which they actively solicit business
and allow Internet users to interact. Some Web pages merely post
information that can be reviewed. Others publish toll-free telephone
numbers or solicit contracts or applications. Still others allow an
immediate response by email, or include hypertext links that allow
transfer to another Web site by clicking on highlighted text.
The cases addressing these issues indicate that a Web site is more
likely to create minimum contacts if it actively solicits business or
has interactive features. Thus, in Minnesota
v. Granite Gate Resorts Inc.,20
the Minnesota Court of Appeals upheld a finding of personal jurisdiction
over a Nevada corporation that published a Web site advertising online
betting services. The court found it significant that the Web page at
issue consisted of direct solicitation, rather than the mere posting of
information, and included a toll-free telephone number to contact the
owner of the Web site.
A similar result was reached in Maritz Inc. v.
Cybergold Inc.,21 where the court
held that a Web site that actively solicited customers, and invited a
response by email, was sufficient to satisfy the minimum contacts
standard. Likewise, in Zippo
Manufacturing Co. v. Zippo Dot Com Inc.22 the court noted the difference between a
"passive" Web site and an "interactive Web site where a user can
exchange information with the host computer." Where a Web site is
interactive, the court stated that "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."23
Popularity of the Web page
|
Steven P. Means, Iowa 1987, is a partner in
the law firm of Michael, Best & Friedrich LLP. He practices in the
firm's Madison office in commercial litigation including antitrust,
business torts, class action defense and environmental litigation. |
In addition to the content and features of a Web page, recent cases
also suggest that a Web page's popularity in a particular state will be
a factor in determining whether personal jurisdiction may be asserted.
For example, in the Cybersell decision, the court found
significant the fact that the Web site at issue had not been accessed in
Arizona except by the plaintiff. Moreover, it found that the Internet
advertisement had not resulted in any business, contracts, sales income,
or email messages from Arizona except through the plaintiff.
In contrast, the Minnesota Court of Appeals, in upholding personal
jurisdiction in Granite Gate Resort, made a specific finding
that "at least 248 Minnesota computers accessed and received
transmissions from appellant's Web sites," during a two-week
period.24 Likewise in the Zippo
Manufacturing case, the court relied on evidence that the Web site
at issue had resulted in more than 3,000 subscriber contracts within the
forum state.
Conclusion
An article such as this generally would conclude with a list of
specific recommendations on reducing legal exposure. However, in this
situation, there is a strong tension between reducing legal exposure and
maximizing business opportunity. Given the newness of the issue, there
is simply no cookbook answer that fits the needs of every business.
The features that make a Web site successful from a business
standpoint, that is, interactive capability, promotional content, and
the ability to generate actual revenue, are the same features that
likely will increase the risk of litigation in a remote forum. In other
words, businesses and their attorneys need to be aware that attempts to
expand one's business over the Internet also can expand the risk of
out-of-state litigation. Thus, the decision of whether to advertise over
the Internet should be made with full consideration of the risks and the
benefits involved.
Endnotes
1 Zeran v. America
Online Inc., 129 F.3d 327, 328 (4th Cir. 1997) (quoting Reno v. ACLU,
117 S. Ct. 2329, 2334, 138 L. Ed. 2d 874 (1997)).
2 Zaitlen & Victor, The New
Internet Domain Name Guidelines: Still Winner-Take-All, 13 Computer
L. 12 (1996).
3 See, e.g., Wis. Stat.
§ 801.05.
4 Internat'l Shoe Co. v.
Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 2d 95
(1945); Omni
Capital Int'l v. Rudolph Wolff & Co., 484 U.S. 97, 104, 108
S. Ct. 404, 98 L. Ed. 2d 415 (1987); Brown v. LaChance, 165
Wis. 2d 52, 66-67, 477 N.W.2d 296 (Ct. App. 1991), rev. denied,
479 N.W.2d 173 (1991).
5 Pennoyer v. Neff,
95 U.S. 714, 733, 24 L. Ed. 565 (1878).
6 326 U.S. 310, 316 (1945).
7 Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 472, 105 S. Ct. 2174, 85 L. Ed. 2d 528
(1985); Hanson v.
Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 2 L. Ed. 2d 1283
(1958).
8 355 U.S. 220, 78 S. Ct. 199, 2 L.
Ed. 2d 223 (1957).
9 471 U.S. at 476.
10 89 F.3d 1257 (6th Cir.
1996).
11 Id. at 1266.
12 Reno v. ACLU,
117 S. Ct. 2329, 138 L. Ed. 2d 874, 885 (1997).
13 Cybersell Inc. v.
Cybersell Inc., 130 F.3d 14 (9th Cir. 1997).
14 Id. at 418.
15 937 F. Supp. 295 (S.D.N.Y.
1996), aff'd, 126 F.3d 25 (2d Cir. 1997).
16 Id. (citing Asahi Metal Indus. Co. v.
Superior Court, 480 U.S. 102, 112 (1992)).
17 937 F. Supp. 161 (D. Conn.
1996).
18 Id. at 165.
19 958 F. Supp. 1 (D.D.C.
1996).
20 568 N.W.2d 715 (Minn. Ct. App.
1997).
21 947 F. Supp. 1328 (E.D. Mo.
1996).
22 952 F. Supp. 1119 (W.D. Pa.
1997).
23 Id. at 1124.
24 568 N.W.2d at 218.
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