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ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Lecture 2: Internet Jurisdiction
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Outline Jurisdiction: the central Internet legal question –Why? Every website is accessible from everywhere Personal jurisdiction in the US Internet jurisdictional tests International jurisdiction
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Internet Operation SERVER ROUTER PC SERVER ROUTER PC REQUEST FOR HOME PAGE HOME PAGE ADDRESSEE: ADDRESSEE:
Internet Communications PHILADELPHIA BEAVERTON SEATTLE MIDDLETOWN DC CHICAGO
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Personal Jurisdiction When does court C have power over person X? –Example: Can a resident of Pennsylvania be sued in California for breach of an online contract? –Who decides? The court decides on its own jurisdiction. Personal jurisdiction is largely geographic –Acts, parties, physical presence in a state –Long-arm power. States have jurisdiction over people outside the state causing harm inside the state The Internet does not respect geography –Often can’t tell where someone is –Can’t tell routing, location of caches, optical cables, servers, etc. –Does it matter?
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Personal Jurisdiction Constitutional limitations –5th Amendment: “No person shall be “deprived of life, liberty, or property, without due process of law.” (Applies to federal government)5th Amendment –14th Amendment: “nor shall any State deprive any person of life, liberty, or property, without due process of law.”14th Amendment What is a “person”? –A natural person –A “juristic person.” A partnership, corporation, limited liability company, trust, etc. An entity that can sue and be sued.
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Due Process What is “due process”? –‘due process’ means fundamental fairness and substantial justice. Vaughn v. State, 3 Tenn. Crim. App. 54, 456 S.W.2d 879, 883 (1970) –"An orderly proceeding wherein a person is served with notice, … and has an opportunity to be heard and to enforce and protect his rights before a court having power to hear and determine the case. Kazubowski v. Kazubowski, 45 Ill.2d 405, 259, N.E.2d 282, 290 (1970), cert. den. 400 U.S. 926
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Personal Jurisdiction (U.S.) Residents of a state are subject to its jurisdiction –Based on geography, state manages its territory Avail themselves of the legal protection of the state Juristic persons reside in any state in which they (1) are incorporated; or (2) “doing business”; or (3) where their employees reside Residents can be sued in their own state on any type of claim for which the court has subject matter jurisdiction. (Personal jurisdiction not an issue.)
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Personal Jurisdiction (U.S.) Federal courts: jurisdiction specified by law –Federal matters: “all cases arising under the Constitution, laws, or treaties of the United States” 28 U.S.C. § U.S.C. §1331 –State matters: 28 U.S.C. §1332. Amount over $75K and28 U.S.C. §1332 between citizens of different states between a foreign state (country) and a U.S. citizen States: –for residents (citizens + people within the state’s borders): unlimited jurisdiction –for non-residents: jurisdiction limited by the Constitutional guarantee of “due process”
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Jurisdiction Over Non-Residents Based on actions of the party “Minimum contacts” rule: does the party have sufficient “contacts” with the forum that exercising jurisdiction will not “offend traditional notions of fair play and substantial justice”? International Shoe Co. v. Washington, 326 U.S. 310 (1945)326 U.S. 310 Foreseeability: Would the party expect to be sued there? Forum = place where the case is being heard
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Jurisdiction Over Non-Residents Did the party “purposefully avail himself” of the privilege of conducting activities in the forum? “Purposefully directing” activities to the forum Transacting business with the forum Visiting the forum in connection with the transaction Acts with consequences in the forum, e.g. causing injury Contacts “numerous, purposeful, and continuous” Not “random, isolated, or fortuitous”
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Example: Pennsylvania Long-Arm Statute A Pa. Court may exercise jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from: Transacting any business in this Commonwealth: –doing by any person in this Commonwealth of a series of similar acts for the purpose of realizing pecuniary benefit –doing of a single act in this Commonwealth for the purpose of thereby realizing pecuniary benefit with the intention of initiating a series of such acts. –shipping merchandise directly or indirectly into or through Pa. –engaging in any business or profession within Pa. Contracting to supply services or things in Pa. Causing harm or tortious injury by act or omission in or out of Pa. 42 Pa. C.S. § Pa. C.S. §5322
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Factors Affecting Jurisdiction When more than one state has jurisdiction, we look at: (1) burden on the defendant (2) forum state's interest in resolving the dispute (3) the plaintiff's interest in receiving convenient and effective relief (4) interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) shared interest of the several states in furthering fundamental substantive social policies. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)471 U.S. 462
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Internet Jurisdiction Maintaining website that regularly sends information into the forum state on request is sufficient for general jurisdiction. –Maritz, Inc. v. CyberGold, Inc., 947 F.Supp (E.D. Mo. 1996). Opinion.Opinion –CyberGold had a website in California that sent advertisements to interested users who signed up to receive them –CyberGold had no employees or physical presence in Missouri –Maritz, a Missouri corporation, alleged trademark infringement –Held: Missouri jurisdiction proper. “CyberGold automatically and indiscriminately responds to each and every user who accesses its web site” NOT JUST JURISDICTION OVER WEB TRANSACTIONS
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Internet Jurisdiction Issues Where does an Internet company reside? –Where any of its servers is located? –Where the domain is registered? –Along the path where messages are routed to it? –Where more than 3 employees work? –Where its ISP is located? –Where a lot of computers are located? –Where orders are “taken”? –Where orders are “filled”? –Where goods are stored? What about information goods? Do any of these distinctions make sense? Do we need Internet courts?
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Internet Jurisdiction Courts recognize three types of eCommerce activity Doing business over the Internet –“the knowing and repeated transmission of computer files over the Internet” –Personal jurisdiction proper Passively informational websites –“little more than an electronic billboard for the posting of information” –No personal jurisdiction Gray area: –defendant has a website that allows a user to exchange information with a host computer –jurisdiction depends on nature of the information transmitted and degree of interaction.
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Zippo Case Zippo Manufacturing v. Zippo Dot Com Inc., 952 F.Supp (W.D. Pa. 1997), 2 ECLR 197, 2/14/97. Full text.Full text Zippo Manufacturing is in Bradford, Pa. Makes Zippo lighters Zippo.com is in Sunnyvale, California. Operates an Internet news service. 140,000 subscribers. About 3000 (2%) are in Pa. Subscribers only have password access to a bulletin board Zippo.com has contracts with 7 ISPs in Pa. Zippo Manufacturing sued Zippo.com for trademark infringement HELD, jurisdiction proper because of Pa. contacts –“The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site.”
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Intercon Case Intercon, Inc. v. Bell Atlantic Internet Solutions, Inc., 205 F.3d 1244 (10 th Cir., March 9, 2000). Full text.Full text Intercon is an Oklahoma ISP (icon.net)icon.net Bell Atlantic Internet Solutions is a Delaware corp. offering dialup ISP service in the northeast US. No presence in Oklahoma Bell Atlantic mistakenly routed its traffic to icon.net instead of to its subcontractor iconnet.net icon.net was choked with , severely affecting its ISP service. Took 7 months for Bell Atlantic to correct the problem Intercon sued Bell Atlantic in Oklahoma HELD, jurisdiction proper because “defendant purposefully availed itself of the Oklahoma server for … months after being notified of the erroneous address” (District Court dismissed the case; Court of Appeals reversed.)
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Effect of Forum Selection Clauses Williams v. America OnLine, Inc., (2001 Mass. Super. No ) Software downloaded by AOL damaged Williams’ computer Williams consented to an online “Terms of Service” contract containing the clause: “You expressly agree that exclusive jurisdiction for any claim or dispute with AOL or relating in any way to your membership or your use of AOL resides in the court of Virginia and you further agree and expressly consent to the exercise of personal jurisdiction in the courts of Virginia in connection with any such dispute.…” Williams was already an AOL member; previously agreed to a Virginia forum selection clause Damage to computer occurred before Williams agreed to new contract. New contract governs, but forum selection clause is unenforceable!
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Butler v. Beer Across America Beer Across America (BAA): Illinois company selling beer over the Internet; no offices, assets or personnel in Alabama; never visited Alabama Butler and her son, a minor, live in Alabama. Son bought 12 bottles of beer for $24.95 from BAA by ordering over the Internet The Alabama Civil Damages Act provides for a civil action by the parent or guardian of a minor against “any person who unlawfully sells or furnishes spiritous liquors to such minor and may recover such damages as the jury may assess.” Butler brought suit against BAA in Alabama. (Why?) BAA had sold beer to other Alabama residents, bought beer from Alabama brewers. Advertised nationally, but not specifically in Alabama HELD: no personal jurisdiction over BAA in Alabama. Website “electronic version of a postal reply card” Butler is not without remedy. Case was transferred to court in Illinois. Butler v. Beer Across America, 83 F.Supp. 2d 1261 (N.D. Ala. 2000)
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Internet Criminal Jurisdiction Transmission of obscene material from California over phone lines to Tennessee computer sufficient contact to try California residents in Tennessee, even though transmission was originated by postal inspector from Tennessee –United States v. Thomas, 74 F.3d 701 (6th Cir. 1996) cert. den. Full text. Full text
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Bases of International Jurisdiction Territoriality principle –regulate conduct within its territory Nationality principle –regulate conduct of nationals, wherever they are Effects principle –regulate conduct having effect in the state Universality principle –jurisdiction over crimes that are universally condemned Protective principle –jurisdiction over defendants who threaten security of a state
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS The iCraveTV Case TORONTO UNITED STATES CANADA PITTSBURGH NY PA BUFFALO US TV stations broadcast from Buffalo iCraveTV set up receivers in Toronto, Canada iCraveTV registered the iCraveTV.com domain name in Pittsburgh iCraveTV.com No iCraveTV servers in the US iCraveTV was sued in Federal Court in Pittsburgh by TV networks, movie studios and sports leagues for copyright infringement Do US courts have jurisdiction? iCraveTV wrapped it own advertising around the images and served them to anyone visiting its website Received US TV signals, stored them on a streaming RealServer in Canada RealServer iCraveTV is a Canadian company owned Pennsylvania residents iCraveTV
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Soma v. Standard Chartered Bank Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir. 1999). Full text.Full text Soma is a Delaware corporation doing business in Utah Standard Chartered Bank (SCB) is a UK bank with an office in Hong Kong (no presence in Utah) Soma had an account with SCB’s Hong Kong office SCB maintained a website accessible from Utah Defendant Fong submitted a forged signature card to SCB; then withdrew $250,000 from Soma’s account Soma sued SCB in Utah HELD, no jurisdiction in Utah since SCB had a “passive Web site that does little more than make information available to those who are interested”
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Yahoo! Nazi Memorabilia Case The Penal Code of France, Sec. R6456, makes it an offenseR6456 –“other than for the needs of a film; a show or an exhibit enjoying historical context, –to wear or exhibit in public a uniform, an insignia or an emblem which evokes the uniforms, insignia or the emblems which were worn or exhibited [by Nazis]” Penalty: –fines; higher for subsequent offenses –confiscation of the object used to commit the infraction –perform public service; prohibition against carrying firearms for 3 years Yahoo! auctions routinely offered Nazi items Yahoo! Inc. is a California corporation Yahoo! France is a joint venture between Yahoo! Inc. and Softbank, a UK corporation
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Yahoo! Nazi Memorabilia Case Yahoo! Inc. and Yahoo France were sued in France by LICRA (League Against Racism and Antisemitism) and UEJF (Union of French Jewish Students) to enforce R6456 Yahoo argued: –Court had no jurisdiction over it –Yahoo’s content is directed to US “internauts” –Yahoo servers are in the US –Any order against Yahoo could not be enforced in the US because of freedom of speech HELD, France has jurisdiction over Yahoo because –violation of the Code was disruptive to public order –visualization of Nazi objects causes grief in France –Yahoo (US) offers French content to users in France
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS March 11, 2001
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Yahoo! Nazi Memorabilia Case Yahoo! initially complied with the French order Dec Yahoo filed a declaratory judgment action in California against LICRA and UEJFaction –asserts jurisdiction on grounds that: LICRA, UEJF sent cease-and-desist letters into California LICRA, UEJF agreed to Yahoo’s “terms of service” LICRA, UEJF used the U.S. Marshal to serve process –alleges: Yahoo cannot comply on technological grounds French order chills freedom of expression in the U.S. Online service providers are immunized by DMCA Feb Yahoo announced it would no longer comply SUCCEEDED
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Yahoo! Nazi Memorabilia Case Nov California court granted summary judgment that “the First Amendment precludes enforcement within the United States of a French order intended to regulate the content of its speech over the Internet.” 169 F. Supp. 2d 1181 (N.D. Cal. 2001)169 F. Supp. 2d 1181 “What is at issue here is whether it is consistent with the Constitution and laws of the United States for another nation to regulate speech by a United States resident within the United States on the basis that such speech can be accessed by Internet users in that nation.” Dec. 2001: appeal filed with Ninth Circuit
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Significance of Yahoo! Goes way beyond Nazi memorabilia Basic question: When acts performed in country A are legal in A but violate the laws of B because of transmission over the Internet: –Whose laws apply? –Does B have jurisdiction? –Should A act in aid of any judgment against its own citizen?
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS In the Matter of Moshe D. Court of Cassation, Rome, Italy (Dec ) Moshe D. was libeled by a statement on a website outside Italy Magistrate forbade prosecution: (1) offense not committed in Italy; (2) sequestration of the server would affect other sites Reversed on appeal. Prosecution may proceed. Court must “assess the nature of the offense of libel as perpetrated through that new medium of … the Internet” “The offense is … perpetrated not upon publication of the injurious statement, but when the same is perceived by subjects one may consider “third parties” in relation to both the sender and the injured party” Conclusion: libel is an offense anywhere the statement is perceived
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Major Ideas Jurisdiction is largely territorial Territories make little sense on the Internet Jurisdiction should be predictable, but isn’t Federal action may be necessary International jurisdiction is complicated by the interaction of different legal systems An Internet treaty may be required
ECOMMERCE LEGAL ENVIRONMENT SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS Q A &
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