Elec. Frontier Found. v. Global Equity Mgmt. (SA) Pty Ltd., Case No. 17–cv–02053–JST

290 F.Supp.3d 923

ELECTRONIC FRONTIER FOUNDATION, Plaintiff,

v.GLOBAL EQUITY MANAGEMENT (SA) PTY LTD., Defendant.

Case No. 17–cv–02053–JST

United States District Court, N.D. California.

Signed November 17, 2017

Duffy Carolan, Jassy Vick Carolan LLP, San Francisco, CA, Kevin Lester Vick, Jassy Vick, LLP, Los Angeles, CA, Matthew Edward Kelley, Ballard Spahr LLP, Washington, DC, Ashley Ivy Kissinger, Ballard Spahr LLP, Denver, CO, for Plaintiff.

ORDER REGARDING MOTION FOR DE NOVO DETERMINATION OF DISPOSITIVE MATTER ASSIGNED TO MAGISTRATE JUDGE

Re: ECF Nos. 27, 28, 29

JON S. TIGAR, United States District JudgeBefore the Court is Plaintiff Electronic Frontier Foundation ("EFF")'s motion for a de novo determination of a dispositive matter referred to the magistrate judge. ECF No. 27. EFF seeks default judgment against the Defendant Global Equity Management (SA) Pty Ltd. ("GEMSA"). The Court grants the motion, finds that there is personal jurisdiction, and grants default judgment in favor of EFF.

I. REQUESTS FOR JUDICIAL NOTICE

In conjunction with its motion, EFF seeks judicial notice of nine complaints that GEMSA filed in federal district courts against companies with principal places of business in California. ECF No. 28. The Court may take judicial notice of court filings. Bias v. Moynihan, 508 F.3d 1212, 1225 (9th Cir. 2007) (providing that a court "may take judicial notice of proceedings in others court ... if those proceedings have a direct relation to matters at issue."). Accordingly, the Court grants EFF's request for judicial notice of the nine publicly filed GEMSA complaints in federal district courts.¹

II. ADMINISTRATIVE MOTION TO AUGMENT THE RECORD

EFF also moved to augment the record under Civil Local Rule 72–3(b), 7–11 and 28 U.S.C. § 686. ECF No. 29. EFF seeks to add two declarations to the record: (1) A declaration from Kurt Opsahl, the General Counsel for EFF, describing EFF's connections with California (its property, banking, services, members, readers, and donors) and, (2) a declaration from Benjamin Weed, a partner at K & L Gates LLP who represents eBay in a suit in which GEMSA is suing eBay in another court in this district. ECF No. 29–3 ¶¶ 1–4. Weed explains that in January 2017, GEMSA's director Schumann Rafizadeh came to San Francisco for a several day mediation session, and, separately, for a two day deposition regarding the eBay suit. ECF No. 29–3 ¶ 7–8.

Under 28 U.S.C. § 636(b)(1), a district court "may ... receive further evidence" in reviewing a party's objections to a magistrate judge's findings and recommendations. Under Civil Local Rule 72–3(b), a party may move to augment the record to accompany a motion for de novo determination of a dispositive matter referred to a magistrate judge. Accordingly, this Court grants EFF's motion to augment the record and considers the declarations filed herein. ECF No. 29.

III. BACKGROUND

EFF is a nonprofit that aims to protect civil liberties as they relate to digital life, the internet, and other modern technology.

ECF No. 1 ("Compl.") ¶ 4. EFF advocates for free speech online and other civil liberties through litigation, blog posts, and policy analysis. Id. GEMSA is an Australian corporation that holds a number of patents and has filed several patent infringement lawsuits in the United States. Id. ¶ 5.

EFF also advocates for reform of the United States patent system, including through an article series called the "Stupid Patent of the Month." ECF No. 1 ¶ 9. The "Stupid Patent of the Month" series "call[s] attention to examples of questionable patents that stifle innovation [and] harm the public" each month in an effort to ultimately inspire patent reform. Id. ¶ 10. On June 30, 2016, EFF staff attorney Daniel Nazer published a "Stupid Patent of the Month" article about a patent owned by GEMSA, U.S. Patent No. 6,690,400 ("the '400 patent") and GEMSA's related litigation efforts. Id. ¶ 13; see Daniel Nazer, Stupid Patent of the Month: Storage Cabinets on a Computer, Deeplinks Blog (June 30, 2016), https://www.eff.org/deeplinks/2016/06/stupid-patent-month-storage-cabinets-computer (the "article"), available at ECF No. 1–5. The article explains that the '400 patent claims the idea of using a cabinet to graphically represent data organization, and that GEMSA uses this basic idea to sue "just about anyone who runs a website." Id. The article says that GEMSA "seems to be a classic patent troll." Id. The article calls on Congress to pass venue reform legislation to reduce the harm caused by frequent patent litigators like GEMSA. Id.

Two months after Nazer posted his article, GEMSA's counsel emailed EFF a demand letter, alleging that EFF had slandered the company and demanding that EFF retract the article, remove all copies of the article from the internet, issue an apology, and pay damages. Id. at ¶ 20–21. GEMSA demanded a response within two weeks, and threatened litigation if EFF did not comply. Id. ¶ 21. EFF responded by letter, seeking clarification. Id. ¶ 22. GEMSA did not respond, and instead filed suit against EFF in October 2016 in the Supreme Court of South Australia. Id. ¶ 23. GEMSA failed to properly serve EFF the lawsuit's initiating papers. Id. The lawsuit sought an order requiring EFF to immediately remove the article and restraining EFF from publishing any content regarding GEMSA's intellectual property. Id. ¶ 25. The lawsuit challenged nine specific statements in the article as misleading and negligent. Id. ¶ 27. For example, GEMSA alleged that: (1) EFF's statement that the '400 patent is "stupid" was false, (2) EFF's description of the patent did not "accurately depict the complexities" of the patent, and (3) EFF "did not have reasonable grounds" for stating that the local rules for the district court for the Eastern District of Texas, where GEMSA filed its cases regarding the patent, favor frequent patent litigators like GEMSA. Id. GEMSA alleged that EFF's article harmed GEMSA's litigation efforts in the United States, as demonstrated by cancelled mediations, and a court setting a Markman hearing. Id. ¶ 31–32. According to GEMSA, such harm was part of a conspiracy by EFF, Airbnb (a defendant in a GEMSA patent litigation case), and Mark Cuban (an EFF donor), though GEMSA did not provide further details on this alleged conspiracy. Id. Although EFF never appeared in the Supreme Court of South Australia, on October 31, 2016, that court issued an injunction against EFF which ordered EFF to immediately remove the article and restrained EFF from publishing any content regarding GEMSA's intellectual property. Id. ¶ 34. EFF faces asset seizure, imprisonment, and other potential penalties for failing to comply with the Australian injunction. Id.

GEMSA's counsel emailed EFF a second demand letter in January 2017 which included a copy of the injunction, and demanded that EFF remove the article, remove all references to the article across the internet, and pay $750,000 in damages. Id. ¶ 35. Counsel for EFF responded in February 2017 declining to comply as the injunction was unenforceable because EFF's commentary consisted of "substantially true facts, protected opinion, and rhetorical hyperbole." Id. ¶ 36. EFF has not removed the article and does not intend to do so, but nonetheless feels chilled from speaking about GEMSA's intellectual property. Id. ¶ 36–68.

EFF turned to this Court for declaratory relief from the injunction under the Securing the Protection of our Enduring and Established Constitutional Heritage Act (the "SPEECH Act"), 28 U.S.C. §§ 4101 – 4105 and the Declaratory Judgment Act, 28 U.S.C. §§ 2201 – 2202. EFF alleges that declaratory relief is due because the Australian injunction violates EFF's free speech rights under the United States Constitution and under California law, as the article's statements are true, opinion, hyperbole, or otherwise protected by the First Amendment. Id. ¶ 42. Moreover, EFF alleges that the Australian court's exercise of jurisdiction did not comport with United States due process, and therefore also did not comply with the Hague Convention. EFF seeks only a declaration (1) "that the Australian Injunction is repugnant to the United States Constitution and the law of California and the United States," and (2) "that the Australian Injunction cannot be enforced in the United States." Id. at 19.

GEMSA has not appeared in this action. ECF No. 14 at 10. Accordingly, EFF seeks default judgment on its claims. Id. EFF argues that default judgment is due because the Australian injunction was a prior restraint on speech, which would not survive constitutional scrutiny in the United States under the SPEECH Act and the Declaratory Judgment Act. Id. at 10. In its motion for default judgment, EFF also elaborates on this Court's jurisdiction over GEMSA. EFF explains that this case closely resembles a case where the Ninth Circuit found personal jurisdiction because defendants sent demand letters and served process against a California company in California, but obtained a French court's order against that plaintiff. Id. at 16 (citing Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199 (9th Cir. 2006) ).

Magistrate Judge James, who was originally assigned this case, ordered EFF to provide supplemental briefing on how the Court had personal jurisdiction over GEMSA under the Supreme Court's test articulated in Walden v. Fiore, ––– U.S. ––––, 134 S.Ct. 1115, 1122, 188 L.Ed.2d 12 (2014) and whether GEMSA was properly served. ECF No. 17. In its supplemental brief, EFF explained that in addition to the contacts with California alleged in the complaint, GEMSA retained counsel in California to prosecute three unrelated infringement actions. ECF No. 22 at 2 n.1. EFF also argued that GEMSA's successful effort to obtain the Australian injunction was a part of a "course of conduct explicitly aimed at suppressing a Californian's speech about litigation involving California companies such as Airbnb that is of interest to...