NY Long-Arm Statute Permits Copyright Suit, Judges Say

New York's long-arm statute permits a Manhattan-based publisher to sue an out-of-state online corporation for copyright infringement, the state Court of Appeals ruled on March 24.

The fact that American Buddha downloaded in either Arizona or Oregon four books on which the Penguin Group holds the copyright is 'not fatal to a finding that the alleged injury occurred in New York,' the Court concluded unanimously.

Judge Victoria A. Graffeo wrote for the Court that the pervasiveness of the Internet distinguishes such cases 'from traditional commercial tort cases where courts have generally linked the injury to the place where sales or customers are lost.'

'The location of the infringement in online cases is of little import inasmuch as the primary aim of the infringers is to make the works available to anyone with access to an Internet connection, including computer users in New York,' she wrote in Penguin Group (USA) v. American Buddha, 7. 

'In addition, the injury to a New York copyright holder, while difficult to quantify, is not as remote as a purely indirect financial loss due to the broad spectrum of rights accorded by copyright law.'

Among other things, Judge Graffeo wrote, the online posting of materials in defiance of copyright laws could diminish the incentive to publish meritorious hard-copy versions of 'marginally profitable' or purely academic works because of the loss of property interests in those publications by their appearance for free on the Internet.

'The harm to a plaintiff's property interest in copyright infringement cases 'has often been characterized as irreparable in light of possible market confusion,” Judge Graffeo wrote, quoting the U.S. Court of Appeals for the Second Circuit in Salinger v. Colting, 607 F.3d 68 (2010).

The Court of Appeals ruling was in answer to a certified question from the Second Circuit asking whether New York's long-arm statute, CPLR '302(a)(3)(ii), applies to tortious copyright infringement committed outside New York without 'reasonably' apparent effects on commerce within New York.

Then-Southern District Judge Gerald E. Lynch ruled in April 2009 in favor of American Buddha. He determined his court lacked personal jurisdiction in the case because the electronic copying by American Buddha was done out of state. (Judge Lynch has since been elevated to the circuit.)

On appeal, a Second Circuit panel asked the state Court of Appeals for guidance.

American Buddha, which is based in Oregon but has its primary offices in Arizona, was sued in early 2009 by Penguin for copyright infringement when it posted copies of 'Oil!' by Upton Sinclair; 'It Can't Happen Here' by Sinclair Lewis; E.J. Kenney's translation of 'The Golden Ass' by Apuleius; and R.E. Latham's translation of Lucretius' 'On the Nature of the Universe.'

American Buddha said it wanted to make the works available to its 50,000 members on its 'online library.' It also operates the Ralph Nader Library, which is not affiliated with the consumer advocate.

American Buddha argued that its posting of the four works is protected by ”107, 108 of the federal Copyright Act, 17 USC '101, governing fair use and reproduction of works by libraries and archives.

Chief Judge Jonathan Lippman, Carmen Beauchamp Ciparick, Theodore T. Jones Jr., Eugene F. Pigott Jr., Susan Phillips Read and Robert S. Smith joined in the ruling.

The Penguin Group's lawyer, Richard Dannay of Cowan Liebowitz & Latman, said that the profit margin of publishers is in large part determined by books they sell on the margins of their operations and not the best-sellers. Those are the books that Internet 'pirates' tend to try to pick off, Mr. Dannay contended.

'These four books are not best sellers, but they are important books,' he said. 'That is how publishers make money. They earn it on the back list.'

Mr. Dannay said it is difficult, if not impossible, to tell how much Penguin lost on the four books posted by American Buddha, but he declared the ruling a 'terrific victory' for authors and publishers in New York in general.

Charles H. Carreon of Online Medial Law in Tucson, AZ, represented American Buddha.

He said the Court of Appeals' ruling would be quoted nationwide in a series of unrelated court cases involving the alleged piracy of music, movies and other forms of entertainment.

'The Court of Appeals has cut a new piece of law, but it will not resolve this case,' Mr. Carreon said in an interview. 'That will go back to the Second Circuit, and probably back to another district court judge ' and the Court of Appeals will never have occasion or jurisdiction to revisit this issue again.'

New York's long-arm statute permits a Manhattan-based publisher to sue an out-of-state online corporation for copyright infringement, the state Court of Appeals ruled on March 24.

The fact that American Buddha downloaded in either Arizona or Oregon four books on which the Penguin Group holds the copyright is 'not fatal to a finding that the alleged injury occurred in New York,' the Court concluded unanimously.

Judge Victoria A. Graffeo wrote for the Court that the pervasiveness of the Internet distinguishes such cases 'from traditional commercial tort cases where courts have generally linked the injury to the place where sales or customers are lost.'

'The location of the infringement in online cases is of little import inasmuch as the primary aim of the infringers is to make the works available to anyone with access to an Internet connection, including computer users in New York,' she wrote in Penguin Group (USA) v. American Buddha, 7. 

'In addition, the injury to a New York copyright holder, while difficult to quantify, is not as remote as a purely indirect financial loss due to the broad spectrum of rights accorded by copyright law.'

Among other things, Judge Graffeo wrote, the online posting of materials in defiance of copyright laws could diminish the incentive to publish meritorious hard-copy versions of 'marginally profitable' or purely academic works because of the loss of property interests in those publications by their appearance for free on the Internet.

'The harm to a plaintiff's property interest in copyright infringement cases 'has often been characterized as irreparable in light of possible market confusion,” Judge Graffeo wrote, quoting the U.S. Court of Appeals for the Second Circuit in Salinger v. Colting, 607 F.3d 68 (2010).

The Court of Appeals ruling was in answer to a certified question from the Second Circuit asking whether New York's long-arm statute, CPLR '302(a)(3)(ii), applies to tortious copyright infringement committed outside New York without 'reasonably' apparent effects on commerce within New York.

Then-Southern District Judge Gerald E. Lynch ruled in April 2009 in favor of American Buddha. He determined his court lacked personal jurisdiction in the case because the electronic copying by American Buddha was done out of state. (Judge Lynch has since been elevated to the circuit.)

On appeal, a Second Circuit panel asked the state Court of Appeals for guidance.

American Buddha, which is based in Oregon but has its primary offices in Arizona, was sued in early 2009 by Penguin for copyright infringement when it posted copies of 'Oil!' by Upton Sinclair; 'It Can't Happen Here' by Sinclair Lewis; E.J. Kenney's translation of 'The Golden Ass' by Apuleius; and R.E. Latham's translation of Lucretius' 'On the Nature of the Universe.'

American Buddha said it wanted to make the works available to its 50,000 members on its 'online library.' It also operates the Ralph Nader Library, which is not affiliated with the consumer advocate.

American Buddha argued that its posting of the four works is protected by ”107, 108 of the federal Copyright Act, 17 USC '101, governing fair use and reproduction of works by libraries and archives.

Chief Judge Jonathan Lippman, Carmen Beauchamp Ciparick, Theodore T. Jones Jr., Eugene F. Pigott Jr., Susan Phillips Read and Robert S. Smith joined in the ruling.

The Penguin Group's lawyer, Richard Dannay of Cowan Liebowitz & Latman, said that the profit margin of publishers is in large part determined by books they sell on the margins of their operations and not the best-sellers. Those are the books that Internet 'pirates' tend to try to pick off, Mr. Dannay contended.

'These four books are not best sellers, but they are important books,' he said. 'That is how publishers make money. They earn it on the back list.'

Mr. Dannay said it is difficult, if not impossible, to tell how much Penguin lost on the four books posted by American Buddha, but he declared the ruling a 'terrific victory' for authors and publishers in New York in general.

Charles H. Carreon of Online Medial Law in Tucson, AZ, represented American Buddha.

He said the Court of Appeals' ruling would be quoted nationwide in a series of unrelated court cases involving the alleged piracy of music, movies and other forms of entertainment.

'The Court of Appeals has cut a new piece of law, but it will not resolve this case,' Mr. Carreon said in an interview. 'That will go back to the Second Circuit, and probably back to another district court judge ' and the Court of Appeals will never have occasion or jurisdiction to revisit this issue again.'