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September 15, 2022

Foreign Video-Hosting Website Can't Escape Long Arm of the Law

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Focusing on the first prong of the minimum contacts test (whether the foreign defendant purposefully directed its activities at the United States) the US Court of Appeals for the Ninth Circuit reversed a district court holding that it lacked specific personal jurisdiction over the operators of a Japanese-language video-hosting website and remanded the case for further analysis under Fed. R. Civ. P. 4(k)(2), the federal long-arm statute. Will Co. v. Lee, Case No. 21-35617 (9th Cir. Aug. 31, 2022) (Wardlaw, Gould, Bennett, JJ.)

Will is a Japanese adult entertainment producer with more than 50,000 videos registered with the US Copyright Office. Will sells access to its content on its website, where it makes more than $1 million per year from US consumers. Defendants Youhaha Marketing and Promotion (YMP) and Lee own and operate ThisAV.com, a Japanese-language video-hosting website similar to YouTube. ThisAV.com allows users to upload and view videos for free alongside advertisements posted by third-party vendors.

After discovering 13 of its videos on ThisAV.com, Will sent the defendants take-down notices pursuant to the Digital Millennium Copyright Act (DMCA). When the defendants failed to honor the takedown notices, Will sued for copyright infringement. The defendants moved to dismiss the lawsuit for lack of personal jurisdiction because Lee is a permanent resident of Hong Kong currently residing in Canada, and YMP is registered in Hong Kong (where it operates ThisAV.com). Will countered that the lower court had specific personal jurisdiction over the defendants because their display of the copyrighted videos was sufficiently connected to the United States. The district court granted the defendants' motion to dismiss, concluding that the content on ThisAV.com was not "expressly aimed" at the United States, and that the defendants had not caused "jurisdictionally significant harm," since only 4.6% of the site's viewers were from the United States. Will appealed.

The principal issue on appeal was whether the defendants had "purposefully directed" the content of ThisAV.com at the United States under the minimum contacts Calder test, which asks whether the defendant (1) committed an intentional act (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.

The Ninth Circuit summarily concluded that YMP and Lee had committed intentional acts by operating ThisAV.com and purchasing the domain name and domain privacy services. However, whether Lee and YMP had "expressly aimed" ThisAV.com at the United States was a closer question. The Court noted that "mere passive operation of a website" is insufficient to show express aiming. Instead, the operator must have "appealed to and profited from an audience in that forum." The Court first determined that the defendants had "profited from" the US market because US consumers viewed advertisements posted on the website more than 1.3 million times, and the defendants were paid by third-party advertisers based on views. The Court further concluded that the defendants had intentionally "appealed to" the US market by enabling the website to be quickly accessible to US consumers with reduced latency (aka loading times). Reduced latency is crucial for attracting and maintaining the attention of users and can be achieved by hosting the website on servers close to the desired audience or purchasing access to a content delivery network (CDN) covering the desired geographic area. The Court reasoned that the defendants intended to "appeal to" US consumers because they chose to host the site in Utah and purchased CDN services in North America.

The Ninth Circuit also noted that the website's legal compliance pages were only relevant to US viewers. The Privacy Policy page only guaranteed that the site was lawful for users in the United States, and the website provided pages specific to US law, including the DMCA and 18 U.S.C. § 2257. These facts, in addition to the host server and CDN in North America, indicated that the defendants had "prepared for U.S. visitors to the exclusion of all others" and expressly aimed the site at the United States.

Finally, the Ninth Circuit concluded that ThisAV.com had caused foreseeable harm in the United States. While only 4.6% of the site's views came from US customers, this small percentage still amounted to more than 1.3 million views. Furthermore, because the defendants "purposefully directed" ThisAV.com at US users, the Court found these views were foreseeable. Thus, the Court reversed the district court's dismissal for lack of personal jurisdiction and remanded for further analysis under Rule 4(k).

ALM expressly disclaims any express or implied warranty regarding the OnPractice Content, including any implied warranty that the OnPractice Content is accurate, has been corrected or is otherwise free from errors.

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