Internet Business Can Create Internet Liability

In the days before the internet, the scope of a company's business was often determined by its physical location. Local contacts provided supplies, labor and the know-how to get jobs done.

Today, it's all available online. And so are the lawsuits.

The benefits of the internet are often touted. Its ability to bridge vast distances and link companies that otherwise would have never done business are undeniable advantages. But the internet's ability to facilitate interactive business across state lines has spawned a new problem for small companies in particular. When a company extends its reach electronically across state lines, it may also be extending its liability to be sued in other states.

Recently, we have seen an increase in the number of cases where companies in other states have sued Oregon companies in their courts, claiming that the Oregon companies' web sites are enough to give the foreign courts jurisdiction. Whether a web site gives another state's court jurisdiction over an Oregon company is a complicated issue. Generally, courts have looked to the level of interaction the web site provides.

Foreign courts have not hesitated to exert jurisdiction over local companies when their web sites were complex and provided high levels of interaction. For instance, a web site that provided access to detailed product catalogs and allowed a viewer to purchase a product or see when a show exhibiting that product would be in the area would likely be sufficient to give a foreign court jurisdiction over an Oregon company.

In contrast, a web site that did nothing more than provide passive advertising would probably be insufficient, without some other contacts, to give the court jurisdiction.

In the middle, are the majority of web sites that exist today. Many contain passive banners and other advertising, but also may contain some level of interactivity such as the ability to request more information via electronic mail or join a mailing list. Courts are sharply divided over whether these acts will subject an out of state company to a court's jurisdiction when they have no other contacts with the state.

The ability of a web viewer to do business with your company via the internet from thousands of miles away is exciting. The threat that the same browser will sue you in another state, although frightening, is sobering. There are steps you can take to mitigate the threat.

First, you can attempt to protect your business by putting a disclaimer on the web site that states the company will not sell products or do business outside of a certain geographical area. Second, you could attach to any interactive sales agreement a choice of venue clause that provides any disputes must be resolved in Oregon.

These measures, although untested, should help to lessen the chances that your company will be hauled into a state far, far away based solely on an internet presence.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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