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NYC/618572.1
Penguin v. American Buddha: What’s Next?
Paul Fakler Arent Fox LLP In Penguin Group (USA) v. American Buddha, the plaintiff book publisher sued the
owner/operator of a website for posting complete copies of several books on that
website without Penguin’s authorization. The defendant, American Buddha, is an
Oregon not-for-profit corporation with one employee, Tara Lyn Carreon. American
Buddha operates the Ralph Nader Library (no association with the actual Ralph Nader,
apparently) at a physical location in Tucson, Arizona. As noted above, American
Buddha also makes certain books, motion picture screenplays (annotated with screen
captures of the actual movies) and even sound recordings publicly available on the
www.naderlibrary.com website. American Buddha claims that the materials made
available on its website are effectively a digital library, provided for the purpose of
furthering criticism and scholarship. Penguin claims that it is garden variety copyright
infringement.
Penguin chose to sue American Buddha in the Southern District of New York.
American Buddha moved to dismiss for lack of personal jurisdiction. Penguin asserted
personal jurisdiction based upon one particular provision of New York’s long-arm
jurisdiction statute, N.Y. C.P.L.R. § 302(a)(3)(ii), which provides, in pertinent part:
[A] court may exercise personal jurisdiction over any non-domiciliary . . . who . . . commits a tortious act without the state causing injury to person or property within the state, . . . if he . . . expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce . . .
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The district court granted American Buddha’s motion to dismiss on the narrow ground that, in
light of the fact that Penguin had not claimed any actual infringement took place within New
York, the site of Penguin’s injury was where the alleged infringement took place, in Arizona or
Oregon (the locations of American Buddha’s servers). Penguin Group (USA) Inc. v. American
Buddha, No. 09 Civ. 528 (GEL), 2009 WL 1069158 at *4 (S.D.N.Y. April 21, 2009). Because
this ground was sufficient to deny the court of personal jurisdiction, the district court did not
reach the other requirements of C.P.L.R 302(a)(3)(ii) or the independent Due Process
requirements for personal jurisdiction. Id.
Rather than simply sue the defendant in Arizona or Oregon or request a transfer to one of
those venues, Penguin appealed the dismissal. Noting a split of authority, the Second Circuit
referred the following question to the New York Court of Appeals: 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 actions or the residence or location of the
principal place of business of the copyright holder? Penguin Group (USA) Inc. v. American
Buddha, 609 F.3d 30, 42 (2d Cir. 2010). The New York Court of Appeals narrowed the referred
question to the following: 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? The court, based upon its view of the unique nature of harm from copyright
infringement on the Internet (as compared to typical commercial torts), answered that the situs of
injury in such cases is the location of the copyright owner. Penguin Group (USA) Inc. v.
American Buddha, 16 N.Y.3d 295, 306-07 (N.Y. 2011).
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Based upon the answer from the New York Court of Appeals, the Second Circuit
reversed the district court’s decision, and remanded the case for further consideration of the other
factors required to support long-arm jurisdiction under N.Y. C.P.L.R. § 302(a)(3)(ii) and the Due
Process clause. Penguin Group (USA) Inc. v. American Buddha, 640 F.3d 497, 500-501 (2d Cir.
2011). So, even though Penguin won the appeal it is not out of the woods yet. The interesting
question remaining is whether any of these other analyses will preclude the exercise of personal
jurisdiction over American Buddha.
The Remaining Section 302(a)(3)(ii) Factors
Reasonable Expectation of Consequences in New York
One of the requirements of N.Y. C.P.L.R. § 302(a)(3)(ii) is that Penguin
demonstrate that American Buddha expects or should reasonably expect their acts to
have consequences in New York. American Buddha argues that the mere availability of
its website throughout the world does not make it foreseeable that there would be
consequences in New York, particularly where Penguin did not allege that anyone in
New York (other than counsel) had actually accessed the website. Penguin, on the other
hand, notes that its books each list Penguin’s New York address on the copyright page
and argues that this put American Buddha on at least constructive notice that its
unauthorized copying and display of the books would have an impact in New York.
Substantial Revenue From Interstate or International Commerce
Another requirement of N.Y. C.P.L.R. § 302(a)(3)(ii) is that Penguin demonstrate
that American Buddha has generated substantial revenue from interstate or
international commerce. The New York Court of Appeals has noted that this
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independent requirement is meant to preclude jurisdiction over foreign parties whose
business operations are of a local character or are not “economically big enough” to
reasonably endure litigation in a foreign forum. Ingraham v. Carroll, 90 N.Y.2d 592, 599
(N.Y. 1997). Whether the defendant’s revenues from interstate commerce are
substantial is determined both on relative and absolute scales. That is to say, the court
look at both the total amount of the defendant’s revenues from interstate commerce and
the percentage of the defendant’s total revenues that come from interstate commerce.
Ronar, Inc. v. Wallace, 649 F. Supp. 310, 316-17 (S.D.N.Y. 1986).
According to the testimony of American Buddha’s president, American Buddha
has no revenues whatsoever because it does not charge any fees at its physical library or
for access to its website, and does not advertise on its website. It seems to be
undisputed that American Buddha has never generated any revenue from the alleged
infringement at issue in the case. Penguin make various allegations about certain books
written by American Buddha’s counsel and links advertising that book in various e-
mails that were sent during the litigation, and also points to several books available on
Amazon.com that are listed as being published by American Buddha, but it is not at all
clear that there is any relationship between these books and the allegedly infringing
website at issue in the case. It seems hard to square the allegations and evidence with
any substantial revenues from interstate commerce.
Due Process
If Penguin establishes that American Buddha’s conduct satisfies the New York
State long-arm requirements described above, it will still have to independently
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demonstrate that the court’s exercise of jurisdiction over American Buddha comports
with the Due Process clause. Penguin (USA) Inc. v. American Buddha, 16 N.Y.3d 295, 307.
The due process test for personal jurisdiction has two related components: the
“minimum contacts” requirement and the “reasonableness” requirement. Under the
first component, the Court must determine whether the defendant has sufficient
contacts with the forum state to justify the court’s exercise of personal jurisdiction. Int’l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The second stage of the due process
inquiry asks whether the exercise of jurisdiction comports with “traditional notions of
fair play and substantial justice” -- that is, whether it is reasonable under the
circumstances of the particular case. Id.
Minimum Contacts
Under the traditional “purposeful availment” due process test for minimum
contacts, the district court can exercise specific jurisdiction over American Buddha only
if (i) American Buddha committed some act by which it “purposefully availed itself of
the privilege of conducting activities” in New York “thus invoking the benefits and
protections of its laws” and (ii) American Buddha’s contacts with New York relate to
Plaintiff’s cause of action for copyright infringement or have given rise to it. World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). This “purposeful availment”
formulation is the test most commonly used by courts to determine the existence of
specific jurisdiction, particularly in cases where no intentional tort is involved.
For intentional tort cases, the Calder “effects” test is sometimes applied. Under
the Calder test, a defendant accused of an intentional tort that was specifically directed
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towards causing harm in the forum state may be subject to specific personal jurisdiction
in that forum, even if the defendant has no other contacts with the forum state Calder v.
Jones, 465 U.S. 783, 788-89 (1984). In Calder, entertainer Shirley Jones brought an action
in California against the author and editor of an article which had appeared in the
National Enquirer, and which she claimed was defamatory. The article alleged that
Jones had a problem with alcohol, which prevented her from fulfilling her professional
obligations. Although the Enquirer was distributed nationally, it had its largest
circulation in California. Defendant South, the reporter, did most of his research in
Florida, relying on phone calls to California for information. Defendant Calder had no
such contacts with California. He reviewed and approved the initial evaluation of the
topic of the article and edited drafts to its final form. Id. at 785-86. Both defendants,
residents of Florida, moved to dismiss Jones' suit for lack of personal jurisdiction.
The Court found that the exercise of personal jurisdiction over the defendants was
proper. The Court concluded:
The allegedly libelous story concerned the California activities of a California resident. It impugned the professionalism of an entertainer whose television career was centered in California. The article was 261*261 drawn from California sources, and the brunt of the harm, in terms of both respondent's emotional distress and the injury to her professional reputation, was suffered in California. In sum, California is the focal point both of the story and of the harm suffered. Jurisdiction over petitioners is therefore proper in California based on the "effects" of their Florida conduct in California.... [T]heir intentional, and allegedly tortious, actions were expressly aimed at California. Petitioner South wrote and petitioner Calder edited an article that they knew would have a potentially devastating impact upon respondent. And they knew that the brunt of that injury would be felt by respondent in the State in which she lives and works and in which the National Enquirer has its largest circulation.
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Id. at 788-90. (footnote omitted).
In the American Buddha case, it seems undisputed that American Buddha has no
contacts with the State of New York. Penguin did not allege and direct infringement by
New York users, and there is no evidence that the infringing website was used by any
New York residents, other than Penguin’s counsel. There do not seem to be any facts at
all that American Buddha purposefully availed itself of the benefit of conducting
activities in New York, thereby invoking the benefits and protections of its laws. Thus,
it seems that the only path to personal jurisdiction would have to be the Calder effects
test, which in turn depends as a threshold matter upon whether Penguin’s copyright
infringement claim is for an intentional tort. Indeed, Penguin argues that its claim is for
an intentional tort. This argument, however, conflates an allegation of willfulness,
included in almost every copyright infringement complaint (whether grounded in fact
or not), and the fundamental nature of the tort.
It has long been established that copyright infringement is a strict liability tort,
and not one that requires any specific intent. See, e.g., Shapiro, Bernstein & Co. v. H. L.
Green Co., 316 F.2d 304 (2d Cir. 1963); Parker v. Dufresne, No. 09-cv-1859, 2010 WL
2671578, at *9 (W.D. La. May 18, 2010). Willfulness is irrelevant to liability in copyright
law; it is only relevant to the amount of statutory damages available if statutory
damages are elected. Even there, infringing conduct is only willful if the plaintiff can
prove that the defendant acted with either actual or constructive knowledge that its acts
were infringing. See, e.g., RCA/Ariola Int’l, Inc. v. Thomas & Grayston Co., 845 F.2d 773,
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779 (8th Cir. 1988). Such actual or constructive knowledge cannot be triggered merely
by a plaintiff alleging infringement or filing a lawsuit. Even where the conduct is
eventually found to be infringing and the defendant refused to cease the conduct
during the dispute, a defendant’s good faith belief that its conduct was not infringing is
sufficient to prevent a finding of willfulness. Id.
In the context of personal jurisdiction, courts have routinely held that a copyright
infringement claim requires no particular state of mind and thus should not be treated
by itself as a basis for asserting jurisdiction without an additional specific showing that
the alleged infringement was specifically directed at the forum state. CoStar Group, Inc.
v. LoopNet, Inc., 106 F. Supp. 2d 780, 787 (D. Md. 2000) (Effects test not satisfied where
plaintiff did not make prima facie showing of intentional direction of infringing conduct
toward the forum); Figi Graphics, Inc. v. Dollar Gen. Corp., 33 F. Supp. 2d 1263, 1267 (S.D.
Cal. 1998) (Effects test not satisfied where plaintiff “failed to present any evidence
demonstrating that [defendant] ‘intentionally’ infringed upon [plaintiff’s] copyrights”);
Richter v. INSTAR Enters. Int’l., Inc., 594 F. Supp. 2d 1000, 1011-12 (N.D. Ill. 2009); Parker,
2010 WL 2671578, at *9 (quoting 5 Patry on Copyright § 17:167 criticizing courts for
bootstrapping specific jurisdiction based upon mere allegations of intentional
infringement). If the mere allegation of willful infringement in a complaint were
sufficient to provide minimum contacts, such a rule would effectively graft a
nationwide jurisdiction provision onto the Copyright Act.
Even if the district court does hold that copyright infringement is an intentional
tort, Penguin will also have to prove that American Buddha’s intentional misconduct
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(1) was directly aimed at the forum and (2) caused injury within the forum that
Spiderwebart should have reasonably anticipated. Calder v. Jones, 465 U.S. at 788-89.
For both of these requirements, Penguin focuses on the fact that each of the infringed
books bears the address of Penguin’s New York headquarters on the copyright page. It
seems that it would be difficult to prove, from this fact alone, that American Buddha
had actual knowledge of Penguin’s New York location. Although constructive
knowledge is often sufficient to show reasonable anticipation, it does not seem likely
that constructive knowledge should be sufficient to show that the conduct was directly
and expressly aimed at New York.
Fair Play and Substantial Justice
The final stage of the due process analysis requires a determination of whether
the “exercise [of] personal jurisdiction . . . would offend ‘traditional notions of fair play
and substantial justice.’” Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113 (1987)
(quoting Int’l Shoe, 326 U.S. at 316). The factors considered in this analysis are “the
burden on the defendant,” “the forum State’s interest in adjudicating the dispute,” “the
plaintiff’s interest in obtaining convenient and effective relief,” “the interstate judicial
system’s interest in obtaining the most efficient resolution of controversies,” and the
“shared interest of the several States in furthering fundamental substantive social
policies.” World-Wide Volkswagen, 444 U.S. at 292. Even where sufficient minimum
contacts have been found, due process requirements will defeat the exercise of personal
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jurisdiction if that exercise will not meet the requirements of fair play and substantial
justice.
In the American Buddha case, the defendant is a tiny, not-for-profit corporation
with one employee, located in Arizona. It seems unlikely that Penguin, a large
publishing company, will succeed in arguing that litigation in New York will not be
unduly burdensome of American Buddha. With respect to New York’s local interest in
the dispute, New York clearly has such an interest. Penguin’s interest in obtaining
convenient and effective relief seems almost neutral, because it can certainly obtain
effective relief in Arizona federal court, and is better suited to bear the inherent
inconvenience of litigating in a foreign forum than is American Buddha. With respect
to the interstate judicial system’s efficiency interest, there is no reason to think that one
venue or the other will be more efficient. And finally, both New York and Arizona
have similar interests in the copyright issues raised by the case.
Balancing these factors, the only one weighing strongly in favor of jurisdiction is
New York’s interest in adjudicating a dispute concerning harm to one of its citizens.
This factor always weighs in favor of a plaintiff’s home jurisdiction, however.
Weighing strongly against jurisdiction is the extreme burden that will be placed on
American Buddha if it is forced to litigation in New York. The remaining factors appear
to be relatively neutral. Penguin does not appear to have a compelling position with
respect to fair play and substantial justice. On the other hand, the district court has
considerable discretion in evaluating and weighing these factors.
Conclusion
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It is always interesting to consider why litigants take the positions that they do.
In the American Buddha case, I have to admit I find Penguin’s strategic decision
puzzling. It seem that on the merits, which are beyond the scope of this paper, Penguin
has an airtight case that American Buddha is infringing its copyrights. Why didn’t
Penguin simply sue in Arizona? Did it really believe it would save that much money by
avoiding the need to hire local counsel there? Certainly the cost of litigating and
appealing the personal jurisdiction issue has far eclipsed any additional expense
associated with litigating in Arizona. Even if Penguin perceived that a judge in the
Southern District of New York would be more likely to be familiar with copyright law,
does this case present such difficult or complex issues that strong copyright expertise is
necessary? Of course, we will never know the answers to these questions, but thinking
about them may help us advise our own clients when faced with a distant, but small,
infringer.
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