Court upholds ruling on Net jurisdiction

Under the Constitution, a Web site advertising a Florida company's services is not enough grounds to land its owners in court thousands of miles away in Arizona, according to a federal appeals court ruling today.

The decision, handed down by the Ninth Circuit U.S. Court of Appeals, adopts reasoning set out in a similar ruling by a separate federal appeals court in New York. Both courts ruled that despite their worldwide reach, noninteractive Internet sites are like print ads in a magazine: They do not establish the necessary contacts with another state to create legal jurisdiction.

But unlike the earlier appellate ruling, which hinged on New York law and involved trademark rights over a Manhattan jazz nightclub known as the Blue Note, today's decision is rooted in due process guarantees provided by the Constitution. Hence, today's decision will have a broader effect, two professors specializing in Internet law explained.

"This decision said, 'This is what the Constitution requires, that it violates due process for people to be hailed into court in Arizona when all they've done is put up a Web site in Florida,'" said Eugene Volokh, a law professor at the University of California at Los Angeles. The Blue Note case, by contrast, "was about New York law. It was relevant in New York but not even in Connecticut."

The case involved two Internet consulting companies that both went by the name Cybersell. When one of the companies, located in Arizona, tried to register a domain name in late 1995, it discovered that a Florida company had already done so. The Arizona company sued in an Arizona federal court for trademark infringement. A judge later dismissed the case on the grounds that the mere presence of the Florida company's site did not make it subject to Arizona's laws.

The Ninth Circuit Court agreed, noting that all the site did was advertise the Florida company's services. "[Florida] Cybersell's contacts are insufficient to establish 'purposeful availment,'" the three-judge panel ruled. "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."

While jurisdictional laws vary from state to state, the Constitution offers a base level of protection that must be followed across the board. David Post, a law professor at Temple University and the codirector of the Cyberspace Law Institute, agreed with Volokh, saying the constitutional interpretation gives the decision significantly more weight.

"If [under constitutional law] these guys were subject to jurisdiction in Arizona, then they would be subject to jurisdiction everywhere in the United States," he added.

The decision is at odds with a Minnesota state court ruling issued last December, holding that the state had jurisdiction over a Nevada Web site accused of false advertising. The state claimed that the site posted an ad on the Net implying that gambling is legal in Minnesota, when in fact it is not. (See related report)

Minnesota resides outside the Ninth Circuit's reach, so today's ruling isn't binding there. Still, Volokh said, the decision carries a great deal of persuasive weight because it comes from an appeals court, and lawyers for the Nevada site, Wager Net, are likely to cite the decision when appealing their case.

While both Volokh and Post described the latest ruling as good for the Net, they warned that today's decision--in addition to the Blue Note decision--may be narrowly applied. That's because the judges in both cases stressed the passive nature of the defendants' Web sites, whereas a great many Internet sites attempt to engage users with features such as email lists and search and retrieval services.

"The courts' decisions are formally limited to the passive sites, and as sites become more and more interactive it's not clear that these cases will apply there," Volokh said.

"There seems to be a trend emerging that interactivity is critical" to finding jurisdiction in a foreign state, Post added. "Sites that just sit there like advertisements are not enough to subject their owners to personal jurisdiction anywhere they can be accessed."

In an interesting side note, this is not the first time the owners of the Arizona company have had a major effect on the evolution of the Internet. It turns out that immigration lawyers Laurence Canter and Martha Siegel made headlines some three years ago when they were the first commercial outfit to spam thousands of newsgroups, setting off a tidal wave of protest and copycats.