Court: District Court, E.D. New York; October 18, 2018; Federal District Court
Denis R. Hurley, United States District Judge, presided over a case initiated by plaintiff Adwar Casting against defendants Star Gems Inc. and Anish Desai, alleging copyright infringement under 17 U.S.C. § 501, along with related state law claims. The defendants filed a motion to dismiss the complaint for lack of personal jurisdiction, which the Court granted.
Adwar, a New York corporation, creates and sells original jewelry products nationwide. Star, a Georgia corporation, manufactures and sells jewelry domestically and internationally, with Desai as its CEO responsible for significant business decisions, including artwork usage. In July 2017, Star allegedly copied Adwar's registered jewelry designs without consent, marketing them as "Knock-off Products," which bore substantial similarity to Adwar's original designs. Adwar claims to have suffered income loss due to Star's actions.
Regarding the motion to dismiss under Rule 12(b)(2), the plaintiff must demonstrate personal jurisdiction over the defendant, with courts able to consider materials beyond the pleadings. The plaintiff can counter a motion by presenting a prima facie case for jurisdiction through allegations and supporting evidence. At this stage, courts favor the plaintiff's pleadings but do not accept legal conclusions as factual assertions. Jurisdiction cannot be established through vague or conclusory statements; specific factual allegations are required.
In a diversity case, a federal district court's personal jurisdiction is based on the forum state's law and must comply with due process requirements. Due process mandates that a defendant must have "minimum contacts" with the forum state, ensuring that being subjected to jurisdiction does not violate fair play and substantial justice principles. The key consideration is whether the defendant has purposefully engaged in activities within the forum state, thereby invoking its laws and reasonably anticipating court involvement.
In New York, general jurisdiction is defined under N.Y. CPLR § 301, allowing courts to exercise jurisdiction over a non-domiciliary defendant if it conducts continuous and systematic business in the state. However, mere continuous activity is insufficient; the defendant must be "essentially at home" in New York, typically defined by its place of incorporation or principal place of business, unless exceptional circumstances exist.
Specific jurisdiction, governed by CPLR § 302, requires a direct connection between the forum state and the controversy, typically arising from activities within the state. New York's long-arm statute permits jurisdiction over non-domiciliaries who conduct business in the state, commit tortious acts within the state, or cause injury within the state from actions taken outside it.
Defendants argue that general jurisdiction is not applicable as Star is neither incorporated nor has its principal place of business in New York, and Desai is a Georgia resident who was not served in New York. They assert that specific jurisdiction also fails because the complaint does not allege that any relevant actions regarding the "Knock-off Products" occurred in New York.
Plaintiff asserts specific jurisdiction under N.Y. CPLR § 302(a)(3)(iii), which allows for jurisdiction over a person who commits a tortious act outside New York that results in injury within the state. Relying on the case of Penguin Group (USA) Inc. v. Am. Buddha, Plaintiff contends that the injury occurred in New York because Star downloaded images from Adwar’s website, reproduced the artwork, and displayed it online, thereby making the work accessible to New York customers. Plaintiff further argues that Defendants waived objections to jurisdiction by consenting to New York's jurisdiction through the website's terms of use.
In contrast, Defendants argue that Plaintiff's claims do not support personal jurisdiction, asserting that the allegations in the complaint lack specificity regarding injury occurring in New York. They maintain that Plaintiff's loss of income does not equate to injury within the state and that the terms on the website are unenforceable under New York law.
The Court will first evaluate whether the original allegations in the complaint support specific jurisdiction under CPLR § 302(a)(3)(iii) and then consider Plaintiff's amended theory regarding jurisdiction. Ultimately, the Court finds that Plaintiff has not demonstrated sufficient grounds for specific jurisdiction based on either the original or reformulated claims, concluding that personal jurisdiction does not exist over Defendants.
In Penguin Group, the Second Circuit posed a question to the New York Court of Appeals regarding the situs of injury in copyright infringement cases for determining long-arm jurisdiction under N.Y.C.P.L.R. § 302(a)(3)(ii). The New York Court of Appeals reformulated the question to specifically address cases involving the uploading of copyrighted literary works online and concluded that the situs of injury is the location of the copyright holder. The court reasoned that due to the internet's role in these cases and the comprehensive rights granted to copyright holders, the injury is considered in-state when a copyrighted work is uploaded without permission for public access. The court emphasized that the location of infringement is less relevant in online cases, where the infringer's intent is to make works widely available, including to users in New York. The court acknowledged that while quantifying the injury is challenging, it is not as remote as in traditional tort cases. Importantly, the court refrained from determining whether a New York copyright holder experiences in-state injury in cases not involving digital piracy.
In a subsequent case, Troma Entertainment, Inc. v. Centennial Pictures, Inc., the Second Circuit upheld the dismissal for lack of personal jurisdiction, clarifying that merely residing in New York does not suffice for jurisdiction under CPLR § 302(a)(3). The court distinguished Troma from Penguin, noting that the alleged injury could be confined to a specific location, aligning it more with traditional commercial tort cases. It found the argument regarding harm to the bundle of rights held by the New York copyright holder to be overly theoretical and not sufficient to establish a direct, non-speculative injury in New York, particularly when the alleged harm stemmed from broadcasting in Germany.
No direct, non-speculative injury to Plaintiff's intellectual property in New York has been established. The claims regarding the loss of copyright rights lack substantiation and resemble allegations previously dismissed in Troma. The fact that images were uploaded to the internet does not constitute in-state injury, as the case does not involve easily downloadable literary works, and there is no evidence that the disputed image on Star's Facebook page is downloadable. The Court emphasizes that asserting that any posting of copyrighted material online results in in-state injury is an overly broad interpretation not supported by New York law.
Regarding personal jurisdiction, Adwar contends that Star's access to its website implied agreement to terms that confer exclusive jurisdiction to New York courts. However, the terms were not adequately highlighted to ensure enforceability, as there was no affirmative consent mechanism such as a checkbox, nor were users' attention drawn to the relevant terms through formatting changes. Thus, any purported consent cannot be enforced against Defendants.
The Court denied Plaintiff's request to amend the complaint for additional allegations supporting personal jurisdiction, noting the lack of new information presented. Consequently, Defendants' motion to dismiss for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2) was granted. Although Plaintiff claimed proper venue in New York, the Court did not address this issue as it was not central to Defendants' motion. The evidence presented only indicated one instance of alleged infringement online, leading the Court to reject the notion that this could encourage public downloading of Adwar's designs. The Court noted that while some cases have viewed the situs of injury as the copyright owner's location, this broad interpretation is inconsistent with the New York Court of Appeals’ ruling in Penguin Group and the Second Circuit's findings in Troma.
