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July 28, 2022

Purposeful Direction in a Forum Activates the Long Arm of the Law

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The US Court of Appeals for the Ninth Circuit again vacated the US District Court for the Central District of California's dismissal of a case for lack of personal jurisdiction, applying Fed. R. Civ. Proc. 4(k)(2) and concluding that the copyright infringement claims involving a foreign defendant were properly litigated in the United States. Lang Van, Inc. v. VNG Corporation, Case No. 19-56452 (9th Cir. Jul. 21, 2022) (Bybee, Bennett, JJ.; Bataillon, Distr. J., sitting by designation).

Lang Van, Inc. (LVI) is a California corporation that produces and distributes Vietnamese music and entertainment and owns copyrights to more than 12,600 songs and original programs. LVI sued VNG Corporation, a Vietnamese company that makes copyrighted music available for download worldwide through its Zing MP3 website and mobile applications. LVI served discovery requests on VNG, but instead of supplying substantive information or documents, VNG moved to dismiss for lack of personal jurisdiction. The district court granted the motion, and LVI appealed to the Ninth Circuit, which vacated and remanded the case to the district court with instructions that LVI be permitted to undertake jurisdictional discovery.

On remand, LVI took third-party discovery and argued that the evidence showed that VNG intentionally chose to release its applications in the United States; consented to jurisdiction, choice of law and venue in California; and allowed hundreds of thousands of iOS downloads and tens of thousands of Android downloads.

VNG filed a renewed motion to dismiss LVI's (now amended) complaint, arguing a lack of personal jurisdiction, forum non conveniens (that there is another, more appropriate, forum) and failure to state a claim. The district court granted VNG's motion after finding that there was no specific personal jurisdiction over VNG in California under the Ninth Circuit's specific personal jurisdiction test. The district court did not address the second and third arguments (forum non conveniens and failure to state a claim) and did not address the issue of long-arm jurisdiction over VNG under Rule 4(k)(2). Again, LVI appealed.

The Ninth Circuit assessed jurisdiction under Rule 4(k)(2), which provides for jurisdiction over foreign defendants that have ample contacts within the United States as a whole, but whose contacts are so scattered among states that no single state would have jurisdiction. The test requires proof that (1) the claim at issue arises from federal law and (2) the defendant is not subject to any state's courts of general jurisdiction, such that (3) invoking jurisdiction upholds due process, with the burden shifting to the defendant to show that application of jurisdiction under the third prong would be unreasonable.

The Ninth Circuit found that the first prong was met because the case involved claims of copyright infringement under federal law, and that the second prong was met because VNG asserted that it was not subject to the personal jurisdiction of any state court of general jurisdiction in the United States.

As for the third prong, the Ninth Circuit explained that when jurisdiction is challenged, the plaintiff must show (1) purposeful activities or transactions with the United States (as a whole, instead of with a specific state), (2) an act that shows that the defendant purposefully availed itself of the privileges of doing business in the United States, (3) that the claim arose out of activities that are related to the United States, and (4) that the exercise of jurisdiction comports with notions of fair play and substantial justice. Because of the copyright infringement claims, the panel applied the 1984 Supreme Court Calder effects test, which requires "purposeful direction" by the defendant in committing an intentional act aimed at the forum that causes harm that the defendant knew would occur in the forum.

VNG argued that Vietnam is its target market, and that LVI provided no evidence of (1) an internal strategy to target California or the United States (2) that VNG generated revenue outside of Vietnam, (3) evidence of advertising contracts with California, and (4) no specific instances of infringement in California. However, consistent with past cases, the panel concluded that VNG purposefully targeted US companies and their intellectual property since VNG had taken the following actions:

  • Released Zing MP3 in English to the United States
  • Contracted with US businesses in conjunction with Zing MP3
  • Did not apply any geoblocks or location restrictions to LVI's content on Zing MP3 impacting its use in the United States or outside of Vietnam, evidencing an intent to serve US customers
  • Sent a letter to the US Trade Representative asking to be taking off an international list of internet pirates, stating that it had "signed license contracts with U.S. studios . . . to have copyrighted music streaming on Zing.MP3's sites," and professed its understanding of "the importance of working with U.S. Content Owners."

The Ninth Circuit also credited a former employee's testimony that VNG had specifically sought LVI's music for Zing MP3. The Court found substantial contacts within the United States and substantial evidence of intentional direction into the US market, satisfying personal jurisdiction under Rule 4(k)(2).

VNG's alternative argument was that Vietnam is a more appropriate forum with the majority of witnesses and evidence, and that the copyright claims would be better decided there. LVI countered that because it was a California business with its principal place of business in California, Vietnam was not a convenient place to litigate. LVI also stressed the International Intellectual Property Alliance's 2018 statements that Vietnamese civil and criminal courts are not appropriate for copyright infringement cases, in light of complicated procedures, delays and a lack of certainty as to the expected outcome. The Ninth Circuit ultimately concluded that venue was not proper in Vietnam since the case concerned alleged unlawful activities purposely directed toward the United States, which were more amenable to suit in the United States.

The panel remanded the case for further proceedings.

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