Brian D. Boone, Bullseye!: Why a "targeting" Approach to Personal Jurisdiction in the E-commerce Context Makes Sense Internationally

• Citation: Vol. 20 No. 1
• Publication year: 2006

COMMENTS

BULLSEYE!: WHY A "TARGETING" APPROACH TO PERSONAL JURISDICTION IN THE E-COMMERCE CONTEXT MAKES SENSE INTERNATIONALLY

"As technological progress has increased the flow of commerce between States, the need for jurisdiction over nonresidents has undergone a similar increase."¹

Chief Justice Earl Warren, Hanson v. Denckla, 1958.

INTRODUCTION

A. Untangling the Web-the Need for Predictability

The U.S. Supreme Court has long understood that technological progress drives jurisdictional change. It is hard to imagine, however, that the Court in all its sagacity envisioned the jurisdictional problems electronic commerce ("E-commerce") now poses to U.S. and international courts. Perhaps the Court today would echo Judge Van Graafeiland of the U.S. Court of Appeals for the Second Circuit who stated that adjudicating over Internet-related matters is

"somewhat like trying to board a moving bus."²

Yet judges, both in the United States and abroad, must hop on the bus. Courts increasingly will be called on to decide cases arising in the E-commerce context. This increase stems from the Internet having become the global marketplace in the last decade. Because of the ubiquity of companies like eBay and Amazon and the steady growth of niche and specialty product sites, E-commerce sales are experiencing total growth at rates easily outpacing brick-and-mortar retail sales.³The profundity of commercial offerings and universality of the Internet make it increasingly attractive for commercial activity.⁴Yet, it is this same universality that raises a host of new issues for businesses engaging in E-commerce. As jurisdictional law governing Internet transactions now stands, businesses often have to make educated and informed guesses-but guesses, nonetheless-about whether they will be subjected to lawsuits in other countries by offering their goods, services, or advertising online. For the sake of sustained growth, the jurisdictional "web" must be untangled.

The American Bar Association's Cyberlaw Committee conducted a study in 2004 and found that businesses, particularly those located in North America, are beginning to take seriously the potentially devastating financial consequences that could (and probably would) flow from being hauled into foreign courts and suffering foreign court judgments resulting from their

E-commerce activity.⁵This concern over jurisdiction was not prompted in most cases by incidents within the organizations but rather by a heightened awareness of the shifting legal framework and associated developments worldwide.⁶Businesses began to realize that in Internet-related cases, "nearly simultaneous decisions" with "seemingly indistinguishable facts" were reaching "opposite results."⁷

This heightened concern among business leaders coincides with academic forecasting of the need for change in E-commerce jurisdictional law. Prophecies abound about the stagnating effects that inconsistent approaches to

Internet jurisdiction will have on E-commerce.⁸Awareness of the interdependence of sovereign economies underlies this increased focus on jurisdictional uniformity.⁹There has also been increased discussion about the potential for economic and cultural protectionism if jurisdictional questions are left to sovereign nations to decide without contemplation of the broader international impact.¹⁰

Many "traditionalists" believe that the emergence of a cohesive body of jurisdictional law for E-commerce will be the product of much contemplation of those cases, conventions, and statutes that preceded the Internet age but still substantially bear on the theories underlying contractual relationships and the exercise of jurisdiction.¹¹For others, questions linger as to whether traditional jurisdictional "hooks" will suffice to treat the myriad scenarios that can arise through the consummation of Internet contracts.¹²This group of scholars believes that the Internet, as a radical new technology, requires equally radical approaches to regulation.¹³In fact, the "Internet problem" has already spawned several new "theories" of cyber-jurisdiction.¹⁴

Fortunately, U.S. case law is beginning to pass from a period of "web entanglement" to embracing a workable jurisdictional framework for Internet cases. This framework emerged from case law that hashed out the "stream of commerce" discussion by the Supreme Court in Asahi Metal Industry Co. v.

Superior Court of California.¹⁵Ultimately, the "targeting" approach favored by Justice O'Connor and three other justices in Asahi,¹⁶while not inspiring widespread adoption among U.S. courts in traditional contexts,¹⁷is gaining traction in E-commerce cases in the United States. This Comment contends

International Jurisdiction over E-Consumer Contracts in the European Union: Quid Nove Sub Sole?, 10 INT'L J.L. & INFO. TECH. 344, 348-49 (2002) (discussing the changes made to the Brussels Convention by the Brussels Regulation in an effort to adopt a workable E-commerce framework). Professor Martinez of Stanford Law School further argues that: that "the concept of targeting is the best solution to the theoretical challenge presented by difficulties in localizing conduct in Internet markets."¹⁸In this regard, this Comment rejects treating Internet jurisdictional questions as sui generis and adopts the view that traditional concepts of jurisdiction can, with minor tweaking, prove up to the task in the Internet context.

First, this Comment discusses the unique jurisdictional problems inherent in the Internet as a commercial medium, with recent cases showing these problems to be more than hypothetical. Second, this Comment compares the emerging targeting approach with competing Internet-specific approaches in the United States. Here, the adoption of targeting notions by the Securities and Exchange Commission and targeting in cross-border disputes are considered. Third, this Comment discusses the Hague Convention on jurisdiction and the American Law Institute's (ALI) proposed Recognition and Enforcement of Foreign Judgments federal statute as representative attempts to harmonize international jurisdictional law. In sum, this Comment demonstrates that targeting concepts are essential to a workable jurisdictional framework for E- commerce in the global marketplace.

B. Unique Problems Inherent in E-commerce Jurisdiction

1. The Internet Lacks Geographic Boundaries

It is easy to understand the unique problem that the Internet poses in jurisdictional matters. The very infrastructure of the Internet makes it difficult to determine some facts fundamental to the exercise of jurisdiction. This difficulty arises from the lack of geographic boundaries.¹⁹Local sovereigns

"may have a monopoly on the lawful use of physical force, but they cannot control online actions whose physical location is irrelevant or cannot even be established."²⁰

For traditional jurisdictional systems that are framed by geographic borders, the lack of geographic boundaries is especially threatening because exercising jurisdiction over E-commerce requires ad hoc rulemaking in a rapidly evolving area of law.²¹The Internet is "not merely multi-jurisdictional, it is almost 'a-jurisdictional.'"²²The hardware and software structure of the Internet is designed to ignore rather than acknowledge geographic location.²³

For purposes of jurisdiction, there is "simply no coherent homology between cyberspace and real space."²⁴

A noteworthy Australian case precisely illustrates the problem of geographic indeterminacy. In Dow Jones & Co. v. Gutnick, the High Court of Australia held that the Dow Jones' publication Barrons was subject to the jurisdiction of Australian courts because people in Australia can access the publication over the Internet.²⁵The High Court found that Dow Jones was subject to suit in Victoria for publishing alleged defamatory material about an Australian resident that appeared in an online version of Barrons.²⁶The Court also ruled that Victorian law would apply in the case.²⁷Because some Australian consumers purchased subscriptions and viewed the website in Australia, the Court reasoned that Dow Jones could have reasonably foreseen litigation in Australia.²⁸Critics of the decision predicted both that the decision will produce ignoble offspring in other countries, and that it could, as noted above, encourage larger companies to restrict whole countries from accessing their websites to snuff out the possibility of litigation.²⁹

2. Consumers Can Easily Maintain Anonymity on the Internet

Consumers can also maintain nearly impenetrable anonymity throughout their "visit" to a website.³⁰Names as well as geographic locations and virtually any other piece of information pertinent to the completion of a valid contract can be falsified.³¹Given the countless ways in which contracting parties can hide or distort identifying personal or geographic information, it is no wonder that Internet anonymity poses especially difficult problems for determining the level of "contact" with the potential forum state under any contacts-based analysis. Also, it is no wonder that early decisions have ignored the actions of the consumer when they "lie" to get access to a website.

Consider Twentieth Century Fox Film Corp. v. iCraveTV,³²a U.S. district court decision that drives home this point emphatically. In iCraveTV, Twentieth Century Fox, other movie studios, and professional sports leagues brought suit against a Canadian company that broadcast both Canadian and

U.S. television programming over its website.³³The plaintiffs claimed the defendant's programming infringed their trademarks and copyrights.³⁴To gain access to the site, the user was required to enter his or her area code.³⁵If the area code was not Canadian, then the user could not gain access to the online television programming. If the user succeeded in entering a Canadian area code, the user still had to acknowledge in another click-wrap agreement that he was in Canada.³⁶After acknowledging he lived in Canada...