Personal jurisdiction by way of the internet

The Internet is a pervasive presence in current life. It provides information, communication and a myriad of legal issues because of its presence. Where does a cyberspace communication begin? Where does it exist? Who has access? Who can claim a copyright or trademark in cyberspace? These are the some of the issues that are on the legal horizon. More practically, can a party obtain jurisdiction over another party for purposes of litigation by the out-of-state party’s Internet usage? If so, how? How are the due process tests met?

Most of the cases which discuss obtaining jurisdiction through Internet contacts are cases that sound in tort. They are primarily defamation cases, trademark infringement or copyright infringement cases. There are few examples of cases sounding in equity.

There are three cases which set the cornerstones of establishing jurisdiction by way of Internet contacts. They are Panavision v. Toeppen, 141 F.3d 1316 (9th Cir. 1998), Maritz, Inc. V. CyberGold, Inc., 947 F.Supp. 1328 (E.D. Mo. 1996) and Bensusan Restaurant Corp. v. King, 937 F.Supp. 296 (S.D. N.Y. 1996). These cases demonstrate the range of Internet contacts and their application.

In Bensusan, the defendant had opened a night club in Columbia, Missouri called the Blue Note. It had a website which advertised the club and which provided information about how to obtain tickets for shows at the club. Tickets could not be purchased on line. They could be purchased through a ticket broker or at the club box office where the tickets would be held for pick up by the customer. The website also referenced the New York night club owned by Bensusan Restaurant Corporation and suggested that, when visiting New York, jazz fans should visit that club. Bensusan brought a claim for trademark infringement in the New York courts. The federal court applied the New York long arm statute to the facts and found that there was little if any financial impact on the New York entity and that there was no proof that the defendant was promoting, selling or otherwise making an effort to target its product in New York. The New York court granted the defendant’s motion to dismiss the complaint for lack of personal jurisdiction.

The opposite extreme is represented in the Panavision case. The Panavision case represents a hijacking of a corporate domain name for profit. Defendant Toeppen registered the domain name, “panavision.com”. Panavision is a registered tradename of Panavision International, L.P., the plaintiff. When Panavision sought to establish a presence on the Internet and it learned that Toeppen had registered the names, it notified him of its intent to use the names. Toeppen demanded $13,000 for the name “Panavision.com”. He subsequently registered the “panaflex.com” name. Like Panavision, Panaflex is a registered tradename of the Plaintiff’s. The allegation was made that Toeppen had registered other domain names which were registered marks or similar to registered marks of other corporations such as, American Standard, Delta Airlines, Eddie Bauer, Anaheim Stadium and the French Open. Again, the court looked to the state’s long arm statute to determine whether it could assert jurisdiction. The court also undertook an analysis under the federal case law to ensure that the requisite due process standards had been met.

The court found that there was no general jurisdiction over Toeppen because he was not a California resident and because his California activities were not substantial, systematic or continuous which are the requirements for general jurisdiction. See, Helicopters Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984). The court did find that there was specific jurisdiction. In applying the Ninth Circuit’s three part test, it wrote,

(1) the nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or results from the defendant’s forum-related activities; and (3) exercise of jurisdiction must be reasonable.

141 F.3d at 1320, citations omitted. The court went on to find that Toeppen’s out of state conduct was intended to and did result in harmful effects in California. As a result, there was personal jurisdiction over Toeppen.

In the middle ground is Maritz, Inc. v. CyberGold, Inc., supra (1996). CyberGold maintained a website which provides information about CyberGold’s upcoming service which is a ailing list of Internet users who have provided CyberGold with their interests. CyberGold will forward advertisements to the users based on their profiles. CyberGold will provide user incentives for reading the advertisements and will generate revenues for allowing advertisers access to the users. The Missouri plaintiff was a holder of a registered federal trademark and sought to enforce its trademark. Again, the court employed the state’s long arm statute to determine whether it could exercise jurisdiction.

The court examined the Missouri long arm statute and found that there were two bases on which jurisdiction might be predicated. The first was whether CyberGold was transacting business in the state; the second was whether there was a tortious act committed in the state. The court declined to consider whether CyberGold was transacting business. It simply relied on the allegation that there was a tortious act of infringement being committed. It then questioned whether an exercise of jurisdiction would violate due process. It employed the five part test established in the Eighth Circuit while recognizing that the Internet is a new a rapidly developing means of mass communication and information exchange which rendered analogies to conventional mail and telephone cases less than satisfactory. The court found that CyberGold did purposefully avail itself of the privilege of doing business in Missouri and that it could reasonably anticipate being haled into court in Missouri.

Other cases have concluded that these three cases establish a sliding scale for the determination of whether there is jurisdiction over a non-resident party. The Pennsylvania Court wrote in Blackburn v Walker Oriental Rug Galleries, Inc., 999 F.Supp. 636 (E.D. Pa. 1998),

Three types of contacts have been identified in order to determine the existence of personal jurisdiction. Weber v. Jolly Hotels, 977 F. Supp. 327, 333 (D. N.J. 1997). The first type of contact is when the defendant clearly does business over the Internet. Id. “If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper.” Zippo, 977 F.Supp. at 1124 (citing CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996)). The second type of contact occurs when “a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Website.” Zippo, 952 F.Supp. At 1124 (citing Maritz, Inc. v. CyberGold, Inc., 947 F.Supp. 1328 (E.D. Mo. 1996)); Weber, 977 F.Supp. at 333. The third type of contact involves the posting of information or advertisements on an Internet Web Site “which is accessible to users in foreign jurisdictions.” Zippo, 952 F.Supp. at 1124; see Weber, 977 F.Supp. at 333; Bensusan Restaurant Corp. v. King, 937 F.Supp. 295 (S.D.N.Y. 1996). Personal jurisdiction is not exercised for this type of contact because “a finding of jurisdiction ... based on an Internet web site would mean that there would be nationwide (indeed, worldwide) personal jurisdiction over anyone and everyone who establishes an Internet web site. Such nationwide jurisdiction is not consistent with personal jurisdiction case law...” Weber, 977 F.Supp at 333 (quoting Hearst Corp. v. Goldberger, 1997 WL 97097, at *1 (S.D. N.Y. Feb. 27, 1997)).

999 F.Supp. at 638-639.

A solid jurisdictional basis for a claim precludes later attack and eases enforcement. The recent Canadian case of Braintech, Inc. v. Kostiuk, 1999 BCCA 0169, from the Court of Appeals of British Columbia1, shows why it is essential to ensure that jurisdiction is proper at the outset of the litigation. In Braintech, Braintech was a Nevada corporation holding itself out as a Canadian developmental stage company with offices in Vancouver, British Columbia and research and development facilities in Austin, Texas. It brought suit against Mr. Kostiuk because he published defamatory information about Braintech on the Internet. He was served by service on the Texas Secretary of State and by mail at Mr. Kostiuk’s father’s home. Mr. Kostiuk’s father never returned the return receipt attached to the letter. Personal service was also performed. A default was taken and judgment in the amount of $300,000 entered. Braintech subsequently sought to enforce its judgment by means of an independent action in Canada. It prevailed and an appeal followed.

The Canadian appellate court first reviewed the Texas long arm statute. It reviewed the credibility of the witnesses regarding service of process. Its decision focused, however, on whether there were real and substantial connections between Texas and the injury alleged for the purposes of reviewing the foreign judgment. It reviewed the concept of comity and the due process analysis contained in Zippo Manufacturing Company v. Zippo DotCom, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997) to find that Kostiuk’s posting of allegedly defamatory material with no commercial on an Internet Bulletin Board does not support jurisdiction in Texas. The Court further noted that subjecting Kostiuk to jurisdiction in Texas  would create a chilling effect on freedom of expression.

This analysis parallels the analysis of Bensusan in that the mere presence of a statement--opinion or advertising--on the Internet does not give rise to jurisdiction in the state where it is accessed. Braintech shows the importance of clearly establishing jurisdiction in the selected forum before proceeding with litigation.

Despite the rapid rush of new technologies and ideas brought about by the Internet, fundamental due process has not been abandoned, although it has been tested and new limits defined to match the new electronic frontier.

1. This case, along with many of the other cases cited can be retrieved online from the BNA website at: www.bna.com/e-law/cases