Source: http://www.medialawmonitor.com/2011/12/penguin-group-usa-inc-v-american-buddha-new-york%E2%80%99s-long-arm-statute-grows-longer-for-internet-piracy/
Timestamp: 2019-04-25 04:08:48+00:00

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Earlier this year, the New York Court of Appeals issued an important decision which should help New York publishers combat online piracy of their copyrighted works and will have implications for other online content providers as well. In Penguin Group (USA) Inc. v. American Buddha the Court held that “[i]n copyright infringement cases involving the uploading of a copyrighted printed literary work onto the Internet,” the situs of the injury for purposes of determining personal jurisdiction under C.P.L.R. § 302(a)(3)(ii) is the “location of the principal place of business of the copyright holder,” not, as some courts had held in other circumstances, the location of the infringing act or the specific location where sales or customers are lost. The ruling is significant because it should make it easier for publishers based in New York State – which includes the majority of large book publishers and many smaller U.S. publishers – to bring actions in New York for online piracy of their published works, whether or not they can allege an infringing download or use within the state.
Penguin Group (USA) is one of New York’s leading trade books publishers. In late 2008, it became aware of an Oregon not-for-profit entity called American Buddha with its principal place of business in Arizona. Through its website at www.naderlibrary.com, American Buddha offers to its estimated 50,000 members and to the general public free downloads of many books, articles, speeches, and movies, including books published by Penguin such as Oil by Upton Sinclair. The website assures its users that by downloading any works from the American Buddha library, no copyright infringement is taking place because the site merely “makes available selected artistic and literary works under a system of voluntary, free online lending, under the fair use exclusion from copyright liability accorded to libraries and archives pursuant to 17 U.S.C. Section 108.” For Penguin, however, American Buddha’s “library” amounted to blatant copyright infringement.
Penguin wrote to American Buddha’s counsel to demand that it remove its works from the site. American Buddha responded by invoking the safe harbor provision of the Digital Millennium Copyright Act (DMCA). Penguin served notice on the site’s designated agent for service under the statute, and the work was removed, but days later American Buddha restored the work, submitting a counter-notification pursuant to section 512(g)(3) of the DMCA, citing 17 U.S.C. § 108, the First Amendment, and fair use.
On appeal to the Second Circuit, Penguin stressed that the purpose of section 302(a)(3) was to plug a perceived gap in the reach of the long-arm statute and that courts in cases such as Fantis had undermined that purpose by requiring that the injury to plaintiff be directly felt in New York. Penguin stressed that the Second Circuit’s decision in DiStefano v. Carozzi, Inc.. was more relevant. In that case, the court held that a man whose employment was unlawfully terminated at a meeting in New Jersey felt the first effect of the tortious act not in New Jersey, where the firing occurred, but in New York, where he lived and worked. His New York injury – the loss of his job – was sufficient to confer jurisdiction. Further, district courts in the Second Circuit had extended the concept to find that the situs of injury in an intellectual property case was where that property was held.
In copyright infringement cases, 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 business of the copyright holder?
American Buddha raised a wide variety of arguments in its papers to the Court of Appeals. It argued that the Court had no place setting forth broad jurisdictional principles specific to copyright infringement when Congress had pre-empted the field. To decide on the situs of the injury, American Buddha stated, the Court would have to determine the situs of the copyright, which Congress had declined to do in the statute and which the fragmented complexities of copyright ownership would make impossible. It also again raised its library exemption defense under 17 U.S.C. § 108, arguing that the court should not make distinctions between bricks and mortar libraries and online libraries when neither the statutory language nor the Copyright Office has made any such distinction.
American Buddha further argued that the case had been correctly decided by the district court and that the Court of Appeals should continue to rely on its decision in Fantis for the proposition that derivative economic injury is insufficient to confer jurisdiction. To find that the location of the rights holder is the situs of injury, American Buddha argued, raised the specter of opening a “Pandora’s box” that would flood the New York courts with litigation.
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 business of the copyright holder?
It is worth noting two additional points. First, in answering the certified question, the Court of Appeal ignored American Buddha’s preemption argument and gave short shrift to its lengthy briefing on the threshold question of where a copyright physically resides. Rather, in a footnote the Court simply accepted the characterization of the Second Circuit for purposes of the appeal that “copyrights have a location and that their location in this case is in New York State.” Second, the Court expressly reserved the question of whether the same jurisdictional result would apply in a copyright infringement case that does not allege Internet piracy, simply noting that cases in New York had come to different conclusions when considering non-Internet distribution.
Courts have struggled with the challenge of applying personal jurisdiction rules developed under traditional geographic analysis to the Internet. The Internet is both everywhere and nowhere. The widespread electronic dissemination of copyright works can inflict damage on a rights holder faster and on a vastly greater scale than anything possible in the bricks-and-mortar world. On the other hand, legitimate users or disseminators of copyrighted material online risk exposure to legal action in a far greater number of jurisdictions. The publishing industry, overwhelmingly concentrated in New York, has faced significant obstacles to remaining viable in the face of the increasing threat of online piracy and other threats to its traditional business model. In American Buddha the Second Circuit and the New York Court of Appeals have shown a willingness to use New York’s long-arm jurisdiction to protect that valuable asset.
The ruling will have important ramifications for online content providers based in New York. Despite American Buddha’s focus on “printed literary works,” its reasoning applies with equal force to the digital piracy of movies, television shows, music, and other online content. As the Association of American Publishers, the Association of American University Presses, and the Association of Magazine Media pointed out in their amicus brief on behalf of Penguin, permitting content providers to sue out-of-state alleged infringers in New York will make it easier and quicker to obtain preliminary injunctive relief without having to do what is sometimes impossible without discovery – determining where the infringing uploads take place. It will also allow New York litigants to benefit from the New York judiciary’s considerable expertise in applying copyright law to digital piracy of all content, leading to greater consistency in this area.
 Although the website professes admiration for Ralph Nader’s libertarian philosophy, it disclaims any direct affiliation with him.
 Penguin was reluctant to seek out and sue users of the website and therefore did not assert jurisdiction under C.P.L.R. § 302(a)(2) for tortious acts committed within the state.
 2009 U.S. Dist. LEXIS 34032, at * 9, 90 U.S.P.Q. 2d (BNA) 1954 (S.D.N.Y. Apr. 21, 2009).
 49 N.Y.2d 317, 326 (1980).
 2009 U.S. Dist. LEXIS 34032, at *8-13 (citing Andy Stroud, Inc. v. Brown, No. 08 Civ. 8246, 2009 WL 539863, at *3 (S.D.N.Y. Mar. 4, 2009)).
 286 F.3d 81 (2d Cir. 2001).
 46 N.Y.2d 197, 413 N.Y.S.2d 127 (1978).
 7 N.Y.3d 78, 85 (2006).
 609 F.3d 30 (2d Cir. 2010).
Elizabeth McNamara, Linda Steinman, and Christopher Robinson of Davis Wright Tremaine, LLP represented the publishing associations as amici before the New York Court of Appeals.

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