October 6, 2020
Authored and Edited by Pu-Cheng (Leo) Huang; Margaret A. Esquenet
The internet connects the globe and makes it easy to share information across the world. Yet its borderless nature presents difficult questions for U.S. courts. Should a foreign website operator who had never performed any work within the United States, or even visited here, be subjected to suit in the United States? The Fourth Circuit considered this issue in a case involving a Russian citizen who operated websites that allegedly infringed twelve record companies’ U.S. copyrights.
The defendant, Tofig Kurbanov, owned and ran two websites in Russia—“FLVTO” and “2conv”—which provide a “stream-ripping” service that allows visitors to download copyrighted music extracted from YouTube videos. The websites have become two of the most popular on the internet, including among Americans. Not surprisingly the copyright owners—twelve record companies—objected to Kurbanov’s activities and sued him in federal court in Virginia for copyright infringement. And while the district court found that it had no jurisdiction over Kurbanov—and thus dismissed the lawsuit—the Fourth Circuit disagreed.
A federal court can properly exercise personal jurisdiction over a nonresident if two conditions are satisfied. First, jurisdiction over the nonresident has to be authorized by the “long-arm statute” of the state where the court is located. And second, as the Supreme Court held 75 years ago in International Shoe v. Washington, the defendant must have had “minimum contacts” with that state such that “the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Also, in past cases, the Fourth Circuit synthesized a three-prong test to determine whether exercising personal jurisdiction is consistent with this principle: “(1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the State; (2) whether the plaintiffs’ claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable.”
In arguing that the district court could not properly assert personal jurisdiction over him under this test, Kurbanov argued that he had never done anything that “purposefully availed himself of the privilege of conducting business in Virginia.” Instead, he said, essentially all of his work on his two websites was performed in Russia, and he operated the websites entirely from Russia. Moreover, he said, he had never performed any work on the websites from within the United States, had employees in the United States, owned or leased real estate in the United States, or held a bank account or paid taxes in the United States. In fact, Kurbanov said, he had never even visited the United States, much less Virginia.
But even though all this appeared to be true, it was also true that many of the websites’ visitors were Americans who accessed the websites from the United States, and specifically Virginia, and that Kurbanov had profited from that use. Together, in fact, Kurbanov’s two websites attracted over 300 million visitors worldwide between October 2017 and September 2018, about 10% of whom came from the United States. And among the visitors in the United States, about 2% (nearly 600,000 users) came from Virginia. The websites’ services were free for the visitors, but they had to open an account, and provide personal (including geographic) information before they could download any music. Kurbanov’s profits came from selling advertising on the websites to advertising brokers, many of whom were interested in the websites’ “geo-targeting” function, which allowed ads to be targeted to audiences within a certain geographic area (for example, a certain country, state, or city).
The district court had reviewed these facts and found them insufficient to justify exercising personal jurisdiction over Kurbanov. In particular, the district court found that the websites’ interactions with their visitors were non-commercial in nature and that the record companies had established neither of the first two prongs of the Fourth Circuit’s test. That is, the district court concluded that Kurbanov had not taken any actions to purposefully avail himself of Virginia’s protections nor were the record companies’ claims related to activities in Virginia. Therefore, the court concluded that exercising personal jurisdiction over Kurbanov would have violated the due process clause. But having reached this conclusion, the court never addressed the third prong of the test—whether exercising personal jurisdiction would be “constitutionally reasonable.”
On appeal, the Fourth Circuit came to a different conclusion. After recognizing that Virginia’s long-arm statute extends personal jurisdiction over nonresidents to the full extent permitted by the due process clause, the court turned to the first prong of its test—“purposeful availment.” Disagreeing with the district court, the Fourth Circuit found that Kurbanov’s contacts with Virginia were sufficient to satisfy this prong of the test. Among other things, the court said, Kurbanov’s two websites had nearly 1.5 million visits from Virginia, making it one of the most popular states. Additionally, the court noted that although the websites were free to use, they still established commercial relationships with the visitors, since Kurbanov allowed the visitors to download music in exchange for their geographic information. The court also observed that Kurbanov profited by selling this information to advertising brokers so they could generate ads targeting different geographical areas, including the state of Virginia or possibly even a specific city in Virginia. Thus, the court found that the test’s first prong was established.
Turing to the second prong, the Fourth Circuit—whether the record companies’ copyright infringement claims arose out of the activities Kurbanov directed at Virginia—again disagreed with the district court. Specifically, the Fourth Circuit found that “Kurbanov actively facilitated the alleged music piracy through a complex web involving Virginia visitors, advertising brokers, advertisers, and location-based advertising.” And “through this intricate network,” the court said, “Kurbanov directly profited from a substantial audience of Virginia visitors.” Thus, the court found that the test’s second prong was also established.
Finally, the Fourth Circuit addressed the third prong of the test—whether it would be “constitutionally reasonable” to exercise jurisdiction over Kurbanov. As noted above, the district court decided that there was no jurisdiction under the first two prongs of the test, so it never analyzed the third prong. Accordingly, emphasizing its position as “a court of review, not of first view,” the Fourth Circuit declined to consider this issue for the first time on appeal. Instead, it remanded the case to the district court so it could perform the analysis.
The case is UMG Recordings, Inc. v. Kurbanov, 963 F.3d 344 (4th Cir. 2020).
Copyright © 2020 Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.
DISCLAIMER: Although we wish to hear from you, information exchanged in this blog cannot and does not create an attorney-client relationship. Please do not post any information that you consider to be personal or confidential. If you wish for Finnegan, Henderson, Farabow, Garrett & Dunner, LLP to consider representing you, in order to establish an attorney-client relationship you must first enter a written representation agreement with Finnegan. Contact us for additional information. One of our lawyers will be happy to discuss the possibility of representation with you. Additional disclaimer information.
June 10-12, 2024
San Francisco
Lecture
Patent Protection for Software-Related Inventions in Europe and the USA Training Course
June 5, 2024
Hybrid
10th Annual Georgia Asian Pacific American Bar Association Gala
May 29, 2024
Atlanta
Due to international data regulations, we’ve updated our privacy policy. Click here to read our privacy policy in full.
We use cookies on this website to provide you with the best user experience. By accepting cookies, you agree to our use of cookies. Please note that if you opt not to accept or if you disable cookies, the “Your Finnegan” feature on this website will be disabled as well. For more information on how we use cookies, please see our Privacy Policy.
Finnegan is thrilled to announce the launch of our new blog, Ad Law Buzz, devoted solely to breaking news, developments, trends, and analysis in advertising law.