Appeals Court Hears Oron's Plea to Unfreeze Assets

Rhett Pardon

SAN FRANCISCO — The 9th U.S. Circuit Court of Appeals on Monday heard's oral argument that a federal judge overreached his authority when he approved a preliminary injunction that froze all of the defunct file-locker site's U.S. assets.

Falcon and Raging Stallion's parent company, DataTech Enterprises, sued Oron for unspecified damages in August after it found at least 400 titles on the site that were involved in more than 40,000 separate acts of infringement.

A month after filing the suit, U.S. District Judge Charles Breyer ruled that he would grant a preliminary injunction to halt infringement and allow early discovery proceedings against Oron, which is based in Hong Kong.

DataTech, at the time, was able to convince Breyer to freeze Oron' s U.S. assets in its PayPal, CCBill, AlertPay accounts, as well as other U.S. financial institution accounts.

Oron later requested the court to unfreeze some of the funds to pay attorneys fees and business expenses, but Breyer wouldn't budge, setting a showdown at the 9th Circuit.

On Monday, the three-judge appeals court panel sounded inclined to uphold the preliminary injunction against Oron but suggested that  Breyer may have overreached — or "overseized," as one judge put it — by freezing all of Oron's assets, rather than just some, according to The Recorder, a San Francisco-based legal publication.

Oron's counsel, Evan Fray-Witzer, said the preliminary injunction was inappropriate because the only dispute is over monetary damages under the Copyright Act, and that Breyer unfairly put the burden on Oron to prove how much of its profits did not come from DataTech content.

Fray-Witzer compared Breyer's order to shutting down General Motors Co. over the use of a copyrighted photo in an annual report.

"This is the nuclear bomb of litigation," Fray-Witzer argued. "Litigation against an alien defendant creates a higher jurisdictional barrier."

But one jurist wasn't moved by Oron's argument that it doesn't have sufficient U.S. contacts to be subject to U.S. court jurisdiction. Oron registered its domain name with a U.S. registrar and relied on U.S. customers for 12 percent of its revenue.

"Like it or not," 9th Circuit Judge M. Margaret McKeown said, "your case lands in a different world than some of the prior cases about extraterritoriality."

Adult industry attorney Gill Sperlein, who represents DataTech, told XBIZ on Tuesday that the most interesting aspect of the argument is a question of legal theory that would determine whether the injunction was proper. Sperlein argued against Oron's appeal before the 9th Circuit panel yesterday.

"We think the court of appeal recognized the Judge Breyer was correct on this issue and the injunction was proper," he said. "Oron did not argue that the injunction was impermissibly broad and don't believe that question was properly before the court."