If you get smacked by the Interwebs, where does it hurt?

May 17, 2011 GS2LAW

A two-year excursion to resolve that question has finally returned home to the District Court where it all began. The Second Circuit Court of Appeals has determined that, in certain circumstances, the “situs of injury” for the purpose of personal jurisdiction is where the plaintiff resides. In other words, when a fellow in New York gets word that his magnum opus was copied and uploaded to the free world by a fellow in Wichita, KS, he can claim harm in New York.

The case Penguin v. American Buddha began when the world-renowned publisher, Penguin, discovered that an Oregon not-for-profit had uploaded some of its books to the internet and made them available for download. Penguin sued in the Southern District of New York and the case ricocheted between the Second Circuit Court of Appeals, the New York State Court of Appeals, and the Southern District of New York to determine if jurisdiction was proper over a non-domiciliary under CPLR 302(a)(3)(ii).

American Buddha claimed that it was not amenable to suit as it had done nothing in New York and the District Court agreed as Penguin’s case was not based on downloading in New York but rather on the uploading in Oregon or Arizona (wherever the American Buddha servers reside).

The New York Court of Appeals resolved the issue narrowing the question certified to it by the Second Circuit in answering “a New York copyright owner alleging infringement sustains an in-state injury pursuant to CPLR 302(a)(3)(ii) when its printed literary work is uploaded without permission onto the Internet for public access.” Upon getting the ball back in its court, the Second Circuit issued a 9-page opinion remanding the case back to the District Court with the order that in the cases of this type the ‘situs of the injury was indeed the copyright holder’s principal place of business. Two years later, the case can finally begin (or not, depending on whether Penguin satisfies the other elements of the jurisdiction analysis).

So what’s the big deal you may ask? First, it is always good when the courts catch up, at least momentarily, with technological advances. Second, although the New York Court of Appeals has narrowly construed the circumstances in which this case applies (copyrighted, printed, literary work, uploaded without permission for public access) more importantly it concluded that it is illogical to extend traditional tort analysis that “equate[s] a plaintiff’s injury with the place where its business is lost or threatened” to the Internet “where the place of uploading is inconsequential and it is difficult, if not impossible, to correlate lost sales to a particular geographic area.”

Consequently, the court took into account two crucial factors in determining that an injury in New York could occur by upload in Oregon:

  1. That the right of a copyright holder is the right “to exclude others from using his property”; and
  2. American Buddha’s websites could be accessed in New York.

Now that the trailblazers at Penguin have invested their money into this question, the Garrett authors, the little guys without the resources have a chance, albeit slight, that a cease and desist letter to an out-of-state infringer won’t go the way of the paper telephone book.