On March 12, 2004 a New York District Court asserted jurisdiction over iMesh.Com, Inc., a file sharing company incorporated in Delaware, and its Israel-based subsidiary. Plaintiffs, a group of music recording companies, alleged that defendants operated an online peer-to-peer file sharing service which encourages and facilitates unlawful copying and distribution of plaintiffs’ sound recordings, thereby infringing their copyrights under U.S. copyright law. The Court denied defendants’ motion to dismiss, which was based on lack of personal jurisdiction, the doctrine of forum non conveniens and the plaintiffs’ failure to state a claim.First, the Court stated that personal jurisdiction may be exercised if New York’s long arm statute allows it and if the assertion of jurisdiction would comport with the requirements of due process. According to the Court, for the latter requirement to be met, defendants must have had “minimum contacts” with the State of New York and the assertion of jurisdiction must comport with “traditional notions of fair play and substantial justice”, which means that the exercise of jurisdiction must be reasonable under the circumstances of the particular case.
The Court found that under the New York Civil Practice Law & Rules, a foreign corporation is subject to general personal jurisdiction in New York if it does business in New York not occasionally or casually, but with a fair measure of permanence and continuity. As regards the Delaware-based defendant corporation, the Court found that this requirement was met, since (1) when it sought Delaware incorporation, it listed the address of its New York-based lawyers as its address, (2) it held meetings in New York, including meetings with its New York-based accountants, (3) it maintained and used a bank account in New York, and (4) it had filed suit in New York against an entity with whom it did business, and asserted in those pleadings that its place of residence was New York. The Court also found that these facts satisfied the due process inquiry.
As regards the Israel-based defendant, the Court concluded that that it was present in New York for purposes of personal jurisdiction because the Delaware–based parent corporation is present and, in the context of the alter ego doctrine, the parent treated its wholly-owned subsidiary as a mere department.
Second, the Court denied to dismiss under the doctrine of forum non conveniens. Defendants asserted that Israel was an available and more convenient forum, and that, if the case is not to be dismissed in favor of re-filing in Israel, then under 28 USC §1404(a) it should be transferred to the Central District of California. The Court found that the courts of Israel generally provide an adequate alternative forum for the adjudication of civil disputes, but that defendants’ motion was silent on the question of whether or not a suit on a US copyright may be brought in the courts of Israel by entities resident in the US, so that they had not shown an alternative forum. Moreover, the Court found that a weighing of the private and public interest factors would also have lead to a denial of the motion. In addition, the Court concluded that most of the plaintiffs had their principal place of business in New York, and that, apart from a few non-party witnesses and one of the Israeli-based subsidiary’s directors who reside in California, there was no particular nexus between California and defendants’ activities.
Third, the Court noted that plaintiffs alleged, among other things, that defendants themselves had “designed and operate knowingly, willfully and intentionally to facilitate the copying and distribution of plaintiffs copyrighted sound recordings without plaintiffs’ authorization,” so that plaintiffs did have set forth a claim that defendants are contributorily infringing plaintiffs’ copyrights.