THE CALIFORNIA DVD CASE:
An Important Personal Jurisdictional Ruling Restricts Where the DVD Industry Can Sue For Alleged Internet Trade Secret Infringement

The DeCSS code is a popular method for unscrambling the encryption code (CSS) that prevents people from copying DVDs. Recently, the California-based DVD Copy Control Association sued Matthew Pavlovich and other defendants for trade secret infringement, alleging that he had posted the DeCSS code on a website as early as October 1999.

Pavlovich was the founder and project leader of the LiVid video project. The project sought to "improve video and DVD support for Linux," a free open-source operating system for personal computers, and thus to defeat the CSS technology and enable the decryption and copying of DVDs containing motion pictures.

However, on Monday, the California Supreme Court ruled, 4-3, that the suit against Pavlovich cannot proceed in California. Rather it must occur in Texas, where he now resides, or in Indiana, where he was located (as a student at Purdue) when he allegedly posted the code. The decision reversed earlier lower court rulings allowing California jurisdiction.

The decision was purely jurisdictional: As the majority stated, "Pavlovich may still face the music—just not in California." Still, the ruling is an obvious setback for the DVD industry.

For the last three years, the industry has been fighting a legal battle to try to block Internet distribution of the DeCSS code. It now may have to sue alleged infringers wherever they reside, and may not be able to seek consolidation of numerous suits even if they raise the same issues. Previously it seemed that the DVD industry would be able to sue any Web publisher in California (after all, websites can be accessed in every state), and force the individual to litigate there.

The industry plaintiffs have stated that they may seek U.S. Supreme Court review. Let us hope the Court heeds their request. A Supreme Court decision in this case would indeed be helpful, since jurisdictional issues relating to the Internet remain unsettled.

Applying Personal Jurisdiction Rules to Internet Postings

Personal jurisdiction is jurisdiction over the defendant himself - literally, in the case of an individual, over his person. For personal jurisdiction to exist, the Supreme Court has said, a defendant must have sufficient "minimum contacts" with the state that the assertion of jurisdiction over him or her does not violate "traditional notions of fair play and substantial justice."

It is enough, for instance, if the defendant has "purposefully directed" his activities at residents of the forum, and the litigation results from alleged injuries that arise out of or relate to those activities. In that case, he "should reasonably anticipate being haled into court there."

The majority found it relevant that Pavlovich's site "merely posts information and has no interactive features." Merely posting the DeCSS code on the Internet, the majority held, did not show any intent to impact a California business.

The dissenters strongly disagreed. They pointed out that Pavlovich's site was intended to defeat the CSS technology and allow people to decrypt DVDs nationwide - including in California. To them, then, it was hardly "passive."

The dissenters also noted that Pavlovich knew that posting the DeCSS code would harm the movie and DVD industries, which he knew or should have known were centered in California. (Pavlovich, however, said he did not know the specific identity or location of the CSS licensing agency plaintiff when he posted the material at issue; the dissent said this was irrelevant.)

What Was the Internet's Role In The Jurisdiction Decision?

Although both the majority and the dissent purported to apply traditional, long-established personal jurisdiction rules, did the fact that the material at issue was posted on the Internet play a role? Certainly.

The majority worried that if even "passive" sites could be liable, "mere use of the Internet would subject the user to personal jurisdiction in any forum where the site was accessible." And targeting an industry, it insisted, was not the same as targeting a state. Otherwise, "plaintiffs connected to the auto industry could sue any defendant in Michigan, plaintiffs connected to the financial industry could sue any defendant in New York, and plaintiffs connected to the potato industry could sue any defendant in Idaho."

On the other hand, the dissent worried that the majority's opinion could allow lawbreakers to hide behind the Internet, knowingly causing harm in a particular state but still escaping being sued there.

The dissenters agreed with the majority that "the maintenance of a passive Internet Web Site" is not enough to establish jurisdiction in every state, and that such a site "is just a way of allowing interested persons to search for and retrieve information stored in remote computers." But the dissenters believed Pavlovich's site to be much more than a mere library anyone could

access. They thought it was more like a "television broadcast which all or none may watch as they choose or a recorded toll-free telephone message which all or none may hear as they choose."

In the end, all these comparisons may be insufficient - the Internet is not really like a library, or a television broadcast, or a toll-free number. And the DVD industry is not really like the auto, financial, or potato industries either. For new media, new rules - including new jurisdictional rules - may have to be devised.

We can only hope the U.S. Supreme Court will step in and help establish some bright-line rules to help the lower courts sort out the vexing jurisdictional issues the Internet raises.