Tuesday, August 9, 2011
Court Issues Dual Rulings on Suing Non-Residents for Online Acts
By SHERRI M. OKAMOTO, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday issued a pair of decisions clarifying the standard to sue a non-resident company in California based on its online activities.
Both cases, which were unrelated, were heard by the same appellate panel, and revived lawsuits that had been dismissed for a lack of personal jurisdiction over out-of-state companies who allegedly misappropriated material from a business with a presence in California and exploited it for financial gain within the state.
The first case involved Mavrix Photo Inc., a Florida corporation with its principal place of business in Miami, which licenses and sells candid photographs of celebrities to purveyors of celebrity news.
Mavrix keeps a Los Angeles office, employs Los Angeles-based photographers to take pictures of celebrities who live and work in Southern California, has a registered agent for service of process within the state, and pays fees to the California Franchise Tax Board.
Celebrity Gossip Site
The company claimed that Brand Technologies Inc., an Ohio corporation which operates a website called celebrity-gossip.net, had posted to its website a series of copyright protected photos belonging to Mavrix that depicted Black Eyed Peas singer Stacy Ferguson—who goes by the stage name Fergie—and her husband, actor Josh Duhamel, while the couple was vacationing in the Bahamas.
Mavrix sought an injunction barring Brand from further disseminating the photos, as well as actual and statutory damages, but U.S. District Court Judge Philip S. Gutierrez of the Central District of California denied Mavrix’s motion for jurisdictional discovery and granted Brand’s motion to dismiss.
Writing for the appellate panel, Judge William A. Fletcher agreed with Gutierrez that Brand’s contacts with California were insufficient to confer general jurisdiction over the company, but said that Brand had sufficient minimum contacts with the state arising out of, or related to, its actions in posting the photos of Ferguson and Duhamel to justify the exercise of specific jurisdiction.
Fletcher said there was “is no question that [Brand] acted intentionally” in causing the allegedly infringing photographs to appear on its website, and that this act was “expressly aimed” at California.
The jurist noted that “Brand makes money by selling advertising space on its website to third-party advertisers,” and reasoned the fact that some of these third-party advertisers targeted California residents “indicates that Brand knows—either actually or constructively—about its California user base, and that it exploits that base for commercial gain by selling space on its website for advertisements.”
He concluded that “it is clear from the record that Brand operated a very popular website with a specific focus on the California-centered celebrity and entertainment industries,” and that the “website’s subject matter, as well as the size and commercial value of the California market” indicated that Brand “anticipated, desired, and achieved a substantial California viewer base.”
As this audience “is an integral component of Brand’s business model and its profitability,” Fletcher said, “it does not violate due process to hold Brand answerable in a California court for the contents of a website whose economic value turns, in significant measure, on its appeal to Californians.”
Fletcher also wrote for the panel in the second case, which involved CollegeSource Inc., a California corporation, and AcademyOne Inc., of Pennsylvania, who are competitors in the market to assist students and educational institutions with the college transfer process.
CollegeSource said that it maintains a digital collection of 44,000 course catalogs from 3,000 colleges and universities dating back to 1993, at a cost of more than $10 million, and accused AcademyOne of having wrongfully reproduced 680 catalogs from this collection on its website.
After jurisdictional discovery, U.S. District Court Judge Marilyn L. Huff of the Southern District of California granted AcademyOne’s motion to dismiss CollegeSource’s complaint for lack of personal jurisdiction.
Fletcher reasoned that specific jurisdiction was justified. He said that AcademyOne “committed intentional acts by downloading CollegeSource’s catalogs, republishing them on its own websites, and obtaining course descriptions from those catalogs,” and that these acts were targeted at California, where CollegeSource was based.
Since “CollegeSource and AcademyOne were direct competitors in a relatively small industry,” Fletcher said “AcademyOne’s assertion that it was unaware of CollegeSource’s California place of business…is implausible, to say the least.”
Kim McLane Wardlaw and U.S. District Judge Barbara M. Lynn of the Northern District of Texas, sitting by designation, joined Fletcher in each of his decisions.
The cases were CollegeSource, Inc. v. AcademyOne, Inc., 09-56528, and Mavrix Photo, Inc. v. Brand Technologies, Inc., 09-56134.
Copyright 2011, Metropolitan News Company