Analyzing Novel Issues in Internet Jurisdiction

Generally speaking, a federal district court may only exercise personal jurisdiction over a nonresident defendant if such jurisdiction is authorized by the applicable state long-arm statute and is consistent with the Due Process clause of the Fourteenth Amendment such that “the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” However, when infringing conduct occurs online behind the mask of anonymous IP addresses, plaintiffs cannot identify defendants without leave to subpoena the users' ISPs for the identity of the individual accountholder linked to a certain IP address. Further, if copyright infringement and distribution occurs online over multiple computer servers located in different locations, determining the site of plaintiff's injury can become a thorny question.

A notable dispute highlighted the potential limits of New York's long-arm jurisdiction over out-of-state defendants in online copyright infringement actions. In Penguin Group (USA) Inc. v. American Buddha, 90 U.S.P.Q.2nd 1954 (S.D.N.Y. 2009), the plaintiff, a New York publisher, alleged that the defendant unlawfully uploaded unauthorized copies of copyrighted works for free downloading. The publisher asserted that the court had jurisdiction under a provision of New York's long-arm statute, C.P.L.R. '302(a)(3)(ii), which allows for jurisdiction over an out-of-state defendant with no contacts with New York, if the plaintiff demonstrates that:

1. The defendant's tortious act was committed outside New York;
2. The cause of action arose from that act;
3. The tortious act caused an injury to a person or property in New York;
4. The defendant expected or should reasonably have expected that his or her action would have consequences in New York; and
5. The defendant derives substantial revenue from interstate or international commerce.

In American Buddha, only the third requirement was in dispute, namely, whether the defendant's allegedly copyright-infringing conduct involving computer servers located in Oregon or Arizona caused the requisite injury in New York.

Site of Injury vs. Site of IP

The district court recognized two competing lines of authority interpreting '302(a)(3)(ii): one that views the “situs” of injury as the location of the infringing conduct; and another that views it as the location of the plaintiff or the intellectual property.

Relying on the first line of authority, the lower court concluded that injury occurred where the book was electronically copied ' presumably in Arizona or Oregon, where the defendant and its computer servers were located ' and not New York, where the plaintiff was headquartered. Accordingly, the lower court dismissed the case for lack of personal jurisdiction.

On appeal, the Second Circuit certified a novel question of jurisdictional law to the New York Court of Appeals concerning whether a New York copyright holder can sue an out-of-state defendant accused of digital piracy in New York federal court or whether the copyright holder must pursue an action in the defendant's home state or the location of the unlawful downloading. See, Penguin Group (USA) Inc. v. American Buddha, 609 F.3d 30 (2nd Cir. 2010, http://bit.ly/GCe2yu). Answering the certified question, the state's highest court held that in copyright infringement cases involving the uploading of a literary work onto the Internet, the situs of injury under New York's long-arm jurisdiction statute is the location of the principal place of business of the copyright holder. See, Penguin Group (USA) Inc. v. American Buddha, 16 N.Y.3d 295 (2011). The court commented that in the case of online infringement and digital piracy, where the harm is dispersed throughout the country, the location of the infringing conduct carries less weight in the jurisdictional inquiry.

Upon receiving the answer to the certified question, the Second Circuit held that it was compelled by the Court of Appeals decision to rule that under New York's long-arm statute, the situs of the plaintiff's alleged injury was New York. Penguin Group (USA) Inc. v. American Buddha, 640 F.3d 497 (2nd Cir. 2011, http://bit.ly/GcejkM). The appeals court then vacated the lower court's judgment and remanded the case for consideration of whether the plaintiff established the four remaining jurisdictional requisites, and the extent to which the assertion of personal jurisdiction over the defendant would be consistent with the requirements of Due Process. See also, Digiprotect USA Corp. v. Does 1-240, 2011 WL 4444666 (S.D.N.Y. Sept. 26, 2011, http://bit.ly/GCesEV) (court declined to rule on the issue of whether the American Buddha reasoning extended to a New York copyright licensee that held a limited right, while an out-of-state company retained most of the “bundle of rights” as copyright holder; court found that even assuming that the situs of injury was New York, the plaintiff failed to satisfy the other requirements of long-arm jurisdiction).

Jurisdiction and 'Swarms'

In the past year, content providers, particularly in the adult film industry, have brought numerous suits against users who have copied and redistributed their works via the BitTorrent protocol. Litigation of this nature invariably involves an ex parte application for expedited discovery to subpoena various ISPs to obtain account information pertaining to hundreds of John Doe defendants connected to anonymous IP addresses. Some courts have expressed serious doubts over joinder and jurisdictional deficiencies and have denied applications for expedited discovery or otherwise required plaintiffs to demonstrate prima facie cases of personal jurisdiction before allowing subpoenas to be issued to the unnamed defendants' ISPs. Other courts, however, have issued orders allowing the expedited discovery to proceed against unnamed defendants who may ultimately possess valid affirmative defenses.

BitTorrent software allows users to join together in a peer-to-peer network to download and make available for download large files. Within a modern BitTorrent network, the download process is unique from that of previous peer-to-peer systems like Napster and Grokster. Rather than downloading a file from a single source, users of a BitTorrent network click on a dot-torrent file link, and, at that point, the downloading of a media work begins simultaneously from various sources around the Web. As described by one California federal district court, BitTorrent technology involves a multistep process:

• A user must first install a client application to facilitate the transfer of the file to the user's computer.
• Then, the user visits a BitTorrent indexing site, which collects and indexes dot-torrent files that point to downloadable media or software files, including popular copyrighted works. The dot-torrent files on the site do not contain the actual movie, music, or software file; instead, the files contain the data used by the BitTorrent client to retrieve the content through a peer-to-peer transfer, including “hash” values that are used to identify the various pieces of the content file and the location of those pieces in the network.
• Once the user selects a file to download, “trackers” manage the download process and update the list of online users that are presenting all or part of the requested file, that is, members of the “swarm.” In terms of speed, the larger the swarm, the faster the download.
• The BitTorrent client application then simultaneously downloads pieces of the content file from as many users as are available at the time of the request, and then reassembles the content file on the user's computer when the download is complete. Once a user downloads a given file, he or she can choose to become part of the “swarm” and a source for future downloads.
• Since users download material from members of a swarm regardless of geography, each unauthorized download of a copyrighted work may involve many ISPs and individuals located in numerous jurisdictions around the country.

Recent Decisions

In the context of peer-to-peer file sharing, courts are debating whether mere participation in a BitTorrent swarm that results in a copyrighted work being distributed to computers in the forum state is sufficient by itself to confer specific jurisdiction over an out-of-state defendant. Under such a theory, a court would have personal jurisdiction over all Doe defendants simply because at least one of them allegedly downloaded a file at some point during the relevant time period from a computer located in the forum.

However, as one court noted, taken to its logical extreme, BitTorrent users would be subject to jurisdiction in any state, a potentially unfair result. See generally, Berlin Media Art v. Does 1-654, 2011 WL 36383080 (N.D. Cal. Oct. 18, 2011, http://bit.ly/GCeZ9Y) (“The Court is not aware of any caselaw that suggests that this Court has personal jurisdiction over all 654 Defendants simply because ' at least one of the defendants (unidentified) allegedly happened to download the file at some point during the time period in question from a computer located in this District”).

Echoing this reasoning, a district court recently found that participation in a BitTorrent swarm that resulted in copyrighted work being distributed to computers in the forum was insufficient by itself to confer specific jurisdiction over a defendant. In Nu Image Inc. v. Does 1-23,322, 799 F. Supp. 2nd 34 (D.D.C. 2011, http://bit.ly/GCfgtn), a California copyright owner brought an infringement action against over 23,000 Doe defendants who allegedly used the BitTorrent protocol to unlawfully download the plaintiff's movie. The court denied the plaintiff's motion to conduct expedited discovery to subpoena the alleged infringers' ISPs to compel production of account information.

Interestingly, the court rejected the plaintiff's reliance on American Buddha as a basis for jurisdiction over the unnamed participants in the BitTorrent swarm. The court held that since the copyright holder was based in California (not the District of Columbia), the plaintiff could not rely on American Buddha to establish personal jurisdiction over putative defendants who resided outside of the District of Columbia. Even applying the alternate theory that the situs of injury should be the location of the original events that triggered the infringement, the court stated that the “triggering event” would have been the location of the putative defendant and his or her computer when the download occurred. Under either analysis, this court found that the plaintiff could not establish that putative defendants who resided outside of the District of Columbia caused tortious injury within the forum as required by the District's long-arm statute.

In Nu Image, the court elaborated that the plaintiff would only be entitled to discovery related to those John Does who, based upon a good faith basis, might reside in the District of Columbia. The court noted that a plaintiff could use Web-based geolocation services that derive the approximate physical location of an Internet user based upon his or her IP address. The court rejected the plaintiff's argument that such services were not 100% reliable, concluding that such geolocation information would at least give a plaintiff a good faith belief that a putative defendant may be a District of Columbia resident, as opposed to making assertions about the defendants' location based on mere conjecture. But see, Call of the Wild Movie, LLC v. Does 1-1,062, 770 F. Supp. 2nd 332, 346-47 (D.D.C. 2011, http://scr.bi/GCfEbv) (use of IP address lookup services are not completely accurate and do not conclusively resolve whether jurisdiction is proper; court declined to cut off jurisdictional discovery prematurely, stating “when the defendants are named, they will have the opportunity to file appropriate motions challenging the Court's jurisdiction '”); MGCIP, LLC v. Does 1-316, 2011 WL 2292958 (N.D. Ill. June 9, 2011, http://bit.ly/GCfOzu) (unnamed Doe defendants' motions to dismiss for lack of jurisdiction deemed premature).

In another mass infringement dispute, Berlin Media Art v. Does 1-654, 2011 WL 36383080 (N.D. Cal. Oct. 18, 2011), a California district court also criticized the defendant's failure to show due diligence in attempting to winnow out out-of-state defendants through online geolocation services before requesting expedited discovery. The court further stated that a cursory look at the regional ISPs identified in the plaintiff's complaint as linked to the offending IP addresses (e.g., Atlantic Broadband, of Quincy, MA) suggested that the account holders were certainly located outside the California forum. The court ultimately denied the plaintiff's motion for expedited discovery, with leave to amend to make a prima facie showing of personal jurisdiction using online geolocation tools.

In subsequent cases, parties have seemingly taken greater care in their pleadings. Earlier this year, in John Wiley & Sons Inc. v. Does Nos. 1-27, 2012 WL 364048 (S.D.N.Y. Feb. 3, 2012, http://bit.ly/GCfZLj), the Southern District of New York allowed a copyright holder to conduct discovery to obtain identification of unknown online infringers via subpoenas to their ISPs. The court denied, as premature, a Doe defendant's motion to dismiss based upon a lack of jurisdiction. The court found that the plaintiff introduced evidence that the Doe defendant was located in the forum based on an online IP address location tool and that such a showing was a sufficient good faith allegation regarding the defendant's location to make a prima facie showing of jurisdiction at this stage of the litigation.

The ubiquity of the Internet and the ease with which copyrighted material can be widely distributed across boundaries have created novel issues regarding personal jurisdiction. In recent years, accused infringers have challenged the jurisdictional reach of federal courts in disputes over online file-sharing and copyright infringement and raised dynamic legal issues that compel courts to balance the right to seek redress against the principle of judicial fairness. For example, if a party infringes a work produced by a publisher located in one state, but the copying and distribution occurred on computers located in two other states, where did the “infringement” occur for purposes of personal jurisdiction? Moreover, can a copyright holder sue in a single forum hundreds of geographically diverse individuals accused of downloading a copyrighted movie simply because the defendants participated in a single BitTorrent “swarm”?

This article discusses jurisdictional issues involving online copyright infringement, as well as the emerging issues surrounding disputes involving BitTorrent file-sharing technology.

Infringement and 'Injury'

Generally speaking, a federal district court may only exercise personal jurisdiction over a nonresident defendant if such jurisdiction is authorized by the applicable state long-arm statute and is consistent with the Due Process clause of the Fourteenth Amendment such that “the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” However, when infringing conduct occurs online behind the mask of anonymous IP addresses, plaintiffs cannot identify defendants without leave to subpoena the users' ISPs for the identity of the individual accountholder linked to a certain IP address. Further, if copyright infringement and distribution occurs online over multiple computer servers located in different locations, determining the site of plaintiff's injury can become a thorny question.

A notable dispute highlighted the potential limits of New York's long-arm jurisdiction over out-of-state defendants in online copyright infringement actions. In Penguin Group (USA) Inc. v. American Buddha , 90 U.S.P.Q.2nd 1954 (S.D.N.Y. 2009), the plaintiff, a New York publisher, alleged that the defendant unlawfully uploaded unauthorized copies of copyrighted works for free downloading. The publisher asserted that the court had jurisdiction under a provision of New York's long-arm statute, C.P.L.R. '302(a)(3)(ii), which allows for jurisdiction over an out-of-state defendant with no contacts with New York, if the plaintiff demonstrates that:

1. The defendant's tortious act was committed outside New York;
2. The cause of action arose from that act;
3. The tortious act caused an injury to a person or property in New York;
4. The defendant expected or should reasonably have expected that his or her action would have consequences in New York; and
5. The defendant derives substantial revenue from interstate or international commerce.

In American Buddha, only the third requirement was in dispute, namely, whether the defendant's allegedly copyright-infringing conduct involving computer servers located in Oregon or Arizona caused the requisite injury in New York.

Site of Injury vs. Site of IP

The district court recognized two competing lines of authority interpreting '302(a)(3)(ii): one that views the “situs” of injury as the location of the infringing conduct; and another that views it as the location of the plaintiff or the intellectual property.

Relying on the first line of authority, the lower court concluded that injury occurred where the book was electronically copied ' presumably in Arizona or Oregon, where the defendant and its computer servers were located ' and not New York, where the plaintiff was headquartered. Accordingly, the lower court dismissed the case for lack of personal jurisdiction.

On appeal, the Second Circuit certified a novel question of jurisdictional law to the New York Court of Appeals concerning whether a New York copyright holder can sue an out-of-state defendant accused of digital piracy in New York federal court or whether the copyright holder must pursue an action in the defendant's home state or the location of the unlawful downloading. See , Penguin Group (USA) Inc. v. American Buddha , 609 F.3d 30 (2nd Cir. 2010, http://bit.ly/GCe2yu ). Answering the certified question, the state's highest court held that in copyright infringement cases involving the uploading of a literary work onto the Internet, the situs of injury under New York's long-arm jurisdiction statute is the location of the principal place of business of the copyright holder. See , Penguin Group (USA) Inc. v. American Buddha , 16 N.Y.3d 295 (2011). The court commented that in the case of online infringement and digital piracy, where the harm is dispersed throughout the country, the location of the infringing conduct carries less weight in the jurisdictional inquiry.

Upon receiving the answer to the certified question, the Second Circuit held that it was compelled by the Court of Appeals decision to rule that under New York's long-arm statute, the situs of the plaintiff's alleged injury was New York. Penguin Group (USA) Inc. v. American Buddha , 640 F.3d 497 (2nd Cir. 2011, http://bit.ly/GcejkM ). The appeals court then vacated the lower court's judgment and remanded the case for consideration of whether the plaintiff established the four remaining jurisdictional requisites, and the extent to which the assertion of personal jurisdiction over the defendant would be consistent with the requirements of Due Process. See also, Digiprotect USA Corp. v. Does 1-240, 2011 WL 4444666 (S.D.N.Y. Sept. 26, 2011, http://bit.ly/GCesEV) (court declined to rule on the issue of whether the American Buddha reasoning extended to a New York copyright licensee that held a limited right, while an out-of-state company retained most of the “bundle of rights” as copyright holder; court found that even assuming that the situs of injury was New York, the plaintiff failed to satisfy the other requirements of long-arm jurisdiction).

Jurisdiction and 'Swarms'

In the past year, content providers, particularly in the adult film industry, have brought numerous suits against users who have copied and redistributed their works via the BitTorrent protocol. Litigation of this nature invariably involves an ex parte application for expedited discovery to subpoena various ISPs to obtain account information pertaining to hundreds of John Doe defendants connected to anonymous IP addresses. Some courts have expressed serious doubts over joinder and jurisdictional deficiencies and have denied applications for expedited discovery or otherwise required plaintiffs to demonstrate prima facie cases of personal jurisdiction before allowing subpoenas to be issued to the unnamed defendants' ISPs. Other courts, however, have issued orders allowing the expedited discovery to proceed against unnamed defendants who may ultimately possess valid affirmative defenses.

BitTorrent software allows users to join together in a peer-to-peer network to download and make available for download large files. Within a modern BitTorrent network, the download process is unique from that of previous peer-to-peer systems like Napster and Grokster. Rather than downloading a file from a single source, users of a BitTorrent network click on a dot-torrent file link, and, at that point, the downloading of a media work begins simultaneously from various sources around the Web. As described by one California federal district court, BitTorrent technology involves a multistep process:

• A user must first install a client application to facilitate the transfer of the file to the user's computer.
• Then, the user visits a BitTorrent indexing site, which collects and indexes dot-torrent files that point to downloadable media or software files, including popular copyrighted works. The dot-torrent files on the site do not contain the actual movie, music, or software file; instead, the files contain the data used by the BitTorrent client to retrieve the content through a peer-to-peer transfer, including “hash” values that are used to identify the various pieces of the content file and the location of those pieces in the network.
• Once the user selects a file to download, “trackers” manage the download process and update the list of online users that are presenting all or part of the requested file, that is, members of the “swarm.” In terms of speed, the larger the swarm, the faster the download.
• The BitTorrent client application then simultaneously downloads pieces of the content file from as many users as are available at the time of the request, and then reassembles the content file on the user's computer when the download is complete. Once a user downloads a given file, he or she can choose to become part of the “swarm” and a source for future downloads.
• Since users download material from members of a swarm regardless of geography, each unauthorized download of a copyrighted work may involve many ISPs and individuals located in numerous jurisdictions around the country.

Recent Decisions

In the context of peer-to-peer file sharing, courts are debating whether mere participation in a BitTorrent swarm that results in a copyrighted work being distributed to computers in the forum state is sufficient by itself to confer specific jurisdiction over an out-of-state defendant. Under such a theory, a court would have personal jurisdiction over all Doe defendants simply because at least one of them allegedly downloaded a file at some point during the relevant time period from a computer located in the forum.

However, as one court noted, taken to its logical extreme, BitTorrent users would be subject to jurisdiction in any state, a potentially unfair result. See generally, Berlin Media Art v. Does 1-654, 2011 WL 36383080 (N.D. Cal. Oct. 18, 2011, http://bit.ly/GCeZ9Y) (“The Court is not aware of any caselaw that suggests that this Court has personal jurisdiction over all 654 Defendants simply because ' at least one of the defendants (unidentified) allegedly happened to download the file at some point during the time period in question from a computer located in this District”).

Echoing this reasoning, a district court recently found that participation in a BitTorrent swarm that resulted in copyrighted work being distributed to computers in the forum was insufficient by itself to confer specific jurisdiction over a defendant. In Nu Image Inc. v. Does 1-23,322 , 799 F. Supp. 2nd 34 (D.D.C. 2011, http://bit.ly/GCfgtn ), a California copyright owner brought an infringement action against over 23,000 Doe defendants who allegedly used the BitTorrent protocol to unlawfully download the plaintiff's movie. The court denied the plaintiff's motion to conduct expedited discovery to subpoena the alleged infringers' ISPs to compel production of account information.

Interestingly, the court rejected the plaintiff's reliance on American Buddha as a basis for jurisdiction over the unnamed participants in the BitTorrent swarm. The court held that since the copyright holder was based in California (not the District of Columbia), the plaintiff could not rely on American Buddha to establish personal jurisdiction over putative defendants who resided outside of the District of Columbia. Even applying the alternate theory that the situs of injury should be the location of the original events that triggered the infringement, the court stated that the “triggering event” would have been the location of the putative defendant and his or her computer when the download occurred. Under either analysis, this court found that the plaintiff could not establish that putative defendants who resided outside of the District of Columbia caused tortious injury within the forum as required by the District's long-arm statute.

In Nu Image, the court elaborated that the plaintiff would only be entitled to discovery related to those John Does who, based upon a good faith basis, might reside in the District of Columbia. The court noted that a plaintiff could use Web-based geolocation services that derive the approximate physical location of an Internet user based upon his or her IP address. The court rejected the plaintiff's argument that such services were not 100% reliable, concluding that such geolocation information would at least give a plaintiff a good faith belief that a putative defendant may be a District of Columbia resident, as opposed to making assertions about the defendants' location based on mere conjecture. But see , Call of the Wild Movie, LLC v. Does 1-1,062 , 770 F. Supp. 2nd 332, 346-47 (D.D.C. 2011, http://scr.bi/GCfEbv ) (use of IP address lookup services are not completely accurate and do not conclusively resolve whether jurisdiction is proper; court declined to cut off jurisdictional discovery prematurely, stating “when the defendants are named, they will have the opportunity to file appropriate motions challenging the Court's jurisdiction '”); MGCIP, LLC v. Does 1-316, 2011 WL 2292958 (N.D. Ill. June 9, 2011, http://bit.ly/GCfOzu) (unnamed Doe defendants' motions to dismiss for lack of jurisdiction deemed premature).

In another mass infringement dispute, Berlin Media Art v. Does 1-654, 2011 WL 36383080 (N.D. Cal. Oct. 18, 2011), a California district court also criticized the defendant's failure to show due diligence in attempting to winnow out out-of-state defendants through online geolocation services before requesting expedited discovery. The court further stated that a cursory look at the regional ISPs identified in the plaintiff's complaint as linked to the offending IP addresses (e.g., Atlantic Broadband, of Quincy, MA) suggested that the account holders were certainly located outside the California forum. The court ultimately denied the plaintiff's motion for expedited discovery, with leave to amend to make a prima facie showing of personal jurisdiction using online geolocation tools.

In subsequent cases, parties have seemingly taken greater care in their pleadings. Earlier this year, in John Wiley & Sons Inc. v. Does Nos. 1-27, 2012 WL 364048 (S.D.N.Y. Feb. 3, 2012, http://bit.ly/GCfZLj), the Southern District of New York allowed a copyright holder to conduct discovery to obtain identification of unknown online infringers via subpoenas to their ISPs. The court denied, as premature, a Doe defendant's motion to dismiss based upon a lack of jurisdiction. The court found that the plaintiff introduced evidence that the Doe defendant was located in the forum based on an online IP address location tool and that such a showing was a sufficient good faith allegation regarding the defendant's location to make a prima facie showing of jurisdiction at this stage of the litigation.