Monday, December 29, 2008

From the Archives: Australia To Dow Jones: Stay Awhile

There's no disputing that the Internet is the first freely accessible and truly global medium. Now, following an Australian High Court ruling on Tuesday, it appears that all Web vendors--publishers, retailers and the like--should prepare to realize those global consequences.

In a case pitting an Australian businessman against U.S.-based publisher Dow Jones (nyse: DJ - news - people ), the High Court of Australia ruled that the company must stay in the land Down Under to defend itself against a two-year-old defamation suit in the Australian state of Victoria.

In denying a Dow Jones appeal to dismiss the case based on jurisdiction, the opinion is the latest in a growing list of cases and judgments establishing the global legal ramifications of Internet commerce and content. The Australian High Court decision deems that widely disseminated Web content is bound by the same laws that govern print. That means Web information is liable at the point of download, not the location of the server. In its ruling, the Court admits the difficulties in coming to such a conclusion but insists that "the human right to protection by law for the reputation and honor of individuals must also be defended to the extent that the law provides." That means the case stays at home, where the defamation is said to have occurred.

According to Joel Reidenberg, who specializes in international law at Fordham University's Law School in New York City, the case reinforces that there is little difference between a physical border to a country and an electronic one. Reidenberg says that a firm that knowingly does or could potentially do business in a jurisdiction must be willing to comply with that jurisdiction's law.

The suit, brought in November 2000, concerns an article that appeared in the print and online versions of Barron's, a weekly financial newspaper published by Dow Jones. The story questioned the dealings of Australian businessman Joseph Gutnick. After Gutnick told an Australian paper that he was planning to gain more business in the U.S., Barron's wrote a cautionary piece about Gutnick's work as a stock promoter to religious charities. In the article, Barron's drew conclusions that Gutnick found defamatory.

Though Gutnick declined comment for that story, he sued Dow Jones in the Australian state of Victoria shortly after the piece was published. The first thing Gutnick's lawyers had to establish in the suit was why it should be tried there. Dow Jones claimed that the correct jurisdiction was in New Jersey, the location of the Internet file servers that dish out Barron's online content.

Gutnick claimed that, though Barron's is not widely distributed in print in Victoria, its content was available through Barron's Online and, the Web site of The Wall Street Journal. Dow Jones' lawyer conceded that there are at least 1,700 subscribers with Australian credit cards. Additionally, Gutnick claimed the damage to his reputation occurred in Australia and not in New Jersey, where Dow Jones wanted to move the trial. Following this decision, the case will proceed in Australia.

In a statement, Dow Jones said it will continue its defense and was encouraged by the High Court's admission of challenges brought by Internet publishing. Dow Jones' position was supported by the likes of (nasdaq: AMZN - news - people ), The New York Times, and the Time and CNN units of AOL Time Warner (nyse: AOL - news - people ).

Web portal Yahoo! (nasdaq: YHOO - news - people ), which also backed Dow Jones, recently encountered jurisdictional issues as well. A French court ruled that its site should not be accessible to French citizens, due to Nazi memorabilia available on its auction service. The French version of Yahoo! was already in compliance. That judgment, however, has yet to be enforced. The company is currently seeking a declaratory relief action in U.S. federal court in California. That action, which seeks to say that the French court lacked jurisdiction, would run counter to today's Australian opinion.

Other jurisdictional issues related to the Internet include commerce and taxation. Internationally, such issues are being debated under the Hague Convention. In the U.S., there has been some advancement on how to tax interstate e-commerce. Last month, representatives from 33 states and the District of Columbia reached a tentative agreement on tax and use issues--but its implementation would require states to enact new business legislation.

Record companies chasing music-sharing services like Kazaa are also running into jurisdictional issues. Because attempts to bring down such services have hit legal snags, the recording industry's new tactic is to pursue companies and individuals that facilitate the illegal trade of copyrighted materials.

Reflecting on these and similar cases, Fordham's Reidenberg says, "The technology has to evolve in a way that will allow and empower states to enforce their domestic laws within their own borders."

"The Internet isn't changing this basic legal principle," he add

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