Capitol Records, LLC v. Videoegg, Inc.
| Decision Date | 09 March 2009 |
| Docket Number | No. 08 CV 5831(HB).,08 CV 5831(HB). |
| Parties | CAPITOL RECORDS, LLC; Caroline Records, Inc.; Virgin Records America, Inc.; EMI Blackwood Music, Inc.; EMI Virgin Music, Inc.; EMI Robbins Catalog, Inc.; EMI Waterford Music, Inc. EMI Grove Park Music, Inc.; Colgems-EMI Music, Inc.; and EMI Virgin Songs Inc., Plaintiffs, v. VIDEOEGG, INC.; Hi5 Networks, Inc.; and Does 1-10, Defendants. |
| Court | U.S. District Court — Southern District of New York |
The instant motion requires the Court to apply the unsettled rules of internet-based jurisdiction to an increasingly popular means of online interaction, the "social networking" website. Plaintiffs, three record companies and ten music publishers, bring this copyright infringement action against Defendants VideoEgg, Inc. ("VideoEgg") and Hi5 Networks, Inc. ("Hi5"). Hi5 moves to dismiss for lack of personal jurisdiction and improper venue and, in the alternative, to transfer of this action to the Northern District of California.1 On January 16, 2009, the Court ordered discovery on the issue of personal jurisdiction. For the following reasons Hi5's motions to dismiss for lack of personal jurisdiction and improper venue are DENIED and its motion to transfer this action to the Northern District of California is GRANTED.
Plaintiffs are major record companies and music publishers, most of which are based in New York City. (Decl. of Michael Abitbol, dated August 15, 2008 ("Abitbol Decl.") ¶ 3; Decl. of Alasdair McMullan, dated August 18, 2008 ("McMullan Decl.") ¶¶ 3-5). Hi5 is a privately held California corporation based in San Francisco that owns and operates the internet website www.hi5.com. (Compl. ¶ 25.) All of Hi5's approximately 105 employees work in San Francisco, and the website was created and is maintained on servers located in California. (Aff. of Ramu Yalamanchi, dated July 31, 2008 ("Yalamanchi Aff.") ¶ 4, 11.) Hi5 does not maintain bank accounts, telephones, or an agent for service of process in New York, and it is not registered to do business in this state. (Id. ¶¶ 15, 6, 8, 10.)
Hi5.com is a self-described "social networking site," where registered users may, in Hi5's words, "share photos, send messages ... join discussion groups, explore music and videos, and more." (Declaration of Marc E. Mayer, dated August 18, 2008 ("Mayer Decl.") Ex. 8.) Hi5 claims to have "more than 80 + million registered users in over 200 nations" and "nearly 50 million unique monthly users." (Mayer Decl. at Ex. 8.) Registered users generate or upload most of the content available on the Hi5 website and interact with one another via the "social networking" features of the website. Apart from making the website available to registered users, Hi5's interaction with users is generally limited to registration and provision of technical support. (Yalamanchi Aff. ¶ 14.) Hi5 does not advertise its website, but rather relies on word of mouth to increase its user base. (Id. ¶ 15.)
This litigation concerns technology that allowed registered users to upload video files to the Hi5 website and, after such video files had been "indexed," to view videos uploaded by other users by means of a "streaming" transmission enabled by technology supplied by VideoEgg. (Compl.¶ 38.) This feature has been removed from the website.2 Plaintiffs allege that video functionality led to the illegal reproduction, performance and distribution of their copyrighted recordings and musical compositions, and on the basis of such allegations they sue Hi5 for direct, contributory and vicarious copyright infringement. (Compl.¶¶ 45, 60, 76.)
Hi5 generates income from the sale of advertising displayed to registered users as they engage in "social networking" on the Hi5 website.3 (Yalamanchi Aff. ¶ 3.) Such advertisements take the form of "banner" advertisements, which are graphic advertisements displayed on web-pages together with content such as user profiles, group pages and, during the period of video functionality, video files. (Compl.¶ 41.) Plaintiffs allege that Hi5 used VideoEgg's technology to "embed" advertisements into user-uploaded videos so that the advertisement would run after the video was displayed. (Compl.¶¶ 40, 41.) Hi5 promotes its website as an effective advertising platform for "global brands as well as national and regional advertisers." (Mayer Decl. Ex. 9.) Documents produced by Hi5 pursuant to this Court's Order for jurisdictional discovery confirm that Hi5 has the capability to target advertisements to registered users based on their geographic location or demographic profile and that Hi5 bases advertising rates on an advertiser's targeting requirements.
Hi5 has estimated that its website attracts several hundred thousand "unique" visitors from the New York metropolitan area each month.4 Hi5 confirms that New York is one of its larger domestic markets but points out that the majority of its users are located overseas. (Def.'s Supp. Br. at 2 n. 2.) Documents produced by Hi5 show that users in the New York metropolitan area viewed enough advertisements in a single month to generate substantial monthly advertising revenue. Documents also show that Hi5 has received substantial advertising revenue from companies located in New York and that its advertising sales staff in San Francisco both communicated directly with potential advertisers in New York and expressed interest in advertising campaigns that targeted New York.
Plaintiffs have identified 254 videos files alleged to contain their copyrighted works, which videos were viewed hundreds of thousands of times, including by Plaintiffs in their New York offices. At least four Hi5 users who self-identified as New York residents uploaded a minimum of five allegedly infringing videos. Hi5 has not produced documents that reflect information about the other website users who viewed the allegedly infringing videos, and, in the documents it has produced, Hi5 has redacted information about users who commented on those videos.
Although the plaintiff ultimately "bears the burden of establishing jurisdiction over the defendant by a preponderance of the evidence, the plaintiff need only make a prima facie showing that jurisdiction exists prior to the holding of an evidentiary hearing." Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 196 (2d Cir.1990) (citing Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985)). The plaintiff's obligation varies, however, depending on whether the jurisdictional determination is made prior to or subsequent to discovery. Id. at 197. Whereas prior to discovery the plaintiff may meet its burden by merely pleading good faith allegations sufficient to establish jurisdiction, "[a]fter discovery, the plaintiffs prima facie showing ... must include an averment of fact that, if credited by the trier, would suffice to establish jurisdiction over the defendant." Id. That is, "[t]he prima facie showing must be factually supported." Id. In ruling on a motion to dismiss for lack of personal jurisdiction, pleadings and affidavits must be "construed in the light most favorable to plaintiff and all doubts are resolved in its favor." CutCo Industries, Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir.1986) (citing Hoffritz, 763 F.2d at 57).
The Copyright Act, 17 U.S.C. § 101 et seq., does not provide for nationwide service of process and so the Court applies the forum state's personal jurisdiction rules to determine if it has personal jurisdiction over a non-domiciliary defendant such as Hi5. Fort Knox Music Inc. v. Baptiste, 203 F.3d 193, 196 (2d Cir.2000). Plaintiffs do not contend that Hi5's "contacts with New York are so continuous and systematic that it is subject to the jurisdiction of courts in New York on a general jurisdiction theory." Sole Resort, S.A. de C.V. v. Allure Resorts Management, LLC, 450 F.3d 100, 103 (2d Cir.2006) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) (internal citation and quotation marks omitted)). Rather, Plaintiffs contend that two provisions of New York's long-arm statute, N.Y. C.P.L.R. § 302(a)(1) and § 302(a)(3)(ii), afford this Court specific jurisdiction over Hi5 in this case. New York's long-arm statute does not coincide with the limits of the Due Process Clause, and thus a twopart inquiry is required: first, the Court must determine if jurisdiction is proper under the New York statute, and, if jurisdiction is statutorily permissible, the Court will then turn to the constitutional inquiry. Best Van Lines v. Walker, 490 F.3d 239, 244 (2d Cir.2007).
Under C.P.L.R. Section 302(a)(1), jurisdiction is proper over an out-of-state defendant who "transacts any business within the state [of New York]" when the cause of action "arises from" such acts. To determine if this standard has been met, courts look to the totality defendant's "interactions with, and activities within, the state," and their relation to the matter that gives rise to the law suit. D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 105 (2d Cir.2006); PDK Labs, Inc. v. Friedlander 103 F.3d 1105, 1109 (2d Cir.1997).
In construing the phrase "transacts business," the New York courts rely upon U.S. Supreme Court cases that articulate the constitutional limits of a state's power to assert personal jurisdiction over an out-of-state defendant. See, e.g., Ehrenfeld v. Bin Mahfouz, 9 N.Y.3d 501, 508, 851 N.Y.S.2d 381, 881 N.E.2d 830 (2007). Thus, "`[t]he overriding criterion' necessary to establish a transaction of business is `some act by which the defendant purposefully avails itself of the...
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