Determining Internet Jurisdiction

By Roy Whitehead and Pam Spikes

In Brief

Court Decisions Provide Some Clarity in a Developing Field

The ability of the Internet to reach across borders has raised a host of questions, including questions of legal jurisdiction. Should defendants be haled to a jurisdiction where, though their websites are accessible, they had no intent to do business? Several recent court decisions on interstate jurisdiction point to the beginnings of a standard for determining whether an entity has “purposefully” directed itself to Internet users in another jurisdiction. At the international level, the disparate legal approaches between countries magnify the potential problems. Without international guidelines on recognizing jurisdiction, exposure to local liability could have a detrimental effect on global business.

The Internet has created many challenging legal issues for the courts, not the least of which is the question of jurisdiction (the power to hear a case). The Internet can allow computer users anywhere in the world to search and retrieve information from a publicly available site anywhere else in the world. Although this potential global audience can mean great exposure for businesses, it can also translate into potential liability.

What if information on the website of a company in Buffalo, New York, is considered defamatory, an infringement of copyright, or an interference with a business relationship, by someone in Juneau, Alaska? What if the allegedly wronged party sues for one of the foregoing causes of action in Juneau? Would the New York company have to undergo the trauma, expense, and inconvenience of defending itself in Alaska? What if the plaintiff is located even farther afield, such as in China?

Jurisdictional Questions

This jurisdictional question has been explored in several recent cases involving lawsuits filed against operators of U.S. websites accessible in other states. (The jurisdictional decisions with regard to websites accessible in other countries will be discussed below.) The cases provide general guidelines about when the operation of a website will allow specific personal jurisdiction over the operator of a website. Generally, the cases agree that the operation of an interactive website that is merely available to citizens of another state does not in itself subject the operator to legal defense in another state. Instead, in order to establish jurisdiction in Ozark, Arkansas, an Arkansas plaintiff must show that the defendant’s website specifically, intentionally, or knowingly targeted or conducted business with users in Arkansas. The precise question raised by recent cases is whether mere access to an interactive website in a state is sufficient to support specific personal jurisdiction, or whether additional evidence that the out-of-state defendant has “purposefully availed” itself of the privilege of engaging in the activities in a forum state is needed.

Court decisions have generally defined the term “purposefully availed” as meaning that the evidence should establish an intentional interaction directed toward the forum state [ALS Scan v. Digital Consultants, Inc., 293 F.3d 707 (2002)]. If a defendant website operator intentionally targets his site to the forum state or knowingly conducts business with forum state residents by the Internet site, then the “purposeful availment” requirement would be satisfied.

This intentional targeting can also be established by combining Internet contacts with other, traditional business contacts with the state. According to the Pennsylvania case of Barrett v. Catacombs Press [44 F. Supp. 717 (1999)], even when the website’s interactivity is not specifically and intentionally targeted at a forum state, the court can still exercise personal jurisdiction over a defendant if other related traditional non-Internet contacts with the forum state exist, such as “Specific personal business trips to the forum state, telephone and fax communication directed to the forum state, purchase contracts with forum state residents, contracts that apply the law in the forum state, and advertisements in local newspapers.”

U.S. Cases

Several U.S. cases have dealt with the meaning of “purposefully avail.” The Supreme Court of California’s decision in Pavlovich v. DVD Copy Control Association [58 P.3d (2002)] concerned Pavlovich, an engineer and resident of Texas who posted on his website the source code of a program that allowed DVDs to be copied over the Internet. The plaintiff, representing the entertainment industry, claimed that Pavlovich was subject to personal jurisdiction in California because his posting activities in Texas harmed the California recording and entertainment industry by allowing the pirating of copyrighted material.

Despite the considerable potential harm in California, the California Supreme Court decided that the mere foreseeability of harmful effects in California was not enough to justify long-arm jurisdiction over a Texas resident. Instead, the entertainment industry had to demonstrate that Pavlovich committed some intentional act expressly aimed at the state of California. The evidence revealed that Pavlovich had never visited California, had made no Internet contacts in California, his website had no interactive features, he had made no telephone calls to California, and he did not know that the plaintiffs owned a license for the program that protected access to DVDs. This license was actually obtained after the misappropriated code was posted. The court reasoned that Pavlovich had never intentionally or “purposefully” directed his harmful program toward California. As a result, the State of California had no jurisdiction over Pavlovich.

In Young v. New Haven Advocate [318 F.3d 86 (2002)], a Connecticut newspaper posted several articles on its Internet site critical of a Connecticut state program to house prisoners in Virginia. The articles were alleged to have defamed the warden of a Virginia prison by implying he was a racist and encouraged the abuse of prisoners. He sued the newspaper for defamation in Virginia. The evidence indicated that the newspaper did not post the information on the Internet for the purpose of directing the information to a Virginia audience. The court said that something more than posting and accessibility was needed to indicate the newspaper “purposefully” directed its activity in a substantial way to Virginia. The newspaper had only seven subscribers in Virginia. The court stated that the newspaper did not post materials on the Internet with the “manifest intent of targeting Virginia readers.” The court decided that Virginia did not have jurisdiction over the newspaper because Connecticut, not Virginia, was the focal point of the articles about the prisoners and because the newspaper’s website was not targeted to Virginia residents. The newspaper could not have “reasonably” anticipated being haled into court in Virginia. Interestingly, one judge disssented, arguing that posting defamatory information on the newspaper’s website was sufficient contact with Virginia to allow jurisdiction.

Similarly, in Toys “R” Us, Inc., v. Step Two [318 F.3d 446 (2003)], the court relied on the “purposefully availed” standard in deciding whether it had the power to hear a trademark infringement case brought in New Jersey. Toys “R” Us claimed that the New Jersey Federal District Court had jurisdiction to hear an allegation that a Spanish company, Step Two, had infringed on its trademark by selling toys from a website located in Spain that could be accessed in the United States. The evidence showed that Step Two did not have any offices, bank accounts, or employees in the United States. The website was entirely in Spanish and quoted prices in Spanish pesetas and Euros. Purchased toys were normally shipped only to addresses in Spain. There was evidence, however, that two New Jersey residents had purchased toys from the Step Two website. It was also clear from e-mail messages that the Spanish website employees did not know how to ship the toys to New Jersey because the site was not programmed to accept U.S. addresses. The court considered whether Step Two’s website was directly targeted toward New Jersey or if the employees of Step Two interacted with residents of New Jersey to sell toys. Again, the court held that Toys “R” Us had failed to satisfy the “purposefully availed” requirement for jurisdiction in New Jersey because Step Two’s Spanish website was not designed nor intended to target customers in New Jersey.

Finally, a significant case that did not involve the Internet provided a standard to be followed when the publication activity in one state might be directed at another state. It is often cited by courts wrestling with today’s complex Internet cases as authority about the meaning of the “purposefully availed” standard. In Jones v. Calder [465 U.S. 783 (1984)], actress Shirley Jones filed a defamation and emotional distress complaint in California against the National Inquirer, a magazine published and incorporated in Florida. The Inquirer claimed that the California court lacked personal jurisdiction over the publication and its employees because the article was written and published in Florida. The evidence indicated that the author of the article made a few telephone calls to California but never visited the state while writing his article. Over 600,000 copies of the total Inquirer circulation of 6 million were sent to California.

Then–Associate Justice Rehnquist wrote that the story concerned a California resident, was drawn from California sources, the magazine had a large California circulation, and the focal point of both the story and the harm was California. He said that because the defamatory effects were expressly “directed” toward California, the Inquirer and its employees could “reasonably anticipate being haled into court there.” The Supreme Court decided that the Inquirer had to go to California to defend the suit.

Retraction protection. The fluid nature of Internet publishing raises interesting questions about errors and retractions. An error published on the Internet may be immediately accessible to many readers, but it can also be corrected and retracted promptly. Many states have statutes that give special protection from defamation liability to publishers that promptly publish a retraction. Should Internet speech receive the same protection? The Georgia Supreme Court recently ruled as such. In Mathis v. Cannon [573 S.E.2d 376 (2002)], it decided that the Georgia retraction statute does apply to Internet speech. The court reasoned that the Georgia law, which protects defendants from punitive damages if they promptly and prominently publish a retraction in a regular issue of the publication in question, did not include specific language excluding the Internet. The court wrote in its opinion:

Our reasons for preferring this broader reading are many…it encourages defamation victims to seek self-help, their first remedy…It eliminates the difficult task of determining what is a ‘written publication’ and who is the ‘print media’ at a time when any individual with a computer can become a publisher. It supports free speech by extending the same protection to the private individual who speaks on matters of public concern as newspapers and other members of the press now enjoy. In short, it strikes a balance in favor of ‘uninhibited, robust, and wide-open debate’ in an age of communications when ‘anyone, anywhere in the world, with access to the Internet’ can address a worldwide audience in cyberspace.

The case is informative because it treats Internet speech like newspaper speech and may indicate that courts are beginning to recognize the importance of protecting the speech of both personal and commercial Internet publications.

International Jurisdiction

The jurisdictional questions raised at the international level are even more far-reaching and unanswered. In Dow Jones & Company v. Gutnick (HCA 56 Dec. 10, 2002), the High Court of Australia ruled that a U.S. defendant could be haled into a foreign court. The High Court ruled that the Australian courts have jurisdiction to try the Dow Jones Company, a U.S. corporation that publishes Barron’s, for libel. The High Court ruled that personal jurisdiction existed solely because the article in question, posted on the Barron’s Online website based in New Jersey, could be viewed on the Internet in Australia. The Australian High Court reasoned that:

Harm to reputation is done when a defamatory publication is comprehended by the reader, the listener, or the observer. This being so it would be wrong to treat publication as if it were a unilateral act on the part of the publisher alone. It is not. It is a bilateral act in which the publisher makes it available and a third party has it available for his or her comprehension.

The Australian Court also relied on the International Covenant on Civil and Political Rights (ICCPR) in its ruling. The court said that the ICCPR protects everyone against interference with his privacy and attacks on his honor and reputation. Said the court, “Everyone has a right to the protection of the law against such interference or attacks.” As a result, the common law of Australia should recognize and protect the honor and reputation of individuals. Not to do so would be a default to the ICCPR covenant. But what of the rights to hold opinions without interference and the right of freedom of expression also protected by the ICCPR? Has the High Court’s decision hampered those media rights? The current conglomerated outlets have significant assets in China, Europe, or Africa that could be at risk in local libel trials. The risk of local liability may cause media corporations to think twice about publishing controversial information.

The Australian decision poses serious concerns for U.S. entities with assets in other countries because the libel laws of Australia and other countries are the exact reverse of American law. Under U.S. law, the burden is on the plaintiff to show that a libelous statement is false. In certain other jurisdictions, the burden is on the defendant to show it is true [Review & Outlook, Wall Street Journal (December 11, 2002)]. The U.S. First Amendment free speech rights are not so well established, if recognized at all, in many global jurisdictions. Internet libel cases have been filed in jurisdictions like Zimbabwe and the Ukraine [Editorial, Washington Times (December 16, 2002)]. Some countries try to stifle criticism by intimidating journalists [Editorial, New York Times (December 11, 2002)]. For example, in November 1986, Saddam Hussein and Iraq’s Revolutionary Council authorized the death penalty for anyone who flagrantly insulted the Iraqi president [Christian Science Monitor (December 2002)].

Such cases warrant attention because they chill free speech and pose great perils to global business arrangements. Unless the authors manifest an intention to aim their websites or post their article at a foreign country, the proper jurisdiction ought to be where the information is posted.

New technology can often raise jurisdictional issues without precedent, but there is often a solution to be found. For example, the U.S.–Soviet space race led the countries of the world to agree that spacecraft in orbit should be regarded as subject to the laws of the country where they were launched rather than the country they were flying over. The Internet presents similar problems, and one can imagine similar solutions. Entities that want to limit their international exposure could clearly indicate on their websites that the information therein is targeted solely to users in a particular jurisdiction. Websites could also block access to users from jurisdictions that do not recognize certain speech rights or libel protections. Finally, it may be time to start formulating international agreements, such as those that protect patents and copyrights, to deal with the issue of Internet jurisdiction and liability questions. One logical organization to do this is the Hague Convention on International Jurisdiction and Foreign Judgements in Civil and Commercial Matters.

Roy Whitehead, JD, LLM, is an associate professor of business law, and
Pam Spikes, PhD, CPA, is a professor of accounting, both at the University of Central Arkansas, Conway, Ark.

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