Doing Business On The Web: Jurisdiction Over Interactive Websites

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The global reach of the Internet raises the possibility that online activities can subject businesses to the jurisdiction of courts in far-flung places. The rules for Internet-based jurisdiction are still being spelled out by U.S. courts. The general rule emerging is that operation of an active Web site, where one actually transacts business through the Web site, is sufficient to confer “general jurisdiction” over the site’s owner; that is, to subject the site’s owner to all lawsuits of any sort, whether or not related to the Web site’s activities. The theory of general jurisdiction is that the defendant is constructively present in the state by reason of doing business with that state’s citizens, albeit from a distant locale.

At the other end of the continuum are passive Web sites, which only advertise or provide information to online visitors. Most courts have held that passive Web sites do not provide a basis for jurisdiction. But what about Web sites that provide some limited level of interactivity, such as allowing email exchanges or allowing or requiring visitors to submit personal information?

A court recently answered this question and held that such limited interactivity is not sufficient to confer jurisdiction. In Hurley v. Cancun Playa Oasis International Hotels, No. Civ.A. 99-574, 1999 WL 718556 (E.D. Pa. Aug. 31, 1999), the plaintiff, a Pennsylvania resident, was injured while staying at a hotel in Cancun, Mexico. He sued the U.S. agent for the hotel, a Georgia corporation, in the plaintiff’s home state of Pennsylvania.

The defendant moved to dismiss based on lack of personal jurisdiction. In the ruling on the motion to dismiss, the court said that Web sites fall under three categories: (1) those that actually conduct business over the Internet, (2) those that allow exchange of information with the Web site, and (3) those that merely post information or advertisements.

The court held that jurisdiction generally exists in the first category and does not exist in the third. However, in the second category, whether jurisdiction exists “is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site.” Id. at *2 (citation omitted).

The court examined the particular site’s level of interactivity and the extent of its contacts with Pennsylvania residents and held that these contacts were not sufficient to confer general jurisdiction. The site accepted and confirmed reservations online, advertised a toll-free number for telephone reservations, and allowed email exchanges with the site’s owner. The court found no evidence in the record that these interactive contacts with Pennsylvania residents were sufficiently “continuous, systematic, and substantial” to support general jurisdiction. Id. at *3.

Note that this case might have come out differently had the plaintiff’s claim arisen out of his contacts with the Web site, but the court was not called upon to reach this issue, because the plaintiff had never visited the defendant’s site. What if the plaintiff had booked his reservation on the site? What if he had read the on-site ads and then called the toll-free number to book his room? Answers to questions such as these will have to await future cases.

For two other cases involving limited-interactivity Web sites, see Molnlycke Health Care AB v. Dumex Medical Surgical Products Ltd., 64 F. Supp. 2d 448 (E.D. Pa. 1999) (no jurisdiction in patent infringement case where defendant advertised his products on site and allowed purchases directly from site, but no evidence of significant sales in Pennsylvania), and Mink v. AAAA Development LLC, 190 F.3d 333 (5th Cir. 1999) (no jurisdiction over copyright infringement case where defendant’s site advertised allegedly infringing software code but had made no sales into Texas).

The application of Internet jurisdictional rules to defamation cases is equally interesting and equally controversial. See Jere M. Webb, “Defamation on the Internet: Risks of Getting Hauled into Court in Distant Locations,” . In Alternate Energy Corp. v. Redstone, 328 F. Supp. 1379 (S.D. Fla. 2004), the court held that the sale of online subscriptions was not a sufficient basis to create personal jurisdiction in online libel cases. The court applied the Internet jurisdiction test set forth in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997), which held that engaging in commercial activity over the Internet constitutes sufficient minimum contacts to satisfy due-process requirements, but that posting information on the Internet does not. In Alternate Energy, the court noted that “the Fifth Circuit has held that selling subscriptions to view an informational website does not constitute sufficient commercial activity to invoke jurisdiction under Zippo for a defamation action, when the cause of action[ ] arises out of the information posted on the site. Revell v. Lidov, 317 F.3d 467 (5th Cir. 2002). The [Revell] court held that because the cause of action did not arise out of the solicitation of subscriptions, the defendant’s solicitation activity could not give rise to jurisdiction.” 328 F. Supp. 2d at 1382. The court held that “selling subscriptions to an internet site to an unknown, relatively small number of Florida residents, without more, does not constitute carrying on a business in Florida. . .and does not constitute the commission of a tortious act in Florida . . . .” The case law is split on the proper test for jurisdiction in Internet-based defamation cases. This issue is of considerable importance, because if simply publishing on the Internet triggers jurisdiction in any country where content is read, Web site owners and Internet publishers will need to “dumb down” their content in order to satisfy the laws of the most stringent jurisdictions or else face lawsuits that could lead to judgments that would put them out of business.

For now, the lesson is this: If you operate an interactive Web site, you are submitting yourself to the possibility of having to defend lawsuits in distant jurisdictions, both in the United States and abroad.

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