Is There A Court In Cyberspace?

by Neal J. Friedman

Online information services and the Internet have made it possible for businesses of all sizes to do business nationally, even globally, at a fraction of what the cost once was. Not surprisingly, this explosion of electronic commerce has spawned the inevitable disputes that must be resolved in the courts. But, unlike traditional forms of business, commerce in cyberspace has raised intriguing issues of first impression for courts.

Such a dilemma faced a federal court judge when Compuserve sued one of its customers who had claimed that the online information service provider infringed on its claimed common law trademark. The immediate problem for the court was that Compuserve is headquartered in Ohio and its customer was in Texas. Could Compuserve sue in Ohio? The court said no. It held that even though the case was unique in that it involved a nationwide computer information service network, well- established principles of jurisdiction could apply.

The defendant, Richard Patterson, a resident of Texas, claims to have developed shareware programs variously called WinNav, Windows Navigator, and Flashpoint Windows Navigator. Patterson entered into an agreement with Compuserve under which he placed his software on their system and offered it for sale in return for allowing Compuserve a 15 percent commission on each sale.

In late 1993 Compuserve announced to its users that it would be releasing a Windows program called Compuserve Navigator. Patterson told Compuserve that if it released the product under that name it would be infringing on his common law trademark. A common law trademark is established by use even within only a single state. It is no substitute, however, for the greater protection obtained through federal registration of a mark. Compuserve brought a complaint in Ohio asking the court to find that there would be no infringement if it used the Compuserve Navigator name. Patterson argued that before the court could rule on that claim, it would have to decide whether it had jurisdiction over him.

Federal courts are often called upon to determine jurisdictional issues among citizens of different states. The Supreme Court laid down the basic rule of law almost 50 years ago and lower courts have adopted those principles to specific cases.

Patterson argued that he had never set foot in Ohio and the mere fact that he entered into an agreement with an Ohio company and had limited electronic contacts with the firm was not sufficient to bring him within the jurisdiction of a federal court in Ohio. Compuserve argued that its agreement with Patterson stated that it would be governed by Ohio law and that Patterson had sold copies of his software to Ohio residents, thus bringing him within the courts jurisdiction.

The court found that the relationship between Patterson in Texas and Compuserve in Ohio was not at all extensive. Patterson conducted no negotiations with Compuserve and merely signed a take it or leave it standard contract. Compuserve, the court held, was merely a conduit for information sharing among its customers. The presence of Pattersons software on the Compuserve network was entirely incidental to the underlying trademark dispute between the parties. Moreover, the court found that Patterson did not even become aware of the similarity between the names of the programs via Compuserve and, even if he had, it would not be relevant.

The Ohio court dealt another blow to Compuserve when it refused to order the case transferred to a Texas court. It told Compuserve that if it felt it still had a live issue with Patterson, it could bring suit in Texas where the court would have jurisdiction.

This case is but one of many that are percolating through the courts. Journalist Brock Meeks, based in Washington, DC, distributed an investigative article world-wide on the Internet. The subject of the article, coincidentally also based in Ohio, sued Meeks for defamation in that state. A settlement of the case precluded a determination of where Meeks could be sued. In another celebrated case, a couple who operate a BBS in California were convicted in Tennessee because their allegedly obscene graphics were downloaded there. The court applied the contemporary community standards of Tennessee rather than California.

For several weeks this summer lawyers and academics debated the jurisdictional issue online. The only conclusion was that there is no conclusion. But business is no longer conducted via rotary dial telephones and three-cent letters as it was the last time the Supreme Court looked at jurisdiction. Confronted with the reality of commerce in cyberspace, the Court may have a very different view the next time.

Compuserve says it will appeal the decision -- in Ohio.

The information contained in this document is not intended as legal advice. Legal counsel should be consulted prior to reliance upon it.


Copyright © 1996 Neal J. Friedman

Reproduced with permission of
Neal J. Friedman
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