Penguin Group (USA) Inc., v. American Buddha, No. 09-1739 (2d Cir. 2010)

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The court issued a subsequent related opinion or order on May 12, 2011.

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09-1739-cv Penguin Group (USA) Inc., v. American Buddha 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2009 4 (Argued: January 7, 2010 Question Certified: June 15, 2010) 5 Docket No. 09-1739-cv 6 ------------------------------------- 7 PENGUIN GROUP (USA) INC., 8 Plaintiff-Appellant, 9 - v - 10 AMERICAN BUDDHA, 11 Defendant-Appellee. 12 ------------------------------------- 13 Before: 14 SACK, KATZMANN, and CHIN,* Circuit Judges. Appeal from an order of the United States District 15 Court for the Southern District of New York (Gerard E. Lynch, 16 Judge) granting the defendant's motion to dismiss the plaintiff's 17 copyright infringement action for lack of personal jurisdiction. 18 Jurisdiction over the defendant, American Buddha, was asserted 19 under a provision of New York's Long-Arm Statute. 20 deciding whether the plaintiff's alleged injury resulting from 21 alleged copyright infringement with respect to material uploaded 22 to the Internet out-of-state and made available from servers 23 located out-of-state occurred in New York for purposes of * Because The Honorable Denny Chin, who was at the time of argument a United States District Judge for the Southern District of New York, sitting by designation, is now a member of this Court. 1 applying section 302(a)(3)(ii) requires the resolution of an 2 undecided question of New York law, we certify that question to 3 the New York Court of Appeals. 4 5 6 7 RICHARD DANNAY, Cowan Liebowitz & Latman, P.C. (Thomas Kjellberg, of counsel), New York, NY, for PlaintiffAppellant. 8 9 CHARLES CARREON, Online Media Law, PLLC, Tucson, AZ, for Defendant-Appellee. 10 Sack, Circuit Judge: 11 Plaintiff Penguin Group (USA) ("Penguin") appeals from 12 an order of the United States District Court for the Southern 13 District of New York (Gerard E. Lynch, Judge) granting defendant 14 American Buddha's motion pursuant to Federal Rule of Civil 15 Procedure 12(b)(2) to dismiss Penguin's copyright infringement 16 action for lack of personal jurisdiction. 17 Inc. v. Am. Buddha, No. 09 Civ. 528, 2009 WL 1069158, 2009 U.S. 18 Dist. LEXIS 34032 (S.D.N.Y. Apr. 21, 2009). 19 its complaint that American Buddha unlawfully uploaded to servers 20 an unauthorized copy of four of Penguin's copyrighted works for 21 downloading, via the Internet and free of charge, by any of the 22 50,000 members of what American Buddha terms its "online 23 library." 24 Penguin Group (USA) Penguin alleges in The sole issue on appeal is whether there is a basis 25 for personal jurisdiction over American Buddha in New York 26 enabling the district court to decide this dispute. 27 asserted that the court has such jurisdiction under a provision 28 of New York's Long-Arm Statute, N.Y. C.P.L.R. § 302(a)(3)(ii), 2 Penguin 1 that allows for jurisdiction over an out-of-state defendant with 2 no contacts with New York, if, inter alia, the defendant is 3 alleged to have committed a tortious act outside the State that 4 caused, and reasonably should have been expected by the putative 5 defendant to cause, injury to a person or property within the 6 State. 7 The district court recognized two competing lines of 8 authority interpreting section 302(a)(3)(ii), one that views the 9 situs of injury as the location of the infringing conduct and one 10 that views the situs of injury as the location of the plaintiff 11 and, in some cases, the location of its intellectual property. 12 Relying on the first line of authority and rejecting the second, 13 the court concluded that the situs of the injury allegedly 14 resulting from the asserted infringement of Penguin's copyrights 15 would be where the book was electronically copied -- presumably 16 in Arizona or Oregon, where American Buddha and its computer 17 servers were located -- and not New York, where Penguin was 18 headquartered. 19 failure adequately to plead injury in New York. 20 1069158, at *4, 2009 U.S. Dist. LEXIS 34032, at *13. 21 Accordingly, the court dismissed the case for Penguin, 2009 WL Determining the situs of injury for the purposes of 22 N.Y. C.P.L.R. § 302(a)(3)(ii) in a copyright case requires 23 analysis of state law and policy considerations that this Court 24 is ill-suited to make. 25 determination of how the New York State Legislature intended to Specifically, it requires a 3 1 weigh the breadth of protection to New Yorkers whose copyrights 2 have allegedly been infringed against the burden on non-resident 3 alleged infringers whose connection to New York may be remote and 4 who may reasonably have failed to foresee that their actions 5 would have consequences in New York. We therefore certify the following question to the New 6 7 York Court of Appeals: In copyright infringement cases, is the 8 situs of injury for purposes of determining long-arm 9 jurisdiction under N.Y. C.P.L.R. § 302(a)(3)(ii) the location of 10 the infringing action or the residence or location of the 11 principal place of business of the copyright holder? 12 Penguin has not effectively pleaded that the situs of injury is 13 affected by the fact that the infringement here occurred through 14 the media of the Internet and an online library, we recognize 15 that this factor may be relevant to the considerations 16 underlying the definition of the situs of injury due to the 17 speed and ease with which the Internet may allow out of state 18 actions to cause injury to copyright holders resident in New 19 York. 20 21 Although BACKGROUND The plaintiff, Penguin Group USA, describes itself as 22 "the U.S. arm of the internationally renowned Penguin Group, a 23 leading United States trade book publisher and the second-largest 24 English-language trade book publisher in the world, with its 4 1 principal place of business" in New York City. Appellant's Br. 2 at 5. 3 corporation" that, through its operation of a "passive website" 4 known as the Ralph Nader Library but unaffiliated in any way with 5 Ralph Nader, "operates an online library that provides access to 6 classical literature and other works through the website, 7 including three works published in print format by Plaintiff- 8 Appellant Penguin Group (USA) Inc." 9 (footnotes omitted). American Buddha describes itself as "an Oregon nonprofit Appellee's Br. at 3 10 Penguin brought this copyright infringement action 11 against American Buddha under 17 U.S.C. § 501, alleging that 12 American Buddha infringed on Penguin's copyrights in four works1 13 by publishing complete copies of them on coordinated websites 14 together comprising "online libraries" -- that it operates called 15 the American Buddha Online Library and the Ralph Nader Library. 16 American Buddha has made these works available to its 50,000 17 members free of charge. 18 assurances that American Buddha's uploading of these works and 19 the users' downloading of the works do not constitute copyright 20 infringement because they are protected under Sections 107 and 21 108 of the Copyright Act, 17 U.S.C. § 101 et seq., which govern 22 fair use and reproduction by libraries and archives, It has also provided its members with 1 The four works at issue are Oil! by Upton Sinclair, It Can't Happen Here by Sinclair Lewis, The Golden Ass by Apuleius translated by E.J. Kenney, and On the Nature of the Universe by Lucretius translated by R.E. Latham. 5 1 respectively. 2 Copyright Act applies to American Buddha's conduct. 3 Penguin disputes that any exception to the American Buddha, as noted, is an Oregon not-for-profit 4 corporation whose principal place of business is in Arizona and 5 whose websites are hosted on servers located in Arizona and 6 Oregon. 7 American Buddha conducts no business in, and has no other 8 contacts with, the State. 9 to have occurred in New York. 10 Aside from the accessability of its sites in New York, The infringing conduct was not alleged American Buddha filed a motion in the district court to 11 dismiss Penguin's complaint pursuant to Federal Rule of Civil 12 Procedure 12(b)(2) for lack of personal jurisdiction. 13 asserted personal jurisdiction under New York's Long-Arm Statute, 14 N.Y. C.P.L.R. § 302. 15 jurisdiction of courts in New York under N.Y. C.P.L.R. 16 § 302(a)(1) (conferring jurisdiction over a party that "transacts 17 any business within the state or contracts anywhere to supply 18 goods or services in the state") or N.Y. C.P.L.R. § 302(a)(2) 19 (conferring jurisdiction over a party that "commits a tortious 20 act within the state"). 21 jurisdiction on N.Y. C.P.L.R. § 302(a)(3)(ii), which, under 22 specified circumstances, allows for long-arm jurisdiction over 23 out-of-state residents who commit tortious acts outside of the 24 State if the resulting injury occurs in, and it was foreseeable 25 to the prospective defendant that the injury would occur in, New Penguin American Buddha was not subject to the Penguin therefore premised its claim of 6 1 York.2 2 whether it had personal jurisdiction over the defendant with 3 respect to the claims made in the complaint, was whether the 4 injury from the alleged infringement by American Buddha occurred 5 in New York. 6 The central question for the district court, in deciding The district court granted American Buddha's motion to 7 dismiss because it found the situs of injury to be where the 8 electronic copying of the works was made -- presumably, although 9 this was not explicitly stated by the court, in Arizona or 10 Oregon, where the servers to which American Buddha uploaded the 11 works were located -- and not in New York, where Penguin's 12 headquarters is located. 13 2009 U.S. Dist. LEXIS 34032, at *12-*13. 14 division of authority as to how to determine the situs of injury 15 for the purposes of N.Y. C.P.L.R. § 302(a)(3)(ii). 16 ultimately persuaded by a line of cases recognizing "the well- 17 established principle requiring a direct injury in New York" and 18 rejecting jurisdiction based on "purely derivative economic 19 injury" suffered in-state solely because of the location of the 20 plaintiff's business in-state. 21 2009 U.S. Dist. LEXIS 34032, at *9, *11. Penguin, 2009 WL 1069158, at *3-*4, The court recognized a It was Id., 2009 WL 1069158, at *3-*4, 2 As Penguin made no allegation that persons downloading material from the websites thereby infringed its copyrights, potential injury for personal jurisdiction purposes would have to be the result of American Buddha's, and not any downloading user's, infringement. 7 1 The court recognized that the Internet was a 2 complicating factor for personal jurisdiction analysis. 3 nonetheless concluded that in this case, the Internet "plays no 4 role in determining the situs of plaintiff's alleged injury" 5 because a single incident of copyright infringement that occurred 6 in Oregon or Arizona was alleged; downloading of that copied 7 material by users in other locations, including hypothetically 8 New York, was not. 9 LEXIS 34032, at *12. 10 It Id., 2009 WL 1069158, at *4, 2009 U.S. Dist. Penguin appeals. DISCUSSION 11 12 I. Introduction 13 There is only one issue presented on appeal, which is 14 whether, for the purposes of New York's Long-Arm Statute, the 15 situs of injury in copyright infringement cases is the location 16 of the infringing conduct or the location of the plaintiff and, 17 perhaps, the copyright. 18 insufficient guidance to allow us to answer that question based 19 on the statute's plain meaning. 20 specifically pleaded that the situs of injury is influenced by 21 the fact that the alleged infringement here was conducted by 22 means of the Internet and online libraries, we recognize that 23 this fact may affect the analysis. 24 25 The language of the statute provides And while Penguin has not We find insufficient guidance to answer the question of where the situs of injury is located in the text of the statute, 8 1 the statute's legislative history, or the jurisprudence of New 2 York state courts. 3 to ask the New York Court of Appeals for guidance. 4 therefore certify to the New York Court of Appeals this question: 5 In copyright infringement cases, is the situs of injury for 6 purposes of determining long-arm jurisdiction under N.Y. 7 C.P.L.R. § 302(a)(3)(ii) the location of the infringing action 8 or the residence or location of the principal place of business 9 of the copyright holder? The district court did not have the ability We do. We 10 II. Standard of Review 11 We review a district court's dismissal of an action for 12 want of personal jurisdiction de novo, construing all pleadings 13 and affidavits in the light most favorable to the plaintiff and 14 resolving all doubts in the plaintiff's favor. 15 Carozzi N. Am., Inc., 286 F.3d 81, 84 (2d Cir. 2001) (per 16 curiam). DiStefano v. 17 III. New York's Long-Arm Statute: N.Y. C.P.L.R. § 302 18 A plaintiff bears the burden of demonstrating personal 19 jurisdiction over a person or entity against whom it seeks to 20 bring suit. 21 204, 206 (2d Cir. 2003) (per curiam). 22 motion to dismiss for lack of personal jurisdiction, a plaintiff 23 must make a prima facie showing that jurisdiction exists." 24 Thomas v. Ashcroft, 470 F.3d 491, 495 (2d Cir. 2006). 25 showing entails making "legally sufficient allegations of In re Magnetic Audiotape Antitrust Litig., 334 F.3d 9 "In order to survive a Such a 1 jurisdiction," including "an averment of facts that, if 2 credited[,] would suffice to establish jurisdiction over the 3 defendant." 4 quotation marks and ellipsis omitted). 5 In re Magnetic Audiotape, 334 F.3d at 206 (internal In litigation arising under federal statutes that do 6 not contain their own jurisdictional provisions, such as the 7 Copyright Act under which suit is brought in the case at bar, 8 federal courts are to apply the personal jurisdiction rules of 9 the forum state, see Fort Knox Music, Inc. v. Baptiste, 203 F.3d 10 193, 196 (2d. Cir. 2000), provided that those rules are 11 consistent with the requirements of Due Process, see Metro. Life 12 Ins. Co. v. Roberston-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 13 1996). 14 the extent permitted by principles of Due Process -- as it 15 commonly does in states other than New York -- analysis under Due 16 Process principles is not necessary unless there is long-arm 17 jurisdiction under the applicable state statute. 18 Lines, Inc. v. Walker, 490 F.3d 239, 242 (2d Cir. 2007); Savin v. 19 Ranier, 898 F.2d 304, 306 (2d Cir. 1990). 20 Except where the long-arm statute permits jurisdiction to See Best Van In New York, the question of long-arm personal 21 jurisdiction over an out-of-state defendant is governed by N.Y. 22 C.P.L.R. § 302.3 The only basis for personal jurisdiction over 3 Section 302 permits a court to exercise personal jurisdiction over an out-of-state party that: (1) transacts business or contracts to supply goods or services within the state; (2) commits a tortious act within the state; (3) commits a tortious act outside of the state that causes an injury to a person or property within the state, provided that the party (i) 10 1 American Buddha in New York that is asserted by Penguin is 2 provided by section 302(a)(3)(ii). 3 over an out-of-state defendant who "commits a tortious act 4 without the state causing injury to person or property within the 5 state, . . . if he . . . expects or should reasonably expect the 6 act to have consequences in the state and derives substantial 7 revenue from interstate or international commerce . . . ." 8 9 It provides for jurisdiction In order to establish jurisdiction under that subsection of the law, a plaintiff is thus required to 10 demonstrate that (1) the defendant's tortious act was committed 11 outside New York, (2) the cause of action arose from that act, 12 (3) the tortious act caused an injury to a person or property in 13 New York, (4) the defendant expected or should reasonably have 14 expected that his or her action would have consequences in New 15 York, and (5) the defendant derives substantial revenue from 16 interstate or international commerce. 17 Co., 95 N.Y.2d 210, 214, 735 N.E.2d 883, 886, 713 N.Y.S.2d 304, 18 307 (2000). 19 LaMarca v. Pak-Mor Mfg. Only the third requirement of section 302(a)(3)(ii) is 20 in dispute on this appeal: Whether the defendant's allegedly 21 copyright-infringing conduct in Oregon or Arizona caused the 22 requisite injury in New York. engages in a persistent course of conduct with the state or (ii) expects or reasonably should expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; or (4) owns, uses or possesses real property in the state. N.Y. C.P.L.R. § 302. 11 1 If these five requirements were satisfied and personal 2 jurisdiction were thus established under New York law, we would 3 then assess whether a finding of personal jurisdiction comports 4 with the Due Process Clause of the Fourteenth Amendment. 5 Van Lines, 490 F.3d at 242; Savin, 898 F.2d at 306. 6 explained below, we do not reach that issue on this appeal. Best For reasons 7 8 IV. The Situs of Injury Under N.Y. C.P.L.R. § 302(a)(3)(ii) 9 Neither the New York Court of Appeals nor this Court 10 has decided what the situs of injury is in an intellectual 11 property case. 12 addressed the question have reached disparate results, some 13 concluding that the injury occurs where the plaintiff experiences 14 the loss; some concluding that it depends where the infringed 15 property is held, apparently assuming that the property is held 16 at its owner's residence or principal place of business;4 and District courts in this Circuit that have 4 There is a possible question at the threshold that neither the district court nor the parties have addressed and which we do not here decide: whether a copyright -- in and of itself an intangible thing -- has a physical location for jurisdictional purposes and, if so, what that location is. Several courts have at least suggested that intellectual property has a location for jurisdictional purposes. See, e.g., McGraw-Hill Cos., Inc. v. Ingenium Techs. Corp., 375 F. Supp. 2d 252, 256 (S.D.N.Y. 2005) (finding injury to be "where the allegedly infringed intellectual property is held"); Design Tex Group, Inc. v. U.S. Vinyl Mfg. Corp., No. 04 Civ. 5002, 2005 WL 357125, at *1 (S.D.N.Y. Feb. 14, 2005) (same); Tatum v. Hunter Eng'g Co., 25 F.3d 1050 (6th Cir. 1994) (per curiam) (Table) (finding the fact that "the design processes and intellectual property are located in California" to be relevant to evaluating contacts with that state). If it does have a location, then, what is it? Federal law appears equally unsettled on this point. Some courts have 12 1 some concluding that the injury occurs where the infringing 2 conduct took place. 3 A. The District Court's Analysis of the Situs of Injury See section IV(E), infra. 4 The district court recognized a division of authority 5 as to the situs of injury for purposes of section 302(a)(3)(ii) 6 in intellectual property infringement cases. 7 persuaded by decisions that suggested or concluded that the situs 8 of injury is where the infringing conduct occurred (in this case, 9 Oregon or Arizona) rather than where the plaintiff is located and The court was 10 the copyrights are owned (in this case, New York). Penguin, 2009 11 WL 1069158, at *3-*4, 2009 U.S. Dist. LEXIS 34032, at *9. concluded, either explicitly or implicitly, that the location of intellectual property is the residence of its owner. See, e.g., Horne v. Adolph Coors Co., 684 F.2d 255, 259 (3d Cir. 1982) ("[I]nsofar as the situs of the property damaged by the alleged wrongdoing is a concern, both a state trade secret and a patent should be deemed to have their fictional situs at the residence of the owner."). "The theory [of these cases] is that, since intellectual property rights relate to intangible property, no particular physical situs exists. If a legal situs must be chosen, it is not illogical to pick the residence of the owner." Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1570 (Fed. Cir. 1994). Other courts have reasoned that intellectual property is located wherever the infringing action is taken, because that is where the sales related to the intellectual property are in fact lost. See, e.g., id. at 1570 ("[W]hen an infringement occurs by a sale of an infringing product, the right to exclude is violated at the situs where the sale occurs.") The issue has not been briefed or otherwise raised by the parties. We therefore accept for the purposes of this appeal the district court's implicit conclusion that copyrights have a location and that their location in this case is in New York State. See Penguin, 2009 WL 1069158, at *2-*3, 2009 U.S. Dist. LEXIS 34032, at *8 (recognizing line of cases that suggest that intellectual property injuries are located in the state where intellectual property is held). 13 1 2 3 4 5 6 7 8 9 10 11 New York has long held that "the residence or domicile of the injured party within a State is not a sufficient predicate for jurisdiction, which must be based upon a more direct injury within the State and a closer expectation of consequences within the State than the indirect financial loss resulting from the fact that the injured person resides or is domiciled there." Id., 2009 WL 1069158, at *2-*3, 2009 U.S. Dist. LEXIS 34032, at 12 *7-*8 (quoting Fantis Foods, Inc. v. Standard Importing Co., 13 Inc., 49 N.Y.2d 317, 326, 402 N.E.2d 122, 125-26, 425 N.Y.S.2d 14 783, 786-87 (1980)). 15 The principal factual question addressed in the course 16 of the district court's analysis was where the plaintiff lost 17 business. 18 LEXIS 34032, at *9-*10 & n.5 (citing Am. Eutectic Welding Alloys 19 Sales Co., Inc. v. Dytron Alloys Corp., 439 F.2d 428, 433 (2d. 20 Cir. 1971)). 21 copyright infringement action: 22 the impact, if any, of the means by which the alleged 23 infringement was committed -- by use of an online library 24 delivered through the Internet. 25 infringement only by American Buddha, and not by any individual 26 who downloaded material from American Buddha's site, the court 27 reasoned that business was lost through the copying of the 28 copyrighted works by American Buddha and not through their 29 placement on the Internet. 30 U.S. Dist. LEXIS 34032, at *12. 31 where the books were uploaded -- Oregon or Arizona -- not where Id., 2009 WL 1069158, at *3 & n.5, 2009 U.S. Dist. The court analyzed this case as a run-of-the-mine It did not explicitly consider Because Penguin pleaded Id., 2009 WL 1069158, at *4, 2009 The business was therefore lost 14 1 they were downloaded and used, which could have been anywhere 2 that the Internet is available, including New York. 3 B. Penguin's Arguments Regarding the Situs of Injury 4 Id. On appeal, Penguin contends that the district court 5 relied on the wrong line of cases both as a matter of law and as 6 a matter of policy. 7 cases are inconsistent with the reasoning of DiStefano v. 8 Carozzi, Inc., 286 F.3d 81 (2d Cir. 2001) (per curiam), in which 9 we concluded that the termination of employment of an employee at As a legal matter, Penguin argues that those 10 a meeting in New Jersey caused the employee injury in New York 11 State, because New York was where the employee lived and where he 12 performed the duties of his employment. 13 perspective, Penguin argues that 14 15 16 17 18 19 20 21 22 23 24 From a policy [t]he restrictive reading of the long-arm statute under the line of cases followed by the District Court would substantially -- and unnecessarily -- stack the deck against the authors, publishers and other intellectual proprietors in New York in the accelerating struggle against Internet piracy, allowing pirates with the entire 21st-century arsenal of digital infringement tools to shelter behind a 19th-century personal jurisdiction model based on their physical location. 25 Appellant's Br. at 14. 26 C. Legislative History of N.Y. C.P.L.R. § 302(a)(3)(ii) 27 The legislative history of N.Y. C.P.L.R. § 302(a)(3) is 28 of little assistance. The provision was adopted to fill a gap in 29 the New York Long-Arm Statute that was recognized in Feathers v. 30 McLucas, 15 N.Y.2d 443, 209 N.E.2d 68, 261 N.Y.S.2d 8 (1965). 31 There, the New York Court of Appeals declined to apply section 15 1 302(a)(2), which provides for jurisdiction over any person who 2 "commits a tortious act within the state," to a manufacturer 3 whose negligent construction of a gas tank in Kansas had caused 4 bodily injury in New York State. 5 N.E.2d at 77, 261 N.Y.S.2d at 21 (internal quotation marks 6 omitted). 7 Id., 15 N.Y.2d at 460, 209 The following year, according to a Memorandum of the 8 New York Judicial Conference, the New York State Legislature 9 adopted section 302(a)(3) for the purpose of "broaden[ing] New 10 York's long-arm jurisdiction so as to include non-residents who 11 cause tortious injury in the state by an act or omission without 12 the state." 13 2911 (McKinney) (as quoted in Reyes v. Sanchez-Pena, 191 Misc. 2d 14 600, 608, 742 N.Y.S.2d 513, 520 (N.Y. Sup. Ct. 2002)). 15 to that memorandum, the amendment was 16 enough to protect New York residents yet not so broad, even 17 though constitutionally feasible, as to burden unfairly non- 18 residents whose connection with the state is remote and who could 19 not reasonably be expected to foresee that their acts outside of 20 New York could have harmful consequences in New York." 21 Mem. of Judicial Conference, 1966 N.Y. Sess. Laws According intended to be "broad Id. We have not found in the legislative history any 22 discussion of how to strike this balance in commercial tort cases 23 (much less Internet copyright infringement cases), with respect 24 to which the New York Court of Appeals has acknowledged that the 25 locus of injury is "not as readily identifiable as it is in torts 16 1 causing physical harm." Sybron Corp. v. Wetzel, 46 N.Y.2d 197, 2 205, 385 N.E.2d 1055, 1058, 413 N.Y.S.2d 127, 131 (1978). 3 Penguin advocates an approach that emphasizes 4 protection of New York residents or domiciliaries, while American 5 Buddha advocates an approach -- the one that persuaded the 6 district court -- that focuses on avoiding unjust burdens on non- 7 residents whose connection with the State may be tenuous or 8 remote. 9 with the intent of the New York Legislature is more appropriate We think that deciding which approach better comports 10 for the New York Court of Appeals than it is for us. 11 12 D. New York Courts' Interpretation of N.Y. C.P.L.R. § 302(a)(3)(ii) 13 The New York Court of Appeals has never squarely 14 applied N.Y. C.P.L.R. § 302(a)(3)(ii) in the intellectual 15 property context. 16 section 302(a)(3)(ii) have not provided a clear indication of how 17 the Court of Appeals would apply the section to the case we are 18 presented with here. 19 Lower New York courts that have addressed It is settled New York law that the suffering of 20 economic damages in New York is insufficient, on its own, to 21 establish a "direct" injury in New York for N.Y. C.P.L.R. 22 § 302(a)(3) purposes. 23 at 125-26, 425 N.Y.S.2d at 786-87 (rejecting jurisdiction based 24 on loss of overall sales where conversion of goods occurred en 25 route from Greece to Chicago); Sybron, 46 N.Y.2d at 205, 385 26 N.E.2d at 1058, 413 N.Y.S.2d at 131 (recognizing that courts have Fantis Foods, 49 N.Y.2d at 326, 402 N.E.2d 17 1 concluded that "remote injuries located in New York solely 2 because of domicile or incorporation here do not satisfy CPLR 302 3 (subd. (a), par. 3)"); Lehigh Valley Indus. v. Birenbaum, 527 4 F.2d 87, 94 (2d Cir. 1975) ("[S]ection 302(a)(3) is not satisfied 5 by remote or consequential injuries such as lost commercial 6 profits which occur in New York only because the plaintiff is 7 domiciled or doing business here."). 8 9 From this premise, some New York courts have concluded that the situs of injury is the location where the actions or 10 events associated with the injury took place. 11 v. Sharon Hosp., Inc., 135 A.D.2d 682, 683, 522 N.Y.S.2d 581, 583 12 (2d Dep't 1987) ("The situs of the injury is the location of the 13 original event which caused the injury, not the location where 14 the resultant damages are subsequently felt by the plaintiff." 15 (internal citations omitted)); Weiss v. Greenburg, Traurig, 16 Askew, Hoffman, Lipoff, Quentel & Wolff, P.A., 85 A.D.2d 861, 17 862, 446 N.Y.S.2d 447, 449 (3d Dep't 1981) ("[I]t has been held 18 that the situs of a nonphysical, commercial injury is where the 19 critical events associated with the dispute took place." 20 (internal quotation marks and citations omitted)). 21 See, e.g., Hermann But in cases in which something more than economic 22 injury is alleged, some New York courts have determined the situs 23 of injury to be the place where the plaintiff is located and 24 conducts business. 25 which the New York Court of Appeals recognized the applicability 26 of section 302(a)(3) to commercial torts, the court decided that Most prominently, in Sybron, the case in 18 1 domicile or incorporation in New York State alone was 2 insufficient as a basis for personal jurisdiction. 3 however, that jurisdiction was appropriate where the plaintiff 4 had additional ties to the State, such as the presence of the 5 trade secrets and the threatened loss of customers here. 6 46 N.Y.2d at 205, 385 N.E.2d at 1058, 413 N.Y.S.2d at 131. 7 It concluded, Sybron, The ties to New York State in Sybron were stronger than 8 those in the case at bar. Sybron involved the alleged loss of a 9 New York-specific customer base and the alleged acquisition of 10 trade secrets in New York. Id., 46 N.Y.2d at 205-06, 385 N.E.2d 11 at 1059, 413 N.Y.S.2d at 132. 12 dictate the result of this appeal. 13 reasonable likelihood that the New York Court of Appeals may 14 interpret the alleged wrong here -- which is analogous to a 15 commercial tort and involves both the presumptive presence of 16 intellectual property rights in the State, and the likely ability 17 of the plaintiff to foresee that the distribution of the 18 copyrighted material in issue will cause loss beyond that caused 19 by the initial unauthorized uploading of the copyrighted works -- 20 to involve more than derivative economic harm within the State. 21 Penguin has alleged infringement not only through the copying of 22 its copyrighted work, but also through the unauthorized 23 "reproduction and distribution" of the works over the Internet. 24 Compl. ¶ 28. 25 offered the materials to its 50,000 users via the Internet free 26 of charge, and had provided assurances that downloading the works Its holding therefore does not But Sybron does raise a Penguin presented evidence that American Buddha had 19 1 would not constitute copyright infringement. Penguin has not 2 asserted the foreseeable loss of customers in New York, and 3 apparently for this reason the district court treated the alleged 4 infringement to be analogous to "an unauthorized photocopy of a 5 copyrighted book in Oregon or Arizona." 6 1069158, at *4, 2009 U.S. Dist. LEXIS 34032, at *12. 7 nonetheless in the context of certifying a question to the New 8 York Court of Appeals that the allegation of distribution over 9 the Internet may be a factor in the Court's interpretation of the Penguin, 2009 WL 10 statute in question. 11 12 We note E. Legal Arguments For and Against Finding New York To Be the Situs of Injury 13 1. Legal Arguments in Favor of Deeming New York To Be 14 the Situs of Injury. 15 appear to be an argument based on the logic this Court employed 16 in DiStefano. 17 of injury for section 302(a)(3) purposes where an employee who 18 lived and worked in New York was fired at a meeting held in New 19 Jersey. 20 Penguin's strongest legal argument would The question there was the location of the situs DiStefano, 286 F.3d at 82-83. We concluded that to determine "whether there is an 21 injury in New York sufficient to warrant § 302(a)(3) 22 jurisdiction[, courts] must generally apply a situs-of-injury 23 test, which asks them to locate the original event which caused 24 the injury." 25 "'This "original event" is, however, generally distinguished not 26 only from the initial tort but from the final economic injury and Id. at 84 (internal quotation marks omitted). 20 1 the felt consequences of the tort.'" Id. (quoting Bank Brussels 2 Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 791 (2d 3 Cir. 1999)). 4 of the tort that ultimately produced the final economic injury is 5 located." 6 omitted). "[T]he original event occurs where the first effect 7 Id. at 84-85 (internal quotation marks and ellipsis In Mr. DiStefano's case, the "original event" occurred 8 in New York because "the 'original event' [was] DiStefano's 9 experience of being removed from his job." Id. at 85. 10 "DiStefano experienced the 'first effect' of losing his job in 11 New York, even though he was fired in New Jersey." 12 argues that similarly here, although the copying that allegedly 13 infringed its copyright occurred in Oregon or Arizona, Penguin 14 experienced the effect of the infringing conduct in New York, 15 where its business was located and its copyright was located for 16 present purposes. 17 that the injury "was experienced by Penguin in New York, where 18 its offices and personnel are located, and where its copyrights 19 are held"); cf. Calder v. Jones, 465 U.S. 783, 789-90 (1984) 20 (concluding that jurisdiction over Florida defamation defendants 21 in California satisfied Due Process standards because the 22 defendants wrote and edited article "they knew would have a 23 potentially devastating impact upon" the plaintiff, a California 24 resident). 25 26 Id. Penguin See, e.g., Appellant's Br. at 21 (alleging Although we have never extended this logic to conclude that there was jurisdiction in New York courts over a defendant 21 1 in an intellectual property dispute, district courts in this 2 Circuit have. 3 Techs. Corp., 375 F. Supp. 2d 252, 256 (S.D.N.Y. 2005) ("The 4 torts of copyright and trademark infringement cause injury in the 5 state where the allegedly infringed intellectual property is 6 held.");5 Design Tex Group, Inc. v. U.S. Vinyl Mfg. Corp., No. 7 04 Civ 5002, 2005 WL 357125, at *1, 2005 U.S. Dist. LEXIS 2143, 8 at *4 (S.D.N.Y. Feb. 14, 2005) ("[B]ecause the plaintiffs (and 9 their intellectual property) are based in New York, the injury is See, e.g., McGraw-Hill Cos., Inc. v. Ingenium 10 felt within the state no matter where the infringement takes 11 place.").6 12 Constr., No. 04 Civ. 1089, 2004 WL 1824102, 2004 U.S. Dist. LEXIS 13 16088 (S.D.N.Y. Aug. 13, 2004), the district court found the 14 situs of injury under section 302(a)(3) to be New York State 15 where an out-of-state defendant committed trademark infringement 16 that affected a New York-based defendant's website through damage 17 to its goodwill, lost sales, or lost customers. 18 1824102 at *9, 2004 U.S. Dist. LEXIS 16088, at *29-*30 (citing Similarly, in Savage Universal Corp. v. Grazier Id., 2004 WL 5 American Buddha tries to distinguish this statement as dictum because the defendant in McGraw-Hill had actual contacts with New York. Those contacts are relevant to an inquiry under section 302(a)(1), not section 302(a)(3), which is at issue here. 6 See also Royalty Network Inc. v., LLC, 638 F. Supp. 2d 410, 423 (S.D.N.Y. 2009); Mfg. Tech. Inc. v. Kroger Co., No. 06 Civ. 3010, 2006 WL 3714445, at *2, 2006 U.S. Dist. LEXIS 90393, at *5 (S.D.N.Y. Dec. 13, 2006); Mario Valente Collezioni, Ltd. v. Confezioni Semeraro Paolo, S.R.L., 115 F. Supp. 2d 367, 376-77 (S.D.N.Y. 2000); Cello Holdings, L.L.C. v. Lawrence-Dahl Cos., 89 F. Supp. 2d 464, 470 (S.D.N.Y. 2000). 22 1 Citigroup Inc. v. City Holding Co., 97 F. Supp. 2d 549, 568 2 (S.D.N.Y. 2000)). 3 Although, as noted, Penguin does allege copyright 4 infringement through the "distribution" of its copyrighted work 5 over the Internet, Compl. ¶ 28, Penguin does not specifically 6 allege the loss of customers or other direct harm in New York, 7 distinguishing this case from most of those cited, see, e.g., 8 id.; Citigroup, 97 F. Supp. 2d at 568. 9 read to suggest that the injury from the infringement of an But these cases can be 10 intellectual property right committed outside of New York may be 11 a New York injury for section 302(a)(3) purposes if it adversely 12 affects the plaintiff and his intellectual property in New York. 13 2. Legal Arguments Against Deeming New York To Be the 14 Situs of Injury. Looking not to domicile or residence but to 15 lost business at the site of the allegedly infringing action 16 taken by the defendant, some other district courts in this 17 Circuit have concluded that injuries resulting from intellectual 18 property torts occur where the infringing action is taken. 19 e.g., Art Leather Mfg. Co., Inc. v. Albumx Corp., 888 F. Supp. 20 565, 568 (S.D.N.Y. 1995) ("A patent holder suffers economic loss 21 at the place where an infringing sale is made because the holder 22 loses business there."); Freeplay Music, Inc. v. Cox Radio, Inc., 23 No. 04 Civ. 5238, 2005 WL 1500896, at *8, 2005 U.S. Dist. LEXIS 24 12397 at *24 (S.D.N.Y. June 23, 2005) ("In cases of commercial 25 torts, the place of injury will usually be located where the 26 critical events associated with the dispute took place. 23 See, In this 1 case, the critical events are [the defendant's] alleged 2 unlicensed use of [the plaintiff's] recordings and compositions." 3 (internal quotation marks and citation omitted)). 4 court relied on this line of cases to conclude that Penguin's 5 injury occurred where the book was impermissibly copied, since 6 that is where the sale was lost. 7 at *4, 2009 U.S. Dist. LEXIS 34032, at *11-*12. The district See Penguin, 2009 WL 1069158, 8 V. Due Process 9 The question whether defining the situs of injury here 10 as New York so as to give rise to jurisdiction in New York over 11 Penguin's claims against American Buddha would violate American 12 Buddha's right to Due Process is beyond the scope of this appeal. 13 We do not, as a general matter, conduct the due process analysis 14 until we have first determined that there is personal 15 jurisdiction under New York's Long-Arm Statute. 16 Lines, 490 F.3d at 242; Savin, 898 F.2d at 306. 17 See Best Van Here, were we eventually to agree with Penguin, 18 contrary to the district court's decision, that the situs of 19 injury was indeed New York, the proper course would be to remand 20 to the district court to consider the remaining four factors for 21 personal jurisdiction under the long-arm statute. 22 95 N.Y.2d at 214, 735 N.E.2d at 886, 713 N.Y.S.2d at 307 (setting 23 out five-part test for jurisdiction under section 302(a)(3)). 24 least two of those factors -- that American Buddha reasonably 25 expected an injury to occur in New York and that American Buddha 26 derives substantial revenue from interstate or international 24 See LaMarca, At 1 commerce -- were not analyzed by the district court. Penguin, 2 2009 WL 1069158, at *4, 2009 U.S. Dist. LEXIS 34032, at *13 3 ("[I]t is not necessary to explore whether plaintiff has met its 4 burden on the other elements necessary to establish jurisdiction 5 under Rule 302(a)(3)(ii), or whether the exercise of jurisdiction 6 would comport with due process."). 7 likely involve additional questions of fact, they would best be 8 decided by the district court, if necessary, in the first 9 instance. Inasmuch as these issues 10 VI. Certification to the New York Court of Appeals 11 The rules of this Circuit provide that "[i]f state law 12 permits, the court may certify a question of state law to that 13 state's highest court." 14 Auth. of N.Y. & N.J., 315 F.3d 146, 150-51 (2d Cir. 2002). 15 certification to the New York Court of Appeals is discretionary, 16 see McCarthy v. Olin Corp., 119 F.3d 148, 153 (2d Cir. 1997), and 17 we have recognized several factors as guiding that discretion. 18 2d Cir. R. 27.2; see also Prats v. Port Our First, and most important, certification may be 19 appropriate if the New York Court of Appeals has not squarely 20 addressed an issue and other decisions by New York courts are 21 insufficient to predict how the Court of Appeals would resolve 22 it. 23 Cir. 2009); O'Mara v. Town of Wappinger, 485 F.3d 693, 698 (2d 24 Cir. 2007). 25 cases dealing with the issue here. See Kuhne v. Cohen & Slamowitz, LLP, 579 F.3d 189, 198 (2d As discussed above, there are two competing lines of 25 The proper resolution of this 1 appeal depends on a determination as to which of those lines of 2 cases is correct. 3 Second, certification may be appropriate if the 4 "statute's plain language does not indicate the answer." 5 v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47, 51 (2d Cir. 1992); 6 Colavito v. N.Y. Organ Donor Network, Inc., 438 F.3d 214, 229 (2d 7 Cir. 2006). 8 neither the plain language nor the legislative history of section 9 302(a)(3) makes clear the location of the situs of injury in a 10 11 Riordan Here, for the reasons discussed, we think that copyright infringement case. Third, certification may be appropriate if a decision 12 on the merits requires value judgments and important public 13 policy choices that the New York Court of Appeals is better 14 situated than we to make. 15 Cross & Blue Shield of N.J., Inc. v. Phillip Morris USA, Inc., 16 344 F.3d 211, 221 (2d Cir. 2003). 17 requires deciding how the New York Legislature intended to strike 18 the balance between the protection of New York-based intellectual 19 property holders and the rights of defendants with few if any 20 apparent ties to New York beyond the availability of material 21 they have uploaded to a website out-of-state. 22 of Appeals is better situated to ascertain the New York State 23 Legislature's intent than are we. 24 See Colavito, 438 F.3d at 229; Blue Resolution of this appeal The New York Court Finally, certification may be appropriate if the 25 questions certified will control the outcome of the case. 26 O'Mara, 485 F.3d at 698 (analyzing earlier version of the Second 26 See 1 Circuit local rule governing certification). Here, resolution of 2 the certified issue will determine how we resolve this appeal -- 3 if not necessarily whether jurisdiction will ultimately be found 4 appropriate in New York State. 5 deems the situs of injury under the circumstances presented by 6 this case to be the location of the infringing conduct, we will 7 doubtless affirm the district court's judgement. 8 Appeals decides the situs of injury to be the location of the 9 plaintiff and the intellectual property at issue, then the If the New York Court of Appeals If the Court of 10 district court's opinion must, with virtual certainty, be vacated 11 and we expect to remand for further proceedings. 12 Because all four factors weigh in favor of 13 certification, we hereby certify the question restated below. CONCLUSION 14 15 For the foregoing reason, we certify the following In copyright 16 question to the New York Court of Appeals: 17 infringement cases, is the situs of injury for purposes of 18 determining long-arm jurisdiction under N.Y. C.P.L.R. 19 § 302(a)(3)(ii) the location of the infringing action or the 20 residence or location of the principal place of business of the 21 copyright holder? 22 As is our practice, we do not intend to limit the scope 23 of the Court of Appeals' analysis through the formulation of our 24 question and we invite the Court of Appeals to expand upon or 25 alter this question as it should deem appropriate. 27 See 1 Kirschner v. KPMG LLP, 590 F.3d 186, 195 (2d Cir. 2009). 2 example, we recognize that the presence of online libraries and 3 the Internet may have an impact on the Court of Appeals' 4 evaluation of the situs of injury and may figure in the Court's 5 analysis. 6 For Pursuant to New York Court of Appeals Rule 500.17 and 7 United States Court of Appeals for the Second Circuit Rule 27.2, 8 it is hereby ORDERED that the Clerk of this Court transmit to the 9 Clerk of the Court of Appeals of the State of New York this 10 opinion as our certificate, together with a complete set of the 11 briefs, appendix, and record filed in this Court by the parties. 12 We direct the parties to bear equally any fees and costs that may 13 be imposed by the New York Court of Appeals in connection with 14 this certification. 15 appeal after disposition of this certification by the New York 16 Court of Appeals, and after the Court of Appeals judgment should 17 it choose to accept this certification. This panel will retain jurisdiction of the 28