United States: Second Circuit Says New York Publisher Can Sue Online Infringer In New York

Last Updated: May 26 2011
Article by Amelia K. Brankov

This article first appeared in Entertainment Law Matters, a Frankfurt Kurnit legal blog.

The Second Circuit has revived a New York publishing house's New York based copyright infringement lawsuit against an online publisher. With guidance from New York State's highest court, the Second Circuit reversed a decision that would have required the publisher to bring suit in the state where the infringer uploaded the works, rather than the publisher's home state. The decision provides comfort to New York copyright holders who seek to stop digital piracy caused by out-of-state infringers by bringing suits in New York.

Penguin Group (USA) Inc. ("Penguin"), one of the largest trade book publishers in the world, sued American Buddha for copyright infringement. American Buddha is a not-for-profit corporation based in Arizona that maintains a website called the Ralph Nader Library (which despite its name is not affiliated with consumer advocate Ralph Nader). The website "provides access to classical literature and other works."

Penguin alleged that American Buddha published complete copies of four Penguin books online, including Oil! by Upton Sinclair among others, thereby infringing Penguin's copyrights in those works. American Buddha made the books freely available to its 50,000 members and the general public on its website.

Penguin, based in New York, filed its lawsuit in federal court in New York. That court dismissed Penguin's case on the grounds that it lacked personal jurisdiction over American Buddha. Applying the provisions of New York State's long-arm jurisdiction statute applicable to nondomiciliaries who commit tortious acts outside of the state that cause injury within New York, the court held that American Buddha, an out-of-state company, could not be sued in New York because Penguin's purported injury occurred where the books were electronically copied – presumably in Arizona or Oregon, where American Buddha and its computer servers were located, not New York, where Penguin was headquartered.

On appeal, the Second Circuit asked New York State's highest court for assistance on the grounds that resolution of the issues on appeal "require[d] analysis of state law and policy considerations that [the Second Circuit was] ill-suited to make." The Second Circuit found that the issue on appeal "require[d] a determination of how the New York State Legislature intended to weigh the breadth of protection to New Yorkers whose copyrights have allegedly been infringed against the burden on non-resident alleged infringers whose connection to New York may be remote and who may reasonably have failed to foresee that their actions would have consequences in New York."

The New York Court of Appeals responded that a New York copyright owner alleging infringement sustains an in-state injury for purposes of New York's long-arm statute when its printed literary work is uploaded without authorization onto the internet for public access. Because in this case the alleged infringement dispersed the work nationwide and perhaps worldwide, it was "illogical to extend" the traditional tort approach that "equate[s] a plaintiff's injury with the place where its business is lost or threatened" to the context of "online copyright infringement cases where the place of uploading is inconsequential and it is difficult, if not impossible, to correlate lost sales to a particular geographic area."

The New York high court also held that the right of a copyright holder to exclude others from using its work was a "critical factor" that tipped the balance in favor of identifying New York as the situs of injury. Because American Buddha's website was accessible by any New Yorker with an internet connection (even though there was no evidence that any New Yorker actually downloaded one of the works in question), the court held that the injury occurred in New York. In doing so, the court rejected American Buddha's claim that the decision would open a "Pandora's box" to haling non-New Yorkers into New York courts, ruling that both New York law and the Due Process Clause of the United States Constitution would safeguard against such abuses. The New York Court of Appeals did strictly limit the scope of its ruling, holding that the court "d[id] not find it necessary to address whether a New York copyright holder sustains an in-state injury pursuant to [the New York long-arm statute] in a copyright infringement case that does not allege digital piracy and, therefore express[es] no opinion on that question."

In light of the New York Court of Appeals's decision, the Second Circuit vacated the judgment of the district court and remanded the case to the district court for further proceedings. On remand, the district court will consider in the first instance whether Penguin has established the remaining jurisdictional requisites under the long-arm statute, and the extent to which the assertion of personal jurisdiction over American Buddha would comport with the requirements of the Due Process Clause.

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This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

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