Vol. 14, No. 4, Pg. 20. Jurisdiction in cyberspace.

• Author: By Manton M. Grier

South Carolina Lawyer

2003.

Vol. 14, No. 4, Pg. 20.

Jurisdiction in cyberspace

20Jurisdiction in cyberspaceBy Manton M. GrierRobert Bork once said that it is the habit of the law to reason by analogy. Thus, when the law is faced with a new technology, such as the Internet, it typically does not seek to reinvent itself to accommodate what was previously unknown. Rather, lawyers and judges look for analogs in what is familiar and attempt to use existing rules and doctrines to resolve disputes involving the new technology. For example, if it is accepted that the parties may enter into a contract by exchanging correspondence, it is but a small step to conclude that the parties may contract by exchanging e-mails.

The same reasoning holds for determining questions of personal jurisdiction. The Internet, is after all, another channel by which a defendant may purposely avail itself of the privilege of conducting activities within a state thereby invoking the protection of its laws and submitting its person to the jurisdiction of its courts.

21 Jurisdictional doctrine

Personal jurisdiction is either general or specific. With specific jurisdiction, the plaintiff's cause of action arises directly from the defendant's activity purposely directed toward the forum state. With general jurisdiction, by contrast, the plaintiff's cause of action need not arise out of the defendant's activities with the forum. General jurisdiction may be asserted over a defendant domiciled in the forum or whose activities in the forum have been substantial, continuous and systematic.

South Carolina's Long Arm Statute, S.C. Code Ann. § 36-2-803, specifies categories of conduct giving rise to specific jurisdiction: e.g., entering into a contract to be performed in whole or in part by either party in this state. The jurisdictional analysis under § 36-2-803 is the same as that used by the Supreme Court under the Due Process Clause. Southern Plastics Co. v. Southern Commerce Bank, 310 S.C. 256, 260, 423 S.E.2d 128, 130 (1992); Stover v. O'Connell Assocs., 84 F.3d 132, 135-36 (4th Cir. 1996).

The Supreme Court's decision in International Shoe Co. v. Washington, 326 U.S. 310 (1945), establishes a two part test for establishing personal jurisdiction. The defendant must have (1) minimum contacts with the forum state such that (2) maintenance of the suit does not offend "traditional notions of fair play and substantial justice." Id. at 316. Lesnick v. Hollingsworth & [pose Co., 35 F.3d 939, 942 (4th Cir. 1994).

The Doctrine of Minimum Contacts has developed as a surrogate for the defendant's physical presence in the state. Lesnick, 35 F.3d at 941-42. "[I]t is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 254 (1958). The defendant's activities may not involve physical presencewithin the state but must be "purposefully directed toward the forum state." Lesnick, 35 F.3d at 945.

Even if the minimum contacts test is met, the court must still determine that its exercise of jurisdiction over the defendant is consistent with traditional concepts of fair play and substantial justice. Lesnick, 35 F.3d at 945.

Jurisdictional contacts

via the Internet

Early in the history of the Internet some thought that simply maintaining a Web site accessible in the forum was sufficient to subject a defendant to essentially nationwide jurisdiction. Superguide Corp. v. Kegan, 987 F.Supp. 481 (W.D. N.C. 1997); Inset Sys. v. Instruction Set, 937 F.Supp. 161 (D. Conn. 1996). That view is no longer generally accepted. "Rather, the critical issue for the court is to analyze the nature and quality of commercial activity actually conducted by an entity over the Internet in the forum state." ESAB Group, Inc. v. Centricut, LLC, 34 F.Supp. 2d 323, 330-31 (D.S.C. 1999) (ESAB II). See also Brown v. Geha-Werke GmbH, 69 F. Supp. 2d 770 (D.S.C. 1999) (passive Web site not sufficient "additional conduct" beyond merely placing product in stream of commerce to permit court to exercise personal jurisdiction over German manufacturer of allegedly defective document shredder that caused injury in South Carolina).

Of course, general jurisdiction requires a significantly higher level of contacts with the forum state than specific jurisdiction. ESAB Group v. Centricut, Inc., 126 F.3d 617, 623-25 (4th Cir. 1997) (ESAB I). See Soma Medical Int'l v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir. 1999) (defendant's passive Web site and limited contacts with forum were not sufficiently systematic and continuing to support an exercise of general jurisdiction); Mieczkowski v. Masco Corp. 997 F.Supp. 782 (E.D. Tx. 1998) (Rose Furniture Company's interactive Web site along with other contacts with the state of Texas sufficient to establish general jurisdiction for products liability suit). With specific jurisdiction a single contact or tortious act to be performed in part or committed within the forum may suffice so long as the plaintiff's cause of action arises out of that contact or tortious act.

One frequently cited case is Zippo Mfg. Co. v. Zippo Dot Com, 952 F.Supp. 1119 (W.D. Pa. 1997), in which the manufacturer of the famous Zippo Lighter filed suit in a Pennsylvania court asserting causes of action related to trademark infringement against Zippo Dot Corn, Inc. (ZDC), an Internet news service located in California. ZDC had approximately 140,000 paying customers worldwide of which approximately 2 precent (3,000) were Pennsylvania residents. The court upheld the assertion of specific jurisdiction over ZDC, concluding that ZDC had purposely and repeatedly accepted applications from Pennsylvania residents and knew that the result of these contracts would be the transmission of electronic messages into Pennsylvania. The court also concluded that the cause of action arose out of ZDC's forum related activities which resulted in a significant amount of the alleged infringement and dilution. In language that has been widely quoted by other courts, the district judge proposed a sliding scale to evaluate the nature and quality of a defendant's commercial activity over the Internet:

At one end of the spectrum are situations where a defendant clearly does business over the Internet. . . . At the opposite end are situations where a defendant has simply posted information on an Internet website which is accessible to users in foreign jurisdictions . . . . The middle ground is occupied by interactive websites where a user can

22exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the website.

952 F.Supp. at 1124 (citations omitted). Accord ALS Scan, Inc. v. LDidgital Serv. Consultants, Inc., 293 F.3d 707, 713-14 (4th Cir. 2002) (Maryland district court did not have jurisdiction over Georgia-based Internet service provider who provided the bandwidth service that enabled plaintiff's copywrighted photographs to be published on the Internet accessible to Maryland residents) (expressly adopts Zippo model).

"While numerous courts have found this sliding scale analysis helpful . . ., courts have also recognized that, regardless of a web-site's passivity or interactivitiy, the essential question remains the same - did the defendant purposely direct activity at the forum." Vinten v. Jeantot Marine Alliances, S.A., 191 F. Supp. 2d 642, 647 (D.S.C. 2002) (French manufacturer of catamaran that conducted no activities over its website in state not subject to suit in South Carolina.)

A number of other reported cases, like the Zippo case, involve allegations that the defendant's Web site or domain name infringe or dilute trade marks owned by the plaintiff. In Millennium Enters., Inc. v. Millennium Music, LP, 33 F.Supp. 2d 907 (D. Or. 1999) the court said that characterizing the defendant's Web site as interactive is not enough to establish jurisdiction in the forum state. Rather, the plaintiff must demonstrate actual exchanges or transactions with residents of the forum or evidence that local residents were targeted by defendant. The plaintiff, a retail music store in Oregon, sued the defendant, a retail music store in South Carolina, for trademark infringement andunfair competition. The defendant's Web site permitted Web users to purchase compact discs over the Internet, join a discount club and request franchising information. There was only one sale to an Oregon resident, however, which was instigated by the plaintiff in an attempt to establish jurisdiction in Oregon. The court granted the defendant's motion to dismiss for lack of jurisdiction. The court's opinion also contains a useful survey of the cases dealing with the issues of jurisdiction over the Internet.

Other trademark cases include Panavision International, L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998), in which the court upheld jurisdiction in Panavision's home state of California over Toeppen, an Illinois resident, who registered Panavision's trademarks as domain names that he later offered to sell to Panavision. The court relied on the "effects doctrine" drawn from Calder v. Jones, 465 U.S. 783 (1984), in which the U. S. Supreme Court held that two Florida residents, who authored a National

23Inquirer article defamatory of the actress Shirley Jones, could be sued in California, Ms. Jones' home state, where the article had been extensively published. But see ESAB I, 126 F.3d at 622, 625-26; see generally, Howard B. Stravitz, Personal Jurisdiction in Cyberspace: Something More is Required on the Electronic Stream of Commerce, 49 S.C.L. Rev. 925, 936-38 (1998). The court in Panavision held that Toeppen's activities were purposely directed towards California and were likely to injure Panavision in California, its principal place of business and the center of the movie and television industries

By contrast, the court in Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997) held that Cybersell FL's contacts with Arizona were insufficient to support jurisdiction there. Cybersell FL's Web site was essentially passive. No Arizona resident hit its Web site except Cybersell AZ. "In short, Cybersell FL has done no act and has consummated no transactions, nor has it performed any act by which it purposefully availed itself of the privilege of conducting activities in Arizona, thereby invoking the benefits and protections of Arizona law." 130 F.3d at 419. See also Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2d Cir. 1997) (no jurisdiction in New York over owner of The Blue Note, a small cabaret in Columbia, Missouri whose Web site allegedly infringed the trademark of the well known New York City Jazz Club, The Blue Note). See Christian Sci. Bd. of Dirs. of the First Church of Christ, Scientist v. Nolan, 259 F.3d 209 (4th Cir. 2001) (defendant who supplied content for North Carolina based Web site subject to suit in that state for trademark infringement).

When the district court's subject matter jurisdiction arises under the patent laws, the Federal Circuit Courtof Appeals has exclusive appellate jurisdiction. Accordingly, its decisions are considered authoritative on issues of personal jurisdiction in such cases. See 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1377 (Fed. Cir. 1998); Beverly Hills Fan. Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564-65 (Fed. Cir. 1994), cert. dismissed, 512 U.S. 1273 (1994).

Offers to sell infringing products over the Internet were asserted as a jurisdictional basis in ESAB II, 34 F.Supp.2d 323. ESAB, a manufacturer of welding and cutting equipment brought suit in South Carolina against Centricut, a New Hampshire company, alleging that it had infringed on one or more of ESAB's patented electrodes by offering the electrodes for sale in South Carolina over the Internet. Centricut conducted its business by telemarketing from New Hampshire where it shipped products in response to orders received by mail, phone or fax. Centricut's online catalog included listings of the allegedly infringing electrodes. The court said that, "merely categorizing a website as interactive or passive is not conclusive of the jurisdictional issue. Generally, in personam jurisdiction must be based on more than a defendant's mere presence on the Internet even if it is an 'interactive' presence. . . . Rather, the critical issue for the court to analyze is the nature and quality of commercial activity actually conducted by an entity over the Internet in the forum state." 34 F.Supp. 2d at 330-31. Here the record revealed that Centricut had conducted no commercial activity over the Internet in South Carolina. The court concluded that the national nature of the Internet and its potential to reach customers in South Carolina were not an adequate basis to establish jurisdiction. See also Edberg v. Neogen Corp., 17 F.Supp. 2d 104 (D. Conn. 1998) (one sale of allegedly infringing product in Connecticut, which was instigated by plaintiff and the existence of defendant's Web site which provided information about defendant, an order form and toll-free 800 number, insufficient to establish minimum contacts with forum).

In Mink v. AAAA Dev., LLC, 190 F.3d 333 (5th Cir. 1999), Mink sued AAAA in a Texas district court alleging patent and copyright infringement. AAAA's contracts with the forum state were alleged to be its Web site, which provided browsers with only a printable mail-in order form, AAAA's toll-free number, mailing address and e-mail address. Orders were not taken over the Web site. The court affirmed the dismissal for lack of personal jurisdiction and said that the existence of an e-mail link (not clear from the record) would not change its opinion.

In Blackburn v. Walker Oriental Rug Galleries, Inc., 999 F.Supp. 636 (E.D. Penn. 1998), the court held that the defendant's Web site, alleged to have infringed plaintiff's copyrighted Web site, was essentially an advertisement for oriental rugs. The court said that advertising on the Internet is akin to advertising in a national magazine and as such is insufficient to form continuous and substantial contacts with the forum. The court also said that the existence of an e-mail link alone is not sufficient to establish jurisdiction. The court criticized Maritz Inc. v. Cybergold Inc., 947 F.Supp. 1328 (E.D. Mo. 1996), which based a finding of jurisdiction on defendant's solicitation of potential customers to provide their e-mail addresses over a link so that defendant could in turn set up electronic mail boxes to transmit customized advertisements. The defendant in that case had also indiscriminately responded to every Internet user who accessed its Web site.

The public nature of the Internet and the Calder v. Jones "effects" doctrine may make it easier to establish

24personal jurisdiction over a defendant in defamation cases involving the Internet. See Panavision International, L.P., 141 F.3d 1316. But see ALS Scan, Inc., 293 F.3d at 714-15. In Blumenthal v. Drudge, 992 F. Supp. 44 (D. D.C. 1998), the defendant, publisher of the Internet "Drudge Report," published an article over the Internet defamatory of presidential aid Sidney Blumenthal. The court concluded that defendant had sufficient contacts within the District to support jurisdiction under the District's long arm statute and due process. The court stressed the following factors: (1) Drudges' Web site was interactive, (2) the "Drudge Report" was regularly distributed to District residents via AOL and the World Wide Web, (3) Drudge had solicited and received contributions from District residents, (4) Drudge's Web site was available to District residents 24 hours a day, (5) Drudge had visited the District to be interviewed on C-SPAN and (6) Drudge had gossip sources (residents) within the District. The court also mentioned that the "Drudge Report" focused on "inside the Beltway gossip" and thus targeted District residents. See also Telco Communications v. An Apple A Day, 977 F.Supp. 404 (E.D. Va. 1997) (defamatory press releases posted on the Internet were held sufficient to establish jurisdiction under Virginia's long arm statute and due process).

The Internet has also spawned cases involving claims of antitrust and unfair trade practices. In GTE New Media Servs., Inc. v. BellSouth Corp., 199 F.3d 1343 (D.C. Cir. 2000), GTE alleged that the defendants, five regional Bell operational companies and their relevant subsidiaries sought to restrain and monopolize the market for Internet business directories and to secure exclusive links with Netscape and Yahoo to insure that users of these browser sites would be specifically directed to the defendants' Internet Yellow Pages. The district court found thatthe defendants had entered into an agreement outside of the District of Columbia (District), the object of which was to attract Internet users in the District to their Web sites (Internet Yellow Pages) (instead of GTE's Super Pages) and thereby draw advertisers away from GTE. The district court had concluded that these facts alone established that defendants had foreseeably caused tortious injury to GTE's business in the District. The court of appeals reversed but remanded the case to permit GTE additional discovery on the question of jurisdiction. The court said that jurisdiction could not be based on the activities of the defendants outside the District. Access to a Web site is analogous to a telephone call, and the receipt of telephone calls outside the District does not amount to persistent conduct "in the District." Also, access to an Internet yellow page is analogous to searching the yellow pages of a telephone book and does not constitute transacting business by District residents with defendants within the District. Even if defendants acted to maximize use of their Web sites by residents of the District, the mere accessibility of those Web sites in the District would not establish the necessary minimum contacts with the District.

In CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996), Compuserve sued Patterson, a Texas resident, in its home state of Ohio seeking a declaratory judgment that it had not infringed on Patterson's common law trademarks and that it was not otherwise guilty of unfair and deceptive trade practices in marketing a computer software program that was similar to Patterson's. Patterson was a Compuserve subscriber and had also placed software products on the Compuserve system for others to use and purchase. When Compuserve began to market a program that was similar to Patterson's, he complained by e-mails addressed to Compuserve in Ohio. The court of appeals held that Patterson had purposely availed himself of the privilege of doing business in Ohio and that Compuserve's claims were sufficiently connected with Patterson's Ohio activities to support the exercise of specific jurisdiction over his person. The court's opinion is subject to the criticism that the subject of Compuserve's suit (Patterson's claim) did not directly relate to his activities in Ohio. Rather, Patterson complained of Compuserve's activities in Ohio in marketing a program that was similar to his. Certainly, Compuserve was subject to suit in Ohio, but the defendant was Patterson, not Compuserve.

Conclusion

With the possible exception of defamation or similar types of cases, a defendant's passive Web site, accessible in the forum, standing alone, is not sufficient to establish jurisdiction. Also characterizing the defendant's Web site as interactive is not enough. Rather, as in other cases, the court will examine the nature and quality of the defendant's activities conducted over the Internet by which it may be said that the defendant has purposely availed "itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." Hanson, 357 U.S. at 254. The advent of new technology, such as the Internet, should not mark the end of long-held principles of personal jurisdiction. ALS Scan, Inc., 293 F.3d at 712-15. "The Due Process Clause exists, in part, to give "a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." GTE New Media Servs., Inc., 199 F.3d at 1350.

Manton Grier is a member of the Columbia office of Haynwsorth Sinkler Boyd, P.A.

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