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By the Muddy Waters of Internet Jurisdiction - April 10, 2007
As you may have heard, the Internet is an information revolution. It is a global market place of ideas that creates the opportunity for anyone anywhere to publish to everyone everywhere. [ ACLU v Reno ] It also creates the opportunity for anyone to be sued by everyone everywhere. Oh goody!
There are great stories of a reporter in New York City, writing an article which was hosted on a web server in New Jersey, getting hauled into court in Australia. [ Dow Jones v Gutnick ] Stories like this are enough to cause one to fear the slings and arrows of outrageous Internet fortune, and head for the safe refuge of the couch where the only risk is whether your TIVO captured all four showings of the Simpsons today.
It hardly seems fair. If I, in Texas , want to inform the world of the benefits of mixing Mentos and diet coke, why should I be subject to suit in Ohio , a state in which I have never dared set foot. Mine is just a passive website; if someone in Ohio should read it, follow my example, and cause diet coke to explode all over the basement, should I have to face lawsuit in a state I can't even find on a map?
Fortunately, recently there has been a plethora of Internet jurisdiction cases that provide perfect clarity on this troubling question; and by perfect clarity I of course mean that the waters are as murky as the mighty Mississippi that blocks the path between Ohio and Texas.
Our story starts in 1954, which would be 15 B.I. (Before Internet) for you young'uns, and an international shoe. Now if I am in Ohio, and you are in Ohio, it's a pretty easy case that an Ohio court has jurisdiction over the both of us. But what if I am in Texas, and you, in Ohio, want to sue me on the grounds of my lousy hockey playing. In 1954, the Supreme Court stated that a court can have jurisdiction over me, an out-of-state defendant, if I have certain "minimum contacts" with the forum state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington , 326 US 310, 316 (1945). Then a few years later we learn that this jurisdiction can be specific or general . Specific is where the jurisdiction over me, the defendant, relates specifically to my lousy hockey playing (specifically to the cause of action). General jurisdiction is where I have had "continuous and systematic" ties with the forum state, Ohio, such as say going to school for the last four years at Oberlin - a fact not directly related to my lousy hockey playing (or maybe it is!?!).
If you know this much, you can get an A in first year law school civil procedure; I got a C.
So what about the Internet which is present everywhere all-the-time? If I write a blog in Texas, hosted on a server in New York City, about hockey that is read in Ohio, do I have to face the man in Ohio?
The answer is something called the " Calder Test ." Only some courts call it the "Effects Test." And other courts call it the "Sliding Scale Test." You see, we are already off to a bad start. Our story is about Hockey so we will call it the Icing Test .
In the Icing Test , the courts have set out a sliding scale for the effect that a website might have in a forum, as set forth by the Supreme Court in Calder v. Jones . At one end of the scale are those passive websites that have no interactivity that just present information.. Has anyone ever seen one of these?? Even my website, Cybertelecom , which is about the most amateur site in the world, has an email link , a Google Search Button , Google Ads, an RSS feed , and displays a secret message to visitors from Canada. There are court cases which conclude that the mere presence of an email link makes a website "interactive." So one end of the scale is "passive websites," but then according to court cases, these websites only exist in mythology. Muddy water.
At the other end of the Sliding-Scale-Effects-Icing test are websites which engage in commercial transactions over the Internet. In these cases, the courts state, "jurisdiction is almost always proper." Cybersell, Inc. v. Cybersell Inc , 130 F3d 414, 415 (9th Cir 1997). "Almost"? If these cases are "almost always" proper, do we ever get to a point where it is "always always" proper? Is there an end to this scale that gives a definitive answer? Or do we just have more muddy water?
Well maybe it would help if we look at the facts of some of the recent cases (then again, maybe not).
In Columbia Pictures Industries, Inc., v Fysh , Case No 5:06-CV-37, Sec. III.A (WDMi Feb. 16, 2007), Columbia Pictures tried in Michigan to sue Fysh, who was apparently in England where he ran a website that distributed copyrighted material. Fysh's website reportedly had indexed hash files of movies and television programs that visitors could download, and visitors could upload their own hash files. And visitors could login! The web server of the site was located in Michigan. So it was clear in the Michigan court's mind that "Defendant's website was interactive to such a degree that it is clear he specifically intended interaction with Michigan residents."
As you read over these cases, think to yourself about Web2.0. These court cases traditionally deal with judges that are struggling with the notion of website owners subject to jurisdiction everywhere - and that being bad. Judges have attempted to draw this magical line in the sand called "interactive websites." These are judges who have dealt primarily with Web1.0 where some amateurish websites simply presented information, and other interactive sites sell any book in all of creation. But what about Web2.0, where interactivity of all participants is the norm? What about my hockey blog post in Texas that permits comments, RSS feeds, trackbacks, digs, and has embedded videos. However much the judges wanted to stick fingers in the dyke and hold back universal jurisdiction at "passive websites," the whole thing comes tumbling down with the interactivity of Web2.0. Under the rules of Web1.0, the blogger, attempting to simply present passive information, could be subject to jurisdiction everywhere all the time.
Anyway, on to the next beacon of clarity: Optimal Beverages Co., Inc., v United Brands Co., Inc. , Civil Action No H-06-1386 , Sec. IV (SDTex Feb. 27, 2007). This case involved conflicting diesel. Plaintiff Optimal Beverages out of Houston had an energy drink "Deezel" that it sells nationwide and for which it has a trademark. In the other corner, Defendant United Brands out of California has an energy drink "Diesel" that it also sells nationwide - where nationwide apparently does not include Texas. As seems to be the way in these situations, plaintiff sued defendant.
The Texas court took note that the Defendant has no presence in Texas, and that there was no evidence that Defendant sold its drink in Texas, or that there was any confusion between brands in Texas. The court did note that Defendant's website was one of those interactive websites where one can come, review defendant's products, and place orders for defendant's drinks. Pursuant to the Sliding-Scale-Effects-Icing test, this seems like one of those interactive websites that could be sufficient to get sued everywhere all the time, almost .
This is a case of general jurisdiction, not specific jurisdiction. If it were specific, defendant's presence in Texas would have to be directly related to the cause of action. But defendant's only presence in Texas is the website - no one has bought drinks in Texas and apparently no one in Texas is confused (at least with regard to the Diesel drink). So jurisdiction must be general. And defendant has no presence in Texas, hasn't sold drinks in Texas, and Texas is not confused. The court reviews the Sliding-Scale-Effects-Icing test and some precedent, but comes back to the fact that no one in Texas has bought drinks, and concludes that it has no general long arm jurisdiction over defendant.
This case seems to elucidate the word "almost." Here we learn that "almost" seems to mean that the existence of the interactive website is irrelevant where the court can look at real word evidence of "minimum contacts." Interactive or not, this case turned on whether anyone anywhere in the real world of Texas had bought one Diesel Drink.
Well, what if the defendant had one sale in the forum state? This next case reportedly involves an MP3 -FM Transmitter thingy for which Plaintiff claimed a patent. Netalog, Inc. v Tekkeon, Inc. , No 1:05CV00980 (MD NC Feb. 15, 2007). Defendant allegedly (if I forget to use the word "allegedly," just assume everything is "allegedly" and I have no idea if it is true - and don't wanna get sued) had an interactive website and sold an infringing device in the forum of North Carolina. This is a specific jurisdiction case where an infringing product has been sold and delivered in the forum, and therefore the alleged patent infringement occurred in North Carolina . Based on that one sale from the interactive website, this court concluded that the defendant purposefully directed activities at the forum.
What's the difference between defendant Tekkeon and defendant United Brands? One sale. Is this the factor that helps elucidate "almost" - indicating when interactive websites may be subject to jurisdiction and when they might not? Well, what if the defendant had 17 sales in the forum state? Would that make things clearer?
In this last case - actually decided in 2002 but cited frequently in the collection of recent cases - Plaintiff Oliver "Buck" Revell believed that he had been defamed by Hart Lidov on an online bulletin board operated by Columbia University School of Journalism. Defendant Lidov apparently wrote a lengthy article concerning the bombing of Pan Am Flight 103 which exploded over Scotland. The troubling part of the article was an accusation of conspiracy and cover-up against Plaintiff and one-time Associate Deputy Direct of the FBI Revell. Once again, according to the way these things go, plaintiff sued defendant. Once again, the forum was Texas.
Plaintiff argued that defendant Columbia University ran a highly interactive website where the public can subscribe to the Columbia Journalism Review (17 Texans had subscribed to the journal - but this has nothing to do with this cause of action), purchase advertising (which has nothing to do with this cause of action), or submit an application for admission (which again has nothing to do with this cause of action). Where the interactive website has nothing to do with the cause of action, this falls under "general jurisdiction." For "general jurisdiction" contacts to be sufficient, they must constitute "continuous contacts" with the forum of the court. Once again citing the rule and looking at a bunch of precedent, the court comes to the gut conclusion that this is just not purposeful continuous contacts and does not qualify for long arm jurisdiction.
Okay, but part of the website was the bulletin board where the offending article was published. What about specific jurisdiction based on the harm caused by that article? First, we have to take off the table the subscribing to the journal, the ordering advertisements, and the submission of applications. They have nothing to do with the cause of action and therefore cannot substantiate a finding of specific jurisdiction. This leaves a "passive" bulletin board website where articles are posted. It is interactive, that's true, because people can post articles. But the court notes that the article written by the defendant contains no reference to Texas, does not refer to Texas activities of Revell, does not rely upon Texas sources, and it's not directed at readers in Texas. The Court specifically references the Calder test, concludes that this activity was not aimed at Texas, and therefore the court lacks jurisdiction.
Boy there are so many things you could say about these cases, and the handful of others I did not even get to. See Sayeedi v. Walser , 2007 NY Slip Op 27081 (Civil Court of the City of New York, Richmond County Feb. 27, 2007) (one sale on eBay didn't constitute minimum contacts to support jurisdiction). An online presence can subject a defendant to litigation anywhere - even if defendant prevails on a motion to dismiss for lack of jurisdiction - the defendant still had to deal with the litigation. Texas (a technology state) seems resistant to over-extending long arm jurisdiction to out of state websites; other states seem to have less of a problem with it. Where the jurisdictional analysis involves a mix of real world and virtual world facts, courts seem to emphasize the meat-space facts. And finally, a jurisdictional analysis which barely gave clarity with Web1.0 gives nothing but muddy water for Web2.0.
Long Arm Jurisdiction
Internet Long Arm Jurisdiction
At the one end of the spectrum, there are situations where a defendant clearly does business over the Internet by entering into contracts wit residents of other states which involve the knowing and repeated transmission of computer files over the Internet. In that situation, personal jurisdiction is proper. At the other end of the spectrum, there are situations where a defendant merely establishes a passive website that does nothing more than advertise on the Internet. With passive websites, personal jurisdiction is not appropriate. In the middle of the spectrum, there are situations where a defendant has a website that allows a user to exchange information with a host computer. In the middle ground, the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information that occurs on the website.
190 F3d at 336 (internal quotation marks and citations omitted); see also Zippo Mfg, Co. v. Sippo Dot Com, Inc., 952 FSupp 1119 (WDPa 1997) (establishing the spectrum test). In Mink, the court held that the defendant's website was passive even though the site contained an email link as an order form which the customer could print, complete, and return through traditional mail. 190 F3d at 337. Because the site fell on the passive end of the spectrum, personal jurisdiction was not established. Id. - Optimal Beverages Co., Inc., v United Brands Co., Inc., Civil Action No H-06-1386 , Sec. IV.B (SDTex Feb. 27, 2007)
Given that individuals can access an Internet website from any forum, an exercise of general jurisdiction based solely on an interactive website would subject many companies and individuals to suit in essentially any court, which is untenable. There must be evidence to show that the website was systematically and continuously aimed at the forum such that an exercise of jurisdiction would comport with "traditional notions of fair play and substantial justice." Absent such evidence, this Court does not have general personal jurisdiction of the basis of Defendants' interactive websites. See Cybersell Inc., 130 F3d at 419-20 (maintaining a website accessible to anyone over the Internet is not enough to establish jurisdiction). Accordingly, the Court finds that Boss Media's and RealTime's contacts with the District of Nevada are insufficient to support an exercise of general personal jurisdiction over these defendants -- Mullally v Jones, 2:05-cv-00154-BES-GWF Sec. II.C. (DNV Feb. 28, 2007).
Toeppen engaged in a scheme to register Panavision's trademarks as his domain names for the purpose of extorting money from Panavision. His conduct, as he knew it likely would, had the effect of injuring Panavision in California where Panavision has its principal place of business and were the movie and television industry is centered. Under the "effects test," the purposeful availament requirement necessary for specific jurisdiction is met.
Id at 1322, The court then found that the second requirement for specific jurisdiction was also met, as "Panavision's claims arise out of Toeppen's California-related activities." Id. -- Rodentpro.com LLC v Biggers & Callaham LLC, No 3:06-cv-81-RLY-WGH (SDIn Feb. 12, 2007)
Plaintiff, however, did not purchase the car through eBay. Instead, he decided to leave South Dakota, go to Illinois, and call defendant from there. An agreement was made for the transaction, defendant sent a purchase agreement to Plaintiff, Plaintiff signed the agreement while in South Dakota, and Plaintiff arranged for the down deposit to be wired from a bank in Wisconsin to defendant. Plaintiff paid the balance of the car and then "executed the agreement at the office of Montana Muscle" in Montana. The car was shipped by Plaintiff. After receiving the car in South Dakota, plaintiff "decided that it was not in the condition that he expected."
Plaintiff decided to sue Defendant and decided that South Dakota would be an okay forum in which to sue Defendant.
Plaintiff based his argument that the court has jurisdiction over defendant in part on defendant's Internet presence. But then, plaintiff did not actually use the Internet to make the deal; Plaintiff just learned about the availability of the car from the Net - just like one might pick up any advertising magazine that lists cars for sale. And the court had already dealt with Deals on Wheels concluding that such print advertising by itself is insufficient for jurisdiction.
Plaintiff responds, well what about all this other stuff: the negotiations, the mailing of the agreement, and the paying of the money.
The court was not persuaded, concluding in the alternative that this appeared to be a "one shot deal." The court noted that there were no other contacts of defendant with South Dakota on the record. Indeed, it was Plaintiff that initiated the negotiations (from Illinois). The only contact initiated by defendant with South Dakota was mailing the purchase agreement to Plaintiff there. The Court concludes that this "one shot deal" does not constitute sufficient contact for South Dakota to extend its long arm around Defendant.
The few courts that have found personal jurisdiction over purely on-line auction sales have focused primarily on the sophistication of the seller. (See, e.g., Dedvukaj v. Maloney, 447 F. Supp. 2d 813 [D. Mich. 2006]). Traditionally, courts have applied the "sliding scale" test in internet jurisdiction cases, which seeks to distinguish interactive from passive websites (see Zippo Mfg. Co. v. Zippo Dot Com, Inc. 952 F. Supp. 1119 [W.D.Pa.,1997]). Under the Zippo sliding scale test, "proper exercise of personal jurisdiction in a claim involving Internet contact is directly proportional to the commercial interactivity of the website over which the contact is made" (Action Tapes, 2005 U.S. Dist. LEXIS 29312, 2005 WL 3199706 at *2, [internal citations omitted]). However, this mode of analysis makes little sense in the eBay context since eBay, and not the user, controls the interactivity and marketing efforts of the website. As noted in Action Tapes, the sellers and buyers who connect through eBay "cannot be said themselves to control eBay's degree of commercial interactivity any more than a buyer and seller at Sotheby's can be said to be responsible for the premises or to control the auctioneer" (Id). Accordingly, the "sliding scale" standard is not applicable in the current case. Courts such as Dedvukaj appear to be applying a modified Zippo analysis, aimed not at determining the interactivity or passivity of the eBay internet site itself, but instead seeking to distinguish between the purposeful activity and the impressions created by the activity and representations of the individual eBay user from the standard content, templates, and general structure provided to all eBay users.
Regardless of whether such a sliding scale analysis is employed or not, the crucial question remains whether the quality of the New York contact was of such a nature that the defendant can be said to have purposefully invoked the benefits and protections of New York law (Hutton v. Piepgras 451 F. Supp. 205 [1978, SD NY].) In the case at bar the contacts of the Defendant, as presented by Plaintiff, fail to meet the Hutton requirements. It has not been shown to this Court's satisfaction that the Defendant purposefully invoked the benefits and protections of New York law. No evidence was provided by Plaintiff as to Defendant's overall eBay statistics, experience, or of any marketing directed at potential customers, designed for instance, to welcome bids from New Yorkers or any other acts that indicate Defendant may be purposely availing himself specifically to the business of New Yorkers or any desire to take advantage of New York law. The Defendant was prepared to sell his Chevrolet engine to whoever the highest bidder happened to be regardless of the state in which they happened to reside. Given this unique sale style, even though a contract may be formed, the location of delivery is not likely in the seller's realm of contemplation. In the typical on-line auction sale the ultimate destination of any item is completely determined by the potential buyers through the bidding process. Accordingly, to summon the Defendant into a New York court on this matter would contravene the traditional notions of "fair play" and "substantial justice" that have become the touchstone of personal jurisdiction.