This post is part of a series of posts entitled A Legal Guide to the Internet.

Traditional tests of personal jurisdiction are applied to cases involving Internet activity. Presence on the Internet will not automatically subject one to jurisdiction anywhere. Early 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, 568 N.W.2d 715 (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. 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 on the site vegas.com. 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 sued Granite Gate in Minnesota, alleging deceptive trade practices, false advertising, and consumer fraud on the Internet.

In Granite Gate, the court held that the defendants were subject to personal jurisdiction in Minnesota “because, through their Internet activities, they purposefully availed themselves of the privilege of doing business in Minnesota.” The court compared Internet advertisements to broadcast and direct mail solicitation. It reasoned that paying for English-language advertising on an American commercial site and offering a toll-free number showed an intent to solicit responses from all jurisdictions in that market, including Minnesota. The district court had also found that Minnesota computers accessed the sites and that at least one Minnesota resident was on the mailing list.

Ordinarily, a state’s jurisdiction is limited to people, businesses, transactions, events, or other occurrences within the state’s geographical territory. A state may, however, exercise its right to assert jurisdiction over non-residents to the extent such parties transact business within the state, commit acts within the state causing injury or property damage, or own, use, or possess real or personal 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. A company doing business on the Internet should therefore review where it actually targets customers, because courts look to purposeful contact with the forum and not to the mere fact that a site can be reached there.

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

  • Deliberate and repeated revenue producing activities on the Internet directed toward parties in the forum district may result in a finding of personal jurisdiction, even if they yield little revenue actually earned in the forum. See CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996).
  • Sliding Scale established for Internet sellers. Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997), held that the likelihood of personal jurisdiction “is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet,” and the Eighth Circuit, which covers Minnesota, has found the test instructive. Johnson v. Arden, 614 F.3d 785 (8th Cir. 2010). A court will assert jurisdiction based on on-line activities where the defendant purposefully avails itself of the privilege of doing business in the forum state through those 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 Calder v. Jones, 465 U.S. 783 (1984). The Eighth Circuit construes this test narrowly and holds that, “absent additional contacts, mere effects in the forum state are insufficient to confer personal jurisdiction.” Johnson v. Arden, 614 F.3d 785 (8th Cir. 2010).

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 Puretunes.com 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.