Personal Jurisdiction in Georgia and the Internet

By:  Robert C. Port, Esq.

Business Litigation/Securities Arbitration & Litigation

Cohen Goldstein Port & Gottlieb, LLP

990 Hammond Drive, Suite 990

Atlanta, Georgia 30328

(678) 775-3550 (Direct Dial)

(770) 901-9417 (Fax)

Email:  rport@cgpglaw.com

Web Site:  http://www.cgpglaw.com

 

Business transacted over the Internet continues to increase in an exponential fashion. As it does, the traditional theories used to determine the propriety of a court exercising jurisdiction over a person or business are stretched to their limits. If conducting business on the Web exposes the user to being hauled into court in any state, or indeed, in any country in which its Website might be accessible, then the substantial benefits and efficiencies of e-commerce will be severely constrained.

As of the date of this paper, no reported decision of a Georgia appellate court, or a Federal Court either sitting in Georgia or applying Georgia law, has directly addressed the question of whether personal jurisdiction can be premised upon Internet usage or commerce. However, courts throughout the United States, and particularly the federal courts, are attempting to fashion an analytical framework to assess and test the assertion of jurisdiction. Presumably, the analysis developed by those courts will be relied upon when Georgia courts are faced with these jurisdictional issues. There are, however, few bright line rules in jurisdiction jurisprudence, and the developing case law in the Internet context are no different. As Justice Marshall wrote in Kulko v. Superior Court, 436 U.S. 84, 92 (1978), “few answers will be written in black and white. The greys are dominant and even among them the shades are innumerable.”

TRADITIONAL JURISDICTIONAL ANALYSIS DUE PROCESS AND “MINIMUM CONTACTS” ANALYSIS

Due process requires that a non-resident defendant “have certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 315, 66 S. Ct. 154 (1945) (internal quotation marks omitted). Minimum contacts can be demonstrated through facts supporting either general or specific jurisdiction over the defendant. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S. Ct. 1868 (1984).

General Jurisdiction

General jurisdiction refers to the authority of a court to hear any cause of action involving a defendant, regardless of whether the cause of action arose from the defendant’s activities within the forum state. Helicopteros, 466 U.S. at 415. In order for a court to assert general jurisdiction, the defendant must have “continuous and systematic” contacts with the forum state. Id. at 416.

Specific Jurisdiction

A court can acquire specific jurisdiction when the cause of action arises directly from a defendant’s contacts with the forum state. The defendant must perform some act or consummate some transaction within the forum by which it “purposefully avails” itself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of the forum and having “fair warning” that a particular activity may subject it to jurisdiction. See Burger King v. Rudzewicz, 471 U.S. 462, 472, 475, 105 S. Ct. 2174 (1985). The claim must be one which arises out of or results from the defendant’s forum-related activities. Finally, the court’s exercise of jurisdiction must be reasonable. Kulko v. California Superior Court, 436 U.S. 84, 93-94 (1978); Hanson v. Denckla, 357 U.S. 235, 253 (1958).

Purposeful availment is shown “if the defendant has taken deliberate action within the forum state or if he has created continuing obligations to forum residents.” Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 44 U.S.P.Q.2d (BNA) 1928 (9th Cir. 1997). Although contacts that are “isolated” or “sporadic” may support specific jurisdiction if they create a “substantial connection” with the forum, the contacts must be more than random, fortuitous, or attenuated. Burger King, 471 U.S. at 472-73, 475. Furthermore, a defendant need not be physically present within the forum, provided the defendant’s efforts are purposefully directed toward forum residents. Id. at 476.

Burden of Proof on Jurisdictional Challenge

Plaintiff bears the burden of establishing personal jurisdiction through a prima facie showing of jurisdictional facts. See Robinson v. Giarmarco & Bill. P.C., 74F3d 253 (11th Cir. 1996). This prima facie case must consist of enough evidence to withstand a directed verdict and the facts as alleged in the complaint must be taken as true. Robinson, 74 F.3d at 255. Conflicts in the facts are resolved in the plaintiff’s favor in determining if a prima facie case of personal jurisdiction exists. Delong Equipment Co. v. Washington Mills Abrasive Co., 840 F.2d 843 (11th Cir. 1988), en banc reh’g denied, 896 F.2d 560 (11th Cir. 1990), cert denied 494 U.S. 1081 (1990).

JURISDICTIONAL ANALYSIS UNDER GEORGIA LAW

Diversity Cases

In a federal case where jurisdiction is founded on diversity of citizenship, the court must first look to Georgia’s Long Arm Statute to determine if it has personal jurisdiction over the Defendant, and, if the Defendant can be reached by that statute, the court must then determine if an assertion of jurisdiction would be constitutional. See, e.g., Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir. 1990).

The federal court considers a number of factors in determining whether the exercise of jurisdiction is reasonable: (1) the burden on the defendant, (2) the forum state’s interest in resolving the dispute, (3) the plaintiff’s interest in receiving convenient and effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477, 105 S. Ct. 2174 (1985).

Georgia Cases

In an action filed in the Georgia courts, the courts undertake a similar analysis to determine whether to exercise jurisdiction over a nonresident. As set forth by the cases, there are three factors to consider: “(1) The non-resident must purposefully avail himself of the privilege of doing some act or consummating some transaction with or in the forum; . . . (2) The plaintiff must have a legal cause of action against the non-resident, which arises out of, or results from, the activity or activities of the defendant [non-resident] within the forum; and (3) If . . . the requirements of Rules (1) and (2) are [met, there must also exist] a ‘minimum contact’ between the nonresident and the forum. . . [Lastly,] the assumption of jurisdiction [by the forum] must be . . . consonant with . . . due process notions of ‘fair play’ and ‘substantial justice.’” Girard v. Weiss, 160 Ga. App. 295, 287 S.E.2d 301 (1981) (quoting Shellenberger v. Tanner, 138 Ga. App. 399, 404-405, 227 S.E.2d 266 (1976)); State of South Carolina v. Reeves, 205 Ga. App. 656, 657, 423 S.E.2d 32 (1992).

Georgia’s Long Arm Statute

The Georgia Long Arm Statute, O.C.G.A. § 9-10-91, provides in pertinent part that “[a] court of this state may exercise personal jurisdiction over any nonresident . . . as to a cause of action arising from any of the acts, omissions, ownership, use, or possession enumerated in this Code section, in the same manner as if he were a resident of the state, if in person or through an agent, he:

(1)       Transacts any business within this state;

(2)       Commits a tortious act or omission within this state, except as to a cause of action for defamation of character arising from the act;

(3)       Commits a tortious injury in this state caused by an act or omission outside this state if the tortfeasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state;

(4)       Owns, uses, or possesses any real property situated within this state.”

Georgia’s Long Arm Statute May Not Permit “General Jurisdiction” Over Non-resident Foreign Corporations

The Georgia courts have stated repeatedly that the Long Arm Statute confers jurisdiction to the maximum extent allowable under the Due Process Clause. See, e.g., First United Bank v. First National Bank, 255 Ga. 505, 340 S.E.2d 597 (1986); Clarkson Power Flow, Inc. v. Thompson, 244 Ga. 300, 260 S.E.2d 9 (1979); Coe & Payne Co. v. Wood-Mosiac Corp., 230 Ga. 58, 195 S.E.2d 399 (1973).

However, some case law affirmatively suggests that the Long Arm Statute is more restrictive than the Due Process Clause. Gust v. Flint, 257 Ga. 129, 130, 356 S.E.2d 513 (1987)(“The rule that controls is our statute, which requires that an out-of-state defendant must do certain acts within the State of Georgia before he can be subjected to personal jurisdiction.”); Allstate Ins. Co. v. Klein, 262 Ga. 599, 600, 422 S.E.2d 863 (1992)(“The requirement that a cause of action ‘arise out of’ activities within the state (OCGA §§9-10-91), applies . . . to the exercise of personal jurisdiction over nonresidents.”); Pratt & Whitney Canada v. Sanders, 218 Ga. App. 1, 460 S.E.2d 94 (1995)(“jurisdiction over a nonresident foreign corporation can only be maintained within the confines of the Long Arm Statute. “)(emphasis added).

JURISDICTIONAL ANALYSIS AND THE INTERNET

Georgia Cases

Unfortunately, as of the date of this paper, there are no reported cases in which Georgia law has been analyzed to determine the propriety of exercising jurisdiction over a non-resident defendant. However, the analysis being developed by other courts confronted with these questions will no doubt be persuasive when the question arises under Georgia’s Long Arm Statute, O.C.G.A. §9-10-91.

Early Cases

Some of the early decisions considering personal jurisdiction in matters related to the Internet found jurisdiction based upon on the slimmest of contacts by the non-resident defendant. These early decisions seem to reflect a lack of a full understanding of the technology associated with the Internet and the various types of interactivity and business transactions possible through Web pages, email, and other Internet applications. For example, in Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996), a Missouri Court exercised jurisdiction in a trademark infringement action over a California defendant “because the allegedly infringing activities have produced an effect in Missouri as they have allegedly caused [Plaintiff] economic injury.” 947 F. Supp. at 1331. The Court found the exercise of jurisdiction reasonable based upon evidence showing 131 hits from Missouri to defendant’s Web page, and that defendant “has consciously decided to transmit advertising information to all Internet users, knowing that such information will be transmitted globally.” 947 F. Supp. at 1334. Defendant had no other connections with Missouri. Similarly, in Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996), a Connecticut Court found jurisdiction over a Massachusetts Web developer who posted a Web advertisement with a toll free phone number for computer support under a domain name that was similar to the plaintiff’s registered trademark. The Massachusetts developer had no contacts with Connecticut and no evidence existed that anyone from Connecticut had visited the Website or called the number listed. The District Court held that personal jurisdiction would apply for the mere use of the Internet to post an advertisement accessible to Internet users in the forum. In supporting the exercise of jurisdiction, the Court noted that at that time there were 10,000 Connecticut Internet users who could possibly access the advertisement. 937 F. Supp. at 164.

The Developing Analytical Model

The “Sliding Scale” or “Spectrum” of Internet Activity

In Zippo Mfg. Co. v. Zippo Dot Com, 952 F. Supp. 1119, 1124-25 (W.D. Pa. 1997), the plaintiff alleged trademark dilution and infringement based on the defendant’s Website domain names. 952 F. Supp. at 1121. In determining whether jurisdiction was proper, the Court applied a “sliding scale” under which “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.” 952 F. Supp. at 1124. The Court categorized Internet activity into three levels:

a.         Situations where a defendant clearly does business over the Internet by entering into contracts with residents of other states which “involve the knowing and repeated transmission of computer files over the Internet.” Zippo, 952 F. Supp. at 1124 (citing CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996)). In these circumstances, the court’s assertion of personal jurisdiction is likely to be proper.

b.         Situations where a defendant has a Website that allows a user to exchange information with the defendant. In this middle ground, “the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information that occurs on the Website.” Zippo, 952 F. Supp. at 1124 (citing Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996)). The additional factors which may tip the scale in favor of exercising jurisdiction are often described as “plus factors.”

c.         Situations where a defendant merely establishes a passive Website that does nothing more than advertise or post information on the Internet. Zippo, 952 F. Supp. at 1124 (citing Bensusan Restaurant Corp., v. King, 937 F. Supp. 295, 297 (S.D.N.Y. 1996), aff’d, 126 F.3d 25 (2nd Cir. 1997).

The analytical model of the Zippo Court has been adopted or cited with approval by a number of circuit and district courts around the country. See, e.g., Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292, 1296 (10th Cir. 1999); Mink v. AAAA Dev., 190 F.3d 333 (5th Cir. 1999); Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997); Butler v. Beer Across America, 83 F. Supp. 2d 1261 (N.D. Ala. 2000); Roche v. Worldwide Media, Inc., 90 F. Supp. 2d 714 (E.D. Va. 2000); JB Oxford Holdings, Inc. v. Net Trade, Inc., 76 F. Supp. 2d 1363 (S.D. Fla. 1999); Decker v. Circus Circus Hotel, 49 F. Supp. 2d 743 (D.N.J. 1999); GTE New Media Services, Inc. v. Ameritech Corp., 21 F. Supp. 2d 27 (D.D.C. 1998); Blackburn v. Walker Oriental Rug Galleries, 999 F. Supp. 636 (E.D. Pa. 1998).

Using the Zippo analytical model and other jurisdictional analysis, certain trends are emerging in Internet jurisprudence:

A Passive Website, Standing Alone, Is Generally Not Sufficient to Provide a Jurisdictional Basis

Maintaining a Website arguably means that it is foreseeable that the residents of any state have the ability to access the site. If addresses, phone numbers, or email addresses are provided on the site, Internet users might be able to contact the Website owner to buy the products or services advertised, or otherwise communicate with the Website owner. A plaintiff might therefore argue that maintaining a Website makes it “foreseeable” to the non-resident that as a result of the site, its products or services might end up in that forum. However, it is well-established that foreseeability alone cannot serve as the constitutional benchmark for personal jurisdiction. “The foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum state. Rather, it is that the defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being hauled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559 (1980)(emphasis added). See also, Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 112, 107 S. Ct. 1026 (1987)(the “placement of a product in the stream of commerce, without more, is not an act the defendant purposefully directed toward the forum State.”). Therefore, most courts considering this issue have concluded that an essentially passive Web presence, without more, is insufficient to establish jurisdiction.

As generally used by the courts, a “passive” Website is one which posts information only, and simply is used to advertise goods and services. See, e.g., Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Penn. 1997). Some courts suggest that by providing phone numbers, postal addresses, or email addresses, the site is no longer passive, since a Web surfer can use that information to consummate a transaction with or otherwise communicate with the Website owner. However, since Georgia case law suggests that mere telephone or mail contact with forum residents, or simply placing an advertisement that might reach the forum is not sufficient, by itself, to confer jurisdiction, having contact information on a Website should not alone be sufficient to create the jurisdictional nexus. See, e.g., Wise v. State Board of Architects, 247 Ga. 206, 209, 274 S.E.2d 544 (1981)(mere telephone or mail contact is not sufficient to create jurisdiction); Gust v. Flint, 257 Ga. 129, 356 S.E.2d 513 (1987)(placing advertisements in national newspapers is insufficient to support jurisdiction in Georgia). Some illustrative and representative cases follow:

Mink v. AAAA Dev., 190 F.3d 333 (5th Cir. 1999) (jurisdiction not proper were Website provided users with a printable mail-in order form, a toll-free telephone number, a mailing address and an e-mail address, but orders were not taken through the Website)

Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292, 1296 (10th Cir. 1999)(passive Website that merely provided information to interested viewers)

GTE New Media Services Inc. v. BellSouth Corp., 199 F. 3d 1343, 1346 (D.C. Cir. 2000)(“mere accessibility to an Internet site” is not enough for jurisdiction)

Ty Inc. v. Clark, 2000 U.S. Dist. LEXIS 383 (N.D. Ill. 2000)(no jurisdiction found were defendants’ Website allowed consumers to exchange information with defendants, but did not allow consumers to order or purchase products on-line, and contracts could not be formed over the Website)

Uncle Sam’s Safari Outfitters Inc. v. Uncle Sam’s Army Navy Outfitters-Manhattan, Inc., 2000 U.S. Dist. Lexis 6523 (S.D.N.Y. 2000)(the mere operation of a non-interactive Website without “something more” does not establish personal jurisdiction)

IDS Life Ins. Co. v. SunAmerica, Inc., 958 F. Supp. 1258, 1268 (N.D. Ill. 1997)(“Plaintiffs ask this court to hold that any defendant who advertises nationally or on the Internet is subject to its jurisdiction. It cannot plausibly be argued that any defendant who advertises nationally could expect to be hauled into court in any state, for a cause of action that does not relate to the advertisements.”), aff’d in part, vacated in part on other grounds, 136 F.3d 537 (7th Cir. 1998)

SF Hotel Co. v. Energy Investments, 985 F. Supp. 1032, 1035-36 (D. Kan. 1997) (no jurisdiction where defendant maintained a passive Website providing general information about its hotel)

Transcraft Corp. v. Doonan Corp., 45 U.S.P.Q. 2d 1097 (N. D. Ill. 1997)(Website containing email contact information was insufficient to create personal jurisdiction).

Bensusan Restaurant Corp. v. King, 937 F. Supp. 295, 301 (S.D.N.Y. 1996), aff’d 126 F.3d 25 (2d Cir. 1997)(In a copyright infringement action, a New York court refused to exercise personal jurisdiction over a Missouri corporation whose Website contained general information about the defendant’s club, a calendar of events and ticket information. “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”).

McDonough v. Fallon McElligott, Inc., 40 U.S.P.Q.2D (BNA) 1826 (S.D. Cal. 1996)(“allowing computer interaction via the Web to supply sufficient contracts to establish jurisdiction would eviscerate the personal jurisdiction requirement as it currently exists.”)

“Plus Factors” that May Tip the Scales in Favor of Exercising Jurisdiction

The difficult cases are those in the middle of the “sliding scale” identified in Zippo, where the courts must make a very fact-specific analysis to determine whether the non-resident defendant has ‘purposely availed’ itself of the privileges of doing business in the forum, such that it is foreseeable and not unreasonable that the defendant be hauled into court in a foreign jurisdiction. Often, the court will focus on whether the Website is ‘interactive’, e.g. whether the user can place orders or enter into a contract through the site, contact and communicate with the owner of the site, or whether the site requires payment of a subscription or fee before usage. In many of these cases, it is the non-Internet activity of the defendant, when coupled with its Internet activity, which courts rely upon in asserting jurisdiction. In determining whether to exercise jurisdiction, the courts often question whether the defendant undertook ‘deliberate action’ within the forum, whether the conduct of the defendant was ‘purposefully directed’ at residents of the forum, whether defendant’s activities in the forum were ‘substantial’, ‘continuous’, ‘systematic’, or ‘substantive’, or whether the forum was ‘targeted’ by the defendant’s Website. Some illustrative and representative cases follow:

Jurisdiction Found

Intercon, Inc. v. Bell Atlantic Internet Solutions, Inc., 205 F.3d 1244 (10th Cir. 2000) (Oklahoma court exercises jurisdiction over Delaware defendant, which despite notice, failed to correct error which mistakenly routed its e-mail customers to plaintiff’s mail server in Oklahoma)

Compuserve v. Patterson, 89 F.3d 1257 (6th Cir. 1996) en banc reh’g denied, 1996 U.S. App. LEXIS 24796, (Ohio court exercises jurisdiction over a Texas resident who entered into a contract over the Internet to distribute software through Compuserve’s Internet server located in Ohio)

Stomp, Inc. v. NeatO, LLC, 61 F. Supp. 2d 1074, 1078 (C.D. Cal. 1999)(California court asserts jurisdiction over a Connecticut defendant whose Website provided information about the company, customers, service, and technical support, and facilitated on-line purchases of defendant’s products. The court concluded that the site functioned as a “virtual store” where “consumers [could] view descriptions, prices, and pictures of various products . . . [and could] add items to their ‘virtual shopping cart’ and ‘check out’ by providing credit card and shipping information.”)

Thompson v. Handa-Lopez, Inc., 998 F. Supp. 738, 744 (W.D. Tex. 1998) (Texas Court exercised specific personal jurisdiction over California corporation that operated Internet casino. The Texas plaintiff played casino games while in Texas, the site continuously interacted with casino players, and permitted contracts to be entered into by casino players)

Telephone Audio Prods., Inc. v. Smith, 1998 U.S. Dist. LEXIS 4101, 1998 WL 159932 (N.D. Tex. Mar. 26, 1998)(Texas court exercised specific personal jurisdiction over Ohio partnership which maintained Website that contained an allegedly infringing trademark, accessible to Texas residents, attended trade show in Dallas at which infringing mark was displayed, received orders from distributors in Houston and Dallas, and advertised in magazine available in Texas)

Vitullo v. Velocity Powerboats, Inc., 1998 U.S. Dist. LEXIS 7120, 1998 WL 246152 (N.D. Ill. 1998), partial summary judgment granted on other grounds, 2000 U.S.Dist. LEXIS 5840 (N.D.Ill. 2000), (Illinois court exercises jurisdiction over Florida corporations in a products liability action. Defendants’ Website solicited residents to attend their “local boat show” and view defendants’ boats, and also provided a hyperlink with information about a boat show within the forum state)

Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1125-26 (W.D. Penn. 1997)(Pennsylvania court exercises jurisdiction over California corporation where defendant contracted with approximately 3,000 individuals and several Internet access providers in the forum state)

Gary Scott International, Inc. v. Baroudi, 981 F. Supp. 714 (D. Mass. 1997) (Massachusetts court exercises jurisdiction over California defendant based on sales of infringing products to Massachusetts retailer in addition to Website advertising)

Heroes, Inc. v. Heroes Foundation, 958 F. Supp. 1, 3-5 (D. D.C. 1996) (District of Columbia court asserts jurisdiction over new York non-profit organization based on Website and advertisement in local newspaper soliciting donations)

Jurisdiction Lacking

Berthold Types Ltd. v. European Mikrograf Corp., 2000 U.S. Dist. LEXIS 6544 (N.D. Ill. 2000)(Illinois court refuses to exercise jurisdiction over German corporation. “Customers may submit suggestions [to defendant’s site] for improving services, may link to on-line service manuals, are provided a list of contact persons, and may download updates on Helios’ activities. However, this level of interactivity is insufficient to enable the exercise personal jurisdiction over defendants on the basis of their Internet activities. The exercise of jurisdiction is ultimately determined by examining the level of interactivity and the commercial nature of the exchange of information. While the Helios site does provide information on ordering products, Helios makes no commercial response to customers’ submissions. At most, Helios uses the information provided by customers to improve its site and services.”)

Molnlycke Health Care AB v. Dumex Medical Surgical Products Ltd., 64 F. Supp. 2d 448, 451 (E.D. Pa. 1999) (rejecting the argument that there was general jurisdiction based on the operation of a Website: “to hold that the possibility of ordering products from a Website establishes general jurisdiction would effectively hold that any corporation with such a Website is subject to general jurisdiction in every state. The court is not willing to take such a step.”)

Edberg v. Neogen, 17 F. Supp. 2d 104 (D. Conn. 1998)(Interactive site which allowed users to order product information and send electronic mail to defendant’s representatives. The court found that no evidence suggested that any user in the forum state accessed the defendant’s Website or purchased products based on the Website.)

E-Data Corp. v. Micropatent Corp., 989 F. Supp. 173, 176 n.2 (D. Conn. 1997)(plaintiff failed to offer any evidence “that any Connecticut resident ever accessed” defendant’s Website to purchase photographic images.)

Activities Which Permit the Court to Assert Specific Jurisdiction Based on the Internet Conduct of Defendant

At the far end of the Zippo “sliding scale” are those cases in which the defendant’s Internet activity in the forum permit the court to assert specific jurisdiction over the defendant under a traditional jurisdictional analysis. Cases arising from contracts entered into within the forum, or affecting the forum, often fall within this category. In addition, claims asserting trademark infringement, patent infringement, defamation, slander, and tortious interference with contractual relations seem particularly well suited for the finding of jurisdiction. In these latter cases, jurisdiction may attach if the defendant’s Internet conduct is aimed at or has an effect in the forum state.

Many of these cases are based on the “effects test” articulated in Calder v. Jones, 465 U.S. 783, 788-90, 104 S. Ct. 1482 (1984), where the Supreme Court found personal jurisdiction could properly be asserted over a defendant whose libelous actions were directed at the plaintiff resident of the forum state.

Some illustrative cases:

Defamation

Georgia’s Long Arm Statute:

Note that Georgia’s Long Arm Statute excludes from the scope of long-arm jurisdiction “a cause of action for defamation of character arising from [a tortious act or omission within this state]” O.C.G.A. §9-10-91(2). The Supreme Court has held that subsection (2) precludes all long arm jurisdiction in defamation cases. Bradlee Management Services, Inc. v. Cassells, 249 Ga. 614, 292 S.E.2d 717 (1982). However, “Georgia courts do have jurisdiction over nonresident defendants in defamation cases when there exist requisite minimum contacts other than the commission of the tort itself.” Id. at 292 S.E.2d 720. Accord, Process Control Corp. v. Witherup Fabrication & Erection, Inc., 439 F. Supp. 1284 (N. D. Ga. 1977). Therefore, the Calder “effects test” has no application in Georgia, and unlike many of the cases cited below, a defaming non-resident defendant cannot be hauled into a Georgia court based solely on the act of defamation.

Defamation cases from other jurisdictions:

Amway Corp. v. The Procter & Gamble Company, 2000 U.S. Dist. LEXIS 372 (W.D. Mich. 2000)(defendant had taken intentional actions, aimed at the forum state, and those actions caused harm, the brunt of which was suffered, and which the defendant knew was likely to be suffered, in the forum state)

Blumenthal v. Drudge, 992 F. Supp. 44 (D.D.C. 1998) (defendant’s Web page focused primarily on political gossip and rumor in Washington, D.C., and targeted readers in Washington, D.C.; further, defendant’s Website was not truly passive because it allowed readers to directly e-mail defendant and to request subscriptions to his report.)

Bochan v. LaFontaine, 68 F. Supp.2d 692 (E.D. Va. 1999)(Virginia resident sued out of state defendants for posting allegedly defamatory material on servers in Virginia via “AOL,” jurisdiction found on the basis that a tort had occurred in Virginia)

TELCO Communications v. An Apple A Day, 977 F. Supp. 404 (E.D. Va. 1997)(defendants were subject to personal jurisdiction in Virginia for posting an allegedly defamatory press release regarding the Virginia plaintiff on a passive Internet site because defendants should have known that the press release would be received in Virginia and would cause injury there)

Edias Software International, L.L.C. v. Basis International. Ltd., 947 F. Supp. 413 (D. Ariz. 1996) (Arizona court exercised jurisdiction over New Mexico resident who sent defamatory messages directed at forum).

But see, Lofton v. Turbine Design, Inc., 2000 U.S. Dist. LEXIS 4593 (N.D. Miss. 2000)(Mississippi Court did not have jurisdiction over claim asserting that allegedly defamatory statements were made about Mississippi corporation; Website was passive and the primary focus of the statements was a Tennessee shareholder); Bailey v. Turbine Design, Inc., 86 F. Supp. 2d 790 (W. D. Tenn. 2000)(Tennessee Court did not have jurisdiction when defendant’s passive Website merely posted the allegedly defamatory statements on the site. There was no evidence that defendant had any contacts with Tennessee other than the posting of the site, the allegedly defamatory actions were not expressly aimed at Tennessee, and no effort was made to reach out to Tennessee more than any other state).

Trademark Infringement

Jurisdiction over infringers has often been premised upon the concept that the infringement is a tortious act within the state sufficient to confer long-arm jurisdiction. See, e.g., H.K. Corp. v. Louder, 336 F. Supp. 79 (N.D. Ga. 1971)(trademark infringement in Georgia held to be a “tortuous injury” in the state by an “act or omission” outside the state by one who “derives substantial revenue” from goods sold in the state). Cases from other jurisdictions apply a similar analysis when a Website or other Internet activity allegedly infringes upon a trademark.

Jurisdiction Found

Panavision v. Toeppen, 141 F.3d 1316, 1322 (9th Cir. 1998)(California Court had jurisdiction over Illinois resident because of Defendant’s intentional reservation of Plaintiff’s trademarks as domain names, “knowing that this would likely injure [Plaintiff] in California”).

Cello Holdings, L.L.C. v. Lawrence-Dahl Companies, 89 F. Supp. 2d 464 (S.D. N.Y. 2000)(personal jurisdiction could be exercised where defendant allegedly engaged in a scheme to register plaintiffs’ trademark name for purposes of extorting money from plaintiffs)

Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Penn. 1997)(defendant who entered into ongoing contracts with subscribers and Internet service providers to allow subscribers to view and download newsgroup messages from defendant’s Website was subject to specific jurisdiction in Pennsylvania, where trademark injury occurred)

Jurisdiction Lacking

Perry v. Righton.com, 90 F. Supp. 2d 1138 (D. Or. 2000) (Oregon Court refused jurisdiction where defendant did not engage in any national advertising in Oregon, did not direct any marketing activities toward Oregon, did not sell any product or service in Oregon, and did not accept inquiries from Oregon residents for the sale of any product or service. Plaintiff offered no evidence that defendant intentionally directed its acquisition of the “righton.com” domain name at plaintiff’s business in Oregon, with knowledge that plaintiff would be, or was likely to be, harmed. Defendant was unaware of plaintiff’s business and plaintiff’s claimed right to the “Righton” trademark at the time defendant selected the domain name)

Copyright Infringement

Colt Studio, Inc. v. Badpuppy Enterprise, 75 F. Supp. 2d 1104 (C.D. Cal. 1999)(defendant who entered into continuing contractual relationships with subscribers that allowed subscribers to access members-only area of defendant’s Website and download photographs was subject to personal jurisdiction in California)

CYBERSQUATTING – In Rem Jurisdiction

The Anticybersquatting Consumer Protection Act, 15 U.S.C.  §1125(d) amended Section 43 of the Lanham Act to add subsection (d). The Act is directed to domain name registrants who acquire or use a domain name containing a trademark “with a bad-faith intent to profit” from the use of such mark.

Trademark holders often found that the persons listed as owners of the domain name were fictitious, and/or located in foreign jurisdictions. Personal jurisdiction over the owner of the domain name was therefore often impossible to acquire. As an alternative strategy, one trademark owner filed a “in rem” lawsuit, seeking to attach and gain possession of the “res” — the underlying registration certificates for the offending domain names. However, the case was dismissed for lack of jurisdiction. The Court concluded that the Trademark Dilution Act, 15 U.S.C. §1125(c) could not be read to permit in rem action, and further, that an in rem adjudication raised substantial due process concerns. Porsche Cars North America, Inc. v. Porsche.com, 51 F. Supp. 2d 707 (E. D. Va. 1999).

To address these problems, the Anticybersquatting Act authorized an in rem action against the domain name. 15 U.S.C. §1125(d)(2)(a). The remedies in such an in rem action are limited to (a) the forfeiture or cancellation of the domain name, or (b) transfer of the domain name to the mark’s owner. The in rem action is available if the holder of the domain name is not subject to personal jurisdiction in a federal civil action or cannot be found. The venue for the in rem action is the district in which the domain name registrar, domain name registry, or other authority that registered or assigned the domain name is located. The action can be brought against multiple defendants if those defendants all use the same registrar. See, e.g., Caesers World, Inc. v. Caesars-Palace.com, 2000 U.S. Dist. LEXIS 2671 (E.D. Va. 2000)(court denies defendants’ motion to dismiss in rem action alleging constitutional defects in statute); Lucent Technologies, Inc., v. Lucentsucks.com, 2000 U.S. Dist. LEXIS 6159 (E.D. Va. 2000)(Defendant’s motion to dismiss plaintiff’s in rem action granted; plaintiff was not entitled to proceed in rem because the identity and address of the registrant of defendant domain name had been found and in personam jurisdiction was possible.)

PRACTICE POINTERS

Website Development Considerations

Potential defendants should be able “to structure their primary conduct with some minimum assurance as to where the conduct will and will not render them liable to suit.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559 (1980) cert denied, 502 U.S. 1091, 112 S.Ct. 1160 (1992).

Venue and Jurisdiction Selection Clause

In the terms and conditions of use of the site, consideration should be given to including a venue and jurisdiction selection clause which visitors to the site must ‘click accept’ before any purchases, postings, or other interactive activities can be performed via the site.

A suggested venue clause follows:

This Agreement shall be deemed to have been made in the United States in the State of Georgia and shall be construed and enforced in accordance with, and the validity and performance hereof shall be governed by, the laws of the State of Georgia, without reference to principles of conflicts of laws thereof. To the fullest extent permitted by law, Purchaser/Subscriber hereby consents to submit to the jurisdiction of the courts of or for the State of Georgia in connection with any action or proceeding arising from or related to this Agreement.

In Harry S. Peterson Co. v. National Union Fire Ins. Co., 209 Ga. App. 585, 434 S.E.2d 778 (1993), the Georgia Court of Appeals adopted the United States Supreme Court’s analysis regarding the enforcement of forum selection clauses in Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907 (1972). Such clauses are prima facie presumptively valid and should be enforced unless the opposing party shows that enforcement would be unreasonable under the circumstances. Id. at 10. To invalidate such a clause, the opposing party must show that trial in the chosen forum will be so inconvenient that he will, for all practical purposes, be deprived of his day in court. Id. at 18. A freely negotiated agreement should be upheld absent a compelling reason such as “fraud, undue influence, or overweening bargaining power.” Id. at 12. See generally, Iero v. Mohawk Finishing Products, 2000 Ga. App. LEXIS 525 (April 20, 2000); Antec Corporation v. Popcorn Channel, L.P., 225 Ga. App. 1, 482 S.E.2d 509 (1997).

Blocking Access from Certain Forums

Presumably, technology exists by which the Website can be inaccessible to visitors from certain forums, or alternatively, the Website can be configured to refuse to accept orders or purchases from certain forums.

Notify Visitors that the Site’s Product and Services are Available Only in Certain States

The Website may contain disclaimer language advising that the products and services offered are not available in certain states. See, e.g., Millennium Enterprises, Inc. v. Millennium Music, 33 F. Supp. 2d 907, 909 (D. Or. 1999). Any such restrictions should be enforced vigorously and without exception.

LITIGATION/DISCOVERY CONSIDERATIONS

Plaintiff Cannot Manufacture Jurisdiction

The courts generally reject efforts by plaintiffs to contact defendants through the Website to induce defendant to conduct business in the forum. Millennium Enterprises, Inc. v. Millennium Music, 33 F. Supp. 2d 907, 911 (D. Or. 1999)(“no confusion and no harm or loss resulted from one commercial sale orchestrated by plaintiff through an acquaintance of counsel. Such questionable and unprofessional tactics cannot subject defendants to jurisdiction in this forum.”); Edberg v. Neogen Corp., 17 F. Supp. 2d 104, 112 (D. Conn. 1998)(“Only those contacts with the forum that were created by the defendant, rather than those manufactured by the unilateral acts of the plaintiff, should be considered for due process purposes.”).

Discovery in Support of Jurisdiction

In response to a Motion to Dismiss, Plaintiff should move to delay ruling on the motion, and move for leave to engage in limited discovery to prove jurisdiction. See, e.g., Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir. 1999).

Discovery Directed to Assessing Jurisdiction Defendant’s Internet Activities

Is the defendant’s Website a ‘virtual store’ that permits a visitor to order goods or services?

Does the defendant’s Website permit payment by credit card, electronic transfer, or other third party payment methods?

Does the defendant’s advertising promoting its site target the forum?

How may ‘hits’ have been received from the forum?

What is the volume of business derived from the forum state through the Internet, and what is the percentage of defendant’s total sales that are derived from Internet sales in the forum.

Is the defendant’s Website an interactive form that permits the visitor to communicate with the defendant via email?

Does the defendant’s Website permit the visitor to leave his/her name, address, telephone number, fax number, e-mail address, and/or provide the opportunity for the visitor to engage in other interactive contact with the site operators?

Does the defendant’s Website have hypertext links to e-mail the defendant directly?

Has the defendant had significant interaction with residents of the forum, via email or other contact developed through the Website?

Is the defendant’s Website one with requires payment of a membership fee, purchase of a subscription, does it require passwords, or otherwise limit access? If so, are a significant number of members or subscribers residents of the forum?

Does the defendant’s Website permit third-party companies to receive ‘click-through’ referrals through the Internet? Does defendant generate revenue as a result of such ‘click-through’ referrals?

Is defendant’s computer server located in the forum state?

Are a significant number of advertisers on defendant’s Website residents of the forum?

Is the content of defendant’s Website focused on local matters in the forum state (e.g., maps and directions to a business location; discussion of matters of purely local interest), or is its content generally useful to any Web Internet user?

Defendant’s General Non-Internet Activities

What portion of defendant’s revenues/profits are attributable to business with forum residents?

Has defendant obtained necessary licenses to conduct business in state?

Does the defendant own, lease, or control real or personal property in the state?

Does the defendant have employees/representatives in state?

Does the defendant have offices in the state?

Does the defendant have telephone number listings in the forum state, including ‘800’ or ‘900’ numbers targeted to residents of the forum state?

Does the defendant have resellers/retailers/distributors of product in the state?

Does the defendant have suppliers located in forum state?

Has the defendant attended trade shows in forum state?

Does the defendant target its advertising specifically at the state?

Have defendant’s personnel traveled to state on business?

Has defendant made offers to sell its products or services to citizens of state?

Has the defendant paid taxes in the forum state?

Does the defendant make continuous and regular purchases from the forum state?

Does the defendant maintain a bank account in the state?

Do shareholders of the defendant reside in the state?

The information above is provided for general educational purposes and not as legal advice. Laws in areas in which we practice change continually and also vary from jurisdiction to jurisdiction. Therefore no visitor to our site should rely on any of the articles provided for legal advice, but should always consult their own attorney regarding legal matters.

* Robert C. Port is a partner with Cohen Goldstein Port & Gottlieb, LLP, Atlanta, Georgia, where he practices business litigation, securities arbitration & general litigation. He received his J.D., with Honors, from the University of North Carolina in 1983.

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About Rob Hassett

Rob Hassett is an attorney in technology, entertainment and corporate law with Hassett Law Group/Business Law Partners in Atlanta, GA. He is a co-author of a leading volume on internet and interactive media law and has taught many classes in the professional education program at Georgia Tech.

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