In copyright infringement and false designation of origin action brought by owners of The Wall Street Journal and the New York Post, district court holds that San Francisco-based Perplexity AI Inc. is subject to personal jurisdiction and venue in New York.
News Corp.-owned Dow Jones & Company Inc. and NYP Holdings Inc., which publish The Wall Street Journal and the New York Post, respectively, sued generative AI company Perplexity AI Inc. in the Southern District of New York. Perplexity AI Inc. developed an artificial intelligence (AI) "answer engine" that allows users to type in questions and receive "coherent, easy-to-understand answers" based on "authoritative sources" compiled in a retrieval-augmented generation (RAG) database comprising publicly available articles, websites and journals deemed trustworthy by Perplexity. The plaintiffs, who own large libraries of registered copyrighted works and registered trademarks associated with their publications, allege two counts of copyright infringement—first, for Perplexity's alleged copying of the plaintiffs' works as inputs for its RAG index and, second, for Perplexity's provision of output responses to users that "contain full or partial verbatim reproductions of Plaintiffs' copyrighted articles." They also allege one count of false designation of origin and trademark dilution under the Lanham Act for Perplexity's generation of "made-up text (hallucinations) in its outputs and attribut[ion of] that text to Plaintiffs' publications using Plaintiffs' trademarks." The publishers allege that Perplexity users obtain information from their news articles while being diverted from the publishers' paid-access and ad-supported websites. Perplexity moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(2) (for lack of personal jurisdiction) and 12(b)(3) (for improper venue) or, alternatively, to transfer the action to the Northern District of California. Perplexity also moved to dismiss claims relating to 10 of the publishers' works for failure to state a claim pursuant to Rule 12(b)(6).
While Perplexity is incorporated in Delaware and headquartered in California, the publishers alleged the company is registered to do business in New York, has office space in New York, and employs high-level personnel who "develop, implement, maintain, and promote" Perplexity's technology in New York. Further, the publishers alleged that Perplexity is seeking to expand operations in New York by hiring additional employees there and developing a network of people to promote Perplexity at New York colleges and universities. The publishers also argued that Perplexity specifically markets its product to a New York audience, including on its website with a designated page inviting users to "Discover New York with Perplexity" and through marketing showing Perplexity's presence in Times Square.
Perplexity countered that the publishers did not establish a sufficient connection between their claims and Perplexity's contacts with New York. In analyzing Perplexity's motion to dismiss for lack of personal jurisdiction, the district court first looked to New York Civil Practice Law & Rules (CPLR) § 302(a)(1), which provides that a court may exercise personal jurisdiction "over any non-domiciliary ... who in person or through an agent ... transacts any business within the state," as long as the claims arise from that transaction. Noting Perplexity's physical presence in New York—renting an office and employing staff there—the district court held that Perplexity clearly transacts business in New York. It also concluded that Perplexity's operation of a highly interactive website available to and specifically directed at New Yorkers further established Perplexity's transactions in the state. Next, the district court found a nexus between Perplexity's business conduct in New York and the publishers' claims, based on the presence of at least some engineers in New York tasked with maintaining Perplexity's website, through which the alleged infringement occurs. The district court also found it likely, given Perplexity's webpage directed to New Yorkers, that at least some users who received allegedly infringing outputs were located in New York. Thus, the district court concluded that the publishers' claims arise from Perplexity's business activities in New York, subjecting Perplexity to personal jurisdiction in the state under CPLR § 302(a)(1).
Bolstering its determination, the district court also concluded that Perplexity is subject to personal jurisdiction pursuant to CPLR § 302(a)(3), which provides for personal jurisdiction over a defendant that commits a tortious act outside the state that causes injury within the state, provided the defendant expected or should have expected there to be consequences in the state. As Perplexity's website was created and primarily maintained in California, the alleged tortious infringing activities were deemed to have occurred outside New York. The district court found that the publishers suffered alleged injuries in New York in the form of lost content licensing revenue and lost subscribers, visitors and users due to the widespread availability of the allegedly infringing content on the internet. The district court further concluded that, due to its efforts to serve the New York market, Perplexity reasonably should have expected its actions to have consequences in New York. Finally, it determined that Perplexity met the final element of the long-arm jurisdiction analysis because the company derived substantial revenue from interstate or international commerce.
The district court then analyzed whether its exercise of personal jurisdiction comported with due process, which requires that the defendant have sufficient minimum contacts with the forum state and that the exercise of jurisdiction comport with traditional notions of fair play and substantial justice. Noting that "[g]enerally, if a defendant meets the contacts requirement under the long-arm statute, it also meets the minimum contacts requirement under the constitutional analysis[.]" The court held that Perplexity had contacts sufficient to meet first prong of the due process analysis. For the second prong, the district court considered the burden imposed on the defendant, the interests of the forum state in hearing the case, the plaintiffs' interest in obtaining convenient and effective relief, the judicial system's interest in an efficient resolution, and the interests of the state in furthering substantive social policies. The district court found that the balance of these factors weighed in the publishers' favor. Accordingly, the court denied Perplexity's motion to dismiss for lack of personal jurisdiction.
Next, the district court turned to Perplexity's motion to dismiss for improper venue pursuant to Rule 12(b)(3). Because Perplexity is subject to personal jurisdiction in New York and is therefore deemed to reside in the district, the court held that the venue is proper for the publishers' copyright claims under 28 U.S.C. § 1400(a), the federal statute governing venue for copyright claims. Similarly, the district court held that the venue is proper for the publishers' trademark claim under the Lanham Act.
Alternatively, Perplexity moved to transfer the case to the Northern District of California pursuant to 28 U.S.C. § 1404(a), which provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented." Courts have broad discretion to consider such motions based on "notions of convenience and fairness." First, a court must ask whether the case could have been initiated in the requested forum and, second, it must consider "whether the convenience of the parties and witnesses and the interests of justice favor transfer." In doing so, courts consider factors such as the convenience of the witnesses and parties, the location of relevant documents, the site of occurrences at issue, the availability of processes to compel witness attendance, the relative means of the parties, the forum's familiarity with the governing law, plaintiffs'choice of forum, and trial efficiency and interests of justice. Here, the district court first concluded that venue would be proper in the Northern District of California, given that Perplexity's principal place of business is in San Francisco. Next, it analyzed whether the factors favored transfer, ultimately concluding that the publishers' choice of forum in the Southern District of New York outweighed the fact that the majority of Perplexity's engineers are located in California; the other factors were construed as largely neutral.
The district court also rejected Perplexity's argument that the California forum selection clause in Perplexity end user license agreements mandated transfer. The court reasoned that the publishers were not "users" of Perplexity's website in the general sense, as they accessed the website only to investigate and plead their claims. On that basis, the district court denied Perplexity's motion to transfer.
Finally, the district court denied Perplexity's motion to dismiss claims relating to 10 copyrighted works under Rule 12(b)(6). In the original complaint, the publishers alleged infringement of 326 copyrighted works registered with the Copyright Office. After filing the complaint, the publishers registered 10 additional works with the Copyright Office. When publishers filed their first amended complaint, they revised their allegations to include those additional 10 works. Perplexity argued that pursuant to 17 U.S.C. § 411(a), which states that "no civil action for infringement of the copyright in any United States work shall be instituted until ... registration of the copyright claim has been made in accordance with this title," the 10 additional works registered after initiation of the suit could not be included in the action. The district court disagreed, distinguishing this case from actions where a plaintiff initially pleaded infringement of an unregistered work and then sought to fix the error by amending the complaint after registering the work. Here, the district court concluded that the publishers did not identify the 10 additional works in their original complaint, and did so in the first amended complaint only after those works were registered. The district court determined it would be inefficient to dismiss claims as to the 10 additional works and then force the publishers to file a new action as to those works.
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