July 26-27, 1999
Montreal, Canada

American Bar Association Internet Jurisdiction Project
Sale of Services Working Group
Draft Report - July 1999

Professor Michael A. Geist
University of Ottawa Law School
mgeist@uottawa.ca

Introduction

The study of jurisdictional issues involving sale of services on the Internet has been conducted in two phases. In the first phase, members of our working group drafted five reports covering the impact of the Internet on a broad range of services including legal and medical services, consulting, engineering, and education. The goal of this first phase was to identify the key concerns impacting this issue and to develop a course of action for further investigation.

The primary finding from this first round of reports was that the Internet's impact upon certain services is dependent upon both the type and level of regulation within that service. It quickly became apparent that those services that are not regulated by either a professional body or governmental equivalent raise few new issues for jurisdictional analysis. These services, such as business or computer consulting, are bound by traditional choice of law rules, consumer protection legislation and other various business laws that relate to their industry when conducting activity via the Internet. The jurisdictional analysis is therefore unchanged and the evolving Internet jurisdiction framework can be effectively applied to such service delivery.

Regulated services, on the other hand, do present new issues and concerns since the power to apply real-space law to the virtual provision of these services raise significant new jurisdictional and enforcement challenges. The first round of working group reports suggested that there are two levels or kinds of regulatory regimes.

The first are those services for which regulatory bodies are mandated only to create and set standards for the acceptance into the practice of a specific profession or service. Once an individual attains those standards, the regulatory body ceases to direct the professional conduct of that individual. For example, to become an engineer one must meet specific educational and practical requirements before earning the Professional Engineer status. Upon receiving this status, the regulatory engineering body ceases to impact upon an engineer's professional practice through mechanisms such as disciplinary boards or required practice processes.

The second type of service involves those regulatory bodies that impose educational and practical experience to enter the profession and possess a continuing role over the conduct and practices of their respective professionals. This continuing role is indicated by the mandate or authority of the regulatory body to conduct disciplinary proceedings, require ongoing education, initiate investigations into an individual's professional practices and the power to institute mandatory practice guidelines. This list is not an exhaustive one but provided only to indicate the differences between an ongoing regulatory body and bodies previously mentioned. Examples of these types of bodies are state medical boards and state Bar Associations that oversee the legal profession.

With these distinctions in mind, in phase two of our research it was necessary for us to further inquire into the possible jurisdictional issues that exist due to the Internet. For regulated services -- on-going and certifying only -- we required the identification of issues that specifically impact upon each of the two types of regulatory bodies.

I. Certifying Only Regulation

Research was conducted into the provision of engineering services which was identified as a certifying-only service. Our investigation revealed that most states employ a similar standard that mandates that no one shall practice engineering (as further defined, typically contracting or performing such services in the state) or advertise (the typical standard is "...by verbal claim, business cards, letterhead, signs or otherwise...") such services without being licensed. Other states adopt a similar standard defined as "no one shall offer to practice engineering in the state without being duly licensed". The other type of standard typically imposed by various states is that a person shall not hold himself out as a professional engineer without being licensed in the state. We could find no caselaw on the issue.

The current regulatory and jurisdictional approach to this service suggests that there is little to distinguish certifying regulation and on-going regulation since both utilize a similar statutory provision to the certification aspect of the service. Accordingly, the lessons to be drawn from the ongoing regulation also provide an effective model for certifying regulation.

II. Ongoing Regulation

Ongoing regulation, which includes telemedicine, law, and education, presents issues pertaining to both who may practice or provide services as well as the content of such services. As one of the most regulated professions, we felt that medicine would provide the perfect model for beginning to understand how the Internet may affect regulated professions and could be used with equal applicability in the legal and educational sectors. Due to the fact that medical service directly impacts upon the life and death of individuals, both the media and the government have been focusing on the impact/consequences of the Internet. Examining telemedicine in light of the recent media and government attention would also provide a framework for our discussions on how states can regulate professions which may provide service via the Internet, how courts have asserted jurisdiction and how regulatory bodies can assert jurisdiction.

There are a range of issues that arise out of the introduction of medical service delivery via the Internet: the standard of care, quality of service, insurer liability and cost. Our focus however, is on the legal issues and specifically jurisdictional issues. For example, which medical board has jurisdiction over a doctor who conducts diagnosis over the Internet - the state where the patient resides or where the doctor resides? How may a doctor utilize a website, as an advertising mechanism or as a virtual office? Is the profession prepared to deal with the Internet?¹

Telemedicine and Jurisdiction - A Case Study

There are two main approaches that may be used in order to assert jurisdiction over an out of state physician when dealing with the issue of Telemedicine. The first is for the courts to assert jurisdiction using existing conflicts of laws principles and caselaw. The second is the state regulatory approach through the conduit of state medical boards and their respective legislative codes.

A.) Court-based Jurisdiction

As U.S. courts have faced an increasing number of Internet jursidiction cases, a well-accepted approach of examining the active vs. passive nature of the Internet activity has emerged.² Recently, the Court of Appeal of Texas used this analytical framework to find it had jurisdiction over an out-of-state medical clinic in the case of Mayo Clinic v. Jackson.³ The Jackson's were referred to the Mayo Clinic in Minnesota by their personal physician within Texas. The Clinic argued that the Texas state court had no jurisdiction over the defendants. The Court examined whether there were minimum contacts within the state of Texas such that the non-resident could reasonably anticipate being sued otherwise known as the "minimum contacts" doctrine.

The Clinic noted that it did not maintain a place of business in Texas, did not own property in Texas and does not maintain agents in Texas. In response, the Jacksons pointed to evidence of advertising in national magazines, a website accessible within Texas, a national toll-free telephone number and specific instructions on the website for doctors on how to refer patients to the Clinic. Lastly, evidence was presented which showed that the Clinic had provided service to over 1000 Texas residents in the previous five years.

The Court ruled that it had jurisdiction over the matter, based on the Clinic's advertising practices, recruiting practices and continuing treatment of state residents. Although the decision did not involve service delivery via the Internet, it provides a strong example of how courts may exercise jurisdiction over out of state service providers.⁴

The decision raises a number of issues for medical practitioners engaged in service delivery over the Internet and in real-space. For example, should a doctor in Kansas deny service to a patient who has as a place of residence Texas, for fear of being brought within the laws of Texas? In real-space, doctors and hospital treat patients from out of state without consequence of being brought within another state's jurisdiction. What number of out of state patients treated will bring a hospital within the other jurisdiction?

B.) Regulator-based Jurisdiction

In the United States, the states are responsible for regulating the practice of medicine. They do so through the licensing of physicians by medical boards. Physicians not licensed by the forum state may be subject to civil suits or criminal prosecution under an "unauthorized practice of medicine" statute. In addition, authorities in the forum state may report unauthorized practice to the offending physician's home state licensing board. Thus, licensing is the primary tool used to bring an individual within the jurisdiction of a state medical board.

The educational and competency requirements for obtaining an initial medical license are relatively uniform, but are determined by medical boards to whom the state delegates licensing authority. Those requirements include: graduation from an accredited medical school; passing of the United States Medical Licensing Exam (USMLE); and residency at a teaching hospital or other post-graduate training. Physicians licensed in one state may obtain a second license in another state through a process known as "endorsement," under which an applicant presents evidence of credentials and competency to the medical licensing board. There is, as yet, no centralized process for endorsement, and the paperwork, fees, forms, and procedures vary from state to state.⁵

As discussed, a Website is multi-jurisdictional in nature and allows for a physician to easily provide service in more than one jurisdiction. As such, the profession is Internet ready in that it already legally allows physicians to practice in more than one jurisdiction so long as the individual possesses the appropriate licenses.

a) Telemedicine & Jurisdiction over the Out-of-State Physician

The advent of telemedicine has prompted several U.S. states to amend their medical licensing statutes to cover the delivery of medical services through electronic media.

Several states, including Indiana, Oklahoma, and South Dakota , have statutes requiring that out-of-state physicians providing telemedical services to in-state residents do so on a regular, continuous, or ongoing basis, usually under contract. In terms of conventional minimum contacts analysis, the presence of an agreement between an out-of-state physician and an in-state provider to provide telemedical services is an indication of the out-of-state physician's intent to avail himself of the privileges and benefits of the forum state claiming jurisdiction over him.

Following are the relevant statutory provisions from the codes of Indiana, Oklahoma and South Dakota:

Indiana Code 25-22.5-1-1.1(a) (4) (as amended 1996, 1997): As used in this article, the practice of Medicine or osteopathic medicine means one or a combination of the following . . . Providing diagnostic or treatment services: (A) that are transmitted through electronic communications; and (B) are on a regular, routine, and non-episodic basis or under an oral or written agreement to regularly provide medical services. . . . A nonresident physician who is located outside Indiana does not practice medicine or osteopathy in Indiana by providing a second option to a licensee or diagnostic or treatment services to a patient in Indiana following medical care originally provided to the patient while outside Indiana.

Oklahoma Statutes Annotated, Title 59, § 492 (as amended 1995): Except as provided in Subsection (D) of this section, performance by a person outside of this state, through an ongoing regular arrangement of diagnostic or treatment services through electronic communications for any patient whose condition is being diagnosed or treated within this state. A person who performs any of the functions covered by this subparagraph submits to the jurisdiction of the courts of this state for the purposes of any cause of action resulting from the functions performed. Title 59, § 492 (C)(3)(b) . . . .D. The practice of medicine and surgery, as defined in this section, shall not include: . . .8. Any person who is licensed to practice medicine and surgery in another state or territory of the United States whose sole purpose and activity is limited to brief actual consultation with a specific physician who is licensed to practice medicine and surgery by the Board, other than a person with a special or restricted license; . . .

South Dakota Codified Laws Annotated, § 36-4-41 (as amended 1996): Practice of Medicine or Osteopathy in South Dakota while located outside of state. Any nonresident physician or osteopath who, while located outside this state, provides diagnostic treatment or services through electronic means to a person located in this state under a contract with a health care provider licensed under Title 36, a clinic located in this state that provides health services, or a health care facility licensed under chapter 34-12, is engaged in the practice of medicine or osteopathy in this state. No nonresident physician or osteopath who, while located outside this state, consults on an irregular basis with a licensee under this chapter who is located in this state, is engaged in the practice of medicine or osteopathy in this state.

Other states, such as Nevada and Texas, do not appear to require that medical services be provided on a regular, continuing, or ongoing basis, in order to justify assertion of jurisdiction over out-of-state physicians. In other words, some states require less of a virtual presence than others in asserting jurisdiction over out-of-state physicians who deliver diagnostic and treatment services over the Internet. Following are the Nevada and Texas Statutes:

Nevada Revised Statutes Annotated 54-630.020 (as amended 1995): Practice of Medicine means: (1) To diagnose, treat, correct, prevent, or prescribe for any human disease, ailment, injury, infirmity, deformity, or other condition, physical or mental, by any means or instrumentality, (2) To apply principles or techniques of medical science in the diagnosis or the prevention of any such conditions. (3) To perform any of the acts described in subsections (1) and (2) by using equipment that transfers information concerning the medical condition of the patient electronically, telephonically or by fiber optics. . . .

Texas Revised Civil Statutes, Article 4495b, §3.06(i) (1995): A person who is physically located in another jurisdiction but who, through the use of any medium, including an electronic medium, performs an act that is part of a patient care service initiated in this state, including the taking of an X-ray examination or the preparation of pathological material for examination, and that would affect the diagnosis or treatment of the patient, is engaged in the practice of medicine in this state for the purposes of this act, and is subject to this Act and appropriate regulation by the Board. This subsection does not apply to: (1) the acts of a medical specialist located in another jurisdiction who provides only episodic consultation services on request to a person licensed in this state who practices in the same medical specialty; (2) the acts of a physician located in another jurisdiction who is providing consultation services to a medical school; or (3) the acts of a physician located in another jurisdiction who is providing consultation services to an [educational] institution [other than a medical school].

A noteworthy question is whether states, which have not clearly stated within their legislation as found within the Texas statute above, possess the jurisdiction over out-of-state physicians providing service over the Internet to in-state residents. The answer to such a question may not be such a difficult one. Combining traditional conflicts of laws rules with the jurisdiction provisions of the medical statutes it would be appear that the state medical board would have jurisdiction so long as the physician is acting within the state's definition of the "practice of medicine". It should be noted that all medical statutes give authority to their respective regulatory bodies over any individual engaged in the "practice of medicine". Using the Internet to practice medicine does not alter this authority or regulatory power of the board. The key to the authority is not the medium utilized but the actions of the individual.

Assertion of Jurisdiction -- What is the "Practice of Medicine"?

An essential requirement for a state to assert jurisdiction over an individual derives from the state's power over individuals who "practice medicine". State medical boards are granted the right to regulate the "practice of medicine". Anyone engaged in the "practice of medicine" within a state is subject to the jurisdiction of the state medical board. As such a definition is required in order to understand the activity that falls within regulation. Each state possesses its own definition of the "practice of medicine", but there are common similarities that can be highlighted to foster our discussion. A good definition of the "practice of medicine" which contains elements that are found within almost all state codes comes from Colorado:

12-36-106 - Practice of medicine defined.

(1) For the purpose of this article, "practice of medicine" means:

(a) Holding out one's self to the public within this state as being able to diagnose, treat, prescribe for, palliate, or prevent any human disease, ailment, pain, injury, deformity, or physical or mental condition, whether by the use of drugs, surgery, manipulation, electricity, telemedicine, the interpretation of tests, ...

(b) Using the title M.D., D.O., physician, surgeon, or any word or abbreviation to indicate or induce others to believe that one is licensed to practice medicine in this state and engaged in the diagnosis or treatment of persons afflicted with ... .

[Emphasis added.]

Based upon this definition of the "practice of medicine" that such activities when practised or offered over the Internet would fall within the authority and jurisdiction of State medical boards. As an example, in June of this year, the state of Kansas filed five lawsuits against online prescription providers who were not properly licensed to practice medicine within the state after they had prescribed and sold drugs to state residents via a website.⁶ There is one element within this definition that is key to our discussion which is not found within all state code definitions. That is the reference to telemedicine. In fact, as will be discussed further, the inclusion of this word is key to the preparedness of state medical boards in dealing with the Internet.

In addition to the definition of "practice of medicine" there are exclusionary sections which allow a medical practitioner to consult with out of state practitioners on a limited basis thus not bringing the out of state practitioner within the jurisdiction of the in-state practitioner. Such provisions existed long before the advent of telemedicine and Internet and as such it is fair to conclude that such provisions would continue to apply if the Internet is used as a medium for such limited consultations.

b) Telemedicine and Jurisdiction - Online Activities

Another major task was to identify the types of activities and conduct that state medical boards have the authority to regulate in order to determine whether service over the Internet could have a possibility of falling within that authority

i.) Diagnosis

[PLEASE INSERT A DISCUSSION ON DIAGNOSIS - HOW IT OBVIOUSLY FALLS WITHIN THE PRACTICE OF MEDICINE STATUTE (cite one if you like) AND PROVIDE EXAMPLES FROM THE NET HOW THIS IS TAKING PLACE - www.mediconsult.com is one example - check it out and explain how it works

ii.) Pharmaceutical Sales

With the billions of dollars spent every year by Americans on prescription drugs, it was only a matter of time before such products became available over the Internet. In recent months the issue has attracted widespread attention as regulators become increasingly concerned with the proliferation of pharmaceutical sales online. State medical boards are possessed with authority over those who prescribe for within the definition of "practice of medicine" is the prescribing of drugs or treatment. Several states have already chosen to ban on-line prescriptions such as Connecticut, Nevada, Wyoming, Maryland and Kansas.⁷

In all states, doctors are required to examine patients before prescribing medication. Not doing so is a violation of professional standards. Oklahoma provides that the following is unprofessional conduct:

§59-509 13. Prescribing or administering a drug or treatment without sufficient examination and the establishment of a valid physician-patient relationship.

The Internet complicates this requirement in that it is unclear whether medical advice and prescribing can be dispensed over the Internet such that the "sufficient examination" criteria is fulfilled. Similar requirements in other within medical statutes will heavily effect the legality of medical practitioners providing service over the Internet. Current definitions of "physician-patient relationship" and "sufficient examination" will need to be examined in order to determine whether medical service via the Internet can validly occur.

The American Medical Association recently recommended that doctors actually see patients face to face before prescribing any form of medication.⁸ Of course, until every computer is equipped with a digital camera this requirement could never be fulfilled. Some question whether such a policy directly contradicts the practice of allowing doctors to dispense medical advice over the phone which is acceptable in many states.⁹ In other words, such requirements will stall the Internet from being utilised as a tool for service delivery.

The key issue here is sufficiency of the physician-patient relationship and sufficiency of the information the doctor has before prescribing. In order to foster the accepted use of the Internet to deliver medical service, some Web sites are requiring that patients provide them with a full medical history. The Telemedicine Group [http://www.telemedicine.com] to be officially launched August 1, 1999 will require all its patients to provide detailed medical information that is then encrypted and stored in order to assist their on-line doctors in dispensing medical advice. The company aims to ensure that their physicians have enough information to make a confident and professional diagnosis.¹⁰

Unfortunately, the Telemedicine Group's practices can be countered with the numerous sites that circumvent the traditional medical relationship by allowing patients to order their drugs and wait for approval from the on-line doctor.¹¹ One such site which recently gained media attention was Drpropecia.com where baldness medication was dispensed. The doctor operating the site was placed on suspension by the California state medical board for prescribing medication to patients without an adequate consultation.¹²

iii.) Advertising

Several states have statutory provisions which deal directly with advertising by medical practitioners. The state of Oklahoma includes in its list of activities which are "unprofessional conduct":

§59-509 2. Advertising to the public in any manner; provided, however, that a person, firm, association or corporation may place an announcement in a newspaper regarding the opening of an office, permanent or temporary, for whatever reason, and the specialty or specialties of person or persons, firm, association or corporation;

In contrast, the state of Texas provides the following:

§ 3.085 Restrictions on Bidding and Advertising

(b) The board may not include in its rules to prohibit false, misleading, or deceptive practices by a person regulated by the board a rule that:

(1) restricts the use of any medium for advertising;

Oklahoma specifically uses the word "newspaper" in discussing what and where a medical practitioner may advertise. This would appear to indicate that no other form of advertising is allowed under Oklahoma's statute and as such, advertising on the Internet would fall within "unprofessional conduct".¹³ Contrasted with Texas legislation which allows for advertising via "any medium" which would seem to indicate that the state is prepared to allow for the use of the Internet as an advertising medium.

Another key issue which could possibly fall under the advertising of wares or services is the type of information permitted on a Web site. In other words, the definition of "advertising" will need to be re-examined by state medical boards. Many medical Web Sites operated by medical practitioners on the Internet provide medical information and serve as a resource. Although not providing traditional medical advice, medical boards will need to provide a framework for classification of Web Sites.¹⁴

Conclusions

[to come]

Endnotes

1. Similar concerns are raised in the context of both law and education. In the legal sector, bar associations have begun to grapple with jurisdictional issues such as Web-based practices as well as the rules pertaining to law firm Web sites. In an education context, regulators have been slower to deal with challenge presented by the Internet though the regulatory structure in licensing teachers as well as setting curriculum and educational standards raise significant jurisdictional questions.

2. This trend begins with Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997), which canvassed existing caselaw at that time and developed the active vs. passive test. The Zippo line of reasoning has been followed by most courts including recent decisions such as Rannoch, Inc. v. Rannoch Corporation (1999 WL 450824 (E.D.Va. 1999), Ty Inc. v. Collett (1999 WL 300290 (N.D.Ill.)), and Resnick v. Manfredy (1999 WL 257751 (E.D.Pa.).

3. 1998 Tex. App. LEXIS 6307, October 9, 1998.

4. Two legal services case indicate that courts will treat the issue in a similar manner even where there is online service delivery. The California Supreme Court has recently established (albeit in dicta) that a foreign attorney need not be physically present within California to violate Business and Professions Code Section 6125's prohibition that "[n]o person shall practice law in California unless the person is an active member of the State Bar." In Birbrower, Montablano, Condon & Frank v. Superior Court (17 Cal. 4th 119, 128 (Cal. 1998)) the court held that:

   In our view, the practice of law "in California" entails sufficient contact with the California client to render the nature of the legal service a clear legal representation. In addition to a quantitative analysis, we must consider the nature of the unlicenced lawyer's activities in the state. Mere fortuitous or attenuated contacts will not sustain a finding that the unlicenced lawyer practiced law "in California." The primary inquiry is whether the unlicenced lawyer engaged in sufficient activities in the state, or created a continuing relationship with the California client that included legal duties and obligations.

   In adopting a balancing test to determine the meaning of "in California" for purposes of Section 6125, the California supreme court explicitly recognized that the test "does not necessarily depend on or require the unlicenced lawyer's physical presence in the state." The court stated that a foreign attorney would practice law in California "in violation of section 6125 although not physically present here by advising a California client on California law in connection with a California legal dispute by telephone, fax, computer, or other modern technological means." However, the court also rejected the idea that a person automatically practices law "in California" merely by "virtually enter[ing] the state by telephone, fax, e-mail, or satellite." Rather, the court concluded that the "statute's goal of assuring the competence of all attorneys practicing law in [California]" is best effectuated "[b]y applying section 6125 to out-of-state attorneys without becoming licensed in our state."

   In Texas, existing statutory law grants the state bar jurisdiction to discipline members, wherever they may be located. The Unauthorized Practice of Law Committee also has authority to sue out-of state people and entities to enjoin them from practicing law in Texas. The Committee ha been aggressive in policing perceived infractions of the statute. It recently won summary judgment in federal court on its complaint requesting an injunction against the sale in Texas of a computer program - Quicken Family Lawyer - on the ground that the program violated Texas's unauthorized practice of law statutes. Quicken Family Lawyer asks a series of questions relevant to filling in various legal forms, and then creates the forms for the user. The forms include, living trusts, living wills, noncompete agreements, premarital agreements, promissory notes, residential real estate leases, and various power of attorney forms. In granting the plaintiff Committee's motion for summary judgment, the Court followed Texas Supreme Court precedent holding that "the mere advising of a person as to whether or not to file a form requires legal skill and knowledge, and therefore, would be the practice of law."

5. This process puts medicine ahead of the legal profession since state bar requirements vary considerably and entry into a state bar generally is more arduous than the endorsement process found in medicine.

6. WIRED CITATION HERE.

7. CITE HERE

8. CITE HERE

9. For example, in Walgreen Co. v. Wisconsin Pharmacy Examining Board (1998 Wisc. App. LEXIS 201), the Wisconsin Court of Appeal analogized online prescribing to prescriptions submitted by facsimile transmission.

10. CITE HERE

11. See, e.g., Net-Dr at http:// http://www.net-dr.com/ or U.S. International Health Care, Inc. at http://www.us-care.com/.

12. CITE HERE

13. Although one might question whether advertising in an online newspaper would meet the statutory requirement.

14. Law footnote here about approach of state bars on web advertising and information.