Are SOPA and PIPA Necessary To Shut Down Rogue Websites?

Thanks to Anonymous for commenting here on my Megaupload post yesterday and for explaining that one of the rationales for the Stop Online Piracy Act and the Protect IP Act is that this legislation is purportedly necessary because there is allegedly no remedy against rogue websites that operate offshore.

I immediately went to Chapter 7 of my Copyright Litigation Handbook and found the Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 243 F.Supp.2d 1073, 1087 (C.D.Cal.2003) case.   As I recalled, that court found that Grokster/Kazaa had subjected itself to jurisdiction by the nature of its contacts with the forum state.   There, jurisdiction was exercised over a company that had moved to the island of Vanuatu.

This Grokster rationale has been used by a few other courts in exercising jurisdiction over offshore/foreign "rogue websites".   Below are a few cites that basically support the proposition that our existing copyright law has substantial remedies against rogue websites that permit or promote infringement of U.S. copyrights.

Other jurisdictions, such as Germany or India, also have courts and laws that will enforce U.S. copyrights.  So the claim by SOPA and PIPA supporters that remedies don't exist is a bit mystifying.   Of course to remedy some of these injuries, a company might have to leave the comfort of home, but there is a pretty strong reason that we consult German courts and the German justice system, for example, before shutting down a German website.

Additionally, I considered the Second Circuit's decision in Penguin Group (USA) v. American Buddha, 640 F.3d 497 (2d Cir. 2011) which permits a copyright owner to bring suit in NY when the owner of the copyright is injured by an illegal download outside New York.

I would be happy to hear from anyone who can cite cases to the contrary or assist me in better understanding the counterargument.

Some quotes below.

When media producers bring suit for copyright infringement, the presence of software users in the forum state is enough to show that the defendant purposefully directed its activities there. Motown Record Co., L.P. v. iMesh.Com, Inc. 2004 WL 503720, 8 (S.D.N.Y.,2004) citing Arista Records, Inc. v. Sakfield Holding Co., 314 F.Supp.2d 27, 32 (D.D.C.2004); Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 243 F.Supp.2d 1073, 1087 (C.D.Cal.2003).

From Arista Records, Inc. v. Sakfield Holding Co. S.L., 314 F.Supp.2d 27, 31 (D.D.C. 2004):

Thus even without considering the evidence offered in the declaration of Bruce Ward the Court can find that the download of music files by Henriksen constitutes transacting business in the District. As the Court of Appeals in Gorman noted, the fact that the transactions between defendant and residents of the District of Columbia occurred in cyberspace “is not some mystical incantation capable of warding off the jurisdiction of courts built from bricks and mortar.” 293 F.3d at 510. See also Material Supply Intern., Inc. v. Sunmatch Industrial Co., 62 F.Supp.2d 13 (D.D.C.1999) (noting that a single act may be sufficient to transact business and that defendant need not ever be physically present in the district to transact business within the meaning of the statute). All of the aforementioned acts represent transactions between a district resident and defendant that have given rise to consequences in the District.

DigiProtect USA Corp. v. Does, 2011 WL 4444666, 2 (S.D.N.Y. 2011)(discussing American Buddha):

New York's long arm statute also provides jurisdiction over nondomiciliaries who commit a tortious act within the state, N.Y. C.P.L.R. § 302(a)(2); or a tortious act outside the state that resulted in injury within New York, id. § 302(a)(3)(ii). For a copyright infringement claim, under § 302(a)(2), the tortious act committed within the state is the act of infringement, or the illegal download. Yash Raj Films (USA) Inc. v. Dishant.com LLC, No. 08–CV–2715 (ENV)(RML), 2009 WL 4891764, at *7 (E.D.N.Y. Dec. 15, 2009). Under § 302(a)(3)(ii), only the injury must occur in New York; the act of downloading may occur outside the state, but the plaintiff must also show that the nondomiciliary “expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.” N.Y. C.P.L.R. § 302(a)(3)(ii).

Finally, the Due Process Clause requires proof that out-of-state defendants have “certain minimum contacts ... such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Calder v. Jones, 465 U.S. 783, 788, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (quotations omitted).

The New York Court of Appeals recently held that, while the site of injury under § 302(a)(3)(ii) in commercial tort cases traditionally has been where business is lost, rather than where the plaintiff is located, “the unique bundle of rights granted to copyright owners” “tips the balance in favor of New York as the situs of the injury” when a New York company's copyright is infringed by unauthorized publishing on the internet. Penguin Grp. (USA) Inc. v. Am. Buddha, 16 N.Y.3d 295, 921 N.Y.S.2d 171, 946 N.E.2d 159, 176 (N.Y.2011).

UPDATED.   Attorney Benjamin Wright has pointed out the Liquid Motors case in which a federal judge ordered the FBI to restore service to legitimate users of a website containing allegedly infringing content. Wright's take on the Megaupload raid and discussion of the case here.

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Ninth Circuit: Specific California Jurisdiction Over Ohio Celebrity Gossip Website Publishing Black-Eyed Peas Infringing Photographs

In Mavrix Photo Inc. v Brand Technologies (09-56134) (Ninth Circuit August 8, 2011), embedded below, the Ninth Circuit reversed a district court's dismissal of a copyright infringement lawsuit brought in California against an Ohio celebrity gossip website http://www.celebrity-gossip.net/ by Mavrix, the operator of http://www.mavrixonline.com/.

The opinion, by Circuit Judge William Fletcher, found no general jurisdiction over the Ohio website.  However, the court found specific jurisdiction based on the activities of the Ohio website directed towards California residents, the serious commercial purpose and national fame of the Ohio website, its expectation knowledge that California residents would be its clients, and its purposeful infringement of a copyright owned by a California resident.

Specific jurisdiction is now a very hot topic in copyright law, following the American Buddha case (more on American Buddha here or scroll down to the bottom of the blog and select "American Buddha").   The issue is whether New York or California long-arm statutes will permit an exercise of jurisdiction over out of state infringers, so it is an example of federal courts relying on state law for their jurisdiction.  The test is "due process" and the citations are to cases that are the bane of first-year law students.  In the American Buddha case, the Second Circuit certified the question to the New York Court of Appeals.  We are seeing an expansion of effective remedies for New York and California copyright owners for serious infringers who are located out-of-state.

Required reading for copyright practitioners.

Mavrix Technologies v Brand 09-56134

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NY CT of Appeals To Second Circuit: Copyright Owners Suffered Injury in New York For Long Arm Jurisdiction

Penguin Group (USA) Inc. v. American Buddha (N.Y. Ct. Appeals March 24, 2010), the New York State Court of Appeals decided an issue of extraordinary importance:  whether someone offering copyrighted works in another state could be sued in New York if the copyright owner is located in New York, even if no sale took place in New York?

You can read my earlier post Copyright and the Story of the Long-Armed Buddhist Penguin here.

My post on the question being certified to the New York Court of Appeals: The Long Arm of New York Copyright Holders: Can New York Copyright Lawyers Sue America Without Leaving Manhattan? is here.

As readers of the Copyright Litigation Blog know, copyright cases overwhelmingly take place in federal court.  That is because copyright law presents "federal questions" and the doctrine of complete preemption applies in copyright law.  "Preemption" means that states cannot make laws inconsistent with copyright laws or that govern rights that are equivalent to copyright. It's not an easy test.  More on preemption here.

So how did a copyright case get to the New York State Court of Appeals?   Well, when legal questions at the appellate level arise that require a federal circuit court of appeals to determine an unsettled area of state law, the circuit court might "certify" or ask the state's highest appeals court to answer the question.

So the Second Circuit Court of Appeals heard an appeal from a district court ruling that denied "long arm jurisdiction" over American Buddha, a Washington State based online service that uploads Penguin books and claims that it is permitted by the fair use doctrine to give away free copies online to its members.

Instead of determining the question of whether New York's long-arm statute applied to American Buddha, the Second Circuit "certified" the question to the New York Court of Appeals.   The question certified was:

In copyright infringement cases involving the uploading of a copyrighted printed literary work onto the Internet, is the situs of injury for purposes of determining long-arm jurisdiction under N.Y. C.P.L.R. § 302 (a) (3) (ii) the location of the infringing action or the residence or location of the principal place of the copyright holder?
To understand why this matters, we need to understand that federal courts are courts of limited jurisdiction.  They can only exercise jurisdiction over matters when a statute says so.  Usually over matters in their judicial district.   For a court to answer a legal question, it must have 1. subject matter jurisdiction and 2. personal jurisdiction over the person whose rights are being decided.

In American Buddha, the "subject matter" is copyright, which is governed by the Copyright Act thus satisfying the test for subject matter jurisdiction (more on subject matter jurisdiction here).

But how can a federal court decide a matter outside the confines of its judicial district?  When does a non-resident of New York acting outside New York state subject herself to jurisdiction in New York?  The answer is that the federal court may exercise "long arm" jurisdiction to the extent that the state in which it sits permits.

CPLR 302 provides in part:

§ 302. Personal jurisdiction by acts of non-domiciliaries. (a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:

1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or

2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; or

3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he

(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or


(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; or

So the question answered by the New York Court of Appeals was whether copyright infringement by using the internet is an "act without the state causing injury to person or property within the state."

They said "yes".   This case is of extraordinary importance to the New York copyright bar specifically and to intellectual property practitioners in general.   But both the Second Circuit and the New York Court of Appeals specifically punted in a tantalizing footnote as follows:

The Second Circuit also stated that "[t]here is a possible question at the threshold that neither the district court nor the parties have addressed and which we do not here decide: whether a copyright -- in and of itself an intangible thing -- has a physical location for jurisdictional purposes and, if so, what that location is" (609 F3d at 36 n 4). The Second Circuit resolved to "accept for the purposes of this appeal the district court's implicit conclusion that copyrights have a location and that their location in this case is in New York State" (id.). We, too, accept this characterization in answering the certified question.

Now a New York lawyer can sue anyone in the world who infringes on the web by buying a subway token?  Not so fast, says the NYS Court of Appeals:

Finally, contrary to American Buddha's assertion, our decision today does not open a Pandora's box allowing any nondomiciliary accused of digital copyright infringement to be haled into a New York court when the plaintiff is a New York copyright owner of a printed literary work. Rather, CPLR 302 (a)(3) (ii) incorporates built-in safeguards against such exposure by requiring a plaintiff to show that the nondomiciliary both "expects or should reasonably expect the act to have consequences in the state" and, importantly, "derives substantial revenue from interstate or international commerce." There must also be proof that the out-of-state defendant has the requisite "minimum contacts" with the forum state and that the prospect of defending a suit here comports with "traditional notions of fair play and substantial justice," as required by the Federal Due Process Clause (International Shoe Co. v Washington, 326 US 310, 316 [1945] [internal quotation marks and citation omitted]; see also World-Wide Volkswagen Corp. v Woodson, 444 US 286, 291-292 [1980]). These issues are beyond the scope of this certified question and their resolution awaits further briefing before the federal courts.
This case is an extraordinary victory for Penguin and Richard Dannay, who has a string of extraordinary victories behind him.

Full decision below:
 Penguin Group v American Buddha  http://www.dunnington.com/rdowd_bio.html
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