New York's top court ruled Thursday that publishers should file Internet copyright infringement lawsuits in courts where their businesses are located, even if alleged copyright violations occurred elsewhere.
The Court of Appeals said this differs from traditional cases because of the intangible and ubiquitous nature of the Internet. In other cases, the injury is linked to the place where sales or customers are lost, in short where the injury occurred.
The question arose from Penguin Group's federal lawsuit filed in Manhattan against American Buddha over four books posted online by the Oregon nonprofit whose main place of business is in Arizona. A federal trial judge dismissed the case in New York, concluding any injury occurred where the books were uploaded. A federal appeals court then asked the state court to weigh in on the question of injury and long-arm jurisdiction.
Agreeing with Penguin and the American Association of Publishers, the state court said that the site of the injury for determining jurisdiction is the copyright holder's place of business, not the place where the alleged violation occurred. The judges said that applies even without evidence of any readers downloading the copyright material in New York, that it was undisputed that websites are available to New Yorkers. The judges added that courts often will issue injunctions to stop infringement without determining actual losses.
"The injury in the case before us is more difficult to identify and quantify because the alleged infringement involves the Internet, which by its nature is intangible and ubiquitous," Judge Victoria Graffeo wrote. "The alleged injury in this case involves online infringement that is dispersed throughout the country and perhaps the world."
The six other judges agreed. Graffeo noted that the rate of electronic-book piracy has risen with the increasing popularity of devices for reading them.
Attorney Richard Dannay, representing New York-based Penguin, said the finding establishes major case law for publishers, authors and other copyright owners in fighting a proliferating problem.
"It's just critical ...," he said. "It means you do not have to chase all around the country or elsewhere to find book pirates to sue, at least on this element of long-arm jurisdiction."
The federal judge in Manhattan had granted American Buddha's motion to dismiss the complaint, concluding Penguin was injured in Arizona or Oregon, where the copying and uploading of the books took place.
Dannay said he expects the federal appeals court to reverse that judge's ruling and let the copyright infringement case proceed in New York.
Calls to American Buddha's attorney Charles Carreon were not immediately returned Thursday. He had argued that federal copyright laws pre-empt the state, the federal judge ruled correctly, and a contrary Court of Appeals ruling would "impermissibly intrude" on federal jurisdiction.
Penguin claimed that American Buddha infringed on its copyrights to "Oil!" by Upton Sinclair, "It Can't Happen Here" by Sinclair Lewis, "The Golden Ass" by Apuleius as translated by E.J. Kenney, and "On the Nature of the Universe" by Lucretious as translated by R.E. Latham, making full copies available on its website to its 50,000 members and anyone with an Internet connection.
The nonprofit said the uploading and reader downloading were protected as copyright exceptions for fair use and reproduction by libraries and archives. Its websites are the American Buddha Online Library and the Ralph Nader Library, which the court noted is not affiliated with the consumer advocate.
The New York court rejected American Buddha's assertion that this decision would open "a Pandora's box," allowing anyone to be hauled into a New York court by a copyright owner based in New York, citing safeguards in the copyright law.
In a brief, the American Association of Publishers cited a study estimating e-book sales rose to $313 million in 2009 and were up almost 200 percent in the first half of 2010. Meanwhile, a January 2010 study by Attributor Corp. of four pirated file-hosting websites showed 3.2 million downloads of 913 book titles over 90 days.
"Digital piracy has resulted in significant lost sales for the publishing industry in already challenging economic conditions," attorney Elizabeth McNamara wrote. "Moreover, in an industry often operating on a thin margin for many works, digital piracy threatens to decrease significantly the incentives to publish."