<b>Decision of Note:</b> No Jurisdiction over E-Book Uploader

Southern District Judge Gerard Lynch (who has since been elevated to the U.S. Court of Appeals for the Second Circuit) quickly dismissed the case in April 2009. He ruled that Penguin couldn't show that New York was the 'situs' of its alleged injury. Therefore, New York courts couldn't claim jurisdiction over American Buddha through the state's long-arm statute, NY CPLR 302, Judge Lynch ruled.

Penguin's lawyers appealed to the Second Circuit. Because the issue presented involved a perplexing question of state law, the Second Circuit asked the New York Court of Appeals to weigh in. The high court reversed Judge Lynch, ruling that in copyright cases the situs of the injury is the location of the copyright holder and not the location of the infringing action. Penguin Group (USA) Inc. v. American Buddha, 16 N.Y.3d 295 (2011).

On remand, American Buddha argued that New York courts still couldn't hear Penguin's claims. In order to assert jurisdiction over an out-of-state defendant, New York courts must determine that the defendant derives 'substantial revenue from interstate commerce.' NY CPLR 302(a)(3)(ii). The Carreons argued that they didn't derive any revenue from American Buddha. But Penguin countered that the Carreons, who are authors, sold rights to 13 books they authored to Amazon Inc. for roughly $2,000.

In her recent ruling, Southern District Judge Abrams concluded that, even after factoring in the $2,000 from Amazon, American Buddha's revenue wasn't substantial enough for New York to assert jurisdiction over the plaintiff. '[Penguin] appears to be arguing that substantial revenue ' using any traditional definition of substantial ' should no longer be required in cases involving the Internet, Judge Abrams wrote. The judge continued: 'It is true that Internet companies can operate without any costs or even revenue. ' Nonetheless, the statutory language remains the same, requiring proof of 'substantial' revenue to apply to New York's long-arm statute. Given the Court's view that $2,078.33 is far too minimal to meet that test, dismissal is mandated.'

In an interview, Charles Carreon said that 'Judge Abrams reached the natural conclusion that was there all along. This case is a classic example of how difficult it is for individuals to litigate against a major corporation like Penguin and achieve substantial justice. I'm sure the fees Penguin has paid in this case are what any normal person would consider astronomical.' (Carreon achieved Internet notoriety after he demanded that Matthew Inman ' the artist behind the popular Oatmeal cartoon ' pay $20,000 for allegedly defaming a client. Inman's loyal readers responded by ruthlessly mocking Carreon.)

Penguin counsel Dannay said that Judge Abrams' ruling doesn't entirely negate the impact of the earlier Second Circuit ruling: 'The commercial pirates out there, who are out to make money, are going to be subject to jurisdiction [in New York].'

Jan Wolfe is a Staff Reporter for The American Lawyer, an ALM affiliate publication of Entertainment Law & Finance.

The U.S. District Court for the Southern District of New York dismissed Penguin Group's copyright infringement claims against American Buddha, a nonprofit that makes hundreds of books available for free, including four titles by Penguin. Penguin Group (USA) Inc. v. American Buddha, 09 Civ. 528. The loss for Penguin comes two years after the book publisher won an appellate ruling in the case that was supposed to help book publishers combat online piracy. District Judge Ronnie Abrams in Manhattan dismissed the case by ruling that New York courts don't have jurisdiction over American Buddha because it doesn't derive substantial revenue in the state.

A librarian in Tucson, AZ, named Tara Carreon founded American Buddha, which makes hundreds of books available for free on a website called The Ralph Nader Library. Carreon's husband, Charles Carreon, is a copyright lawyer who represents American Buddha pro bono.

The Carreons have argued in court filings that the library was meant to 'provide a unique resource for scholars and students,' and that its activities are protected by the fair use doctrine. Penguin Group learned in 2008 that four of its titles ' two Upton Sinclair novels, Oil! and It Can't Happen Here, as well as English translations of two Roman classics, The Golden Ass and On the Nature of the Universe ' were available on the Nader library. Penguin, which is represented by Richard Dannay of Cowan Leibowitz & Latman, sought an injunction forcing American Buddha to take down the copyrighted works.

Southern District Judge Gerard Lynch (who has since been elevated to the U.S. Court of Appeals for the Second Circuit) quickly dismissed the case in April 2009. He ruled that Penguin couldn't show that New York was the 'situs' of its alleged injury. Therefore, New York courts couldn't claim jurisdiction over American Buddha through the state's long-arm statute, NY CPLR 302, Judge Lynch ruled.

Penguin's lawyers appealed to the Second Circuit. Because the issue presented involved a perplexing question of state law, the Second Circuit asked the New York Court of Appeals to weigh in. The high court reversed Judge Lynch, ruling that in copyright cases the situs of the injury is the location of the copyright holder and not the location of the infringing action. Penguin Group (USA) Inc. v. American Buddha , 16 N.Y.3d 295 (2011).

On remand, American Buddha argued that New York courts still couldn't hear Penguin's claims. In order to assert jurisdiction over an out-of-state defendant, New York courts must determine that the defendant derives 'substantial revenue from interstate commerce.' NY CPLR 302(a)(3)(ii). The Carreons argued that they didn't derive any revenue from American Buddha. But Penguin countered that the Carreons, who are authors, sold rights to 13 books they authored to Amazon Inc. for roughly $2,000.

In her recent ruling, Southern District Judge Abrams concluded that, even after factoring in the $2,000 from Amazon, American Buddha's revenue wasn't substantial enough for New York to assert jurisdiction over the plaintiff. '[Penguin] appears to be arguing that substantial revenue ' using any traditional definition of substantial ' should no longer be required in cases involving the Internet, Judge Abrams wrote. The judge continued: 'It is true that Internet companies can operate without any costs or even revenue. ' Nonetheless, the statutory language remains the same, requiring proof of 'substantial' revenue to apply to New York's long-arm statute. Given the Court's view that $2,078.33 is far too minimal to meet that test, dismissal is mandated.'

In an interview, Charles Carreon said that 'Judge Abrams reached the natural conclusion that was there all along. This case is a classic example of how difficult it is for individuals to litigate against a major corporation like Penguin and achieve substantial justice. I'm sure the fees Penguin has paid in this case are what any normal person would consider astronomical.' (Carreon achieved Internet notoriety after he demanded that Matthew Inman ' the artist behind the popular Oatmeal cartoon ' pay $20,000 for allegedly defaming a client. Inman's loyal readers responded by ruthlessly mocking Carreon.)

Penguin counsel Dannay said that Judge Abrams' ruling doesn't entirely negate the impact of the earlier Second Circuit ruling: 'The commercial pirates out there, who are out to make money, are going to be subject to jurisdiction [in New York].'

Jan Wolfe is a Staff Reporter for The American Lawyer, an ALM affiliate publication of Entertainment Law & Finance.