Introduction to Cyber Law- Module 1 of 5
Foundations of Law: Jurisdiction over the Subject Matter of the Action (Subject Matter Jurisdiction)
Module 1: Introduction to Cyberlaw
Cyberlaw is formally defined as “[t]he field of law dealing with the Internet, encompassing cases, statutes, regulations, and disputes that affect people and businesses interacting through computers.” Cyberlaw addresses issues of online speech and business that arise because of the nature of the medium, including intellectual property rights, free speech, privacy, e-commerce and safety, as well as questions of jurisdiction. Cyberlaw encompasses a wide variety of federal, state, and local laws and regulations in the United States along with international treaties and laws of other countries.
The Internet is ubiquitous in people’s lives and cyberlaw is at the heart of many legal issues today. Cyberlaw intersects with many other areas of the law, including torts, contracts, intellectual property, and criminal law. Since the Internet is a dynamic medium that is constantly changing, cyberlaw also changes rapidly in response to changes in technology.
In our introductory module, we will define cyberlaw’s parameters and consider some of the most common cyberlaw issues. We will first examine jurisdiction over cyberlaw litigation and where disputing parties can adjudicate cyberlaw disputes. Next, we will look at commonly-included clauses in online agreements and contracts. Finally, we’ll learn how courts enforce judgments, including cases in which they must be enforced in multiple states.
Jurisdiction is the initial question in any lawsuit. It’s a question of whether a court has the power to hear a dispute and resolve it.
The first type of jurisdiction is subject matter jurisdiction, or jurisdiction over the nature of the case. Subject matter jurisdiction is the extent to which a court can rule on the conduct of people or the status of things. For example, federal district courts have exclusive jurisdiction to decide patent infringement cases, including business method patents for software companies. Additionally, when a cyberlaw dispute arises over trademark and copyright infringement, a federal court will have subject matter jurisdiction to resolve the dispute. State courts, however, usually hear tort claims, such as defamation, invasion of privacy, and garden variety contract claims.
Second is personal jurisdiction, a court’s power to bind a defendant with its ruling. Personal jurisdiction involves a defendant’s personal rights and/or property interests (such as determining who owns a parcel of real estate) and is an oft-litigated concern in cyberlaw cases involving websites and e-commerce.
The due process clauses in the Fifth and Fourteenth Amendments to the Constitution have been interpreted to limit courts’ authority to exercise powers over nonresident defendants. The Due Process Clause of the Fifth Amendment states that “no person shall be deprived of life, liberty, or property without the due process of law.” The Fourteenth Amendment, which extended the principle of due process to state and local governments, states that “no state shall . . . deprive any person of life, liberty, or property without the due process of law.”
A seminal personal jurisdiction case was International Shoe Co. v. Washington, in which the Supreme Court held that a state could exercise personal jurisdiction over a defendant if the defendant had “minimum contacts” with the state of Washington and when it was fair for the nonresident defendant to have to defend the lawsuit there.
Thus, the first important question in analyzing lawsuits against out of state websites involves personal jurisdiction. If a website written and hosted in Georgia posts false information that a user in Iowa relies on to her detriment, the question becomes whether, under the principles of International Shoe and its subsequent line of cases, an Iowa court can exercise jurisdiction over the sponsors of the Georgia-based website.
Some courts use a sliding scale to determine whether a website owner or operator has sufficient minimum contacts to invoke personal jurisdiction. Courts have held that passive websites that are used only for informational purposes, even if they include advertisements, are not sufficient to establish minimum contacts to support exercise of personal jurisdiction over a nonresident defendant. A court is more likely to recognize personal jurisdiction when the defendant maintains an interactive website, a website that engages in repeated contacts and transmissions or that allows visitors to enter into contracts using the website.
For example, in Boschetto v. Hansing, the Court of Appeals for the Ninth Circuit applied the minimum contacts test set forth in International Shoe to dismiss a lawsuit brought by a California-based plaintiff who purchased an automobile on eBay from a seller in Wisconsin. The federal appeals court held that the Wisconsin seller did not have sufficient contacts with the State of California for California to exercise jurisdiction over him. It reasoned that a single sale of an item over eBay doesn’t amount to the requisite level to constitute “minimum contacts.”
Every state has enacted “long-arm” statutes, which purport to allow the state to exercise jurisdiction over nonresident defendants who have contacts with the state where the case is filed, to allow its state courts to exercise personal jurisdiction over non-resident defendants. For example, South Carolina long-arm statute provides that a court in South Carolina “may exercise personal jurisdiction over a person who acts directly or by an agent as to a cause of action arising from the person's transacting any business in this State.” The question usually becomes whether the application of a long-arm statute in a given case offends the Constitutional Due Process clauses under a minimum contacts analysis. The minimum contact requirement is also considered satisfied if the defendant purposefully directs substantial activities to the forum state. So, for example, if an e-commerce website routinely sells goods to buyers in, say, Michigan, it is highly probable that Michigan courts will have personal jurisdiction over cases involving Michigan plaintiffs injured by products sold through e-commerce site.
Parties may, however, waive their right to contest personal jurisdiction. A waiver is the voluntary relinquishment or abandonment of a legal right or advantage. A person may consent to personal jurisdiction expressly or by implication. For example, parties may sign an agreement in which they both consent to personal jurisdiction in a given state. Moreover, even when a valid personal jurisdiction defense exists, a party can implicitly waive the defense by failing to raise it in a timely fashion.
Therefore, a defendant challenging personal jurisdiction should raise the objection when its opponent first files the lawsuit. In one case involving alleged defamatory statements made online, a third-party website host operator defended itself by arguing that there was a lack of personal jurisdiction over it. The Court of Appeals for the Seventh Circuit disagreed and held the defendant waived its defense by participating in district court proceedings, which included briefing and oral arguments addressing the merits of the claims. The host never pursued the personal jurisdiction defense before its appeal, so it was no longer a valid defense.
If a defendant wants to participate in the lawsuit and avoid a default judgment, but still preserve a potential challenge based on personal jurisdiction, it can make a “special appearance” in which it appears solely to challenge the personal jurisdiction of the court. If the court finds that there is jurisdiction and the case subsequently goes forward, the defendant will thus have preserved the issue for appeal.
Jurisdiction and Venue Clauses in Online Agreements
There are several clauses that are routinely included in online agreements and contracts. These include:
· forum selection clauses; and
· choice of law clauses.
A forum selection clause determines venue for a lawsuit should a dispute arise. Venue is normally determined by looking as which location has connections with the events that gave rise to the lawsuit or with the plaintiff or defendant. Typically, online vendors and websites ask users to acknowledge user or licensing agreements which include forum selections clauses to name the proper venue, including the country, state, or type of court, should a dispute arise.
Companies do this for efficiency. It saves time, money and other resources to avoid having to litigate cases throughout the country. Companies often choose a forum for resolving disputes that are near where their businesses are headquartered. For example, Amazon’s forum selection clause specifies “Any dispute relating in any way to your visit to Amazon.com or to products or services sold or distributed by Amazon or through Amazon.com . . . shall be adjudicated in any state or federal court in King County, Washington, and you consent to exclusive jurisdiction and venue in such courts.”
Forum selection clauses are ordinarily valid and enforceable. In 2018, a federal court in Hawaii considered the validity of the forum selection clause involving Facebook. Facebook’s terms of service provide: “You will resolve any claim, cause of action or dispute (claim) you have with us arising out of or relating to this Statement or Facebook exclusively in the U.S. District Court for the Northern District of California or a state court located in San Mateo County, and you agree to submit to the personal jurisdiction of such courts for the purpose of litigating all such claims.” The court recognized that a forum selection clause is presumptively valid. To overcome this presumption, a party challenging the clause bears a heavy burden of proof and must show that enforcement would be unreasonable and unjust, or that the clause is invalid for such reasons as fraud or over-reaching. Courts generally “uphold forum selection clauses in online user agreements ‘when the user is given notice of the agreement by clicking a box stating “I agree to the terms of the User Agreement” followed by a hyperlink.’” The Hawaii court agreed and upheld the Facebook forum selection clause.
A second commonly-included provision in an online contract is a choice of law provision, which dictates which state’s law governs the contract. An online company may include this to resolve disputes under the laws of a state that may be most beneficial to it. For example, the statute of limitations may be shorter in one state and longer in another state. Amazon, for example, includes a choice of law provision in its agreements with Amazon sellers or vendors. The choice of law provision in the vendor contract for Amazon.com spells out that “This Agreement will be governed by the laws of the state of Washington,” the state where Amazon is based.
A court may refuse to enforce a choice of law provision if it finds that the provision violates public policy. In 2008, the New Mexico Supreme Court considered a class action lawsuit brought by consumers against the computer manufacturer Dell, claiming that the website misrepresented the amount of memory in its computers sold online. While the choice of law provision stated that Texas law governed the contract, the New Mexico Supreme Court refused to uphold the provision. Application of Texas law, which allowed a class action ban, was contrary to New Mexico public policy, which required that consumers with small claims have a mechanism for dispute resolution via a class action lawsuit. In addition, if the provision chooses the law of a state with which the defendant has little or no connection merely to take advantage of a friendly state law (such as a business incorporated and doing business in New York choosing the laws of corporate-friendly states such as Delaware or Nevada for its choice of law), it is at risk of being struck down. The company can avoid this risk by incorporating in Delaware or Nevada, in which case choice of law provisions favoring those states should be upheld.
Clickwrap and “Browsewrap” Agreements
The following day, the buyer received notice that his order had been cancelled due to the sale having been ended due to depletion of inventory. The plaintiff filed a class action lawsuit against Barnes & Noble claiming false advertising and deceptive business practices, but the online retailer asserted that the plaintiff had agreed to the terms and conditions of its website, which required any issue be resolved through binding arbitration.
The federal court looked at whether the plaintiff had “actual or constructive knowledge” of the agreement, or whether the website as a whole “put a reasonably prudent user” on notice of the agreement.
The court acknowledged that Barnes & Noble placed the link to the terms and conditions on every page, including one close to the button the user must click to complete a purchase. The court also noted that the link was in underlined, color-contrasted text. Nevertheless, since there was nothing to prompt the user to “take any affirmative action to demonstrate assent,” the court concluded that consumers cannot be expected to click hyperlinks and read terms and conditions to which they have no reason to suspect they will be bound. As a result, there was no actual or constructive notice, and the arbitration provision could not be enforced.
Enforcing Judgments Across State Borders
The Full Faith and Credit Clause of Article IV, Section 1 of the United States Constitution, requires that all decisions, public records, and rulings from one state be honored in all other states, provided that the first state had jurisdiction over the parties and the subject matter.
A court in one state must generally, therefore, enforce a judgment rendered in another state. There have been several cases analyzing the issue of enforcing judgments with respect to the Internet, software, and other information technology. In Fine v. AOL, the plaintiffs filed a class action lawsuit in Ohio against America Online, their Internet service provider. A month earlier, an Illinois AOL customer had filed an identical action. That litigant had the Illinois trial court certify a class-action with a national class. Notice was given to all national class members, including the Ohio plaintiffs. The Illinois litigants then settled. AOL then sought summary judgment in the Ohio case because this suit was included in the Illinois class action. The trial court granted the motion to dismiss. The plaintiffs appealed, but the Ohio Court of Appeals affirmed, holding that the Illinois settlement precluded the Ohio class suit because the underlying claims were identical in both suits. As a result, the Illinois decision must be given full faith and credit.
In our next module, we will delve further into cyberlaw and begin looking at intellectual property controversies that can arise through Internet activity.
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 Restatement (3rd) of Torts: Prods Liab., §6(d)(2).
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 15 U.S.C. ch. 36 § 1331 et seq.
 Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S. Ct. 2608, 120 L. Ed. 2d 407 (1992).