Under an emerging body of law, jurisdictional defenses may be eroding for companies with Internet sites that are sued in states where they don't operate.
Nevertheless, the argument was thrown out by a federal judge in Boston. He held that Clue Computing's Web site advertised the company's services to Massachusetts residents, constituting grounds to be sued in that state.
Under an emerging body of law, such jurisdictional defenses--among the oldest in the books--may be eroding for companies with sites on the Internet. The consequences of the ruling, and a dozen or so like it, could be dramatic.
Jurisdictional defenses--which have their roots in the Constitution's due process protections, as well as in "long-arm" statutes penned by each state--help insure companies against the exorbitant expense of being hauled into foreign territories every time a competitor there has a legal gripe.
Essentially, the plaintiff is required to show that the defendant has some connection to the state that is hearing the case. Without showing such evidence, the court is said to lack jurisdiction and the case is dismissed outright.
The Hasbro decision is one of three released since August holding that a company's Internet presence is sufficient contact with an outside state to land it in court there. Another three decisions released during the same period, though, swing the other way, demonstrating that the rule is not cast in stone. (A number of the decisions are available at the Bureau of National Affairs' document library.)
"At this point, there is a significant risk every time you put up a Web page that you could be sued anywhere in the world," said Mark Lemley, an associate professor specializing in Internet issues at the University of Texas School of Law. "There are enough courts that now take that position that I don't think that fear can be discounted."
"The trend in the court decisions is to find jurisdiction where the Web site is more interactive, where it actively seeks to encourage viewers to interact with the site, or [where it] indicates a willingness to reach out to the viewers in some way," said James Jordan, a lawyer at Alston & Bird in Atlanta.
Jordan pointed to a recent decision involving two competing jazz clubs both named The Blue Note. As recently reported, a federal appeals court last month upheld a lower court decision throwing out the case, in which the Manhattan club claimed that the Web page of its Missouri counterpart committed trademark infringement. The ruling held that The Blue Note Cyberspot merely provided information to New Yorkers about the Missouri club and therefore the case could not be heard in that state.
"Passive Web sites are less likely to create jurisdictional contact than active sites," said Jordan.
"There is no magic bullet solution that I can tell a client [to] keep them out of the courts," said Eric Schlachter, an attorney at Cooley Godward in Palo Alto, California. Schlachter did add that a Web site has a better chance of constituting a contact with a foreign territory if it is directly related to the injury the plaintiff is complaining about in the suit.