Source: http://www.techlawjournal.com/alert/2003/07/08.asp
Timestamp: 2019-04-20 10:38:11+00:00

Document:
TLJ Daily E-Mail Alert No. 693, July 8, 2003.
July 8, 2003, 9:00 AM ET, Alert No. 693.
7/2. The U.S. Court of Appeals (4thCir) issued its opinion [PDF] in Carefirst Maryland v. CPC, a case involving whether the operation of a website by a local non profit group can serve as the basis for personal jurisdiction over it by an out of state court in a trademark infringement case. The District Court dismissed for lack of personal jurisdiction. The Appeals Court affirmed.
Carefirst of Maryland, which does business as Carefirst Blue Cross/Blue Shield, is a large healthcare insurance company. It has registered the trademark "Carefirst".
Carefirst Maryland filed a complaint in U.S. District Court for the District of Maryland against CPC alleging trademark infringement, trademark dilution, and unfair competition. However, the District Court did not address the merits of Carefirst's claims. Rather, it dismissed the complaint, without prejudice, for lack of personal jurisdiction over CPC. Instead of filing its complaint in the U.S. District Court for the Northern District of Illinois, Carefirst appealed.
The Court of Appeals affirmed. The Court first addressed the basics of personal jurisdiction. It wrote that "for a district court to assert personal jurisdiction over a nonresident defendant, two conditions must be satisfied: (1) the exercise of jurisdiction must be authorized under the state's long-arm statute; and (2) the exercise of jurisdiction must comport with the due process requirements of the Fourteenth Amendment."
The Court added that "A court's exercise of jurisdiction over a nonresident defendant comports with due process if the defendant has ``minimum contacts创 with the forum, such that to require the defendant to defend its interests in that state "does not offend traditional notions of fair play and substantial justice." The Court cited the landmark case of International Shoe v. Washington, 326 U.S. 310 (1945).
The Court continued that "The standard for determining the existence of personal jurisdiction over a nonresident defendant varies, depending on whether the defendant's contacts with the forum state also provide the basis for the suit. If those contacts form the basis for the suit, they may establish ``specific jurisdiction.创 In determining whether specific jurisdiction exists, we consider (1) the extent to which the defendant has purposefully availed itself of the privilege of conducting activities in the state; (2) whether the plaintiffs' claims arise out of those activities directed at the state; and (3) whether the exercise of personal jurisdiction would be constitutionally ``reasonable.创" The Court cited ALS Scan, Inc. v. Digital Service Consultants, 293 F.3d 707 (4th Cir. 2002), cert. denied, 123 S. Ct. 868 (2003), a case in which the Court found that there was not jurisdiction over an out of state web host in an online copyright infringement action. See also, stories titled "Internet Shoes: Two Appeals Courts Address Internet Based Personal Jurisdiction", "Fourth Circuit Holds No Personal Jurisdiction Over Out of State Web Host", and "DC Circuit Suggests Personal Jurisdiction Over Out of State Online Brokerage" in TLJ Daily E-Mail Alert No. 452, June 17, 2002.
The Court also wrote that "If, however, the defendant's contacts with the state are not also the basis for the suit, then jurisdiction over the defendant must arise from the defendant抯 general, more persistent, but unrelated contacts with the state. To establish general jurisdiction, the defendant抯 activities in the state must have been ``continuous and systematic.创"
The Appeals Court then concluded that since there is "no suggestion that CPC engaged in continuous and systematic activities within Maryland, our inquiry must focus on the conduct giving rise to the suit, i.e., CPC抯 alleged infringement of Carefirst's trademark. And accordingly, it is only if (1) CPC purposefully availed itself of the privilege of conducting activities in Maryland, (2) Carefirst's claims arise out of those activities, and (3) the exercise of personal jurisdiction would be constitutionally ``reasonable,创 that CPC can be held subject to specific jurisdiction in Maryland."
In analyzing whether the requisites of specific jurisdiction were met, the Court applied the "effects test" of Calder v. Jones, 465 U.S. 783 (1984), in which the Supreme Court held that a court may exercise specific personal jurisdiction over a nonresident defendant when the defendant intentionally directed tortious conduct toward the forum state, knowing that that conduct would cause harm to a forum resident.
Having set forth the applicable law and precedent, the Court then applied this law to the facts of the present case. First, the Court examined whether the CPC website can serve as the basis for jurisdiction. The wrote that "in order for CPC's website to bring CPC within the jurisdiction of the Maryland courts, the company must have done something more than merely place information on the Internet." The Court examined the character of the CPC website.
Hence, the Court concluded that "when CPC set up its generally accessible, semi-interactive Internet website, it did not thereby direct electronic activity into Maryland with the manifest intent of engaging in business or other interactions within that state in particular. ... Consequently, the website fails to furnish a Maryland contact adequate to support personal jurisdiction over CPC in the Maryland courts."
Second, the Court examined whether the use of a Maryland web hosting company can serve as the basis for jurisdiction. The Court wrote that "NetImpact merely facilitated the purchase of CPC抯 domain names and rented CPC space on its servers -- which in fact were located not in Maryland, but in Massachusetts. It is unreasonable to expect that, merely by utilizing servers owned by a Maryland-based company, CPC should have foreseen that it could be haled into a Maryland court and held to account for the contents of its website. Consequently, CPC抯 employment of NetImpact as a web host does not ground specific jurisdiction over CPC in Maryland."
Other Cases. In addition to the cases cited by the Court (ALS Scan and Young v. New Haven Advocate), there are several other recent cases that address personal jurisdiction in the context of internet activities.
On December 10, 2002, the High Court of Australia issued its opinion in Dow Jones v. Gutnick. It took a different approach, and reached a different result on the question of personal jurisdiction. This was a case involving three procedural issues -- jurisdiction, choice of law, and convenient forum. It was a tort action brought in Australia for an allegedly defamatory news story published on the internet by Dow Jones, a U.S. publisher. The Court held that because of publication on the internet, the Australian courts have jurisdiction, that Australian law applies, and that the case should proceed in the trial court in the Australian state of Victoria. See, story titled "High Court Rules Australia Has Jurisdiction Over Dow Jones Based on Web Publication", TLJ Daily E-Mail Alert No. 564, December 10, 2002.
In addition, on October 7, 2002, the U.S. Court of Appeals (9thCir) issued its opinion in Healthgrades.com v. Northwest Healthcare Alliance, another case in which jurisdiction was basis upon internet activity. The Court held that the U.S. District Court (WDWash) has personal jurisdiction over an out of state defendant in defamation case, based solely upon publication of its allegedly defamatory statements in its internet web site, which publishes ratings of health care providers. The Supreme Court denied certiorari, without opinion, on April 28, 2003.
Finally, on January 9, 2003 the U.S. District Court (CDCal) denied Sharman Network's motion to dismiss for lack of personal jurisdiction in the Kazaa copyright infringement litigation. In that case, Sharman's free software, the Kazaa Media Desktop, had been downloaded millions of times in the forum state, and Sharman had been organized offshore largely for the purpose of attempting to avoid personal jurisdiction. See, TLJ story titled "District Court Squeezes Sharman on Internet Based Personal Jurisdiction", January 9, 2003.
7/1. The U.S. Court of Appeals (DCCir) issued its opinion [12 pages in PDF] in Ranger Cellular v. FCC, a case regarding how the Federal Communications Commission (FCC) awards cellular licenses. The Appeals Court denied the petition for review.
The FCC previously awarded licenses for use of spectrum through either a comparative hearing or a lottery. The petitioners, Ranger Cellular and Miller Communications, filed applications in 1988 and 1989 respectively to participate in a lottery for Rural Service Area (RSA) cellular telephone licenses. The FCC awarded most of the licenses, but by the mid 1990s six licenses for RSAs were still pending due to the disqualification or withdrawal of the original winner.
Congress amended the Communications Act of 1934 by in 1993 by adding Section 309(j), codified at 47 U.S.C. � 309(j), which authorized the FCC to award almost all spectrum licenses by competitive bidding and limited the use of lotteries. The 1993 legislation provided that the FCC "shall not issue any license or permit [by lottery] ... unless ... one or more applications for such license were accepted for filing by the Commission before July 26, 1993."
Congress further amended Section 309(j) in 1997 by requiring the FCC to use competitive bidding, except in a few specifically enumerated circumstances, and terminated the FCC's authority to use a lottery, except for a small class of broadcast licenses).
The Congress also amended Section 309(l) regarding "Applicability of competitive bidding to pending comparative licensing cases". The statute provides that "With respect to competing applications for initial licenses or construction permits for commercial radio or television stations that were filed with the Commission before July 1, 1997, the Commission shall ... treat the persons filing such applications as the only persons eligible to be qualified bidders for purposes of such proceeding."
Thus, the statute bars the FCC from accepting new applications in the case of "commercial radio or television stations". The petitioners asserted that this provision applied to applications for cellular licenses, and limited the pool of bidders to those who had filed an application prior to July 1, 1997. The FCC issued an order that rejected petitioners' interpretation. Ranger Cellular and Miller Communications then filed their petition for review with the Court of Appeals.
The Court wrote that the petitioners had some credible arguments. For example, it wrote that "cellular service is regulated as a ``commercial mobile radio service,创 47 C.F.R. � 20.9(a), which seems to place it neatly within the more general class of ``commercial radio and television stations创 referenced in � 309(l)." However, the Court also found that the FCC supported its argument that "commercial radio or television stations" does not encompass cellular telephone services. The Court applied the Chevron standard, and concluded that the FCC "has shown that � 309(l), viewed in the context of the 1997 Act, supports a reading that covers only broadcast stations. Although this reading is not the only possible interpretation of � 309(l), it is certainly a reasonable one and therefore commands our deference."
The Appeals Court also held that the FCC justified its decision under the public interest standard.
Finally, it held that the FCC was not subject to 47 U.S.C. � 309(j)(7)(B), which provides that "in prescribing regulations pursuant to Paragraph 4(A) of this subsection, the Commission may not base a finding of public interest, convenience and necessity solely or predominantly on the expectation of Federal revenues from the use of a system of competitive bidding under this subsection."
The House will meet at 10:30 AM for legislative business. Votes will be postponed until 6:30 PM. The House will consider HR __, the Department of Defense Appropriations Act for Fiscal Year 2004, a bill which contains technology related provisions. See, Republican Whip Notice.
9:30 AM. The Senate Commerce Committee will hold a hearing on two nominations, including that of Pamela Harbour to be Commissioner of the Federal Trade Commission (FTC). Location: Room 253, Russell Building.
2:30 PM. The Senate Judiciary Committee will hold a hearing on two nominations, including that of Jack Goldsmith to be Assistant Attorney General in charge of the Office of Legal Counsel (OLC). Press contact: Margarita Tapia at 202 224-5225. See, notice. Location: Room 226, Dirksen Building.
Approx. 11:00 AM. The House Commerce Committee's Subcommittees on Commerce, Trade and Consumer Protection and on Telecommunications and the Internet will hold a hearing titled "Legislative Efforts to Combat Spam". The scheduled witnesses are Timothy Muris (Chairman of the Federal Trade Commission), Charles Curran (Assistant General Counsel of America Online), Charles Betty (P/CEO of EarthLink), Paul Misener (Amazon.com), Kenneth Hirschman (Digital Impact), Christopher Murray (Legislative Counsel of the Consumers Union), and Christine Gregoire (Attorney General of the state of Washington). Press contact: Ken Johnson or Jon Tripp at 202 225-5735. The hearing will begin 30 minutes after completion of the Committee's markup of HR 1950, the Foreign Relations Authorization Act, which is scheduled for 10:00 AM. Location: Room 2123, Rayburn Building.
9:30 AM. The Senate Judiciary Committee will hold an executive business meeting. Press contact: Margarita Tapia at 202 224-5225. See, notice. Location: Room SDG 50, Dirksen Building.
The Commerce Department's Bureau of Industry and Security (BIS) will host a one day seminar titled Essentials of Export Controls. The BIS charges for admission. Location: Washington DC.
7/3. The U.S. Court of Appeals (9thCir) issued its opinion [12 pages in PDF] in In Re Read-Rite Corp. Securities Litigation, a case involving application of the pleading requirements of the Private Securities Litigation Reform Act (PSLRA).
Read-Rite manufactured and sold ferrite metal-in-gap (MIG) recording heads and Tripad thin film inductive recording heads for hard disk drives. Plaintiffs were owners of common stock of Read-Rite.
Plaintiffs filed a complaint in the U.S. District Court (NDCal) against Read-Rite and several of its officers and directors alleging securities fraud under Section 10(b) of the Securities Exchange Act of 1934. The plaintiffs also sought class action status. The District Court dismissed the complaint for failure to state a claim upon which relief may be granted, pursuant to the PSLRA, for failing to meet the heightened pleading requirements of the statute.
The Appeals Court affirmed in a relatively brief opinion which it relied upon 9th Circuit precedent in Ronconi v. Larkin, 253 F.3d 423 (2001), and In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970 (1999).
7/1. The U.S. Court of Appeals (DCCir) issued its opinion [17 pages in PDF] in Z-Tel v. FCC. In 2001 the Federal Communications Commission (FCC) issued an order approving Verizon's Section 271 application to provide in region interLATA services in the state of Pennsylvania. Z-Tel, a competitive local exchange carrier, challenged the order, arguing that the FCC erred in finding that Verizon provides competitors nondiscriminatory access to its wholesale billing services. The Appeals Court affirmed the order of the FCC.

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