Vol. 76, No. 10, October
2003
Personal Jurisdiction and the Internet: An Update
As the courts reach a more uniform approach to
determining issues of personal jurisdiction and the Internet, it is
easier to predict whether a particular Web site might subject a
defendant to personal jurisdiction in a particular state.
by Eugenia G. Carter & Jennifer
R. Racine
Are your clients subject to personal jurisdiction in every forum in
which Internet users access the clients' Web sites? Possibly. Internet
contacts can be sufficient to confer personal jurisdiction in a state
with which a defendant has no other contacts. For a court to
constitutionally exercise personal jurisdiction over a defendant, the
plaintiff must show that the defendant had "minimum contacts" with the
forum state.1 These minimum contacts must be
such that subjecting the defendant to personal jurisdiction in that
state would be within the bounds of traditional notions of fair play and
substantial justice.2 Sometimes, Internet
contacts meet this requirement.
A 1998 Wisconsin Lawyer article3
outlined the way in which early cases dealt with this issue. Although
the early cases, especially Zippo Manufacturing Co. v. Zippo Dot Com
Inc.,4 are still very important, the
topic deserves revisiting for two reasons. First, Internet activity has
increased significantly in the last five years and, as a result, the
number of cases dealing with the issue of the effect of Internet
activity on personal jurisdiction also has increased significantly. As
many as 25 cases, for example, addressed the issue in the last six
months. Second, although Wisconsin courts have not yet dealt with the
issue,5 a definite trend in the law has
emerged as more courts, including district courts in the Seventh
Circuit,6 adopt some version of the
Zippo "sliding scale" approach to determine the sufficiency of
Internet contacts to confer personal jurisdiction.
This article summarizes the now-standard Zippo approach to
dealing with Internet activity as the basis for personal jurisdiction,
describes recent cases applying the Zippo approach, and further
notes an alternate approach used by some courts to deal with Internet
activity and personal jurisdiction. The article concludes with practice
pointers for handling the personal jurisdiction issues raised by
operating a Web site.
The Standard Approach: The Zippo Sliding Scale
In most of the cases dealing with the effect of Internet activity on
personal jurisdiction, courts have adopted and applied some form of the
approach first put forth in the Zippo case. This approach is
known as the "sliding scale."7 Whether a
defendant's Internet activity constitutes the requisite minimum contacts
to warrant the imposition of personal jurisdiction depends on where the
particular Web site falls on the sliding scale.8 There are three main categories into which Web
sites fall: passive, active, and interactive.
Passive Web Sites: No Personal Jurisdiction. On one
end of the sliding scale are passive Web sites. If the court finds the
Web site passive, personal jurisdiction over the defendant based on that
Web site is improper.9 A passive Web site is
one that is purely informational and does not offer those who access it
any means for interacting with the Web site's owner to make purchases or
exchange information.10 In one recent case,
for example, no personal jurisdiction existed when the particular Web
site provided general product information, advertisements, and contact
information but did not allow for direct contractual relationships or
purchasing.11
Active Web Sites: Personal Jurisdiction is Proper.
On the opposite end of the sliding scale are active Web sites. A
defendant operating an active Web site can be properly subjected to
personal jurisdiction based on Internet activity alone.12 An active Web site is one that the defendant
clearly uses for doing business on the Internet.13 The Zippo case itself found the
particular Web site to be active because the defendant had entered into
contracts with approximately 3,000 forum state residents and seven
Internet access providers in the forum state.14 Even fewer specific transactions with residents
of a state can support personal jurisdiction. In a recent decision, a
federal district court in Florida found a Web site to be active because
it allowed users to place orders, and five residents of the forum state
had in fact used the Web site to place an order.15
Interactive Web Sites: Further Analysis Required.
Web sites falling into the middle range of the sliding scale - those
that are neither passive nor active - require additional analysis. The
Zippo court termed these Web sites "interactive" because they
allow some exchange of information between the Web site operator and the
Web site user.16 Thus, the site is not
merely informational like a passive Web site, but it also does not rise
to the level of "doing business" like an active Web site. The
interactive class of Web sites creates the most difficulty for courts
because there is no clear line to distinguish those interactive features
that will subject the Web site's operator to personal jurisdiction and
those interactive features that will not. In making that distinction,
courts analyze the level of the Web site's interactivity as well as its
commercial nature.17 Consistent with the
"sliding scale" analogy, the more interactive and the more commercial
the Web site, the more likely that the court will find personal
jurisdiction over the Web site's operator.
A leading case dealing with an interactive Web site is Millennium
Enterprises Inc. v. Millennium Music L.P.18 In that case, the defendant's Web site
allowed users to order products over the Internet; however, because
there was no evidence that the defendant had ever sold any products to
residents of the forum state, personal jurisdiction in that state was
not proper.19 A recent federal district
court case reached a similar result, holding that absent evidence that
residents of the forum state have actually used the Web site to make
purchases, the mere existence of a Web site on which purchases can be
made was not sufficient to warrant personal jurisdiction.20
Eugenia G. Carter, Georgetown
1986 cum laude, is a shareholder in the Intellectual Property Practice
Group of LaFollette Godfrey & Kahn, Madison, and is cochair of the
firm's Emerging Technologies Practice Group. She advises and litigates
in all areas of intellectual property and e-commerce law.
Jennifer R. Racine, U.W. 2003 cum laude, is an
associate in the firm's Intellectual Property Practice Group. She
provides counsel to clients on patent, trademark, copyright, trade
secret, and other intellectual property and technical issues, including
licensing and litigation.
Web Sites and Non-Internet Contacts: Further Analysis
Required. In applying the Zippo approach, courts also
may consider a defendant's non-Internet contacts with the forum state in
combination with the Web site to determine whether personal jurisdiction
is proper. For example, two recent cases held that the operation of a
moderately interactive Web site combined with non-Internet contacts with
the forum state may warrant the exercise of jurisdiction, despite the
fact that neither factor would warrant the exercise of jurisdiction on
its own. In Toys "R" Us Inc. v. Step Two S.A.,21 the Third Circuit reversed the district court's
denial of the plaintiff's request for jurisdictional discovery on the
issue of non-Internet contacts. The court noted that the plaintiff thus
far had not shown, with regard to the defendant's Internet contacts,
that personal jurisdiction existed.22 But,
the court further held that when looking for the "something more" beyond
operation of an interactive Web site required by the Zippo
approach, it is appropriate to consider non-Internet contacts, and the
court thus allowed jurisdictional discovery on that issue.23
Similarly, the court in Haemoscope Corp. v. Pentapharm
AG24 found that the Web site in
question was not on its own enough to warrant personal jurisdiction, but
the combination of the Web site with other non-Internet contacts may be
sufficient. Because the parties had not briefed the issue, the court
ordered them to do so.25
Defendants Outside the United States. Another
interesting aspect of the effect of Internet activity on personal
jurisdiction is its effect on securing personal jurisdiction over
defendants operating Web sites outside the United States. When dealing
with a defendant operating a Web site in a foreign country, the
Zippo approach still applies; thus, the court examines the Web
site using the same sliding scale analysis. However, Federal Rule of
Civil Procedure 4(k)(2) provides that if a foreign defendant does not
have the requisite minimum contacts with any one state, his or her
contacts with the United States as a whole may be considered for
purposes of U.S. jurisdiction. The court in Graduate Management
Admission Council v. Raju,26 for
instance, analyzed the case using the Zippo approach and found
no personal jurisdiction over the defendant based on his contacts with
the forum state. However, the court then analyzed the case under Federal
Rule of Civil Procedure 4(k)(2). Using the United States instead of
Virginia as the forum, the court found personal jurisdiction.27
An Alternate Approach: The "Effects" Test
Although most courts addressing the issue of personal jurisdiction
and the Internet have adopted some form of the Zippo approach,
some courts also have used an alternate approach based on traditional
principles of personal jurisdiction.28 The
North Dakota Supreme Court, for example, recently found personal
jurisdiction to be proper based on the "effects" test used to determine
personal jurisdiction generally.29 The
"effects" test is based on a U.S. Supreme Court case, Calder v.
Jones,30 in which a defendant was
subject to personal jurisdiction based upon the "effects" the
nonresident defendant's activity would have on the forum state. In
rendering its decision, the North Dakota Supreme Court also noted that
many states apply the Zippo approach.31 Based upon the limited record in the appeal
before the court, however, it was apparent that the defendant was
subject to jurisdiction under the "effects" test based on both her
Internet contacts and her other contacts with the state.32
Other courts have combined the Zippo approach with the
"effects" test. For instance, the Fourth Circuit has explicitly adopted
the Zippo approach but developed its own three-prong test to
bring in elements of the "effects" test. The test allows a state to
exercise jurisdiction over a nonresident when the nonresident 1) directs
electronic activity into the state, 2) with manifest intent to engage in
business or other interaction within the state, and 3) that electronic
activity creates a potential cause of action in the state's
courts.33
Conclusion
Clearly, your clients may be subject to personal jurisdiction based
solely on their Internet contacts with a forum state. The good news, of
course, is that so may your clients' adversaries. As the courts reach a
more uniform approach to determining issues of personal jurisdiction and
the Internet, it is easier to predict whether a particular Web site
might subject a defendant to personal jurisdiction in a particular
state. Businesses operating passive, information-only Web sites are
probably safe; however, businesses operating active or interactive Web
sites, especially successful ones, need to be aware that they risk
out-of-state litigation. This risk may have the biggest impact on
expanding businesses with interactive Web sites, because although the
mere presence of a Web site is not enough, as few as five sales through
a Web site to residents of a forum state could be enough to confer
personal jurisdiction. As the business expands, then, so does the risk
of out-of-state litigation.
Endnotes
1International Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945) (cited in Michael S. Neustel,
Personal Jurisdiction, Internet L. Today, at
www.internetlawtoday.com/personaljurisdiction.htm).
2Id.
3Steven P. Means, Personal
Jurisdiction and the Internet, 71 Wis. Law. 10 (April 1998).
4952 F. Supp. 1119 (W.D. Pa.
1997).
5The Wisconsin Court of Appeals did
briefly address the issue in a footnote of an unpublished opinion.
Catalytic Combustion Corp. v. Vapor Extraction Tech. Inc., No.
00-0450-FT, *11 n.6 (Wis. Ct. App. Aug. 8, 2000) (unpublished opinion)
(rejecting the argument that because defendant's Web site is not
interactive, defendant may not be subjected to personal jurisdiction in
Wisconsin and noting "[a]lthough the mere existence of [the defendant's]
web site is not dispositive of the jurisdiction issue, we conclude that
the web site in conjunction with the various correspondence surrounding
the three contracts evidences the sufficiency of [the defendant's]
contacts with Wisconsin for jurisdictional purposes.").
6E.g., Infosys Inc. v.
Billingnetwork, 2003 U.S. Dist. LEXIS 14808 (N.D. Ill. Aug. 26,
2003); David White Instruments LLC v. TLZ Inc., 2003 U.S. Dist.
LEXIS 8375 (N.D. Ill. May 14, 2003); Caterpillar Inc. v. Miskin
Scraper Works Inc., 256 F. Supp. 2d 849 (C.D. Ill. 2003); Aero
Prods. Int'l v. Intex Corp., 2002 U.S. Dist. LEXIS 17948, 64
U.S.P.Q.2d (BNA) 1772 (N.D. Ill. Sept. 19, 2002).
7Zippo, 952 F. Supp. at
1124.
8Id.
9Id.
10Id.
11Caterpillar, 256 F.
Supp. 2d at 853.
12Zippo, 952 F. Supp. at
1124.
13Id.
14Id. at 1125-26.
15Hartoy Inc. v.
Thompson, Copyright L. Rep. (CCH) ¶ 28611, 2003 U.S. Dist.
LEXIS 3185, *14 (S.D. Fla. Jan. 29, 2003).
16Zippo, 952 F. Supp. at
1124.
17Id.
1833 F. Supp. 2d 907 (D. Ore.
1999).
19Id. at 921-23.
20Quality Improvement
Consultants Inc. v. Williams, 2003 U.S. Dist. LEXIS 2705, *16,
17-19 (D. Minn. Feb. 24, 2003).
21318 F.3d 446 (3d Cir.
2003).
22Id. at 456.
23Id. at 456, 458.
242002 U.S. Dist. LEXIS 23387
(N.D. Ill. Dec. 6, 2002).
25Id. at *23.
26241 F. Supp. 2d 589 (E.D. Va.
2003).
27Id.
28In addition to the "effects"
test discussed infra, it has been noted that courts also are
applying a similar principle called "purposeful availment." Dee McAree,
Award for Libel Upheld: A Student's Web Site Raises Jurisdictional
Issues in a State Appeal, Nat'l L.J., May 19, 2003, at 5. Because
the Zippo approach itself is an attempt to satisfy the
traditional principle of "purposeful availment," it is not discussed
separately here. See Zippo, 952 F. Supp. at 1125-26
(stating that "[w]e are being asked to determine whether [the
defendant's] conducting of electronic commerce with [forum state]
residents constitutes the purposeful availment of doing business in [the
forum state].").
29Wagner v.
Miskin, 660 N.W.2d 593 (N.D. 2003).
30465 U.S. 783 (1984).
31Wagner, 660 N.W.2d at
598.
32Id. at 598-99.
33ALS Scan Inc. v. Digital
Servs. Consultants Inc., 293 F.3d 707, 714 (4th Cir. 2002).
Wisconsin
Lawyer