Jurisdiction: Building Confidence in a Borderless Medium
July 26-27, 1999
A US Perspective on The Global Jurisdictional Checkpoints in Cyberspace
Fried, Frank, Harris, Shriver & Jacobson
Cyberspace transcends geography. Perhaps that means that the rules that
determine who can tax, incorporate and resolve disputes in cyberspace will
be different from those to which we are accustomed. It certainly seems to
mean that we must view more and more commercial transactions from the
perspective of international laws. Perhaps many rules need not change just
because we may wonder where cyberspace is and how digital traffic moves.
Does Internet commerce differ from telephone or catalogue commerce and, if
so, how? Should the existence and location of a server affect how a
business should be taxed?
The law should take a fresh look at how different forms of legal
jurisdiction are determined in the boundless world of cyberspace. The
American Bar Association's Business Law Section, through its Cyberspace Law
Committee, and with the joint sponsorship of four other Sections, has funded
a two-year transnational jurisdiction in cyberspace project which will make
its report on nine different areas of the law at the London 2000 Annual
). But, the courts must and are dealing with these issues today.
1.1. The Nature of the Internet
The Internet is a global network where local computer networks are connected
to regional networks that combine to form national and international high
capacity systems.1 Each link in this web of
networks is a computer connected to other computers by a variety of
connections, including fiber optic cables, copper wires, microwave
transmissions, and other communications media. Communications between
computers on the Internet are in the machine language known as Internet
Protocols ("IP").2 Communications
in IP eliminate geographic barriers by way of a packet switching network and
Transmissions over the Internet utilize a packet switching network that
breaks up a communication into distinct packets of data that can be
transmitted individually as capacity on network connections permit. Each
packet is labeled with the "address" of the final destination. It
may follow a number of different routes from computer to computer until
arriving at its final destination, where the packet is reassembled by the
recipient computer server.3 A stream of
packets on one channel between two computers may carry parts of an e-mail
message to an intended recipient within the same state, interspersed with
parts of a software program downloaded from a server in another state, to a
user in Tokyo along with a myriad of other packets that are parts of
communications in the stream of data traversing the Internet worldwide.
The Internet architecture employs "smart communications." As a
network of computers, every link is capable of using computer intelligence
to monitor packet traffic on the network and route packets along the least
congested route to the next computer. This process is generally
repeated.4 Each computer determines whether
to send packets along a channel, to hold packets pending reduction of
network traffic, or to reroute packets of data via different channels to
their ultimate destination to maximize use of the available carrying
capacity of the Internet. In sum, a single communication has the potential
to be broken up into separate packets and sent through several different
jurisdictions before reaching its final destination. With the exceptions of
the jurisdiction in which the communication originates, and the jurisdiction
in which the communication is received, only segments of the communication
may pass "through" computer servers located in other territories,
but not the entire communication.
Generally, there is no centralized control of data transmissions over the
Internet. Each computer acts autonomously, coordinating data flow with its
nearest connected computers, guided by the "invisible hand" that
arises from the interconnection of millions of independent actions on the
Internet. "There is no central authority to govern Internet usage, no
one to ask for permission to join the network, and no one to complain to
when things go wrong."5
2. The Federal Government and the Commerce Clause
The United States Constitution grants express powers to a centralized
government to represent the composite interests of the states that make up
our Union. James Madison wrote over 200 years ago that if "we are to
be one nation in any respect, it clearly ought to be in respect to other
nations."6 In that vein, the federal
government was given control of foreign relations, and specifically,
Congress was given the power to regulate commerce with foreign nations and
among the states.7 State and local
governments, however, have increasingly interjected themselves into varying
aspects of foreign affairs.8 In a critique
of local government's increasing involvement in foreign relations, one
commentator states: "[t]he national interest demands that local
interference in foreign and defense policy be curtailed before the federal
government finds itself hamstrung by hundreds of would-be secretaries of
state touting their own parochial agendas. . . . Foreign policy must be
made in Washington and not in the citizens' backyards."9
Congressional statutes concerning foreign commerce prevail over any
contrary state statutes.10 The Commerce
Clause is more than an affirmative grant of power to the U.S. Congress, it
has a negative implication as well.11 Even
in the absence of federal law, state regulations or taxes are invalid if
they unduly burden interstate or foreign commerce.12 In a lawsuit involving a state's infringement
of foreign commerce, rather than interstate commerce, a
court will look to whether the state or local law prevents the federal
government from speaking "with one voice when regulating commercial
relations with foreign governments," among other factors.13
The Internet creates a conundrum in that states trying to regulate
Internet commerce within their territory may be viewed in effect as seeking
to regulate the Internet worldwide.
2.1. The Internet as a Railroad or "Superhighway"
As U.S. courts confront a state's application of its laws to the Internet,
judges will naturally seek to determine the most appropriate analogy for the
application of existing legal principles to criminal activity on the
Internet. In mid-1997, a federal court in New York in the case of
American Library Association v. Pataki
("Pataki") stated that "the phrase 'information
superhighway' is more than a mere buzzword; it has legal
significance."14 The New York statute
at issue attempted to prohibit transmissions of sexually-related
communications to minors via the Internet. The Pataki court issued
an injunction preventing the statute's enforcement, finding it an
unconstitutional infringement on interstate commerce.15 In analogizing the Internet to a highway or
railroad, the Pataki court stated that the Internet fits within the
parameters of interests traditionally protected by the Commerce
The Pataki court gave three grounds for its decision: (1) the
New York Act represents an unconstitutional projection of New York law into
conduct that occurs wholly outside of New York;17 (2) even if the New York Act is not a per
se violation of the Commerce Clause, it is an invalid, indirect
regulation of interstate commerce because it imposes on interstate commerce
burdens that are excessive in relation to the benefits it confers;18 and (3) the Internet is one of those areas of
commerce that must be marked off as a national preserve to protect
users from inconsistent legislation that, taken to its most extreme, could
paralyze development of the Internet altogether.19
The Pataki court recognized that the "Internet is wholly
insensitive to geographic distinctions."20 Internet users generally do not know the
location of the Internet resources that they access, and Internet service
providers also cannot be certain from which jurisdiction the resources are
For example, a user may have four e-mail accounts with four different
Internet service providers, each providing access the World Wide Web. Two
may exist in the District of Columbia while the other two are located in the
State of Maryland. However, all are easily accessible from any computer
located across the Potomac River in northern Virginia by virtue of a local
telephone call. In addition, the user could make a local telephone call
from northern Virginia for a remote login into one of the D.C. Internet
service providers and then use a software application called Telnet to
access another Internet service provider in Baltimore. From there, the user
could access the worldwide resources of the Internet. The issue then is in
which of the three jurisdictions, D.C., Maryland, or Virginia, the user may
be sued or prosecuted for a violation of the law. It might be all three.
If a user accesses a site that distributes illegal materials, such as
pornography, then is the website owner subject to suit in any or all of the
three jurisdictions discussed above? If the website operator is subject to
jurisdiction in some or all of these sovereign territories, how might that
operator curtail or limit its service to dispel this jurisdictional dilemma?
"[N]o aspect of the Internet can feasibly be closed off to users from
another state,"21 no more than a state
may shut down its highways, railroads, or ports. The Internet is more than
a communications system, it is the foundation for electronic commerce
serving as the conduit for digital goods, including software, data, music,
graphics, videos, literature, and economic information that can be
downloaded from the provider's site or mirror site to a user's computer
anywhere in the United States and throughout the world.
The extraordinary low cost of participation in worldwide commerce and
communications is one of the most phenomenal developments in this century.
However, the emergence of a real threat of multijurisdictional liability and
criminal prosecution may, in some instances, deter both business and
individuals from using the Internet. Much of the democratization and
liberalization of the barriers to the international marketplace created by
the Internet may be lost if legislators, whether at the national, state, or
local level, create a morass of jurisdictional entanglements on the World
Wide Web. Merchants may be deterred by potentially conflicting content
requirements or the threat of potentially defending civil suits or facing
criminal prosecution in multiple jurisdictions. The expense and effort
entailed in monitoring and complying with the regulatory requirements of
every jurisdiction that an entrepreneur or user may electronically touch
could be enormous.22
2.2. Extraterritorial Assertions of State Jurisdiction that Violate
the Commerce Clause
States may not directly interfere with interstate commerce by establishing
statutes or regulations that effectively dictate the manner in which
commercial activities may occur beyond their borders. Put another way, the
Commerce Clause precludes a state from exporting its regulatory policies
into other states by legislative enactment.23 State statutes that, on their face, directly
regulate commercial transactions occurring wholly outside that state are
per se violations of the Commerce Clause.24 For example, a state's efforts to regulate the
manner in which corporate takeovers are conducted, when the target
corporation is an in-state corporation, violate the Commerce Clause if the
state's attempt to, for example, prevent a takeover is based on
considerations of fairness to corporate shareholders, although not one of
the shareholders is a resident of that state.25 If one state were permitted to pass a statute
that directly restrains interstate commerce on the Internet with sweeping
extraterritorial effect, then any other state could do the same.26 The Commerce Clause prevents such a regime of
overlapping state regulations of commerce.
Regardless of the legitimate purpose of a statute, a statute that by its
operation directly interferes with or burdens interstate commerce is
invalid.27 When the practical effect of a
state statute is to control activities beyond its territorial borders, the
statute will be struck down as violative of the Commerce Clause.28 The courts will not only consider the
consequences of the statute itself, but will determine how the statute
interacts with "legitimate regulatory schemes of other States and what
effect would arise if not one, but many or every, State adopted similar
2.3. Indirect Regulation of Interstate Commerce that Violates the
Even if a statute withstands constitutional scrutiny because it does not
directly affect interstate commerce through extraterritorial application, it
may still be determined an impermissible indirect regulation of interstate
commerce if the burdens it imposes on interstate commerce are excessive
relative to the local benefits.30 A court
will first determine the legitimacy of the state's interest in prescribing
the regulation. Then the court will determine the burden on interstate
commerce in light of any benefit obtained in meeting the state's alleged
interest in enacting and enforcing the statute.31 For example, the State of New York's interests
in protecting minors from pedophiles, and the benefits associated with a
statute to limit the transmission of pornography to minors, were found to be
insufficient to outweigh the burdens on Internet commerce.32
2.4. Avoidance of Inhospitable Jurisdictions
It is well-accepted that commercial parties may agree to have their contract
governed in accordance with a particular state's laws and agree that any
disputes shall be resolved exclusively in that state's courts or by
arbitration within that state. Choice of law and forum provisions may
increase legal certainty for commercial participants using the Internet.
Such provisions, however, may not be enforceable if they are not reasonable
or properly supported by consideration.33
They also may not provide the legal certainty that Internet merchants seek
when dealing with individual consumers worldwide.34 Furthermore, although civil liability in
commercial transactions may, as agreed by contract, be assessed in
jurisdictions with more favorable laws, those same venue and choice of law
provisions are not applicable to a sovereign's decision to impose its
Rather than relying solely upon choice of law provisions, an Internet
merchant or financial institution may seek to conduct its activities on the
Internet in a manner that avoids commercial transactions with citizens of a
forum with unfavorable laws. This may be accomplished through several
features incorporated into the merchant's or financial institution's
website. The merchant or financial institution may prominently display
either a list of jurisdictions to which it is directing its business or list
those jurisdictions in which it is not doing business, or both. They may
also install filtering devices programmed to determine the location of any
potential customers by requiring either zip code or other identifiable data
to determine the customer's geographic location. Based on predetermined
criteria, such software could reject attempts to transact business by
customers of unfavorable states. If the merchant or financial institution
subsequently becomes aware that a customer is a resident of a state in which
it does not wish to conduct business, it may decide to return all funds
received from, and cancel any orders made by, that customer. Of course, to
the extent that a merchant or financial institution commits itself to not
doing business with residents of particular jurisdictions, it must be
prepared to experience a loss of potential revenue.
3. Jurisdiction Over a Foreign Party
In the United States, federal and state governments have either already
implemented legislation over Internet activities or are in the process of
doing so.35 Regulation may result in
liability for proscribed online activities.36 The applicable scope of Internet legislation is
not, however, without bounds.37 As
discussed above, Internet use may subject financial institutions and
Internet merchants to multiple jurisdictions, theoretically requiring them
to comply with the most restrictive laws created by a single state or
nation. In this multijurisdictional scenario, which entails the prospect
for conflicting regulation, the potential for civil litigation may require
electronic commerce participants to be concerned with which foreign courts
they may be subject to suit in and the legal standards under which their
conduct will be assessed.
3.1. Personal Jurisdiction
Traditionally, a court may only hear disputes and render judgments in
actions involving a foreign party if the court has personal jurisdiction
over that party. Courts may assert personal jurisdiction over any party who
is physically present within the territorial confines of the state in which
that court sits.38 Over the course of the
20th Century, as interstate travel and communication has become easier and
more affordable, the concept of "presence" has been judicially
expanded to include contacts between foreign parties outside the forum and
persons in the forum.39
There are two types of personal jurisdiction: general and specific.
General jurisdiction results when a party's ties to a certain forum are
continuous, systematic, and ongoing.40 A
court with general jurisdiction over a party may exercise jurisdiction over
disputes concerning matters unrelated to the party's contacts with the
state.41 Specific jurisdiction, often
asserted when a party's contacts are not continuous, systematic, and
ongoing, permits a court to assert jurisdiction over parties to a dispute
arising from the party's contacts with a state.42
3.2. The Assertion of Personal Jurisdiction by Federal
and State Courts Over Foreign Parties
In the United States, two rules of law govern a court's assertion of
personal jurisdiction over a foreign party: state long-arm statutes and the
Due Process Clause of the Constitution.43
Long-arm statutes provide state courts with the authority to hale foreign
parties into court.44 State long-arm
powers cannot, however, exceed the constitutional limits of federal Due
Process.45 Long-arm statutes also affect a
federal court's jurisdiction because federal courts generally apply the
state long-arm statute of the state in which the federal court sits in
disputes involving foreign parties.46
Some long-arm statutes broadly define proper assertions of jurisdiction,
permitting courts to interpret them as being coextensive with the limits of
the 14th Amendment Due Process Clause.47
Other long-arm statutes, however, do not reach to the fullest extent of
federal Due Process, but only permit assertions of jurisdiction over foreign
parties that operate within the state or cause tortious injury in the
state.48 Some long-arm statutes that reach
to the extent of federal Due Process may nevertheless limit a state's
assertion of jurisdiction to specific circumstances.49
Courts interpreting the reach of long-arm statutes in cases involving the
World Wide Web have generally responded in one of three ways. Some courts
have found that a foreign party's website falls within the specific
provisions of the long-arm statute.50
Other courts have found that a foreign party's website design did not
satisfy the long-arm statute. They focused on the limited nature of the
website, which they perceived as merely providing information to Internet
users rather than selling products.51
Those courts have held that even if foreign parties might reasonably expect
their websites to have an effect in the forum, they could not reasonably
expect to derive significant revenue from the forum, nor expect their
websites to result in a significant injury in the forum.52 Finally, a third group of courts dealing with
such disputes have found that resolution of the federal Due Process question
resolves any uncertainty about the state long-arm statute because the reach
of the statute is coextensive with Due Process.53
Assertions of jurisdiction must comport with the strictures of federal
Due Process.54 An assertion of personal
jurisdiction over a foreign party does not violate federal Due Process if
the party has certain minimum contacts with the forum such that jurisdiction
does not offend traditional notions of "fair play and substantial
justice."55 General jurisdiction is
applicable where a party's ties to a state are continuous, systematic, and
ongoing; rendering the assertion of jurisdiction, even for matters unrelated
to the party's contacts with the state, compatible with federal Due
Process.56 Specific jurisdiction exists if
a controversy relates to or "arises out of" a party's contacts
with a forum and there is "a relationship among the defendant, the
forum, and the litigation."57
In determining whether a court's assertion of general jurisdiction is
proper, a court will analyze the nature of the defendant's contacts and
business activities within the forum.58
Generally, if an entity maintains a corporate office in a forum from which
it performs a variety of business activities, the entity will be subject to
jurisdiction in that forum even if the office is temporary.59 However, mere purchases of products from a
state, even if regularly occurring, are insufficient for an assertion of
general jurisdiction over the purchaser.60
4. The Early Cases
A number of courts have conducted in depth examinations of the assertion of
general jurisdiction based on a corporation's contacts with a state via the
Internet or other electronic means.61 In a
1996 case, McDonough v. Fallon,62
a federal district court in California considered four activities of a
Minnesota advertising agency in determining the appropriateness of
jurisdiction: (1) hiring in-state independent contractors; (2) purchasing
advertisements from California-based entities; (3) placing advertisements in
California; and (4) maintaining a website.63 Recognizing the danger of asserting general
jurisdiction over the advertising agency, because of its website and the
possibility of failing to give reasonable effect to personal jurisdiction
protections, the court held that use of the agency's website by citizens of
the forum state cannot by itself establish jurisdiction.64 The court focused on the agency's lack of
significant forum clients and the fact that no residents of the forum state
actually purchased the products placed into the stream of commerce by the
nonresident.65 The court found the
purchase of advertisements, which were unrelated to the cause of action,
insufficient to support an exercise of general jurisdiction.66 Considering these contacts in their entirety,
the court found that they were not substantial, systematic, or continuous
and, therefore, did not support general jurisdiction over the agency.67
Participants in electronic commerce must be aware of the possibility of a
court's assertion of specific jurisdiction over their activities. Specific
jurisdiction does not violate the federal Due Process if (1) a party
purposely avails itself of the privilege of conducting activities within the
forum, rendering it reasonable for the party to anticipate being haled into
court in the forum, and (2) the exercise of specific jurisdiction does not
offend traditional notions of fair play and substantial justice.68
In determining whether a foreign party purposefully availed itself of the
benefits bestowed by the laws of the forum, a court inquires as to whether
the foreign party could reasonably anticipate being haled into that forum's
courts.69 This anticipation is based on
the extent that the foreign party's activities, sales, services, and
business solicitations, or any manner in which they otherwise avail
themselves of any of the benefits of the forum's laws, are calculated to
reach the forum. The court will not only look to whether foreign parties
regularly sell products to forum residents, but also to whether the parties
indirectly, through others, serve or seek to serve the forum market.70 The unilateral actions of the consumer to take
a foreign party's products to a distant forum, although foreseeable, does
not, however, render the subsequent suit foreseeable.71
By placing its products into the stream of commerce and expecting
consumers in a forum to purchase those products, a corporation purposefully
avails itself of that forum's laws.72 For
example, a magazine publisher is subject to suit in a forum in which it has
"regular monthly sales of thousands of magazines."73 Regular sales do not qualify as random,
isolated, or fortuitous contacts such that personal jurisdiction may not be
The Supreme Court has found a franchisee subject to the jurisdiction of a
foreign forum because he deliberately reached out beyond his home state in
negotiating with a Florida corporation to purchase a long-term franchise and
its ongoing benefits.75 The Court held
that the franchise relationship, wherein the franchisee submitted to
regulations issued by the franchiser from its Florida headquarters, did not
constitute random, fortuitous, or attenuated contacts with the forum.76 A participant in electronic commerce or banking
may use "pull technology" for its contractual relationships with
others and incorporate a choice of law and forum clause within the contract
so as not to be haled into a foreign forum.77
In examining whether an assertion of specific jurisdiction comports with
traditional notions of fair play and substantial justice, a court will
consider its forum's interest in adjudicating the dispute.78 In particular, a court will focus on the
foreign party's contacts and balance whether the forum's interest in
deciding the dispute is greater than the interests of foreign party's
state.79 Although resolution of a dispute
in a foreign forum may be inconvenient and may burden the foreign party's
ability to call witnesses, such inconvenience does not necessarily rise to a
constitutional dimension.80 Courts
recognize that there are dangers accompanying assertions of jurisdiction
based on contractual relationships with inequalities in bargaining power,
but such concerns are generally unwarranted when both parties are commercial
Whether a foreign party is subject to the specific jurisdiction of a
court by virtue of its contacts via the Internet will have significant
implications on the manner in which electronic banking and commerce disputes
will be resolved.82 Electronic commercial
activities create forum contacts not based on physical presence within a
forum, the contacts are more attenuated. In evaluating the forum contacts
created by electronic interaction with customers, courts could decide that
the customers created the contacts by reaching out to banks' websites or
they could decide that the banks purposely directed their activities into
the particular forum. Creating electronic contracts indicates ongoing forum
benefits, such as the enjoyment of the benefits of a forum's commercial laws
creating additional contacts, and increasing the potential for general
jurisdiction. Regular advertisements or billing activity directed to forum
consumers, the creation of special services appealing to forum residents,
the absence of restrictions on electronic access, and efforts to comply with
a forum's commercial regulations are also methods that may constitute
purposeful availment of the benefits of that forum's laws.
5. Developing Judicial Patterns Involving Electronic
A number of courts have looked at this issue, and despite variations, legal
patterns are developing to address the increasing amount and types of
electronic commerce. In 1986, a California federal district court
considered the effect of the defendants nonresidents operation and use of an
online electronic database in California Software, Inc. v. Reliability
Research, Inc.83 In California
Software, the nonresident defendants, a Nevada corporation
("RRI") and its officers, made allegedly false statements in
communications with customers of the plaintiffs, two California software
firms. These communications were made with California residents as well as
individuals outside of California. The defendants communicated with these
potential software purchasers in three ways: by letters, telephone calls,
and by a nationally disseminated computer based information service known as
the Computer Reliability Forum ("CRF"), operated by the
The court found each contact sufficient to support specific jurisdiction.
The court rejected the notion that, in this day of electronic
communications, jurisdiction requires physical entrance into a forum state.
The court found jurisdiction proper because the nonresident defendant, RRI,
intended its message to affect the plaintiff, a California forum resident.
The court considered the electronic nature of the contact
indeterminate.84 The defendants
distributed their messages to a wider audience by placing them on the CRF
system, and thus, correspondingly broadens the permissible scope of
jurisdiction exercisable by courts. The court found jurisdiction to be
proper due to a state's strong interest in protecting its citizens' rights
and the reasonableness of the nonresident defending a suit in California.
In a 1992 case, Plus System, Inc. v. New England Network,
Inc.,85 a district court in Colorado
considered whether to assert jurisdiction over a New England ATM network
member. The defendant, New England Network, Inc. ("NENI"), is
comprised of approximately 700 financial institutions that market and
promote a regional shared ATM network in New England. The action arose out
of a dispute over royalties on ATM transactions by customers of NENI members
that do not use the "PLUS" network but in which the
"PLUS" mark is the only mark that appear on both the customer's
card and the ATM.
The court first analyzed whether NENI had purposely availed itself of the
forum state, Colorado. The court found NENI's physical presence in Colorado
unnecessary. The court considered two contacts in particular, joining a
Colorado-based national ATM network and entering into a licensing contract
signed, at least by the plaintiff, in Colorado. It also looked to the
licensing contract's choice of law clause, the making of monthly payments to
the plaintiff, a Colorado resident, NENI's sending of a representative to
Colorado to initiate the PLUS relationship, and the frequent electronic
communication of NENI's computers with PLUS. The court held that the above
Colorado contacts, over the contract's life of five years, indicated that
NENI purposely availed itself of Colorado.86 It also found that the exercise of jurisdiction
would not offend traditional notions of fair play and substantial justice
because of the strong connection between Colorado and the dispute giving
rise to the suit.
Also in 1992, a federal district court in California, in Resolution
Trust Corp. v. First of America Bank, analyzed whether it had
jurisdiction over a defendant located in Michigan.87 At issue was whether the non-forum bank
established minimum contacts in California by belonging to national
clearinghouse service association and accepting wire transfers from a
California bank. The court noted that the Michigan bank affirmatively
entered the stream of commerce flowing to California by joining the
clearinghouse association. However, the court recognized that entering the
clearinghouse is a technological necessity in modern banking and that if
this contact supported jurisdiction, all banks would be subject to
jurisdiction in every state. The court stated that:
Participating in the national clearinghouse service seems
analogous to having telephone service which allows people to call the bank
from all parts of the country and world to perform banking transactions.
Yet, such technology which makes banking services more accessible to
customers does not commit the bank to national jurisdiction without some
affirmative action to avail itself of a particular forum.88
The court held jurisdiction inappropriate.89
In 1994, a Florida state court, in Pres-Kap, Inc. v. System One,
Direct Access, Inc.,90 examined the
implications of the forum contacts created by a New York travel agency's use
of an online electronic database located in Florida. Expressing concern
about the far-reaching implications of basing jurisdiction on such contacts,
the court held that maintenance of the suit offended traditional notions of
fair play and substantial justice. The court found the notion of defending
the suit "wildly beyond the reasonable expectations of such computer
information users."91 It compared the
New York travel agency's situation to that of a nonresident Lexis or Westlaw
user and expressed concern about how many individuals would be subject to
jurisdiction if it ruled otherwise.92
5.1. Recent Cases Supporting Jurisdiction
As electronic commerce has grown, there have been an increasing number of
cases in the United States dealing with the appropriateness of courts
asserting jurisdiction in a wide range of circumstances. In Inset
Systems, Inc. v. Instruction Set, Inc.93, the plaintiff alleged that the defendant's
Internet website, which contained advertising and a toll-free telephone
number, constituted sufficient minimum contacts for purposes of federal Due
Process. The court agreed that, through its website, defendant had
purposefully availed itself of the privilege of doing business within
Connecticut. Since this case, the trend has shifted away from finding
jurisdiction based solely on the existence of "passive" website
Reversing a lower court's decision, the Sixth Circuit held that a federal
district court in Ohio could assert jurisdiction over a nonresident of the
forum state in a trademark and unfair competition claim arising from the
nonresident's Internet contacts with the forum state.95 Patterson, the nonresident, created several
contacts with the forum as a result of his computer activities by entering
into a Shareware Registration Agreement ("SRA") with CompuServe
and subscribing to CompuServe, an online electronic database system. He
also sent e-mails and physical mail to CompuServe in Ohio, and posted a
message on a CompuServe electronic forum. The SRA incorporated two other
documents by reference. Collectively these documents created a relationship
governed by Ohio law in which Patterson placed his software on the
CompuServe system in exchange for CompuServe agreeing to provide its
subscribers with access to Patterson's software for their use and possible
Focusing on Patterson's unique relationship with CompuServe, the court
distinguished Patterson from a mere purchaser of services. Patterson chose
to repeatedly transmit his software onto CompuServe's system located in the
forum. Others gained access to Patterson's software via that system.96 Patterson advertised and sold his software
through that system. As the court stated, "Patterson deliberately set
in motion an ongoing marketing relationship with CompuServe, and he should
have reasonably foreseen that doing so would have consequences in
The Sixth Circuit distinguished this from merely placing a product into
the stream of commerce.98 It also relied
on Patterson entering into the SRA. The court noted that either contact
alone might be insufficient for jurisdiction, but taken together and
analyzed along with other factors, the contacts rendered jurisdiction
proper. These other factors included the SRA's choice of law provision,
Patterson's sending of e-mail and physical mail to CompuServe in Ohio, and
Patterson's posting a message on a CompuServe electronic forum. The court
also considered Patterson's software sales through the CompuServe system,
not only to consumers in the forum state, but also via the CompuServe
system. Since the CompuServe system was located in the forum, the court
considered the forum contacts created by Patterson in sending messages to
consumers in other states. The court found the intangible and electronic
nature of Patterson's contacts insignificant, applying a traditional
analysis to this new medium. In holding Patterson subject to jurisdiction
in the forum state of Ohio, where CompuServe's headquarters was located, the
court declined to address whether Patterson's contacts were sufficient to
subject him to jurisdiction in any other forum state in which CompuServe
operated and via which Patterson's product might be available.99
Maritz, Inc. v. Cybergold, Inc.100 is cited for the proposition that interactive
websites constitute minimum contacts for jurisdictional purposes. In
Maritz, the defendant maintained a website that offered
subscriptions to receive future information. The court found jurisdiction
because the defendant consciously decided to transmit advertising
information to all Internet users, ignoring whether any resident in the
forum actually had subscribed or received information, noting that forum
residents had accessed the site 131 times.
In Edias Software International, L.L.C. v. Basis International,
Ltd.101, a district court in Arizona
examined whether a nonresident software distributor's contacts with Arizona
residents provided a basis for jurisdiction. Edias Software alleged that
Basis breached their contract and that Basis' website gave rise to claims
for libel, defamation, tortious interference with contract, and violation of
federal trademark laws. Basis' contacts with the state of Arizona included
a contract with an Arizona resident, Arizona product sales, employee visits,
phone calls, faxes, and e-mails. Most significantly, the nonresident's
website was accessible in the forum. The Edias court found that
the fact that the website that reached forum customers and nonresident's
e-mails to forum residents were sufficient contacts under the minimum
contacts analysis to assert jurisdiction. The court asserted that
nonresidents maintaining Internet web pages risk jurisdiction.102
In Minnesota v. Granite Gate Resorts, Inc.103, the Minnesota Attorney General alleged that a
nonresident company and its president engaged in deceptive trade practices,
false advertising, and consumer fraud under Minnesota law when the
nonresident included on its website an advertisement for its sports betting
service based in Belize. Considering whether Granite Gate had established
minimum contacts with the forum, the court noted that Granite Gate published
a statement on its website asserting that it had the right to apply for
injunctive or other relief with regard to a customer in Minnesota.
Discussing the nature of Granite Gate's website contacts with the forum, the
court rejected the defendants' claim that it mailed nothing to Minnesota,
sent nothing to Minnesota, and never advertised in Minnesota. The court
stated that "[t]his argument is not sound in the age of cyberspace.
Once the Defendants place an advertisement on the Internet, that
advertisement is available 24 hours a day, seven days a week, 365 days a
year to any Internet user until the Defendants take it off the
Internet."104 The court found that
would be inappropriate to view Granite Gate's website as a one-way contact.
The court posited that if that were an accurate description, Minnesota
residents would only receive a blank screen when clicking on Granite Gate
website icons.105 Instead, they received
a plethora of information, including a Las Vegas phone number to Granite
Gate's gambling service.
Examining the quantity of contacts with the forum, the Minnesota court
found that Minnesota residents were regular visitors to the website and
that Granite Gate's mailing list included Minnesota residents. During one
two-week period, over 248 different locations in Minnesota accessed Granite
Gate's website. In light of the detailed records kept by Granite Gate of
website users, it could not reasonably claim that Minnesota residents were
not accessing their website. Accordingly, the court held that jurisdiction
In Telco Communications Group, Inc. v. An Apple a Day,
Inc.106, the court addressed the
issue of personal jurisdiction over a defendant whose actions occurred over
the Internet. In Telco the plaintiffs alleged that Apple a Day's
press releases over the Internet defamed Telco. Apple a Day challenged the
suit for lack of personal jurisdiction. The Telco court applied
Virginia's long-arm statute to the Apple a Day's activities.107 Under that statute, a Virginia court may
assert jurisdiction over a defendant who regularly does or conducts business
in Virginia and causes tortious injury in Virginia by an act or omission
outside Virginia.108 Apple a Day did not
challenge the fact that a tortious injury occurred as the result of an act
or omission outside the state. The Telco Court, therefore, focused
on the regular conduct of business prong and, agreeing with the Connecticut
district court's decision in Inset, held that posting an
advertisement or solicitation on a website constitutes a consistent course
of conduct and that the press releases constituted doing or soliciting
business. In doing so, the Telco court rejected the Second
Circuit's holding in Bensusan that nonresidents must be physically
present in the state for jurisdiction to attach. The court also found that
jurisdiction existed based on a tortious injury resulting from an act or
omission in Virginia.109 It reasoned that
the defendants were aware of the breadth of the distribution of the press
releases, both from information they had received when contracting to post
the press releases and from their knowledge of Telco's and an ISP's presence
in Virginia. Finally, though the defendants did not challenge a finding of
personal jurisdiction on federal Due Process grounds, the court held that
the defendants could reasonably have anticipated being haled into court and
thus no violation of federal Due Process would occur.
In GTE New Media Services, Inc. v. Ameritech Corp.,110 companies providing national "Yellow
Pages" directory services over the Internet were subjected to the
court's jurisdiction because they were highly interactive and the
"quality and nature significant so as to allow the assertion of
personal jurisdiction." Defendants did actually derive substantial
advertising revenues from the sites from residents of the forum accessing
and utilizing the site.
In Vitullo v. Velocity Powerboats, Inc.111, defendants' website solicited residents
to attend their "local boat show." It provided a hyperlink with
information about a boat show within the forum state, and the court found
that the website's targeting of local residents was sufficient to assert
Jurisdiction has also been found where the defendant's website encouraged
and enabled anyone, including residents in the forum, to send e-mail to the
company (Hasbro, Inc. v. Clue Computing, Inc.);112 where minimal sales in the forum through
traditional methods, along with an interactive website, were viewed as
constituting continuous and systematic contacts with the forum
(Mieczkowski v. Masco Corp.);113 where an interactive website accepted hotel
reservations from residents of the forum (Park Inns International
v. Pacific Plaza Hotels, Inc.);114 where purposeful availment was found based on
the defendant's sale of subscriptions for Internet services to residents of
the forum state, and contracts were executed with those residents through
its website (American Network, Inc. v. Access America/Connect
Atlanta, Inc.);115 where the
defendant's website solicited contributions, provided a toll free telephone
number and was supplemented by newspaper advertising (Heroes, Inc.
v. Heroes Foundation);116
where the defendant had purposely availed itself of the benefits of the
forum by entering into an agreement with the residents of the forum and
thereafter sold products to forum residents on at least three occasions
through its website (Digital Equipment Corp. v. AltaVista
Technology, Inc.);117 and where the
defendant knowingly registered established trademark names as domain names
for his websites, then attempted to "sell" the rights to the
domain name to the holder of the trademark (Panavision International
5.2. Cases Denying Jurisdiction
In Bensusan Restaurant Corp. v. King,119 the operator of a New York jazz club brought
suit against the owner of a small Missouri jazz establishment, claiming
merely that its website infringed on its right to the trademark "The
Blue Note." The court concluded that assertion of jurisdiction over
the defendant on this basis alone would violate the Due Process Clause.
In Zippo Manufacturing Co. v. Zippo Dot Com,
Inc.,120 the plaintiff alleged
trademark dilution and infringement based on the defendant's website domain
names. In denying jurisdiction, the court applied a "sliding
scale" under which the likelihood that personal jurisdiction could be
constitutionally exercised was directly proportionate to the nature and
quality of commercial activity conducted over the Internet. At one end of
the scale are circumstances where a defendant "conducts business"
over the Internet with residents of the forum, allowing for the assertion of
personal jurisdiction in most cases. At the opposite end are situations
where a defendant simply posts information on a website which is accessible
to users in the forum state, as well as others. In the middle are
situations where a defendant operates an interactive website, allowing a
user to exchange information with the host computer.
Most courts follow the reasoning set forth in Bensusan and
Zippo and decline to assert jurisdiction based solely on website
advertising.121 Those courts which have
asserted jurisdiction in cases involving passive websites seem to have done
so because the defendant had additional contacts with the forum which
related to the plaintiff's claim,122
i.e., it "conducted business" over the Internet by
engaging in repeated or ongoing business transactions with residents in the
forum, or by entering into a contract with the plaintiff through the
Differing conclusions have been reached in cases falling into the middle
"interactive" category identified in Zippo. Some courts
have found that an interactive website alone is sufficient, while others
require additional non-Internet activity in the forum, regardless of whether
the activity is related to the underlying claim. Still others require
additional conduct in the forum that is related to the plaintiff's cause of
In Hearst v. Goldberger124 the
federal district court for the Southern District of New York faced the issue
of whether, in a trademark infringement case, the court had personal
jurisdiction over the defendant as a result of his website being accessible
to and electronically visited by New York computer users. The court based
its analysis on one of New York's jurisdictional statutes, C.P.L.R.
§302.125 It found that Goldberger's
website, announcing the future availability of his services, amounted to the
equivalent of advertisement in a national magazine. Such advertisements do
not provide a basis for personal jurisdiction under the transacted business
or solicitation prongs of the statute. The Hearst court
distinguished the case from Bensusan, stating that
Bensusan addressed purposefully directed contact. It also
distinguished Maritz and Inset, reasoning that in those
instances defendants consciously decided to transmit advertising information
to all Internet users.
Courts have denied jurisdiction either based on the application of legal
principles, or a failure to offer evidence of contacts with the forum. In
Edberg v. Neogen,126 a
website allowing users to order product information and send electronic mail
to defendant did not support jurisdiction where no user in the forum state
was shown to have accessed the site. The defendant in E-Data Corp.
v. Micropatent Corp.127 operated
a website where users could purchase, license and download photography
images. Plaintiff merely showed the potential for the defendant to reach
and solicit forum residents, but offered no evidence that defendant did so.
The court rejected jurisdiction.
Courts have similarly rejected personal jurisdiction on an interactive
website where electronic advertising was the only activity conducted on the
website (Weber v. Jolly Hotels);128 where the defendant's website allowed
the user to type in an e-mail address and receive a copy of a publication
(Scherr v. Abrahams);129
where a domain name was used by two parties who advertised and sold their
services over the Internet (CD Solutions v.
Tooker);130 and where a company
provided web advertising, marketing, consulting services and business
consulting services for strategic management and marketing through a
"passive" website, which included the company logo, a local phone
number, an invitation to send electronic mail, and a hypertext link through
which users could introduce themselves (Cybersell, Inc. v.
It appears that the better view is that "purposeful availment"
which results in jurisdiction is shown if a defendant has taken deliberate
action within the forum state, or if it has created continuing obligations
to forum residents.132
6. Bright Lines Are Developing
A recent case, Millennium Enterprises, Inc. v. Millennium
Music, LP,133 provides an excellent
summary of the cyberspace jurisdiction cases decided to date. The
plaintiff, Music Millennium, was incorporated and principally did business
in Oregon. It also sold products through mail, telephone orders and its
Defendant Millennium Music, Inc., a South Carolina corporation, operated
retail music stores in South Carolina and sold products through its Internet
website. The vast majority of its sales occurred at its retail locations.
From March 1998, through September 1998, defendants sold fifteen compact
discs to nine separate customers in six states and one foreign country over
the Internet. The sales totaled approximately $225. During the same
period, aggregate retail sales were $2,180,000. Defendants purchased a
small amount of compact discs from a distributor located in Portland,
Oregon, between 1994-1997, totaling approximately one-half of one percent of
defendants' inventory purchases for those years.
In 1998, plaintiff received a credit document from a distributor in
Oregon, which apparently was intended for defendants. Later in 1998, an
Oregon resident purchased a compact disc from defendants through its website
at the request of an acquaintance of the plaintiff's counsel. Defendants
sold no other merchandise to any Oregon resident. Plaintiff alleged that
the use of the name "Millennium Music" in connection with the sale
of goods in interstate commerce violated, among other things, state and
common law trademark rights.
The Millennium Music court concluded that although contacts that
are "isolated" or "sporadic" may support specific
jurisdiction if they create a "substantial connection" with the
forum, the contacts must be more than random, fortuitous, or
attenuated.134 It is not required that a
defendant be physically present within the forum, provided its efforts are
purposefully directed toward forum residents.135
Did the defendant in the Millennium Music case
"purposefully avail" itself of the forum at issue by soliciting
sales over the Internet? The only sale outside Oregon was nothing more than
an attempt by plaintiff to manufacture a contact with this forum sufficient
to establish personal jurisdiction. Moreover, there was no confusion shown
regarding plaintiff's and defendants' trade names, since the only
out-of-state purchaser knew exactly with whom she was dealing and knew that
defendants were not associated in any way with plaintiff. Likewise,
defendants' sporadic purchases from a distributor in the forum could not
suffice to establish the requisite minimum contacts unless the cause of
action arose from or related to those purchases.136 Defendants in the Millennium case
did nothing more than publish an interactive website. Accordingly, the court
concluded that the defendants did not "conduct business" in Oregon
over the Internet.
But, neither was defendants' website passively providing information for
those interested. Thus, its website fell into the middle category,
requiring further inquiry into the level of interactivity and commercial
nature of the exchange of information to determine whether jurisdiction
should be exercised.
Defendants' website could be seen as satisfying the requirements for
personal jurisdiction under the middle category in Zippo. The
level of potential interactivity was not insubstantial. But, the court
found that this middle interactive category required "deliberate
action" within the forum state, which could include transactions
between the defendant and forum residents through the defendant's website,
or conduct of the defendant purposefully directed at residents of the forum
state through the website. While defendants did maintain a website which
allowed users to purchase products, thus rendering it foreseeable
that residents of Oregon, or any other state or country for that matter,
could purchase a product from defendants, foreseeability alone could not
serve as the constitutional benchmark for personal jurisdiction in the view
of the court.
Neither was defendant's website a "conduct and connection" with
Oregon giving defendant "fair warning" that it should reasonably
anticipate being "haled" into court in Oregon. Defendants merely
published information on an Internet website that is accessible to whomever
may find it. Defendants had not taken action creating "a substantial
connection" with Oregon, or deliberately engaged in "significant
activities" within Oregon, or created "ongoing obligations"
with residents of Oregon in a manner related to plaintiff's claims.
The court's decision contrasts with decisions in Inset and
Maritz because it determined that a defendant which establishes an
interactive website must "purposefully direct" its activities at
or take "deliberate action" in or create "substantial
connection" with the forum state so as to provide "fair
warning" that such activities may subject the defendant to jurisdiction
in a distant forum.
The existence of a website, whether passive or interactive, may not rise to
the requisite level of conduct that subjects a business to jurisdiction in
another forum. A website is not automatically projected or
"pushed" to a user's computer without invitation, as are
advertisements in a newspaper or on the television and radio. Rather, the
user must take affirmative action to access or "pull" either a
passive or interactive website. Contrary to the scenario described in
Inset, information published on websites is not thrust upon users
Specific jurisdiction appears not to be appropriate unless the
forum-related contacts give rise or relate to the plaintiff's cause of
action. Absent actual business transactions in the forum, or evidence that
consumers were targeted in the forum, the distinctions between specific and
general jurisdiction become blurred. If an interactive website constituted
"purposeful availment" simply by being continuously accessible, a
plaintiff could sue a foreign defendant in any forum and claim jurisdiction,
even if the cause of action were unrelated to the website. That cannot be
the correct result either as a matter of law or business.
The court in Millennium Music seems to have been correct in
concluding that the "imposition of broad territorial concepts of
personal jurisdiction 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." Overreaching jurisdiction
increases the likelihood of "dramatically chilling what may well be the
most participatory marketplace of mass speech that this country -- and
indeed the world -- has yet seen." Businesses may forgo the efficiency
and accessibility of electronic commerce if faced with the "litigious
nightmare" of being subject to suit in every jurisdiction on the
Thomas P. Vartanian is the Managing Partner of the Washington office of
the New York law firm Fried, Frank, Harris, Shriver & Jacobson, Chairman
of the Office's Corporate Department, and head of its Financial Institutions
Transactions and Electronic Commerce Technology Groups. He is an Adjunct
Professor in the graduate law program at Georgetown University Law Center,
where he teaches a course on 21st Century Banking issues. Mr.
Vartanian is also Chair of the American Bar Association's Committee on
Cyberspace Law and a member of the ABA's Banking Law Committee; he is also a
member of the ABA's 1998 Ad Hoc Committee on Financial Services Deregulation
and Consolidation. He is co-author of two recently published books entitled
21st Century Money, Banking & Commerce and The
Management of Risks Created by Internet-Initiated Value Transfers, and a
contributing author of The Year 2000 Legal Guide.
This article is an updated version of Chapter 19 of 21st
Century Money, Banking & Commerce and will be available through the
E-BankFutures Internet updating system for the book. See
- See Dan L. Burk, Federalism in
Cyberspace, 28 Conn. L. Rev. 1095, 1097 (1996).
- See id. (citing A Close-up of Transmission
Control of Transmission Control Protocol/Internet Protocol (TCP/IP),
Datamation (Aug. 1, 1988); Ed Krol & Paula Ferguson, The Whole Internet
for Windows 95 (1995)).
- The address is not a geographical location such as a
street address, but rather a logical address that designates a particular
computer server that may be relocated in any part of the country or the
world while retaining its same logical address. See id.
- See Is the Internet Ready for Prime Time? Skeptics
Have Field Day With Shutdown, Electronic Messaging News, Aug. 6, 1997
(describing the one day shutdown caused by human error, in which
modifications to one server's messaging system, in essence, communicated to
the rest of the Internet that it had no traffic flow causing all other
computers to redirect their packets through that server which caused an
overload and enormous traffic at that server).
- Burk, supra note 1, at 1098.
- The Federalist No. 42 (James Madison).
- U.S. Const. art I, § 8, cl. 3.
- See Richard B. Bilder, The United States
Constitution in its Third Century: Foreign Affairs: Distribution of
Constitutional Authority: The Role of States and Cities in Foreign
Relations, 83 Am. J. Int'l L. 821 (1989) (noting that over 1000 state
and local governments participate in varying aspects of foreign
- Id. (quoting Peter J. Spiro, Taking Foreign
Policy Away From the Feds, Wash. Q., No. 1, 1988, at 191,
- The Constitution provides that the laws and treaties
of the United States are "the supreme law of the land" and
preempt state law, international agreements, and federal determinations and
interpretations of customary international law. U.S. Const, art. VI, cl. 2.
In determining whether a Congressional statute preempts state or local
laws, courts determine whether the federal statute embodied the "clear
and manifest purpose of Congress" to preempt the entire subject area
covered by the state statute or whether by implicit legislative design,
states where precluded from entering that field of law. See Jones
v. Rath Packing Co., 430 U.S. 519, 525 (1977); Burbank v. Lockheed
Air Terminal, 411 U.S. 624, 633 (1973); Rice v. Santa Fe Elevator
Corp., 331 U.S. 218, 230 (1947). Though the Court has upheld a wide
variety of statutes that regulate intrastate economic activity that
substantially affect interstate commerce, the Supreme Court has struck down
federal statutes that intrude upon intrastate matters that do not touch
economy or commerce amongst the states. See United States v. Lopez,
514 U.S. 549 (1995) (finding unconstitutional a federal statute regarding
firearm possession in proximity to school, on the basis that it was not a
valid exercise of Congress' authority under the Commerce Clause because it
did not regulate commercial activity or economic interests).
- Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1,
231-32 (1824) (Johnson, J., concurring). The negative implication of the
Commerce Clause is also known as the "dormant" Commerce
- See Philadelphia v. New Jersey, 437
U.S. 617 (1978) (striking down a New Jersey statute that prohibited the
importation into the state any wastes which originated outside the
territorial limits of New Jersey). The Supreme Court noted that it not only
looks to a state's purpose in whether or not the statute is discriminatory,
but also whether the accomplishment of a valid purpose has the effect of
discriminating against out-of-state articles of commerce. Id. at
626-27. See also Kassel v. Consolidated Freightways Corp. of Del.,
450 U.S. 662 (1981) (striking down an Iowa statute that prescribed a
maximum length for tractor trailers, far shorter than the length used by
many trucks in interstate commerce). In balancing the state's interest in
the safety of its citizens against the burden on interstate commerce, the
Court stated that "[r]egulations designed for salutary
purpose nevertheless may further the purpose so marginally, and interfere
with commerce so substantially, as to be invalid under the Commerce
Clause." Id. at 670.
- Japan Lines, Ltd. v. County of Los Angeles,
441 U.S. 434, 449 (1979) (quoting Michelin Tire Corp. v. Wages, 423
U.S. 276, 285 (1976)).
- Pataki, 969 F. Supp. at 161. Railroads,
trucks, and highways have long been recognized under the law as
"instruments of commerce," because they serve as conduits for the
transportation of products and services. See, e.g., Kassel, 450 U.S.
662; Southern Pacific Co. v. Arizona, 325 U.S. 761 (1945).
- Pataki, 969 F. Supp. at 183-84. But
see New York v. Barrows, 664 N.Y.S.2d 410 (N.Y. Sup. Ct. 1997)
(upholding a similar N.Y. statute under the Commerce Clause since the
statute forbids the transmission of sexually related communications via the
Internet to minors, where such communications were intended to lure the
child into sexual relations within the State of New York).
- Pataki, 969 F. Supp. at 161, 167.
- Id. at 169.
- Id. (emphasis added). Constitutional issues
have also been raised in ACLU v. Reno, 31 F. Supp.2d 473
(E.D. Pa. 1999), appeal docketed, No. 99-1324 (3rd Cir. April 27,
1999); Mainstream Loudoun v. Board of Trustees of the Loudoun
County Library, 2 F. Supp.2d 783 (E.D. Va. 1998) and 24 F. Supp.2d 552
(E.D. Va. 1998).
- Pataki, 969 F. Supp. at 170.
- Id. at 171.
- See Burk, supra note 1, at 1126-28.
California has enacted a criminal statute imposing consumer disclosure
obligations for online vendors and explicitly regulating the manner in
which those disclosures are presented to consumers on the vendors' web
pages. The law applies to the sale of goods to any consumer who is a
resident of California regardless of whether the vendor is from California,
another state, or from another country. See Cal. Bus. & Prof.
Code § 17538 (Deering 1996); see also California Applies Consumer
Protections to Internet Commerce, 21st Century Banking Alert
No. 97-1-16, Jan. 16, 1997, available at
<http://www.ffhsj.com/bancmail/21starch/970116.htm>. A recent Supreme
Court case, however, reversed a large punitive damage award against BMW
that was based on its failure to comply with an Alabama consumer disclosure
statute. The damage award was struck down because it was based on BMW's
national policy of non-disclosure, rather than purely on the company's
failure to follow Alabama law. BMW of North America v. Gore, 517
U.S. 559, 116 S. Ct. 1589, 1596-97 (1996).
- See Pataki, 969 F. Supp. at 174.
- Healy v. Beer Institute, 491 U.S. 324, 336
(1989), Brown-Forman Distillers Corp. v. New York State Liquor
Authority, 476 U.S. 573, 581-82 (1986).
- Edgar v. Mite, 457 U.S. 624 (1982) (striking
down an Illinois anti-takeover statute seeking to entrench management of
Illinois corporations). Only a plurality of the Court adhered to the
extraterritoriality analysis, whereas a majority of the court struck down
the statute under the balancing test. Id. at 643. A majority of the
Supreme Court has adopted the extraterritoriality rationale in later cases.
See Healy, 491 U.S. at 336; Brown-Forman Distillers,
476 U.S. at 581-82.
- See Edgar, 457 U.S. at 642.
- Shafer v. Farmers Grain Co., 268 U.S. 189,
- See Southern Pacific, 325 U.S. at 775
(striking down a statute limiting the length of trains, and thereby
preventing a state from imposing its regulatory policies on neighboring
- Healy, 491 U.S. at 336.
- See Pike v. Bruce Church, 397 U.S. 137, 142
- "The distinction between direct regulations of
interstate commerce, which are subject to a per se rule of
invalidation, and indirect regulations subject to the less stringent
balancing test has never been sharply defined. In either situation,
however, the 'critical consideration is the overall effect of the statute
on both local and interstate activity.'" Pataki, 969 F. Supp.
at 177 n.8 (citing Brown-Forman, 476 U.S. at 579; Raymond Motor
Transportation, Inc. v. Rice, 434 U.S. 429, 440-41 (1978)).
- Pataki, 969 F. Supp. at 178. See also Hunt
v. Washington Apple Advertising Comm'n, 432 U.S. 333, 350 (1977)
("[A]finding that state legislation furthers matters of legitimate
local concern, even in the health and consumer protection areas, does not
end the inquiry.").
- George B. Delta & Jeffrey H. Matsuura, Law of
the Internet § 3.04 (1998).
- Communications Decency Act of 1996, Pub. L. No.
104-104, §507, 1996 U.S.C.C.A.N. (110 Stat.) 132 (codified at 18 U.S.C.
§§1462, 1465). See also GA. Code Ann. § 16-9-93.1; Thomas P.
Vartanian, Robert H. Ledig, Edward B. Whittemore, & James P. Baetzhold,
Georgia Internet Law Raises Jurisdictional Questions for Electronic
Commerce, Electronic Banking L. & Com. Rep., Feb. 1997, at 15.
- See United States v. Thomas, 74 F.3d 701,
706-07 (6th Cir. 1996) (applying the community decency standards of the
forum state into which the nonresident defendants transmitted
computer-generated images, despite defendants' argument that the pictures
were intangible); Playboy Enterprises, Inc. v. Chuckleberry Publishing,
Inc., 939 F. Supp. 1032 (S.D.N.Y. 1996) (holding a nonresident in
contempt for setting up an infringing website in violation of a previous
injunctive order, but finding jurisdiction based on the previous
- See Reno v. ACLU, 524 U.S. 844 (1997)
(finding two provisions regarding "indecent" and "patently
offensive" communications on the Internet unconstitutional under the
First Amendment); ACLU v. Miller, 977 F. Supp. 1228 (N.D. Ga. 1997)
(enjoining enforcement of the Georgia Internet law); Pataki, 969 F.
Supp. 160 (denying New York the right to regulate Internet activity because
of interference with the Commerce Clause).
- Pennoyer v. Neff, 95 U.S. 714
- International Shoe v. Washington, 326 U.S.
310, 320 (1945).
- See Steven Baicker-McKee, William Janssen,
& John B. Corr, Federal Civil Rules Handbook, § 2.4 (1997) [hereinafter
Federal Civil Rules Handbook].
- Helicopteros Nacionales de Columbia, S.A. v.
Hall, 466 U.S. 408, 414 (1984) (quoting Shaffer v.
Heitner, 433 U.S. 186, 204 (1977)); see also Federal Civil Rules
Handbook, supra note 41, § 2.5.
- Fed. R. Civ. P. 4(k); Wenz v. Memery Crystal,
55 F.3d 1503 (10th Cir. 1995) (assertions of jurisdiction over
nonresident defendants require an examination of both the state long-arm
statute and issues of due process); Federal Civil Rules Handbook,
supra note 41, § 2.3.
- Federal Civil Rules Handbook, supra note 41,
- Id. Federal Due Process, as used herein,
refers to the protections offered under the due process clauses of the U.S.
Constitutions, in particular the Fifth Amendment for federal actions and
the Fourteenth Amendment for state actions. These protections have been
interpreted to mean that the exercise of jurisdiction must not be
fundamentally unfair to a defendant. See id. § 2.4.
- See, e.g., Reynolds v. International Amateur
Athletic Fed'n, 23 F.3d 1110, 1115 (6th Cir. 1994); Aanestad v.
Beech Aircraft Corp., 521 F.2d 1298, 1300 (9th Cir. 1974);
Wilson v. Humphreys (Cayman) Ltd., 916 F.2d 1239, 1243 (7th
Cir. 1990); Federal Civil Rules Handbook, supra note 41, §
2.5. However, certain federal causes of action, including suits under
federal antitrust laws and securities laws, provide that courts can
exercise nationwide personal jurisdiction. Id. § 2.7; see,
e.g., 15 U.S.C. § 22 (providing nationwide personal jurisdiction in
antitrust claims). Additionally, Federal Rule of Civil Procedure 4(k)(2)
permits the exercise of personal jurisdiction in federal causes of action
where the defendant has sufficient minimum contacts with the United States
as a whole, but not with any particular state. See Fed. R. Civ. P.
- See Asahi Metal Industry Co. v. Superior
Court, 480 U.S. 102 (1987) (finding that California's long-arm statute
authorizes jurisdiction "on any basis not inconsistent with the
Constitution of this state or the United States"); United States v.
Ferrara, 54 F.3d 825, 828 (D.C. Cir. 1995) (holding that the D.C.
long-arm statute provides for the exercise of jurisdiction over any party
to the extent permissible under the Due Process Clause, merging the
statutory long-arm and constitutional jurisdictional questions into one
inquiry); Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119
(W.D. Pa. 1997) (holding that the court was authorized to exercise
jurisdiction to the limits of the federal Constitution); see, e.g.,
D.C. Code Ann. § 13-423; 42 PA. C.S.A. § 5322 (b). The California long-arm
statute provides that "[a]court of this state may exercise
jurisdiction on any basis not inconsistent with the Constitution of this
state or that of the United States." 5 Cal. Civ. Proc. Code § 410.10.
- See Federal Civil Rules Handbook,
supra note 41, § 2.5; see, e.g., N.Y. C.P.L.R. § 302.
- See Alton v. Wang, 941 F. Supp. 66, 67-68
(W.D. Va. 1996) (finding that the Virginia long-arm statute extends to the
limits of federal Due Process, but that the statute limits jurisdiction by
only providing jurisdiction in specific circumstances). For example, the
statute may provide for jurisdiction over foreign parties because of their
forum activities or based on the effect that their actions outside of a
state have on the state or its residents.
- See Maritz, Inc. v. Cybergold, Inc., 947 F.
Supp. 1328 (E.D. Mo. 1996) (finding that a website produced an effect
within the forum so that even if the website operator's actions were
interpreted as occurring outside the forum, the contacts satisfied the
long-arm statute); Inset Systems, Inc. v. Instruction Set, Inc., 937
F. Supp. 161 (D. Conn. 1996) (finding that a foreign party's defendant's
website constituted a continuous advertisement which could be accessed by
forum residents, satisfying the "solicitation of business"
provision of the Connecticut's long-arm statute).
- See Bensusan Restaurant Corp. v. King,
937 F. Supp. 295 (S.D.N.Y. 1996), aff'd, 126 F.3d 25 (2d Cir. 1997)
(holding that the creation of a website with a telephone number to order an
allegedly infringing product is not an offer to sell the product in the
forum state within the meaning of the New York long-arm statute); Hearst
Corp. v. Goldberger, No. 96 Civ. 3620, 1997 Dist. LEXIS 2065, *14, *26,
*29 (S.D.N.Y. Feb. 26, 1997) (holding that the nonresident's website,
e-mails with the media in the forum, and use of a disputed e-mail address
did not constitute "transacting business" or "committing a tortious act" in
New York under its long-arm statute).
- Bensusan, 937 F. Supp. at 300; see
Hearst, 1997 LEXIS 2065 at *44-49.
- Heroes Inc. v. Heroes Foundation, 958 F.
Supp. 1 (D.D.C. 1996) (finding that a nonresident's web page which
solicited contributions and provided a toll-free telephone number for that
purpose provided the court with jurisdiction within the ambit of federal
Due Process); Panavision Int'l, L.P. v. Toeppen, 938 F. Supp. 616,
620 (C.D. Cal. 1996) (finding that because the California long-arm statute
permits courts to assert jurisdiction to the extent of federal Due Process,
the court need only examine whether jurisdiction meets the requirements of
Due Process); Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp.
1119, 1122 (W.D. Pa. 1997) (finding that even if the situation does not
satisfy a specific provision of the long-arm, the long-arm provides for
jurisdiction to the extent of federal Due Process).
- See Helicoptoros Nacionales De Columbia,
S.A., 466 U.S. at 413-14 (1984).
- See id. at 414; International Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer,
311 U.S. 457, 463 (1940)).
- See Federal Civil Rules Handbook,
supra note 41, § 2.4.
- See Helicopteros, 466 U.S. at 414
(quoting Shaffer v. Heitner, 433 U.S. at 204); see
also Federal Civil Rules Handbook, supra note 41, §
- Perkins v. Benguet Consolidated Mining Co.,
342 U.S. 437, 447 (1952). See generally James Wm. Moore, Moore's
Federal Practice (3d ed. 1997).
- Perkins, 342 U.S. at 447-48.
- Helicopteros, 466 U.S. at 418.
- See California Software, Inc. v. Reliability
Research, Inc., 631 F. Supp. 1356 (C.D. Cal. 1986) (finding that the
use of a nationally-disseminated, computer-based information service and
regular communications with forum residents through that service did not
establish the minimum contacts necessary to support general jurisdiction).
Another court found it unnecessary to consider the issue. See Edias v.
Basis, 947 F. Supp. 413, 417 (D. Ariz. 1996) (finding that because all
of the nonresident's contacts with the forum via the Internet gave rise to
the suit, it was unnecessary to consider whether the nonresident's ongoing
business relationship with a forum resident, involving sales, visits, and
communications into the forum, supported general jurisdiction).
- McDonough v. Fallon, No. 95-4037, 1996
U.S. Dist. LEXIS 15139 (S.D. Cal. Aug. 5, 1996).
- Id. at *6-7.
- Id. at *7.
- Id. at *8.
- Id. at *11.
- World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286, 297 (1980); Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475-77 (1985); International Shoe Co., 326 U.S. at
- World-Wide Volkswagen, 444 U.S. at 295
(holding that the New York distributor and retail dealer of an automobile
is not subject to the jurisdiction of Oklahoma, the location of a collision
involving an automobile purchased from the dealer).
- Id. at 298.
- Id. at 297-298.
- Keeton v. Hustler Magazine, 465 U.S. 770, 774
- Burger King, 471 U.S. at 479-80.
- "Pull" technology, such as a web
browser, requires an Internet user to actively do something in order for
the information to be transmitted from a foreign party's website to the
user's computer. "Push" technology downloads data and other
communications to a user's computer via the Internet without the user
having requested the information, such as unsolicited e-mail communications
- Burger King, 471 U.S. at 482-86. See also
Asahi Metal Industry Co., 480 U.S. 102.
- Burger King, 471 U.S. at 482-83.
- Id. at 484.
- Kulco v. Superior Court, 436 U.S. 84, at
96-98 (1978) (finding that commercial contacts with a forum are more likely
to give rise to jurisdiction than personal and domestic
- California Software, Inc. v. Reliability
Research, Inc., 631 F. Supp. 1356 (C.D. Cal. 1986).
- Id. Electronic messages sent from RRI in
Vermont to corporations in Washington, New York, and Ontario, Canada via
the forum Computer Reliability Forum provided one basis for
- Plus System, Inc. v. New England Network,
Inc., 804 F. Supp. 111 (D. Colo. 1992).
- Id. at 119.
- Resolution Trust Corp. v. First of America
Bank, 796 F. Supp. 1333, 1334-35 (C.D. Cal. 1992).
- Id. at 1336.
- Id. at 1338.
- Pres-Kap, Inc. v. System One, Direct Access,
Inc., 636 So.2d 1351 (Fla. Dist. Ct. App. 1994).
- Lexis and Westlaw are two popular computer research
- Inset Systems, Inc. v. Instruction Set,
Inc., 937 F. Supp. 161 (D. Conn. 1996).
- See Cybersell, Inc. v. Cybersell,
Inc., 130 F.3d 414, 418 (9th Cir. 1997).
- CompuServe, Inc. v. Patterson, 89 F.3d 1257
(6th Cir. 1996).
- Id. at 1265.
- Id. Turning to the second factor in the
minimum contacts analysis, the court also held that jurisdiction did not
offend traditional notions of fair play and substantial justice. Although
it may be burdensome for Patterson to defend a suit in Ohio, he was not a
mere consumer but rather an entrepreneur who should have anticipated the
possibility of being subject to jurisdiction when entering into the
CompuServe relationship. The court held that Ohio and the plaintiff,
CompuServe, both had a strong interest in adjudicating the dispute. Id.
- Maritz, Inc. v. Cybergold, Inc., 947
F. Supp. 1328 (E.D. Mo. 1996).
- Edias Software International, L.L.C. v. Basis
International, Ltd., 947 F.Supp. 413 (D. Ariz. 1996).
- Id. at 420.
- Minnesota v. Granite Gate Resorts, Inc., No.
C6-95-7227, 1996 WL 767431 (Minn. Dist. Ct. Dec. 11, 1996), aff'd,
568 N.W.2d 715 (Minn. Ct. App. 1997) and aff'd, 576 N.W.2d 747
(Minn. 1998). See also Banned in Kansas City -- Missouri Residents Need
Not Apply, 21st Century Banking Alert No.
97-7-11, July 11, 1997; State of Minnesota Presses Jurisdiction Over
Out-of-State Web Page. 21st Century Banking Alert No.
96-12-20.1, Dec. 20, 1996, available at
- Granite Gate Resorts, 1996 WL 767431, at *6.
- Id. at *9.
- Telco Communications Group, Inc. v. An Apple a
Day, Inc., 977 F. Supp. 404 (E.D. Va. 1997).
- Va. Code Ann. §§8.01-328.1(A)(3), (4).
- Id. §8.01-328.1(A)(4).
- Id. §8.01-328.1(A)(3).
- GTE New Media Services, Inc. v. Ameritech
Corp., 21 F. Supp.2d 27 (D.D.C. 1998).
- Vitullo v. Velocity Powerboats, Inc.,
1998 WL 246152 (N.D. Ill. 1998).
- Hasbro, Inc. v. Clue Computing,
Inc.,994 F. Supp. 34 (D. Mass. 1997).
- Mieczkowski v. Masco Corp.,997 F.
Supp. 782 (E.D. Tex. 1998).
- Park Inns International v. Pacific Plaza
Hotels, Inc., 5 F. Supp.2d 762, 764-65 (D. Ariz. 1998).
- American Network, Inc. v. Access
America/Connect Atlanta, Inc.,975 F. Supp. 494 (S.D.N.Y.
- Heroes, Inc. v. Heroes Foundation,
958 F. Supp. 1 (D.D.C. 1996).
- Digital Equipment Corp. v. AltaVista
Technology, Inc., 960 F. Supp. 456 (D. Mass. 1997).
- Panavision International v. Toeppen,
141 F.3d 1316 (9th Cir. 1998).
- Bensusan Restaurant Corp. v. King,
937 F. Supp. 295 (S.D.N.Y. 1996), aff'd, 126 F.3d 25 (2d Cir.
- Zippo Manufacturing Co. v. Zippo Dot Com,
Inc., 952 F. Supp. 1119, 1123 (W.D. Pa. 1997).
- See, e.g., Patriot Systems, Inc. v.
C-Cubed Corp., 21 F. Supp.2d 1318 (D. Utah 1998); SF Hotel
Company v. Energy Investments, 985 F. Supp. 1032 (D. Kan. 1997);
Weber v. Jolly Hotels, 977 F. Supp. 327, 333 (D.N.J. 1997);
Smith v. Hobby Lobby Stores, Inc., 968 F. Supp. 1356 (W.D.
Ark. 1997); IDS Life Ins. Co. v. SunAmerica, Inc., 958 F.
Supp. 1258, 1268 (N.D. Ill. 1997), vacated in part on other grounds,
136 F.3d 537 (7th Cir. 1998); No Mayo-San Francisco v.
Memminger, 1998 WL 544974 (N.D. Calif. 1998); CFOs 2 Go, Inc.
v. CFO 2 Go, Inc., 1998 WL 320821 (N.D. Calif. 1998);
Transcraft Corp. v. Doonan Trailer Corp., 45 U.S.P.Q.2d 1097,
1997 WL 733905 (N.D. Ill. 1997); Graphic Controls Corp. v. Utah
Medical Products, 1997 WL 276232 (W.D.N.Y. 1997), aff'd,
149 F.3d 1382 (Fed. Cir. 1998); Hearst Corp. v.
Goldberger, 1997 WL 97097 (S.D.N.Y. 1997).
- See Gary Scott International, Inc. v.
Baroudi, 981 F. Supp. 714 (D. Mass. 1997) (jurisdiction based on
sales of infringing products to Massachusetts retailer in addition to web
site advertising); Heroes, Inc. v. Heroes Foundation, 958 F.
Supp. 1, 3-5 (D.D.C. 1996) (jurisdiction based on web site and
advertisement in local newspaper soliciting donations).
- See Compuserve v. Patterson, 89 F.3d
1257 (6th Cir. 1996); Thompson v. Handa-Lopez, Inc.
998 F. Supp. 738 (W.D. Tex. 1998) (defendant operated casino-type arcade
game through its web site and entered into contract with plaintiff to play
the game); Zippo, 952 F. Supp. at 1125-26 (defendant contracted with
approximately 3,000 individuals and several Internet access providers in
the forum state).
- Hearst v. Goldberger, No. 96 Civ. 3620, 1997
U.S. Dist. LEXIS 2065 (S.D.N.Y. Feb. 26, 1997).
- N.Y. C.P.L.R. § 302. The court did note, however,
that the defendants contacts with New York would not meet the requirements
of "doing business" as set forth in N.Y. C.P.L.R. §301.
Hearst, 1997 U.S. Dist. LEXIS 2065, at *24.
- Edberg v. Neogen, 17 F. Supp.2d 104
(D. Conn. 1998).
- E-Data Corp. v. Micropatent Corp.,
989 F. Supp. 173 (D. Conn. 1997).
- Weber v. Jolly Hotels, 977 F. Supp.
327 (D. N.J. 1997).
- Scherr v. Abrahams, 1998 WL 299678
(N.D. Ill. 1998).
- CD Solutions v. Tooker, 965 F. Supp.
17 (N.D. Tex. 1997).
- Cybersell, Inc. v. Cybersell, Inc.,
130 F.3d 414 (9th Cir. 1997).
- Ballard, 65 F.3d at 1498.
- Millennium Enterprises, Inc. v.
Millennium Music, LP, Civ. No. 98-1058-AA, 1999 WL 27060 (D. Ore.
Jan. 4, 1999).
- Burger King, 471 U.S. at 472-73,
- Id. at 476.
- Helicopteros, 466 U.S. at 414, 418.
- See Donnie L. Kidd, Jr., Casting the Net:
Another Confusing Analysis of Personal Jurisdiction and Internet Contacts
in Telco Communications v. An Apple a Day, 32 U. Rich. L. Rev. 505, 541
This article originally appeared in Pike & Fischer
Internet Law and Regulation. For more information, please see http://internetlaw.pf.com. For print
and/or CD Rom, please call 800-255-8131.
About ILPF | To Join ILPF | Working Groups & Publications
Member Resources | Events | Home