Local and International Jurisdiction on the Internet (Part I)

As the amount of information and number of sites on the Internet has grown, so Cyberspace litigation has multiplied. This litigation inevitably raises substantial issues of local and international jurisdiction. Since June 1996, time after time, the courts in the USA have had to rule on their jurisdiction to hear in one state on-line activity which was prima facie performed in another state. In at least one case a transatlantic issue was involved: a court in New York decided that activity performed on a computer in Europe constituted the infringement of an injunction that had been awarded in the USA, merely on the ground that the European Internet site could be accessed from computers in America.

Here are four possible examples:

  • An Internet surfer from Israel enters the site of a French company, which is located on a server in Finland and orders goods or a service. The Finnish server transmits the data to the company's branch in the USA, which sends an order confirmation to the Israeli customer's electronic mail box. Situations like this are already a matter of course on the Internet. If necessary an Israeli court would acquire jurisdiction over the transaction if, for example, the plea could be established that the contract was made in Israel, whereupon the court would permit service of the statement of claim outside the jurisdiction in accordance with Rule 500(4) of Civil Procedure Rules, 5744-1984.
  • Someone puts on a computer in the USA a page in Hebrew which is defamatory to an Israeli resident. This is not merely hypothetical. Recently the President of the Israeli Supreme Court, Judge Aharon Barak, was defamed on a server which was apparently not located in Israel. If the particular defamer is an Israel resident, there is no problem. The Israeli Civil Procedure Rules provide that he can be sued in the court where he lives. However, what if the defamer is a non-resident - can he be sued in Israel? If the defamatory publication is on a computer in the USA, can it be treated as "something done in the territory in the State" or "an act or omission in the territory of the State", whereupon the court would grant leave to serve the statement of claim against the defamer overseas and thereby acquire jurisdiction over him? In other circumstances the plaintiff would have to follow the defendant to his domicile (which might effectively frustrate the claim). As we shall see later in this series of articles, the answer to the question is not as obvious as might have been thought.
  • A particular corporation has a trademark registered in its favour solely in Israel. Another corporation copies the trademark and publishes it on its Internet site, which is kept on a computer in another country. Can the copier be sued in Israel for trademark infringement?
  • An Internet surfer downloads software from an overseas site. The software turns out to be infected by a damaging virus or is a "Trojan Horse" which transmits data from the downloader's computer to the foreign programmer (which has recently become a real concern). Can the operator of the foreign site, from which the software was downloaded, be sued in Israel under the Computers Law? Is the act or omission sued for located in Israel, whereupon the Israeli court would permit service on the defendant overseas?

The "Location" of the Internet

It would appear that most of these questions (like the majority of possible situations that will arise) have a strange common denominator. The Israel Civil Procedure Rules make it necessary to enquire into the "location" of the Internet. Where is the activity on it conducted? The question of jurisdiction raises issues which are at odds with the nature of Cyberspace: whilst the Internet by definition lacks a location, the court, in considering its jurisdiction, will be moved to decide the "location of the act or omission".

As mentioned above, since 1996 the US courts have decided issues of this type. The American case law should viewed by Israeli jurists with care: firstly, because the issue of local jurisdiction has arisen there incidental to inter-state rather than international claims; secondly, because local jurisdiction is regulated differently under American and Israeli law. In American law there are what are called "long arm" provisions, whereby a court in one state can acquire jurisdiction over the resident of another state if, for example, he carries on business in the first state. Finally, it should be borne in mind that the issue has not yet been decided by the US Supreme Court, and insofar as the writer is aware no such decision is pending.

Playboy? Playmen!

The first case was decided on 19th June 1996. The question of jurisdiction did not directly arise in it and perhaps specifically because of that its implications are more far reaching than the judgements following it. In Playboy Enterprises Inc. v. Chucklebery Publishing Inc., Playboy alleged that the defendants were infringing an injunction which has been awarded at the beginning of the 1980's restraining them from publishing, distributing, marketing or selling in the USA an erotic magazine in English called "Playmen". The magazine's distribution in Italy was not restrained. At the beginning of 1996, Playboy discovered that the Defendants had set up an Internet site in Italy (playmen.it) through which the Playmen magazine could be seen, including pictures and advertisements published in it, and products marketed by Playmen could also be ordered.

The Court held that although the original 1981 injunction had not envisaged the Internet, that did not mean that the restraints prescribed by it did not apply to distribution through the Internet. The Court decided that the very existence of the Internet site constituted a publication that was prohibited in the USA. Moreover, soliciting American customers for the Italian site, obtaining orders from them by fax and e-mail, sending code words to the site's subscribers and the like, were all activities that were recognised as enjoined distribution in the USA. It was therefore held that the injunction, which it should be borne in mind applied in the USA, had been infringed by the site that was physically located on a server thousands of kilometres away from there in Italy, merely because it could be visited from computers in the USA:

"While this Court has neither the jurisdiction nor the desire to prohibit the creation of Internet sites around the globe, it may prohibit access to those sites in this country. Therefore, while Tattilo may continue to operate its Internet site, it must refrain from accepting subscriptions from customers living in the United States".

The Conduct of Business and International Jurisdiction

The second judgement was awarded a few days later, on 22nd June 1996, in the case of Compuserve v. Patterson. Richard Patterson, a Texas lawyer, was a subscriber of Compuserve (one of the US' major on-line service providers). Compuserve is resident in Ohio. Patterson used to dial a local Texas number in order to get on-line. One of the reasons that Patterson contracted with Compuserve was his desire to distribute computer programs that were developed by him through Compuserve. To that end he made a contact with it that was transmitted from his computer in Texas to Compuserve's computers in Ohio. The agreement and service terms to which it related provided that they had been signed in Ohio and it was also provided that they would be governed by the law of the State of Ohio.

A dispute ultimately arose between the parties. Compuserve filed a claim in the State of Ohio for declatory judgement against Patterson. The Federal Appeal Court examined the issue in light of the State of Ohio's long arm provision and held that the Courts of that State had jurisdiction to hear the claim against Patterson. It was held that Patterson had entered into the contract by connecting to a computer system in Ohio and that "Patterson had chosen to transmit his software from Texas to Compuserve's system in Ohio.... Many others were able to access Patterson's software through that system... Patterson published and sold his products through that system..." It was accordingly held that although the activity left no real physical traces, there was no doubt that Patterson had voluntarily carried on business in Ohio. Although the judgement deals with the location of carrying on business, it can be applied, mutatis mutandis, to the Israeli law which enquires into the location of the act of omission or of the obligation's creation.

Translated by Word Power