Professor Wendy Seltzer, email wendy.seltzer@brooklaw.edu
Who Rules the Net?September 7, 2006
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RYMER, Circuit Judge:
We are asked to hold that the allegedly infringing use of
a service mark in a home page on the World Wide Web suffices
for personal jurisdiction in the state where the holder of the mark has
its principal place of business. Cybersell, Inc., an Arizona corporation that advertises for
commercial services over the Internet, claims that Cybersell, Inc., a Florida corporation that
offers web page construction services over the Internet, infringed its federally registered mark
and should be amenable to suit in Arizona because cyberspace is without borders
and a web site which advertises a product or service is necessarily intended
for use on a world wide basis. The district court disagreed, and so
do we. Instead, applying our normal "minimum contacts" analysis, we conclude that it
would not comport with "traditional notions of fair play and substantial justice," Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1485 (9th Cir. 1993) (quoting
International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945)), for Arizona to exercise personal jurisdiction over an allegedly infringing Florida web site
advertiser who has no contacts with Arizona other than maintaining a home page
that is accessible to Arizonans, and everyone else, over the Internet. We therefore
affirm.
I
Cybersell, Inc. is an Arizona corporation, which we will refer to as Cybersell
AZ. It was incorporated in May 1994 to provide Internet and web advertising
and marketing services, including consulting. The principals of Cybersell AZ are Laurence Canter
and Martha Siegel, known among web users for first "spamming" the Internet. n1
Mainstream print media carried the story of Canter and Siegel and their various
efforts to commercialize the web.
On August 8, 1994, Cybersell AZ filed an application to register the name
"Cybersell" as a service mark. The application was approved and the grant was
published on October 30, 1995. Cybersell AZ operated a web site using the
mark from August 1994 through February 1995. The site was then taken down
for reconstruction.
Meanwhile, in the summer of 1995, Matt Certo and his father, Dr.
Samuel C. Certo, both Florida residents, formed Cybersell, Inc., a Florida corporation (Cybersell
FL), with its principal place of business in Orlando. Matt was a business
school student at Rollins College, where his father was a professor; Matt was
particularly interested in the Internet, and their company was to provide business consulting
services for strategic management and marketing on the web. At the time the
Certos chose the name "Cybersell" for their venture, Cybersell AZ had no home
page on the web nor had the PTO granted their application for the
service mark.
As part of their marketing effort, the Certos created a web page
at http://www.cybsell.com/cybsell/index.htm. The home page has a logo at the top with "CyberSell"
over a depiction of the planet earth, with the caption underneath "Professional Services
for the World Wide Web" and a local (area code 407) phone number.
It proclaims in large letters "Welcome to CyberSell!" A hypertext link allows the
browser to introduce himself, and invites a company not on the web -
but interested in getting on the web - to "Email us to find
out how!"
Canter found the Cybersell FL web page and sent an e-mail on
November 27, 1995 notifying Dr. Certo that "Cybersell" is a service mark of
Cybersell AZ. Trying to disassociate themselves from the Canters, the Certos changed the
name of Cybersell FL to WebHorizons, Inc. on December 27 (later it was
changed again to WebSolvers, Inc.) and by January 4, 1996, they had replaced
the CyberSell logo at the top of their web page with WebHorizons, Inc.
The WebHorizons page still said "Welcome to CyberSell!" …
II
The general principles that apply to the exercise of personal jurisdiction are well
known. As there is no federal statute governing personal jurisdiction in this case,
the law of Arizona applies. Under Rule 4.2(a) of the Arizona Rules of
Civil Procedure, an Arizona court may exercise personal jurisdiction over parties, whether found
within or outside the state, to the maximum extent permitted by the Constitution
of this state and the Constitution of the United States.
The Arizona Supreme Court
has stated that under Rule 4.2(a), "Arizona will exert personal jurisdiction over a
nonresident litigant to the maximum extent allowed by the federal constitution." Uberti v. Leonardo, 892 P.2d 1354, 1358. Thus, Cybersell
FL may be subject to personal jurisdiction in Arizona so long as doing
so comports with due process.
A court may assert either specific or general jurisdiction
over a defendant. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, (1984). Cybersell AZ concedes that general jurisdiction over Cybersell FL
doesn't exist in Arizona, so the only issue in this case is whether specific
jurisdiction is available.
We use a three-part test to determine whether a district
court may exercise specific jurisdiction over a nonresident defendant:
(1) The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections[;] (2) the claim must be one which arises out of or results from the defendant's forum-related activities[; and] (3) exercise of jurisdiction must be reasonable.Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995) (citations omitted).
Cybersell AZ argues that the test is met because trademark infringement
occurs when the passing off of the mark occurs, which in this case,
it submits, happened when the name "Cybersell" was used on the Internet in
connection with advertising. Cybersell FL, on the other hand, contends that a party
should not be subject to nationwide, or perhaps worldwide, jurisdiction simply for using
the Internet.
A
Since the jurisdictional facts are not in dispute, we turn to the first requirement, which is the most critical. As the Supreme Court emphasized in Hanson v. Denckla, "it 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." 357 U.S. 235, 253, (1958). We recently explained in Ballard that
the "purposeful availment" requirement is satisfied if the defendant has taken deliberate action within the forum state or if he has created continuing obligations to forum residents. "It is not required that a defendant be physically present within, or have physical contacts with, the forum, provided that his efforts 'are purposefully directed' toward forum residents."Ballard, 65 F.3d at 1498 (citations omitted).
We have not yet considered when personal jurisdiction may be exercised
in the context of cyberspace, but the Second and Sixth Circuits have had
occasion to decide whether personal jurisdiction was properly exercised over defendants involved in
transmissions over the Internet, see CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996); Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996), aff'd, (2d Cir. 1997), as have a number of
district courts. Because this is a matter of first impression for us, we
have looked to all of these cases for guidance. Not surprisingly, they reflect
a broad spectrum of Internet use on the one hand, and contacts with
the forum on the other. As CompuServe and Bensusan seem to represent opposite
ends of the spectrum, we start with them.
CompuServe is a computer information service headquartered in Columbus, Ohio, that contracts with
individual subscribers to provide access to computing and information services via the Internet.
It also operates as an electronic conduit to provide computer software products to
its subscribers. Computer software generated and distributed in this way is often referred
to as "shareware." Patterson is a Texas resident who subscribed to CompuServe and
placed items of "shareware" on the CompuServe system pursuant to a "Shareware Registration
Agreement" with CompuServe which provided, among other things, that it was "to be
governed by and construed in accordance with" Ohio law. During the course of
this relationship, Patterson electronically transmitted thirty-two master software files to CompuServe, which CompuServe
stored and displayed to its subscribers. Sales were made in Ohio and elsewhere,
and funds were transmitted through CompuServe in Ohio to Patterson in Texas. In
effect, Patterson used CompuServe as a distribution center to market his software. When
Patterson threatened litigation over allegedly infringing CompuServe software, CompuServe filed suit in Ohio
seeking a declaratory judgment of noninfringement. The court found that Patterson's relationship with CompuServe
as a software provider and marketer was a crucial indicator that Patterson had
knowingly reached out to CompuServe's Ohio home and benefitted from CompuServe's handling of
his software and fees. Because Patterson had chosen to transmit his product from
Texas to CompuServe's system in Ohio, and that system provided access to his
software to others to whom he advertised and sold his product, the court
concluded that Patterson purposefully availed himself of the privilege of doing business in
Ohio.
By contrast, the defendant in Bensusan owned a small jazz club known as "The Blue Note" in Columbia, Missouri. He created a general access n5 web page that contained information about the club in Missouri as well as a calendar of events and ticketing information. Tickets were not available through the web site, however. To order tickets, web browsers had to use the names and addresses of ticket outlets in Columbia or a telephone number for charge-by-phone ticket orders, which were available for pick-up on the night of the show at the Blue Note box office in Columbia. Bensusan was a New York corporation that owned "The Blue Note," a popular jazz club in the heart of Greenwich Village. Bensusan owned the rights to the "The Blue Note" mark. Bensusan sued King for trademark infringement in New York. The district court distinguished King's passive web page, which just posted information, from the defendant's use of the Internet in CompuServe by observing that whereas the Texas Internet user specifically targeted Ohio by subscribing to the service, entering into an agreement to sell his software over the Internet, advertising through the service, and sending his software to the service in Ohio,
King has done nothing to purposefully avail himself of the benefits of New York. King, like numerous others, simply created a Web site and permitted anyone who could find it to access it. Creating a site, like placing a product into the stream of commerce, may be felt nationwide-or even worldwide-but, without more, it is not an act purposefully directed toward the forum state.Bensusan, 937 F. Supp. at 301 (citing the plurality opinion in Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102 (1992)). Given these facts, the court reasoned that the argument that the defendant "should have foreseen that users could access the site in New York and be confused as to the relationship of the two Blue Note clubs is insufficient to satisfy due process." 937 F. Supp. at 301.
"Interactive" web sites present
somewhat different issues. Unlike passive sites such as the defendant's in Bensusan, users
can exchange information with the host computer when the site is interactive. Courts
that have addressed interactive sites have looked to the "level of interactivity and
commercial nature of the exchange of information that occurs on the Web site"
to determine if sufficient contacts exist to warrant the exercise of jurisdiction. See,
e.g., Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997) (finding purposeful availment based on Dot Com's interactive web site and contracts
with 3000 individuals and seven Internet access providers in Pennsylvania allowing them to
download the electronic messages that form the basis of the suit); Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328, 1332-33 (E.D. Mo.)
(browsers were encouraged to add their address to a mailing list that basically
subscribed the user to the service), reconsideration denied, 947 F. Supp. 1338 (1996).
Cybersell AZ points to several
district court decisions which it contends have held that the mere advertisement or
solicitation for sale of goods and services on the Internet gives rise to
specific jurisdiction in the plaintiff's forum. However, so far as we are aware,
no court has ever held that an Internet advertisement alone is sufficient to
subject the advertiser to jurisdiction in the plaintiff's home state. See, e.g., Smith v. Hobby Lobby Stores, 968 F. Supp. 1356 (W.D. Ark. 1997) (no
jurisdiction over Hong Kong defendant who advertised in trade journal posted on the
Internet without sale of goods or services in Arkansas). Rather, in each, there
has been "something more" to indicate that the defendant purposefully (albeit electronically) directed
his activity in a substantial way to the forum state.
…In sum, the common thread, well stated by the district court in Zippo,
is that "the likelihood that personal jurisdiction can be constitutionally exercised is directly
proportionate to the nature and quality of commercial activity that an entity conducts
over the Internet." Zippo, 952 F. Supp. at 1124.
B
Here, Cybersell FL has conducted no commercial activity over the
Internet in Arizona. All that it did was post an essentially passive home
page on the web, using the name "CyberSell," which Cybersell AZ was in
the process of registering as a federal service mark. While there is no
question that anyone, anywhere could access that home page and thereby learn about
the services offered, we cannot see how from that fact alone it can
be inferred that Cybersell FL deliberately directed its merchandising efforts toward Arizona residents.
Cybersell FL did nothing to encourage people in Arizona to access its site,
and there is no evidence that any part of its business (let alone
a continuous part of its business) was sought or achieved in Arizona. To
the contrary, it appears to be an operation where business was primarily generated
by the personal contacts of one of its founders. While those contacts are
not entirely local, they aren't in Arizona either. No Arizonan except for Cybersell
AZ "hit" Cybersell FL's web site. There is no evidence that any Arizona
resident signed up for Cybersell FL's web construction services. It entered into no
contracts in Arizona, made no sales in Arizona, received no telephone calls from
Arizona, earned no income from Arizona, and sent no messages over the Internet
to Arizona. The only message it received over the Internet from Arizona was
from Cybersell AZ. Cybersell FL did not have an "800" number, let alone
a toll-free number that also used the "Cybersell" name. The interactivity of its
web page is limited to receiving the browser's name and address and an
indication of interest - signing up for the service is not an option,
nor did anyone from Arizona do so. No money changed hands on the
Internet from (or through) Arizona. In short, Cybersell FL has done no act
and has consummated no transaction, 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.
We therefore hold that Cybersell FL's
contacts are insufficient to establish "purposeful availment." Cybersell AZ has thus failed to
satisfy the first prong of our three-part test for specific jurisdiction. We decline
to go further solely on the footing that Cybersell AZ has alleged trademark
infringement over the Internet by Cybersell FL's use of the registered name "Cybersell"
on an essentially passive web page advertisement. Otherwise, every complaint arising out of
alleged trademark infringement on the Internet would automatically result in personal jurisdiction wherever
the plaintiff's principal place of business is located. That would not comport with
traditional notions of what qualifies as purposeful activity invoking the benefits and protections
of the forum state. See Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985) (series of phone calls and letters to California physician
regarding plaintiff's injuries insufficient to satisfy first prong of test).
III
Cybersell AZ also invokes
the "effects" test employed in Calder v. Jones, 465 U.S. 783 (1984), and Core-Vent Corp. v. Nobel Industries, 11 F.3d 1482 (9th Cir. 1993), with respect to intentional torts directed to
the plaintiff, causing injury where the plaintiff lives. However, we don't see this
as a Calder case. Because Shirley Jones was who she was (a famous
entertainer who lived and worked in California) and was libeled by a story
in the National Enquirer, which was published in Florida but had a nationwide
circulation with a large audience in California, the Court could easily hold that
California was the "focal point both of the story and of the harm
suffered" and so jurisdiction in California based on the "effects" of the defendants'
Florida conduct was proper. Calder, 465 U.S. at 789. There is nothing comparable about Cybersell FL's web page.
Nor does the "effects" test apply with the same force to Cybersell AZ
as it would to an individual, because a corporation "does not suffer harm
in a particular geographic location in the same sense that an individual does."
Core-Vent, 11 F.3d at 1486. Cybersell FL's web page simply was not aimed intentionally at Arizona knowing that
harm was likely to be caused there to Cybersell AZ.
IV
We conclude that the essentially passive nature of Cybersell FL's activity in posting
a home page on the World Wide Web that allegedly used the service
mark of Cybersell AZ does not qualify as purposeful activity invoking the benefits
and protections of Arizona. As it engaged in no commercial activity and had
no other contacts via the Internet or otherwise in Arizona, Cybersell FL lacks sufficient
minimum contacts with Arizona for personal jurisdiction to be asserted over it there.
Accordingly, its motion to dismiss for lack of personal jurisdiction was properly granted.
AFFIRMED.
This is an Internet domain name dispute. At this stage of
the controversy, we must decide the Constitutionally permissible reach of Pennsylvania's Long Arm
Statute, 42 Pa.C.S.A. § 5322, through cyberspace. Plaintiff Zippo Manufacturing Corporation ("Manufacturing") has filed a five
count complaint against Zippo Dot Com, Inc. ("Dot Com") alleging trademark dilution, infringement,
and false designation under the Federal Trademark Act, 15 U.S.C. § § 1051-1127. In addition, the Complaint
alleges causes of action based on state law trademark dilution under 54 Pa.C.S.A. § 1124, and seeks
equitable accounting and imposition of a constructive trust. Dot Com has moved to
dismiss for lack of personal jurisdiction and improper venue pursuant to Fed.R.Civ.P 12(b)(2) and (3)
or, in the alternative, to transfer the case pursuant to 28 U.S.C. § 1406(a). For the
reasons set forth below, Defendant's motion is denied.
I. BACKGROUND
The facts relevant to this
motion are as follows. Manufacturing is a Pennsylvania corporation with its principal place
of business in Bradford, Pennsylvania. Manufacturing makes, among other things, well known "Zippo"
tobacco lighters. Dot Com is a California corporation with its principal place of
business in Sunnyvale, California. Dot Com operates an Internet Web site and an
Internet news service and has obtained the exclusive right to use the domain
names "zippo.com", "zippo.net" and "zipponews.com" on the Internet.
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n Dot
Com has registered these domain names with Network Solutions, Inc. which has contracted
with the National Science Foundation to provide registration services for Internet domain names.
Once a domain name is registered to one user, it may not be
used by another.
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- End Footnotes- - - - - - - - - - -
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Dot Com's Web site contains information about the company, advertisements and
an application for its Internet news service. The news service itself consists of
three levels of membership - public/free, "Original" and "Super." Each successive level offers
access to a greater number of Internet newsgroups. A customer who wants to subscribe
to either the "Original" or "Super" level of service, fills out an on-line
application that asks for a variety of information including the person's name and
address. Payment is made by credit card over the Internet or the telephone.
The application is then processed and the subscriber is assigned a password which
permits the subscriber to view and/or download Internet newsgroup messages that are stored
on the Defendant's server in California.
Dot Com's contacts with Pennsylvania have occurred almost
exclusively over the Internet. Dot Com's offices, employees and Internet servers are located
in California. Dot Com maintains no offices, employees or agents in Pennsylvania. Dot
Com's advertising for its service to Pennsylvania residents involves posting information about its
service on its Web page, which is accessible to Pennsylvania residents via the
Internet. Defendant has approximately 140,000 paying subscribers worldwide. Approximately two percent (3,000) of
those subscribers are Pennsylvania residents. These subscribers have contracted to receive Dot Com's
service by visiting its Web site and filling out the application. Additionally, Dot
Com has entered into agreements with seven Internet access providers in Pennsylvania to
permit their subscribers to access Dot Com's news service. Two of these providers
are located in the Western District of Pennsylvania.
The basis of the trademark claims
is Dot Com's use of the word "Zippo" in the domain names it
holds, in numerous locations in its Web site and in the heading of
Internet newsgroup messages that have been posted by Dot Com subscribers. When an
Internet user views or downloads a newsgroup message posted by a Dot Com
subscriber, the word "Zippo" appears in the "Message-Id" and "Organization" sections of the
heading. n4 The news message itself, containing text and/or pictures, follows. Manufacturing points
out that some of the messages contain adult oriented, sexually explicit subject matter….
III.
DISCUSSION
A. Personal Jurisdiction
1. The Traditional Framework
Our authority to exercise personal jurisdiction in this
case is conferred by state law. Fed.R.Civ.P. 4(e); Mellon, 960 F.2d at 1221. The extent to which we may
exercise that authority is governed by the Due Process Clause of the Fourteenth
Amendment to the Federal Constitution. Kulko v. California Supreme Court, 436 U.S. 84, 91 (1978).
Pennsylvania's long arm jurisdiction statute is codified at
42 Pa.C.S.A. § 5322(a). The portion of the statute authorizing us to exercise jurisdiction here permits
the exercise of jurisdiction over non-resident defendants upon:
(2) Contracting to supply services or things in this Commonwealth.
42 Pa.C.S.A. § 5322(a). It is undisputed that Dot Com contracted to supply Internet news services
to approximately 3,000 Pennsylvania residents and also entered into agreements with seven Internet
access providers in Pennsylvania. Moreover, even if Dot Com's conduct did not satisfy
a specific provision of the statute, we would nevertheless be authorized to exercise
jurisdiction to the "fullest extent allowed under the Constitution of the United States."
42 Pa.C.S.A. § 5322(b).
The Constitutional limitations on the exercise of personal jurisdiction differ depending upon whether
a court seeks to exercise general or specific jurisdiction over a non-resident defendant.
… Manufacturing does not contend that we should exercise general personal jurisdiction over Dot
Com. Manufacturing concedes that if personal jurisdiction exists in this case, it must
be specific.
A three-pronged test has emerged for determining whether the exercise of specific
personal jurisdiction over a non-resident defendant is appropriate: (1) the defendant must have
sufficient "minimum contacts" with the forum state, (2) the claim asserted against the
defendant must arise out of those contacts, and (3) the exercise of jurisdiction
must be reasonable. Id. The "Constitutional touchstone" of the minimum contacts analysis is
embodied in the first prong, "whether the defendant purposefully established" contacts with the forum
state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (citing International Shoe Co. v. Washington, 326 U.S. 310 (1945)). Defendants who "'reach out beyond one state' and create continuing relationships
and obligations with the citizens of another state are subject to regulation and
sanctions in the other State for consequences of their actions." Id. (citing Travelers Health Assn. v. Virginia, 339 U.S. 643, 647 (1950)). "The
foreseeability that is critical to the due process analysis is ... that the
defendant's conduct and connection with the forum State are such that he should
reasonably expect to be haled into court there." World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980). This protects defendants from being
forced to answer for their actions in a foreign jurisdiction based on "random,
fortuitous or attenuated" contacts. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984). "Jurisdiction is proper, however, where contacts proximately result from
actions by the defendant himself that create a 'substantial connection' with the forum
State." Burger King, 471 U.S. at 475 (citing McGee v. International Life Insurance Co., 355 U.S. 220, 223 (1957)).
The "reasonableness" prong exists to protect defendants against unfairly inconvenient litigation.
World Wide Volkswagen, 444 U.S. at 292. Under this prong, the exercise of jurisdiction will be reasonable if it does
not offend "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316. When determining the
reasonableness of a particular forum, the court must consider the burden on the
defendant in light of other factors including: "the forum state's interest in adjudicating
the dispute; the plaintiff's interest in obtaining convenient and effective relief, at least
when that interest is not adequately protected by the plaintiff's right to choose
the forum; the interstate judicial system's interest in obtaining the most efficient resolution
of controversies; and the shared interest of the several states in furthering fundamental
substantive social policies." World Wide Volkswagen, 444 U.S. at 292 (internal citations omitted).
2. The Internet and Jurisdiction
In Hanson v. Denckla,
the Supreme Court noted that "as technological progress has increased the flow of
commerce between States, the need for jurisdiction has undergone a similar increase." Hanson v. Denckla, 357 U.S. 235, 250-51 (1958). Twenty
seven years later, the Court observed that jurisdiction could not be avoided "merely
because the defendant did not physically enter the forum state. Burger King, 471 U.S. at 476. The Court observed
that:
It is an inescapable fact of modern commercial life that a substantial amount
of commercial business is transacted solely by mail and wire communications across state
lines, thus obviating the need for physical presence within a State in which
business is conducted.
Id.
Enter the Internet, a global "'super-network' of over 15,000 computer networks used by
over 30 million individuals, corporations, organizations, and educational institutions worldwide." Panavision Intern., L.P. v. Toeppen, 938 F. Supp. 616 (S.D.Cal. 1996) (citing American Civil Liberties Union v. Reno, 929 F. Supp. 824, 830-48 (E.D.Pa. 1996). "In recent
years, businesses have begun to use the Internet to provide information and products
to consumers and other businesses." Id. The Internet makes it possible to conduct
business throughout the world entirely from a desktop. With this global revolution looming
on the horizon, the development of the law concerning the permissible scope of
personal jurisdiction based on Internet use is in its infant stages. The cases
are scant. Nevertheless, our review of the available cases and materials reveals that
the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to
the nature and quality of commercial activity that an entity conducts over the
Internet. This sliding scale is consistent with well developed personal jurisdiction principles. At
one end of the spectrum are situations where a defendant clearly does business
over the Internet. If the defendant enters into contracts with residents of a
foreign jurisdiction that involve the knowing and repeated transmission of computer files over
the Internet, personal jurisdiction is proper. E.g. Compuserve, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996). At the opposite end are
situations where a defendant has simply posted information on an Internet Web site
which is accessible to users in foreign jurisdictions. A passive Web site that
does little more than make information available to those who are interested in
it is not grounds for the exercise personal jurisdiction. E.g. Bensusan Restaurant Corp., v. King, 937 F. Supp. 295 (S.D.N.Y. 1996). The middle ground
is occupied by interactive Web sites where a user can exchange 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 Web site. E.g. Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D.Mo. 1996). …
3. Application to this Case
First, we
note that this is not an Internet advertising case in the line of
Inset Systems and Bensusan, supra. Dot Com has not just posted information on a Web
site that is accessible to Pennsylvania residents who are connected to the Internet.
This is not even an interactivity case in the line of Maritz, supra. Dot Com
has done more than create an interactive Web site through which it exchanges
information with Pennsylvania residents in hopes of using that information for commercial gain
later. We are not being asked to determine whether Dot Com's Web site
alone constitutes the purposeful availment of doing business in Pennsylvania. This is a
"doing business over the Internet" case in the line of Compuserve, supra.. We are being
asked to determine whether Dot Com's conducting of electronic commerce with Pennsylvania residents
constitutes the purposeful availment of doing business in Pennsylvania. We conclude that it
does. Dot Com has contracted with approximately 3,000 individuals and seven Internet access
providers in Pennsylvania. The intended object of these transactions has been the downloading
of the electronic messages that form the basis of this suit in Pennsylvania.
We
find Dot Com's efforts to characterize its conduct as falling short of purposeful
availment of doing business in Pennsylvania wholly unpersuasive. At oral argument, Defendant repeatedly
characterized its actions as merely "operating a Web site" or "advertising." Dot Com
also cites to a number of cases from this Circuit which, it claims,
stand for the proposition that merely advertising in a forum, without more, is
not a sufficient minimal contact. This argument is misplaced. Dot Com has done
more than advertise on the Internet in Pennsylvania. Defendant has sold passwords to
approximately 3,000 subscribers in Pennsylvania and entered into seven contracts with Internet access
providers to furnish its services to their customers in Pennsylvania.
Dot Com also contends
that its contacts with Pennsylvania residents are "fortuitous" within the meaning of World Wide Volkswagen, 444 U.S. 286 (1980). Defendant
argues that it has not 'actively' solicited business in Pennsylvania and that any
business it conducts with Pennsylvania residents has resulted from contacts that were initiated
by Pennsylvanians who visited the Defendant's Web site. The fact that Dot Com's
services have been consumed in Pennsylvania is not "fortuitous" within the meaning of
World Wide Volkswagen. In World Wide Volkswagen, a couple that had purchased a
vehicle in New York, while they were New York residents, were injured while
driving that vehicle through Oklahoma and brought suit in an Oklahoma state court.
World Wide Volkswagen, 444 U.S. at 288. The manufacturer did not sell its vehicles in Oklahoma and had not made
an effort to establish business relationships in Oklahoma. Id. at 295. The Supreme Court characterized the
manufacturer's ties with Oklahoma as fortuitous because they resulted entirely out the fact
that the plaintiffs had driven their car into that state. Id.
Here, Dot Com
argues that its contacts with Pennsylvania residents are fortuitous because Pennsylvanians happened to
find its Web site or heard about its news service elsewhere and decided
to subscribe. This argument misconstrues the concept of fortuitous contacts embodied in World
Wide Volkswagen. Dot Com's contacts with Pennsylvania would be fortuitous within the meaning
of World Wide Volkswagen if it had no Pennsylvania subscribers and an Ohio
subscriber forwarded a copy of a file he obtained from Dot Com to
a friend in Pennsylvania or an Ohio subscriber brought his computer along on
a trip to Pennsylvania and used it to access Dot Com's service. That
is not the situation here. Dot Com repeatedly and consciously chose to process
Pennsylvania residents' applications and to assign them passwords. Dot Com knew that the
result of these contracts would be the transmission of electronic messages into Pennsylvania.
The transmission of these files was entirely within its control. Dot Com cannot
maintain that these contracts are "fortuitous" or "coincidental" within the meaning of World
Wide Volkswagen. When a defendant makes a conscious choice to conduct business with
the residents of a forum state, "it has clear notice that it is
subject to suit there." World Wide Volkswagen, 444 U.S. at 297. Dot Com was under no obligation to sell its
services to Pennsylvania residents. It freely chose to do so, presumably in order
to profit from those transactions. If a corporation determines that the risk of
being subject to personal jurisdiction in a particular forum is too great, it
can choose to sever its connection to the state. Id. If Dot Com
had not wanted to be amenable to jurisdiction in Pennsylvania, the solution would
have been simple - it could have chosen not to sell its services
to Pennsylvania residents.
Next, Dot Com argues that its forum-related activities are not numerous
or significant enough to create a "substantial connection" with Pennsylvania. Defendant points to
the fact that only two percent of its subscribers are Pennsylvania residents. However,
the Supreme Court has made clear that even a single contact can be
sufficient. McGee, 355 U.S. at 223. The test has always focused on the "nature and quality" of the
contacts with the forum and not the quantity of those contacts. International Shoe, 326 U.S. at 320. The Sixth
Circuit also rejected a similar argument in Compuserve when it wrote that the
contacts were "deliberate and repeated even if they yielded little revenue." Compuserve, 89 F.3d at 1265.
We also
conclude that the cause of action arises out of Dot Com's forum-related conduct
in this case. The Third Circuit has stated that "a cause of action
for trademark infringement occurs where the passing off occurs." Cottman Transmission Systems Inc. v. Martino, 36 F.3d 291, 294 (citing Tefal, S.A. v. Products Int'l Co., 529 F.2d 495, 496 n.1 (3d Cir. 1976); Indianapolis Colts v. Metro. Baltimore Football, 34 F.3d 410 (7th Cir. 1994). In Tefal, the
maker and distributor of T-Fal cookware sued a partnership of California corporations in
the District of New Jersey for trademark infringement. Tefal, 529 F.2d at 496. The defendants objected to venue
in New Jersey, arguing that the contested trademark accounted for only about five
percent of national sales. Id. On appeal, the Third Circuit concluded that since
substantial sales of the product bearing the allegedly infringing mark took place in
New Jersey, the cause of action arose in New Jersey and venue was
proper. Tefal, 529 F.2d at 496-97.
In Indianapolis Colts, also case cited by the Third Circuit in Cottman,
an Indiana National Football League franchise sued a Maryland Canadian Football League franchise
in the Southern District of Indiana, alleging trademark infringement. Indianapolis Colts, 34 F.3d at 411. On appeal, the Seventh
Circuit held that personal jurisdiction was appropriate in Indiana because trademark infringement is
a tort-like injury and a substantial amount of the injury from the alleged
infringement was likely to occur in Indiana.' Id. at 412.
In the instant case, both a
significant amount of the alleged infringement and dilution, and resulting injury have occurred
in Pennsylvania. The object of Dot Com's contracts with Pennsylvania residents is the
transmission of the messages that Plaintiff claims dilute and infringe upon its trademark.
When these messages are transmitted into Pennsylvania and viewed by Pennsylvania residents on
their computers, there can be no question that the alleged infringement and dilution
occur in Pennsylvania. Moreover, since Manufacturing is a Pennsylvania corporation, a substantial amount
of the injury from the alleged wrongdoing is likely to occur in Pennsylvania.
Thus, we conclude that the cause of action arises out of Dot
Com's forum-related activities under the authority of both Tefal and Indianapolis Colts, supra.
Finally,
Dot Com argues that the exercise of jurisdiction would be unreasonable in this
case. We disagree. There can be no question that Pennsylvania has a strong
interest in adjudicating disputes involving the alleged infringement of trademarks owned by resident
corporations. We must also give due regard to the Plaintiff's choice to seek
relief in Pennsylvania. Kulko, 436 U.S. at 92. These concerns outweigh the burden created by forcing the Defendant
to defend the suit in Pennsylvania, especially when Dot Com consciously chose to
conduct business in Pennsylvania, pursuing profits from the actions that are now in
question. The Due Process Clause is not a "territorial shield to interstate obligations
that have been voluntarily assumed." Burger King, 471 U.S. at 474. …
IV. CONCLUSION
We conclude that this Court may appropriately exercise
personal jurisdiction over the Defendant and that venue is proper in this judicial
district. An appropriate order follows.
A majority of the en banc court (Judge W.A. Fletcher, joined
by Chief Judge Schroeder and Judges Hawkins, Fisher, Gould, Paez, Clifton, and Bea)
concludes that the district court had personal jurisdiction over the defendants. Of that majority,
three judges (Chief Judge Schroeder, and Judges W.A. Fletcher and Gould) conclude that
the action should be dismissed for lack of ripeness. Five judges (Judge Fisher,
joined by Judges Hawkins, Paez, Clifton, and Bea) conclude that the case is
ripe for adjudication. The three remaining judges (Judges Ferguson, O'Scannlain, and Tashima) conclude
that the action should be dismissed because the district court lacked personal jurisdiction
over the defendants.
A majority of the en banc court having voted therefor, the
judgment of the district court is REVERSED and the case REMANDED with directions
to dismiss the action without prejudice.
W. FLETCHER, Circuit Judge, with whom SCHROEDER, Chief
Circuit Judge, and GOULD, Circuit Judge, join as to the entire opinion, and
with whom HAWKINS, FISHER, PAEZ, CLIFTON and BEA, Circuit Judges, join as to
Parts I and II:
…
I. Background
Yahoo! is a Delaware corporation with its principal place
of business in California. Through its United States-based website yahoo.com, Yahoo! makes available
a variety of Internet services, including a search engine, e-mail, web page hosting,
instant messaging, auctions, and chat rooms. While some of these services rely on
content created by Yahoo!, others are forums and platforms for user-generated content. Yahoo!
users can, for example, design their own web pages, share opinions on social
and political message boards, play fantasy baseball games, and post items to be
auctioned for sale. Yahoo! does not monitor such user-created content before it is
posted on the web through Yahoo! sites.
Yahoo!'s United States website is written in
English. It targets users in the United States and relies on servers located
in California. Yahoo!'s foreign subsidiaries, such as Yahoo! France, Yahoo! U.K., and Yahoo!
India, have comparable websites for their respective countries. The Internet addresses of these
foreign-based websites contain their two-letter country designations, such as fr.yahoo.com, uk.yahoo.com, and in.yahoo.com.
Yahoo!'s foreign subsidiaries' sites provide content in the local language, target local citizens,
and adopt policies that comply with local law and customs. In actual practice,
however, national boundaries are highly permeable. For example, any user in the United
States can type www.fr.yahoo.com into his or her web browser and thereby reach Yahoo!
France's website. Conversely, any user in France can type www.yahoo.com into his or her
browser, or click the link to Yahoo.com on the Yahoo! France home page,
and thereby reach yahoo.com.
Sometime in early April 2000, LICRA's chairman sent by mail and fax a cease and desist letter, dated April 5, 2000, to Yahoo!'s headquarters in Santa Clara, California. The letter, written in English, stated in part:
We are particularly choked [sic] to see that your Company keeps on presenting every day hundreds of nazi symbols or objects for sale on the Web.On April 10, five (rather than eight) days after the date on the letter, LICRA filed suit against Yahoo! and Yahoo! France in the Tribunal de Grande Instance de Paris. On April 20, UEJF joined LICRA's suit in the French court. LICRA and UEJF used United States Marshals to serve process on Yahoo! in California.
This practice is illegal according to French legislation and it is incumbent upon you to stop it, at least on the French Territory.
Unless you cease presenting nazi objects for sale within 8 days, we shall size [sic] the competent jurisdiction to force your company to abide by the law.
After a hearing on May 15, 2000, the French court issued
an "interim" order on May 22 requiring Yahoo! to "take all necessary measures
to dissuade and render impossible any access [from French territory] via Yahoo.com to
the Nazi artifact auction service and to any other site or service that
may be construed as constituting an apology for Nazism or a contesting of
Nazi crimes" (emphasis added). Among other things, the French court required Yahoo! to
take particular specified actions "by way of interim precautionary measures." Yahoo! was required
"to cease all hosting and avail-ability in the territory of [France] from the
'Yahoo.com' site . . . of messages, images and text relating to Nazi
objects, relics, insignia, emblems and flags, or which evoke Nazism," and of "Web
pages displaying text, extracts, or quotes from 'Mein Kampf' and the '[Protocols of
the Elders of Zion]'" at two specified Internet addresses. Yahoo! was further required
to remove from "all browser directories accessible in the territory of the French
Republic" the "index heading entitled 'negationists'" and any link "bringing together, equating, or
presenting directly or indirectly as equivalent" sites about the Holocaust and sites by
Holocaust deniers.
The May 22 interim order required Yahoo! France (as distinct from Yahoo!)
to remove the "negationists" index heading and the link to negationist sites, described
above, from fr.yahoo.com. The order further required Yahoo! France to post a warning
on fr.yahoo.com stating to any user of that website that, in the event
the user accessed prohibited material through a search on Yahoo.com, he or she must
"desist from viewing the site concerned[,] subject to imposition of the penalties provided
in French legislation or the bringing of legal action against him."
The order stated
that both Yahoo! and Yahoo! France were subject to a penalty of 100,000
Euros per day of delay or per confirmed violation, and stated that the
"possibility of liquidation of the penalties thus pronounced" was "reserved." The order also
awarded 1 Franc in "provisional damages," payable by Yahoo! and Yahoo! France to
UEJF, and awarded an additional 1 Franc against Yahoo! and Yahoo! France for
expenses under Article 700 of the New Code of Civil Procedure. The French
court also awarded 10,000 Francs against Yahoo! for expenses under Article 700, payable
to LICRA, and 10,000 Francs each against Yahoo! and Yahoo! France under Article
700 (a total of 20,000 Francs), payable to UEJF.
Yahoo! objected to the May
22 order. It contended, among other things, that "there was no technical solution
which would enable it to comply fully with the terms of the court
order." (Emphasis added.) In response, the French court obtained a written report from
three experts. The report concluded that under current conditions approximately 70% of Yahoo! users
operating from computer sites in France could be identified. The report specifically noted
that Yahoo! already used such identification of French users to display advertising banners
in French. The 70% number applied irrespective of whether a Yahoo! user sought
access to an auction site, or to a site denying the existence of
the Holocaust or constituting an apology for Nazism.
With respect to auction sites, the
report concluded that it would be possible to identify additional users. Two out
of the three experts concluded that approximately an additional 20% of users seeking
access to auction sites offering Nazi-related items for sale could be identified through
an honor system in which the user would be asked to state his
or her nationality. In all, the two experts estimated that almost 90% of
such auction site users in France could be identified: "The combination of the
two procedures, namely geographical identification of the IP address and declaration of nationality,
would be likely to achieve a filtering success rate approaching 90%." The third
expert expressed doubts about the number of additional users of the auction site
who would respond truthfully under the honor system. He did not, however, specify
an alternative number of users -- say, 15% or 10% -- who would
respond truthfully.
With respect to sites denying the existence of the Holocaust or constituting
an apology for Nazism, the report was not able to "propose suitable and
effective technical solutions" because no "grievance" against those sites had been made with
"sufficient precision." In consequence, as to these non-auction sites, the report did not
estimate how many Yahoo! users above the base 70% number could be identified
by an honor system.
In a second interim order, issued on November 20, 2000,
the French court reaffirmed its May 22 order and directed Yahoo! to comply
within three months, "subject to a penalty of 100,000 Francs per day of
delay effective from the first day following expiry of the 3 month period."
(The May 22 order had specified a penalty of 100,000 Euros rather than
100,000 Francs.) The court "reserved the possible liquidation of the penalty" against Yahoo!.
The French court's November 20 order required Yahoo! France (as distinct from Yahoo!)
to display "a warning to surfers even before they have made use of
the link to Yahoo.com, to be brought into effect within 2 months following notification
of the present order." However, the French court found "that YAHOO FRANCE has
complied in large measure with the spirit and letter of the order of
22nd May 2000[.]" (Emphasis added.)
The November 20 order required Yahoo! to pay 10,000
Francs for a report, to be prepared in the future by one of
the experts previously appointed by the court, to determine whether Yahoo! was in
compliance with the court's orders. It also awarded a total of 20,000 Francs
against Yahoo! for expenses under Article 700, payable to LICRA and UEJF, and
an unspecified amount of costs against Yahoo!, payable to LICRA and UEJF. The
court specifically stated that it was not awarding any expenses or costs against
Yahoo! France (which it had found to have complied "in large measure" with
its order). LICRA and UEJF used United States Marshals to serve both orders
on Yahoo! in Santa Clara, California.
Yahoo! did not pursue appeals of either interim
order.
The French court has not imposed any penalty on Yahoo! for violations of
the May 22 or November 20 orders. Nor has either LICRA or UEJF
returned to the French court to seek the imposition of a penalty. Both
organizations affirmatively represent to us that they have no intention of doing so
if Yahoo! maintains its current level of compliance. Yet neither organization is willing
to ask the French court to vacate its orders. As LICRA and UEJF's
counsel made clear at oral argument, "My clients will not give up the
right to go to France and enforce the French judgment against Yahoo! in
France if they revert to their old ways and violate French law."
The record
reveals that the French "public prosecutor" participated in the proceedings against Yahoo! and
Yahoo! France in the French court, but it does not reveal whether he
has the authority to seek a penalty against Yahoo! under the interim orders,
either on his own or pursuant to a request by LICRA and/or UEJF.
The public prosecutor was not made a party to the suit in the
district court, and has made no appearance in the district court or on
appeal to this court. If LICRA, UEJF, or the public prosecutor were to
seek the imposition of a penalty by the French court pursuant to the
interim orders, that court would have to determine the extent of Yahoo!'s violation,
if any, of the orders, as well as the amount of any penalty,
before an award of a penalty could be entered.
On December 21, 2000, Yahoo!
filed suit against LICRA and UEJF in federal district court, seeking a declaratory
judgment that the interim orders of the French court are not recognizable or
enforceable in the United States. Subject matter jurisdiction is based solely on diversity
of citizenship. 28 U.S.C. § 1332(a)(2). In a thoughtful opinion, the district court concluded that it
had personal jurisdiction over LICRA and UEJF. et l'Yahoo! Inc. v. La Ligue Contre le Racisme Yahoo! Inc., 145 F. Supp. 2d 1168, 1180 (N.D. Cal. 2001). Several months later, in
another thoughtful opinion, the district court concluded that the suit was ripe, that
abstention was not warranted, and that "the First Amendment precludes enforcement within the
United States." Yahoo!, Inc. v. La Ligue Contre le Racisme et L'Antisemitisme, 169 F. Supp. 2d 1181, 1194 (N.D. Cal. 2001).
In early 2001, after both interim orders had been entered by
the French court, and after Yahoo! had filed suit in federal district court,
Yahoo! adopted a new policy prohibiting use of auctions or classified advertisements on
Yahoo.com "to offer or trade in items that are associated with or could
be used to promote or glorify groups that are known principally for hateful
and violent positions directed at others based on race or similar factors." Yahoo!
has represented, in this court and elsewhere, that its new policy has not
been adopted in response to the French court's orders, but rather for independent
reasons. Yahoo's new policy eliminates much of the conduct prohibited by the French
orders. However, after conducting its own Internet research on yahoo.com, the district court
found that even after this policy change, Yahoo! "appear[s]" not to have fully
complied with the orders with respect to its auction site. 169 F. Supp. 2d at 1185. For example,
the district court found that Yahoo! continued to allow the sale of items
such as a copy of Mein Kampf and stamps and coins from the
Nazi period on which the swastika is depicted. Id. The district court also
found that access was available through yahoo.com to various sites in response to
searches such as "Holocaust/5 did not happen." Id.
It matters not, in this case, whether par (i) of the rule applied. It
follows from the fact that par (j) was satisfied that the jurisdiction of the
Supreme Court of Victoria was regularly invoked by service of the proceeding on
Dow Jones. Was Victoria, nevertheless, a clearly inappropriate forum? Dow Jones contended that
Victoria was a clearly inappropriate forum because the substantive issues to be tried
would be governed by the laws of one of the States of the
United States. Although reluctant, at first, to identify whether the state whose laws
applied was New Jersey or New York, in the end Dow Jones submitted
that the defamation had occurred in New Jersey and that the substantive issues
in the proceeding were, therefore, to be governed by the law of that
State.
As has been noted earlier, Mr Gutnick has sought to confine his claim in
the Supreme Court of Victoria to the damage he alleges was caused to
his reputation in Victoria as a consequence of the publication that occurred in
that State. The place of commission of the tort for which Mr Gutnick sues
is then readily located as Victoria. That is where the damage to his
reputation of which he complains in this action is alleged to have occurred,
for it is there that the publications of which he complains were comprehensible
by readers. It is his reputation in that State, and only that State,
which he seeks to vindicate. It follows, of course, that substantive issues arising
in the action would fall to be determined according to the law of
Victoria. But it also follows that Mr Gutnick's claim was thereafter a claim for
damages for a tort committed in Victoria, not a claim for damages for
a tort committed outside the jurisdiction. There is no reason to conclude that
the primary judge erred in the exercise of his discretion to refuse to
stay the proceeding.
Actions for publications in several places
More difficult questions may arise if complaint were to be made for an
injury to reputation which is said to have occurred as a result of
publications of defamatory material in a number of places. For the reasons given
earlier, in resolving those difficulties, it may be necessary to distinguish between cases
where the complaint is confined to publications made in Australia, but in different
States and Territories, and cases where publication is alleged to have occurred outside
Australia, either with or without publication within Australia. Several kinds of difficulty may
arise and each requires separate identification and consideration, even if the treatment of
one may have consequences for some other aspect of the matter.
First, there may be some question whether the forum chosen by the plaintiff
is clearly inappropriate. If there is more than one action brought, questions of
vexation may arise and be litigated either by application for stay of proceedings
or application for anti-suit injunction.
Secondly, a case in which it is alleged that the publisher's conduct has
all occurred outside the jurisdiction of the forum may invite attention to whether
the reasonableness of the publisher's conduct should be given any significance in deciding
whether it has a defence to the claim made. In particular, it may
invite attention to whether the reasonableness of the publisher's conduct should be judged
according to all the circumstances relevant to its conduct, including where that conduct
took place, and what rules about defamation applied in that place or those
places. Consideration of those issues may suggest that some development of the common
law defences in defamation is necessary or appropriate to recognise that the publisher
may have acted reasonably before publishing the material of which complaint is made.
Some comparison might be made in this regard with the common law developing
by recognising a defence of innocent dissemination to deal with the position of
the vendor of a newspaper and to respond to the emergence of new
arrangements for disseminating information like the circulating library.
In considering any of these matters, it should go without saying that it
is of the first importance to identify the precise difficulty that must be
addressed. In particular, in cases where the publisher of material which is said
to be defamatory has acted in one or more of the United States,
any action that is brought in an Australian court in respect of publications
that were made in America, would, in applying the law of the place
of commission of the tort, have to give effect to the rather different
balance that has been struck in the United States between freedom of speech
and the individual's interest in reputation. Furthermore, it may well be that the
resolution of a claim for publications made in one or more of the
United States would be affected by the application by the law of the
relevant state of a form of the single publication rule.
Three other matters should be mentioned. In considering what further development of the
common law defences to defamation may be thought desirable, due weight must be
given to the fact that a claim for damage to reputation will warrant
an award of substantial damages only if the plaintiff has a reputation in
the place where the publication is made. Further, plaintiffs are unlikely to sue
for defamation published outside the forum unless a judgment obtained in the action
would be of real value to the plaintiff. The value that a judgment
would have may be much affected by whether it can be enforced in
a place where the defendant has assets.
Finally, if the two considerations just mentioned are not thought to limit the
scale of the problem confronting those who would make information available on the
World Wide Web, the spectre which Dow Jones sought to conjure up in
the present appeal, of a publisher forced to consider every article it publishes
on the World Wide Web against the defamation laws of every country from
Afghanistan to Zimbabwe is seen to be unreal when it is recalled that
in all except the most unusual of cases, identifying the person about whom
material is to be published will readily identify the defamation law to which
that person may resort.
The appeal should be dismissed with costs.
Global computer-based communications cut across
territorial borders, creating a new realm of human activity and undermining the
feasibility--and legitimacy--of applying laws based on geographic boundaries.
While these electronic communications play havoc with geographic boundaries, a new
boundary, made up of the screens and passwords that separate the virtual world
from the "real world" of atoms, emerges. This new boundary defines a
distinct Cyberspace that needs and can create new law and legal institutions of
its own. Territorially-based law-making and law-enforcing authorities find this
new environment deeply threatening. But established territorial authorities may
yet learn to defer to the self-regulatory efforts of Cyberspace participants
who care most deeply about this new digital trade in ideas, information, and
services. Separated from doctrine tied to territorial jurisdictions, new rules
will emerge, in a variety of online spaces, to govern a wide range of new
phenomena that have no clear parallel in the nonvirtual world. These new rules
will play the role of law by defining legal personhood and property, resolving
disputes, and crystallizing a collective conversation about core values.
…
B. The Absence of Territorial Borders in Cyberspace
Cyberspace radically undermines the relationship
between legally significant (online) phenomena and physical location. The rise
of the global computer network is destroying the link between geographical
location and: (1) the power of local governments to assert control over
online behavior; (2) the effects of online behavior on individuals or
things; (3) the legitimacy of the efforts of a local sovereign to
enforce rules applicable to global phenomena; and (4) the ability of physical
location to give notice of which sets of rules apply.
The Net thus radically subverts a system of rule-making based on
borders between physical spaces, at least with respect to the claim that
cyberspace should naturally be governed by territorially defined rules.
Cyberspace has no territorially-based boundaries, because the cost and
speed of message transmission on the Net is almost entirely independent of
physical location: Messages can be transmitted from any physical location to
any other location without degradation, decay, or substantial delay, and
without any physical cues or barriers that might otherwise keep certain
geographically remote places and people separate from one another. The Net enables transactions between people who do not know, and
in many cases cannot know, the physical location of the other party. Location
remains vitally important, but only location within a virtual space
consisting of the "addresses" of the machines between which messages
and information are routed.
The system is indifferent to the physical location of those
machines, and there is no necessary connection between an Internet address and
a physical jurisdiction.
Although a domain name, when initially assigned to a given machine, may
be associated with a particular Internet Protocol address corresponding to the
territory within which the machine is physically located (e.g., a
".uk" domain name extension), the machine may move in physical space
without any movement in the logical domain name space of the Net. Or,
alternatively, the owner of the domain name might request that the name become
associated with an entirely different machine, in a different physical
location. Thus, a server with a ".uk" domain
name may not necessarily be located in the United Kingdom, a server with a
".com" domain name may be anywhere, and users, generally speaking,
are not even aware of the location of the server that stores the content that
they read. Physical borders no longer can function as signposts informing
individuals of the obligations assumed by entering into a new, legally
significant, place, because individuals are unaware of the existence of those
borders as they move through virtual space.
The power to control activity in Cyberspace has only the most tenuous
connections to physical location. Many governments first respond to electronic
communications crossing their territorial borders by trying to stop or regulate
that flow of information as it crosses their borders. Rather than deferring to
efforts by participants in online transactions to regulate their own affairs,
many governments establish trade barriers, seek to tax any border-crossing
cargo, and respond especially sympathetically to claims that information coming
into the jurisdiction might prove harmful to local residents. Efforts to stem
the flow increase as online information becomes more important to local
citizens. In particular, resistance to "transborder data flow" (TDF)
reflects the concerns of sovereign nations that the development and use of
TDF's will undermine their "informational sovereignty,"\13\ will negatively impact
on the privacy of local citizens,\14\ and will upset private
property interests in information. Even local governments in the United States
have expressed concern about their loss of control over information and
transactions flowing across their borders.
But efforts to control the flow of electronic information across
physical borders--to map local regulation and physical boundaries onto
Cyberspace--are likely to prove futile, at least in countries that hope to
participate in global commerce.\17\ Individual electrons
can easily, and without any realistic prospect of detection, "enter"
any sovereign's territory. The volume of electronic communications crossing
territorial boundaries is just too great in relation to the resources available
to government authorities to permit meaningful control.
U.S. Customs officials have generally given up. They assert
jurisdiction only over the physical goods that cross the geographic borders
they guard and claim no right to force declarations of the value of materials
transmitted by modem. Banking and securities regulators seem
likely to lose their battle to impose local regulations on a global financial
marketplace. And state
Attorneys General face serious challenges in seeking to intercept the electrons
that transmit the kinds of consumer fraud that, if conducted physically within
the local jurisdiction, would be more easily shut down.
Faced with their inability to control the flow of electrons across
physical borders, some authorities strive to inject their boundaries into the
new electronic medium through filtering mechanisms and the establishment of
electronic barriers.\20\
Others have been quick to assert the right to regulate all online trade insofar
as it might adversely impact local citizens. The Attorney General of Minnesota,
for example, has asserted the right to regulate gambling that occurs on a
foreign web page that was accessed and "brought into" the state by a
local resident.\21\ The
New Jersey securities regulatory agency has similarly asserted the right to
shut down any offending Web page accessible from within the state.
But such protective schemes will likely fail as well.
First, the determined seeker of prohibited communications can simply
reconfigure his connection so as to appear to reside in a different location,
outside the particular locality, state, or country. Because the Net is
engineered to work on the basis of "logical," not geographical,
locations, any attempt to defeat the independence of messages from physical
locations would be as futile as an effort to tie an atom and a bit together.
And, moreover, assertions of law-making authority over Net activities on the
ground that those activities constitute "entry into" the physical
jurisdiction can just as easily be made by any territorially-based authority.
If Minnesota law applies to gambling operations conducted on the World
Wide Web because such operations foreseeably affect Minnesota residents, so,
too, must the law of any physical jurisdiction from which those operations can
be accessed. By asserting a right to regulate whatever its citizens may access
on the Net, these local authorities are laying the predicate for an argument
that Singapore or Iraq or any other sovereign can regulate the activities of
U.S. companies operating in cyberspace from a location physically within the
United States.
All such Web-based activity, in this view, must be subject
simultaneously to the laws of all territorial sovereigns.
Nor are the effects of online activities tied to geographically
proximate locations. Information available on the World Wide Web is available
simultaneously to anyone with a connection to the global network. The notion
that the effects of an activity taking place on that Web site radiate from a
physical location over a geographic map in concentric circles of decreasing
intensity, however sensible that may be in the nonvirtual world, is incoherent
when applied to Cyberspace. A Web site physically located in Brazil, to
continue with that example, has no more of an effect on individuals in Brazil
than does a Web site physically located in Belgium or Belize that is accessible
in Brazil. Usenet discussion groups, to take another example, consist of
continuously changing collections of messages that are routed from one network
to another, with no centralized location at all; they exist, in effect,
everywhere, nowhere in particular, and only on the Net.\23\
Nor can the legitimacy of any rules governing online activities be
naturally traced to a geographically situated polity. There is no
geographically localized set of constituents with a stronger claim to regulate
it than any other local group; the strongest claim to control comes from the
participants themselves, and they could be anywhere.
The rise of an electronic medium that disregards geographical
boundaries also throws the law into disarray by creating entirely new phenomena
that need to become the subject of clear legal rules but that cannot be
governed, satisfactorily, by any current territorially-based sovereign. For
example, electronic communications create vast new quantities of transactional
records and pose serious questions regarding the nature and adequacy of privacy
protections. Yet the communications that create these records may pass through
or even simultaneously exist in many different territorial jurisdictions. What
substantive law should we apply to protect this new, vulnerable body of transactional
data? May a French policeman lawfully access the records of communications
traveling across the Net from the United States to Japan? Similarly, whether it
is permissible for a commercial entity to publish a record of all of any given
individual's postings to Usenet newsgroups, or whether it is permissible to
implement an interactive Web page application that inspects a user's
"bookmarks" to determine which other pages that user has visited, are
questions not readily addressed by existing legal regimes--both because the
phenomena are novel and because any given local territorial sovereign cannot
readily control the relevant, globally dispersed, actors and actions.
Because events on the Net occur everywhere but nowhere in particular,
are engaged in by online personae who are both "real" (possessing
reputations, able to perform services, and deploy intellectual assets) and
"intangible" (not necessarily or traceably tied to any particular
person in the physical sense), and concern "things" (messages,
databases, standing relationships) that are not necessarily separated from one
another by any physical boundaries, no physical jurisdiction has a more
compelling claim than any other to subject these events exclusively to its
laws.
…
…
Many of the jurisdictional and substantive
quandaries raised by border-crossing electronic communications could be
resolved by one simple principle: conceiving of Cyberspace as a distinct
"place" for purposes of legal analysis by recognizing a legally
significant border between Cyberspace and the "real world."
Using this new approach, we would no longer ask the unanswerable
question "where" in the geographical world a Net-based transaction
occurred. Instead, the more salient questions become: What rules are best
suited to the often unique characteristics of this new place and the
expectations of those who are engaged in various activities there? What
mechanisms exist or need to be developed to determine the content of those
rules and the mechanisms by which they can enforced?
Answers to these questions will permit the development of rules better
suited to the new phenomena in question, more likely to be made by those who
understand and participate in those phenomena, and more likely to be enforced
by means that the new global communications media make available and effective.
Treating Cyberspace as a separate "space"
to which distinct laws apply should come naturally, because entry into this
world of stored online communications occurs through a screen and (usually) a
"password" boundary. There is a "placeness" to Cyberspace
because the messages accessed there are persistent and accessible to many
people. You know when you are "there." No one accidentally strays
across the border into Cyberspace. To be sure, Cyberspace is not a homogenous
place; groups and activities found at various online locations possess their
own unique characteristics and distinctions, and each area will likely develop
its own set of distinct rules. But the line that separates online transactions
from our dealings in the real world is just as distinct as the physical
boundaries between our territorial governments--perhaps more so.
Crossing into Cyberspace is a meaningful act that would make
application of a distinct "law of Cyberspace" fair to those who pass
over the electronic boundary.
…
What should happen when conflicts arise between the
local territorial law (applicable to persons or entities by virtue of their
location in a particular area of physical space) and the law applicable to
particular activities on the Net? The doctrine of "comity," as well
as principles applied when delegating authority to self-regulatory
organizations, provide us with guidance for reconciling such disputes.
The doctrine of comity, in the Supreme Court's classic formulation, is
"the recognition which one nation allows within its territory to the
legislative, executive, or judicial acts of another nation, having due regard
both to international duty and convenience, and to the rights of its own
citizens or of other persons who are under the protections of its law."
It is incorporated into the principles set forth in the Restatement
(Third) of Foreign Relations Law of the United States, in particular Section
403, which provides that "a state may not exercise jurisdiction to
prescribe law with respect to a person or activity having connections with
another state when the exercise of such jurisdiction is unreasonable," and
that when a conflict between the laws of two states arises, "each state
has an obligation to evaluate its own as well as the other state's interest in
exercising jurisdiction [and] should defer to the other state if that state's
interest is clearly greater.").\80\
It arose as an attempt to mitigate some of the harsher features of a
world in which lawmaking is an attribute of control over physical space but in
which persons, things, and actions may move across physical boundaries, and it
functions as a constraint on the strict application of territorial principles
that attempts to reconcile "the principle of absolute territorial
sovereignty [with] the fact that intercourse between nations often demand[s]
the recognition of one sovereign's lawmaking acts in the forum of
another." In general, comity reflects the view that those who care more
deeply about and better understand the disputed activity should determine the
outcome. Accordingly, it may be ideally suited to handle, by extension, the new
conflicts between the a-territorial nature of cyberspace activities and the
legitimate needs of territorial sovereigns and of those whose interests they
protect on the other side of the cyberspace border. This doctrine does not
disable territorial sovereigns from protecting the interests of those
individuals located within their spheres of control, but it calls upon them to
exercise a significant degree of restraint when doing so.
Local officials handling conflicts can also learn from the many
examples of delegating authority to self-regulatory organizations. Churches are
allowed to make religious law. Clubs and social organizations can, within broad
limits, define rules that govern activities within their spheres of interest.
Securities exchanges can establish commercial rules, so long as they protect
the vital interests of the surrounding communities.
In these cases, government has seen the wisdom of allocating rule-making
functions to those who best understand a complex phenomenon and who have an
interest in assuring the growth and health of their shared enterprise.
Cyberspace represents a new permutation of the underlying issue: How
much should local authorities defer to a new, self-regulating activity arising
independently of local control and reaching beyond the limited physical
boundaries of the sovereign. This mixing of both tangible and intangible
boundaries leads to a convergence of the intellectual categories of comity in
international relations and the local delegation by a sovereign to
self-regulatory groups. In applying both the doctrine of "comity" and
the idea of "delegation" to Cyberspace, a local sovereign is called
upon to defer to the self-regulatory judgments of a population partly, but not
wholly, composed of its own subjects.
Despite the seeming contradiction of a sovereign deferring to the
authority of those who are not its own subjects, such a policy makes sense,
especially in light of the underlying purposes of both doctrines. Comity and
delegation represent the wise conservation of governmental resources and
allocate decisions to those who most fully understand the special needs and
characteristics of a particular "sphere" of being. Although
Cyberspace represents a new sphere that cuts across national boundaries, the
fundamental principle remains.
If the sysops and users who collectively inhabit and control a
particular area of the Net want to establish special rules to govern conduct
there, and if that rule set does not fundamentally impinge upon the vital
interests of others who never visit this new space, then the law of sovereigns
in the physical world should defer to this new form of self-government.
…
Because controlling the flow of electrons across physical boundaries is
so difficult, a local jurisdiction that seeks to prevent its citizens from
accessing specific materials must either outlaw all access to the Net--thereby
cutting itself off from the new global trade--or seek to impose its will on the
Net as a whole. This would be the modern equivalent of a local lord in medieval
times either trying to prevent the silk trade from passing through his
boundaries (to the dismay of local customers and merchants) or purporting to
assert jurisdiction over the known world. It may be most difficult to envision
local territorial sovereigns deferring to the law of the Net when the perceived
threat to local interests arises from the very free flow of information that is
the Net's most fundamental characteristic--when, for example, local sovereigns
assert an interest in seeing that their citizens are not adversely affected by
information that the local jurisdiction deems harmful but that is freely (and
lawfully) available elsewhere.
Examples include the German government's attempts to prevent its
citizens access to prohibited materials, or the prosecution of a California
bulletin board operator for making material offensive to local "community
standards" available for downloading in Tennessee.
Local sovereigns may insist that their interest (in protecting their
citizens from harm) is paramount, and easily outweighs any purported interest
in making this kind of material freely available. But the opposing interest is
not simply the interest in seeing that individuals have access to ostensibly
obscene material, it is the "meta-interest" of Net citizens in
preserving the global free flow of information.
If there is one central principle on which all local authorities within
the Net should agree, it must be that territorially local claims to restrict
online transactions (in ways unrelated to vital and localized interests of a
territorial government) should be resisted. This is the Net equivalent of the
First Amendment, a principle already recognized in the form of the
international human rights doctrine protecting the right to communicate.
Participants in the new online trade must oppose external regulation
designed to obstruct this flow. This naturally central principle of online law
bears importantly on the "comity" analysis, because it makes clear
that the need to preserve a free flow of information across the Net is just as
vital to the interests of the Net as the need to protect local citizens against
the impacts of unwelcome information may appear from the perspective of a local
territorial sovereign.
For the Net to realize its full promise, online rule-making authorities
must not respect the claims of territorial sovereigns to restrict online
communications when unrelated to vital and localized governmental interests.
One of a border's key characteristics is that it
slows the interchange of people, things, and information across its divide.
Arguably, distinct sets of legal rules can only develop and persist where
effective boundaries exist. The development of a true "law of
Cyberspace," therefore, depends upon a dividing line between this new
online territory and the nonvirtual world. Our argument so far has been that
the new sphere online is cut off, at least to some extent, from rule-making
institutions in the material world and requires the creation of a distinct law
applicable just to the online sphere.
But we hasten to add that Cyberspace is not, behind that border, a
homogeneous or uniform territory behind that border, where information flows
without further impediment. Although it is meaningless to speak of a French or
Armenian portion of Cyberspace, because the physical borders dividing French or
Armenian territory from their neighbors cannot generally be mapped onto the flow
of information in Cyberspace, the Net has other kinds of internal borders
delineating many distinct internal locations that slow or block the flow of
information.
Distinct names and (virtual) addresses, special passwords, entry fees,
and visual cues --software boundaries--can distinguish subsidiary areas from
one another. The Usenet newsgroup "alt.religion.scientology" is
distinct from "alt.misc.legal," each of which is distinct from a chat
room on Compuserve or America Online which, in turn, are distinct from the
Cyberspace Law Institute listserver or Counsel Connect. Users can only access
these different forums through distinct addresses or phone numbers, often
navigating through login screens, the use of passwords, or the payment of fees.
Indeed, the ease with which internal borders, consisting entirely of software
protocols, can be constructed is one of Cyberspace's most remarkable and
salient characteristics; setting up a new Usenet newsgroup, or a
"listserver" discussion group, requires little more than a few lines
of code.
The separation of subsidiary "territories" or spheres of
activity within Cyberspace and the barriers to exchanging information across
these internal borders allow for the development of distinct rule sets and for
the divergence of those rule sets over time.
…
The internal borders within Cyberspace will thus allow for
differentiation among distinct constellations of such information … . Content
or conduct acceptable in one "area" of the Net may be banned in
another. Institutions that resolve disputes in one "area" of
Cyberspace may not gain support or legitimacy in others. Local sysops can, by
contract, impose differing default rules regarding who has the right, under
certain conditions, to replicate and redistribute materials that originate with
others. While Cyberspace's reliance on bits instead of atoms may make physical
boundaries more permeable, the boundaries delineating digital online
"spheres of being" may become less permeable. Securing online
systems from unauthorized intruders may prove an easier task than sealing
physical borders from unwanted immigration. Groups can establish online
corporate entities or membership clubs that tightly control participation in,
or even public knowledge of, their own affairs.
Such groups can reach agreement on or modify these rules more rapidly
via online communications. Accordingly, the rule sets applicable to the online
world may quickly evolve away from those applicable to more traditional spheres
and develop greater variation among the sets.
…
The ability of inhabitants of Cyberspace to cross borders at will
between legally significant territories, many times in a single day, is
unsettling. This power seems to undercut the validity of developing distinct
laws for online culture and commerce: How can these rules be "law" if
participants can literally turn them on and off with a switch? Frequent online
travel might subject relatively mobile human beings to a far larger number of
rule sets than they would encounter traveling through the physical world over
the same period. Established authorities, contemplating the rise of a new law
applicable to online activities, might object that we cannot easily live in a
world with too many different sources and types of law, particularly those made
by private (non-governmental) parties, without breeding confusion and allowing
anti-social actors to escape effective regulation.
But the speed with which we can cross legally meaningful borders or
adopt and then shed legally significant roles should not reduce our willingness
to recognize multiple rule sets. Rapid travel between spheres of being does not
detract from the distinctiveness of the boundaries, as long as participants
realize the rules are changing. Nor does it detract from the appropriateness of
rules applying within any given place, any more than changing commercial or
organizational roles in the physical world detracts from a person's ability to
obey and distinguish rules as a member of many different institutional
affiliations and to know which rules are appropriate for which roles Nor does
it lower the enforceability of any given rule set within its appropriate
boundaries, as long as groups can control unauthorized boundary crossing of
groups or messages.
Alternating between different legal identities many times during a day
may confuse those for whom cyberspace remains an alien territory, but for those
for whom cyberspace is a more natural habitat in which they spend increasing
amounts of time it may become second nature. Legal systems must learn to
accommodate a more mobile kind of legal person.\105\
Global electronic communications have created new
spaces in which distinct rule sets will evolve. We can reconcile the new law
created in this space with current territorially-based legal systems by
treating it as a distinct doctrine, applicable to a clearly demarcated sphere,
created primarily by legitimate, self-regulatory processes, and entitled to
appropriate deference--but also subject to limitations when it oversteps its
appropriate sphere.
The law of any given place must take into account the special
characteristics of the space it regulates and the types of persons, places, and
things found there. Just as a country's jurisprudence reflects its unique
historical experience and culture, the law of Cyberspace will reflect its
special character, which differs markedly from anything found in the physical
world. For example, the law of the Net must deal with persons who
"exist" in Cyberspace only in the form of an email address and whose
purported identity may or may not accurately correspond to physical
characteristics in the real world. In fact, an e-mail address might not even
belong to a single person. Accordingly, if Cyberspace law is to recognize the
nature of its "subjects," it cannot rest on the same doctrines that
give geographically based sovereigns jurisdiction over "whole,"
locatable, physical persons. The law of the Net must be prepared to deal with
persons who manifest themselves only by means of a particular ID, user account,
or domain name.
Moreover, if rights and duties attach to an account itself, rather than
an underlying real world person, traditional concepts such as
"equality," "discrimination," or even "rights and
duties" may not work as we normally understand them. New angles on these
ideas may develop. For example, when AOL users joined the Net in large numbers,
other Cyberspace users often ridiculed them based on the ".aol" tag
on their email addresses--a form of "domainism" that might be
discouraged by new forms of Netiquette. If a doctrine of Cyberspace law accords
rights to users, we will need to decide whether those rights adhere only to
particular types of online appearances, as distinct from attaching to
particular individuals in the real world.
Similarly, the types of "properties" that can become the
subject of legal discussion in Cyberspace will differ from real world real
estate or tangible objects. For example, in the real world the physical covers
of a book delineate the boundaries of a "work" for purposes of
copyright law; those limits may disappear entirely when the same materials are
part of a large electronic database. Thus, we may have to change the "fair
use" doctrine in copyright law that previously depended on calculating
what portion of the physical work was copied. Similarly, a web page's
"location" in Cyberspace may take on a value unrelated to the
physical place where the disk holding that Web page resides, and efforts to
regulate web pages by attempting to control physical objects may only cause the
relevant bits to move from one place to another. On the other hand, the
boundaries set by "URLs" (Uniform Resource Locators, the location of
a document on the World Wide Web) may need special protection against
confiscation or confusingly similar addresses. And, because these online
"places" may contain offensive material, we may need rules requiring
(or allowing) groups to post certain signs or markings at these places' outer
borders.
The boundaries that separate persons and things behave differently in
the virtual world but are nonetheless legally significant. Messages posted
under one e-mail name will not affect the reputation of another e-mail address,
even if the same physical person authors both messages. Materials separated by
a password will be accessible to different sets of users, even if those
materials physically exist on the very same hard drive. A user's claim to a
right to a particular online identity or to redress when that identity's
reputation suffers harm, may be valid even if that identity does not correspond
exactly to that of any single person in the real world.
Clear boundaries make law possible, encouraging rapid differentiation
between rule sets and defining the subjects of legal discussion. New abilities
to travel or exchange information rapidly across old borders may change the
legal frame of reference and require fundamental changes in legal institutions.
Fundamental activities of lawmaking--accommodating conflicting claims, defining
property rights, establishing rules to guide conduct, enforcing those rules,
and resolving disputes--remain very much alive within the newly defined,
intangible territory of Cyberspace. At the same time, the newly emerging law challenges
the core idea of a current law-making authority--the territorial nation state,
with substantial but legally restrained powers.
If the rules of Cyberspace thus emerge from consensually based rule
sets, and the subjects of such laws remain free to move among many differing
online spaces, then considering the actions of Cyberspace's system
administrators as the exercise of a power akin to "sovereignty" may
be inappropriate. Under a legal framework where the top level imposes physical
order on those below it and depends for its continued effectiveness on the
inability of its citizens to fight back or leave the territory, the legal and
political doctrines we have evolved over the centuries are essential to
constrain such power. In that situation, where exit is impossible, costly, or
painful, then a right to a voice for the people is essential. But when the
"persons" in question are not whole people, when their
"property" is intangible and portable, and when all concerned may
readily escape a jurisdiction they do not find empowering, the relationship
between the "citizen" and the "state" changes radically.
Law, defined as a thoughtful group conversation about core values, will
persist. But it will not, could not, and should not be the same law as that applicable
to physical, geographically-defined territories.
© 1996
David R. Johnson and David G. Post. Permission granted to redistribute freely,
in whole or in part, with this notice attached.