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Gone are the Barbary days when pirates would board a ship and grab the bounty with their own hands. Today’s copyright pirates with a click of their mouse need only download and transmit their bounty anywhere worldwide via the information superhighway with a modem or satellite. The changing landscape of the new global economy facilitates this new piracy modus operandi and leaves owners of copyrights particularly susceptible to infringement through the Internet or by intercepting broadcast signals in the United States and retransmitting those signals in other countries. What is worse, the extraterritorial bar to bringing copyright infringement suits in the United States allows this new breed of pirates to victimize copyright owners’ rights with impunity, unless Congress acts to address the extraterritorial bar or practitioners learn to plead their case through an exception that rebuts the presumption against extraterritorial copyright actions in the United States.

The Costs Of Extraterritorial Copyright Infringement To The United States Copyright Industries

Once thought to be a cottage industry or perhaps limited to end users for personal use, copyright piracy has grown to multinational dimensions that threaten US jobs and businesses. Pirated bootlegs distributed extraterritorially, according to Copyright Industries in the U.S. Economy: The 2004 Report, cost billions of dollars per year to industries whose primary purpose involves music, recording, motion pictures, radio and television broadcasting, newspapers, periodicals, book publishing, and computer software (the copyright industries).[1]

In the world’s first economic study to measure the impact of copyright infringement under the new 2003 standards of the World Intellectual Property Organization (WIPO), the International Intellectual Property Alliance (IIPA) estimated extraterritorial trade losses for the year 2003-04 due to copyright piracy of $702 million in the Middle East and Africa, $4.275 billion in Europe and the Confederation of Independent States, and $5.188 billion in Asia Pacific, for a grand total of $10.165 billion.[2]

Moreover, “[a]s the digital revolution and the Internet have become more important, the challenge of piracy has grown commensurately”[3] One such challenge, the presumption against the extraterritorial application of US copyright laws, presents an anachronistic roadblock that must be navigated in order to protect the copyright industries from modern day Barbary pirates.

An Overview of the Presumption against Extraterritoriality

Once upon a time, in 1818, the borders to the United States seemed more real, a concept born in real property and penetrable by land or sea. In that year, Chief Justice John Marshall applied the presumption against extraterritoriality to limit the reach of federal customs and piracy laws.[4] If the presumption against extraterritoriality applies, the court lacks subject matter jurisdiction, which presents a defense that litigants can raise at any stage of the litigation.[5] However, at the time that Chief Justice Marshall handed down the presumption against extra territoriality, he could not foresee satellites or the World Wide Web.

Almost a century later, in 1909, justice Oliver Wendell Holmes delivered the modern-day presumption against extraterritoriality in a case involving the Sherman Act. In that antitrust case, Justice Holmes held as follows:

"[T]he character of an act as lawful or unlawful must be determined wholly by the law of the country where the act is done [which] would lead, in case of doubt, to a construction of any statute as intended to be confined in its operation and effect to the territorial limits over which the lawmaker has general and legitimate power."[6]

Notwithstanding such renowned jurists as Marshall and Holmes, the Supreme Court has actually discarded the presumption in certain areas over the years. Ironically, the Supreme Court no longer applies the presumption to the Sherman Act[7] or antitrust cases.[8] Likewise, in Lanham Act[9] cases, the Supreme Court has seen fit to overcome the presumption.[10]

Copyright owners, in contrast, receive little protection from infringing acts that take place abroad. Even though the US Constitution empowers Congress to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors . . . the exclusive Right to their respective Writings,”[11] the Supreme Court in 1908 held that the Copyright Act[12] has no extraterritorial application.[13] Furthermore, international treaties are often inadequate.[14]

Are copyright owners hopelessly out to sea against the copyright pirates save for a response from Congress? Before abandoning ship, copyright owners need to increase the reach of the copyright protection by mastering the waters of pleading offensively to rebut the presumption of extraterritoriality.

Avoiding the Waters of Subafilms: A Defendant’s Right to Authorize Extraterritorial Sales with Impunity?

The Beatles accompanied Captain Fred in his yellow submarine to free Pepperland from music-hating Blue Meanies in the 1968 animated movie Yellow Submarine, as a joint venture with Subafilms Ltd. and the Hearst Corporation. The Fab Four and their yellow submarine would journey to the United States in 1994, when the Ninth Circuit in Subafilms, Ltd. v. MGM-Pathe Communications Co. torpedoed a theory that “a claim for infringement can be brought under the Copyright Act . . . when the assertedly [sic] infringing conduct consists solely of the authorization within the territorial boundaries of the United States of acts that occur entirely abroad.”[15]

MGM-Pathe had executed a license in the United States that authorized foreign distribution of videocassette of Yellow Submarine. Subafilms filed suit alleging, in part, infringement of the exclusive right under § 106 of the Copyright Act “to authorize” the use of the copyrighted works.[16]

The rub, according to the Ninth Circuit, was how MGM-Pathe could be liable under the Copyright Act for authorizing a third party’s conduct overseas when that third party’s activities would not constitute infringement under the “long-standing principle of American law ‘that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.’”[17] Thus, the Ninth Circuit held that a “mere authorization” that occurred “entirely outside of the United States does not state a claim for infringement under the Copyright Act..”[18]

Subafilms seemingly takes away the copyright owner’s § 106 exclusive right “to authorize” and gives it to the defendant who acts through a foreign affiliate. Can the Subafilms ruling on the “authorization” be plugged before the floodgates open to torrential foreign infringement of US copyrights? There is hope in the courts if copyright owners continue to plead this theory.

First, the Supreme Court denied certiorari in Subafilms and presumably is waiting for a sufficient split in the circuit courts. Thus, except in the Ninth Circuit, Subafilms is not binding and, as shown later, has been distinguished in district court decisions from other Circuits. As a result, the Supreme Court may someday hold (if copyright owners continue to plead the theory) that § 106 does not merely modify one or more of the enumerated rights but actually creates a separate and independent exclusive right “to authorize.”

Indeed, Congress added the words “to authorize” to § 106 in 1978. Legislative history, though sparse, is illustrative of congressional intent:

Use of the phrase “to authorize” is intended to avoid any questions as to the liability of contributory infringers. For example, a person who lawfully acquires an authorized copy of a motion picture would be an infringer if he or she engages in the business of renting it to others for purposes of unauthorized public performance.[19]

Moreover, the Supreme Court has noted that “an infringer is not merely one who uses a work without authorization by the copyright owner, but also one who authorizes the use of a copyrighted work without actual authority from the copyright owner.”[20] Hence, copyright owners may be encouraged and motivated to continue to plead this theory but to do so with an eye toward the differences between their facts and the facts of Subafilms.

Second, the holding in Subafilms may be distinguished as limited to cases of contributory infringement. By way of background, § 501(a) of the Copyright Act defines an infringer as follows: “Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 118 . . . is an infringer of the copyright..”[21] The Supreme Court has enumerated the elements of a claim for infringement as follows: (1) the plaintiff owns a valid copyright, and (2) the defendant copies constituent original elements of the work in violation of any one of these exclusive rights.[22]

Contributory infringement per se occurs when the defendant itself does not directly infringe the copyrighted works but instead knowingly induces, causes, or materially contributes to the infringing activity of the primary direct infringer.[23] Analyzing the theory of contributory infringement, the Supreme Court in the seminal case of Sony Corp. of America v. Universal Studios, Inc., found support in the Patent Act and its concepts of active inducement or contributory patent infringement.[24] In describing the defense to contributory patent infringement based on a showing that the products had significant non-infringing uses, the Supreme Court again relied on the Patent Act by analogy.[25]

Consequently, drawing a parallel to the Patent Act means that contributory copyright infringement first requires activity that constitutes direct infringement. In Subafilms, the only so-called direct infringement occurred abroad because none of the well-settled six enumerated rights happened in the United States, only the step of “authorizing” had. Therein lies a distinction.

For purposes of pleading contributory infringement or establishing a direct cause of action for illegal authorizations under the Copyright Act, and thereby overcoming a Subafilms defense, care must be taken to allege direct infringement occurring in the United States when the facts support it. Under the Federal Rules of Civil Procedure, one may assert “claims for relief,” which seeks redress of a distinct wrong (e.g., copyright infringement) regardless of the number of distinct legal theories because theories do not equal claims.[26] Therefore, no matter how many theories may be asserted against the defendant, the hook for contributory infringement by a defendant must be an act of primary infringement in the United States by that defendant based on at least one of the rights as provided by §§ 106 through 118 of the Copyright Act,[27] particularly if the overseas activity is legal where it takes place.

Hinging illegal authorizations under the Copyright Act on direct infringement in the United States transforms the tail that wags the dog into the claim for relief more familiar to the courts, while preserving the theory and the concomitant damages that can be proved to stem from the illegal authorizations. Therefore, the right-to-authorize theory would not be characterized as the tail that wags the dog; rather, it is just one part of the dog, and as a dog’s tail tends to do, sometimes it is tucked between the hind legs and sometimes it wags.

Navigating a Course Through Supreme Court Precedent in Order to Rebut the Presumption Against Extraterritoriality

The previous section suggested ways of avoiding Subafilms, but there may be times when copyright owners need to overcome the extraterritorial bar to bringing copyright actions. How, then, may the presumption against extraterritoriality be rebutted in order to recover against a defendant that ships overseas for distribution abroad? The solution begins with an understanding of Supreme Court precedent.

Historically, the American Law Institute (ALI), through its Restatements of Law series, signaled the refinements (exceptions) to the presumption against extraterritoriality. In 1965, for example, the ALI in the Restatement (Second) of Foreign Relations Law characterized the presumption against extraterritoriality as applying when no “conduct” and “effects” occurred in the United States; federal laws “apply only to conduct occurring within, or having an effect within, the territory of the United States.”[28] By the time of its 1987 Restatement (Third) of Foreign Relations Law, the ALI eliminated the presumption as “not reflecting] the current law of the United States.”[29]

Four years later, in 1991, Chief Justice William H. Rehnquist, writing for the Court in EEOC v. Arabian American Oil Co. (Aramco), forcefully invoked the presumption in a Title VII employment discrimination suit but acknowledged “that Congress has the authority to enforce its laws beyond the territorial boundaries of the United States.”[30] However, the Aramco court addressed the exception for the Lanham Act, as held in Steele v. Bulova Watch Co. decades earlier,[31] in a way that intimated a refinement of the presumption as seen in later cases. Distinguishing the facts of Steele, Chief Justice Rehnquist in Aramco emphasized that the allegedly unlawful conduct in Steel “had some effects within the United States.”[32] In Steel, the Supreme Court protected the owner of the trademarks from a defendant US citizen who had placed the Bulova name on watches he had assembled in Mexico and had sold in Mexico to US tourists who brought the watches into the United States.

The next year, in 1992, justice John Paul Stevens, writing in concurrence with the judgment, focused on where the “effects” of the conduct would be felt, regardless of where the conduct occurs in Lujan v. Defenders of Wildlife.[33] The issue in Lujan was whether the Eighth Circuit correctly applied the Endangered Species Act to species that, though endangered, were located abroad. The Endangered Species Act regulated activity of federal agencies, and the conduct, to wit the decision. making process, occurred largely in Washington, DC.

Because the plaintiffs were found to have lacked standing, the Supreme Court never reached the issue of whether to apply the presumption against extraterritoriality of federal statutes. Nonetheless, Justice Stevens’ concurrence illustrates an evolving analytical framework of whether an exception or refinement should apply to the presumption when the conduct occurs in the United States or when the conduct occurs elsewhere but the effects are felt in the United States as Aramco characterized Steele.

In the following year, 1993, the Supreme Court handed down three cases that raised the presumption against extraterritoriality. Writing for the court in Smith v. United States, Chief Justice Rehnquist held that tort claims arising in Antarctica could not be brought under the Federal Tort Claims Act (FTCA) after analyzing sources of congressional intent such as the language, structure, and legislative history of the FTCA.[34] Significantly, Chief Justice Rehnquist stopped short of applying the presumption against extraterritoriality as a clear statement of rule and instead characterized the presumption as requiring a “clear evidence of congressional intent to apply the FTCA to claims arising in Antarctica.”[35]

Justice Stevens, this time writing for the majority of the Court in Sale v. Haitian Centers Council, Inc., applied the presumption to the Immigration and Nationality -Act (INA) but, like the Smith Court, again stopped short of treating the presumption as a clear statement of rule.[36] There, the language of the INA prohibited state agencies from deporting aliens when they would be subject to persecution in the repatriated country. In a telling display of common ground for the more conservative and liberal sides of the bench and an important indicator of a refinement of the presumption against extraterritoriality, the Sale Court considered “all available evidence.”[37]

Returning full circle to justice Oliver Wendell Holmes and the Supreme Court’s modern-day pronouncement of the presumption against extraterritoriality and application of the presumption to the Sherman Act, in an opinion by Justice David H. Souter, the Supreme Court in 1993 discarded the presumption in Hartford Fire Insurance Co. v. California and held that the Sherman Act applies extraterritorially.[38] In its analysis, the Supreme Court relied on Circuit Court cases in which at least some conduct had taken place in the United States. In Hartford, however, the conduct happened entirely abroad, in London, England, where reinsurers conspired to make unavailable certain types of insurance in the United States.

Why the departure? In Hartford, much like in Steele, the conduct overseas had resulted in “effects” being felt in the United States. In Steele, the Lanham Act applied to conduct occurring entirely in Mexico because some watches had made their way back into the States. In Hartford, the Sherman Act applied to conduct occurring entirely in England, notwithstanding 84 years of Supreme Court precedent, because that conduct had harmful effects in the United States, namely the unavailability of certain insurance coverage.

Therefore, the Copyright Act should reach any conduct that occurs within the United States under the justice Holmes pronouncement of the presumption, but there may be an alternative path to applying federal statutes extraterritorially: an “effects” test.

Pleading “Effects” and “Predicate Acts” in the United States to Rebut the Presumption against Extraterritoriality

With sufficient harmful “effects” occurring in the United States, a claim for copyright infringement may be brought against a defendant that ships overseas for distribution abroad. However, these effects may escape the complaint in favor of the more habitual practice of “notice pleading,” as the Federal Rules of Civil Procedure permit.[39] Rather than abiding by that long-standing rule, fact pleading (as opposed to federal notice pleading) should be considered. Indeed, using an appropriate level of fact pleading in a well-pleaded complaint may dissuade motion practice for lack of subject matter jurisdiction based on the presumption against the extraterritorial application of US copyright laws, as well as help to broaden the scope of allowable discovery.[40]

An “effects” exception (refinement) to the presumption against extraterritoriality finds some support in the Supreme Court decisions of Hartford, Aramco’s characterization of Steele, Justice Stevens’ concurrence in Lujan, the Smith court’s intimation against applying the presumption as a clear statement of rule, and the Sale courts willingness to consider “all available evidence.” Furthermore, the “effects” test finds support among the circuits.

For instance, unless the statute or its legislative history suggested that Congress intended otherwise, judge Robert H. Bork, writing for the DC Circuit, held that a federal statute would apply extraterritorially regardless of where the conduct were to take place so long as that conduct causes effects within the United States.[41] Also writing for the DC Circuit but expressing an even broader view of applying federal statutes extraterritorially, judge Abner J. Mikva extended Acts of Congress, absent intent to the contrary, if the conduct occurs in the Uruted States or if the harmful effects are felt in the United States.[42]

Also, Judge Learned Hand, writing for the Second Circuit, looked to the “effects” of the defendant’s conduct in an antitrust case under the Sherman Act in United States v. Aluminum Co. of America, in which the sole issue was “whether Congress chose to attach liability to the conduct outside the United States of persons not in allegiance to it.”[43] Judge Hand applied the Sherman Act to foreign companies acting abroad, so long as the defendant “intended to affect imports and did affect them.”[44]

In order to bolster the effects allegations, copyright owners should think outside the box during their pre-filing investigation in order to find and allege some “predicate acts” occurring in the United States. When predicate acts take place in the United States, then a damages computation may include the defendant’s overseas sales under ancillary theories of an equitable trust and constructive trust.

Other effects should be considered in drafting the complaint, including the economic impact on the copyright owner. For example, if the plaintiff has a multinational reputation, perhaps the infringing goods are of inferior quality and have damaged the plaintiff’s worldwide reputation. Indeed, the plaintiff may have lost contracts with overseas vendors that were entered in the United States. Furthermore, perhaps the plaintiff has expended US dollars and hours addressing customer complaints over the defendant’s products that the customers mistakenly took for the plaintiff’s products.

Moreover, the plaintiff may have lost foreign markets and indirectly cost the plaintiff revenues and losses in jobs located in the United States. Start to think in terms of the global market in characterizing the US market. When the defendant makes unauthorized copies within the borders of the United States and then ships the infringing product to points outside of the United States for distribution, the economic impact is the same to the plaintiff: losses and usurpation of the plaintiff’s market for the copyrighted works. In addition, the defendant no doubt received money in a locale within the United States from the foreign distributor stemming from the purchase of the first unauthorized copy or on a continuing basis for royalty payments. Money flowing into the United States would show the defendants’ obvious and direct financial interest in the exploitation of copyrighted materials and might establish a sufficient nexus to the United States.

For example, in Sheldon v. Metro-Goldwyn Pictures Corp., the lower court found direct infringement in the United States, and Judge Hand addressed the issue of “whether to include the profits made from exhibiting the infringing picture outside the United States.”[45] Because the defendant’s act of copying the plaintiff’s copyrighted works in the United States constituted a tort, the plaintiff acquired an equitable interest in all copies and profits stemming from that original copyright infringement, and the Sheldon court held that proof of direct infringement in this country allowed the copyright owner to collect the infringing party’s overseas profits.[46] Indeed, according to one commentator, a growing number of courts are allowing copyright owners to recover extraterritorial profits stemming from infringing acts within the United States:

This exception to the territorial approach to copyright laws rests on the idea that, when an infringement of copyright occurs in the United States, the owner of the copyright acquires an “equitable interest” in the infringing product, such that a court may impose a “constructive trust” with respect to the extraterritorial proceeds derived by the defendant from the product.[47]

When the US defendant uses a subsidiary, division, or other related company, the Sheldon analysis and its progeny may provide the best chance for recovering extraterritorial profits. However, a US defendant that ships overseas sometimes uses a foreign entity to assist with distribution abroad, and a claim for civil conspiracy might improve the chances of sweeping in extraterritorial profits that the defendant and its related companies do not keep on their corporate books.[48] Also, a claim of civil conspiracy might tag the defendant with joint and several liability of profits that the overseas co-conspirator generates from the defendant’s predicate act of direct infringement within the United States. This strategy may prove particularly useful when the overseas activity constitutes copyright infringement where it takes place.

Moreover, a claim of civil conspiracy allows a copyright owner to sue fewer than all of the co-conspirators: “It is not necessary, in order for one member of civil conspiracy to be liable, that all members of conspiracy be named defendants or be joined as defendants; the plaintiff, at his or her option, may maintain a suit against any one or more of them.[49] Exercising that option of suing fewer than all co-conspirators takes on special importance in a case, for example, only and not by way of limitation, when one or more of the co-conspirators may no longer be extant, when the automatic stay of or discharge under the Bankruptcy Code shields the co-conspirator, or when personal jurisdiction cannot be had over all of the conspirators.[50]

The predicate-act exception (refinement) also might overcome the presumption against extraterritoriality in the right circuit. Indeed, the Ninth Circuit that handed down Subafilms had in actuality later concluded that “an exception [to the rule that the Copyright Act does not apply extraterritorially] may apply where an act of infringement is completed entirely within the United States and that such infringing act enabled further exploitation abroad.[51] How, then, does one plead predicate acts? A few district court cases inform on this challenge.

Preserving copyright protection for the music Industry, the Middle District of North Carolina, in Curb Music Co. v. MCA Records, Inc., counsels the pre-filing investigation to analyze the multinational conduct into discrete acts country by country. In Curb, MCA had granted a license to distribute sound recordings in the United States, Canada, and the United Kingdom. MCA had alleged copyright infringement against Curb, in part based on Curb’s duplication within the borders of the United States of sound recordings coupled with shipment to Curb’s sublicensees around the world, including countries outside the three covered under the license. Unless Curb had shipped to its foreign distributor its only original master, Curb had reproduced the master, which thereby committed “primary acts of infringement in the United States,” which had effectively rebutted the presumption against extraterritoriality.[52]

Safeguarding the movie industry, the Southern District of Florida, in P&L International v. Halsey Publication Co., found subject matter jurisdiction over a copyright action when the complaint had alleged that the defendant had copied the copyrighted film in Florida and then showed the film on a cruise ship in international waters. The court ruled that, “to the extent that part of an ‘act’ of infringement occurs within this country, although such act be completed in a foreign jurisdiction, those who contributed to the act within the United States may be liable under U.S. copyright law”[53]

Protecting the radio and broadcasting industry, the Southern District of New York, in National Football League v. Primetime 24 Joint Venture, found subject matter jurisdiction over a copyright action when the plaintiff alleged that the defendant “captures the over-the-air broadcast signals in the United States,” even though the defendant’s retransmission of those signals happened outside of the United States.[54] The court provided the following notable analysis:

PrimeTime’s transmission of the signals captured in the United States is “a step in the process by which a protected work wends its way to its audience,” although not the only, or the final, step, and an infringement, even though it takes one or more further steps for the work to reach the public.[55]

The NFL court then held that PrimeTime’s act of capturing the signals in the United States constituted a “domestic predicate act [which is] itself an act of infringement” in violation of the US copyright laws. This case instructs copyright owners that, in order to establish jurisdiction over extraterritorial acts, the domestic predicate act, taken alone or inchoate as a precursor to later steps taken abroad, must at the very least violate one of the exclusive rights under the copyright laws:

Where an individual commits an act of infringement in the United States that permits further reproduction outside the United States-such as when an individual makes unauthorized copies of copyrighted material and then sends them out of the country court may assert jurisdiction over those foreign acts and a plaintiff may recover damages for the infringing acts that took place extraterritorially.[56]

Bolstering copyright protection for the book publishing industry, the Southern District of Texas, in Compaq Computer Corp. v. Ergonome Inc., looked to predicate acts in support of the defendant’s counterclaim for copyright infringement occurring outside the territorial jurisdiction of the United States. Ergonome had accused Compaq of copying its work in the United States (an act of infringement) and then translating the infringing materials into foreign languages and distributing the translations to other countries. Holding that the “exception to the presumption against extraterritoriality” applied to the case, the court ruled that “Compaq allegedly completed the initial, primary infringement within the borders of the United States . . . . As a result, foreign translations of that initial work are subject to this court’s jurisdiction, no matter where those translations may have been eventually made.”[57]

Securing copyright protection for sound recordings and musical compositions, the Northern District of Illinois, in Seals v. Compendia Media Group, acknowledged that acts wholly outside the United States may not be actionable under the Copyright Act but that, if the plaintiff can establish a predicate act of copyright infringement in the United States, then the plaintiff may be able to state a copyright claim against the defendant. The court ruled that plaintiff’s allegations had established a predicate act of copyright infringement in the United States.

The Northern District of Illinois found the plaintiff’s complaint allegations dispositive of defendant’s motion to dismiss based on the presumption against extraterritoriality. According to the complaint, the defendant had made unauthorized copies of the plaintiff’s copyrighted works in Roswell, GA, and then had transmitted those unauthorized copies to a licensee in the Philippines for reproduction and distribution. The Seals court then distinguished Subafilms as follows: The Ninth Circuit “did not consider allegations regarding domestic reproduction of copyrighted works that were then shipped abroad for distribution. Such reproduction within the United States, when it leads to exploitation abroad of a copyright owner’s works, is indeed actionable under the Copyright Act.”[58]

Conclusion

When defendants have committed at least one primary act of copyright infringement in the United States, the presumption against extraterritoriality ought not to defeat a court’s subject matter jurisdiction. This is no less so when an ultimate destination for the infringed works is to a point outside of the United States. The specter of harm to copyright owners looms just as great. If shielded under the presumption against extraterritorial application of the United States Copyright Act, then anyone in any foreign nation need only reach into the United States for an unauthorized copy and then reproduce that unauthorized copy within its own borders and with impunity. Certainly, the owner of a US copyright ought to have a remedy. The road to that remedy may very well lie with pleading a complaint that anticipates and then rebuts the presumption against extraterritoriality with a predicate act or effect occurring in the United States that violates one of the exclusive rights under the Copyright Act.

Notes

[1] The International Intellectual Property Alliance (IIPA) de fines the core “copyright industries” to include those industries whose primary purpose is to produce or distribute copyrighted materials, including newspapers, book publishing, recording, music, periodicals, motion pictures, radio and television broadcasting, computer software, book stores, news dealers and newsstands, and commercial photography operations. Stephen E. Siwek, “Copyright Industries in the U.S. Economy: The 2004 Report,” at iii n.3 (2004), available at http://www.iipa.com/pdf/2004_SIWEK_FULL.pdf.

[2] See International Intellectual Property Alliance Statistics, http://www.iipa.com/statistics.html.

[3] Siwek, supra n. 1, at ii.

[4] United States v. Palmer, 16 US. (3 Wheat.) 610, 630-632 (1818).

[5] 28 U.S.C. § 1338 gives the district courts original jurisdiction over civil actions arising under federal copyright law. But, if the federal Copyright Act has no extraterritorial effect, then the Copyright Act cannot be invoked to secure relief, if the presumption applies, and the district court would dismiss, under the Federal Rules of Civil Procedure 12(b, h), for lack of subject matter jurisdiction. See, e.g., Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999) (“Whenever it appears . . . that the court lacks jurisdiction of the subject matter, the court shall dismiss the action”) (citations entitled); Mayor of City of Philadelphia v. Educational Equality League, 415 U.S. 605, 627 (1974) (noting that subject matter jurisdiction also can be raised by the court “sua sponte at any stage.”).

[6] American Banana Co. v United Fruit Co., 213 US. 347, 356-357 (1909); see also EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991) (“It is a longstanding principle of American law `that legislation of Congress, unless a contrary intent appears is meant to apply only within the territorial jurisdiction of the United States.”).

[7] 15 U.S.C. § 1, et seq.

[8] United States v. Aluminum Co. of Am.,148 F2d 416 (2d Cit. 1945); Hartford Fire Insurance Co. v California, 509 U.S. 764 (1993).

[9] 15 U.S.C. § 1125, et seq.

[10] Steele v. Bulova Watch Co., 344 U.S. 280, 282-284 (1952).

[11] US Const. art. 1, cl. 8, § 8.

[12] Copyright Act of 1976, as amended, 17 U.S.C. §§ 101, et seq.

[13] United Dictionary Co. v. G&C Merriam Co., 208 US. 260, 264-265 (1908); Quality King Distrib., Inc. v. L'Anza Research Int’l, 523 U.S. 135, 154 (1998) (Ginsburg, J., concurring) (“Copyright protection is territorial. The rights granted by the United States Copyright Act extend no farther than the nation’s borders.”).

[14] As the United States Copyright Office states, “[t]here is no such thing as an ‘international copyright’ that will automatically protect an author’s writings throughout the world. Protection against unauthorized use in a particular country basically depends on the national laws of that country.” Circular 38a: International Copyright Relations of the United States at 8 (2005). The Circular then provides a list of international conventions, including the oft-recognized primary conventions of (i) the Universal Copyright Convention, and (ii) the Berne Union for the Protection of Literary and Artistic Property. These treaties provide for national treatment in the member countries but considered procedurally cumbersome and to lack efficient enforcement mechanism.

[15] Subafilms, Ltd. v. MGM-Pathe Communications Co., 24 F.3d 1088 (9th Cir.), cert. denied, 513 U.S. 1001 (1994).

[16] Among other things, § 106 of the Copyright Act provides the owner of the copyright the “exclusive rights to do and to authorize any of the following: (1) to reproduce the copyrighted work in copies or phonorecords; (2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work . . .” 17 U.S.C. § 106.

[17] Subafilms, 24 F.3d at 1095.

[18] Id. at 1099.

[19] H.R. Rep. No. 1476, 94th Cong., 2nd Session 61, reprinted in 1976 U.S.C.C.A.N. 5659 at 5674.

[20] Sony Corp. of America v. Universal Studios, Inc., 464 US. 417, 435 n.17 (1984).

[21] 17 U.S.C. § 501(a).

[22] Feist Pubs., Inc. v. Rural Tel. Serv. Co., 499 US. 340, 361 (1991).

[23] MGM Studios, Inc. v. Grokster Ltd., 380 F.3d 1154, 1160 (9th Cir. 2004); see also Bridgeport Music, Inc. v. Diamond Time, Ltd., 371 E3d 883, 889 (6th Cit. 2004); A&M Records, Inc. v Napster, Inc., 239 Fad 1004, 1020 (9th Cit. 2001); Matthew Bender & Co. v West Pub. Co., 158 EM 693, 706 (2d Cir. 1998); Cable/Home Comm. Corp. Network Prods., Inc., 902 E2d 829, 845 & 846 n.29 (11th Cir. 1990); Gershwin Pub. Corp. v. Columbia Artists Mang., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971); Polygram Int’l Pub., Inc. v. Nevada/TIG, Inc., 855 F. Supp. 1314 (D. Mass. 1984).

[24] Sony, 464 U .S. 417, 435 (1984); see also id. (“For vicarious liability is imposed in virtually all areas of the law, and the concept of contributory infringement is merely a species of the broader problem of identifying circumstances in which it is just to hold one individual accountable for the actions of another.”).

[25] Id. at 440-442.

[26] NAACP v American Family Mut. Ins. Co., 978 F2d 287, 291(7th Cir. 1992).

[27] See, e.g., Expediters Int’l of Washington, Inc. v. Direct Line Cargo Mang. Servs., Inc., 995 F. Supp. 468, 476-477 (D.NJ. 1998) (noting a division among courts of whether copyright infringement lies when the infringing conduct consists “solely of the authorization within the United States of acts that occur entirely abroad,” id. at 476, but holding that the “mere authorization of infringing acts abroad constitutes direct infringement liability,” id. at 477); Curb Music Co. v. MCA Records, Inc., 898 F. Supp. 586, 594-596 (M.D. Tenn. 1994) (holding that the presumption against extraterritoriality will not thwart a court’s jurisdiction where defendants committed primary acts of infringement in the United States).

[28] Restatement (Second) of Foreign Relations Law 38 (1965) (emphasis added).

[29] Restatement (Third) of Foreign Relations Law 415 n.2 (1987).

[30] Aramco, 499 U.S. 244, 248 (1991).

[31] Steele v. Bulova Watch Co., 344 U.S. 280, 282-284 (1952)

[32] Aramco, 499 U.S. at 252.

[33] Lujan v. Defenders of Wildlife, 504 U.S. 555, 582-589 (1992).

[34] Smith v. United States, 507 U.S. 197 (1993).

[35] Id. at 204. In his dissenting opinion, Justice Stevens disagreed with the court’s applying the presumption to the FTCA as “simply [having] no bearing on this case” because Congress had waived governmental immunity for torts occurring abroad. Id. at 209. Similarly, in the Copyright Act, Congress has defined an infringer in § 501 and in § 511 provided that any State “shall not be immune, under the Eleventh Amendment . . ., for a violation of any of the exclusive rights of a copyright owner provided by sections 106 through 122, for importing copies of phonorecords in violation of section 602, or for any other violation under this title,” and Section 602 reaches copies of any works acquired “outside the United States.” 17 U.S.C. §§ 501, 511(a), 602.

[36] Sale v Haitian Centers Council, Inc., 509 U.S. 155 (1993).

[37] Id. at 177.

[38] Hartford Fire Insurance Co. v California, 509 U.S. 764 (1993). In American Banana Co. v. United Fruit Co., Justice Holmes, writing for the court, applied the presumption against extraterritoriality to the Sherman Act and had held that courts should look to where the “act is done” and construe federal statutes as being “confined in [their] operation and effect to the territorial limits over which the lawmaker has general and legitimate power.” 213 U.S. 347, 356-357 (1909).

[39] Fed. R. Civ. P. 8(a), (e).

[40] Providing sufficiently detailed allegations in the complaint may help with a motion to compel discovery or, in the alternative, oppose such a motion. Former Rule 26(b)(1) of the Federal Rules of Civil Procedure allowed discovery into any matter that was deemed to be relevant to the subject matter of the action. Under recent amendments to Rule 26(b)(1) of the Federal Rules of Civil Procedure, a party has a right to discovery on “any matter, not privileged, that is relevant to the claim or defense of any party,” and a court has discretion “for good cause” to allow discovery of all information “relevant to the subject matter involved in the action.” If the plaintiff’s complaint determines the “claims” asserted, then the complaint likewise arguably may delimit the scope of discovery or broaden the scope of permissible discovery. Thompson v. Department of Housing & Urban Dev, 199 ER.D. 168, 171 (D. MD. 2001).

[41] Zoelsch v Arthur Andersen & Co., 824 F.2d 27, 31-32 (D.C. Cir. 1987).

[42] Environmental Defense Fund v. Massey, 986 F2d 528, 531 (D.C. Cir. 1993).

[43] United States v. Aluminum Co. ofAmerica,148 F2d 416, 443 (2d Cit. 1945).

[44] Id. at 444; see also Timberlane Lumber Co. v Bank of Am., 749 F2d 1378,1381-1385 (9th Cit. 1984) (the Sherman Act reaches foreign conduct having a direct, substantial, and reasonably foreseeable effect on commerce in the United States).

[45] Sheldon v. Metro-Goldwyn Pictures Corp., 106 E2d 45, 52 (2d Cir. 1939).

[46] Id.; see also cf. 17 US.C. § 504(b) (“The copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.”). There is some support in the Second Circuit’s post-Sheldon case law for a plaintiff to recover extraterritorial actual damages (as opposed to the defendants’ “profits”) once an act of domestic infringement had been proven. Update Art, Inc. v. Modiin Pub., Ltd., 843 E2d 67, 73 (2d Cir. 1988). However, in Update, the court drew no distinction between “damages” and “profits,” and the amount of damages had actually been based on the defendants’ profits. Id. at 70.

[47] Curtis A. Bradley, “Territorial Intellectual Property Rights in an Age of Globalism,” 37 Va. J. Int’1 L. J. 505, 525 n.111 (1997) (citations omitted).

[48] Cf. United States v. Sisal Sales Corp., 274 U.S. 268 (1927). At a time when the Supreme Court was applying the presumption to bar the Sherman Act from reaching conduct overseas, the court nonetheless took a different course and applied the Sherman Act to an antitrust conspiracy to monopolize imports. In applying the Sherman Act, the court noted that the “effects” of the conspiracy occurred in the United States and was formed in the United States by US citizens, even though the conspiracy was carried out overseas.

[49] 16 Am. Jur. 2d Conspiracy § 66, at 291 (West 1998) (citing cases).

[50] See, e.g., 11 U.S.C. §§ 362(a) (automatic stay), 524 (effect of discharge), 1141(d)(1)(A) (confirmation of a reorganization “discharges the debtor from any debt that arose before the date of such confirmation”). A suit between “citizens of a State and citizens or subjects of a foreign state” lies within federal diversity jurisdiction, 28 U.S.C. § 1332(a)(2), but that only empowers a court with subject matter jurisdiction. The foreign citizen may move to dismiss the case for lack of personal jurisdiction. Fed. R. Civ. P. 12(b)(2); see also Asahi Metal Indus. Co. v Superior Court of Calif, 480 US. 102 (1987) (Asahi, a Japanese company, sent component parts to a Taiwanese company, Cheng Shin, which incorporated those parts into a motorcycle sold in the United States that became subject of a products liability suit in California; the Supreme Court held that the Due Process Clause of the Fourteenth Amendment limited a court’s power to exert personal jurisdiction over Asahi).

[51] L.A. News. Serv. v. Reuters Television Int’l, Ltd., 340 F.3d 926, 928 (9th Cir. 2003) (citing L.A. News. Serv. v. Reuters Television Int’l, Ltd. (Reuters III), 149 E3d 987, 992 (9th Cit. 1998)).

[52] Curb Music Co. v MCA Records, Inc., 898 F. Supp. 586, 594-596 (M.D.Tenn. 1994).

[53] P&L International v Halsey Publication Co., 672 F. Supp. 429, 1432-1433 (S.D. Fla. 1987).

[54] National Football League v Primetime 24 Joint Venture, No. 98 Civ. 3778, 1999 U.S. Dist. LEXIS 3592, at *3 (S.D.N.Y Mar. 24, 1999).

[55] Id. at *6.

[56] Id. at *10 (citing Fun-Damental Too, Ltd. v. Gemmy Ind. Corp., No. 96 Civ. 1103, 1996 US. Dist. LEXIS 18653, at *14 (S.D.N.Y Dec. 17, 1996) (citing Update Art, Inc. v Modiin Pub., Ltd., 843 E2d 67, 73 (2d Cit. 1988)).

[57] Compaq Computer Corp. v. Ergonome, Inc., No. H-97-1026, 2001 U.S. Dist. LEXIS 23485, **15-16 (S.D. Texas June 27, 2001).

[58] Seals v. Compendia Media Group, No. 02 C 0920, 2003 US. Dist. LEXIS 2980, *13 (N.D. Ill. Feb. 28, 2003). While the Seals court followed Subafilms as to domestic authorization of infringement abroad, the Seals court let stand a claim based on whether § 106 of the Copyright Act creates an exclusive right “to authorize” that can be infringed by domestic acts. Id. at n.4 (“Because the court finds that reproduction within the United States is sufficient to state a claim under the Copyright Act, the court need not address plaintiff’s allegations related to ‘[unaruthorized] distribution within the United States.’”).


Christopher A. Harkins, Counsel, Brinks Hofer Gilson & Lione, in Chicago, IL, specializes in litigation involving patents, copyrights, and trade secrets and in prosecuting patent applications in the US Patent and Trademark Office and worldwide under the Patent Cooperation Treaty. Mr. Harkins may be reached at charkins@brinkshofer.com. The views expressed herein are those of the author alone and do not necessarily reflect the views of Brinks Hofer Gilson & Lione or its clients.


This article has been reprinted with permission from Intellectual Property & Technology Law Journal, Volume 17, No. 5, May 2005.

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