IP/Entertainment Law Weekly Case Update for Motion Picture Studios and Television Networks - January 4, 2013

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Table of Contents

Washington Shoe Co. v. A-Z Sporting Goods, Inc., USCA Ninth Circuit, December 17, 2012
 Click here for a copy of the full decision.

  • Ninth Circuit reverses dismissal of copyright infringement action by Washington-based shoe manufacturer against defendant, retailer with one store in Arkansas, finding that Washington district court has personal jurisdiction over defendant based on plaintiff’s allegations that retailer willfully infringed on plaintiff’s copyright.

Plaintiff Washington Shoe Co., a Washington corporation that has been manufacturing and selling shoes in Washington for more than 100 years, brought suit in Washington federal court against defendant A-Z Sporting Goods Inc., an Arkansas corporation that operates a single retail store in Arkansas, alleging willful copyright infringement, among other claims, based on defendant’s sale of children’s boots that allegedly infringed on plaintiff’s copyrighted boots. After allowing jurisdictional discovery on defendant’s claim that it had never sold any goods of any kind to any person or business in Washington, the district court granted defendant’s motion to dismiss for lack of personal jurisdiction, and plaintiff appealed. The Ninth Circuit reversed and remanded, finding that the Washington court had personal jurisdiction over the Arkansas corporation based on plaintiff’s allegations of willful infringement.

According to plaintiff’s complaint, Washington Shoe previously sold shoes to A-Z for a few years, during which time a Washington Shoe sales representative provided A-Z with brochures and catalogs containing plaintiff’s products and including copyright notifications. In 2009, Washington Shoe discovered that A-Z was selling two styles of children’s boots, knockoffs of Washington Shoe’s popular children’s rain boots that A-Z purchased from China, that allegedly infringed on Washington Shoe’s copyrighted styles. Washington Shoe sent A-Z a cease-and-desist letter informing A-Z that its boot designs were copyrighted and that A-Z’s boots infringed that copyright, and demanding that A-Z stop selling the infringing boots and provide Washington Shoe with an accounting of past sales. After Washington Shoe sent a second cease-and-desist letter, A-Z stopped selling the allegedly infringing boots in its store and sold its remaining inventory to an out-of-state thrift store.

On appeal, the Ninth Circuit applied the three-part due process test from the United States Supreme Court’s decision in Int’l Shoe Co. v. Washington, 326 U.S. 310 (1945) to determine whether A-Z had sufficient minimum contacts with the state of Washington to allow the Washington federal court to exercise jurisdiction. Noting only the first prong of the test – whether the defendant either purposefully availed itself of the privilege of conducting activities in Washington or purposefully directed its activities at the state – the appellate court reversed and remanded the district court’s dismissal, finding that A-Z was subject to personal jurisdiction in Washington based on plaintiff’s claim that defendant had willfully violated Washington Shoe’s copyright.

The Ninth Circuit analyzed whether A-Z (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state, considering each element in turn. First, the court found that the willful copyright infringement that plaintiff alleged constituted an intentional act for jurisdictional purposes because A-Z bought the infringing boots from China, not Washington Shoe, and sold them in its retail store and later (after receiving the cease-and-desist letters) to the thrift store. “We have little difficulty finding that by intentionally engaging in the actual, physical acts of purchasing and selling the allegedly infringing boots, A-Z has clearly committed an ‘intentional act’ within the meaning of the Calder test.”

Second, the court found that defendant had expressly aimed its conduct at the state of Washington. According to the court, because the harm caused by an infringement of the copyright laws is felt at least at the place where the owner holds its copyright in the case of willful infringement – in which the defendant knowingly or with reckless disregard infringes on the copyright holder’s rights – the defendant directs the harm there as well. “Particularly in the case of a willful copyright infringement, the intentional act constituting the violation may occur solely within one state while the known impact of that copyright infringement is directed at another state.” Plaintiff alleged that A-Z had an ongoing relationship with Washington Shoe through which it received catalogs with the copyrighted boots. A-Z allegedly purchased the infringing boots from China and sold them in the same Arkansas store as the Washington Shoe footwear – acts that took place in Arkansas. At least as soon as A-Z received the cease-and-desist letters, it knew of plaintiff’s copyright and yet sold the remaining boots to a thrift store. Noting that if plaintiff’s allegations were true they would likely establish willful copyright infringement based on defendant’s actual awareness of its infringing activity, the court concluded that A-Z expressly aimed its intentional infringing conduct at the copyright held by Washington Shoe in the state of Washington. “We think that A-Z’s alleged willful infringement of Washington Shoe’s copyright, and its knowledge of both the existence of the copyright and the forum of the copyright holder, is sufficient ‘individualized targeting’ to establish the ‘something more’ necessary to satisfy the express aiming requirement.”

Finally, the court found that the economic loss caused by the intentional infringement of a copyright is foreseeable – both in Arkansas where the infringing conduct took place, and in Washington, where the copyright holder has its principal place of business. Because A-Z knew that its intentional acts would have an impact on Washington Shoe, and that Washington Shoe was headquartered in Washington, “A-Z knew or should have known that the impact of its willful infringement of Washington Shoe’s copyright would cause harm likely to be suffered in the forum. As a consequence, A-Z can ‘reasonably anticipate being haled into court’ in Washington.”
 

Premier Tracks, LLC v. Fox Broadcasting Co., USDC C.D. California, December 18, 2012 (unpublished order)
 Click here for a copy of the full decision.

  • District court dismisses copyright and breach of contract claims by licensing agents of various music libraries against licensee broadcast networks and their affiliates, finding that change in ownership resulting from a sale of licensee’s stock does not constitute an “assignment” invalidating a copyright license, and that licensing agent did not have standing to bring copyright infringement claim.

Plaintiffs Premier Tracks and Graffiti Music are music publishing and distribution companies that produce and publish musical compositions and sound recordings for use in broadcast, non-broadcast, and online media. In 2005 and 2008, plaintiffs entered into license agreements with defendants Fox Broadcasting Co. and Fox Cable Networks, Inc. (the Fox Defendants), granting certain broadcast networks (the Network Defendants) a three-year, nonexclusive, world-wide, irrevocable license to use tracks from plaintiffs’ 29 music libraries in television sports productions. The license agreements prohibited any assignment of the agreements without consent.

Thereafter, the parent company of the Network Defendants entered into a share exchange agreement that transferred the ownership in the Network Defendants to defendant Liberty Media Corp. (Liberty). Plaintiffs brought a breach of contract claim against the Fox Defendants alleging that this stock sale constituted an assignment in violation of the license agreements, and copyright infringement actions against the Network Defendants. Plaintiffs also brought suit against the Network Defendants, Liberty, and others for direct copyright infringement, and against the Fox Defendants and Liberty for secondary copyright infringement for marketing the allegedly infringing broadcasters and for reproducing and storing infringing content on their servers.

The court dismissed plaintiffs’ copyright infringement and breach of contract claims against the Fox Defendants, Liberty, and the Network Defendants, finding that the stock sale did not amount to an improper assignment or transfer of the license agreements. The court found that the stock sale was permissible because agreements did not expressly prohibit the sale of stock in the Network Defendants. Under California law, because the Network Defendants remained intact after the stock sale, the sale did not result in an assignment or transfer of the licenses, which were retained by the Network Defendants. The court distinguished this stock sale from a transfer of company assets or a merger in which a licensee company ceases to exist.

The court also dismissed the majority of plaintiffs’ copyright infringement claims for lack of standing because plaintiffs failed to plead ownership of an exclusive right in the works. Under the Copyright Act, only the owner of an exclusive right under the copyright is entitled to sue for infringement. Although plaintiffs alleged that they owned exclusive rights to grant non-exclusive licenses and direct licenses for the works at issue, plaintiffs’ rights as licensing agents did not give them legal or beneficial ownership of any exclusive right under the Copyright Act. Plaintiffs also did not acquire standing simply because the owners may have assigned plaintiffs the right to bring copyright claims on their behalves.

Finally, the court found that plaintiffs were not entitled to statutory damages or attorney’s fees under the Copyright Act because all alleged infringement began prior to plaintiffs’ registration of the copyrights to the music libraries. Under the Copyright Act, a plaintiff is not entitled to statutory damages or attorney’s fees for infringement if the first in a series of ongoing infringements of the same kind commenced prior to registration of the copyright, unless the registration occurred within three months after first publication of the work. Plaintiffs first filed their applications for copyright registration in 2012, around the time this action commenced.

For more information, please contact Jonathan Zavin at jzavin@loeb.com or at 212.407.4161.

Westlaw decisions are reprinted with permission of Thomson/West. If you wish to check the currency of these cases, you may do so using KeyCite on Westlaw by visiting http://www.westlaw.com/.

Circular 230 Disclosure: To assure compliance with Treasury Department rules governing tax practice, we inform you that any advice (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.

Topics:  Assignments, Breach of Contract, Broadcasting, Copyright, Infringement, Licenses, Personal Jurisdiction, Standing

Published In: Art, Entertainment & Sports Updates, Civil Procedure Updates, General Business Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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