Texas Lawyer, September 27, 1999; SECTION: Pg. 1

BYLINE: NATHAN KOPPEL

Out-of-state companies cannot be sued in Texas merely because they
advertise over the Internet, the 5th U.S. Circuit Court of Appeals held
Sept. 17.

In a case of first impression, Mink v. AAAA Development, the 5th Circuit
articulated a framework for courts in the circuit to use in determining
when they can assume jurisdiction over companies with a presence in
cyberspace.

Following the lead of a 1997 U.S. District Court case from Pennsylvania,
Zippos Mfg. Co. v. Zippo Dot Com, the 5th Circuit articulated three
levels of Internet business. At one end of the spectrum, companies enter
into contracts with out-of-state residents that involve the "knowing and
repeated transmission of computer files over the Internet," the court
noted, quoting Zippo. These companies, the court held, can be sued in
the home state of the out-of-state residents.

One step down, the court wrote, are companies with a Web site that
allows a user to exchange information with a host computer. "In this
middle ground, 'the exercise of jurisdiction is determined by the level
of interactivity,' " the court reasoned, again citing Zippo.

Finally, companies that merely advertise or post information about their
business on the Internet with "passive" Web sites cannot be sued
out-of-state simply because they maintain the site. The court held that
the defendant, a Vermont company sued in Houston by a Texas resident for
alleged copyright infringement, falls into this passive category.

"While [the defendant's] website provides users with a printable mail-in
order form, AAAA's toll-free telephone number, a mailing address and an
electronic mail ("e-mail") address, orders are not taken through AAAA's
website. This does not classify the website as anything more than
passive advertisement," wrote Circuit Judge Robert M. Parker for a
unanimous court.

He was joined by Judges Jacques L. Wiener Jr. and Harold R. DeMoss Jr.

Nature of the Site

Mink's attorney, Michael Maurice Probus Jr., says he pushed for and is
happy the court adopted the Zippo sliding scale. He believes it will
provide a useful analytical framework for lawyers in the future.

"Lawyers now, when they develop their cases in trial, will concentrate
much more on the nature of the Web site and interactivity of the Web
site: how many hits [was a defendant] getting . . . what kind of
customer information was collected," says Probus. "With vigorous
discovery, Webmasters can collect this sort of information."

Probus, however, thinks the court should have ruled that the defendant
fell within the "middle ground" by virtue of the e-mail link it
allegedly included on its Web site.

"If you have an e-mail link, you are encouraging people to contact you
directly," says Probus, an Austin solo practitioner. "You know full well
and intend to get customers in other jurisdictions."

Michael Dennis Robbins, AAAA's attorney, counters that e-mail is no
different than toll-free phone numbers that companies post on television
advertisements. Neither should subject companies to out-of-state suits,
he says. "There is little different between a phone call and a computer
call," says Robbins, a partner in Houston's Doyle, Rider, Restrepo,
Harvin & Robbins. "If you had a phone solicitation program in which a
company actually made calls and targeted individuals and entered into
contracts over the phone with individuals in Texas, that would be a
different situation."

"Advertising over the Internet is not enough to impose jurisdiction
anywhere in the United States.²