Dudnikov: copyright, jurisdiction and eBay

Posted by Dirk Avery at 1:39 pm under Copyright, Internet, Litigation.

On Jan. 28, the 10th Circuit filed an interesting personal jurisdiction decision. Dudnikovs are eBay “power sellers” that sell fabrics out of their home. A copyright owner (who is British) thought some of the fabrics infringed its copyright in images by Erté. The owner sent eBay a notice of claimed infringement under eBay’s “Verified Rights Owner” program, swearing under penalty of perjury, that it had a good-faith belief the Dudnikovs’ auction item infringed its copyrights. eBay canceled the auction and the Dudnikovs filed a counter notice to contest the copyright claim. The owner threatened suit and Dudnikovs preemptively filed an apparently well done, declaratory pro se suit. The owner attempted to dismiss for lack of specific personal jurisdiction. A magistrate judge reasoned that there was personal jurisdiction but the district court disagreed and dismissed the declaratory suit. In reversing the district court, Circuit Judge Gorsuch had this to say:

Defendants [the owners] do submit, however, that an entirely different sort of policy interest does weigh strongly in its favor-namely, the federal interest in allowing federal copyright holders to alert potential infringers of their rights and encouraging the settlement of such potential disputes. By way of support, they point us to Red Wing Shoe. There, a Louisiana corporation sent a letter to a Minnesota corporation informing the latter that the former believed a shoe manufactured by the Minnesota corporation infringed the Louisiana corporation’s patent, and offering to negotiate for a non-exclusive license. The Federal Circuit held that this “cease-and-desist” letter constituted a contact purposefully directed at Minnesota, and that the case arose out of that contact… Yet, the court held that a patent holder would not “subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement.” Red Wing Shoe, 148 F.3d at 1361 (emphasis added). The court reasoned that such cease-and-desist letters are essential to promoting settlement of copyright disputes, and the promotion of settlement is a strong federal policy interest. Id.; see also Silent Drive, 326 F.3d at 1206; Wise v. Lindamood, 89 F.Supp.2d 1187 (D.Colo.1999).

Assuming without deciding that it would be unreasonable to found [sic] jurisdiction solely on a cease-and-desist letter, this case is readily distinguishable. Defendants’ NOCI went well beyond providing notice to plaintiffs of the claimed infringement and seeking settlement; it purposefully caused the cancellation of their auction and allegedly threatened their future access to eBay and the viability of their business… Of course, plaintiffs’ contact information was readily accessible from their eBay auction site and defendants thus had the option of sending a mere cease-and-desist letter directly to plaintiffs. Instead, however, they communicated their complaint to a third party with the intent that the third party take action directly against plaintiffs’ business interests, something that thereafter occurred. On these facts, we cannot say that the exercise of jurisdiction would be either unfair or unjust, and again our inquiry profits by analogy to Bancroft. The court there held that cases involving cease-and-desist letters were inapposite because the plaintiff’s case arose “principally out of [the defendant]’s letter to [the third party], and that letter did more than warn or threaten [the plaintiff].” 223 F.3d at 1089. Instead, the letter initiated procedures under which the plaintiff either had to give in to the defendant’s demands (thereby losing use of its domain name), or take legal action… Such is the situation with which we are faced. Defendants did not merely inform plaintiffs of their rights and invite settlement discussions prior to potential litigation, but took affirmative steps with third parties that suspended plaintiffs’ ongoing business operations. And under eBay’s procedures, plaintiffs’ only recourse, other than capitulation, was litigation. In such circumstances, we cannot say that requiring defendants to answer for their actions in Colorado is unfair.

Dudnikov v. Chalk & Vermilion Fine Arts, Inc., — F.3d —-, 2008 WL 217724 at 15 (10th Cir. 2008).

Chalk one up for sellers.

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