Personal Jurisdiction: Can My AR App Get Me Sued in a Foreign State?

Picture this: a European software company writes an augmented reality program that allows people to discover information in their respective locales.  An end user in New Jersey downloads the app, and is injured while using it.   (Maybe it gives her bad directions that cause a traffic accident, or maybe it gives her improper instructions for how to use a product.)  She sues the European company in a New Jersey state court.

There are several potential problems with such a lawsuit, of course, and I intend to explore more of them in future posts.  But the first question is, has she sued in the correct court? Is the European company subject to the New Jersey court’s authority?  Does it have to travel there to defend itself, on pain of a default judgment against it?

This is a question of “personal jurisdiction”–the power of a court to exercise authority over a specific person (or company).  As a general rule, state courts may not exercise judicial power over a person or company not located in that state unless the defendant “purposefully avails itself of the privilege of conducting activities  within the  forum State, thus invoking the benefits and protections of its laws.” U.S. courts have spilled a lot of ink over hundreds of years trying to define the circumstances under which it is “fundamentally fair” for a state court to exercise jurisdiction over a person or company not located in that state.

This is an ever-evolving area of American law.  On June 27, 2011, the U.S. Supreme Court waded back into it with decisions in two separate cases–one from New Jersey, the other from North Carolina.  Both were products liability cases, filed by plaintiffs in their home states against companies based in other states or other countries. In the New Jersey case, a man injured by an industrial machine sued J. McIntyre Machinery, Ltd., the machine’s UK-based manufacturer.  In the other case, North Carolina survivors of a bus crash in France sued the Goodyear subsidiaries companies who made the bus tires.  Those companies were located in Ohio, France, Luxembourg, and Turkey.

None of these defendants had ever had any substantial contacts with the States in which they were sued.  Instead, the courts relied on the “stream of commerce” theory of personal jurisdiction. Under that approach, as long as a manufacturer places its product in the “stream of commerce” with knowledge that it could, potentially, show up in a particular state someday, then it is fair for that manufacturer to be sued in that State.

The “stream” theory did not hold water in either of these cases.  The Supreme Court reversed both decisions, finding it unfair for these companies to be sued in states that they had never “purposefully availed” themselves of.  That said, however, the decisions didn’t completely close the door on the theory, either–leaving the door open for different approaches to the theory in future cases.  And the cases only got to the Supreme Court in the first place because two separate state supreme courts had upheld the theory.  As Justice Kennedy observed in the New Jersey case, the circumstances under which a foreign corporation in state court “is a question that arises with great frequency in the routine course  of litigation.”

So it’s quite likely that our hypothetical plaintiff could argue–and perhaps persuade her local state-court judge–that it is fair to drag the European AR company into a New Jersey courtroom, simply because the company allowed its app to be sold in an online app store accessible from New Jersey.

Of course, when your content is available on the worldwide web, it could be downloaded by anyone, anywhere. Should you expect to get sued anywhere that any user of your online content may be? There is a whole separate body of case law in U.S. courts that ask that question.  Historically, these cases have tested the fairness of exercising personal jurisdiction over online retailers based on how “interactive” the retailer’s website is.  Called the “Zippo sliding scale test” (from the Zippo case that fashioned the test), the approach generally holds that the greater the commercial nature and level of interactivity associated with the website, the more likely it is that the website operator has “purposefully availed itself” of the forum State’s jurisdiction.  Under this approach, sites that offer such “interactive” features as downloads, forums, messaging, and the like are more likely than merely “passive” websites to be viewed as “targeting” a particular State where certain of its users live.

The “interactivity” of AR content will depend on the context.  Many such apps store information rather passively, even if they do display it in a unique manner.  Other allow a much greater degree of user interaction with online content.  Under the Zippo sliding scale test, these differences could determine whether the app maker can find themselves dragged into court in a remote jurisdiction.

As online interactions become more commonplace and nuanced, however–for instance, taking place through smartphone apps rather than traditional “websites”–there are signs that at least some U.S. courts are moving past the “sliding scale” approach to personal jurisdiction.  The 7th Circuit Court of Appeals, for example, ruled earlier this year that “a defendant [should] not be haled into court simply because the defendant owns or operates a website that is accessible in the forum state, even if that site is ‘interactive.’  Beyond simply operating an interactive website that is accessible from the forum state, a defendant must in some way target the forum state’s market.”

It seems safe to say that most apps and other software programs–even those that interact heavily with data stored online–do not “target” particular geographic markets.  They are simply programs that can be run on a user’s device, wherever that user may be located.  Of course, there are also many apps designed to point users to local content.  Plaintiffs might have a better argument in some circumstances that these services “target” specific markets, especially if they are only available in select areas.  But even these sites might not be targeted to a given area specifically enough if they collect local data for markets across an entire country or countries, as many apps do.

But AR apps present unique issues in this context that (to my knowledge) have yet to be answered.  By definition, the entire thing that makes AR unique from other means of consuming data is that AR overlays the data on the specific geographic surroundings of the user.  The market that the user finds themselves in, therefore, matters a great deal; that location is an essential component of the AR experience.  Moreover, superimposing data on the physical world necessarily involves at least some minimal degree of “interactivity” with that data.

Does that mean that all AR experiences are sufficiently “targeted” to that market to support the exercise of personal jurisdiction in the local courts there?  Not necessarily–especially not now, when hardware constraints limit the degree of specificity with which an app can recognize physical surroundings and adjust its augmented content accordingly.  Most AR apps on the market today offer a new point-of-view for looking at data, but the data can still be displayed just as easily in a traditional, 2-D manner.   Take Yelp!, for example; a user can view search results through the standard screen display, or through the “Monocle” AR lens, but the choice of perspective doesn’t change the content itself.

Current AR features may make a difference in jurisdictional analyses, but when AR gets into your eyewear and becomes a truly immersive experience is when these questions will really get interesting.  Picture a scenario in which my AR glasses can, for example,  perceive a physical sign, retrieve online information from a remote server based on what the glasses perceive, and overlay that information on my field of view, all in real time.  If that information ends up forming the basis for a lawsuit, where should I sue?  In the state where the company whose servers provided the information is located, or in the state where I experienced the content?

That scenario presents a stronger case for the exercise of personal jurisdiction in the end user’s state than in any of the previous examples.  The relationship between the real-time, localized AR experience and the place where the experience happens will not be as random and fortuitous as when products are sold into the stream of commerce, or when a company launches a website that can be interacted with from anywhere.  Even though the data may be provided by servers and software located elsewhere, the more that data is intended for use in a particular place, the more reasonable it is to expect the provider of that data to be subject to jurisdiction in that place’s courts.

Some of this analysis is necessarily speculative, because we don’t yet know exactly what real-time, immersive AR technology will look like, or how it will function.  But it seems inevitable that. as digital data becomes more closely interwoven with distinct physical environments, jurisdictional consequences will follow.