Foreign Entities Whose Web Sites Violate US Laws Relating to Drug Advertising, Securities, Offerings or Obscenities May Subject American Affiliates to Prosecution

Daniel E. Troy and David J. Goldstone*

Is a World Wide Web on the Internet like a television broadcast station or is it more akin to ordinary mail? This seemingly abstract question is critical to resolving whether those involved with a Web site that physically exists outside of the United States, but which transmits messages that violate U.S. criminal law, can be prosecuted here for their "crimes."

Thanks to the First Amendment, there are not many messages to which U.S. criminal laws apply. Even the few laws that do exist should, in general, not be applied extraterritorially to accommodate First Amendment interests. But there are at least some messages that may be prohibited in the United States yet are lawful in the country in which the speaker -- i.e., the Web site -- is located.

These may include a foreign Web site containing advertisements about the use of drugs for a purpose not approved by the FDA, as well as other forms of prohibited advertising; representations concerning securities that may be for sale in the United States; and material considered obscene. Violations of laws criminalizing these kings of speech can carry massive fines and long prison sentences.(1)

Pending a decision by the U.S. Supreme Court on the constitutionality of the Communications Decency Act, enforcement against a foreign Web site containing "patently offensive" depictions of "sexual or excretory activities or organs" as measured by "contemporary community standards" is enjoined.(2)

Even if a U.S. company were not itself directly responsible for maintaining an offending Web site, it nonetheless should be concerned about its extraterritorial liability for the activities of its licensees and affiliates abroad under the doctrines of aiding and abetting or conspiracy.

There is no general constitutional bar to the extraterritorial application of U.S. laws. Courts look to congressional intent, express or implied, to determine whether a given statute should have extraterritorial application. In construing such intent, however, courts consider whether the application of U.S. criminal law to an act taking place abroad is "unreasonable."(3) The Restatement (3d) of Foreign Relations of the United States lists a number of factors that address when such an exercise of jurisdiction is unreasonable.(4)

This multifactor analysis is worrisome because it provides little warning to those acting abroad as to whether the United States will seek to apply its law extraterritorially. Even the most important of these factors -- whether an activity has or is intended to have "substantial, direct and foreseeable effect" in the United States -- cannot be applied mechanically.

In analyzing whether it is unreasonable to apply U.S. criminal laws to speech emanating from a Web site based in, for example, France or Thailand, a court might try to draw analogies from more familiar communications media. For instance, just as a person can receive a French broadcast only with special equipment such as a short-wave radio, a person can access a French Web site only via an Internet-connected computer.

The U.S. government would not, however, prosecute a Howard Stern-type radio personality broadcasting were in English. After all, a French broadcaster almost certainly does not intend its programs to have substantial, direct and foreseeable effect in the United States. The broadcaster's signals probably reach few, if any; receivers in the United States, and its activities are regulated by French law.

Under this view, it might similarly be thought inappropriate to prosecute the operator of a French Web site for transmitting indecent material outlawed under U.S. law, unless it were specifically directed at the United States.

By contrast, the federal government might well prosecute an individual in Thailand who mailed obscene material to a minor in the United States.(5) Such a person, because he is transmitting his material to a specific, known address, can be accused of intending his or here pornography to be received in the United States.

Determining whether a foreign Web site is more like a far-away broadcast station or more like mail requires some understanding about the way a Web site functions. In response to a user's request, a Web site responds by downloading data, in chunks, back to the requesting party at a particular IP, or Internet Protocol, address, where those chunks are reassembled.

There is, however, no reliable means for a Web site to know in which country the recipient of its data is located. Moreover, even if the physical location of that Internet host -- the service through which an individual accesses the Internet -- were known, the recipient of the message could be connecting to that host from anywhere in the world.

The interactions on the World Wide Web are not like broadcast transmission, mail, phone calls or any other technology criminal law has ever addressed. Nonetheless, a Web site's transmission of data to a particular address may suggest that it is more like a sender of mail than a broadcaster. If so, the foreign Web site that is characterized as transmitting unlawful material directly to a site in the United States may be considered to be violating U.S. law, and may be subjected to the extraterritorial application of the U.S. criminal laws.

Government officials on both the state and federal levels, including the Federal Trade Commission, the Securities Exchange Commission, the Secret Service and state attorneys general, already have manifested an intention to police the Internet. Most prominently, Minnesota Attorney General Hubert Humphrey II in 1995 brought consumer fraud charges against six online operations, none of which was located in Minnesota.

There is, at least in theory, a way in which those maintaining Web sites abroad can protect themselves. Registration of many Internet addresses are maintained by industry entities. IP addresses are organized, in part, on geographic location. A Web site can be programmed to check these features of a requesting party's IP address before replying. Because there is no absolutely reliable way to know where the recipient of data is located, however, the effectiveness of this approach is an open question.

To the extent the source of the request is ascertainable, prosecutors seeking to assert jurisdiction over foreign Web sites may argue that entities maintaining those sites must "block" unlawful transmissions to the United States. Failure to do so could be viewed as intending to have a substantial effect in the United States. This argument would be buttressed by the fact that Americans dominate the Internet.

Foreign entities who know that they are maintaining Web sites with material that may violate U.S. law would be wise to consider trying to implement such a blocking mechanism. Other, less effective measures that also might be considered are blocking out access by leading Internet providers in the United States, such as America Online. The use by a foreign entity of such a purposeful mechanism should immunize that entity from U.S. prosecution; the intent not to have a "substantial effect" in the United States would then be clear.

The potential exposure of a foreign entity should be of concern to U.S. companies to the extent that those entities are licensees of, or closely affiliated with a U.S. company. Even if the foreign entity were deemed to be outside the jurisdiction of the United States, a domestic company might still be subject to prosecution for conspiring with it or aiding and abetting it in the commission of a crime within the United States -- that is, the transmission of an unlawful message within the United States.

It is not unusual for individuals to be convicted of aiding and abetting or conspiracy when the principal has not been caught or goes free for other reasons, such as diplomatic immunity. Although the United States might, for reasons of international comity decide not to exercise jurisdiction over an effect here, in the eyes of the law a crime has nonetheless been committed. A domestic entity participating in such a crime must still be concerned about potential exposure.

There are at least three categories of U.S. companies that should be concerned about potential liability for unlawful speech on foreign Web sites. The first is a company that licenses to a foreign entity material that could be unlawful if transmitted within the United States. To illustrate, a pornographic magazine might be concerned if its British licensee were to post on a foreign Web site material that the U.S. company created and licensed to the British entity. This example assumes that such material could be characterized as obscene -- or prohibited under the Communications Decency Act, if its disputed provisions were to be upheld.

Licensing material arguably created criminal liability as an aider or abettor, particularly if the U.S. company is aware that its material is being used on the Web site and if the U.S. company is rewarded for transmissions to the United States, such as by promotion of the company name or by earning increased licensing fees.

Second, a U.S. company that licenses a product -- such as a pharmaceutical -- to a foreign entity must be concerned about unlawful advertising that can be received in the United States.

Finally, a company intimately involved with a foreign subsidiary of affiliate that maintains a Web site with material proscribed by U.S. law, such as representations concerning securities for sale in the United States that do not meet SEC guidelines, has cause for concern. Piercing the corporate veil to impute criminal liability to affiliates is indeed difficult if normal corporate formalities are observed. Nevertheless, cases in which affiliates of U.S. companies are taking actions that would be illegal in the United States often present particularly bad facts, which could inspire prosecution.

U.S. companies should monitor the Web sites of their foreign licensees and affiliates, and perhaps encourage them to try developing the blocking technology contemplated above. Even if blocking technology were not entirely effective, insistence by a U.S. licensor that the foreign entity employ such technology should obviate any finding that the U.S. company intended to aid and abet in the violation of U.S. laws.

*Dan Troy is a partner, and Mr. Goldstone an associate, at Washington, D.C.'s Wiley, Rein, & Fielding. They specialize in communications law and litigation. Mr. Troy is also an associate scholar of legal studies at the American Enterprise Institute. Mr. Goldstone is a trial attorney in the computer crime and intellectual property section of the Department of Justice. The opinions expressed in this article are solely those of the author and do no necessarily reflect the views or policies of the Department of Justice.

  1. See, e.g., 21 U.S.C. 331(a), 333 and 352 (n), and 21 C.F.R. 202, 1(e) (6)(i) (drug advertising): 15 U.S.C. 78k (b), 78ff(a) and 17 C.F.R. 240.10b-5 (securities); and 47 U.S.C. 233 (obscenity).
  2. Key provisions of the Communications Decency Act were struck down as unconstitutional by a three judge panel of the U.S. District Court for the Eastern District of Pennsylvania June 12, American Civil Liberties Union v. Reno; American Library Assoc. Inc. v. U.S. Dep't of Justice, 929 F. Supp. 824 (E.D. Pa. 1996). The Department of Justice filed a notice of appeal to the Supreme Court July 1. Should the high court reverse foreign Web sites containing material considered indecent under the act could be subject to prosecution. For information on the lawsuits. see and hhtp:/
  3. U.S. v. Felix-Gutierrez, 940 F. 2nd 1200. 1204 (9th Cir. 1991), cert. denied, 508 U.S. 906 (1993) (citing U.S. v. Bowman, 260 U.S. 94 (1922)).
  4. Restatement (3d) of Foreign Relations of the United States, Secs. 402. 403 (1987).
  5. That is, the government might prosecute this person if the United States could exert control over him, either by virtue of his presence here or an extradition demand.

2001 The Federalist Society