In rem jurisdiction involves jurisdiction over a thing rather than a person. Such jurisdiction gives the court the power to determine the rights of every person in the thing, such as issuing a judgment of title to land. Following its decision in International Shoe, the U.S. Supreme Court in dicta introduced fundamental fairness considerations into in rem cases.(25) Accordingly, Porsche Cars North America, Inc. v. Porsche.com, 51 F. Supp 2d 707 (E.D. Va., Alex. Div. 1999), the federal district court declined to exercise in rem jurisdiction over 128 registered Internet domain names, citing the Court's dicta for the proposition that "courts generally cannot exercise in rem jurisdiction to adjudicate the status of property unless the due process clause would have permitted in personam jurisdiction over those who have an interest in the res."(26)
II. Conflicts Between the Internet and Traditional Patterns of Jurisdiction.
A. Conflicts Arising out of the Internet As It Exists in 2000.
Because jurisdictional principles have been essentially geographically based, they have not fully adapted to apply in the context of the Internet. The 'Net is hardly geographic in its structure. Information over the Internet passes through a network of networks, some linked to other computers or networks, some not. Not only can messages between and among computers travel along much different routes, but "packet switching" communication protocols allow individual messages to be subdivided into smaller "packets" which are then sent independently to a destination where they are automatically reassembled by the receiving computer.(27)
The actual location of computers among which information is routed along the Internet is of no consequence to either the providers or recipients of information, hence there is no necessary connection between an Internet address and a physical jurisdiction.(28) Moreover, web sites can be interconnected, regardless of location, by the use of hyperlinks. Information that arrives on a web site within a given jurisdiction may flow from a linked site entirely outside that jurisdiction.(29) Finally, notwithstanding the Internet's complex structure, the Internet is predominately a passive system; Internet communication only occurs when initiated by a user.
B. Increased Conflicts That Will Arise From the Future Development of the Internet.
As discussed, the rules of jurisdiction over activities on the Internet are evolving out of principles that predated the personal computer age. Repeatedly, courts and regulators have analogized the Internet to telephone or print media in analyzing jurisdictional issues. Whether this approach should continue in the future is a serious issue, because the Internet of today is but a glimmer of what lies ahead in digital communications.
Not only is the new global marketplace incredibly complex, but the growth and pace of change in the communications industry are unlike anything since its inception. Each minute, over five million e-mail messages are now being sent around the world. For decades, Silicon Valley was guided by Moore's Law, which states that the capacity of semiconductors will double every 18 to 24 months. But the numbers are changing: by 2001, the semiconductor industry is expected to add as much capacity over that in 1998 as has been created in the entire history of the chip.(30) It is starting to make the move from producing chips to producing whole systems on a chip.(31)
At least two other technologies are expanding information-carrying capacity at least as feverishly: photonics and wireless. Photonics, which employs light to move communications, is doubling the capacity of optical fiber every 12 months. This is dramatically changing the way networks are deployed. Bandwidth (the amount of space available to carry the data and voice traffic that all these networks around us are building up) is also expanding exponentially. Soon, instead of a resource in short supply, bandwidth will be an unlimited one.(32)
Wireless is another force fueling the communications revolution. Cell phones have gone from a curiosity to become commonplace, but the real revolution will come when wireless broadband networks begin to serve as "fiberless" fiber to bring high-speed conductivity to places where it's too expensive or too difficult to lay fiber optic lines. Fixed wireless systems can carry information about eight times more quickly than a computer's 56K modem. New technology will boost that capacity by another 10-20 times, opening up wide pipelines to carry voice, data, video and all of the pieces that comprise the growing network of networks. The system for creating, distributing, selling and consuming products is already turning upside down. Advertising, ordering, billing and trading are being swept into networks in an accelerating and ever-widening fashion. It is anticipated that 5% of all global sales will be occurring online as early as 2004.(33)
Add to the telecommunications revolution just described the new world of "'bots," or cyber-robots. In Silicon Valley and elsewhere, more and sophisticated cyber-robots and other cyberagents are being developed. 'Bots with computerized artificial intelligence can be programmed with enormous amounts of information about the goals, preferences, attitudes and capabilities of their "cyber-principals." They can roam in virtual space without human intervention, endowed with such information and apply their artificial intelligence to conduct all manner of commercial, social and intellectual "transactions" with other 'bots and agents, day and night, while their principals are asleep or working on other things. Such robots in turn can appoint sub-agents, capable of speaking in multiple languages or ultimately communicating through a universal "computer-speak."
Thus, in contrast to the largely linear, point-to-point lines between buyers and sellers that have heretofore characterized traditional commerce and early e-commerce, securities transactions (as well as other kinds of commerce) will increasingly occur outside of any geographical place, in a truly "virtual world, by highly programmed agents without human intervention. This makes it necessary to consider new, non-geographical or less geographical paradigms. These are discussed in more detail in Section III, infra.
25. Shaffer v. Heitner, 433 U.S. 186, 204-106 (1977).
26. 51 F. Supp. at 712.
27. See stipulated facts regarding the Internet in American Civil Liberties Union v. Reno, 929 F. Supp. 824, 830-32 (E.D. Pa. 1996).
28. D. Johnson and D. Post, Law and Borders-The Rise of Law in Cyberspace, 48 STAN. L. REV. 1367, 1371 (1996).
29. The Internet also uses "caching," i.e., the process of copying information to servers in order to shorten the time of future trips to a web site. The Internet server may be located in a different jurisdiction from the site that originates the information, and may store partial or complete duplicates of materials from the originating site. The user of the World Wide Web will never see any difference between the cached materials and the original. American Civil Liberties Union v. Reno, supra note 195, 929 F. Supp. at 848-49.
30. Address by Carleton ("Carly") Fiorena, then Group President, Lucent Technologies, to Commonwealth Club of California, San Francisco, July 18, 1999 ("Fiorena").
31. One of the results will be to shrink the size and cost of an incredibly expanding range of communications devices. Bell Labs, for example, has a camera on a chip and a microphone on a chip.
32. Fiorena.
33. Id.
E-Commerce: Who Has Jurisdiction?
Page Four
C. Current Application of Constitutional Principles to the Internet.
Some precedents involving print, telephone and radio media have been useful in determining whether jurisdiction over Internet activities, at least under the technology existing pre-2001, offends constitutional due process. Thus, if an Internet-based news service were to send a number of messages specifically addressed to residents of a forum, there would be "purposeful direction." Purposeful direction can exist even though, in contrast to the shipment of some physical goods into a state as in Calder v. Jones, from which the shipper can arguably foresee an effect in that state, nothing is shipped physically on the Internet. Direct-mail over the Internet is compared to traditional postal mail and to phone calls in this respect.
However, bulletin boards and web sites are not directed, in contrast to e-mail. While the person who posts a bulletin board message knows that the message can be resent by others elsewhere in the world, the posting person cannot control such redistribution. A web site is even more of a passive medium, because it sends nothing specifically directed to the forum state. The site merely posts general information so viewers can log on to the site. The cases analogize web sites to advertisements beamed to the world over television. Perhaps an analogy to the size of the circulation of a publication in the forum state as in Calder v. Jones could be drawn from the number of hits on the web site that emanate from viewers in a forum state. A site operator can identify the source of "hits" on his site; an operator of a web site would therefore know whether a large proportion of the hits came from California. If information about a California resident were posted on the site, it might be argued under the Calder v. Jones rationale that the operator purposefully directed the information to California residents. However, to do so would be similar to basing jurisdiction over a telecast on the number of viewers in a given jurisdiction.
Nonetheless, an early, poorly reasoned case (that has fortunately been little followed by other courts) involved a defendant's registration of an Internet domain name that contained the plaintiff's trademark. When the plaintiff sued for trademark violation, a Connecticut federal court found the out-of-state defendant subject to its jurisdiction mainly because its website could be accessed in Connecticut.(34) The court found the advertising to be "solicitation of a sufficient[ly] repetitive nature to satisfy" the requirements of Connecticut's long-arm statute, which confers jurisdiction over foreign corporations on a claim arising out of any business in Connecticut. Although there was no evidence that any Connecticut subscriber had accessed the site, the court held that the minimum contact test of the due process clause of the Fourteenth Amendment was satisfied, because the defendant had purposefully "availed" himself of the privilege of doing business in Connecticut in directing its advertising and phone number to the state, where some 10,000 subscribers could access the web site.
Perhaps the first real framework developed by a court for analyzing specific jurisdiction on the Internet was articulated in Zippo Manuf. Co. v. Zippo Dot Com. Inc. ("Zippo").(35) Under Zippo, a given web site falls into one of three categories: (1) passive; (2) interactive; or (3) integral to the defendant's business. The "passive" web site is analogous to an advertisement in a magazine; it posts information generally available to any viewers, who has no on-site means to respond to or the site. Courts ordinarily would not be expected to exercise personal jurisdiction based solely on a passive Internet web site, because to do so would not be consistent with traditional personal jurisdiction law.(36)
An "integral" web site is at the other end of the three categories. An integral site is used actively by a defendant to conduct transactions with persons in the forum state, receiving on-line orders and pushing messages directly to specific customers. In such cases, traditional analysis would support personal jurisdiction. The third category, or "interactive" site, falls between passive and integral. It allows a forum-state viewer to communicate information back to the site. Under Zippo, exercise of jurisdiction in the "interactive" context is determined by examining the level of interactivity and the commercial nature of the site.
The Zippo analysis was applied (without expressly being adopted) to Internet jurisdiction by a federal appellate court for the first time in Cybersell, Inc. v. Cybersell, Inc. ("Cybersell").(37) Cybersell was also the first circuit court decision addressing whether jurisdiction could be constitutionally based solely upon the defendant's operation of a passive web site. The Ninth Circuit ruled that it could not, even though the defendant's website displayed its name, logo and local (not toll-free) telephone number and included a link inviting visitors to submit their names for additional information. The court quoted Zippo for the proposition that "[c]ourts have addressed interactive sites have looked to the 'level of interactivity and commercial nature of the exchange of information that occurs on the Web site" to determine if sufficient contacts exist to warrant the exercise of jurisdiction."(38)
Finding that the defendant operated "an essentially passive home page on the web," the Cybersell court emphasized the lack of contacts between the defendant and the forum state rather than the level of interactivity and the underlying cause of action.(39) The court stated "[w]hile there is no question that anyone, anywhere could access that home page and thereby learn about the services offered, we cannot see how from that fact alone it can be inferred that Cybersell [of Florida] . . . deliberately directed its merchandizing efforts toward Arizona residents."(40) The Ninth Circuit held that, without "'something more' to indicate that the defendant purposefully (albeit electronically) directed his activity in a substantial way to the forum state" the court could not find jurisdiction proper based on the operation of a passive website.(41) 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 . . . [which] would not comport with traditional notions of what qualifies as purposeful activity invoking the benefits and protections of the forum state.(42) The court also emphasized, however, that in evaluating minimum contacts in cyberspace, all contacts-including those occurring terra firma-should be considered.(43)
Since Zippo and Cybersell, the determination of whether specific jurisdiction exists and whether a site falls in the "interactive" or "passive" category can turn more on a court's perception than on any real differences in the manner in which the user employs the Internet. Moreover, even courts which invoke a Zippo analysis largely ignore the "integral" category and focus only on whether a site is "passive" or "interactive." Which of the two labels is used can often determine the jurisdictional issue. Since Zippo, with few exceptions, courts have become reluctant in jurisdictional cases to find specific jurisdiction over a nonresident defendant merely because of an accessible web site or a few contacts with the site by residents of the forum. Findings of specific jurisdiction based on using the Internet have largely been based on the defendant's purposeful availment of the privilege of doing business in the forum jurisdiction or the defendant's purposeful direction of electronic communications to the forum jurisdiction.(44)
34. Inset Systems, Inc. v. Instructions Set, Inc., 937 F. Supp. 161 (D. Conn. 1996).
35. 952 F. Supp. 1119, 1124 (W.D. Pa. 1996).
36. Other than Inset, cited above at note 33, the only other case to base jurisdiction solely on accessibility of a passive website is Telco Communications Group, Inc. v. An Apple A Day, Inc., 977 F. Supp. 404 (E.D. Va 1997). (Relying on Inset to hold that personal jurisdiction existed over defendant for defamation claim solely on basis of web site which "could be accessed by a Virginia resident 24 hours a day").
37. 130 F.3d 414 (9th Cir. 1997).
38. 130 F.3d 414 (9th Cir. 1997)
39. The court wrote that: "Cybersell [of Florida] . . . did nothing to encourage people in Arizona to access its site, and there is no evidence that any part of its business (let alone a continuous part of its business) was sought or achieved in Arizona. To the contrary, it appears to be an operation where business was primarily generated by the personal contacts of one of its founders. While those contacts are not entirely local, they aren't in Arizona either. No Arizonan except for Cybersell AZ 'hit' Cybersell FL's web site. There is no evidence that any Arizona resident signed up for Cybersell FL's web construction services. It entered no contracts in Arizona, made no sales in Arizona, received no telephone calls from Arizona, earned no income from Arizona, and sent no messages over the Internet to Arizona."
40. Id. at 414.
41. Id. at 418.
42. Id. at 420.
43. See id. at 419.
44. Jurisdiction was found to exist in: Archdiocese of St. Louis v. Internet Entertainment Group, Inc., 1999 WL 66022 (E.D. Mo.) ___ F. Supp. 2d ___ (1999) (operator of adult site intended to reach Missouri residents in connection with papal visit to St. Louis); GTE New Media Services, Incorporated v. Ameritech Corporation, 21 F. Supp. 2d 27 (D.C., D.C. 1998) (telephone companies increased advertising revenue by channeling District of Columbia viewers to their websites); Hasbro Inc. v. Clue Computing Inc., 1997 U.S. Dist. LEXIS 18857 (D. Mass. Sept. 30, 1997) (Rhode Island web site operator listed Massachusetts client on its site and which was accessible to Massachusetts residents); CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cor. 1996) (repeated transmission of software and messages over the Internet to forum state); Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996); Heroes, Inc. v. Heroes Foundation, 41 U.S.P.Q.2d 1513 (D.D.C. 1996); Maritz, Inc. v. CyberGold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996) (191 hits by Missouri viewers on California web site constituted "purposeful availment"); Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997) (3,000 Pennsylvania subscribers to Internet news service constituted "purposeful availment"); Panavision Intern, L.P. v. Toeppen, 938 F. Supp. 616 (C.D. Cal. 1996), aff'd 141 F.3d 1416 (9th Cir. 1998); EDIAS Software Intern, L.L.C. v. Basis Intern, Ltd., 947 F. Supp 413 (D. Ariz. 1996) (dependent could foresee impact in the forum state of defamatory material on its web site and e-mail sent into state); Minnesota v. Granite Gate Resorts, Inc., 1996 W.L. 767432 (E. Minn. 1996) (contract provision that web site operator could sue user of operator's services in user's home state); Resuscitation Technologies, Inc. v. Continental Health Care Corp., 1997 W.L. 148567 (S.D. Ind. 1997) (although plaintiff initiated contacts with its web site posting, subsequent extensive e-mail and phone contacts by Michigan defendants warranted Indiana jurisdiction); California Software Inc. v. Reliability Research, 631 F. Supp. 1356 (C.D. Cal. 1986) (messages placed by Vermont residents on Web bulletin board defaming California business foreseeably caused damage in California). Among the increasing number of cases where jurisdiction was not found to exist are: Mid City Bowling Lanes & Sports Palace, Inc. v. Ivercrest, Inc., 1999 WL 76446 (E.D. La.), ___ F. Supp. 2d ___ (1999) (an advertisement on web site held essentially "passive"); Pheasant Run, Inc. v. Moyse, 1999 WL 58562 (N.D. Ill.), ___ F. Supp. 2d ___ (1999) (advertisement on web site containing defendant's telephone number); Millenium Enterprises, Inc. v. Millenium Music, L.P., 1999 WL 27060 (D. Ore.), ___ F. Supp. 2d ___ (1999) (interactive web site not targeted at Oregon viewers and no significant sales in Oregon); Origin Instruments Corp. v. Adaptive Computer Systems, Inc., 1999 WL 76794 (N.D. Tex.) ___ F. Supp. 2d ___ (1999) (no jurisdiction where only "moderate level" of interactivity); ESAB Group, Inc. v. Cetricut, LLC, 1999 WL 27514 (D.S.C.) ___ F. Supp. 2d ____; Cybersell Inc. v. Cybersell Inc. (9th Cir. 1997) (mere accessibility by Arizona resident to passive, Florida-based web site); Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996) (Missouri defendant based on a web site advertising the defendant's nightclub; no evidence that sales were made or solicited in New York or that New Yorkers were actively encouraged to access the site); Smith v. Hobby Lobby Stores, Inc., 968 F. Supp. 1356, 1365 (W.D. Ark. 1997) (no general jurisdiction where Hong Kong manufacturer of artificial Christmas tree advertised on the Web, but tree was purchased from a retailer in Arkansas); McDonough v. Fallow McElligott, Inc., supra note 126 (mere accessibility of Missouri Website by Californians insufficient for general personal jurisdiction); Hearst v. Goldberger, 1997 WL 97097 (S.D.N.Y. 1997) (no jurisdiction where New Jersey site was accessible to and visited by New Yorkers, but no sales of goods or services had occurred).