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

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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