By Neville L. Johnson and Douglas L. Johnson

Long-Arm Jurisdiction and Internet Defamation

A California Court of Appeal recently decided that it could exercise its long-arm jurisdiction over a Canadian defendant in an online defamation case.1 Yue, a California resident, established and moderated a Chinese language community on a website called “Zhen Zhu Bay” (ZZB).2 Defendant Liu, also a California resident, owns and operates a website called Yeyeclub.com (Yeyeclub).3 Yang posted sexually explicit, violent and insulting posts both on ZZB and Yeyeclub.4 Yue removed Yang’s posts, while Liu did not, instead encouraging Yang to continue his posts.5 Yang proceeded to post numerous defamatory statements on Yeyeclub about Yue.6 Yue subsequently sued several defendants, including Yang and Liu, for defamation and unfair competition.

Yang moved to quash the complaint, arguing that the court lacked personal jurisdiction over him because he was a resident of Canada and lacked minimum contacts with California, as Yeyeclub was a website in which users interacted anonymously.8 Yue, in his opposition, argued that the court had specific personal jurisdiction over Yang because Yang had purposefully availed himself of the forum benefits when he intentionally aimed his defamatory comments at California, which is where many of Yeyeclub’s users reside, and many of Yang’s posts mentioned traveling to California to harm Yue.9 The trial court granted the motion to quash, relying on Burdick v. Superior Court,10 reasoning that the court had no personal jurisdiction over Yang because the interaction between Yue and Yang took place on the internet, and simply posting information on websites was not enough to satisfy the minimum contacts rule.11 The trial court did not address the content of the posts themselves.12

The Court of Appeal reversed, distinguishing the case from Burdick.13 In Burdick, the plaintiffs, a group of physicians and others, had made posts on Facebook about the safety and efficacy of a skincare product.14 In retaliation, a representative of the skincare company in Illinois made a public Facebook post suggesting that those who had made the initial posts had criminal histories.15 There, the court held that it could not exercise personal jurisdiction over the Illinois defendant because merely making a post on the internet knowing that the plaintiff resides in a forum state, without evidence of a California audience or focus, was not enough to establish minimum contacts.16 In contrast to Burdick, the Court of Appeal noted that Yang had done far more than simply post on the internet.17 He had communicated with Yue directly, mentioned  Yue in his posts, had even threatened to come to California to harm Yue, had repeatedly referred to California and had suggested criminal liability in California.18 This, combined with the fact that Yue had offered uncontradicted evidence that Yeyeclub had a California audience and that California residents had read the posts, was enough to show a sufficient California connection.19 Therefore, the court reversed the motion to quash and reinstated the complaint.20

Although it remains difficult to bring an action for defamation based on anonymous internet postings, this holding removes jurisdictional hurdles that California plaintiffs face when attempting to recover for defamation by individuals living in different states and/or countries. In contrast, New York’s long-arm statute permits the state to exercise personal jurisdiction over non-resident defendants in much narrower circumstances than California’s long-arm statute.21 There is a business transaction requirement, which means that simply directing a statement into the state is insufficient.22 Therefore, if a party engages in a business transaction in New York, and makes defamatory statements about that transaction outside of New York, including on the internet, then a court will have jurisdiction.23 This requirement makes it difficult to bring a defamation action against an out of state defendant in online harassment contexts, especially in the age of social media, because it specifically requires the online posting to be based on a business transaction.24 As a result, a court in New York would likely not be able to reach an out of state defendant as the California Court of Appeal was able to in Yue v. Yang, as described above.25

The Ninth Circuit Gives Hollywood Studios Even More Protection

The Ninth Circuit lived up to its name of being the “Hollywood Circuit” when it ruled in favor of Disney in a copyright infringement case regarding the characters of its animated hit Inside Out in the case Daniels v. Walt Disney Co.26 Denise Daniels is a renowned child psychologist specializing in teaching children how to cope with their emotions who developed a line of anthropomorphic characters called The Moodsters.27 The Moodsters are an ensemble of graphic characters who live inside a child and are color-coded, each representing a different emotion.28 Daniels hired a team to help her develop the characters into a television show, which resulted in a “bible” for the show and an animated pilot episode.29 The team then developed a second generation of characters that were sold at Target and other retailers as toys.30 Daniels and her team began to pitch the idea for the show to numerous entertainment and media companies, one of them being Disney, in 2008.31 Disney ultimately passed on the project, and subsequently began to develop the film Inside Out, an animated movie that features five anthropomorphized emotions that live inside the mind of an 11-year-old girl.32 Inside Out was released in 2015, and Daniels filed suit for breach of implied-in-fact contract and copyright infringement in 2017.33 Disney filed a motion to dismiss, arguing that Daniels had failed to allege that she in fact owned the characters.34

The district court held in favor of Disney, reasoning that Daniels had failed to allege that the characters were protected by copyright.35 Daniels appealed to the Ninth Circuit, arguing that her characters were entitled to copyright protection.36 In evaluating the claim, the Ninth Circuit used the Towle test to determine whether The Moodsters were in fact copyrightable.37 This test requires that a character (1) have physical and conceptual qualities; (2) be sufficiently delineated such that it is recognizable whenever it appears; and (3) be especially distinctive, containing some unique elements of expression.38 After a lengthy analysis, the Court held that the characters did not pass the test because, although they had physical and conceptual qualities, the characters were not broadly recognizable and their traits were not that distinctive, considering that colors and emotions themselves are not copyrightable elements.39 The Ninth Circuit did not stop there. In addition to the Towle test, the Court reversed its apparent course since the 1970s and revived the “Story Being Told” test40 as an applicable standard, a test that had previously been limited to only literary characters and presents the highest bar to character copyrightability.41

This case sets a high bar for character copyrightability that disadvantages independent creators who do not have the resources to widely disseminate the works in which their characters live.

The Andy Warhol Case Takes Another Turn42 

Lynn Goldsmith is a photographer who owns the copyright in a black and white photograph of Prince, which is at the heart of this copyright dispute.43 Goldsmith took a total of 23 photographs of Prince at a session in 1981, one of which she licensed to Vanity Fair in 1984.44 The license permitted the photograph to be used as an artist reference for an illustration that Vanity Fair would publish in its November 1984 issue.45 Unbeknownst to Goldsmith, the artist that was going to create a work based on the photograph was Andy Warhol.46 Vanity Fair published the Warhol illustration together with an attribution to Goldsmith.47 Furthermore, unbeknownst to Goldsmith was that Warhol had created 15 additional works based on the photo, comprising of 14 silkscreen prints and two pencil illustrations.48 At some point after Warhol’s death, the Andy Warhol Foundation (AWF) acquired title and copyright to the Prince series.49 After Prince died in 2016, AWF licensed the series to Condé Nast for the cover of a planned tribute magazine, which was published in May 2016.50 It was at this point that Goldsmith became aware of the Prince series, which led her to contact AWF to advise it of the perceived infringement of her copyright in the original photograph.51 She then registered the photo with the U.S. Copyright Office as an unpublished work.52 In 2017, AWF sued Goldsmith for a declaratory judgment of non-infringement and, in the alternative, fair use.53 Goldsmith countersued for copyright infringement.54 On July 1, 2018, the district court granted summary judgment for AWF on its fair use claim, holding that the Prince series met all four fair use factors.55 Goldsmith appealed.56

The Second Circuit held that Warhol’s use of Goldsmith’s photograph was not fair use because the fair use factors weighed strongly in favor of Goldsmith.57 The Court found that the series was not transformative, as it had retained the essential elements of the photograph without significantly altering or adding to them; the photograph was creative in nature and unpublished; the series borrowed significantly from the photograph both qualitatively and quantitatively; and even though the primary market for the photograph and the series may differ, the use of the photograph in the series posed a cognizable harm to Goldsmith’s market to license the photograph.58 While the legal community is still debating whether this analysis was proper and the ramifications of this decision, what is also interesting about this holding is that the Court found the photograph and the series to be substantially similar as a matter of law, an analysis that is often reserved for a jury, that the lower court had not engaged in due to its fair use finding.59 The Court reasoned that it was appropriate to engage in the substantial similarity analysis since access to the photograph had been conceded by AWF, and the photograph and Prince series were so substantially similar that reasonable jurors could not possibly differ on the issue.60 The Court then held that the works were substantially similar as a matter of law because Warhol had not created the series by taking his own photograph of Prince or tried to convey the same idea by using a different subject—he had produced the series by directly copying the photograph.61 The Court did acknowledge that not all instances of copying in this manner constitute a work that is substantially similar to the original.62 However, in this particular instance, there was no reasonable debate to the contrary, given the degree to which Goldsmith’s photograph remained recognizable within the Prince series.63

The AWF has since filed an en banc petition with the U.S. Court of Appeals for the Second Circuit, asking for a rehearing of the case.64

The fitting process involved inserting silicone into the ear in order to form a synthetic mold of the ear.67 While none of the other contestants had any issues, Smith experienced pain in his right ear after the impression process started, and his ear bled after the licensed hearing aid dispenser removed the silicone mold.68 Smith then saw an ear, nose, and throat specialist, who informed him that 80% of the right eardrum was missing.69 Smith sued American Idol for negligence.70 American Idol filed a motion for summary judgment, arguing that the claim was precluded due to the release and waiver language contained in the contestant agreement that Smith had signed.71 In opposition, Smith argued that the agreement was both procedurally and substantively unconscionable because he was not able to negotiate any terms and was forced to sign a dense 20-page document, and that the release and waiver did not apply to a claim for gross negligence.72 Unfortunately, the trial court did not agree, and granted American Idol’s motion for summary judgment.73 Smith appealed.74 

The Court of Appeal held that the waiver and release language in the contract was neither procedurally, nor substantively unconscionable, and that Smith had not presented sufficient evidence to support his argument that American Idol had been grossly negligent.75 On the unconscionability issue, the Court first reasoned that although the nature of the agreement was similar to a contract of adhesion due to the fact that Smith could not be on the show unless he signed it, the high level of scrutiny that would otherwise be applicable to adhesion contracts did not apply in this case, because the agreement did not involve any surprise or sharp practices.76 The Court then stated that there was only a low level of procedural unconscionability because Smith had been given weeks to review the agreement, he could have hired a lawyer to review the document, no one had lied to him in order to get him to sign it, the waiver and release language was clearly labeled in the document, and Smith had not alleged any duress on part of American Idol.77 The Court then moved on to the substantive unconscionabil- ity prong, and reasoned that waiver and release of future negligence claims was not substantively unconscionable because, under California law, these waivers are permissible so long as they do not violate public policy, and Smith had failed to meet his burden of proof on this issue.78 Therefore, the Court concluded that the agreement was enforceable.79

These contestant agreements are extremely one-sided, and there is no such thing as a meaningful negotiation between a contestant and a television studio in these situ- ations. In light of what the Court has held, as described above, anyone who wants to be on a television program should be aware of the rights that they likely will be signing away, and the consequences of doing so. Most of these agreements impose significant limitations on damages, and bind a participant to mediation or arbitration, which can be costly.

Endnotes

  1. Yue v. Yang, No. A159145, 2021 Cal. App. LEXIS 267 (Ct. App. Mar. 8, 2021).

  2. Id. at *1.

  3. Id. at *2.

  4. Id.

  5. Id.

  6. Id.

  7. Id.

  8. Id. at *3-4.

  9. Id. at *5.

  10. 233 Cal. App. 4th 8, 24-5 (2015) (holding that merely posting negative comments on the internet about the plaintiff and knowing the plaintiff is in the forum state are insufficient to create minimum contacts).

  11. Id. at *6.

  12. Id.

  13. Id. at *12.

  14. Burdick, 233 Cal. App. 4th at 14-15.

  15. Id.

  16. Id. at 25.

  17. Yue, No. A159145, 2021 Cal. App. LEXIS at *13

  18. Id.

  19. Id.

  20. Id. at 17.

  21. CPLR 302.

  22. Gary Null & Assoc. v. Phillips, 906 N.Y.S.2d 449, 455 (Sup. Ct. 2010).

  23. GTP Leisure Products, Inc. v. B-W Footwear, Co., 5391 N.Y.S.2d 489 (4th Dep’t 1977).

  24. CPLR 302.

  25. Yue v. Yang, No. A159145, 2021 Cal. App. LEXIS at *17.

  26. Daniels v. Walt Disney Co., 958 F.3d 767 (9th Cir. 2020).

  27. Id. at 770.

  28. Id.

  29. Id.

  30. Id.

  31. Id.

  32. Id.

  33. Id.

  34. Id.

  35. Id. at 771; Characters are unique in that they cannot be given copyright protection outside of the work in which they exist, which has led to different circuit courts to formulate different tests as to the copyrightability of characters. Walt Disney Productions v. Air Pirates, 581 F.2d 751 (9th Cir. 1978); Nichols v. Universal Pictures Corp., 45 F.2d 119 (2d Cir. 1930).

  36. Id. at 771.

  37. Id. at 771 (citing DC Comics v. Towle, 802 F.3d 1012, 1021 (9th Cir.

    2015)).

  38. Id.

  39. Id. at 771-74.

  40. This test requires a character to constitute the entire story being

    told. Warner Bros. Inc. v. CBS, 216 F.2d 945, 950 (9th Cir. 1954).

  41. Walt Disney Productions v. Air Pirates, 581 F.2d 751 (9th Cir. 1978).

42. For more information see article by Joel L. Hecker, Second Circuit Reverses Fair Use Decision—Holds Warhol Foundation Infringed Lynn Goldsmith’s Photo as a Matter of Law, on page 10 of this Journal.

43. Andy Warhol Found. For Visual Arts, Inc. v. Goldsmith, 2021 U.S. App. LEXIS 8806, *6 (2d Cir. 2021).

44. Id. *6-7.

45. Id.  at *7.

46. Id.

47. Id.

48. Id. at *8.

49. Id.  at *9

50. Id.  at *10.

51. Id.

52. Id.

53. Id.

54. Id.

55. Id.

56. Id.

57. Id. at *14-48.

58. Id.

59. Id. at *48.

60. Id. at *51.

61. Id. at *52.

62. Id.

63. Id.

64. Petition for Rehearing/Rehearing En Banc, on Behalf of Appellee The Andy Warhol Foundation for the Visual Artist, Inc., Filed 4/23/2021, The Andy Warhol Foundation v. Goldsmith, Docket No. 19-02420 (2d Cir. Aug 07, 2019).

65. Smith v. Am. Idol Prods., No. B301534, 2021 Cal. App. Unpub. LEXIS 2524, *2 (Apr. 20, 2021).

66. Id.
67. Id.
68. Id. at *3.
69.
Id. at *4.
70.
Id. at *4-9.

71. Id. at *9.
72.
Id.
73. Id.
74. Id.
75. Id. *9-21.
76.
Id. at *15.

77. Id. at *16.

78. Id. at *17-19.

79. Id. at *19

Neville L. Johnson and Douglas L. Johnson are partners at Johnson & Johnson LLP, in Beverly Hills, CA, practicing entertainment, media, business and class action litigation. Suna Izgi is a law clerk there and a student at Southwestern Law School who helped in drafting this article.