On September 6, 2013, the Second Circuit narrowed the potential venues for asserting copyright infringement cases when it affirmed the Eastern District of New York’s dismissal of Troma Entertainment’s copyright infringement lawsuit against California residents Lance H. Robbins and King Brett Lauter for lack of personal jurisdiction (decision here). Defendants Robbins and Lauter had allegedly falsely represented that they were acting on behalf of plaintiff Troma when they entered into an agreement with German distributor Intravest for the distribution of Troma’s films “Citizen Toxie, Toxic Avenger Part IV” and “Poultrygeist: Night of the Chicken Dead.” In fact, Troma’s authorization of Robbins to represent it had lapsed after thirty days of unsuccessful negotiations; Robbins and Lauter had entered into the agreement with Intravest without Troma’s knowledge and had delivered the films to Intravest using German language DVDs purchased from Amazon.
Troma learned in August 2010 that Intravest had been broadcasting the two films in Germany via pay-per-view. It filed suit in New York in March 2011, alleging copyright infringement under federal law and state law claims of common law fraud and tortious interference with prospective economic advantage. Robbins and Lauter filed motions to dismiss for lack of personal jurisdiction, which were granted by the Eastern District. Troma Appealed.
A district court must have a statutory basis for exerting personal jurisdiction over an individual. Here, Troma asserted that C.P.L.R. section 302(a)(3)(ii) of the New York long-arm statute conferred personal jurisdiction over Robbins and Lauter. Section 302(a)(3)(ii) confers personal jurisdiction over an individual who “commits a tortious act without the state causing injury to person or property within the state…if he…expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.” The residence of the injured party within New York is not alone a sufficient basis to establish jurisdiction. Moreover, the injured party must establish more than solely “remote or consequential injuries such as lost commercial profits which occur in New York only because the plaintiff is domiciled or doing business” there.
In making its analysis, the court distinguished this case from the landmark Court of Appeals ruling in Penguin Group (USA), Inc. v. American Buddha (16 N.Y.3d 295), holding that the decision of the highest court in New York State’s highest court in Penguin is too narrow to control this case. In Penguin, the plaintiff alleged that its copyrighted materials had been uploaded and made available free of charge over the Internet – a “form of infringement that works an injury that is virtually impossible to localize.” The Court of Appeals inPenguin addressed a very specific question – whether, in copyright infringement cases involving the uploading of a copyrighted printed work onto the Internet, the situs of injury for purposes of determining long-arm jurisdiction under N.Y. C.P.L.R. section 302(a)(3)(ii) is the location of the infringing action or the residence or location of the principal place of business of the copyright holder.
While the court determined in Penguin that the situs of injury was the location of the copyright holder, New York, the Second Circuit distinguished that decision from the facts of the Troma dispute. Here, the court stated that Troma did not allege that Robbins and Lauter’s tortious conduct harmed Troma in a way that cannot be “circumscribed” to a particular locality and, accordingly, this case was more akin to a “traditional commercial tort case” in which the place where the plaintiff’s business is “lost or threatened exerts a significant gravitational influence on the jurisdictional analysis.” As compared to injury caused when a file is uploaded to a globally accessible Internet, the injury in the case at bar occurred when California residents entered into an agreement with a German distributor.
Troma argued that jurisdiction over the defendants in New York was appropriate because the defendants’ conduct harmed its “bundle of rights” to its copyrighted materials in New York. While the court acknowledged that this was a “plausible theory,” it stated that this did not relieve Troma of its obligation to allege facts demonstrating a “non-speculative and direct” New York injury to its intellectual property rights. The court stated that Troma had not articulated such a non-speculative and direct injury that went beyond the “simple economic losses that its New York business suffered.”
Accordingly, the court held that Troma had not made a prima facie showing of personal jurisdiction under section 302(a)(3)(ii) and affirmed.
The Troma decision is instructive on the available forums for a copyright owner to bring an infringement claim. The more localized the injury in the case, the more likely that a plaintiff will be limited in choice of forum. It should be noted that Troma Entertainment, presumably for strategic reasons, declined here to pursue a transfer of the action to the Central District of California, where personal jurisdiction could have been exercised over Robbins and Lauter.
Moreover, the Troma decision draws a clear line between actions based upon what the court called “traditional commercial tort” fact patterns, and those arising out of the unauthorized upload of materials to the Internet. As in the Penguin case, it appears that courts will find personal jurisdiction based on section 302(a)(3)(ii) on a broader basis with respect to cases arising out of online infringement because of the difficulty of specifying a single situs of injury (the place of uploading is largely “inconsequential”). Accordingly, defendants in copyright actions arising out of the Internet would be well advised not to rely unduly upon the Troma holding and to prepare for a potential finding of personal jurisdiction in New York.