US-Based Tech Companies Subject to Worldwide Jurisdiction as Judicial Comity Takes a Back Seat

Guest Commentary

moinBy Moin A. Yahya, Vice Dean and Professor of Law at the University of Alberta’s Faculty of Law.

The Supreme Court of Canada’s (SCC) recent decision in Google Inc. v. Equustek Solutions Inc. is the latest in non-American courts asserting their jurisdiction over American companies’ global operations using the pretext of the Internet.  The case arose as a dispute between two companies—one a manufacturer of networking devices and the other its distributor.  The distributor was accused of passing off its own competing products as the manufacturer’s, which led the manufacturer to sue the distributor.  It obtained an order requiring the distributor to cease distributing the manufacturer’s products.  The distributor did not comply, left Canada, and did not appear in subsequent proceedings.  The distributor, however, continued to advertise itself as a seller of the manufacturer’s products on several non-Canadian websites. 

Unable to stop the distributor from its activities, the manufacturer approached Google and asked it to de-index the distributor’s websites.  After the manufacturer obtained a court order, Google de-indexed various webpages that contained the offending products, but not all the distributor’s websites.  It de-indexed those webpages on Google.ca, but not worldwide.  The manufacturer obtained an injunction ordering Google to de-index all the distributor’s websites on all its worldwide search engines, and not just Google.ca.  Google appealed all the way to the SCC, and the SCC upheld the global injunction against Google, despite it not even being an original party to the dispute.

The SCC in a 7-2 decision held that given that the “Internet has no borders” [Google at para. 41], and given that most of the distributor’s sales are outside Canada and hence mostly searched for on sites other than Google.ca, it made sense to order Google to de-index all the defendant’s website on all its search sites.  The SCC dismissed any concerns regarding the injunction’s impact on freedom of speech in other jurisdictions, mostly because Google had not raised the issue or presented any evidence.  The SCC also seemed to think that the matter of global de-indexing was a trivial task for an entity such as Google.

Two justices dissented arguing that since an injunction is an equitable remedy, courts should exercise some restraint when issuing such orders.  They argued that since the distributor was the true offending party, Google should not be subject to such an order.  The manufacturer’s argument that Google is aiding the distributor to improperly sell the manufacturer’s products was misplaced, as the distributor continues to offend the manufacturer regardless of whether search results on Google appear or not.  Furthermore, one could also argue that the local power company that supplies the power to operate the distributor’s website server could also be seen as aiding in the improper sales, or for that matter any company that provided the distributor with materials and supplies.  The injunction also forced Google to continuously check for resurrected or new websites and de-index them, something that also requires constant judicial supervision.  At the end of this, the dissent observed, there was no evidence that the injunction had any practical effect against the distributor.

The case is problematic for many reasons.  The first is that any entity with deep pockets can now be dragged into a dispute between two parties, under the pretext that it is somehow aiding the offending party in its offenses.  Second, because the Internet is immediately accessible from anywhere in the world, any court anywhere can assert jurisdiction over any company anywhere in the world under the pretext that “[t]he Internet has no borders — its natural habitat is global.” While the court seemed sensitive to the claim that its injunction could affect free-speech right in the other jurisdiction, other courts may not be so sensitive.  The news that an online app-selling business removed an app from its store because it would have allowed users to avoid censorship in China is an example of how another country’s anti-free-speech attitude can affect the operations of an American company.

There are two stark contrasting views of judicial jurisdiction among the world’s courts.  The first is the American approach where its courts have always taken a restrained approach to the question of personal jurisdiction.  The classic case of Pennoyer v Neff set the tone early on limiting the personal jurisdiction that courts had over potential defendants.  Although subsequent cases weakened the rigid limits set out in Pennoyer, nonetheless all the cases from International Shoe v. Washington to J. McIntyre Machinery, Ltd. v. Nicastro have required that any party over whom a court is asserting personal jurisdiction must have some minimal contacts with that court’s geographic territory.  When it comes to the Internet and personal jurisdiction, American courts have been developing sensible legal tests that balance the universal nature of the Internet with the requirement that there be some minimal contacts with the geographic territory where the court is located.  Consider the 1997 case of Zippo Mfg v. Zippo Dot Com, Inc., which developed a “sliding scale” of Internet jurisdiction.  Zippo’s sliding scale defined the low end or passive end where a website has simple postings, the high end where a website is interactive and actively uses the Internet for business and financial gain, and then a middle end where there is some interaction.  Zippo held that there is personal jurisdiction over the high-end scale, none over the low end, and some over the middle end depending on the level of interaction and financial gain.  While newer cases have modified or even changed the Zippo test (especially because of the evolving nature of websites), they all approach the question of jurisdiction in a similarly restrained manner.

Courts in the rest of the world, on the other hand, seem to have a universalist view of their jurisdiction whether or not the Internet is involved.  As far back as 2002, the Australian High Court held that a local businessman could sue the Wall Street Journal in Australia over an article that appeared on its website, even though the article did not necessarily target an Australian audience.  Indeed, not too long ago we saw a former Chilean President held in Britain under an arrest warrant issued by a Spanish magistrate under the theory of universal jurisdiction.  In the early 2000s, Belgian courts even contemplated issuing arrest warrants against former Israeli Prime Minister Ariel Sharon and President George W. Bush and Vice President Dick Cheney.

On the other hand, while American courts have been more measured in asserting their jurisdiction, ever since Wickard v. Filburn the courts have given the federal government carte blanche to expand its jurisdiction with no limits.  From the prosecution of foreign executives of an overseas online gambling website that accepted bets from Americans to the prosecution of lobster fisherman for violating the Lacey Act because their lobsters did not meet the Honduran requirements, the US government is quite happy to assert its jurisdiction over events that take place overseas unconnected to anything domestic.  Indeed, the most recent pursuit of funds related to the making of The Wolf of Wall Street under the auspices of the Foreign Corrupt Practices Act (FCPA) and the Kleptocracy Asset Recovery Initiative should make one wonder, why does the US government care about corruption in Malaysia?

Unfortunately, there doesn’t seem to be an easy answer in sight.  One would have hoped that motivated by the concept of comity, courts in the US and elsewhere could develop jurisdictional norms that respected each others’ sovereignty.  That doesn’t seem to be happening notwithstanding American courts’ continued relative restraint.  A political solution whereby nations agree to limit the jurisdiction of their courts could also be an answer, but the track record of the Federal Government doesn’t bode well for that prospect either.  American companies will unfortunately have to continue navigating the thicket of contradictory approaches to jurisdiction all over the world.

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