This article was written for a Massachusetts Continuing Legal Education Seminar entitled "Litigation in Cyberspace," which was held in Boston on May 19, 1998.
The extraordinary proliferation of the Internet has raised a new and somewhat novel question: can a company be sued every place that its web site can be accessed? Today, the answer is: "It depends." If a company is actively engaged in the version of electronic commerce known as Internet commerce (I-commerce) it almost certainly is vulnerable to suit in every U.S. state. If it is engaged in something less than full-fledged commercial activity, the answer is uncertain and may depend on the specific facts of the case.
However, the courts have only begun to explore the implications of the World Wide Web on the venerable doctrine of "personal jurisdiction." The first case to address this issue was decided less than two years ago. Today, we are in the midst of the "first wave" of Internet jurisdiction cases. Nevertheless, the majority trend of cases decided to date suggests that the Internet will lead to a significant expansion and liberalization of personal jurisdiction.
Because of the nature of the Internet, and because Internet commerce is in its early stages, the vast majority of personal jurisdiction cases decided to date involving the Internet arise in the context of trademark infringement claims. This article will focus on trademark cases of this sort decided to date.
Before turning to Internet-specific cases, the article discusses the history of the personal jurisdiction doctrine, reviews several of the more important and representative cases decided to date, and offers some suggestions on how the law should reconcile concepts of personal jurisdiction, which traditionally have been based on physical territoriality, with the unmarked expanses of cyberspace.
The need for principles of personal jurisdiction to keep pace with changes in technology has long been recognized. In Hanson v. Denkla, 357 U.S. 235, 250-51 (1958), Chief Justice Earl Warren noted: "As technological progress has increased the flow of commerce between States, the need for jurisdiction over nonresidents has undergone a similar increase." A substantial body of judicial precedent has developed to determine when a non-resident can be sued in a particular state. In most instances, the cases addressing this issue have evaluated the conduct of the parties in relation to their physical locations.
Because the Internet has no territorial boundaries, this traditional mode of analysis may not be appropriate to decide whether Internet-based contacts are sufficient to sustain personal jurisdiction. The Internet is indifferent to the physical location of the machines that are used to store, transmit and receive information. There is no necessary connection between an Internet address and a physical address. Because of the way the Internet is structured (packet switching, caching of data on local or intermediary servers, the frequent use of hyperlinks, and the inability to determine the geographic location of other parties), there is no real means of avoiding contact with a specified jurisdiction, except to stay off the Internet entirely.
To quote Massachusetts Federal District Court Judge Nancy Gertner, paraphrasing Gertrude Stein (speaking of Oakland), "as far as the Internet is concerned, not only is there perhaps 'no there there,' the 'there' is everywhere where there is Internet access." Judge Gertner went on to observe that "[w]hen business is transacted over a computer network via a Web site accessed by a computer in Massachusetts, it takes place as much in Massachusetts, literally or figuratively, as it does anywhere." Digital Equipment Corp. v. AltaVista Technology, Inc. , 960 F. Supp. 456, 462 (D. Mass. 1997).
We begin with a brief review of the doctrine of personal jurisdiction, and then turn to a discussion of several key Internet personal jurisdiction cases decided to date in the context of trademark infringement claims.
II. Jurisdiction - Power Over the Subject and the Person
The term "jurisdiction" describes the power of a court to decide a matter in controversy. The exercise of jurisdiction requires control over the subject matter and the parties.
Assuming subject matter jurisdiction to be present (e.g., a case involving a claim of copyright infringement must be brought in federal district court for "subject matter jurisdiction" to be present), a determination of whether a court may assert personal jurisdiction is a two-step process. First, the court must determine if jurisdiction is appropriate under the long-arm statute of the state in which the suit has been brought, the so-called "forum state." (Even if the case is brought in Federal Court on a federal cause of action, such as trademark infringement under the Federal Lanham Act, the Federal Court will look to the forum state law to decide if personal jurisdiction may be asserted.) Second, the court must determine if the exercise of jurisdiction is consistent with federal Constitutional principles of due process.
1. Long-Arm Statute of the Forum State
Long-arm statutes differ from state to state and these differences have already had an impact on cases where jurisdiction is claimed based on Internet contacts. This section provides a brief discussion of the long-arm statute of Massachusetts and several other states.
A. The Massachusetts Long-Arm Statute
Massachusetts General Laws Chapter 223A §3 provides, in relevant part:
A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person's:
(a) transacting any business in this commonwealth;
(b) contracting to supply services or things in this commonwealth;
(c) causing tortious injury by an act or omission in this commonwealth;
(d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he 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 this commonwealth;
This law has been construed to "assert jurisdiction over the person to the constitutional limit only when some basis for jurisdiction enumerated in the statute has been established. Although presented with jurisdictional facts sufficient to survive due process scrutiny, a judge would be required to decline to exercise jurisdiction if the plaintiff was unable to satisfy at least one of the statutory prerequisites." Good Hope Industries v. Ryder Scott , 378 Mass. 1, 6 (1979). In this aspect, the Massachusetts long-arm statute "imposes constraints on personal jurisdiction that go beyond those imposed by the Constitution." Nowack v. Tak How Investments , 94 F.3d 708, 712 (1st Cir. 1996).
The statute is construed broadly in two important respects. First, the requirement that, absent a persistent course of conduct in Massachusetts, a cause of action "arise from" a defendant's Massachusetts contacts imposes a requirement that there be some causal link between these contacts and the cause of action. This test for causality is interpreted as a "but for" test - the most lenient causal test possible. Tatro v. Manor Care, Inc. , 416 Mass. 763, 770-71 (1994). This principle can be illustrated by the facts of the Tatro case. There a Massachusetts plaintiff suffered a personal injury while staying at a California hotel. The Supreme Judicial Court held that the hotel had "transacted business" in Massachusetts by soliciting and obtaining meeting and convention business from Massachusetts companies. Plaintiff's injury "arose from" these contacts because " [b]ut for the defendant's solicitation of business in Massachusetts, and its agreement to provide the plaintiff with hotel accommodations in Anaheim, California, the plaintiff would not have been injured in a room of the hotel." Tatro , 416 Mass. at 771-72 (emphasis added).
Second, the phrase "transacting any business" in §3(a) is easily satisfied. "Transacting business" in Massachusetts "does not require that the defendant have engaged in commercial activity. That language is general and applies to any purposeful acts by an individual, whether personal, private, or commercial." Ross v. Ross , 371 Mass. 439, 441 (1976). For example, negotiations over the telephone and through the mail to purchase real estate in Massachusetts ( Haddad v. Taylor , 32 Mass. App. Ct. 332 (1992)) or signing a trust document in Massachusetts which created ongoing fiduciary duties ( Johnson v. Witkowski , 30 Mass. App. Ct. 697 (1991)) have been held to be the transaction of business in Massachusetts. Further, "physically signing a contract in Massachusetts is, in literal terms, transacting business in Massachusetts, if the cause of action arises from that contract" even though this may not be constitutionally sufficient under the due process analysis outlined below. Carlson Corp. v. University of Vermont , 380 Mass. 102, 105 (1980).
As noted above, to date, most of the Internet jurisdiction cases decided by the courts have involved claims of trademark infringement. Typically, in these cases, a trademark is used on a web site connected to the Internet, and therefore the content of that site is available in all 50 states, as well as internationally. When claiming trademark infringement in this context, a Massachusetts plaintiff must satisfy at least one prong of the long-arm statute. Fundamentally, the plaintiff must show that either the defendant's conduct has caused harm in Massachusetts under §3(c) or §3(d), or that defendant has transacted business in Massachusetts through use of its web site under §3(a). Massachusetts courts have addressed these issues in three Internet jurisdiction cases, as discussed in detail below. Through these decisions, Massachusetts courts have shown a strong predisposition to exert jurisdiction over non-resident defendants based on Internet contacts.
B. Other State Long-Arm Statutes
Many state long-arm statutes either explicitly or through broad interpretation simply allow the forum state to exercise personal jurisdiction to the limit of due process. For example, Cal. Code. Civ. P. § 410.10 explicitly allows personal jurisdiction whenever permitted by the state and federal Constitutions. Likewise, in the District of Columbia the reach of the long-arm statute to any person "transacting any business" within the District has been interpreted to provide "jurisdiction to the full extent of the Due Process Clause." D.C. Code §13-423(a)(4); c.f. Heroes, Inc. v. Heroes Foundation , 958 F. Supp. 1, 2 (D.D.C. 1996).
Like Massachusetts, New York's long-arm statute imposes more stringent limits on personal jurisdiction than the U.S. Constitution would allow. It provides that:
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 . . . 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 . . . ; or
3. commits a tortious act without the state causing injury to person or property within the state . . . 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. . . .
CPLR § 302(a).
Significantly for cases involving Internet commerce, CPLR §302(a)(2) is severely limited in that the phrase "within the state" is taken literally to mean that the defendant must be physically present in New York. Feathers v. McLucas , 15 N.Y.2d 443, 464 (1965); c.f . Bensusan Restaurant v. King , 126 F.3d 25, 28 (2d Cir. 1997). Thus, in Bensusan , an Internet jurisdiction case that has received a great deal of attention, the fact that a nightclub owner in Missouri advertised over the Internet was insufficient, by itself, to give rise to jurisdiction in a trademark infringement suit brought in New York by a New York nightclub.
Bensusan is one of very few Internet jurisdiction cases in which the forum state long-arm statute has been determinative, and this decision must be viewed narrowly in at least two respects. First, the court only analyzed the facts of the case under §§302(a)(2) and 302(a)(3)(ii) of the long-arm statute. Because the Missouri nightclub did not have substantial revenue from interstate commerce, §302(a)(3)(ii) could not be the basis for jurisdiction. There was no discussion in Bensusan of whether the web site constituted a "persistent course of conduct" in New York so as to implicate § 302(a)(3)(i). As discussed below, several other courts have concluded that a web site -- if used to solicit business nationwide -- does amount to a persistent course of conduct in the forum state (and presumably every other state as well). See, e.g., Inset Systems v. Instruction Set, Inc. 937 F. Supp. 161 (D. Conn. 1996); Telco Communications v. An Apple a Day , 977 F. Supp. 404 (E.D. Va. 1997); AltaVista, supra . Although it is still possible to distinguish Bensusan because a Missouri nightclub might not be "soliciting business" in New York though its web page, the reasoning of these cases shows the limits of Bensusan .
The importance of the forum state long-arm statute is further illustrated by a comparison between Bensusan and American Network v. Access America , 975 F. Supp. 494 (S.D.N.Y. 1997), another Internet jurisdiction case decided under the New York long-arm statute. Again, the claim was trademark infringement based on activities conducted on the defendant's web site. As in Bensusan , the court analyzed the facts of this case under §302(a)(3)(ii) of the long-arm statute. This provision allows a New York court to assert jurisdiction over a defendant who has committed a tortious act outside New York which he "expects or reasonably expects to have consequences" in New York and who "derives substantial revenue from interstate . . . commerce."
Unlike the Missouri nightclub in Bensusan , Access America did derive substantial revenue from interstate commerce. In particular, the court found that the defendant, Access America, offered computer services "across the US" with 7500 subscribers worldwide but only six in NY constituting 0.08% of its customer base and only $150 of monthly revenue of $195,000. Despite the fact that only a very small percentage of Access America=s income was derived from New York, the court found that jurisdiction was proper under the long-arm statute based on its overall revenue from interstate commerce. Id . at 496-97 . It is worth noting that there is no "interstate commerce" provision in the Massachusetts long-arm statute, and therefore this reasoning would not apply to a case brought in Massachusetts.
From the point of view of the operator of a web site trying to avoid susceptibility to personal jurisdiction in a distant state, the analysis of the long-arm statutes of fifty states is impractical. We turn, therefore, to the more intriguing (and in most cases determinative) issue of due process and Internet jurisdiction.
2. Due Process Analysis
Once some basis for jurisdiction has been found under the forum state's long-arm statute, a court must proceed to step two of the process, and determine if its assertion of jurisdiction is consistent with the constitutional requirements of due process.
The first phase of the analysis is to determine whether "general" jurisdiction can be asserted; that is, jurisdiction independent of any consideration of the lawsuit and the extent to which defendant's contacts with the forum relate to the lawsuit.
General jurisdiction can only be asserted consistent with the Constitution if the defendant maintains "systematic and continuous" contacts with the forum state. Helicopteros Nacionales de Columbia v. Hall , 466 U.S. 408, 414-16 and n. 9 (1984). In cases where general jurisdiction does not apply, personal jurisdiction may be asserted if the defendant has sufficient "minimal contacts" with the forum state from which the dispute has arisen. Under the standard of International Shoe v. Washington , 326 U.S. 310, 316 (1945), the defendant's contacts with the forum state must be sufficient so that the exercise of jurisdiction does not offend "traditional notions of fair play and substantial justice." The Supreme Court has explained that:
The concept of minimum contacts . . . can be seen to perform two related, but distinguishable functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.
World-Wide Volkswagen v. Woodson , 444 U.S. 286, 291-92 (1980).
In order to find specific jurisdiction "it is essential . . . that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla , 357 U.S. 235, 253 (1958). Defendant's connections with the forum state must be such that "he should reasonably anticipated being haled into court there." World-Wide Volkswagen Corp., 444 U.S. at 297.
The First Circuit divides minimum contact analysis into three parts: relatedness, purposeful availment and reasonableness. See Ticketmaster-N.Y. v. Alioto , 26 F.3d 201, 206 (1st Cir. 1994).
The court first determines if the cause of action arose out of or is related to the defendant's contacts with the forum state. This determination "acts as a divining rod that separates specific jurisdiction cases from general jurisdiction cases" and ensures that "the element of causation remains in the forefront of the due process investigation." Ticketmaster , 26 F.3d at 207.
The "arising out of" principle can be illustrated by the following example. Assume that a California company has occasional sales of "Product A" in Massachusetts. Assume further that the California company has a second product, "Product B", which although sold in California and the Western United States, has never been advertised or sold in Massachusetts. Product B carries a trademark that allegedly infringes the trademark of a Massachusetts company.
A case for trademark infringement brought by the Massachusetts company against the California company in Massachusetts for trademark infringement is unlikely to survive a jurisdictional challenge. While the California company "transacts business" and has minimum contacts in Massachusetts relating to "Product A," it has no contacts with respect to "Product B," and therefore the cause of action does not "arise from" the defendant's contacts with Massachusetts.
As noted above, the term "arising from" as it appears in the Massachusetts long-arm statute implicates a "but for" test of causation. In the First Circuit, the constitutional analysis of whether a claim is sufficiently related to a defendant's forum state contacts is more stringent. Instead the court will ask if there is a "meaningful link" between defendant's contacts with the forum state and the harm suffered. Nowak , 94 F.3d at 714-16 (discussing the constitutional determination of relatedness and noting conflicting holdings among the circuit courts).
In a case alleging trademark infringement (or any other "publication tort," such as defamation) via Internet activities there is little difficulty in determining that the alleged harm arose out of the defendant's contacts with the forum state. In other words, in the typical fact pattern that has emerged in Internet jurisdiction cases to date, a defendant will generally not be able to defeat jurisdiction on this prong of the due process test.
B. Purposeful Availment
This is the heart of the due process analysis and rests on two "cornerstones": "foreseeablility" and "voluntariness." Ticketmaster, 26 F.3d at 207. "The 'purposeful availment' requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts. . . . Jurisdiction is proper, however, where the contacts proximately result from actions by the defendant himself that create a 'substantial connection' with the forum State." Burger King v. Rudzewicz , 471 U.S. 462, 475 (1985) (emphasis in original, citations omitted).
There is no single mechanical test to determine purposeful availment, but two established lines of reasoning on this issue are particularly important to the developing law of Internet jurisdiction. First is the so called "effects test" which has been constructed out of the Supreme Court's decision in Calder v. Jones , 465 U.S. 783 (1984). The second analyzes the degree to which a defendant is open to jurisdiction in a distant state because it has placed a product into the "stream of commerce" and that product has found its way into the forum state.
The plaintiff in Calder , the actress Shirley Jones, brought suit in California against the National Enquirer, its California distributing company, a reporter for the Enquirer and the Enquirer's president and editor after the paper had published an allegedly libelous article written by the reporter. The individual defendants (but not the Enquirer or the distributing company) moved to dismiss for lack of personal jurisdiction claiming they were Florida residents with few ties to California. The Supreme Court viewed the story as "intentionally directed at" Ms. Jones, a California resident, and concluded that defendants' actions were therefore "expressly aimed at" California. 465 U.S. at 790.
This is a departure from the traditional jurisdictional analysis which focuses on the defendant's contacts with the forum state. The Calder court held that, in some instances, the plaintiff's contacts, "may be so manifold as to permit jurisdiction when it would not exist in their absence." In Calder the plaintiff lived and worked in California, "[t]he article was drawn from California sources and the brunt of the harm . . . was suffered in California." The Court concluded that "[j]urisdiction [over the individual defendants] . . . is proper in California based on the 'effects' of their Florida conduct in California." Calder , 465 U.S. at 789.
The "effects test" means that under some circumstances a defendant may have "purposefully availed" itself of the privilege of conducting activities within a forum state - at least in the context of a defamation action - when the "target" of the defamation is a resident of the forum. Because trademark infringement is considered a "tort-like" claim similar to defamation, the effects test arguably can be applied in this context. See AltaVista , 960 F. Supp . at 469-70.
Applying the effects test to trademark law requires a court to determine just where the harm occurs in a trademark infringement case. There is uncertainty as to whether the cause of action arises: "at the point of product origin, at the point of sale, at the principal place of business of the allegedly injured party or at some other location." Amp Inc. v. Methode Electronics Inc. , 823 F. Supp. 259 (M.D. Pa. 1993).
In Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club L.P. , 34 F.3d 410 (7th Cir. 1994), the court found that the trademark infringement would be felt mainly in Indiana because that is where the plaintiff was located. "[T]he state in which the injury occurs is the state in which the tort occurs, and someone who commits a tort in Indiana should, one might suppose, be amenable to suit there." Id. at 411. Thus, the Seventh Circuit suggested that a trademark owner can sue in its home state.
In Dakota Industries, Inc. v. Dakota Sportswear, Inc. , 946 F.2d 1384 (8th Cir. 1991), the court upheld jurisdiction over a clothing manufacturer who allegedly infringed plaintiff's trademark by making sales in North Dakota, where plaintiff's business was also located. The court refrained from deciding just where a trademark injury occurs because two factors were present in the case: the sales were consummated in North Dakota and the plaintiff felt the economic impact there.
In the context of Internet jurisdiction, the U.S. District Court for Massachusetts has expressly approved of applying the effects test to trademark infringement cases. In AltaVista , supra, the court found that because the defendant knew that the plaintiff-trademark owner was located in Massachusetts, the defendant's allegedly infringing conduct caused harm in Massachusetts, and this was enough to satisfy purposeful availment, conferring jurisdiction over the alleged infringer in the trademark owner's home state. See AltaVista , 960 F. Supp. at 470. This suggests that the trademark owner can "always sue in his home state so long as intentional acts [of infringement] are alleged." Amp Inc. , 823 F. Supp. at 266.
A far more conservative view was taken by the Ninth Circuit in Cybersell, Inc. v. Cybersell, Inc. , 130 F.3d 414 (9th Cir. 1997). In Cybersell , plaintiff "Cybersell AZ" was an Arizona corporation that advertised for commercial services over the Internet and owned the service mark CYBERSELL. Defendant "Cybersell FL" was a Florida corporation that posted a web site containing advertising and an email address. The court found that the web site was passive because Cybersell FL conducted no commercial activity over the Internet. Id. at 419. In its trademark infringement suit, Cybersell AZ sought to invoke the "effects test." The court stated that "we don't see this as a Calder case." Id. Distinguishing Calder , the court observed that the "effects test" should not apply to a corporation with the same force as it would to an individual plaintiff (such as in a defamation proceeding) because "a corporation ‘does not suffer harm in a particular geographic location in the same sense that an individual does.'" Id. ( quoting Core-Vent Corp. v. Nobel Industries , 11 F.3d 1482 (9th Cir. 1993)). "Cybersell FL's web page simply was not aimed intentionally at Arizona knowing that harm was likely to be caused there to Cybersell AZ." 130 F.3d at 420.
A second line of "purposeful availment" jurisprudence focuses on the degree to which placing a product in the "stream of commerce" creates jurisdiction down stream. This turns on whether the goods are "directed" toward the forum state. In Asahi v. Superior Court of California , 480 U.S. 102 (1987), the Supreme Court held that "[t]he placement of a product into the stream of commerce, without more," even when a defendant is aware that the product "may or will" be swept into the forum state, "is not an act of the defendant purposefully directed toward the forum state." Id. at 112. Examples of additional activities that indicate that a defendant's actions are directed at the forum state include advertising in that state, marketing the product through an agent in the forum state and providing regular advice to in-state customers. Id.
"Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with 'fair play and substantial justice.'" Burger King, 471 U.S. at 476. These other factors - sometimes called the "Gestalt Factors" are:
1. the defendant's burden of appearing;
2. the forum state's interest in adjudicating the dispute;
3. the plaintiff's interest in obtaining convenient and effective relief;
4. the judicial system's interest in obtaining the most effective resolution of the controversy; and
5. the common interests of all sovereigns in promoting substantive social policies.
Ticketmaster , 26 F.3d. at 209 ( citing Burger King , 471 U.S. at 477).
In Ticketmaster the First Circuit pointed out that "[t]his aspect of the jurisdictional inquiry remains something of an unknown quantity. The gestalt factors have been applied by the [Supreme] Court only once (in Asahi, 480 U.S. at 113-16); beyond mere mention, they have been discussed on rare occasions by the courts of appeals, . . . and they have been used regularly to defeat jurisdiction only in the Ninth Circuit." Ticketmaster, 26 F.3d at 209 (citations omitted).
The Ticketmaster court went on to "agree in principal with the Ninth Circuit" and found that "the reasonableness prong of the due process inquiry evokes a sliding scale: the weaker the plaintiff's showing on the first two prongs (relatedness and purposeful availment), the less a defendant need show in terms of unreasonableness to defeat jurisdiction. The reverse is equally true: an especially strong showing of reasonableness may serve to fortify a borderline showing of relatedness and purposefulness." Id . at 210.
III. Application of Due Process in Web Site Jurisdiction Cases
Cases dealing with personal jurisdiction arising from Internet contacts can be roughly divided into three categories: 1) those involving "passive" web sites that provide only information or advertising; 2) those involving so-called "interactive sites"; and 3) those involving defendants who are actively doing business over the Internet. Although these distinctions are imperfect, this categorization, first described in Zippo Manufacturing v. Zippo Dot Com , 952 F. Supp. 1119, 1124 (W.D. Pa. 1996), is useful in providing a framework to analyze the existing cases and present state of the law. Several other courts have accepted this classification. See, e.g., SF Hotel Company v. Energy Investments, Inc., 985 F. Supp. 1032, 1034 (D. Kan. 1997); Transcraft Corp. v. Doonan Trailer Corp., 1997 WL 733905, at *8 (N.D. Ill. 1997); Weber v. Jolly Hotels , 977 F. Supp. 327, 333 (D.N.J. 1997); Telco, 977 F. Supp. at 406.
1. "Passive" Web Sites
A passive web site, as loosely defined by the courts today, is one that provides some level of information regarding a business, and perhaps some advertising content, but is not a "commerce" site -- it does not permit a user to "interact" with the site or purchase goods or services through the site.
The line between "passive" and "interactive" web sites can be expected to evolve and sharpen quickly, but today it is extremely imprecise. For example, as noted below, the mere existence of a "mailto" function has caused some courts to view a site as "interactive." Given the commonplace nature of this function (which allows someone using the site to easily e-mail a message to the site manager), we expect that this distinction will not continue long as a factor in distinguishing between passive and interactive sites. If it does there will be a time soon when no web site will be considered "passive."
To date, the courts have not considered whether the use of so-called "cookie" technology by the site (in which the site "invisibly" tracks information provided by the user during a visit to the site) pushes a site from the "passive" category into the "interactive" category. We expect that many other nascent technologies will blur the line between "passive" and "interactive" sites.
Few courts have held that a purely passive site gives rise to general jurisdiction. One court has considered, and rejected, the extreme position that the maintenance of a web site unconnected to the underlying controversy is enough to confer general jurisdiction. To adopt such a rule, it found, "would eviscerate the personal jurisdiction requirement as it currently exists." McDonough v. Fallon McElligott , 1996 WL 753991, 40 U.S.P.Q.2d 1826, 1828 (S.D. Cal. 1996).
Several courts have held that a passive site does not give rise to personal jurisdiction, although not all of these courts have explicitly made the "passive" - "interactive" distinction. In Bensusan, supra, the web site at issue fell roughly into the category of a passive site, since it was effectively limited to advertising. As noted above, the Second Circuit found no jurisdiction based on the New York long-arm statute and therefore did not reach the due process issue. The District Court, however, had found that, "creating a site, like placing a product into the stream of commerce, may be felt nationwide - or even worldwide - but, without more, it is not an act purposefully directed toward the forum state." 937 F. Supp. 295, 301 (S.D.N.Y. 1996), citing Asahi, supra .
In Zippo, discussed in more detail below, the court cited the District Court's decision in Bensusan for the proposition that "[a] passive web site that does little more than make information available to those who are interested in it is not the grounds for the exercise [of] personal jurisdiction." 952 F. Supp. at 1124.
In Cybersell , discussed above, the web site at issue was deemed passive where the site advertised the defendant's business and contained a link to email. An email link should never be considered an interactive element of a web site that would in itself confer jurisdiction; such elements are commonplace over the Internet, in business and personal web pages. On the basis of the passive nature of the web site, the Ninth Circuit found that Cybersell FL had done no act to purposefully avail itself of Arizona law.
SF Hotel Company v. Energy Investments, Inc ., 985 F. Supp. 1032 (D. Kan. 1997), concerned a web site used to advertise the defendant's hotels. Plaintiff SF Hotels filed a declaratory judgment action against Florida hotel operator "Sierra Suites" over the rights to use the mark SIERRA SUITES. The court found that the defendant "maintained a passive web site which provides general information about its hotel" and there was no interactivity present. Thus, after citing Zippo and other cases and given the "tenuous connections" between defendant and forum state, the court refused to assert jurisdiction.
In Transcraft Corp. v. Doonan Trailer Corp. , 45 U.S.P.Q.2d 1097, 1997 WL 733905 (N.D. Ill. 1997), an Illinois district court reached much the same conclusion as SF Hotel . Plaintiff Transcraft, an Illinois corporation, sued defendant Doonan, a Kansas corporation, for trademark infringement alleging that Doonan sold cargo trailers with a design confusingly similar to Transcraft's registered trademark. The basis for jurisdiction was Doonan's web site, which contained advertising information and listed a phone number and email address. The court noted that Transcraft could not establish that email contacts were made between Illinois residents and Doonan. The court then inquired whether the web site specifically intended to reach Illinois customers. After endorsing the "stream of commerce" theory of jurisdiction, the court found "no evidence . . . that Doonan used its web site to encourage contacts with Illinois." Id. at *9. Thus, the court refused to exercise jurisdiction.
On the other hand there is a line of cases that have held that passive sites do subject the owner or publisher to personal jurisdiction. These cases, which represent "the outer limits of the exercise of personal jurisdiction based on the Internet," are illustrated by Inset , discussed below , and the Massachusetts cases of Hasbro, Inc. v. Clue Computing, Inc. ,1997 U.S. Dist. LEXIS 18857, 45 U.S.P.Q.2d 1170 (D. Mass. 1997) and Gary Scott Int'l, Inc. v. Baroudi , 981 F. Supp. 714 (D. Mass. 1997).
In Inset , plaintiff Inset Systems, Inc., a Connecticut corporation and the owner of the federally registered trademark INSET, sued the Massachusetts corporation Instruction Set, Inc. ("ISI"). ISI had obtained ownership of the Internet domain name "inset.com", and operated a web site at that address. Inset, 937 F. Supp. at 162-63. Although the court did not provide details regarding the content of ISI's site, the court characterized the site as "advertising," and held that this constituted the repeated solicitation of business under the Connecticut long-arm statute. The court noted that the contacts permitted by the Internet were far more pervasive than traditional print advertising, since the Internet permitted consumers repeated, unlimited access to the "advertising." Id . at 164-65.
In rejecting ISI's argument that there were insufficient minimum contacts to satisfy due process requirements, the court held that ISI had directed its Internet activities "toward not only the state of Connecticut, but to all states." Because the advertising was available "continuously to any Internet user," ISI had "purposefully availed itself of the privilege of doing business with Connecticut." Id . at 165. And, one would assume based on this rationale, with every other U.S. state as well.
Hasbro involved a trademark infringement case brought by Hasbro, a large toy manufacturer, against Clue, a small Colorado company that had no direct contacts with Massachusetts, apart from the fact that its web page could be accessed over the Internet in Massachusetts. At issue was the fact that Clue obtained the domain name "clue.com" before Hasbro, and Hasbro (which had prior use of the trademark CLUE) contended that this use of CLUE infringed Hasbro's trademark. 1997 U.S. Dist. LEXIS 18857, at *9.
Clue's "contacts" with Massachusetts were nonexistent, apart from the fact that its web site could be accessed in Massachusetts. Clue had never "purposefully directed" marketing or business activities toward Massachusetts, other than to the extent that its web site was directed at every location accessible by the Internet. Clue had never had a direct Massachusetts customer, never had a sale in Massachusetts and never traveled to Massachusetts (although one of Clue's clients used Clue to provide subcontracting services to Digital, a Massachusetts company). Id. Clue's web site stated that "Clue will go to any customer site," and Clue's sole full-time employee had performed work outside of Colorado, although not in Massachusetts. Id.
In deciding this case, the court first concluded that Clue's web site advertising amounted to regularly "solicit[ing] business" under §3(d) of the Massachusetts long-arm statute." Accessible 24 hours a day and seven days a week to all Massachusetts residents, the [w]eb site, in essence, serves as a national magazine, in which Clue Computer continuously advertises." Id . at *29.
Moving to the second step in the analysis of personal jurisdiction, the due process inquiry, the court found that by publishing its web site Clue had "purposefully directed its advertising at all the states. It did nothing to avoid Massachusetts." Id. at *32. The court also characterized Clue's web site as "interactive," since it enabled and encouraged viewers to send e-mail to the company. Id. at *33.
The Hasbro decision goes almost, if not all the way, to the point of holding that a party may, in fact, be haled into court in Massachusetts solely by reason of a passive web site, at least in a trademark infringement action where the allegedly infringing trademark appears on the defendant's web site. It is the rare site indeed that is not "interactive" if interactivity is defined solely as the ability to e-mail the publisher of the site.
The Massachusetts district court followed the same logic in Gary Scott Int'l, Inc. v. Baroudi . Plaintiff Gary Scott Int'l, a Massachusetts corporation, sued defendant Frank Baroudi for trademark infringement. Plaintiff claimed that defendant's sale of cigar humidors under the name "Tobacco Keepers" infringed upon its trademark CIGAR JAR. The defendant's contacts consisted of selling 12 "Tobacco Keepers" to a Massachusetts retailer and planning to sell a large number to the retailer Walgreen's. In addition, Baroudi advertised through an Internet web site.
The court found that Baroudi's activities were sufficient to satisfy the transacting business requirement of the Massachusetts long-arm statute in §3(a). Assuming that the sale of 12 cigar humidors and the contemplated sale to Walgreen's was not enough to satisfy the transacting business requirement, the court based its finding of jurisdiction on a passive web site. The court found that Baroudi marketed and sold his product in Massachusetts, making it foreseeable that he might be sued in Massachusetts.
The defendant's intent to attract business outside of its home state was the deciding factor in another trademark action, Haelan Products v. Beso Biological , 43 U.S.P.Q. 2d 1672 (E.D. La. 1997). In that case the defendant utilized a Web site and an 800 number to advertise its products. In addition, defendant Beso had advertised in several nationally circulated publications. Id. at 1673. The court found that although the defendant's "Internet site would be insufficient, without more, to establish personal jurisdiction, it reflects Beso's intent to attract customers nationwide." Beso's web site, together with its 800 number and its national advertising "constitute a 'purposeful availment' of the facilities of Louisiana," the forum state. Id. at 1676.
A number of Internet jurisdiction cases are difficult to categorize under any scheme or coherent set of principles.
In Quality Solutions, Inc. v. Zupanc , 1997 U.S. Dist. LEXIS 21840 (N.D. Ohio 1997), a trademark infringement action, the district court allowed jurisdiction over a defendant that advertised in a trade journal with a national circulation and "[e]ven more compelling" was their use of an Internet web site to promote their business. The court string-cited a few Internet jurisdiction cases and announced their intent to assert jurisdiction over a seemingly passive web site, without further discussion of the issue.
Another case that falls into this category is SuperGuide Corp. v. Kegan , 44 U.S.P.Q.2d 1770, 1997 WL 754467 (W.D.N.C. 1997). Plaintiff had sought a trademark registration for the mark SUPERGUIDE. When defendant, owner of the mark MACGUIDE, initiated an opposition proceeding in the U.S. Patent & Trademark Office, plaintiff responded with this declaratory relief action. The only alleged contacts concerned defendant's web site. The plaintiff submitted no specific evidence relating to access to defendant's web site by North Carolina residents, but instead posited that "a reasonable inference would be that a large number of North Carolina residents have visited defendant's web site, a number of those visitors have utilized defendant's commercial services, and some have even obtained MACGUIDE credit cards." Id. at *5. The court agreed with plaintiff's assumption and found that, coupled with the declaratory nature of the relief, it was enough to constitute "substantial activity" to satisfy the long-arm statute. The court failed to describe the nature of defendant's web site and found jurisdiction based on the simple existence of the web site, without making specific findings about its nature.
2. Interactive Presence on the Web
As noted above, the distinction between a "passive" and an "interactive" web site is far from clear, and it is far from certain that this model that will continue to be used for web site jurisdiction cases. The court that first described the "passive-interactive-doing business" model stated that in situations that go beyond mere advertising or posting of information "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." Zippo Mfg. Co. v. Zippo Dot Com , 952 F. Supp. 1119, 1124 (W.D. Pa. 1997).
Maritz, Inc. v. CyberGold, Inc. , 947 F. Supp. 1328 (E.D. Mo. 1996), illustrates how illusory the distinction between "passive" and "interactive" can be. In that case the defendant, a California corporation, operated a web site that announced CyberGold's upcoming service. Interested parties could add their names to an Internet-based mailing list to receive future information from CyberGold. The plaintiff, a Missouri corporation sued in Missouri alleging trademark infringement. Id. at 1330.
The court declined to accept CyberGold's characterization of its site as "passive" describing the defendant's activity on the Internet as follows:
With CyberGold's web site, CyberGold automatically and indiscriminately responds to each and every internet user who accesses its web site. Through its web site, CyberGold has consciously decided to transmit advertising information to all internet users, knowing that such information will be transmitted globally. Thus, CyberGold's contacts are of such a quality and nature, albeit a very new quality and nature for personal jurisdiction jurisprudence, that they favor the exercise of personal jurisdiction over the defendant. Id. at 1333.
In AltaVista, the plaintiff Digital claimed that the defendant AltaVista, through its web page based in California, had breached a licensing agreement and was infringing on Digital's ALTA VISTA trademark. AltaVista was using its web site to sell software and also to solicit advertisements which would appear on the web page. Significantly, Alta Vista, the original owner of the ALTA VISTA mark, had sold the mark to Digital, and had licensed it back with limited rights to use the mark. Id. at 459-60.
Judge Gertner's opinion is perhaps the most thoughtful decision to date on the implications and risks associated with permitting the exercise of personal jurisdiction based on Internet use. She stated that "[t]o impose traditional territorial concepts on the commercial uses of the Internet has dramatic implications, opening the Web user up to inconsistent regulations throughout fifty states, indeed, throughout the globe." 960 F. Supp. at 463. Judge Gertner went on to state that the exercise of jurisdiction in Internet cases "raises the possibility of dramatically chilling what may well be 'the most participatory marketplace of mass speech that this country -- and indeed the world -- has yet seen." Id ., quoting ACLU v. Reno , 929 F. Supp. 824, 881 (E.D. Pa. 1996), aff'd , 117 S. Ct. 2329 (1997).
The court warned that its decision was very limited:
This case does not reach the issue of whether any Web activity, by anyone, absent commercial use, absent advertising and solicitation of both advertising and sales, absent a contract and sales and other contacts with the forum state, and absent the potentially foreseeable harm of trademark infringement, would be sufficient to permit the assertion of jurisdiction over a foreign defendant. While it raises some troubling issues, and while the traditional analyses must be informed by this new technology, ultimately, this is not the day nor the forum to resolve them.
960 F. Supp. at 463 (emphasis in original).
Despite these warnings, the court found that AltaVista's contacts with Massachusetts were sufficient to satisfy the requirements of §§3(a), 3(c) and 3(d) of the Massachusetts long-arm statute. Id . at 464.
With regard to §3(c), the court found that by placing material on its web site that allegedly infringed on Digital's trademark, AltaVista had acted within Massachusetts even though this "transmission" was not "singularly" directed at Massachusetts. Id. at 466.
Further, the court found that because the defendant's web site solicited business and was available to Massachusetts residents "twenty-four hours a day and seven days a week," it amounted to "a persistent course of conduct sufficient to satisfy the requirements of section 3(d)" of the long-arm statute. Id. at 467.
The court noted that Alta Vista "may well have done everything possible to avoid jurisdiction in terms of its contract and non-Web contacts with Massachusetts." AltaVista's web site, however, "necessarily changes the equation" and "in context, creates minimum contacts." Id. at 469.
The Digital court cited the "effects test" of Calder and, even more ominously for those who would like to avoid jurisdiction in every state because of a web page, cited the case of Keeton v. Hustler , 465 U.S. 770 (1984). Keeton concerned a New York plaintiff who sued Hustler magazine, an Ohio corporation, for libel in federal court in New Hampshire. The plaintiff chose New Hampshire because of its long statute of limitations on libel claims. The Supreme Court held that Hustler's regular circulation of magazines in New Hampshire was sufficient to support personal jurisdiction in a libel suit based on the content of the magazine. 465 U.S. at 772-73.
The Digital court reasoned that "[w]eb-sites are modern analogs of national publications; potentially innumerable 'copies' can be (and are) regularly 'distributed' wherever there is access to the World-Wide Web." 960 F. Supp. at 470. If this rationale is widely accepted, it is hard to see how there is any limitation to the exercise of personal jurisdiction over web site publishers. Every publisher, even those as small as Clue Computing, become national publishers, comparable to Hustler magazine in terms of their vulnerability to suit in 50 states, if not in their ability to afford the cost of defending law suits in every state in the nation.
3. Doing Business over the Internet
Everyone from Bill Gates to Bill Clinton promises the American public that we are entering an age where business relationships based solely on electronic communications over the Internet will be commonplace. If this is the case, there is little question that "minimum contact" standards will be applied in the same manner that they have been for traditional forms of business dealings and communications.
In Zippo, supra , the California defendant marketed an Internet News Service. Customers signed up on the web and paid a fee to be issued a password which allowed access to the defendant's news files. In addition, the defendant in that case entered into agreements with Internet service providers (ISP's) to permit the ISP subscribers access to this service. The plaintiff, a Pennsylvania manufacturing company which makes, among other things, Zippo lighters, sued for trademark infringement. 952 F. Supp. at 1121.
The Court found that approximately 3000 Pennsylvania residents and two Pennsylvania ISPs had entered into contracts with the defendant. "The intended object of these transactions has been the downloading of the electronic messages that form the basis of this suit in Pennsylvania." Id. at 1126. After introducing the "passive-active-doing business" categories as an aid for analyzing Internet jurisdiction cases, the Zippo court determined that the case at hand belonged in the "doing business" category and had little difficulty deciding that jurisdiction was proper. Id. at 1125-26.
Subject only to future developments in the enforceability of "click wrap" licenses, or other jurisdictional provisions that may be implemented by proposed Article 2B of the Uniform Commercial Code or the Uniform Electronic Transactions Act (which is in its early drafting stages), it appears that "doing business" over the web will subject merchants, vendors and service providers to personal jurisdiction.
The heart of the inquiry into personal jurisdiction has always been whether the out-of-state defendant "purposefully availed" itself of the privilege of conducting business in the forum state. Although Internet jurisdiction cases may be in their infancy, it is clear that the trend today is for the courts to treat almost every web publisher, no matter how small, as a national television, newspaper or magazine publisher. We believe that this trend, which is illustrated by many of the cases discussed in this article, goes too far. It is not uncommon for the pendulum to swing too far as the courts attempt to adjust the application of old law to new technologies. It appears that this is the case with respect to Internet jurisdiction today. We believe that the courts need to reevaluate their approach to these cases and recognize that not every web site owner has "purposefully availed" itself of the privileges of every state. The courts need to develop a more reasoned approach to Internet jurisdiction cases. We expect that this will occur on a case-by-case basis as the courts grow to understand the technology and commercial implications of the World Wide Web, and the practical distinctions between the multitude of uses to which the web is put.
Among the many legal resources on the World Wide Web are the following sites which contain materials-or links to materials concerning personal jurisdiction and the Internet.
The Cyberlaw Encyclopedia B Jurisdiction in Cyberspace http://gahtan.com/techlaw/jurisd.htm
The Law Journal Extra maintains resources on "The Law of the Internet." A subtopic, "Jurisdiction on the Internet" can be found at: http://www.ljx.com/internet/irjuris.html
The law firm of Perkins Coie maintains a collection of abstracts of cases related to the Internet which can be accessed through: http://www.perkinscoie.com/cgi-bin/folioisa.dll/netcase.nfo ?
Another list of cases and other resources is maintained by The John Marshall Law School at: http://www.jmls.edu/cyber/index/juris.html
and at the WWW site of Georgetown Law Center's Cyberspace Law Institute at: http://www.cli.org/DPost/jcases.html
An archive of cases related to technology is maintained by BNA. A list of cases in this archive can be found at: http://www.bna.com/e-law/libindex.html#recent_decisions