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Despite some suggestions to the contrary, the rise of the Internet as a business tool does not portend the end of limits on personal jurisdiction. The cybersky is not falling. Rather, the courts are finding that the Internet merely provides another vehicle (albeit an electronic one) through which a party may purposely avail itself of the privilege of conducting business in a foreign state and thus subject itself to jurisdiction in that state. In some recent cases, the federal courts have analyzed the characteristics of this relatively new and expanding technology under the Supreme Court’s existing personal jurisdiction precedent. Instead of changing the personal jurisdiction standard, which is grounded in the Constitution, the courts have applied the existing personal jurisdiction standards to Internet activities. INTERNET-RELATED CONTACTS One important circuit court opinion that recently addressed the question of personal jurisdiction in the Internet context is ALS Scan, Inc. v. Digital Service Consultants, Inc., 293 F.3d 707 (4th Cir. 2002), cert. denied 537 U.S. 1105 (2003). ALS Scan addressed whether Digital Service Consultants, Inc. (Digital), a Georgia-based Internet Service Provider (ISP), was subject to personal jurisdiction in Maryland based on purely Internet-related contacts. Digital was sued by ALS Scan, Inc. (ALS) as an alleged contributory copyright infringer because it provided bandwidth to a co-defendant, Alternative Products, Inc. (Alternative), through which Alternative maintained its Web site. Alternative was posting photographs on its Web site that allegedly infringed on ALS’s copyrights in those photographs. Alternative sold memberships to access its Web site and, in turn, the photographs, to people who had access to the Internet, including those in Maryland. In essence, ALS alleged that Digital, as the ISP, “enabled” Alternative to publish the allegedly copyrighted photographs on the Internet. Digital had no knowledge of Alternative’s activities or what Alternative was posting on its Web site, and it had no control over the content of Alternative’s Web site. Digital merely provided bandwith to Alternative and had no relationship or affiliation with Alternative except through an arms-length customer relationship. Digital also did not select the photographs to be displayed on Alternative’s Web site, did not know the photographs were being posted on Alternative’s Web site, and, importantly, received no income from Alternative’s subscribers. Digital did have a presence on the Internet through its own Web site, but such was purely informative and did not permit a person to use the Web site to enter into contracts with Digital, transfer funds to Digital, or otherwise transact business with Digital. Digital also had no contacts with the state of Maryland other than through the Internet. It had no contracts with any persons or entities in Maryland, derived no income from any persons or entities in Maryland, did not advertise its business in Maryland and owned no property in Maryland. In the district court, Digital moved to dismiss the claims against it for lack of personal jurisdiction on the grounds that Digital did not engage in any continuous or systematic activities in the forum state. The district court granted the motion to dismiss, and the 4th Circuit affirmed the lower court’s ruling. In doing so, the 4th Circuit adopted and adapted a “sliding scale” approach to personal jurisdiction that is grounded in the minimum contacts analysis and was first articulated in the now-seminal case of Zippo Manufacturing, Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997) (Zippo). Prior to engaging in the jurisdictional analysis, the 4th Circuit in ALS Scan acknowledged that advances in technology do not “eviscerate the Constitutional limits on the State’s power to exercise jurisdiction over a defendant.” ALS Scan at 711. The 4th Circuit also noted that the Supreme Court had previously addressed the effect of technological advances on the limits of personal jurisdiction in Hanson v. Denckla, 357 U.S. 235, 78 S. Ct. 1228 (1958), and recognized that the “limits on the State’s power to exercise personal jurisdiction over non-residents must be maintained despite the growing ease with which businesses connect across state lines.” (ALS Scan at 711) The 4th Circuit’s jurisdictional analysis began by rejecting the “general principle that a person’s act of placing information on the Internet subjects that person to personal jurisdiction in each state in which the information is accessed.” (ALS Scan at 712) To hold otherwise, the 4th Circuit reasoned, would vitiate the defense of personal jurisdiction and subject anyone placing information on the Internet to personal jurisdiction in every state. (Id.) The 4th Circuit next considered whether the electronic signals of the Internet are a substitute for the person. In other words, does a person enter a state when he sends his electronic signals into that state. The 4th Circuit rejected this argument as an overly broad interpretation of the minimum contacts requirement. Recognizing that Supreme Court precedent requires purposeful conduct directed at the state in order to subject a party to that state’s jurisdiction, the Court adopted the “sliding scale” model developed in Zippo. ‘ZIPPO’ AND THE SLIDING SCALE Under Zippo, “the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet.” (Zippo at 1124) To identify the “nature and quality of commercial activity,” the Zippo “sliding scale” model describes generally the two extreme ends of the spectrum and the gray areas in between. A court using this model will identify where along the described spectrum the facts of its case fall. At one end of the spectrum, a defendant is subject to the jurisdiction of the state when it clearly conducts business over the Internet. At the other extreme, a defendant is not subject to the jurisdiction of the Court when its Internet-related activity consists only of posting information on the Internet that may be accessed by users in the relevant jurisdiction. This is the so-called “passive Web site.” In between these two extremes are interactive Web sites where a user can exchange information with the host computer. In sum, “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.” (Id.) In addition to the 4th Circuit, the Zippo “sliding scale” model has also been adopted by the 3rd, 5th, 6th, 8th, 9th, and 10th Circuits. Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446 (3rd Cir. 2003); Revell v. Lidov, 317 F.3d 467 (5th Cir. 2002); Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883 (6th Cir. 2002); Lakin v. Prudential Securities, Inc., 348 F.3d 704 (8th Cir. 2003) (but holding that the “sliding scale” model is only one factor to consider for purposes of a general jurisdiction analysis); Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997); Soma Medical Int’l v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir. 1999). In adopting and adapting the Zippo “sliding scale” model, the 4th Circuit articulated its holding as follows: “The exercise of judicial power over a person outside of the state is consistent with due process when that person 1) directs electronic activity into the state, 2) with the manifested intent of engaging in business or other interactions within the state, and 3) that activity creates, in a person within the state, a potential cause of action cognizable in the state’s courts.” (ALS Scan at 714) A WORD OF CAUTION The fact that a Web site is entirely passive does not guarantee that personal jurisdiction will not be found to be proper. One example is a defamation case. In ALS Scan, the 4th Circuit compared its holding with Calder v. Jones, 465 U.S. 783, 104 S. Ct. 1482 (1984). In Calder, the Supreme Court held that the writing of an allegedly defamatory article in Florida that was published nationwide subjected the defendant to personal jurisdiction in California because the subject of the article was a resident of California and there was evidence that the article was targeted at her in California. If a passive Web site contains defamatory material, and it is purposefully directed at the forum state, the requirements of personal jurisdiction may be satisfied despite the fact that the Web site is passive. In fact, after its opinion in ALS Scan, the 4th Circuit held in a defamation case that the purpose or motivation behind placing the information on a Web site, although a passive Web site, could give rise to specific personal jurisdiction over the defendant Web site owner based on the defendant’s intent behind placing the information on the otherwise passive Web site. See Young v. New Haven Advocate, 315 F.3d 256 (4th Cir. 2002). In such a case, the possibility of exposing a defendant to jurisdiction everywhere in the world is likely limited by the analysis of the intent of the defendant and the location of the intended target of the defamatory material. While it was a case of first impression in the 4th Circuit, ALS Scan is consistent with both the Supreme Court’s precedent and the holdings of the majority of other circuit courts that have addressed the issue of personal jurisdiction in relation to Internet activity. Although the Internet creates new and different ways in which a person or entity can enter a foreign state, the principles of personal jurisdiction and its limits remain largely unchanged. To subscribe to the monthly newsletter “Internet Law & Strategy,” click here. If you are interested in submitting an article to law.com, please click here for our submission guidelines.

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