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August 12, 2011
The 9th Circuit Tackles a Pair of Internet Jurisdiction Cases
[Post by Venkat Balasubramani]
I'm inclined to agree with Eric that internet personal jurisdiction cases are not the most exciting. The resolution of a question over whether personal jurisdiction is proper often has more to do with whether the court likes your case or finds it interesting than with whether the non-resident defendant satisfied the "Zippo's sliding scale" or some other test. It ends up being a crapshoot much of the time, albeit one that's informed by the court's view of the equities.
The Ninth Circuit issued two new decisions dealing with personal jurisdiction online. Both applied the Supreme Court's recent decision in J McIntyre Machinery, Ltd. v. Nicastro [pdf]. How did that precedent change things? As best as I can tell, it didn't--personal jurisdiction cases continue to be as erratic as always.
Mavrix Photo v. Brand Technologies [pdf]:
Mavrix is a Florida-based photo agency that licenses celebrity photos. It has a California presence. It maintains an office in Los Angeles, employs LA-based photographers, and has a registered agent in California. Brand is an Ohio corporation which runs celebrity-gossip.net. The court notes that celebrity-gossip.net is ranked number 3,622 out of approximately 180 million websites (per Alexa) and receives "more than 12 million unique visitors and 70 million U.S. page views per month."
In 2008, one of Mavrix's photographers shot photos of Josh Duhamel and Stacy Ferguson ("better known by her stage name 'Fergie' . . . [whose group] has sole some 56 million records in the last decade and has won Grammy awards for such hit singles as 'I Gotta Felling' an 'My Humps.'"). Brand allegedly reposted the photos to Brand's website, and Mavrix sued for copyright infringement. The district court dismissed, finding that personal jurisdiction was not proper. The Ninth Circuit reverses.
The court finds that Brand "continuously and deliberately" exploited the California market, but the facts it points to are somewhat curious. Brand's site has third party advertisers and these "third-party advertisers on Brand's website had advertisements directed to Californians." The court relies on this to conclude that Brand "knows--either actually or constructively--about its California user base, and . . . it exploits that base for commercial gain." At the same time, the court also notes that there was nothing in the record to show that "Brand marketed its website in California local media."
The court does not point to any facts that Brand itself targeted Brand's website to California residents. Third party advertisers may have done so, but obviously advertisers will be interested in targeting locally and offering local products or services. Typically, personal jurisdiction cannot be exercised absent a showing that there is some sort of targeting on the part of the non-resident defendant. In tort or infringement cases, courts tend to imply purposeful direction where the non-resident takes acts which the defendant knows or reasonably should know will be felt in the forum state. Causing harm to a celebrity who is a California resident is the classic example of this (this was the result in Calder v. Jones, which employed the "effects test" to find jurisdiction). That wasn't the case here. Although Mavrix's business revolved around celebrity culture, it was a Florida corporation.
Ultimately, the Ninth Circuit relies on the online version of the stream of commerce analysis, under which an online publisher or infringer who has substantial traffic from all fifty states can be sued anywhere (in any state):
where, as here, a website with national viewership and scope appeals to, and profits from, an audience in a particular state, the site's operators can be said to have 'expressly aimed' at that state.
But I thought this is exactly the opposite of what the Court said in J. McIntyre, where the Court found the stream of commerce approach--which looked to the forseeability of the product ending up in a forum state as a basis for personal jurisdiction--problematic:
The owner of a small Florida farm might sell crops to a large nearby distributor, for example, who might then distribute them to grocers across the country. If foreseeability were the controlling criterion, the farmer could be sued in Alaska or any number of other States’ courts without ever leaving town.
McIntyre resulted in a fractured opinion with no clear majority. Mavrix takes the approach that any highly trafficked website whose advertisers engage in local targeting can be sued pretty much anywhere. It's almost as if the Ninth Circuit is sending out a flare to the Supreme Court, asking for this case to be taken up.
[Eric's brief note: this reminds me a little of the old LICRA v. Yahoo battle from over a decade ago, where the fact that Yahoo (as an ad network) targeted ads to French users supported French jurisdiction. That was a bad decision even then. But at least in that case, Yahoo built and ran the geo-targeting technology. Here, the court doesn't close the loop to establish that Brand cultivated advertisers seeking to target CA residents or otherwise affirmatively try to connect its CA readers with advertisers. Bad ruling.]
CollegeSource v. AcademyOne [pdf]:
This is a crazy, long, drawn out dispute over . . . wait for it, digitized versions of college course catalogs. CollegeSource has digitized a significant volume of catalogs and is the established player in the space. AcademyOne comes along and asks about licensing CollegeSource's catalogs but CollegeSource declines. AcademyOne then hires a foreign contractor to collect catalogs from the internet. Somehow AcademyOne ends up with a slew of CollegeSource catalogs. Although it's not totally clear, it looks like AcademyOne's contractor accessed catalogs from the websites of colleges and universities, but in many instances, the institutions simply linked to the files as they resided on CollegeSource's server. Thus, AcademyOne appears to have obtained several course catalogs which were digitized by CollegeSource and which contained CollegeSource's watermark.
The district court granted AcademyOne's motion to dismiss for lack of personal jurisdiction, and the Ninth Circuit reverses. The court says that general jurisdiction is not proper because AcademyOne is a Pennsylvania corporation that does not have any sort of a significant presence in California. However, the court says that specific jurisdiction is proper. Why? Because AcademyOne knew that it was taking acts which would harm a California company when it downloaded course catalogs owned by CollegeSource. AcademyOne approached CollegeSource about a potential licensing relationship and most likely learned that CollegeSource is a California company in this process. AcademyOne (or its contractor) also saw the CollegeSource watermark when they downloaded the course catalogs. Finally, AcademyOne, as the entrant in a very small competitive space would undoubtedly be aware of CollegeSource. The court finds these facts, along with the fact that some of AcademyOne's employees registered to try out CollegeSource on a trial basis (and would have presumably learned of CollegeSource's location this way), sufficient to establish personal jurisdiction over AcademyOne.
It's unclear as to whether the actions of AcademyOne's contractor will be attributed to AcademyOne for all purposes or just for jurisdictional purposes. It looks like the parties will have to duke out the issue of derivative liability under the Computer Fraud and Abuse Act and California's anti-hacking statute in the next chapter of this litigation. This particular chapter ends with a win for CollegeSource.
I'm trying to make some sense of the two opinions (you almost wish the court would have compared the two opinions since they were issued together and both authored by Judge Fletcher).
In both cases the court rejected general jurisdiction, finding that the "exacting" standard for establishing general jurisdiction had not been satisfied. In the CollegeSource case, the court noted that AcademyOne advertised to California-specific AdWords, but this did not move the needle for purposes of general jurisdiction. Interestingly, in CollegeSource the court did not rely on targeting to find specific jurisdiction proper. The court instead relied on AcademyOne's awareness (or imputed awareness) of where CollegeSource was located. These types of facts were almost non-existent in Mavrix--there was nothing to show that Brand knew in advance where Mavrix was located. This wouldn't have mattered anyway because Mavrix was headquartered in Florida, not California. It looks like Mavrix takes a "general jurisdiction for infringing content" approach to jurisdiction. If your content or website infringe and you have enough traffic and locally target, you can be sued in any state, even one where the plaintiff does not reside. A somewhat scary result for larger publishers and websites.
Oddly, in Mavrix, the court notes that things have changed since the advent of Zippo's "sliding scale" approach--the court rejects Mavrix's attempt to argue that Brand is subject to general jurisdiction because it had a highly interactive website:
Many of the features on which Mavrix relies to show Zippo interactivity--commenting, receiving email newsletters, voting in polls, uploading user-generated content--are standard attributes of many websites. Such features require a minimal amount of engineering expense and effort on the part of the site's owner and do not signal a non-resident defendant's intent to 'sit down and make itself at home' in the forum by cultivating deep, persistent ties with forum residents. To permit the exercise of general jurisdiction based on the accessibility in the forum of a non-resident interactive website would expose most large media entities to nationwide general jurisdiction. That result would be inconsistent with the constitutional requirement that 'the continuous corporate operations with a state' be 'so substantial and of such a nature as to justify suit against the nonresident defendant on causes of action arising from dealings entirely distinct from those activities.'
While the Ninth Circuit cautions against a test for general jurisdiction which would cast an overly broad net in terms of personal jurisdiction over non-resident defendants, that seems to be the precise result of the court's specific jurisdiction analysis.
Posted by Venkat at August 12, 2011 01:03 PM | E-Commerce