Personal Jurisdiction and The Internet

Computer and Gavel | Blog Law

This post is part of a series of posts entitled A Legal Guide to the Internet. For a comprehensive list of articles contained in this series, click here.

Traditional tests of personal jurisdiction are applied to cases involving Internet activity. Presence on the Internet will not automatically subject one to jurisdiction anywhere. Recent cases indicate that merely posting information on a web site with no contact or interaction with the forum state will not subject one to jurisdiction. See Bensusan Restaurant Corp. v. King, 937 F.Supp. 295 (S.D.N.Y. 1996). There must be more. Basically, courts must consider whether messages on a web page that are available to residents of a jurisdiction have been “deliberately directed toward the forum” or have merely arrived there through no direct intention of the defendant.

In a Minnesota case, Minnesota v. Granite Gate Resorts, 568N.W.2d715 (Minn. Ct. App. 1997), the court determined that Minnesota had jurisdiction over an out-of-state company whose web site solicited gambling by Minnesota residents. In Granite Gate, a company opened an Internet on-line gambling service from Belize called “WagerNet.” In order to access “WagerNet,” one first had to pay a $100 set-up fee to receive certain necessary hardware and software. In addition, members were to place at least $1,000 into an account to cover their bets. The WagerNet fee for handling bets was 2-1/2%, and, after paying this fee, one could bet on-line. To attract customers, WagerNet advertised its service on the Internet at the Web site: The web site included several disclaimers and several telephone numbers that prospective members could call to be placed on a mailing list in order to receive information. The Minnesota Attorney General took the position that on-line betting violated both federal law and Minnesota law and filed suit in Minnesota against Granite Gate.

In Granite Gate, the court found that based upon the extent and nature of the Internet advertising, the defendant had sufficient “minimum contacts” with the forum state, and could “reasonably anticipate being hailed into court in Minnesota.” The court further held that “maintenance of the suit in the forum state [would not] offend traditional notions of fair play and substantial justice.” In reaching its conclusion, the court considered that the Internet advertisement was available “24 hours a day, seven days a week to any Internet user.” In addition, the court also considered WagerNet’s intent to reach potential customers in Minnesota, as well as the inclusion of numerous Minnesota residents on its mailing list.

Ordinarily, a state’s jurisdiction is limited to people, businesses, transactions, events, or other occurrences within the state’s geographical territory. Astate may, however, exercise its right to assert jurisdiction over non-residents to the extent such parties transact business within the state, commit illegal acts within the state, own or possess real property within the state, make or perform a contract within or connected to the state, breach a fiduciary duty within the state, or do any other act giving rise to personal jurisdiction in accordance with the state’s laws. Any business conducting activities through the Internet must therefore assume that it may be subject to jurisdiction in another state. To avoid liability, a business might consider specifically identifying on its web site that its offer is limited to specific states. If the web site merely contains information and is not interactive, it may not provide the minimal contacts necessary to trigger jurisdiction. If, however, direct mailings and toll free telephone numbers are combined with promotion over the Internet, courts may assert jurisdiction. Finally, by incorporating the business activities related to the Internet separately from the company’s regular business operations, the business might be able to shield its core assets from liability. Jurisdictional issues related to the Internet are particularly difficult to predict since such cases will depend upon the specific facts and circumstances of each situation. It is fair to say, however, that any company doing business on the Internet should consider that it is now essentially a global business that might be sued in any court and in any territory where its presence becomes known.

The following four themes have emerged from the growing body of case law related to jurisdiction on the Internet:

  • Deriving revenue from forum equals jurisdiction Revenue producing activities on the Internet that result in revenue earned in the forum district may result in a finding of. personal jurisdiction. See CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996).
  • Sliding Scale established for Internet sellers The more completely the transaction of business can take place on-line, the more likely that the court will assert jurisdiction based on the on-line activities, Minnesota v. Granite Gate Resorts Inc., 568 N.W.2d 715 (Minn. Ct. App. 1997). Passive web sites that only provide information about the defendant are not likely to be a sufficient basis for personal jurisdiction in a forum state where the defendant does not conduct business. See Cybersell, Inc. v. Cybersell, Inc., 44 U.S.P.Q.2d 1928 (9th Cir. 1997). There are, however, several exceptions where passive Internet sites of out-of-state defendants were found sufficient to establish personal jurisdiction. See Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1328 . (E.D. Mo. 1996).
  • Effects test of torts applied The “Effects test” is applied where trademark infringement, defamation, or other torts are alleged, to find jurisdiction based on intentional action expressly aimed at the forum state, and causing harm in the forum state. See Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997).
  • 24 hours a day-7 days a week The continuous nature of the Internet makes it more substantial than print, radio, or television. As such, Internet commerce or advertising is more likely to increase the amount of contacts with other forums. See Inset Systems, Inc. v. Instruction Set, 937 F.Supp. 161 (D. Conn. 1996)

As online business becomes a global enterprise, cases involving foreign parties and jurisdiction are becoming frequent. The Arista Record Company sued a Spanish business based on a website that allowed individuals to download copyrighted works owned by Arista without their permission. This action was filed in Washington, D.C. and the Defendant moved for dismissal arguing that the Spanish company had no business contacts in the District of Columbia. During discovery it was revealed that Defendant had customers in the District of Columbia based on information obtained through computer servers owned by a third party service provider as well as the credit card company that provided payment information on customers of the Spanish business. The Motion to Dismiss for lack of personal jurisdiction was therefore denied. See Arista Records Inc. v. Sakfield Holding Company, 314 F.Supp 2nd 27, 71 U.S.P.Q. 2nd 1035 (D.D.C. Apr. 22, 2004).

This and the following posts have been copied or adopted from A Legal Guide To The INTERNET – Sixth Edition, published through a collaborative effort by the Minnesota Department of Employment & Economic Development and Merchant & Gould.