Fourth Circuit holds that Copyright Act has
extraterritorial reach when the type of infringement permits further
reproduction abroad
A group of companies (jointly “Alpha”) sued two groups of
foreign companies (“Al Dobowi,” based in the United Arab Emirates; and
“Linglong,” based in China) for copyright infringement. Alpha develops and
sells specialized tires for underground mining vehicles, trademarked as “Mine
Mauler.” Alpha filed copyright registrations for its tire designs.
It appears that a former Alpha employee gained access to
confidential documents about the Alpha tires and its customers, and shared them
with others, including Al Dobowi. Linglong agreed to manufacture the tires,
which were then sold under the brand name “Infinity.” Alpha soon noticed the
similarity of Infinity tires with its own Mine Mauler tires, and filed a
lawsuit in October 2009 in the U.S. District Court for the Eastern District of
Virginia. Eventually, the jury found for Alpha and awarded $26 million in
damages.
Al Dobowi and Linglong appeal, challenging the verdict and
the district court’s exercise of jurisdiction.
The U.S. Court of Appeals for the Fourth Circuit affirms in
part, reverses in part, and vacates in part. The Court finds that the district
court properly exercised jurisdiction over the defendants, and affirms the
judgment as to the Copyright Act and conversion claims, as well as the jury’s
damages award. However, the Court dismisses the remaining claims submitted to
the jury, and vacates the award of attorneys’ fees.
As for the merits of the case, Al Dobowi and Linglong argue
that The Copyright Act of 1976 (An Act for the general revision of the
Copyright Law, title 17 of the United States Code, and for other purposes, Pub.
L. 94‑553 (Oct. 19, 1976), 17 U.S.C. §§ 101‑810) has no extraterritorial reach.
“We hold that Alpha has presented a cognizable claim under
the Copyright Act and therefore uphold the jury’s finding of liability on that
count. We adopt the predicate‑act doctrine, which posits that a plaintiff may
collect damages from foreign violations of the Copyright Act so long as the
foreign conduct stems from a domestic infringement. No court applying the
doctrine has ascribed significance to the timeliness of domestic claims, and we
decline to endorse Appellants’ proposal that we limit its application to cases
where a domestic violation is not time barred.”
“As a general matter, the Copyright Act is considered to
have no extraterritorial reach. ¼ But courts have recognized a fundamental exception:
‘when the type of infringement permits further reproduction abroad,’ a
plaintiff may collect damages flowing from the foreign conduct. Update Art,
Inc. v. Modin Publ’g, Ltd., 843 F.2d 67, 73 (2d Cir. 1988).”
“This predicate‑act doctrine traces its roots to a famous
Second Circuit opinion penned by Learned Hand. See Sheldon v. Metro‑Goldwyn
Pictures Corp., 106 F.2d 45, 52 (2d Cir. 1939). The Second Circuit in Sheldon
was confronted with an undisputed domestic Copyright Act violation. The
defendant had converted the plaintiff’s motion picture while in the United
States and then exhibited the picture abroad. Id. The court was required to
decide whether the damages award could include profits made from foreign exhibition
of the film. Id. Answering the question in the affirmative, Judge Hand
articulated the framework of the predicate‑act doctrine:”
“‘The Culver Company made the negatives in this country, or
had them made here, and shipped them abroad, where the positives were produced
and exhibited. The negatives were ‘records’ from which the work could be
‘reproduced,’ and it was a tort to make them in this country. The plaintiffs
acquired an equitable interest in them as soon as they were made, which attached
to any profits from their exploitation, whether in the form of money remitted
to the United States, or of increase in the value of shares of foreign
companies held by the defendants. . . . [A]s soon as any of the profits so
realized took the form of property whose situs was in the United States, our
law seized upon them and impressed them with a constructive trust, whatever
their form.’”
“Id. Once a plaintiff demonstrates a domestic violation of
the Copyright Act, then, it may collect damages from foreign violations that
are directly linked to the U.S. infringement.”
“The Second Circuit has reaffirmed the continuing vitality
of the predicate‑act doctrine. Update Art, 843 F.2d at 73. In Update Art, the
plaintiff owned the rights to distribute and publish a certain graphic art
design. Id. at 68. Without authorization from the plaintiff, the defendant
published the image in an Israeli newspaper. Id. at 69. The court reasoned that
‘the applicability of American copyright laws over the Israeli newspapers depends
on the occurrence of a predicate act in the United States.’ Id. at 73. ‘If the
illegal reproduction of the poster occurred in the United States and then was
exported to Israel,’ the court continued, ‘the magistrate properly could
include damages accruing from the Israeli newspapers.’ Id. But if the predicate
act of reproduction occurred outside of the United States, the district court
could award no damages from newspaper circulation in Israel. Id.”
“More recently, the Ninth Circuit embraced the predicate‑act
doctrine. L.A. News Serv. v. Reuters Television Int’l, Ltd., 149 F.3d 987, 990‑92
(9th Cir. 1998). ¼
[¼]
At least two other circuits have recognized the validity of the predicate‑act
doctrine, even if they have not had occasion to squarely apply it to the facts
before them. Litecubes, LLC v. N. Light Prods., Inc., 523 F.3d 1353, 1371 (Fed.
Cir. 2008) (endorsing principle that ‘courts have generally held that the
Copyright Act only does not reach activities ‘that take place entirely abroad’
‘ (quoting Subafilms, 24 F.3d at 1098)); Liberty Toy Co. v. Fred Silber Co.,
149 F.3d 1183, 1998 WL 385469, at *3 (6th Cir. 1998) (unpublished table
decision) (‘[I]f all the copying or infringement occurred outside the United
States, the Copyright Act would not apply. However, as long as some act of
infringement occurred in the United States, the Copyright Act applies.’
(citations omitted)).”
“We join our sister circuits that have adopted the predicate‑act
doctrine. The doctrine strikes an appropriate balance between competing
concerns, protecting aggrieved plaintiffs from savvy defendants while also
safeguarding a defendant’s freedom from stale claims. Absent the predicate‑act
doctrine, a defendant could convert a plaintiff’s intellectual property in the
United States, wait for the Copyright Act’s three‑year statute of limitations
to expire, and then reproduce the property abroad with impunity. Such a result
would jeopardize intellectual property rights and subvert Congress’s goals as
engrafted on to the Copyright Act. But lest the doctrine lead to a windfall for
plaintiffs and force a defendant to face liability for stale claims, plaintiffs
may collect only those damages ‘suffered during the statutory period for
bringing claims, regardless of where they may have been incurred,’ L.A. News,
149 F.3d at 992.”
“Applying the predicate‑act doctrine to this case, we
conclude that Alpha has presented a valid claim under the Copyright Act.
Accordingly, we sustain the jury’s finding of liability on that count.”
“Distilling applicable case law, we find that a plaintiff is
required to show a domestic violation of the Copyright Act and damages flowing
from foreign exploitation of that infringing act to successfully invoke the
predicate‑act doctrine. Alpha has shown both. Appellants concede on appeal that
Alpha has established a domestic violation of the Copyright Act. While in the
United States, Vance and Al Dobowi unlawfully converted Alpha’s blueprints and
reproduced them absent authorization. These acts constitute infringing conduct
under the Copyright Act. See Update Art, 843 F.2d at 73 (concluding there would
be an actionable violation if defendant illegally reproduced image while in the
United States). And Alpha has demonstrated damages flowing from extraterritorial
exploitation of this infringing conduct. Al Dobowi and Linglong used the
converted blueprints to produce mining tires almost identical to those of
Alpha. They then sold these tires to former customers of Alpha, causing Alpha
substantial damage. See Sheldon, 106 F.2d at 52 (finding damages flowing from
foreign exploitation of infringing act where defendant converted negatives of
motion picture in United States and exhibited the film abroad).”
“Effectively granting the validity of the above analysis,
Appellants contend that the predicate‑act doctrine may not be employed when
recovery of damages from a domestic violation of the Copyright Act is barred by
the three‑year statute of limitations. Because the statute of limitations bars
Alpha from collecting damages for activities within the United States,
Appellants assert that the jury’s Copyright Act verdict may not stand.”
“We are not persuaded by Appellants’ creative interpretation
of applicable case law. It may be true that, in each of the cases in which a court
has invoked the predicate‑act doctrine, the plaintiff would have been eligible
to receive a damages award based solely on a domestic infringement. But courts
ascribed no relevance to this observation, never discussing the statute of
limitations and its effect on the predicate‑act doctrine. Quite the opposite,
at least the Ninth Circuit anticipated that a plaintiff may collect damages
from extraterritorial conduct, even if the statute of limitations bars an award
based on domestic infringement. L.A. News, 149 F.3d at 992 (‘Defendants’
argument that adoption of the Second Circuit rule would permit plaintiffs to
circumvent the statute of limitation by recovering damages for distribution
abroad occurring many years after the infringing act in the United States is
without merit. An action must be ‘commenced within three years after the claim
accrued.’ . . . A plaintiff’s right to damages is limited to those suffered
during the statutory period for bringing claims, regardless of where they may
have been incurred.’ (emphasis added)). That Alpha may not collect damages from
Appellants’ domestic activities is thus of no moment to the analysis, as the
district court accurately instructed the jury.” [Slip op. 19‑24]
Citation: Tire Engineering and Distribution, LLC v.
Shandong Linglong Rubber Company, Ltd., No. 10‑2271 (4th Cir. 2012).
**** Terik Hashmi is a business consultant serving businesses in the marketing realm. Among his clients are a medical service provider and an Online Reputation Management company. - Attorney Website at: https://terikhashmiattorney.com/ - Attorney Profile at: https://solomonlawguild.com/terik-hashmi%2C-esq# - Attorney News at https://attorneygazette.com/terik-hashmi%2C-consultant#eec97f53-49a0-4c94-869a-4847514cb694