The World in U.S. Courts: Winter 2018 Electronic Frontier Foundation v. Global Equity Management
Australian Company That Obtained Injunction In Australia Having Impact In California Subject To Specific Personal Jurisdiction
Electronic Frontier Foundation v. Global Equity Management, United States District Court for the Northern District of California, November 17, 2017
The defendant, Global Equity Management (GEMSA), is an Australian corporation that holds a number of patents and has filed several patent infringement suits in the US. Plaintiff Electronic Frontier Foundation (EFF) is a nonprofit focusing on issues relating to the internet and modern technology, including what it considers to be patent reform. As part of a regular article series titled "Stupid Patent of the Month," EFF published an article about a patent owned by GEMSA. EFF's article highlighted the lawsuits brought by GEMSA relating to this patent, described GEMSA as a "classic patent troll," and called on Congress to pass venue reform to mitigate the harm caused by frequent patent litigators. GEMSA sued EFF in Australia, alleging that the article made several misstatements, harmed GEMSA's litigation efforts, and was part of a conspiracy between EFF, Airbnb (a defendant in one of GEMSA's suits), and entrepreneur Mark Cuban. Despite what GEMSA considered procedural defects with service of the suit and its own decision not to appear, the Australian court required EFF to remove the article form its website and enjoined EFF from publishing any content regarding GEMSA's intellectual property. EFF did not remove the article and stated it does not intend to do so. Instead, it brought an action for declaratory relief in federal court in California under the Securing the Protection of our Enduring and Established Constitutional Heritage Act (the "SPEECH Act"), alleging that the Australian injunction violated EFF's free speech rights under the US Constitution and that the Australian court's exercise of jurisdiction did not comport with due process and thus did not comply with the Hague convention. GEMSA did not appear in the case to defend itself.
EFF asserted that the District Court had personal jurisdiction over GEMSA because GEMSA had brought complaints against nine companies with principal places of business in California, had "reached out" to the State by prosecuting three unrelated infringement actions there, and through its Australian litigation had engaged in a "course of conduct explicitly aimed at suppressing a Californian's [EFF's] speech about litigation involving California companies such as Airbnb that is of interest to readers" in California. A Magistrate Judge found that jurisdiction over GEMSA did not exist, and EFF appealed the decision to the District Judge overseeing the case. EFF argued that GEMSA knowingly injured EFF in California because GEMSA knew EFF operated in California when it sought its injunction, and that the effect of GEMSA's injunction is felt in California, where EFF does its speaking and where many of its readers reside. To determine whether these contacts constituted the "minimum contacts" required by the Due Process Clause of the US Constitution for specific personal jurisdiction to attach, the Court applied a three-prong test: Specific personal jurisdiction exists where (i) the defendant purposefully availed itself of the privilege of doing business in the forum State, (ii) the claim arises out of the defendant's forum-related activities, and (iii) the exercise of jurisdiction is reasonable.
To determine whether the first prong was met, the Court applied the "effects test" set forth in Calder v. Jones, which is satisfied if the defendant "committed an intentional act," the act was "expressly aimed" at the forum State, and the act caused harm that the defendant knew was likely to be suffered in the forum State. The Court added that the sole focus of inquiry was conduct by GEMSA directed towards California; connections that EFF had with California were not relevant.
The Court found two instances of relevant conduct by GEMSA directed at California: seeking the injunction granted by the Australian court, and its threat to enforce that injunction in California. "California may properly be said to be the epicenter of the parties' dispute." The Court further noted that EFF was a California nonprofit with employees, and a significant number of donors and readers, in the State; that the challenged speech was "uttered" in California; that any actions to take down the speech pursuant to the Australian injunction would take place in California, and that the harm to EFF would occur in California. The Court also found that GEMSA had "expressly aimed" its conduct at California by sending two demand letters to EFF in the State, obtaining an Australian injunction requiring EFF to take action in California, and serving EFF with an injunction at its California office. While acknowledging that either the demand letters or service might alone be insufficient to establish personal jurisdiction, the Court considered them in conjunction with the more substantial contact of seeking the Australian injunction. Notably, the Court expressly did not rely on GEMSA's active engagement in other patent litigation in California (including its physical presence in the State on some occasions related to that litigation) because those cases were unrelated to the EFF action and EFF's suit did not arise out of or result from those forum-related activities.
Having found that GEMSA had purposefully availed itself of the forum, that EFF's suit arose out of GEMSA's California-related activities, and that GEMSA (by not appearing) had failed to show that the exercise of personal jurisdiction would be unreasonable, the Court ruled that it had specific jurisdiction over GEMSA and granted default judgment in favor of EFF.