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CYBERWHERE Many small businesses have concerns that marketing via the Internet may make them a national business for liability purposes. Two recent appellate decisions address the effect of an Internet presence on personal jurisdiction (i.e., where you can sue or be sued). The first lawsuit arose out of a trademark dispute between two companies with the same name: Cybersell, Inc. The Plaintiff, incorporated in Arizona, provided Internet advertising and marketing services. The Defendant also provided consulting and marketing services, but was based in Florida. The Florida company had not actually obtained any business from Arizona residents; indeed there was no evidence that the Defendant's web page received a single "hit" from anyone in Arizona other than the Plaintiff. Nothing indicated the Florida company was directing its sales effort at Arizona residents. The court characterized the Defendant's home page as "essentially passive" and held that the Florida corporation did not have to come to Arizona to defend itself in a lawsuit. This case could be interpreted to protect only Internet users whose marketing efforts have not been successful in a particular state. Once an interactive web site generates contacts with an Arizona resident, a court may find the activity was directed toward Arizona residents. The more contact a company has with Arizona, the more likely it is the company can be sued in Arizona. The Arizona District Court has stated that an Internet defendant with sales in Arizona "should not be permitted to take advantage of modern technology through an Internet web page and simultaneously escape traditional notions of jurisdiction." In a second Internet-related lawsuit, Dennis Toeppen registered a number of established trademarks as domain names, including "Panavision" and "Panaflex," registered trademarks of Panavision International LP. Toeppen did not register the domain name Panaflex.com until after Panavision refused Toeppen's offer to transfer Panavision.com for $13,000. Toeppen has registered over 100 trademarks as domain names and has offered to sell them for $10,000 to $15,000. The Court held that Toeppen's offers to sell the domain names constituted use in commerce and violated both federal and California trademark dilution laws. (Arizona just enacted a similar dilution law.) Toeppen's use of the domain name (to display pictures of Pana, Illinois) diluted the ability of Panavision to use its trademark to identify its goods and services on the Internet. Toeppen went beyond merely using a trademark as a domain name and was engaged in a scheme to extort money from Panavision in California. Toeppen, an Illinois resident, could therefore be required to defend his Internet activity in a California court. That finding of jurisdiction may, however, owe much to the court's sense that the defendant was a bad actor, engaged in a scheme. Other courts seem reluctant to find jurisdiction over out-of-state companies using merely informational web sites. A Texas resident who distributed shareware through Compuserve was subject to suit in Ohio, but a jazz club owner in Missouri with an informational web page was not subject to jurisdiction in New York. The trend appears to promote commerce over the Internet by permitting use of the web for informational advertisements without subjecting the user to nationwide jurisdiction. |