Maine Bar Journal

October, 1999

Feature

*306 REACHING INTO CYBERSPACE WITH MAINE'S LONG-ARM STATUTE

Rita H. Logan [FNa1]

Copyright _ 1999 Maine State Bar Association; Rita H. Logan

Personal jurisdiction concepts were born years ago and raised in an era when business was conducted in person or occasionally through the mail. Over the years, lawyers and judges have become comfortably familiar with the "traditional notions of fair play and substantial justice" that provide due process protection to defendants sued in a foreign jurisdiction.

The relatively sudden pervasiveness of the Internet [FN1] and popularity of the World Wide Web [FN2] have jolted courts out of their cozy "minimum contacts" groove. While traditional due process notions still apply, courts now "should be sensitive to the unique nature of cyberspace, a non-traditional medium through which the contacts between the defendant and the forum state can occur. Since information posted on a Web site becomes available worldwide almost instantaneously, imposing traditional concepts on commercial Internet users might have dramatic implications, subjecting them to nationwide or even international jurisdiction." [FN3]

The Internet permits information to be transmitted across physical boundaries without any geographic cues or barriers. Because physical boundaries have typically framed legal boundaries, "in effect creating signposts that warn that we will be required after crossing to abide by different rules," the Internet's lack of physical boundaries has legal significance. [FN4] Some courts are concerned that imposing traditional territorial concepts on commercial Internet use would have "dramatic implications, opening the Web user up to inconsistent regulations throughout the fifty states." [FN5]

Several federal district courts and a few circuit courts have considered the extent to which a defendant's use of the Internet could subject it to jurisdiction under a state's long-arm statute and within the limits of the U.S. Constitution. Neither the Maine Supreme Judicial Court, the U.S. District Court for the District of Maine, nor even the First Circuit has yet addressed the issue in any factual context. This article examines how courts from other jurisdictions have analyzed the permissible scope of personal jurisdiction based on Internet use and attempts to predict how courts applying Maine law will likely resolve the issue when, inevitably, they confront it.

MINIMUM CONTACTS IN CYBERSPACE

Some of the earliest cases to analyze personal jurisdiction through Internet use have also been the broadest in scope. They held that jurisdiction was appropriately exercised where the defendant maintained even a "passive" Web site, without any contract to sell goods or any targeted solicitation in the forum state.

For instance in Inset Systems, Inc. v. Instruction Set, Inc., [FN6] the plaintiff, Inset Systems, a Connecticut corporation, brought a trademark infringement action against a Massachusetts corporation that had no employees or offices within Connecticut and did not conduct business there on a regular basis. The defendant had obtained "inset.com" as its Internet domain address and used it to advertise its goods and services. [FN7]

The Inset court noted that "[u]nlike television and radio, in which advertisements are broadcast at certain times only, or newspapers in which advertisements are often disposed of quickly, advertisements *307 over the Internet are available to Internet users continually, at the stroke of a few keys of a computer." [FN8] It further noted that Connecticut had "at least 10,000 Internet connected computer users." [FN9] The court held that "advertising via the Internet issolicitation of a sufficient repetitive nature to satisfy" the business solicitation section of the state's long-arm statute. [FN10] Further, the defendant's use of the Internet and a toll-free number to try to solicit business within Connecticut constituted sufficient minimum contacts to comport with due process. [FN11]

The court in Telco Communications v. An Apple a Day [FN12] followed Inset in holding that "posting a Web site advertising or solicitation constitutes a persistent course of conduct, and that the two or three press releases rise to the level of regularly doing or soliciting business."

In a rare Circuit Court opinion, the Sixth Circuit in CompuServe, Inc. v. Patterson [FN13] permitted an Ohio district court to exercise jurisdiction over a Texas defendant whose contacts with Ohio occurred almost exclusively through computer transmissions to the plaintiff's computer information subscriber service headquartered in Ohio. The court in CompuServe had more to consider than a mere "passive" Web site, however, noting the defendant had entered into a software distribution agreement with CompuServe, had advertised on CompuServe to sell the defendant's products, and had sold software on the server. Further, the defendant had electronically agreed to the provisions of the shareware distribution agreement, which designated Ohio law as governing the contract. [FN14]

Other courts from the Inset era have refused to find that minimum contacts exist from merely advertising on a Web site. For example, in Bensunan Restaurant Corp. v. King [FN15] the owner of the federally registered trademark THE BLUE NOTE and operator of a famous New York jazz club by that name sued a Missouri defendant operating a small jazz nightclub called THE BLUE NOTE and promoting his club using a Web site on a local Internet provider's server. The court noted that New York residents had to take several affirmative steps to obtain access to the defendant's Web site and to utilize the information there. Thus, the court held, "the mere fact that a person can gain information on the allegedly infringing product is not the equivalent of a person advertising, promoting, selling or otherwise making an effort to target its product in New York." [FN16]

The weight of authority since Inset is more in line with Bensunan, holding that use of merely "passive" Web sites is insufficient to trigger jurisdiction. [FN17] In the seminal case Zippo Manufacturing Co. v. Zippo Dot Com, Inc., [FN18] the court summarized the earliest Internet personal jurisdiction cases and set a now familiar standard:

[T]he 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. The sliding scale is consistent with well developed personal jurisdiction principles. At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions. 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. [FN19]

While many cases analyze the jurisdictional question under the "doing business" provision of state long-arm laws, others use the "tortious conduct or consequences" standard. For instance, many trademark infringement and defamation cases are well suited to the "effects test" set forth in Calder v. Jones. [FN20] *308 Purposeful use of another's trademark, such as pirate-like domain name registration known as "cybersquatting," [FN21] can be intended to cause harmful effects in the trademark owner's forum state, particularly when the defendant is motivated by profit. Panavision Int'l, L.P. v. Toeppen [FN22] was just such a case. The court held that by registering the plaintiff's trademarks as domain names with the knowledge that the names belonged to the plaintiff and with the intent to interfere with the plaintiff's business, the defendant had "expressly aimed" his conduct at the plaintiff's forum state and was subject to personal jurisdiction there.

In affirming the district court's Panavision decision, the Ninth Circuit noted that "simply registering someone else's trademark as a domain name and posting a web site on the Internet is not sufficient to subject a party domiciled in one state to the jurisdiction of another," unless the defendant does "something more." [FN23] It then held that the defendant's "purpose of extorting money from Panavision" was the requisite "something more." [FN24]

Similarly, the posting of libelous messages to an Internet news group, where the web site is accessible 24 hours per day and additionally is interactive, has also been held sufficient to satisfy due process concerns because the "effects" of the libel are felt in the plaintiff's forum state. [FN25]

It is important to recognize that not all trademark infringement or similar conduct exposes a defendant to the personal jurisdiction of the plaintiff's forum. Even if the plaintiff claims to feel the harm of the infringement in his or her forum state, there must still be "something more" than mere Internet use to satisfy due process.

In Cybersell, Inc. v. Cybersell, Inc., [FN26] an Arizona plaintiff suing for trademark infringement argued that a Florida defendant's mere use of the same trademark in its home page on the World Wide Web sufficed for personal jurisdiction in the plaintiff's home state. The Florida defendant had "no contacts with Arizona other than maintaining a home page that was accessible to Arizonans, and everyone else, over the Internet." [FN27] The court declined to exercise jurisdiction, noting the Florida defendant "did nothing to encourage people in Arizona to access its site, and there [was] no evidence that any part of its business (let alone a continuous part of its business) was sought or achieved in Arizona." [FN28] The circumstances lacked the "something more" necessary "to indicate that the defendant purposefully ... directed his activity in a substantial way to the forum state." [FN29]

The Cybersell court also rejected the plaintiff's "effects test" argument, noting the test does not apply "with the same force to Cybersell AZ as it would to an individual, because a corporation does not suffer harm in a particular geographic location in the same sense that an individual does." [FN30] Although the court did not expressly analyze the issue, it was likely significant as well that the alleged infringement was innocent, in contrast to a cybersquatter's intentional attempt to profit by registering a famous trademark or the purposeful circulation of libelous material about a particular named plaintiff. In these latter examples, the defendant can be considered to have purposefully directed his activities at the forum, and knowingly caused the harmful effects to be felt there.

Purposeful conduct such as intentional defamation may still be insufficient in jurisdictions where the activity must be directed at the plaintiff in his or her capacity as a resident of the particular state. For instance, the court in Barrett v. Catacombs Press [FN31] held the plaintiff in a defamation action had failed to demonstrate that the "effects test" permitted Pennsylvania courts to exercise personal jurisdiction over a defendant who hosted a web site. The plaintiff was "a national, if not international figure" and the defendant did not, with her conduct, deliberately target the plaintiff in his status as a resident of Pennsylvania. [FN32]

Most courts today follow the three-layer test described in the Zippo case. First, jurisdiction is proper if a defendant clearly does business over the Internet by entering into contracts with residents of the forum state. Second, when a defendant operates an interactive web site, with which a user in the forum state can exchange information, jurisdiction is proper if the level of interactivity is sufficient and there is a commercial component to the web site, but may *309 not be appropriate if the defendant does not benefit from its contacts with the forum state. Third, personal jurisdiction is probably inappropriate when the web site is merely a "passive" posting of information accessible nationwide or worldwide, so long as it does not target a particular plaintiff in a particular forum through intentional trademark or copyright infringement, or defamation. [FN33]

A fourth consideration that has no specific place in the list includes circumstances where the defendant has non-Internet contacts with the forum state in addition to posting a Web site. Many courts have looked to these non- Internet contacts as the "something more" necessary to accommodate due process concerns in exercising personal jurisdiction. [FN34]

MAINE'S APPROACH TO PERSONAL JURISDICTION

If they choose, states may impose through their long-arm statutes even greater restrictions on the exercise of personal jurisdiction than is required by due process. Maine's long-arm law provides explicitly that it "shall be applied so as to assert jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the United States Constitution, 14th Amendment." [FN35] It also enumerates specific acts which, if committed by a nonresident defendant, may subject him or her to the jurisdiction of Maine courts. Such acts include "[t]he transaction of business within this State" and "[d]oing or causing a tortious act to be done, or causing the consequences of a tortious act to occur within this State." [FN36]

One may not disregard the language of Maine's long-arm statute "in a quest for generalized due process. Initially, the facts at hand must be applied to the statute; then considerations of due process as enunciated by the United States Supreme Court must be satisfied." [FN37] Before exercising jurisdiction over a nonresident defendant, courts applying Maine law "must conclude that (1) Maine has a legitimate interest in the subject matter of this action; (2) the defendant, by its conduct, should reasonably have anticipated litigation in Maine; and (3) the exercise of jurisdiction by Maine's courts would comport with traditional notions of fair play and substantial justice." [FN38]

Thus, in spite of the initial breadth of Maine's long-arm statute, the enumerated acts in the statute and the case law have shortened the reach of the law. Whether Maine courts will find sufficient contacts exist through mere Internet use has yet to be determined.

Based upon the case law to date, one can surmise that Maine courts will likely exercise personal jurisdiction over non-residents whose contacts with Maine occur via the Internet, so long as certain conditions exist. Maine courts have upheld the exercise of personal jurisdiction under the "transacting business" provision of the long-arm statute even where the defendant had no physical contact with Maine. In A.F. Briggs Co. v. Starrett Corp., [FN39] for instance, the Maine Supreme Judicial Court upheld the exercise of personal jurisdiction in a case involving a single sale of a single commodity because the defendant had "substantially participated in commercial solicitation of the Maine market" by numerous communications with the plaintiff including invoices, telephone calls and the negotiation of contract terms. Contact with Maine via the Internet in the form of a posted web site with active solicitation in Maine and actual sales in this state is practically indistinguishable from solicitation via magazine ads, or sales via the telephone, fax or the mail.

Like the Zippo court, Maine courts would likely analyze a jurisdictional challenge in an Internet-contacts case by contemplating the "nature and quality" of the contacts with Maine, a standard already followed by Maine courts applying the "transacting business" standard. [FN40] Making multiple sales to Maine residents is likely to expose an Internet-based business to personal jurisdiction in Maine. A single sale may be enough as well, so long as it is accompanied by numerous intentional communications with a Maine buyer so that the transaction can be said to be purposefully aimed at Maine. [FN41]

In Electronic Media International v. Pioneer Communication of America, Inc., [FN42] jurisdiction was proper where the defendant had entered into one $3,000 contract with the plaintiff, engaged in discussions and negotiations over a period of five months, *310 sold and delivered several items to the plaintiff, and also authorized a dealer for Maine, thereby indicating its intentions purposefully to avail itself of the privilege of doing business in Maine. Similarly, in Labbe v. Nissen Corp., [FN43] the court found significant that the defendant had made sales in Maine of approximately $80,000 per year over five years and that it "actively solicit[ed] business through its advertising in many periodicals distributed in Maine, regularly sen[t] sales literature to Maine schools and distribute[d] its catalogs to certain Maine dealers."

A single sale likely will not be sufficient to hale a nonresident defendant into Maine's courts, however, if it occurs solely through the unilateral acts of the buyer who orders on-line without engaging in significant negotiation or interaction with the web site owner. The court in Murphy v. Keenan [FN44] held that no personal jurisdiction existed over a New Hampshire boat dealer where all the transactions concerning the sale of the boat took place in New Hampshire, the sale was a "single, isolated event" between the parties, and the defendant did not initiate contact with the Maine plaintiff.

Further, in Architectural Woodcraft Co. v. Read, [FN45] the district court lacked personal jurisdiction over the nonresident purchaser of a staircase where the defendant's only contacts with Maine arose out of the purchase of the staircase, the defendant never "set foot in Maine or conducted any other business here," and he ordered only the staircase from the Maine plaintiff by telephone and mail. The Court held that "the existence of a single contract with a resident plaintiff coupled with the use of interstate communication does not establish a basis for asserting jurisdiction over a nonresident defendant." [FN46] Under this standard, Maine courts clearly would require "something more" than passive Internet advertising and maybe even a single sale for jurisdiction to exist over a non-resident Web based business.

Maine courts may be even less inclined to exercise personal jurisdiction over nonresidents in cases involving tort claims arising from Internet use. A defendant must direct its activities at a Maine resident, or have a continuing obligation with that resident, in order reasonably to anticipate being haled into court here. In Frazier v. Bankamerica International, [FN47] the Supreme Judicial Court held that a New York corporation and its employee were not subject to personal jurisdiction in Maine when they were sued by Maine residents who were involved in an automobile accident in New York City. The Court held that "[t]he commission outside the forum state of an act that has consequences in the forum state is by itself an insufficient contact where all the events necessary to give rise to a tort claim occurred outside the forum state." [FN48] The Court has also held that "[t]he consequences in the forum state resulting from a tortious act committed outside the forum is merely a factor to be considered" in the minimum contacts analysis. [FN49]

Given the Court's conservative approach to tortious conduct cases, it is unclear how Maine's long-arm statute would be applied to nonresidents who, for instance, are defending trademark infringement cases based upon their domain name registration or defamation cases based upon libelous publication over the Internet. The most appropriate course would be to follow the guidance of other jurisdictions and exercise personal jurisdiction when the defendant's infringing or defamatory conduct is intentionally aimed at a Maine resident, particularly when the Web site is commercial in nature and the defendant hopes to profit through its acts.

CONCLUSION

Courts called upon to apply Maine law to the issue of Internet-based minimum contacts will find the path already somewhat broken. In accordance with the state's relatively cautious approach to personal jurisdiction, Maine courts will likely follow cases requiring a defendant's web site to be at least interactive (rather than merely passive) and also requiring that there be "something more" to justify haling the defendant into a foreign state's court. Under Maine law, that "something more" could be repeated or commercially significant sales to Maine residents, deliberate target marketing of Maine residents or significant non-Internet based contacts with Maine. It may also be purposefully-aimed conduct such as willful trademark infringement or copyright infringement through which the defendant will profit at a Maine resident's expense, or defamation intended to harm a Maine resident in his status as a Mainer.

[FNa1]. Rita H. Logan is a litigation attorney with Verrill & Dana LLP. She received her B.A. in Journalism with Honors and Highest Distinction in 1990 from the University of Iowa, and her J.D. with Honors in 1993 from Drake University Law School, where she was Notes Editor of the Drake Law Review and a member of the National Moot Court team. Following a judicial clerkship with the U.S. Court of Appeals for the Ninth Circuit, Ms. Logan entered private practice, focusing on intellectual property and commercial litigation.

[FN1]. "The Internet is a giant electronic network which connects the smaller networks of the world." Hasbro, Inc. v. Clue Computing, Inc., 994 F. Supp. 34, 36 (D. Mass. 1997).

[FN2]. "The World Wide Web is one part of the Internet which allows for the display of graphic materials, photos, text and audio...Information is 'published' on the Internet by any individual working with the proper software in their [sic] home or business." Id.

[FN3]. Id. at 39.

[FN4]. Digital Equip. Corp. v. Altavista Technology, Inc., 960 F. Supp. 456, 463 (D. Mass. 1997).

[FN5]. Id.

[FN6]. Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161, 162-63 (D. Conn. 1996).

[FN7]. Id. at 163.

[FN8]. Id.

[FN9]. Id.

[FN10]. Id. at 164.

[FN11]. Id.

[FN12]. Telco Communications v. An Apple a Day, 977 F. Supp. 404, 407 (E.D. Va. 1997).

[FN13]. CompuServe, Inc v. Patterson, 89 F.3d 1257 (6th Cir. 1996).

[FN14]. Id. at 1260.

[FN15]. Bensunan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996).

[FN16]. Id. at 299.

[FN17]. See Barrett v. Catacombs Press, 44 F. Supp. 2d 717 (E.D. Pa. 1999).

[FN18]. Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997).

[FN19]. Id. at 1124 (citations omitted).

[FN20]. Calder v. Jones, 465 U.S. 783, 789, 104 S. Ct. 1482, 1486 (1984) (Florida reporter and editor were subject to personal jurisdiction in California for an allegedly defamatory article written for publication in a national magazine where the California plaintiff was the "focal point of both the story and of the harm suffered").

[FN21]. "Cybersquatters" are persons who deliberately register another company's trademark or service mark as a domain name, often hoping to sell the name to its owner for a tidy profit.

[FN22]. Panavision v. Toeppen, 938 F. Supp. 616, 621 (C.D. Cal. 1997).

[FN23]. Panavision v. Toeppen, 141 F.3d 1316, 1319 (9th Cir. 1998).

[FN24]. Id. at 1322, n. 7.

[FN25]. Bochan v. La Fontaine, 1999 WL 343780 (E.D. Va., May 26, 1999); see also EDIAS Software Int'l, LLC v. BASIS Int'l, Ltd., 947 F. Supp. 413 (D. Ariz. 1996) (personal jurisdiction found using "effects test" in action involving defamation via e-mail and through Web page).

[FN26]. Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 419 (9th Cir. 1997).

[FN27]. Id. at 415.

[FN28]. Id. at 419.

[FN29]. Id. at 418.

[FN30]. Id. at 420.

[FN31]. Barrett v. Catacombs Press, 44 F. Supp. 2d 717 (E.D. Pa. 1999).

[FN32]. Id. at 733.

[FN33]. See, e.g., International Star Registry of Illinois v. Bowman- Haight Ventures, Inc., 1999 WL 300285 at *4-6 (N.D. Ill. May 6, 1999); Resnick v. Manfredy, 1999 WL 257751 at *3-4 (E.D. Pa. April 29, 1999); Barrett, 44 F. Supp. 2d at 730. Cases from Massachusetts may be persuasive to Maine courts when the Internet jurisdiction issue arises. The District of Massachusetts has faced the issue several times, and each time has carefully and thoughtfully mapped its approach to the modern question. See, e.g., Digital Equipment, 960 F. Supp. 456 (D. Mass. 1997); Hasbro, 994 F. Supp. 34 (D. Mass. 1997).

[FN34]. See, e.g., Blumenthal v. Drudge, 992 F. Supp. 44 (D.D.C. 1998) (personal jurisdiction proper because of interactive Web site and travel to District of Columbia to promote Web site); Cody v. Ward, 954 F. Supp. 456 (D. Conn. 1997) (minimum contacts sufficient because defendant made fraudulent misrepresentations about stock purchase via e-mail and in series of telephone calls); Digital Equip Corp., 960 F. Supp. at 462 (minimum contacts test satisfied because of a contract agreement to apply Massachusetts law and solicitation of business over Internet).

[FN35]. 14 M.R.S.A. _ 704-A(1).

[FN36]. 14 M.R.S.A. _ 704-A(2)(A) and (B).

[FN37]. A.F. Briggs Co. v. Starrett Corp., 329 A.2d 177, 180 (Me. 1974).

[FN38]. Frazier v. Bankamerica Int'l, 593 A.2d 661, 662 (Me. 1991) (citing Caluri v. Rypkema, 570 A.2d 830, 831 (Me. 1991) and Harriman v. Demoulas Supermarkets, Inc., 518 A.2d 1035, 1036 (Me. 1986)).

[FN39]. A. F. Briggs Co. v. Starrett Corp., 329 A.2d at 182.

[FN40]. In A.F. Briggs, the Court noted that "[a] determination of the jurisdictional fact of 'transacting business' should rest upon an evaluation of both the nature and the quality of the act which is alleged as the basis of jurisdiction." Id. at 181.

[FN41]. See id.

[FN42]. Electronic Media Int'l v. Pioneer Comm. of America, Inc., 586 A.2d 1256 (Me. 1991).

[FN43]. Labbe v. Nissen Corp., 404 A.2d 564 (Me. 1979).

[FN44]. Murphy v. Keenan, 667 A.2d 591 (Me. 1995).

[FN45]. Architectural Woodcraft Co. v. Read, 464 A.2d 210 (Me. 1983).

[FN46]. Id. at 213.

[FN47]. Frazier v. Bankamerica Int'l., 593 A.2d 661 (Me. 1991).

[FN48]. Id. at 663 (quoting Martin v. Deschenes, 468 A.2d 618, 619 (Me. 1983)).

[FN49]. Murphy, 667 A.2d at 595.

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