The Internet gives companies with Web sites the potential to reach a vast worldwide audience, but it may also expose them to an equally vast world of litigation.
As a global network, the Internet gives companies with Web sites the potential to reach a worldwide audience, but that access carries with it uncertain legal consequences. The question arises: What state's or what country's laws will apply when disagreements must be resolved with regard to online content and commerce? As cases work their way through courts around the globe, the answer is beginning to take shape. Still, caution is required for businesses with presences on the Web, as the rules are not entirely clear or consistent. The following overview examines some of the legal precedents being set both in the United States and in other countries.
EVERY STATE HAS MINIMUM THRESHOLD criteria for establishing jurisdiction in the physical world. Generally, to bring an action against a nonresident defendant, the defendant must have established the existence of "minimum contacts" within the forum--the State or country in which the case is being tried. The minimum-contacts requirement means that the defendant being asked to come into court either intentionally made contacts in the plaintiff's State or should have known that his or her contacts could incur legal liability in the other state.
For example, a defendant has sufficient minimum contacts with a state if the defendant has purposefully done business in that state, thus invoking the benefits and protections of its laws.
The minimum-contacts requirement is not set forth in any one checklist and may vary depending on the total circumstances of a case.
This same principle is being adapted to the Internet, as illustrated in Euromarket Designs, Inc. v. Crate & Barrel, Ltd. (U.S. District Court for the Northern District of Illinois, 2000). In the case, an Illinois company, Crate & Barrel, sued an Irish retailer, Euromarket Designs, in Illinois for using the same name for its products, which were made available to U.S. consumers through a Web site. Euromarket requested summary judgment, arguing that the U.S. courts had no jurisdiction over a company based in Ireland.
The court denied the summary judgment request, first determining that the case could move forward on its merits--because Euromarket had used the name "Crate & Barrel" in marketing and selling its wares--and then determining the jurisdictional issues. The court ruled that it did have jurisdiction because the Irish retailer maintained an interactive Internet Web site that was available to consumers in Illinois.
Interactivity. As noted in the Crate & Barrel case, a baseline question is whether the site is interactive. But what makes a site interactive? Courts have generally been answering this question by applying a sliding scale that examines the defendant site's level of commercial interaction. One case in which this principle was laid out was Mattel, Inc. v. Adventure Apparel (U.S. District Court for the Southern District of New York, 2001).
Mattel, Inc., based in New York, filed a lawsuit in that state for trademark infringement against Adventure Apparel, based in Florida. The suit arose after Mattel learned that Adventure Apparel was selling products at a Web site called barbiesbeachwear.com. Mattel holds the trademark on the Barbie name.
Part of the evidence in the case was that an investigator in New York had ordered items from the Web site. The court ruled that New York did have jurisdiction because the company was effectively conducting business locally through its Web site.
In deciding whether the case should proceed to trial, the court articulated a framework that other earlier decisions had set out, referring to three types of Web sites and discussing how each affected jurisdictional issues. The types include: passive Web sites, active business Web sites, and interactive informational Web sites. …