In recent months and years, many businesses have rushed to take advantage of the Internet as a means to advertise goods and services. Almost all of the largest United States corporations, and a strong majority of the world's biggest firms, have already posted sites on the World Wide Web.1 And the statistics of 1996's scramble for Internet domain names demonstrates that companies of all sizes have recognized the Internet's potential as a sales and marketing tool, and are rushing to participate.2

As with all fads, innovations, and new media, problems lurk together with the potential. In particular, unexpected legal and jurisdictional pitfalls may face some of the businesses who are now rushing onto the Internet. This article discusses, from the perspective of the incipiency of Internet law in a burst of 1996 decisions, the risk that posting of a business Internet site will be held to subject the business to the jurisdictional power of courts outside the firm's home territory.

One of the most pressing issues for many new Internet advertisers is the extent to which advertising or solicitation of business on the Internet may subject a company to the power of courts in other states, or even other nations. This issue was hotly litigated in 1996 in cases growing out of Internet advertising. The answer given in a series of path-breaking 1996 decisions indicates that posting of an Internet site in connection with the active offering of sales of goods or services will probably subject the advertiser to the jurisdiction of courts anywhere the Internet can be accessed, at least in this country.3

At least 12 reported court decisions rendered during 1996 specifically addressed the Internet jurisdiction issue, and one case and one state Attorney General's statement from 1996 indirectly shed light on the subject.

1. Cases Finding Internet Publishing Sufficient to Establish Jurisdiction in Distant States

Several cases decided in 1996 directly hold that the activities of the defendants in using the Internet made those defendants subject to the jurisdiction of courts outside the defendants' home states.

The first widely noted Internet jurisdiction case involved a criminal obscenity prosecution in Memphis.4 The defendants operated a computer bulletin board system from their home in Milpitas, California. They loaded scanned Graphic Interchange Format (GIF) files of sexually explicit images onto the bulletin board. Initial screens available to anyone who dialed in to the bulletin board described some of the GIF files that were available. A postal inspector in Memphis, Tennessee submitted an application for membership, and received a confirmatory call from one of the defendants, who authorized him to log on with his personal password. Thereafter, the postal inspector dialed the bulletin board's number, logged on, and, using his computer modem in Memphis, downloaded various sexually explicit GIF files. He also ordered videotapes, and engaged in e-mail and chat-mode conversations with one of the defendants.

Defendants in this case, United States v. Thomas, challenged venue in the Western District of Tennessee and stated that the government agent, without their knowledge, accessed and downloaded the GIF files and caused the files to enter Tennessee. The court disagreed, holding that the offense occurred in every district in which the material touched, and, moreover, defendants foresaw that the materials would enter Tennessee:

In the next Internet jurisdiction case, a more routine trademark infringement action, Inset Systems, Inc. v. Instruction Set, Inc.,6 the court found that the defendant had submitted itself to jurisdiction in Connecticut when it advertised continuously over the Internet, which includes at least 10,000 access sites in Connecticut. The defendant also used an 800 number with the allegedly infringing trademark. The court held "that advertising via the Internet is solicitation of a sufficient repetitive nature to satisfy" the Connecticut long-arm statute. In its minimum contacts analysis, the court held:

Later in 1996, a Minnsota trial court followed Inset Systems and held Internet advertising sufficient to support jurisdiction. The decision, State v. Granite City Resorts, Inc.,8 noted that the defendants' Internet advertising pages invited viewers to do business, from their homes, with defendants, which provided gambling services. The court gave short shrift to defendants' objections that their Internet activities did not occur in Minnesota:

The court reviewed access logs obtained from the defendants, which showed extensive regular contacts made by computers located in Minnesota with the defendants' web sites, and it also concluded that defendants had purposefully solicited business with all Internet users, including Minnesota residents. As a result, the court concluded that defendants' activity "certainly arises to the type of promotional activity or active solicitation" necessary for jurisdictional purposes.10

Similarly, in CompuServe Inc. v. Patterson,11 the Sixth Circuit held that CompuServe could obtain jurisdiction in Ohio, its home state, over a party who not only subscribed to CompuServe but also used the service to offer his "shareware" software to prospective customers. Among other things, the defendant had entered into a "Shareware Registration Agreement" with CompuServe, which in turn incorporated other CompuServe form agreements which provided that they were to be governed by Ohio law. Pursuant to these agreements, the defendant electronically transmitted 32 master software files to CompuServe, which displayed them and made them available for downloading. He also advertised his software on the CompuServe system.

When a trademark dispute arose between Patterson and CompuServe, CompuServe sued in Ohio for a declaratory judgment. The district court upheld the defendant's jurisdictional objections, but the Sixth Circuit reversed. The Sixth Circuit began its jurisdictional analysis with a narrow view of the due process limits on jurisdiction, based on modern transportation and communication realities. Initially, it quoted the Supreme Court in World-Wide Volkswagen Corp. v. Woodson,12 which had noted the confluence of the "increasing nationalization of commerce" and "modern transportation and communication," and the resulting relaxation of the limits that the Due Process Clause imposes on courts' jurisdiction. The court stated that today even remote forums were considered easily accessible for the pursuit of both business and litigation. It then noted:

The appeals court concluded, based on Patterson's dealings with CompuServe, his attempted nationwide sites, and significant actual sales in Ohio, that he was subject to jurisdiction in Ohio. He "purposefully contracted — to market a product . . . with Ohio-based CompuServe operating, in effect, as his distribution center."14 His lack of physical presence in Ohio was irrelevant, given his significant mail and electronic links with the state:

* * *

Several other decisions similarly held that publication of advertising and promotional material on the Internet sufficiently supported jurisdiction in the plaintiff's forums. In Maritz, Inc. v. CyberGold, Inc.,16 for example, Judge E. Richard Webber of the United States District Court for the Eastern District of Missouri held that a California-based Web publisher that actively recruited subscribers and advertisers using an automatic reply mechanism had sufficiently actively entered Missouri to be subject to jurisdiction there.

The facts in this trademark infringement case sharply defined the issue. The defendant, CyberGold, Inc., a company which planned to offer a targeted advertising service over the Internet, had at the time of suit no Missouri contact except for its Web page, which essentially promoted the forthcoming service. The Web page was, of course, "continually accessible to every internet-connected computer in Missouri and the world."17 Judge Webber initially indicated that Internet sites were "clearly of a different nature and quality than other means of contact with a forum such as the mass mailing of solicitations into a forum . . . or that of advertising an 800 number in a national publication."18 By this dictum, the court seemed to suggest that Internet advertising was more likely than non-Internet advertising to support jurisdiction.

However, the court's holding focused on (1) exactly what CyberGold was offering through its Web page, and (2) the jurisdictional significance of various kinds of Internet activities. In particular, the court analyzed whether CyberGold's Web site was "passive" or "active," whether it was used in the solicitation of business with Missourians, and whether the trademark infringement and related torts alleged grew out of the Internet activity. Significantly, CyberGold's Web site was viewed as active, rather than passive, because it "automatically and indiscriminately responds to each and every internet user who accesses its website."19 Through this automatic-reply mechanism, CyberGold had sent scores of messages into Missouri. Finally, each message "invites internet users to use CyberGold's new service" and the trademark infringement alleged grew directly out of those messages. Based on these facts, the court found that CyberGold had purposefully availed itself of the privilege of doing business in Missouri and was susceptible to suit there.

Similarly, in Panavision International, L.P., v. Toeppen,20 the court found jurisdiction in California over an individual Illinois resident whose Internet activities were characterized by the court as "running a scam directed at California." The defendant, Toeppen, was an Internet domain-name grabber who laid claim early on to a number of Internet domain names that incorporated well-known trademarks.21 Toeppen's use of the Internet with respect to his "panavision.com" domain name was truly minimal: he posted a Web site at that address which simply displayed aerial views of Pana, Illinois. But the court, focusing on Toeppen's pattern of domain-name claim-staking, viwed this activity (which obviously reached California on the Internet) as directly related to the trademark infringement alleged, and held it sufficient to support jurisdiction in California.

In an Internet defamation case, EDIAS Software International, L.L.C. v. BASIS International Ltd.,22 a European business firm was held amenable to suit in Arizona. The allegedly libelous communications consisted of e-mail messages directed to the defendant's European customers, and a press release posted on a Web page and in a connected interactive electronic forum. The plaintiff argued that these allegedly defamatory Internet communications were sufficient to establish jurisdiction, because it was forseeable that they would harm plaintiff's reputation in Arizona.23 The court agreed, and noted, "BASIS should not be permitted to take advantage of modern technology through an Internet Web page and forum and simultaneously escape traditional notions of jurisdiction."24

In M&B Beverage Corp. v. New York New York Hotel, LLC,25 also a trademark infringement action, the district court found that a national advertising campaign that included an Internet site along with magazine advertisements, a toll-free telephone number, and a mailing list, created jurisdiction in Florida over the Nevada-based advertiser. Part of the court's analysis was based on the nature of the tort alleged, since trademark infringement injury occurs wherever the allegedly infringing mark was used. The court relied as well on the fact that the defendant, like that in Inset Systems, actively solicited sales from customers in the forum state.

In sum, at least eight decisions found Internet activities of varying kinds and degrees sufficient to support jurisdiction.26

2. Cases Finding Internet Publishing Insufficient to Establish Jurisdiction in Distant States.

Three 1996 decisions found Internet activities insufficient to support the jurisdiction of distant courts. One has Missouri origins, and involved a Columbia, Missouri night club, the "Blue Note." In Bensusan Restaurant Corp. v. King,27 a trademark infringement action, the court found that the defendant, the owner of the "Blue Note" nightclub in Columbia, Missouri, did not submit itself to the jurisdiction of the state of New York solely by posting a site on the World Wide Web which promoted that club.

The owner of the Columbia Blue Note posted a site in April 1996 to promote his club. The site contained general information about the Columbia club, a calendar of information, and ticketing information. It also contained a disclaimer, disclaiming any association with the New York Blue Note, and a hyperlink to the New York club's site.

The owner of the New York club (and the federal trademark registration for BLUE NOTE) sued the owner of the Columbia club in the U.S. District Court for the Southern District of New York. The Columbia club contested jurisdiction. In its long-arm analysis, the court focused on whether the Columbia Web site constituted an "offer to sell" goods or services in New York state. In the court's words, "the issue that arises in this action is whether the creation of a Web site, which exists either in Missouri or in cyberspace—i.e., anywhere the Internet exists—with a telephone number to order the allegedly infringing product, is an offer to sell the product in New York."28 In part because no commercial transaction could be consummated over the Internet, the court held that no offer to sell was made in New York:

In its analysis on the prong of the New York long-arm statute that relates to torts committed outside the state that cause injury within it, the court found that the Columbia club did not derive substantial revenue from New York, and did expect the use of its Web pages to have consequences in New York. The Columbia club derived 99% of its revenue from Missouri, and the defendant's claims of losses in New York were purely speculative and conjectural. The court rejected the plaintiff's argument that the Columbia club should have been able to avoid New York jurisdiction only if it had restricted access to its site only to users in Missouri. The court held that "mere foreseeability of an in-state consequence and a failure to avert that consequence is not sufficient to establish personal jurisdiction."30

Finally, in its minimum contacts analysis, the court directly held that posting of an Internet site "without more" cannot suffice under the Constitution as a basis for jurisdiction in any place where that site can be accessed:

One decision declining to find jurisdiction based on Internet publishing addressed an issue of keen interest to many news organizations: whether a local news organization subjects itself to expanded jurisdiction when it posts its contents on the Internet. In Naxos Resources (U.S.A.) Ltd. v. Southam,32 the court held that it did not. There, a Canadian newspaper publisher was sued in California, a state where its circulation was minimal and, according to the court, insufficient to support jurisdiction. The court rejected the plaintiff's invitation to base jurisdiction instead on the publisher's republication of articles on the Internet. The court held:

At least one other decision refused to find Internet activities as sufficient to support jurisdiction. In McDonough v. Fallon McElligott, Inc.,34 a photographer sought to sue a Minnesota advertising agency for copyright infringement, based on the agency's occasional sales to California and its use of a World Wide Web site. Since none of the defendant's alleged California activities gave rise to the plaintiff's action, the court refused to find jurisdiction. With respect to the Internet issue, it held:

Several cases and opinions that do not directly decide Internet jurisdiction issues may shed light on the analysis that may be used in jurisdictional decisions. One unusual case suggests by implication that even activity outside United States borders may be viewed as sufficient to establish jurisdiction within the United States.36 In Playboy Enters., Inc. v. Chuckleberry Publishing, Inc.,37 the court ordered an Italian publisher's Internet page closed to United States residents. Although jurisdiction was not in issue, the decision is instructive on some jurisdictional issues. The case goes back to the early 1980s. Chuckleberry published in Italy a magazine titled PLAYMEN. When Chuckleberry sought to distribute the magazine in the United States, it was enjoined from doing so because of Playboy's United States trademark rights.38

In early 1996, Playboy learned that Chuckleberry had posted an Internet site featuring the PLAYMEN name. The site was available to anyone; specifically, anyone in the United States with Internet access could browse the PLAYMEN Internet site, and even obtain print and electronic copies of sexually explicitly pages of PLAYMEN magazine.39 The court found that the posting of this Internet site violated the 1981 injunction because, even though the Internet was not mentioned in the injunction, "the purpose behind the Injunction was to restrict the ability of Defendant to distribute its product in the United States. . . . . The Injunctions's failure to refer to the Internet by name does not limit its applicability to this new medium. Injunctions entered before the recent explosion of computer technology must continue to have meaning."40

In order to determine that the injunction had been violated, the court had to determine if Chuckleberry had distributed images connected with the mark PLAYMEN in the United States. In assessing "whether uploading pictorial images onto a computer which may be acessed by other users constitutes a °distribution,''' the court engaged in analysis strikingly similar to that used to determine jurisdiction.

First, it noted that the defendant did more than simply provide access to the Internet; it also provided its own content and services on the Internet. Defendant also actively invited downloading of images. Thus, the court concluded, this use of defendant's Internet site constituted a distribution. Second, the court examined whether defendant had distributed its pictorial images in the United States. The Italian publisher here made a unique argument — that it was merely posting pictorial images on a computer server in Italy, rather than distributing those images to anyone within the United States. The magazine argued that a computer operator wishing to view these images must, in effect, transport himself to Italy to view the pictorial displays. It was, the magazine argued, akin to boarding a plane, landing in Italy, and purchasing a copy of PLAYMEN magazine, an activity permitted under Italian law.

The district court rejected defendant's "flying to Italy" analogy:

For these reasons, the court held that it could prohibit Chuckleberry from allowing access of United States citizens to its Italian Web site. The court held that although it could not and would not "prohibit the creation of Internet sites around the globe," it nonetheless had the power to "prohibit access to those sites in this country."42

Another opinion on Internet jurisdiction, of considerably less weight and analysis than the foregoing judicial decisions, originated in 1996 with Minnesota Attorney General Hubert Humphrey III. He issued a "Warning to all Internet Users and Providers."43 This position statement aggressively asserted jurisdiction in Minnesota over all Internet information that is available to any resident of Minnesota.

The Minnesota statement is not long on analysis. It begins by citing (1) a 1980 case in which jurisdiction was upheld where a defendant, standing inside the border of an Indian reservation, fired a rifle across the boundary line at a person outside the border, and (2) a case upholding jurisdiction over newspaper advertisements placed by an Indian tribe which were published in a newspaper circulated throughout the state. With no further discussion of the Internet, the opinion concluded:

As examples of activities which would be illegal in Minnesota, and on Internet sites accessible in Minnesota, the opinion listed gambling, lotteries, sports bookmaking, and placing a bet through Internet gambling organizations. This position statement may be indicative of a desire among some courts to assert jurisdiction over communications activities that enter into their states and appear to challenge the application of local laws.

The message of the first wave of Internet jurisdiction analyses is that Internet activities may well subject the publisher to jurisdiction in another state. Particularly where the Web publisher commits a tort by use of the Internet (Panavision), contracts with an Internet service provider (Compuserve), or actively uses the Net to solicit customers for sales or prospects for future communications (Thomas, Inset, CyberGold and Granite City Resorts), jurisdiction is likely to attach. Where only informational postings are involved (Bensusan) or where the defendant's Internet activities are unrelated to the claim alleged (Fallon McElligott), the Internet activities may not support jurisdiction.

Although Internet law is rife with analogies and similes (the "Information Superhighway"), no particular analogy or image has taken hold. Rather, courts appear to have rejected reliance on any single, simplistic analogy or image. For example, in both Thomas and Chuckleberry the defendants made the argument that in an Internet transaction the user actually travels electronically to the server's jurisdiction and pulls material from the provider's server. The courts in those cases, however, rejected that "invasion by the user" argument. This argument was given more weight, in a different context, in the Communications Decency Act test case, American Civil Liberties Union v. Reno,44 where the court's factual findings stressed that "Communications over the Internet do not `invade' an individual's home or appear on one's computer unbidden. . . . Although content on the Internet is just a few clicks of a mouse away from the user, the receipt of information on the Internet requires a series of affirmative steps more deliberate than merely turning a dial."45 Similarly, although the courts in Inset Systems and Granite City Resorts noted the around-the-clock availability of Internet sites as a fact that tends to make Internet advertising more pervasive than broadcast advertising, other courts did not mention this fact in connection with the jurisdictional analysis.46

Although the totality-of-the-circumstances approach will continue to be used and the jurisdictional outcome will depend on the facts of each case, it seems inevitable that the technological advances of the Internet and other electronic communications will influence courts and their jurisdictional analyses. Many courts have cited World-Wide Volkswagen's directive to consider the changing nature of modern commerce, including the "nationalization of commerce" and availability of "modern transportation and communication."47 These realities do not only shrink normal commercial boundaries; they also make it easier for litigants to handle litigation in distant forums.48 Businesses that actively utilize the broad reach and sophisticated potential of the Internet may find it paricularly difficult to persuade courts that jurisdiction is not proper over them in areas which they reach by the Web. In short, businesses that actively utilize the World Wide Web may well find themselves litigating in the world wide courtroom.

1 See The American Web 100, at http://fox.nstn.ca/~at_info/

w100_uslist.html; The Global Web 100, at http://fox.nstn.ca/

~at_info/w100_globallist.html.

2 See "Holding the Keys to Internet Addresses; As Sole Domain Name Provider, Network Solutions Does Much Business," Washington Post, July 22, 1996 ("Over three years, the number of domain names has grown more than a hundred-fold as the Internet has soared in popularity").

3 This article will focus for convenience only on the "first wave" of cases on Internet jurisdiction — those rendered during 1996. New cases continue to address the issue. E.g., IDS Life Ins. Co. v. SunAmerica, Inc., 1997 U.S. Dist. LEXIS 56 (N.D.Ill. 1997) (use of Internet site for general national advertising held insufficient to establish jurisdiction in Illinois); Cody v. Ward, 1997 U.S. Dist. LEXIS 1496 (D. Conn. 1997) (defendant's use of online service e-mail messages containing fraudulent messages held sufficient to subject defendant to jurisdiction in home forum of victim); Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997) (defendant's conduct of electronic commerce with Pennsylvania residents over the Internet held sufficient for jurisdictional purposes; relying on Compuserve, CyberGold, Bensusan and Inset Systems); Hearst Corp. v. Goldberger, Civil Action No. 96CIV3620 (PKL) (S.D.N.Y. 1997) (Internet advertisement held insufficient to support jurisdiction where advertiser had no present intention to make sales to forum residents).

One important 1997 decision, Digital Equipment Corp. v. Altavista Technology, Inc., 1997 U.S. Dist. LEXIS 3457 (D. Mass. 1997) (finding a series of activities, mostly conducted in cyberspace, sufficient for jurisdiction) began its discussion with the following description of cyberspace:

The Internet has no territorial boundaries. To paraphrase Gertrude Stein, as far as the Internet is concerned, not only is there perhaps "no there there," the "there" is everywhere where there is Internet access. When business is transacted over a computer network via a Web-site accessed by a computer in Massachusetts, it takes place as much in Massachusetts, literally and figuratively, as it does anywhere.

4 United States v. Thomas, 74 F.3d 701 (6th Cir. 1996).

5 Id. at 710.

6 937 F. Supp. 161 (D. Conn. 1996).

7 Id. at 164.

8 1 BNA Elect. Info. Policy & Law Rpt. 919, No. C6-95-7227 (Minn. Dist. Ct. Ramsey County 1966).

9 Id. at 922.

10 Id. at 924.

11 89 F.3d 1257 (6th Cir. 1996).

12 444 U.S. 286, 293 (1980) (quoting McGee v. International Life Ins. Co., 355 U.S. 220, 223 (1957)).

13 89 F.3d 1257 (6th Cir. 1996).

14 Id. at 1263.

15 Id. at 1264, 1268.

16 947 F. Supp. 1328 (E.D. Mo. 1996).

17 Id. at 1330.

18 Id. at 1333. The court noted that the Internet was more efficient, responsive and self-contained than traditional advertising and sales media: "By simply setting up, and posting information at, a website in the form of an advertisement or solicitation, one has done everything necessary to reach the global internet audience."

19 Id.

20 938 F. Supp. 616 (C.D. Cal. 1996).

21 Among his domain name registrations were not only panavision.com but also deltaairlnes.com, flydelta.com, lufthansa.com, northwestairlines.com and eddiebauer.com. Id. at 619.

22 947 F. Supp. 413 (D. Ariz. 1996).

23 Id. at 416. The plaintiff also alleged other grounds for jurisdiction.

24 Id. at 420.

25 ___ F. Supp. ___, No. 96-2481-Civ-Moreno (S.D.Fla. 1996).

26 One end-of-year decision, Heroes, Inc. v. Heroes Found., 1996 U.S. Dist. LEXIS 20660 (D.D.C. 1996), did not take a definitive position on the issue, but appeared to lean toward finding the Internet activities sufficient to support jurisdiction. In this trademark infringement action, the claimed basis for jurisdiction in the District of Columbia was both a Washington Post advertisement employing a defendant's trademark, and the defendant's Internet home page. The court, after reviewing Inset Systems and Bensusan Restaurant Corp. v. King, and concluding that they were inconsistent, opined that the home page "is certainly a sustained contact with the District" and that it appeared to utilize the allegedly infringing trademark in connection with solicitation of contributions. However, the court expressly declined to determine if that Internet contact alone would support jurisdiction, and it based its ruling in favor of jurisdiction on a combination of contacts.

27 937 F. Supp. 295 (S.D.N.Y. 1996).

28 Id. at 299.

29 Id.

30 Id. at 300.

31 Id.

32 24 Media L.Rptr. 2265 (C.D. Calif. 1996).

33 Id. at 2267.

34 40 U.S.P.Q. 2d 1826 (S.D. Cal. 1996).

35 Id.

36 If this holds true, then Internet publishing activities within the United States may be viewed by foreign nations as sufficient to establish jurisdiction of the courts of the foreign country over the United States publisher.

37 939 F.Supp. 1032 (S.D.N.Y. 1996).

38 See Playboy Enters. Inc. v. Chuck- leberry Pub'g Inc., 486 F. Supp. 414 (S.D.N.Y. 1980), and 687 F.2d 563 (2d Cir. 1982).

39 939 F. Supp. at 1035.

40 Id. at 1037.

41 Id. at 1039-40.

42 Id. at 1040.

43 This undated document is posted on the Minnesota attorney general's web site, http://www.ag.state.mn.us/consumer/

news/onlinescams/memo.txt.

44 929 F. Supp. 824 (E.D. Pa. 1996), probable jurisdiction noted, 117 S.Ct. 554 (1996).

45 Id. at 844-45.

46 The court in Inset Systems stated: "[U]nlike hard-copy advertisements noted in the above two cases, which are often quickly disposed of and reach a limited number of potential consumers, Internet advertisements are in electronic printed form so that they can be accessed again and again by many more potential consumers." Inset Sys., 937 F. Supp. at 164.

47 444 U.S. at 293.

48 In Panavision International, L.P. v. Toeppen, the court noted:

"[I]n this era of fax machines and discount air travel," requiring Toeppen to litigate in California is not constitutionally unreasonable. Scher v. Johnson, 911 F.2d 1357, 1365 (9th Cir. 1990); see also, California Soft-ware, 631 F. Supp. at 1363 (noting that "modern means of communication and transportation have tended to diminish the burden of defense of a lawsuit in a distant forum.") (quoting Insurance Co. of N. America v. Marina Salina Cruz, 649 F.2d 1266, 1270 (9th Cir. 1981)).

© 1997, Mark Sableman