If my only contact with a state is my website, can I be sued there?
A recent decision by the United States Court of Appeals for the Second Circuit in Penguin Group (USA) Inc. v. American Buddha may make it easier for New York plaintiffs asserting copyright infringement over the Internet to haul infringers into court in New York.
The plaintiff in Penguin was the U.S. branch of the internationally renowned Penguin Group publishing company, which has its headquarters in New York City. The defendant was American Buddha, an Oregon non-profit corporation that runs an online library that provides access to classical literature and other works through its website.
Penguin sued American Buddha for copyright infringement in the Southern District of New York. In its complaint, Penguin asserted that American Buddha unlawfully uploaded to its servers an unauthorized copy of four of Penguin’s copyrighted works for downloading, via the Internet and free of charge, by any of its 50,000 members.
Other than the fact that its website is accessible to Internet users in New York, American Buddha does not conduct any business in New York nor does it have any other contacts with New York. American Buddha’s principal place of business is in Arizona and its websites are hosted on servers located in Arizona and Oregon.
Despite these obstacles, Penguin tried to sue in New York based on a New York law that allows out-of-state residents to be sued if the resulting injury occurs in, and it was foreseeable to the prospective defendant that the injury would occur in New York. See N.Y. C.P.L.R. § 302(a) (3)(ii). Penguin’s argument was that, even though the copying that allegedly infringed its copyright took place in Oregon or Arizona, “Penguin experienced the effect of the infringing conduct in New York, where its business was located and its copyright was located.”
To be expected, American Buddha moved to dismiss Penguin’s complaint “for lack of personal jurisdiction” (translation: we don’t have any tangible contact with New York).
A lower federal court considered two conflicting lines of authority interpreting New York law. The first emphasizes the location of the infringing conduct and the second emphasizes the location of the plaintiff and, in some cases, the location of the intellectual property.
Relying on the first line of cases (and rejecting the second), the lower court held that “the situs of the injury allegedly resulting from the asserted infringement of Penguin’s copyrights would be where the book was electronically copied” (i.e. either Arizona or Oregon where American Buddha and its servers were located) and not New York, where Penguin has its headquarters. Accordingly, the district court held that Penguin failed to allege any injury in New York and granted American Buddha’s motion to dismiss. See Penguin Group (USA) Inc. v. Am. Buddha, 2009 U.S. Dist. LEXIS 34032 (S.D.N.Y. April 21, 2009).
Penguin appealed to the U.S. Second Circuit where the sole issue for the court was whether there was a basis for hauling American Buddha into a New York court.
In seeking to resolve this issue, the Second Circuit observed that the language of New York’s “Long-Arm” statute (and its legislative history) “provides insufficient guidance” to allow the Court decide the situs of injury in copyright infringement cases. The Second Circuit then proceeded to examine analogous situations in other commercial tort cases where, for instance, the alleged tort was committed in one state but the injury was felt somewhere else. But since none of those cases involved copyright infringement over the Internet, they could not provide much guidance.
Ultimately, the Second Circuit held that determining the situs of injury for the purposes of finding long-arm jurisdiction in copyright cases “requires analysis of state law and policy considerations that this Court is ill-suited to make” and that certification to the New York Court of Appeals was appropriate.
And so now, it is up to the New York Court of Appeals to answer this question. Stay tuned …
Tuvyah (Terry) Aronoff chairs the Corporate Practice Group at Schwell Wimpfheimer & Associates and specializes in Entertainment law. He has over 25 years of experience representing public and private companies in both traditional and innovative markets, as well as entertainment clients and individual performing artists. He can be reached at taronoff@swalegal.com or 646 328 0781.
Melinda Spitzer is a member of the Litigation Practice Group and has handled a wide range of commercial litigation matters in state and federal courts in areas such as contracts, intellectual property, trade secrets, and employment. She can be reached at mspitzer@swalegal.com or 646 328 0797.
Posting and viewing of the materials on our web site is not intended to constitute the rendering of legal advice or to create an attorney-client relationship with the reader. Readers should not rely on the posted materials as advice about specific legal problems. Such advice can be rendered only by competent counsel familiar with the particular facts and circumstances involved. If you are not presently an Schwell Wimpfheimer & Associates client, please do not send us any information about your legal affairs until you have made direct contact with one of our attorneys—such communications may not be secure, will not be privileged and may be disclosed to others. Once we have determined that we have no conflict in advising you, we would be pleased to discuss your situation in more depth.
Filed Under: Entertainment , Intellectual Property , Litigation , Publications
