e-Jurisdiction: What’s this stuff all about?

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( Second of two parts )

The second test for determining whether a court can assume personal jurisdiction over a non resident defendant is called the "effects" test. Simply put, this means that a court can validly assert jurisdiction over said defendant when his wrongful conduct results in harm within the territorial jurisdiction of that court. An illustrative case is American Network Inc. v. Access America/Connect Atlanta, Inc. (975 F. Supp. 494 [S.D.N.Y. 1997]), where a Georgia Internet service provider was held subject to personal jurisdiction in New York in a suit by a New York Internet service provider (ISP) in New York for Infringement of trademark "American.Net." Defendant used the infringing mark on its home page. Defendant has its only office and all of its business facilities in Georgia, and all of its employees are Georgia residents. It owns no property in New York. Upholding personal jurisdiction over the Georgia resident, the New York court held that defendant committed a tortuous act resulting in an injury that was felt in New York, i.e., the alleged "harm in New York market resulting from the confusion and deception of New York computer users." Defendant stated twice on its home page that it could help customers "across the US." It had signed up six New York customers. Accordingly, the court held that it was "reasonably foreseeable to defendant that publishing its home page on its Web site, with the offending mark, would have New York consequences.

The "effects" test was also applied in a state level. In a recent California case, more popularly known as the DeCSS case, the DVD Copy Control Association (DVD CCA) filed a case against Matthew Pavlovich and some other defendants for misappropriation of trade secrets. The complaint alleged that Pavlovich had repeatedly republished DVC CCA’s trade secrets and copyrighted material throughout the Internet. Pavlovich was a student in Indiana at the time the suit was filed. In his motion to quash, Pavlovich claims to have no contacts with California sufficient to warrant the exercise of jurisdiction by the State over his person. The question was whether Pavlovich’s lack of physical and personal presence in California incapacitates California courts from jurisdictionally reaching him through its long-arm statutes.

The California Court of Appeals upheld personal jurisdiction of the California trial court over Pavlovich. It observed that Pavlovich knew, or should have known, that his Web site DVD republishing and distribution activities, while benefiting him, were injuriously affecting the motion picture and computer industries in California. The Court of Appeals held that Pavlovich used the new medium of the Internet to inflict harm on a California plaintiff. It should not matter whether the delivery system used to inflict the injury is the traditional delivery system of air, land, or sea transporation, or the cutting-edge technological system of cyberspace, satellites, cable, and electro-magnetic technological system of cyberspace, satellites, cable, and electro-magnetic waves. California’s long-arm statute looks at the effects, not at the system that delivered and produced those effects.

The last test to determine personal jurisdiction is called the "targeting" test. This means that if a foreign corporation targets activities or customers in another state, then that corporation is deemed to have minimum contacts with said state as to subject itself to the special personal jurisdiction of the courts of that state. This is illustrated in Washington, District of Columbia (D.C.) where the D.C. circuit court used the "targeting" theory to assert personal jurisdiction over a non-California-based defendant. In Blumenthal v. Drudge (992 F. Supp. 44 [D.D.C. 1998]), a D.C. district court held that an informational Web site that targets customers in the D.C. area and enables them to e-mail requests for subscription, has sufficient minimum contacts in D.C. to support jurisdiction of D.C. courts over the person of the defendant. In this case, defendant Drudge created an electronic publication called the Drudge Report, a gossip column focusing on gossip from Hollywood and Washington, D.C. Mr. Drudge’s base of operations for writing, publishing and disseminating the Drudge Report was his residence in Los Angeles, California. He posted the report in his Web site in California and e-mailed editions of the report to his subscribers. Mr. Drudge also entered into a six-month license agreement with the publisher of the "Wired" magazine. Under the agreement, the publisher had the right to receive and display the Drudge Report in "Hotwired", an electronic Internet publication. After the expiration of his license agreement with the "Wired" magazine, Mr. Drudge entered into a one-year license agreement with the America Online, Inc. (AOL) by virtue of which the Drudge Report was made available to all members of AOL’s service.

Sometime in 1997, Mr. Drudge wrote the edition of the Drudge Report that contained the alleged defamatory statements against the Blumenthals. Drudge transmitted the report from Los Angeles, California by e-mail to his direct subscribers and by posting both a headline and the full text on his worldwide web site. He also transmitted the text to AOL which, in turn, made it available to AOL subscribers. The Blumenthals filed a suit for damages in a D.C. court, which Drudge moved to dismiss on the ground of lack of personal jurisdiction.

The D.C. District court held that "Drudge specifically targets readers in the District of Columbia by virtue of the subjects he covers and even solicits gossips from District residents and government officials who work [t] here." The court also observed that "defendant Drudge also solicited contributions from District residents via the Drudge report’s homepage." In this regard, the court observed that not only is Drudge’s web site interactive, the subject matter of the report primarily concerns political gossip and rumor in Washington, D.C. The Drudge Report" is directly related to the political world of the Nation’s capital and is quintessentially "inside the Beltway" gossip and rumor. The court likewise noted that "[b]y, targeting the Blumenthals who work in the White House and live in the District of Columbia, Drudge knew that the ‘primary and most devastating effects of [the statements he made] would be felt’ in the District of Columbia." For these reasons, the D.C. district court asserted personal jurisdiction over Mr. Drudge.

Conclusion

There are those who contend that our present Rules of Court are insufficient to address the concerns of Web-based business operations. The Supreme Court, through our E-Commerce Subcommittee, is presently reviewing the matter. The foregoing tests, as illustrated in several cases in the United States, can serve as guiding principles in the formulation of rules governing e-Jurisdiction. What is important is that our rules on cyberspace jurisdiction must comfort with the constitutional standards of "traditional notions of fair play and substantial justice." This appears to be the generally accepted standard in determining whether a court of law can acquire personal jurisdiction over a non-resident defendant as to validly render judgment against it. Equally important to consider is the international (as opposed to interstate) character of the issue. The boundaries of sovereign nations are definitely more intact than those of the component states of federal countries like the United States. It might be more unlikely for foreign nations to recognize personal jurisdiction of Philippine courts over their residents where their sole contact with the Philippines occurs over the Internet. Surely, the intricacies of private international law must be factored into our rules on cyberspace jurisdiction. The rules must also reckon with relevant bilateral and multilateral agreements on the matter. Our new rules must take these factors into account, otherwise judgments of our local courts in e-commerce stand the risk of not being recognized and enforced in foreign jurisdictions.

(The author is a law professor at the Ateneo de Manila University and a senior partner of the Abello Concepcion Regala Law Offices or ACCRALAW. He can be contacted at 830-8000.)

(Editor’s note – This is a continuation of the article that appeared in the Sept. 10, 2002 issue of this paper.)