United States: Efforts To Censor American Speech With Foreign Injunctions Dealt Another Blow By California Court

A little over a year ago, the Supreme Court of South Australia issued an injunction ordering the Electronic Frontier Foundation to remove a post on its "Stupid Patent of the Month" blog criticizing the litigation and patent practices of Global Equity Management (GEMSA), an Australian corporation. EFF took the fight back to the United States, seeking a declaratory judgment that the injunction was unenforceable and violated American free speech rights. Despite having several pending patent lawsuits in the same district, GEMSA failed to appear in the proceedings. On November 17, 2017, Judge Jon S. Tigar of the U.S. District Court for the Northern District of California granted a default judgment to EFF in Electronic Frontier Foundation vs. Global Equity Management (SA), and ruled that EFF's blog post is protected speech.

The GEMSA decision, which follows fast on the heels of a similar ruling in the Northern District of California in Google v. Equustek, marks the second time in recent months that a U.S. federal court has rebuffed efforts to enforce foreign injunctions that threaten the speech of American actors.

"Stupid Patent of the Month"

In June 2016, EFF published an article on its "Stupid Patent of the Month" blog slamming a GEMSA patent and the company's allegedly abusive litigation practices. EFF is a nonprofit organization that advocates digital civil liberties, and its "Stupid Patent" blog series takes aim at patents that EFF believes stifle innovation. The patent at issue claimed the idea of using "virtual cabinets" to graphically represent data storage and organization, and GEMSA had already sued dozens of American internet companies for infringement based on running websites with graphical user interfaces.

GEMSA took swift action. It asserted that the article was defamatory and demanded that EFF retract it, apologize and pay damages. Rather than respond to EFF's request for clarification, however, GEMSA filed suit in the Supreme Court of South Australia (without properly serving EFF). The company sought an order requiring EFF to remove the article and enjoining it from publishing anything about GEMSA. The Australian court issued the injunction, and GEMSA demanded that EFF comply.

EFF responded with a lawsuit of its own, this time in the U.S. District Court for the Northern District of California. Its action sought relief from the injunction under the Securing the Protection of our Enduring and Established Constitutional Heritage Act (or SPEECH Act), 28 U.S.C. §§ 4101‑4105 and the Declaratory Judgment Act, 28 U.S.C. §§ 2201‑2202. Even though it had several pending infringement lawsuits in the Northern District concerning the same patent, GEMSA failed to appear. But the magistrate judge recommended denying EFF's motion for default judgment anyway, based on the finding that it lacked personal jurisdiction over GEMSA.

The District Court's Holding

EFF sought de novo review from the district court, which disagreed with the magistrate's decision and found several bases for asserting personal jurisdiction over GEMSA, including its letter demanding that EFF comply with the injunction. The court then moved on to default judgment inquiry, which primarily focused on EFF's likelihood of prevailing under its SPEECH Act claim.

The SPEECH Act prohibits U.S. courts from enforcing foreign defamation judgments unless the foreign law is at least as protective of speech as the First Amendment and forum state's law, or the defendant would have been found liable for defamation by a U.S. court applying U.S. law. The court held that, under either standard, the Australian injunction failed. For one thing, it constituted a prior restraint on speech that could not withstand strict scrutiny. For another, none of GEMSA's claims against EFF could give rise to defamation under U.S. and California law because they constituted protected opinions or lacked falsity. Indeed, the court also found that EFF would prevail under California's anti-SLAPP law (Strategic Lawsuits Against Public Participation), which allows courts to dismiss lawsuits targeting people for exercising their political or legal rights.

Takeaways

The GEMSA decision again demonstrates the willingness of U.S. federal courts (and specifically the Northern District of California) to recognize the free speech implications of foreign injunctions against American entities and refuse to enforce orders from foreign courts when the foreign law conflicts with the First Amendment. Although the default judgment context counsels caution before reading too much into it, GEMSA offers an early signal of how American courts might rule in the face of the growing trend among foreign courts of issuing injunctions that threaten speech interests.

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