New York’s Highest Court, its Court of Appeals, rendered an important decision for international practice in Penguin Group (USA) Inc. v. American Buddha (N.Y. 24 Mar. 2011). The decision answered a question certified to it by the United States Court of Appeals for the Second Circuit, namely whether New York’s long arm statute reached conduct that, in the past, had not been considered part of the geographic area where courts applying New York law have confirmed jurisdictional reach.
The case involved allegations of copyright infringement by Penguin against American Buddha, a not-for-profit corporation whose principal place of business if in Arizona. The infringement allegedly occurred when American Buddha uploaded Penguin’s book in the western part of the U.S., far from New York (specifically on servers located in Oregon and Arizona). Prior cases had involved the physical place where allegedly tortious conduct took place. Here, when dealing with the Internet, the Court of Appeals stated that where the infringement occurs is of “little import” in cases involving the Internet “inasmuch as the primary aim of the infringer is to make the works available to anyone with access to an Internet connection”. The Court therefore interpreted CPLR 302(a)(3)(ii) and held that New York could be deemed the place where Penguin sustained injury, i.e., “the location of the copyright holder”.
In on-line copyright cases, said the Court, “it is difficult, if not impossible, to correlate lost sales to a particular geographic area”. Said the Court, the internet is “by its nature intangible and ubiquitous”, but the Court also relied on the “unique bundle of rights granted to copyright owners”. The Court wasn’t willing to require book publishers to have to incur what the Court believed was greater inconvenience and expense to travel to non-New York venues to sue to protect their copyrights on books, which the Court described as sometimes only “marginally profitable” and which, in the Court’s view, would create a disincentive to publish or write (citing Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010)).
In answering the certified question from the Second Circuit, the New York Court of Appeals did not answer the question whether applying New York’s long arm statute in this fashion comported with the requirements of Due Process. That issue may be decided by the Second Circuit. See the discussion of the two-step process of determining personal jurisdiction in our e-book, International Practice: Topics and Trends.