Who does that apply to? Companies based in CA? Companies doing business with anyone in CA?
This isn't entirely unique to California by the way (although California is notable for reaching further than other U.S. states). For instance, there's a famous case (or series of cases) concerning the application of French law to Yahoo with respect to activity taking place on U.S. servers but accessible to French users. http://en.wikipedia.org/wiki/LICRA_v._Yahoo!
On a practical level, if you're worried about California law, you should consider if you have any people or resources located in California. Or in the U.S. generally. Or if you plan to expand to California at some point. It's one thing to break California law. It's another to have any assets that California can go after.
Pretty much any civil action is similar. Unless it's on a massive scale, ask a lawyer what you should do when someone appears intent on pushing a frivolous copyright suit on you. Sure, you have every right to use that content, but do you have the tens of thousands of dollars (minimum) and months or years in court to prove it? It's practically always easier to just accept that you've been bullied out of exercising your rights and replace the contested content with something that the claimant won't launch a frivolous suit over. Lawsuits are only worthwhile when the workaround is more expensive, which is often a hard standard to meet -- that's why most cases end in settlement.
