Foreign websites that use geotargeted advertising may be subject to personal jurisdiction in the United States, even if they have no physical presence in the United States and do not specifically target their services to the United States, according to a new ruling from the Fourth Circuit Court of Appeals.

In UMG Recordings, Inc. v. Kurbanov, twelve record companies sued Tofig Kurbanov, who owns and operates the websites: flvto.biz and 2conv.com. These websites enable visitors to rip audio tracks from videos on various platforms, like YouTube, and convert the audio tracks into downloadable files.

The record companies sued Kurbanov for copyright infringement and argued that a federal district court in Virginia had specific personal jurisdiction over Kurbanov because of his contacts with Virginia and with the United States more generally. Kurbanov moved to dismiss for lack of personal jurisdiction, and the district court granted his motion.

The district court found that both flvto.biz and 2conv.com were semi-interactive, that the visitors’ interactions with them were non-commercial, and that Kurbanov did not purposefully target either Virginia or the United States. As a result, the court ruled that no federal court in the United States had personal jurisdiction over Kurbanov and to exert such jurisdiction would violate due process. On appeal, however, the Fourth Circuit reversed the district court’s ruling and remanded the case.

Facts of the Case

Tofig Kurbanov is a Russian citizen.  He was born in and still resides in Rostov-on-Don, Russia. He has never worked on his websites in the United States, does not employ anyone in the United States, and has never even visited the United States.

While flvto.biz and 2conv.com are largely used to rip music from YouTube, Kurbanov asserts that his websites could also have non-infringing uses such as by a professor or a student to download the audio from a video lecture or by parents who may want to keep only the audio track from a video of their child’s school concert.

Flvto.biz and 2conv.com are free to use, and users are not required to create an account or register to use the ripping service. Kurbanov does not maintain any relationship with the websites’ users other than requiring them to agree to the websites’ Terms of Use before they can download audio files.

Kurbanov’s websites are free. He makes money by selling advertisements. His websites have geolocation or geotargeting capabilities, which can record users’ IP addresses and countries of origin. This allows the websites to carry geotargeted ads, which in turn attract advertising brokers and advertisers who want to display specific advertisements to certain countries, states, or cities. But Kurbanov does not sell advertising space on the websites directly to advertisers.  Instead, he sells advertising space to advertising brokers who then resell that space to advertisers.

Kurbanov claims that he has no direct relationship or communication with any of the advertisers on his websites and he has little control over the relationship that the brokers have with the advertisers. Furthermore, he has no control over which advertisers are selected for the geotargeting advertisements.

While many of the advertising brokers that Kurbanov uses are based in the Ukraine, at least two of them are based in the United States: one in New York and one in California.

Flvto.biz and 2conv.com are very popular. They are two of the most popular stream-ripping websites in the world. Between October 2017 and September 2018, they had over 300 million visitors from more than 200 countries around the world. About 10% of these websites’ users come from the United States Within the United States and about 2% of those users are in Virginia.

Kurbanov’s websites do have a few other contacts with the United States. For example, his domain names are registered with a U.S.-based domain name registrar and the websites’ top-level domains, “.com” and “.biz,” are administered by companies headquartered in Virginia. The sites have a registered Digital Millennium Copyright Act (DMCA) agent in the United States. And, until July 2018, his websites’ servers were hosted by a global web services provider, which has servers in Virginia. Other than those contacts which many foreign website owners share, Kurbanov has no connections to the United States.

Specific Personal Jurisdiction

The parties agree that there is no general personal jurisdiction over Kurbanov in Virginia. But, the record companies assert, among other things, that there is specific personal jurisdiction over Kurbanov in Virginia under Fed. R. Civ. P. 4(k)(1). Rule 4(k)(1) provides that a district court may exercise personal jurisdiction over Kurbanov if he is “subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located” like Virginia. That exercise of jurisdiction is lawful as long as it is authorized by the state’s long-arm statute and the application of the long-arm statute is consistent with the due process clause of the Fourteenth Amendment.

To meet constitutional due process requirements for personal jurisdiction, Kurbanov must have “minimum contacts” so that “the maintenance of the suit does not offend traditional notion of fair play and substantial justice.” To satisfy this, the record companies must show that Kurbanov “purposefully directed his activities” at Virginia residents and that their cause of action “arise[s] out of” those activities. The Fourth Circuit created a three-prong test for specific personal jurisdiction: “1. The extent to which the defendant purposefully availed itself of the privilege of conducting activities in the State; 2. Whether the plaintiffs’ claims arise out of those activities directed at the State; and 3. Whether the exercise of personal jurisdiction would be constitutionally reasonable.”

In most matters, the purposeful availment analysis requires that the court examine the quality and nature of the party’s connections to the forum state such as whether the person maintained offices or agents in the state or whether the person deliberately tried to initiate business in the state. But, in the context of websites, the analysis is often different. Courts generally use the sliding scale or “Zippo test” to help determine a website’s purposeful availment. The Zippo test requires that a court examine the website’s level of interactivity and commercialism. The more interactive and commercial a website is, the more likely a court will have jurisdiction over it.

In this case, the Fourth Circuit decided that Kurbanov’s websites were somewhat interactive because they record users’ IP address and because visitors must agree to the Terms of Use in order to access the websites. The Court also stated that it is not necessary to determine if a website is highly or only semi-interactive for personal jurisdiction. It found that it is more important to examine whether Kurbanov intentionally directed his activities at Virginians. When examining Kurbanov’s actions, the Court decided that Kurbanov had purposefully availed himself of conducting business in Virginia because many Virginians used his websites and because the geotargeted advertising on his websites targets customers like those in Virginia with local ads.  Since Kurbanov makes money from these advertisements, the Court reasoned that this made his websites commercial in nature and that, as a result of these geotargeted ads, Kurbanov is exploiting his Virginia user base for commercial gain.

The Fourth Circuit also found that the second prong of the personal jurisdiction test was satisfied: The record companies’ claims did arise out of Kurbanov’s contacts with Virginia. In reaching this conclusion, the Court reasoned that Kurbanov did not just create a website that happened to be accessible by Virginians.  Instead, he “actively facilitated the alleged music piracy through a complex web involving Virginia visitors, advertising brokers, advertisers, and location-based advertising.” It was this “complex web” that gave rise to the record companies’ copyright infringement claims.

Finally, the Court did not analyze the third prong of its test since the district court had not done so. Instead, it remanded the case to the district court to perform a reasonability analysis.

Key Takeaway

Prior court decisions have found geotargeting of advertisements in the forum state generally insufficient to establish personal jurisdiction, in particular where the claim does not arise out of the advertisement itself.

Thus, website owners that use geotargeted ads should take note. Just because they do not have a physical presence in the United States and do not intentionally seek to attract users from the United States, does not mean that they are safe from being hauled into a U.S. court.