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Summer 2001 Before a nonresident person or business entity can be sued in a given state, the defendant must have taken some action that indicates a submission to the authority of that state's courts. Traditionally, this has meant "minimum contacts" with the state. The laws that set these ground rules are called "long-arm statutes," a term that describes the reach of the courts into other states. The term, like the body of court decisions on the subject, may need modernizing in the age of the Internet. The issue of long-arm jurisdiction has been adapted previously to technological advances in business, and courts again are setting new standards for its use when a plaintiff attempts to bring an out-of-state defendant into court on the basis of the defendant's website activity. These cases fall at various places along a spectrum. At one end are "passive" websites, which are akin to advertisements in national magazines or newspapers. They allow no real interaction between a business and potential customers. By themselves, passive websites will not subject their creators to jurisdiction wherever the site can be seen. Midway along the spectrum are websites that allow some interaction by permitting the exchange of information between the site owner and users in another state but where the interaction falls short of transacting business. In such circumstances, the nature and level of information exchange will govern the jurisdiction issue. For example, a New York bank was allowed to sue a competitor based in another state for trademark infringement in a New York court. The defendant's website allowed customers in any state to apply for loans online. Customers also could "chat" online with a representative or send e-mailed questions to which they would get a response within an hour. It was ruled that this Internet commercial activity brought the defendant within the jurisdiction of New York. However, while this online activity was both significant and clearly commercial in nature, there was some doubt as to whether customers actually could complete transactions online. In a case at the opposite end of the spectrum from passive websites, a Texas eyewear company was permitted to sue an out-of-state company in Texas because the defendant was effectively carrying on business in Texas by means of its website. This decision was clear-cut because users of the defendant's website could purchase sunglasses on the website with order forms containing credit card and shipping information. The outcome was not affected by the fact that the computers hosting the defendant's website were not located in Texas. Businesses with websites can limit their susceptibility to the jurisdictional reach of courts in other states by: (1) using a" click wrap agreement" in which website customers agree that any litigation will occur in the courts of a designated state; (2) including a disclaimer that the company will not sell its products to customers in a particular state or states; or (3) disabling a website so that it will not handle orders or shipments for such states.
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