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Last week’s U.S. district court decision in a closely watched dispute between Yahoo and French anti-hate groups has Internet companies breathing a collective sigh of relief. U.S. District Judge Jeremy Fogel, of the Northern District of California, refused to enforce a French court’s order that Yahoo prevent French residents from viewing Nazi memorabilia in its on-line auctions. Had the decision gone the other way, experts say, it could have paved the way for a global meltdown of the Internet. “Countries would try to use their laws to force Internet companies to answer to the lowest common denominator,” said Jodie Kelley, a partner at Jenner & Block in Washington, D.C., who submitted an amicus brief supporting Yahoo! on behalf of the U.S. Chamber of Commerce. “At that point, the Internet would cease to be viable.” But before U.S. businesses get too complacent, Kelley and others warned that this is by no means the last word on the difficult issue of Internet jurisdiction. Indeed, at least three other courts abroad have taken jurisdiction over a foreign company on the basis of that company’s Web site. The Yahoo controversy, seen as a key test of the evolving rules governing national jurisdiction over the Internet, came to a head last year, when a French court sought to bar Yahoo’s auction of Nazi items under French anti-hate speech laws, and threatened to fine Yahoo $13,000 per day unless the on-line portal complied with its order. Yahoo protested, saying that it could not effectively block French Internet surfers from accessing the objectionable items without also infringing on the First Amendment rights of U.S. citizens. The French court disagreed, citing the findings of a panel of technical experts who claimed that Yahoo would be able to target between 60 and 80 percent of French users. The immediate controversy became moot a few months later, when Yahoo decided to pull all hate-related articles, including Nazi memorabilia, from its on-line auctions. But Yahoo asked Judge Fogel to resolve the larger issue of whether the French court’s order was unenforceable because it violates the First Amendment. In Yahoo Inc. v. La Ligue Contre le Racisme et L’Antisemitisme, C 00-2127, Judge Fogel agreed with Yahoo. “Although France has the sovereign right to regulate what speech is permissible in France, this court may not enforce a foreign order that violates the protections of the U.S. Constitution by chilling protected speech that occurs simultaneously within our borders,” the court wrote. The ruling did not come as a surprise to many lawyers, who saw it simply as a logical application of existing law. “Courts will typically not enforce foreign judgments that violate U.S. law,” explained Kelley. Nevertheless, she said, the case made U.S. businesses anxious because of its potential for a much broader application. It was the first time a U.S. court has had to decide whether to honor a foreign judgment in the context of the Internet. Although the Yahoo decision should “definitely give companies some comfort,” Kelley said, she and other experts cautioned that the issue of Internet jurisdiction is far from settled. Indeed, the French judge in the Yahoo case has some like-minded company. In recent cases in Australia, Germany and Italy, judges have all come to similar conclusions, declaring that they had jurisdiction over the virtual world as well as the physical one. “No one country wants to give up jurisdiction,” said Thomas Vartanian, who chaired an American Bar Association Internet jurisdiction project. “Courts want to protect their citizens.” The Australian case, Gutnick v. Dow Jones & Co. Inc., VSC 305 (Aug. 28) illustrates just how far courts will reach to exercise jurisdiction over the Internet. There, Victorian Supreme Court Justice John Hedigan found jurisdiction over U.S.-based Dow Jones & Co. based on its Wall Street Journal Web site, which carried an allegedly libelous article about the plaintiff, an American businessman who lives in Melbourne named Joseph Gutnick. Dow Jones argued that New Jersey, not Australia, was the proper jurisdiction, since publication occurred when the article was uploaded to the Internet by the company’s New Jersey server, much like a Victorian taking a book out of a New Jersey library and reading it back home in Victoria. The New Jersey library could not be sued in Australia because the information was not published there, the company argued. The judge rejected Dow Jones’ argument, finding that publication occurred wherever the article was downloaded, including, in this instance, Australia. “This has been the law for centuries in respect of other forms of communication and I find no persuasive reason that it should not apply to Internet publications,” the court wrote. The case should send alarm bells out to every business with a Web site, said Mark Stephens, a partner with Finers Stephens Innocent in London who represents Dow Jones. If the decision is upheld, he said, it means that every Internet company will have to satisfy the standards of the strictest regime worldwide to avoid liability. Stephens said that, if it stands, the ruling will encourage international forum shopping by people looking for the best country in which to sue. “It will allow plaintiffs to drag companies into whatever country in the world is the most plaintiff-friendly,” he contended. He said he was encouraged by Judge Fogel’s decision in the Yahoo case. Still, Dow Jones is pursuing the jurisdictional question. Judge Hedigan’s decision has attracted the attention of Australia’s highest court, which has agreed to hold an expedited hearing on Dec. 14 on whether to permit an interlocutory appeal of the jurisdictional finding. DILEMMA PRESENTED The Yahoo and cases illustrate the dilemma presented by a borderless medium in a balkanized world. As Vartanian, a partner in the Washington, D.C., office of Fried Frank pointed out, while cross-border disputes are nothing new, the Internet raises the ante since it not only makes doing business outside of one’s domestic boundaries substantially easier, but also makes it more difficult to carve out such activities on a country-by-country basis. The only “passports” to the Internet are I.P. addresses, a string of numbers that have no direct correlation to the location of a user’s computer. Geolocation technology, initially developed to facilitate geographically targeted advertising, purports to be able to determine location, but the products are relatively new and their claims untested. But even if such technology is perfected, lawyers argue that conducting business on the Internet on a country-by-country basis is simply not feasible. “You would have to survey the laws of every country in the world,” said Kelley, a partner in the Washington, D.C. office of Jenner & Block. “As a practical matter, it’s virtually impossible.” And Internet proponents also point out the philosophical problems with a geopolitically divided Internet. “The genius of the Internet is that you can set up a Web site anywhere you like and market it worldwide,” said Henry H. Perritt Jr., dean of Chicago-Kent College of Law and author of a book on Internet law. “If you balkanize the ‘Net, you lose its global effect,” he said. In the meantime, lawyers predicted that lawsuits would continue to crop up around the world, and that courts would continue to take jurisdiction. “Unless there is some global movement toward symmetry, courts are likely to handle these issues on a nationalistic basis,” said Fried Frank’s Vartanian, who advocates the creation of a multinational commission to develop uniform jurisdictional principles. “The only global consensus we seem to be getting is that ‘the rules of my country rule.’ “

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