FAQ: Personal Jurisdiction and the Web

If you want to sue someone over something that happens online, where you do go to court? Your hometown? Their hometown? Some neutral location?

In early cases involving online disputes, the plaintiffs (people who sued) all sued in their home states and the defendants didn't challenge personal jurisdiction.

Now defendants are getting wise to spending time and money on out-of-state lawsuits, arguing that the plaintiffs have no personal jurisdiction over them in the plaintiff's home state. In other words, defendants are arguing, "You want to fight, you come to my backyard."

How Do Courts Determine Jurisdiction?

To determine personal jurisdiction, courts normally ask whether defendants have sufficient contact with the state to make it fair to have to defend themselves there. That there is no strict definition of what constitutes "contacts" only makes it more difficult.

But there are examples. If the defendant travels to the state in question, sells services or goods in that state, has an office, agent, or representatives in that state, or if he could expect his actions to have consequences there, then he has contacts. On a case-by-case basis, courts determine whether these "contacts" justify hauling the defendant into that state's court.

Three recent cases show how differently personal jurisdiction cases can work out, depending on the he circumstances.

1. CompuServe, Inc. v. Richard S. Patterson

The Facts: CompuServe, headquartered in Columbus, Ohio, wanted to sue Richard Patterson, a Houston, Texas, resident. Patterson had repeatedly threatened trademark litigation against CompuServe, and the online company wanted to sue him in U.S. District Court in Ohio to determine they didn't infringe his trademarks. Patterson wanted CompuServe's case dismissed, saying CompuServe had no personal jurisdiction over him in Ohio.

Patterson won the first round at the district court level, but the U.S. Court of Appeals for the Southern District of Ohio, reversed the district court's decision on July 22 when it ruled CompuServe could sue him in Ohio. Although Patterson is an attorney, he didn't file an appeal brief or appear at the Court of Appeals to argue his position.

The Court of Appeals' Ruling: The Court of Appeals ruled a combination of factors made it fair to go to court against Patterson in Ohio: 1) He was a CompuServe subscriber; 2) He advertised and sold shareware through CompuServe for three years; 3) He sold software to 12 Ohio residents; and 4) He had threatened trademark litigation against CompuServe.

The Court also noted Patterson had signed a CompuServe Service Agreement and a CompuServe Shareware Registration Agreement that contained clauses saying they were entered in Ohio and "governed by and construed in accordance with" Ohio law.

The Scoop: Some pundits have said this decision means your service provider can always sue you in its hometown. Fears of flying to Virginia for disputes with America Online (AOL) have danced in subscribers' minds.

But the pundits have the wrong idea. The Court specifically said just being a CompuServe subscriber doesn't give CompuServe grounds to sue you in Ohio.

The Court also specifically said that at best, selling services or goods on CompuServe, without more, would be dubious grounds for CompuServe to sue you in Ohio. So if you're an average subscriber, don't worry. If your service provider wants to sue you, it has to come to you. But if you have additional dealings with your service provider and there's a dispute, you may need to book airline tickets.

Helpful Hints: If you run a business via your online service and you have some additional contacts with your provider, it may be sufficient to justify jurisdiction on the provider's home turf. You may want to work with a local service provider to ensure disputes with your service provider stay within your state's borders.

Review your service provider agreements. If you're a corporation with enough clout, request an equitable jurisdiction clause that requires you to sue your service provider in its home state and requires them to sue you in your home state. Kerry Konrad, counsel to Simpson, Thatcher & Bartlett in New York and outside counsel to major corporations like Lotus Development Corporation (now IBM) and Digital Equipment Corporation (DEC) gives a simple hint: "To try to limit your exposure to lawsuits in distant places, publish globally, but interact locally."

2. Inset Systems, Inc. v. Instruction Set, Inc.

The Facts: Connecticut-based Inset Systems, Inc., wanted to sue Massachusetts-based Instruction Set, Inc., for trademark infringement. Even though Inset owned the "INSET" federal trademark, Instruction Set used "inset.com" as its domain name and 800-US-INSET as its telephone number.

Instruction Set wanted the case dismissed, saying Inset didn't have personal jurisdiction over it in Connecticut. The U.S. District Court of Connecticut ruled Inset could sue Instruction Set there.

The District Court's Ruling: On April 17, the District Court ruled the combination of the domain name, telephone number and the ability of Connecticut residents to purchase Instruction Set's services and products via these methods was sufficient to justify jurisdiction in Connecticut. In addition, the Court said the distance between Connecticut and Massachusetts was minimal.

The Scoop: Without evidence that anyone in Connecticut ever purchased Instruction Set's services or goods, the company's contacts with Connecticut seem minimal. Without more contacts, the jurisdiction ruling appears doubtful. This case may not be the one to cite outside the state of Connecticut.

3. Benusan Restaurant Corporation v. Richard B. King, d/b/a The Blue Note

The Facts: The Blue Note, a famous jazz club in New York City, wanted to sue The Blue Note, a club in Columbia, Mo., for trademark infringement. The New York City club owned the federal trademark on the name. The Missouri club had a Web site by the same name where it advertised the club and posted ticket information and a calendar of events. The U.S. District Court for the Southern District of New York ruled these contacts weren't sufficient to justify jurisdiction over the Missouri-based club in New York.

The District Court's Ruling: The District Court ruled that without more contacts the Missouri-based Blue Note's web site wasn't sufficient to justify jurisdiction in New York. The Court found it significant that the Missouri club's web site contained a disclaimer saying it shouldn't be confused with the "world's finest jazz club the Blue Note, located in the heart of New York's Greenwich Village," and a link to the New York club's web site. The Court also found the Missouri club didn't mail tickets out of Missouri and 99 percent of the club's patronage and revenue was derived from local residents of Columbia, Mo. Its few out-of-state customers had either an existing or prior connection to the Missouri area. In short, the court said it would be unfair to drag the Missouri club into New York because it didn't serve customers in New York. The Court of Appeals upheld this decision.

Helpful Hints: If you own a Web site whose name may conflict with another web site or company, provide a disclaimer and a link to its Web site, if it has one. Of course, saying something nice about the other company in your disclaimer may not hurt, either.

Courtesy of Marie D'Amico of Digital Media.