Software & Internet Law 2008

Class 3: Who Rules the Net

March 10, 2008

For Further Reading (optional)
  • Dow Jones & Co. Inc. v. Gutnick
  • Sharon Eisner Gillett and Mitchell Kapor, The Self-governing Internet: Coordination by Design, <http://ccs.mit.edu/papers/CCSWP197/CCSWP197.html>

    Reading Notes

    The Internet is often said to pose new challenges to traditional notions of sovereignty and jurisdiction. Start with Jonathan Zittrain's introduction. As you read the case excerpts below, do you think we need new principles to determine who governs online conduct, or do the laws and procedures we have cover these new situations? What's new, and what's not?

    Within the United States, jurisdiction disputes tend to be arguments about venue, where the substantive laws are relatively uniform. On the Internet's global network, however, we also encounter disputes based on different sovereigns' choices of substantive law. Sovereigns may try to use a combination of legal and technical engineering to assert their own rules for Internet speech. After reading Yahoo v. LICRA, browse the Open Net Initiative site to see the range of Internet filtering efforts countries have adopted.

    Among these competing sovereignties, many want to preserve a globally interoperable Internet. The U.S. government, initial contractor for many of the network's functions, now contracts the management of the domain name system and address assignment to ICANN, the Internet Corporation for Assigned Names and Numbers, which has built its own system of "law" for domain name disputes. What does ICANN "govern" and does it do so effectively? Does the 'Net need governance?

    Cybersell, Inc., an Arizona corporation v. Cybersell, Inc., a Florida corporation. 130 F.3d 414 (9th Cir. 1997).

    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.

    Zippo Manufacturing Co. v. Zippo Dot Com, Inc. 952 F. Supp. 1119, (W.D. Pa. 1997)

    McLAUGHLIN, J.

    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.

    - - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
    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.
    - - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

    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.

    Yahoo! Inc. v. La Ligue Contre Le Racisme et l’Antisemitisme (LICRA), 433 F.3d 1199 (9th Cir. 2006) (en banc)

    OPINION:
    PER CURIAM:

    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.
    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.

    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.

    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.

    Law And Borders: The Rise of Law in Cyberspace.
    David R. Johnson and David G. Post, 48 Stanford Law Review 1367 (1996)

    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.

    I. Breaking Down Territorial Borders



    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.

    II. A New Boundary for Cyberspace

    A. Cyberspace as a Place

    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.

    1. The New Boundary is Real.

    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.

    IV. Local Authorities, Foreign Rules: Reconciling Conflicts

    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.

    V. Internal Diversity

    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\

    V1. Conclusion

    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.

    (c) 1996 David R. Johnson and David G. Post. Permission granted to redistribute freely, in whole or in part, with this notice attached.

    Optional

    Dow Jones & Company Inc. v Gutnick,, High Court of Australia, [2002] HCA 56 (10 December 2002)


    GLEESON CJ, McHUGH, GUMMOW AND HAYNE JJ. The appellant, Dow Jones & Company Inc ("Dow Jones"), prints and publishes the Wall Street Journal newspaper and Barron's magazine. Since 1996, Dow Jones has operated WSJ.com, a subscription news site on the World Wide Web. Those who pay an annual fee (set, at the times relevant to these proceedings, at $US59, or $US29 if they are subscribers to the printed editions of either the Wall Street Journal or Barron's) may have access to the information to be found at WSJ.com. Those who have not paid a subscription may also have access if they register, giving a user name and a password. The information at WSJ.com includes Barron's Online in which the text and pictures published in the current printed edition of Barron's magazine are reproduced.

    The edition of Barron's Online for 28 October 2000 (and the equivalent edition of the magazine which bore the date 30 October 2000) contained an article entitled "Unholy Gains" in which several references were made to the respondent, Mr Joseph Gutnick. Mr Gutnick contends that part of the article defamed him. He has brought an action in the Supreme Court of Victoria against Dow Jones claiming damages for defamation. Mr Gutnick lives in Victoria. He has his business headquarters there. Although he conducts business outside Australia, including in the United States of America, and has made significant contributions to charities in the United States and Israel, much of his social and business life could be said to be focused in Victoria.

    The originating process in the action which Mr Gutnick brought against Dow Jones was served on it outside Australia. … If the defendant does not submit to the jurisdiction by filing an unconditional appearance, the plaintiff must obtain leave to proceed, demonstrating that the originating process makes claims of a kind which one or more of the paragraphs of r 7.01(1) mention. If the defendant wishes to contend that the Court should decline to exercise its jurisdiction or should set aside service, the defendant may enter a conditional appearance and apply for either or both of two forms of order - an order staying further proceedings in the matter or an order setting aside service of the originating process.

    The principal issue debated in the appeal to this Court was where was the material of which Mr Gutnick complained published? Was it published in Victoria? The answer to these questions was said to affect, even determine, whether proceedings in the Supreme Court of Victoria should, as Dow Jones contended, be stayed on the ground that that Court was a clearly inappropriate forum for determination of the action. The procedural steps which give rise to that issue can be described as follows.

    The proceedings below
    Dow Jones entered a conditional appearance to the process served upon it. It applied to a Judge of the Supreme Court of Victoria (Hedigan J) for an order that service of the writ and statement of claim be set aside or an order that further proceedings in the matter be permanently stayed.

    In the course of the proceedings before the primary judge, Mr Gutnick proffered an undertaking to sue in no place other than Victoria in respect of the matters which founded his proceeding. The primary judge recorded in his reasons that Mr Gutnick "seeks to have his Victorian reputation vindicated by the courts of the State in which he lives [and that he] is indifferent to the other substantial parts of the article and desires only that the attack on his reputation in Victoria as a money-launderer should be repelled and his reputation re-established".

    A deal of evidence was led before the primary judge seeking to establish the way in which, and the place at which, information found at a website like WSJ.com is published. It will be necessary to say something more about what that evidence revealed. His Honour concluded that the statements of which Mr Gutnick sought to complain were "published in the State of Victoria when downloaded by Dow Jones subscribers who had met Dow Jones's payment and performance conditions and by the use of their passwords". He rejected Dow Jones's contention that the publication of the article in Barron's Online occurred at the servers maintained by Dow Jones in New Jersey in the United States. Being therefore of the opinion that the defamation of which Mr Gutnick complained had occurred in Victoria, Hedigan J concluded that Victoria was not a clearly inappropriate forum for trial of the proceeding and dismissed Dow Jones's application.

    Undisputed principles
    Argument of the appeal proceeded from an acceptance, by both parties, of certain principles. First, it is now established that an Australian court will decline, on the ground of forum non conveniens, to exercise jurisdiction which has been regularly invoked by a plaintiff, whether by personal service or under relevant long-arm jurisdiction provisions, only when it is shown that the forum whose jurisdiction is invoked by the plaintiff is clearly inappropriate. Secondly, it is now established that in trying an action for tort in which the parties or the events have some connection with a jurisdiction outside Australia, the choice of law rule to be applied is that matters of substance are governed by the law of the place of commission of the tort. Neither party sought to challenge either proposition. Rather, argument focused upon where was the place of publication of the statements of which Mr Gutnick complained. Dow Jones contended that the statements were published in New Jersey and that it was, therefore, the law of that jurisdiction which would govern all questions of substance in the proceeding….

    "Jurisdiction" and "publishing"

    Two of the terms that must be used in considering the questions that arise in this matter are terms that can give rise to difficulty. "Jurisdiction", as was pointed out in Lipohar v The Queen, is a generic term that is used in a variety of senses. In the present matter there are two distinct senses in which it is used - first, as referring to the amenability of a defendant to process in such a way as will give a court authority to decide the controversy which that process seeks to agitate and, secondly, as referring to a particular territorial or law area or law district.

    "Publishing" and its cognate words is also a term that gives rise to difficulty. As counsel for the interveners pointed out it may be useful, when considering where something is published to distinguish between the (publisher's) act of publication and the fact of publication (to a third party), but even that distinction may not suffice to reveal all the considerations relevant to locating the place of the tort of defamation.

    WSJ.com

    …The originator of a document wishing to make it available on the World Wide Web arranges for it to be placed in a storage area managed by a web server. This process is conventionally referred to as "uploading". A person wishing to have access to that document must issue a request to the relevant server nominating the location of the web page identified by its "uniform resource locator (URL)". When the server delivers the document in response to the request the process is conventionally referred to as "downloading".

    Dow Jones has its editorial offices for Barron's, Barron's Online and WSJ.com in the city of New York. Material for publication in Barron's or Barron's Online, once prepared by its author, is transferred to a computer located in the editorial offices in New York city. From there it is transferred either directly to computers at Dow Jones's premises at South Brunswick, New Jersey, or via an intermediate site operated by Dow Jones at Harborside, New Jersey. It is then loaded onto six servers maintained by Dow Jones at its South Brunswick premises.
    Dow Jones's contention
    The principal burden of the argument advanced by Dow Jones on the hearing of the appeal in this Court was that articles published on Barron's Online were published in South Brunswick, New Jersey, when they became available on the servers which it maintained at that place.

    In the courts below, much weight appears to have been placed by Dow Jones on the contention that a relevant distinction was to be drawn between the apparently passive role played by a person placing material on a web server from which the would-be reader had actively to seek the material by use of a web browser and the (comparatively) active role played by a publisher of a widely circulated newspaper or a widely disseminated radio or television broadcast. In this Court, these arguments, though not abandoned, were given less prominence than policy arguments based on what was said to be the desirability of there being but a single law governing the conduct of a person who chooses to make material available on the World Wide Web.

    Dow Jones submitted that it was preferable that the publisher of material on the World Wide Web be able to govern its conduct according only to the law of the place where it maintained its web servers, unless that place was merely adventitious or opportunistic. Those who, by leave, intervened in support of Dow Jones generally supported this contention. The alternative, so the argument went, was that a publisher would be bound to take account of the law of every country on earth, for there were no boundaries which a publisher could effectively draw to prevent anyone, anywhere, downloading the information it put on its web server.

    The rule propounded by Dow Jones may have a greater appearance of certainty than it would have in fact. "Adventitious" and "opportunistic" are words likely to produce considerable debate. Does a publisher's decision to have a server in a country where the costs of operation are low, or the benefits offered for setting up business are high, warrant either of these descriptions? Does a publisher's decision to have servers in two, widely separated, states or even countries warrant either description, or is it simply a prudent business decision to provide security and continuity of service? How is the user to know which server dealt with a particular request? Is the fact that one rather than the other server met the request "adventitious"?

    To the extent that the suggested rule would require reference only to the law of the place in which the server is located, it is a rule that would evidently be convenient to the party putting material on a web server. But that does not conclude debate. The convenience of one party is important to it, but how would such a rule fit with other, no less relevant, considerations? In particular, how would it fit with the nature of the competing rights and interests which an action for defamation must accommodate?

    It is necessary to begin by making the obvious point that the law of defamation seeks to strike a balance between, on the one hand, society's interest in freedom of speech and the free exchange of information and ideas (whether or not that information and those ideas find favour with any particular part of society) and, on the other hand, an individual's interest in maintaining his or her reputation in society free from unwarranted slur or damage. The way in which those interests are balanced differs from society to society. In some cases, for example as between the States in Australia, the differences in substantive law might be said to be differences of detail rather than substance, although even then it may be doubted that this is an accurate characterisation of the effect of the differences in the defamation laws of the Australian States. Whether or not that is so, comparing the law of defamation in different countries can reveal differences going well beyond matters of detail lying at the edge of debate.

    It follows that identifying the law which is to govern questions of substance, in an action for defamation where there is some foreign element, may have substantial consequences for the resolution of the proceeding. No less importantly, those who would seek to order their affairs in a way that will minimise the chance of being sued for defamation must be able to be confident in predicting what law will govern their conduct. But certainty does not necessarily mean singularity. What is important is that publishers can act with confidence, not that they be able to act according to a single legal system, even if that system might, in some sense, be described as their "home" legal system. Activities that have effects beyond the jurisdiction in which they are done may properly be the concern of the legal systems in each place. In considering where the tort of defamation occurs it is important to recognise the purposes served by the law regarding the conduct as tortious: purposes that are not confined to regulating publishers any more than they are confined to promoting free speech.
    Defamation
    The tort of defamation, at least as understood in Australia, focuses upon publications causing damage to reputation. It is a tort of strict liability, in the sense that a defendant may be liable even though no injury to reputation was intended and the defendant acted with reasonable care. Yet a publication made in the ordinary course of a business such as that of bookseller or news vendor, which the defendant shows to have been made in circumstances where the defendant did not know or suspect and, using reasonable diligence, would not have known or suspected was defamatory, will be held not to amount to publication of a libel. There is, nonetheless, obvious force in pointing to the need for the publisher to be able to identify, in advance, by what law of defamation the publication may be judged. …

    Harm to reputation is done when a defamatory publication is comprehended by the reader, the listener, or the observer. Until then, no harm is done by it. This being so it would be wrong to treat publication as if it were a unilateral act on the part of the publisher alone. It is not. It is a bilateral act - in which the publisher makes it available and a third party has it available for his or her comprehension.

    The bilateral nature of publication underpins the long-established common law rule that every communication of defamatory matter founds a separate cause of action. That rule has found reflection from time to time in various ways in State legislation and it would be a large step now to depart from it.

    If the place in which the publisher acts and the place in which the publication is presented in comprehensible form are in two different jurisdictions, where is the tort of defamation committed? That question is not to be answered by an uncritical application of some general rule that intentional torts are committed where the tortfeasor acts or that they are committed in the place where the last event necessary to make the actor liable takes place. Nor does it require an uncritical adoption of what has come to be known in the United States as the "single publication" rule, a rule which has been rejected by the Court of Appeal of New South Wales…

    Single publication rule
    Some 27 States of the United States, including California, Illinois, New York, Pennsylvania and Texas, by legislation or by judicial decision have adopted what is identified as the single publication rule. That rule is set out in §577A of the Restatement of Torts, 2d, (1977), which is headed "Single and Multiple Publications", and reads:
    "(1) Except as stated in Subsections (2) and (3), each of several communications to a third person by the same defamer is a separate publication.
    (2) A single communication heard at the same time by two or more third persons is a single publication.
    (3) Any one edition of a book or newspaper, or any one radio or television broadcast, exhibition of a motion picture or similar aggregate communication is a single publication.
    (4) As to any single publication,
    (a) only one action for damages can be maintained;
    (b) all damages suffered in all jurisdictions can be recovered in the one action; and
    (c) a judgment for or against the plaintiff upon the merits of any action for damages bars any other action for damages between the same parties in all jurisdictions."
    In Firth v State of New York, the New York Court of Appeals decided that the one-year statute of limitation in New York runs from the first posting of defamatory matter upon an Internet site and that the single publication rule applies to that first posting.

    …In the early decades of the twentieth century, the single publication rule came to be coupled with statements to the effect that the place of that single publication was the place where the newspaper or magazine was published. The source of this added proposition was given as a case of prosecution for criminal libel where the question was that raised by the Sixth Amendment to the United States Constitution and its reference to the "state or district wherein the crime shall have been committed". Despite this difference in the context in which the question of location arose, the statement that the place of publication was where the newspaper or magazine was published was sometimes taken as stating an element of (or at least a consequence of) the single publication rule applied to civil defamation suits….

    It was not until the middle of the twentieth century and the advent of widely disseminated mass media of communication (radio and nationally distributed newspapers and magazines) that choice of law problems were identified. In some cases, the law of the forum was applied without any explicit recognition of the possible application of some other law. But then, by a process of what was understood as logical extension of the single publication rule, the choice of law to be applied came to be understood as largely affected by, perhaps even to be determined by, the proposition that only one action could be brought in respect of the alleged defamation, and that the place of publication was where the person publishing the words had acted.

    For present purposes, what it is important to notice is that what began as a term describing a rule that all causes of action for widely circulated defamation should be litigated in one trial, and that each publication need not be separately pleaded and proved, came to be understood as affecting, even determining, the choice of law to be applied in deciding the action. To reason in that way confuses two separate questions: one about how to prevent multiplicity of suits and vexation of parties, and the other about what law must be applied to determine substantive questions arising in an action in which there are foreign elements.

    Clearly, the common law favours the resolution of particular disputes between parties by the bringing of a single action rather than successive proceedings. The principles of res judicata, issue estoppel, and what has come to be known as Anshun estoppel, all find their roots in that policy. The application of that policy to cases in which the plaintiff complains about the publication of defamatory material to many people in many places may well lead to the conclusion that a plaintiff may not bring more than one action in respect of any of those publications that have occurred before the proceeding is instituted or even, perhaps, before trial of the proceeding is complete. Effect can be given to that policy by the application of well-established principles preventing vexation by separate suits or, after judgment, by application of the equally well-established principles about preclusion, including principles of Anshun estoppel. Conversely, where a plaintiff brings one action, account can properly be taken of the fact that there have been publications outside the jurisdiction and it would be open to the defendant to raise, and rely on, any benefit it may seek to say flows from applicable foreign law. If some of the publications of which complaint is or could be made are publications that have occurred outside Australia, or if action has been instituted outside Australia in respect of publications made in this country, or overseas, there is no evident reason why the questions thus presented are not to be answered according to the established principles just mentioned. The application of these principles, however, says nothing about questions of jurisdiction or choice of law. In particular, the application of these principles does not require that a single place of publication be identified in every defamation case no matter how widely the defamatory material is disseminated.

    Widely disseminated publications
    In the course of argument much emphasis was given to the fact that the advent of the World Wide Web is a considerable technological advance. So it is. But the problem of widely disseminated communications is much older than the Internet and the World Wide Web. The law has had to grapple with such cases ever since newspapers and magazines came to be distributed to large numbers of people over wide geographic areas. Radio and television presented the same kind of problem as was presented by widespread dissemination of printed material, although international transmission of material was made easier by the advent of electronic means of communication.

    It was suggested that the World Wide Web was different from radio and television because the radio or television broadcaster could decide how far the signal was to be broadcast. It must be recognised, however, that satellite broadcasting now permits very wide dissemination of radio and television and it may, therefore, be doubted that it is right to say that the World Wide Web has a uniquely broad reach. It is no more or less ubiquitous than some television services. In the end, pointing to the breadth or depth of reach of particular forms of communication may tend to obscure one basic fact. However broad may be the reach of any particular means of communication, those who make information accessible by a particular method do so knowing of the reach that their information may have. In particular, those who post information on the World Wide Web do so knowing that the information they make available is available to all and sundry without any geographic restriction.

    Because publication is an act or event to which there are at least two parties, the publisher and a person to whom material is published, publication to numerous persons may have as many territorial connections as there are those to whom particular words are published. It is only if one starts from a premise that the publication of particular words is necessarily a singular event which is to be located by reference only to the conduct of the publisher that it would be right to attach no significance to the territorial connections provided by the several places in which the publication is available for comprehension.

    Other territorial connections may also be identified. In the present case, Dow Jones began the process of making material available at WSJ.com by transmitting it from a computer located in New York city. For all that is known, the author of the article may have composed it in another State. Dow Jones is a Delaware corporation. Consideration has been given to these and indeed other bases of territorial connection in identifying the law that might properly be held to govern an action for defamation where the applicable choice of law rule was what came to be known as the proper law of the tort.

    Many of these territorial connections are irrelevant to the inquiry which the Australian common law choice of law rule requires by its reference to the law of the place of the tort. In that context, it is defamation's concern with reputation, and the significance to be given to damage (as being of the gist of the action) that require rejection of Dow Jones's contention that publication is necessarily a singular event located by reference only to the publisher's conduct. Australian common law choice of law rules do not require locating the place of publication of defamatory material as being necessarily, and only, the place of the publisher's conduct (in this case, being Dow Jones uploading the allegedly defamatory material onto its servers in New Jersey).

    [L]ocating the place of commission of a tort is not always easy. Attempts to apply a single rule of location (such as a rule that intentional torts are committed where the tortfeasor acts, or that torts are committed in the place where the last event necessary to make the actor liable has taken place) have proved unsatisfactory if only because the rules pay insufficient regard to the different kinds of tortious claims that may be made. Especially is that so in cases of omission. In the end the question is "where in substance did this cause of action arise"? In cases, like trespass or negligence, where some quality of the defendant's conduct is critical, it will usually be very important to look to where the defendant acted, not to where the consequences of the conduct were felt.

    In defamation, the same considerations that require rejection of locating the tort by reference only to the publisher's conduct, lead to the conclusion that, ordinarily, defamation is to be located at the place where the damage to reputation occurs. Ordinarily that will be where the material which is alleged to be defamatory is available in comprehensible form assuming, of course, that the person defamed has in that place a reputation which is thereby damaged. It is only when the material is in comprehensible form that the damage to reputation is done and it is damage to reputation which is the principal focus of defamation, not any quality of the defendant's conduct. In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a web browser to pull the material from the web server. It is where that person downloads the material that the damage to reputation may be done. Ordinarily then, that will be the place where the tort of defamation is committed.

    Set aside service or stay proceedings?
    It is convenient to deal at this point with Dow Jones's contentions that service of the originating process in the proceeding brought by Mr Gutnick should be set aside, and that further proceedings should be stayed on the ground that Victoria was a clearly inappropriate forum for trial of the action.

    Rule 7.01(1) of the Victorian Rules provided that:
    "(1) Originating process may be served out of Australia without order of the Court where -
    ...
    (i) the proceeding is founded on a tort committed within Victoria;
    (j) the proceeding is brought in respect of damage suffered wholly or partly in Victoria and caused by a tortious act or omission wherever occurring".

    Because Mr Gutnick alleged that he suffered damage in Victoria as a result of the publication made in Victoria when the Barron's Online article was comprehensible to a reader, r 7.01(1)(j) was plainly engaged. Mr Gutnick's proceeding was brought in respect of damage alleged to have been suffered at least partly in Victoria and alleged to have been caused by a tortious act or omission. As r 7.01(1)(j) makes plain, that paragraph of the rule has operation wherever the tortious act or omission is alleged to have occurred.

    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.