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Saturday, September 07, 2002

Part III: Pavlovich v. Superior Court (or: why you may have to learn to love the California court system if you're posting on the Web)

Well, I do apologize for the long wind-up in getting around to the actual argument in this case. The context struck me as pertinent, probably because I'm fascinated by the collision between our oldest institutions and our newest technology, and I found the experience of this argument a good example of the clash. Not that the Justices didn't "get" enough of the technical aspects in the case to draw intelligent conclusions; I think they did, if perhaps on a sliding scale basis. But I think it's safe to say that everyone in that courtroom who had followed the case closely and had their own ideas about what should determine the outcome shared two sensations at different points during the argument: they wanted to be on the bench asking the questions, and they wanted to be at the podium giving the answers. There were at least three recurring themes that never were developed, addressed or resolved to my satisfaction. The first was whether and how questions of jurisdiction should turn on the "passive" or "active" nature of the Web activity. The second was whether the Calder aiming requirement is satisfied if no specific plaintiff is targeted. The third was whether a plaintiff can trigger jurisdiction over a non-resident defendant with no forum contacts by sending a cease and desist letter. Here's how it all unfolded (paraphrased and abbreviated; the Court and counsel were much more eloquent and complete), and you may see what I mean. There are many other points for discussion. (Note: toward the end, I was abbreviating the Justices' names to their initials in my notes, without realizing the difficulty this might cause in sorting out Justice Brown's questions from Justice Baxter's. I've done my best to keep them straight, but so you know this may get fuzzy toward the end of the Real Party's argument.)
Petitioner's Main Argument
Allonn Levy led things off, as the petitioner's counsel. His opening point was that Matthew Pavlovich engaged in no activity expressly targeted at this plaintiff, the DVDCCA. Justice Werdegar immediately jumped in: Define specifically targeted. Levy responded with the Calder definition: the defendant has to knowingly cause an injury and intentionally direct wrongdoing at a California resident. [Calder v. Jones, 465 U.S. 783, 790 (1984)] Justice Werdegar: Assume an act with a major impact in California; is this enough? Attorney Levy: No, mere foreseeability of a California impact is insufficient. The activity must be directed at a California resident. Justice Werdegar: What then would qualify as specific targeting? Attorney Levy: A passive post to a Web site would not. But, a plaintiff can turn a passive post into sufficiently purposeful targeting by sending the defendant a cease and desist letter explaining the harm, and specifying the location of the harmed party. The plaintiff puts the defendant on notice this way; due process satisfied if defendant refuses to stop. Justice Werdegar: A cease and desist letter turns mere foreseeability into targeted action sufficient to trigger jurisdiction? Attorney Levy: It would at least increase the predictability; having received such a letter, the defendant then at least knows the activity is having an effect in a particular geographic locale. Justice Werdegar: So the injured party can create jurisdiction through its own actions? Attorney Levy: Yes, if due notice has been given and received. Justice Baxter [fires a shot heard the rest of the argument]: Say a defendant launches a rocket from an eastern state, headed generally westward, and it strikes California. Is there jurisdiction in California over the defendant? Attorney Levy: Under Calder, Bancroft [223 F. 3d 1082 (9th Cir. 200)] and Panavision [141 F. 3d 1316 (9th Cir. 1998)], if the activity is not specifically targeted at California, then no. Justice Baxter: Even if the place the act is completed is California? Attorney Levy: Yes, because there has been no targeting of the state, but this is not a valid analogy to the facts of this case. Firing a rocket is an express, intentional act. [DMH aside: And posting something to a Web site is not?] Here, we have no intentional, express activity, no localized aiming and no localized injury. The high court in Calder had every opportunity to specify that generalized aiming was sufficient to trigger jurisdiction, based on the facts of that case. It did not. It instead found jurisdiction based on targeted acts (investigators were hired, phone calls and a request for retraction were made). Justice Kennard: Mr. Pavlovich is a resident of Texas, with no contacts with California. The Web site does not solicit business or allow interactive exchange, it provides only information. DeCSS was posted on the Web site. Pavlovich had no knowledge DVDCCA was the licensing entity for CSS, or that DVDCCA was in California. Is that a correct summary? Attorney Levy: Yes, with some clarification. There is no evidence of where DeCSS was posted on the site, but there's no dispute it was there somewhere. DeCSS functions as a DVD player in software. Justice Kennard: Calder doesn't help you. There, California didn't need jurisdiction over the Florida reporter. The Court permitted the assertion of jurisdiction based on the defendant's conduct. Attorney Levy: This case is not Calder. Not only was Pavlovich unaware that DeCSS had been posted to the site, but at the time the posting occurred DVDCCA had not yet become the assignee of the CSS license. Justice Werdegar: Didn't Pavlovich knowingly and intentionally post on the site? Why is it unreasonable then to hail him into court here? Attorney Levy: Fact issues remain regarding whether Pavlovich posted anything at all, or whether, if he did, the conduct was wrongful. Justice Baxter: Don't we have to take the complaint allegations as true for the purpose of determining jurisdiction? Attorney Levy: Yes, but the complaint just describes the cause of action. As noted in the JDO decision [72 Cal. App. 4th 1045 (1999)], an unverified complaint is not evidence for the jurisdiction analysis where there also has been discovery. Justice Baxter: Isn't it important whether the alleged trade secret infringement was intentional or accidental? Attorney Levy: Here, the information was passively posted. There was no targeting, no purposeful availment of a particular forum in a passive post, as every other court that has looked at the issue has held.
Real Party's Argument
Justice Brown: What about the DVDCCA's non-ownership of the CSS license at the time DeCSS was posted on Pavlovich's site? Attorney Coleman: Pavlovich did not have to expressly target this plaintiff, DVDCCA. DVDCCA is a trade association representing three industries: movies, computers, consumer electronics. It succeeded to all of the rights held by its predecessor in interest to the CSS license. Justice Werdegar: Please respond to Petitioner's argument that there is no jurisdiction because this was a passive post. Attorney Coleman: It's wrong to view the nature of posts as either passive or active/interactive. There is a spectrum. On one end, you have pictures or text posted simply for viewing. On the other, you're engaged in interactive collection of information, conducting business. Here, the post was not at the passive end of the spectrum because visitors could interact with the site by downloading DeCSS. [Changes tacks a bit.] LiVid's only purpose was to undo CSS encryption and violate the licenseholder's rights. The purpose was to allow anyone to decrypt, copy, sell and/or P2P-share copyrighted motion pictures -- everything CSS was created to guard against. Pavlovich knew there was a licensing entity, and declined to go through the channels to seek a license. Justice Chin: Please respond to Petitioner's argument that due process requires a cease and desist letter in order to trigger jurisdiction here. Attorney Coleman: There were cease and desist letters, sent to all the named defendants including Pavlovich. He refused to take down the site at that time. But the notice provided by the letter is only an alternative basis for jurisdiction; jurisdiction exists even in the absence of such a letter here. Justice Kennard: Pavlovich must have expressly aimed activity at this forum. Isn't that a requirement? The IMO case out of the Third Circuit [aside from DMH: I have not yet looked this up or obtained the cite] rounds up the decisions of the various Circuits on this subject. The decisions of this Court concur that plaintiff must point to contacts that expressly aimed tortious conduct at the forum. Attorney Coleman: Yes, but you don't have to target a known plaintiff. This Court's Vons decision [14 Cal. 4th 434, 457 (1996)] rejected that strict approach. There's no need to target activity at the plaintiff. Pavlovich ignores this. Justice Brown: But Vons involved actual contact between the defendant and the forum. We were concerned there about this sort of situation, where you have no contact and yet jurisdiction. Attorney Coleman: In Vons, the contacts found sufficient were not those related to the tort and indemnity claims. All that's needed is a "substantial connection." Pavlovich would create a test whereby a specific plaintiff must be targeted. Calder says the contacts must be with the state, and must relate to the claims being asserted. There's no need to target a specific plaintiff. Supposed someone sabotaged a truck and sent it forth on the highways, like the earlier rocket example. There should be jurisdiction if the truck causes harm in California. Justice Baxter: Assume the same facts as here, except Petitioner does not reside in another state, he resides in another country. Do the same tests apply as to California's jurisdiction over non-U.S. defendants? Attorney Coleman: Yes, under the "contacts" and "arising out of" prongs. Under the "reasonableness" prong, fairness principles may weigh more heavily against an exercise of jurisdiction where a foreign defendant is involved. Justice Kennard: Pavlovich must have known someone held the license to CSS, but he didn't know about DVDCCA, who didn't actually own the license until the assignment. Attorney Coleman: It's enough to have conduct aimed at the state. Justice Kennard: He also didn't know that whatever licensing entity existed was in California. Is foreseeability enough to trigger jurisdiciton? Attorney Coleman: We don't have to reach that, because here Pavlovich knew more. He was warned by the MPA to stop. He knew that the center of the motion picture industry is Califorina, and he knew that DeCSS violated CSS and would allow infringing of copyrights in California. He was out to destroy [DMH aside: his actual word] not just one company but the whole industry. One must consider the enormity of the harm Pavlovich sought to cause. Justice Brown: Is there any evidence that Pavlovich was seeking to harm these industries? At best, he knew or should have known they had a presence in California. Attorney Coleman: He knew DeCSS was illegal, that a CSS license was available and intentionally not sought. Justice Werdegar: Pavlovich's counsel disputes that. Attorney Coleman: The record indicates he had input, oversight and permitted the code to be posted. His coy and evasive deposition responses about his role, combined with knowledge of what was there, are enough to infer responsibility. Justice Werdegar: So, this fulfills the express aiming requirement? Attorney Coleman: Yes. Justice Moreno: There is no evidence anyone in California downloaded the code, or that Pavlovich or the site benefitted financially from anyone in California, is there? Attorney Coleman: There is no such evidence in the record, but in fact Mr. Pavlovich has gained from his involvement and notoriety. He is now acknowledged as an expert in the field and has been retained to consult in such capacity. Justice Chin: So, the fact that the site is free, the information there costs nothing, is irrelevant? Attorney Coleman: It's a factor to consider but here it does not rule out jurisdiction in light of the other factors also present. Justice Brown: Is it enough for jurisdiction that a defendant's conduct have an industry-wide effect? Attorney Coleman: No, you also need knowledge of the harm from the conduct. Here, there was the process of posting the code and of using stolen trade secrets. See the ADO decision. Justice Brown: Ok, so that explains how you have a claim against him. But why should California be the forum? Attorney Coleman: His actions were directed at California, as in the rocket example. [DMH aside: in the rocket example, there specifically was no destination target.] There is no need for a "California Or Bust" sign. He knew harm would result here. Justice Brown: If I decide to picket in my front yard -- U.S. car companies are terrible -- could I be sued in Michigan? Attorney Coleman: No, because you've done no harm in that forum. But say you carried out a plan to sabotage an automobile plant. Then you'd have subjected yourself to jurisdiction in that forum. It's true that disputed facts must be resolved in Pavlovich's favor for the purpose of this analysis, but even under that standard there is jurisdiction here.
Petitioner's Rebuttal Argument
Attorney Levy: Real Party has misstated the intent of the LiVid project. Its purpose was to improve resources available to Linux users. Justice Chin: Did Pavlovich know the DeCSS code would be used for pirating? Did the code permit the downloading and copying of DVDs? Attorney Levy: DeCSS has nothing to do with downloading. It creates an unencrypted copy to enable playback, like any DVD player does. Justice Chin: So, there's no damage to the licenseholder DVDCCA? Attorney Levy: Actually, there's a tremendous benefit. There's an increase in market share. DeCSS decryption is only used for playback. Of course, individuals may then choose to do illegal things, but that is not a function of the code. Justice Chin: What of this demand letter DVDCCA sent Pavlovich? Attorney Levy: He never received such a letter, never knew it had been sent. The first he knew of any allegations of harm was DVDCCA's complaint. [DMH aside: this was the first juncture during the argument when a question/answer pair wasn't immediately followed up by another question.] Attorney Levy: Mr. Pavlovich is a smart man, but that doesn't mean he wanted to harm an industry. Generalized industry effects in a forum never have been held sufficient for jurisdiction. And as for the presence of these industries in California, five of the seven major movie studios in the world are located outside the U.S. (consider the enormous movie industry in India). On the computer front, IBM is in New York; Dell and Compaq are in Texas. You can't have jurisdiction based on wherever one state decides is the center of an industry. And, the likelihood of harm in any forum is not enough; you need targeting. Bear in mind that in its reply to the amicus brief submitted in this case by the ACLU, DVDCCA states that its Japanese predecessor in interest to the CSS license could have come to California and sued Pavlovich; under the overbroad scenario DVDCCA urges, then, this opens the doors of the California courthouse to every plaintiff, everywhere, who wants to file here.
And thus ended the argument, more or less. I'm interested to hear others' thoughts on the exchange, and will be distilling my own in greater detail for LLRX's September 15 update.

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