Has U.S. Intellectual Property Law Reached Too Far?
By Manjit Gill – June 25, 2013
Surf the Internet. Read the international section of any newspaper, or any leading international periodical. You are bound to find an article discussing the growth of Brazil, Russia, India, China, or other emerging economies, while simultaneously lamenting the state of the U.S. economy. As U.S. companies continue to expand operations beyond the borders, whether by setting up “back office” operations or moving their manufacturing operations abroad, these companies have often wondered if their intellectual property (whether consisting of patents, trademarks, copyrights, or trade secrets) will be adequately protected outside the United States and whether U.S. laws can be brought to bear to protect their intellectual property. This article looks at how this question has been historically answered for these various types of intellectual property and then considers what the future may hold.
No matter the category, the key question in each case is how far, if at all, U.S. courts can adjudicate disputes by enforcing U.S. intellectual property laws for acts that took place outside the country. If the party engaged in the conduct in the United States, U.S. court jurisdiction to enforce U.S. laws would seem assured, absent some exceptional circumstance. Similarly, for foreign activity, one would usually assume that a foreign court would have primary responsibility to police the conduct occurring within its borders, applying its relevant foreign law. How, then, is U.S. intellectual property law ever applicable to police conduct that took place outside the United States? Let’s take a closer look.
Patent Act—Key International Provisions
The Patent Act has three distinct sections that speak to the issue of whether or not it regulates activity outside the United States: sections 271(a), 271(f), and 271(g). Section 271(a) clearly extends the reach of the Patent Act beyond U.S. borders:
Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.
35 U.S.C. § 271(a) (emphasis added).
So, if you not only make, use, offer to sell, or sell an infringing product within U.S. borders but also do any of the same acts outside those borders to import an infringing product into the United States, the U.S. courts are going to be receptive to lawsuits brought by the U.S. patent holders.
Section 271(f) extends the reach of the Patent Act further to situations in which the assembly of a product that infringes a U.S. patent occurs outside the United States, using component parts made in the United States that the supplier knows will be combined to make a product that infringes the patented invention outside the United States. Finally, section 271(g) goes a step further, banning the import into the United States of products made with a process or method covered by a U.S. patent.
A quick read of these provisions would suggest that U.S. patent law does reach beyond U.S. borders to police conduct. The U.S. courts have not hesitated to read the Patent Act to give them the power to stop imports of products into the United States. Although the courts may not strictly view this as an “extraterritorial” assertion of their power, they are in fact regulating conduct that takes place outside the United States.
The most interesting of these three provisions is section 271(f). The key words from this section, “components” and “supplied,” are in fact not defined. In the context of tangible goods, determining the identity of the component parts and the location of their supply is usually a straightforward undertaking; however, is the same true when the goods are intangible, like a copy of computer software? As the pace of economic globalization accelerates, and with the ongoing reliance on the Internet to facilitate commercial transactions, the purported extraterritorial reach of U.S. patent law will be more important for companies across the globe. What, then, can we take away from recent U.S. court decisions in advising clients on how best to transact their overseas business activities without running afoul of the U.S. patent law?
Recent Decisions Interpreting the Reach of the Patent Act
Microsoft Corp. v. AT&T Corp. In Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007), the Supreme Court addressed the scope of section 271(f). The question before the Court was as follows: Did section 271(f) apply to bar the sale of computers outside the United States when those computers were loaded overseas with copies of computer software that infringed a U.S. product patent, which copies were made overseas from a master disk that was sent from the United States in hard-copy form or electronically via the Internet? The Court’s answer was no:
Because [Defendant] does not export from the United States the copies actually installed, it does not “suppl[y] . . . from the United States” “components” of the relevant computers, and therefore is not liable under § 271(f) as currently written.
Id. at 442.
How did the Court get there? First, the Court asked when software could qualify as a “component” for purpose of section 271(f). The Court concluded that the section would be triggered only at the time and place when the “components” were in fact combined to form the “patented invention.” In the case before the Court, this stage was realized only when the software was expressed in a tangible, computer-readable form; that is, when it was in fact loaded onto a given computer.
Then the Court asked whether “components” of the computers made overseas were “supplied” from the United States. The Court reasoned that the supplying took place outside the United States because the copies of the software were made overseas before they were installed on the computers made overseas. Id. at 452–53. The Court noted in a footnote, however, that it was not addressing whether software in the abstract, or any other intangible thing, could be a component for purposes of section 271(f). Id. at 452 n.13.
It is interesting that the Court stated that its holding was consistent with the historic “general rule” that the Patent Act did not apply extraterritorially, inviting Congress to effect a more substantial “adjustment” of the Patent Act to reach the conduct in question. Id. at 442. The Court emphasized that activities outside the United States are meant to be governed by foreign law:
[F]oreign law alone, not United States law, currently governs the manufacture and sale of components of patented inventions in foreign countries. If [the plaintiff] desires to prevent copying in foreign countries, its remedy today lies in obtaining and enforcing foreign patents.
Id. at 456–57.
Cardiac Pacemakers, Inc. v. St. Jude Medical Center, Inc. Following the Supreme Court’s decision in Microsoft v. AT&T, the Federal Circuit en banc considered the reach of section 271(f) in Cardiac Pacemakers, Inc. v. St. Jude Medical Center, Inc., 576 F.3d 1348 (Fed. Cir. 2009), and reversed the district court’s holding that section 271(f) applied to claims of infringement of method or process patents involving activity outside the United States, focusing on the meaning of “supplying” to hold that this section does not apply to method patents: "B]ecause one cannot supply the steps of a [patented] method [or process], Section 271 (f) cannot apply to method or process patents." Cardiac Pacemakers, 576 F.3d at 1364.
Zoltek Corp. v. United States. Most recently, in the context of claims brought under a separate statutory provision pertaining to the scope of claims against the U.S. government for patent infringement, 28 U.S.C. § 1498, the Federal Circuit held that the U.S. government is subject to patent infringement claims for products made outside the United States using methods protected by U.S. patents and then imported into the United States for use by a government contractor. Zoltek Corp. v. United States, 672 F.3d 1309 (Fed. Cir. Mar. 14, 2012).
A key component of the Federal Circuit’s inquiry focused on whether section 1498(c) applied to this case; that is, whether the allegedly unlawful conduct “aris[es] in a foreign country.” In the Zoltek case, the government contractor allegedly infringed a method patent granted in the United States for making carbon fiber sheets, and one of the steps used to make these sheets occurred in Japan (namely, the partial carbonization of the sheets), with the final processing of the sheets taking place in the United States. Zoltek, 672 F.3d at 1312. The Federal Circuit pointed to the legislative history behind this section, noting that it was adopted “to remove the possibility of [the bill] being interpreted as applying to acts of infringement in foreign countries.” Id. at 1326 (quoting S. Rep. No. 86-1877, at 7 (1960)).
Here, the Federal Circuit held that section 1498(c) did not apply to bar a claim against the U.S. government because the infringing acts occurred in the United States; namely, the use or importation of the products resulting from the infringed process.
As shown in the above case law interpreting the scope of enforcement of U.S. patent law, the understanding of “extraterritorial” is rather elastic. The courts will strive to find some connection to the United States to justify reaching conduct that took place outside the country, particularly by characterizing conduct as geared toward “importing” infringing products into the United States. By definition, imports emanate from outside the United States and were necessarily created outside the United States, so any instance of conduct outside the United States could be fair game.
Is the same true for other types of intellectual property? Let’s consider trade secrets.
Trade Secrets and Extraterritoriality: TianRui Group v. ITC
While the scope of the extraterritorial reach of the patent law has evolved and continues to evolve, the extraterritorial reach of trade secrets law received a strong endorsement in the Federal Circuit’s recent decision in TianRui Group v. International Trade Commission, No. 2010-1395 (Fed. Cir. Oct. 11, 2011) (slip op.).
A U.S. company, Amsted Industries, Inc., manufactured cast steel railway wheels using a few different trade secret processes. One of the processes was no longer used by the company in the United States but was licensed by Amsted to several Chinese companies, including Datong ABC Castings Company Limited. TianRui Group Company Limited, another Chinese company, tried and failed to license the trade secret from Amsted. TianRui then hired a number of Datong employees who had been exposed to the Amsted trade secrets and who had signed employment agreements with Datong requiring them to keep the Amsted trade secrets confidential. TianRui then aimed to export the cast steel railway wheels they made using the Amsted trade secrets to the United States. Id. at 3–4.
Amsted filed an administrative complaint with the International Trade Commission (ITC), alleging a violation of section 337 of the Tariff Act of 1930. The administrative law judge, applying Illinois law, found that TianRui had misappropriated 128 trade secrets, and the ITC issued an exclusion order barring TianRui from importing the products using Amsted’s trade secrets into the United States. TianRui then appealed to the Federal Circuit. Id. at 5–7.
The Federal Circuit affirmed the ITC’s ruling, and its holdings endorsed the extraterritorial reach of U.S.-created trade secrets law, although like the courts interpreting the reach of U.S. patent law, the Federal Circuit was convinced its ruling had no extraterritorial reach, a point summarily disputed by the dissent.
The Federal Circuit characterized the “main issue” as being the following: “[w]hether section 337 authorizes the [ITC] to apply domestic trade secret law to conduct that occurs in part in a foreign country.” Id. at 7 (emphasis added).
To resolve this issue, the Federal Circuit first tackled the issue of what law should apply. Characterizing the issue as “a matter of first impression” for the court, the Federal Circuit held that Illinois trade secrets law should not have been consulted; instead, “a single federal standard, rather than the law of a particular state, should determine what constitutes a misappropriation of trade secrets sufficient to establish an ‘unfair method of competition’ under section 337.” Id. at 9. The Federal Circuit did not disturb the ITC’s ultimate finding of misappropriation because the court concluded that there was not a significant difference between Illinois trade secrets law and other states’ trade secrets law or with the general tenets of trade secrets law set forth in the Restatement of Unfair Competition or the Uniform Trade Secrets Act. TianRui, slip op. at 10–11.
Even though TianRui misappropriated the trade secrets, the Federal Circuit was left to resolve the issue of whether this misappropriation was actionable here in the United States, even though the misappropriation took place outside the United States. The court began its analysis by noting the general principle that U.S. laws do not apply beyond the borders, unless “a contrary intent appears” from the relevant statute. Id. at 12 (quoting EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991)). The Federal Circuit concluded there were at least three factors that supported the conclusion that section 337 could apply on the facts of the case.
First, the language of the statute itself spoke to proscribing unfair competition “in the importation of articles” into the United States; the statue’s focus on imports was inherently international. Id. at 13. The court analogized section 337 to the federal immigration laws, which can prohibit a potential immigrant from emigrating to the country if that person engages in wrongful conduct or makes false statements outside the United States in order to enter the county.
Second, the court reasoned that the ITC did not apply section 337 to “purely extraterritorial conduct”; instead, the foreign activity (the misappropriation) is relevant under the statute because it furthers the goal of importing goods into the United States and injuring U.S. manufacturers. Id. at 14. Therefore, “the presumption against extraterritorial application does not apply,” the court held, drawing an analogy to another federal law, the Economic Espionage Act, which criminalizes trade secrets theft outside the United States if there is also an act in support of the theft occurring in the United States. Id. at 14 (citing Small v. United States, 544 U.S. 385, 388–89 (2005)).
That Act prohibits trade secret theft and applies to foreign conduct if “an act in furtherance of the offense was committed in the United States.” 18 U.S.C. § 1837. Congress thus recognized that misappropriation of U.S. trade secrets can, and does, occur abroad, and that it is appropriate to remedy that overseas misappropriation when it has a domestic nexus.
Id. at 16 n.4.
Finally, the Federal Circuit also examined section 337’s legislative history to conclude that Congress intended a broad reach for the statute so that the ITC, in enforcing its provisions, “would consider conduct abroad in determining whether imports that were the products of, or otherwise related to, that conduct were unfairly competing in the domestic market.” Id. at 19.
After overcoming the presumption against extraterritoriality, the court considered the argument raised by TianRui that the ITC’s ruling “would cause improper interference with Chinese law.” Id. at 20. The court held that the ruling did not interfere because the ITC was not trying to regulate conduct in China but was instead focusing on stopping imports into the United States that could injure the U.S. market, regardless of where they come from:
[T]he Commission’s exercise of authority is limited to goods imported into this country, and thus the Commission has no authority to regulate conduct that is purely extraterritorial. The Commission does not purport to enforce principles of trade secret law in other countries generally, but only as that conduct affects the U.S. market.
Id. (emphasis added).
Trademarks and the Lanham Act: Pinkberry, Inc. v. JEC International Corp.
Trademarks comprise a key component of any international business’s asset base, as the trademarks help to grow a company’s business in new global markets by the transmission of the goodwill and reputation reflected in the marks and the associated brands. Trademarking is inherently a country-by-country undertaking, with some opportunities for streamlining the process through certain international conventions, such as the Madrid Protocol. However, will a U.S. court attempt to police conduct outside the United States relating to trademarks? Courts in the Ninth Circuit have addressed this issue more than once, with instructive results.
Most recently, in the Central District of California, the court considered the defendants’ motion to dismiss a Lanham Act claim ultimately involving the propriety of the defendants’ registration of the PINKBERRY trademark in Japan that the plaintiff had already registered in the United States and had been using in the United States to market its frozen yogurt business. Pinkberry, Inc. v. JEC Int’l Corp., No. CV 11-6540 PSG (C.D. Cal. Dec. 7, 2011) (order granting motion to dismiss). The defendants had not yet used the mark in Japan. The plaintiff had separately begun proceedings in Japan to cancel the mark there and wanted the Central District of California to enjoin the defendants from using the mark in Japan. Pinkberry, at *2.
Although the court ultimately dismissed plaintiff’s claim, its analysis of the extraterritorial reach of the Lanham Act was detailed and instructive, and it reflected a careful balancing of a number of factors in the context of the facts of the case. The court did not shy away from the notion that the Lanham Act could be used by U.S. courts to regulate conduct outside the United States, but ultimately, the court held that U.S. trademark law could weigh in only if there was conduct that created a significantly greater impact here in the United States than in any other country that may have a competing interest in policing the relevant conduct.
The court reiterated a three-part test to determine when the Lanham Act could be applied extraterritorially:
For the Lanham Act to apply extraterritorially: (1) the alleged violations must create some effect on American foreign commerce; (2) the effect must be sufficiently great to present a cognizable injury to the plaintiffs under the Lanham Act; and (3) the interests of and links to American foreign commerce must be sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.
Pinkberry, at *4 (quoting Love v. Associated Newspapers, Ltd., 611 F.3d 601, 612 (9th Cir. 2010)).
The first factor to consider is the effect of the foreign conduct on U.S. foreign commerce. The court noted that an effect could be shown “where a defendant directs acts committed abroad from within the United States that have harmed a U.S. corporation.” Pinkberry, at *4 (citing Reebok Int’l v. Marnatech Enters., 970 F.2d 552, 554–55 (9th Cir. 1989) (court found effect on U.S. foreign commerce where defendants in U.S. directed counterfeit shoe manufacturing operation in Mexico so the shoes could then be imported into the U.S.)). Here, despite the defendants’ argument that they were not selling any goods bearing the mark in the United States, the court nevertheless held that the trademark registration in Japan did restrict the plaintiff’s ability to engage in foreign commerce and, therefore, “arguably” had some impact on U.S. foreign commerce. Pinkberry, at *5.
The second factor to consider is whether there is a cognizable injury. The court held that “a loss of current and prospective business opportunity is a cognizable injury under the Lanham Act.” Pinkberry, at *5 (citing Star-Kist Foods, Inc. v. P.J. Rhoades & Co., 769 F.2d 1393, 1395 (9th Cir. 1985)). However, the court cautioned that the connection between the conduct and the loss of business must not be too attenuated. Here, the court held that the defendants’ actions (namely, registering the mark in Japan) had a strong enough proximate connection to the plaintiff’s injury (namely, the inability to expand its business into Japan) to establish a cognizable injury under the Lanham Act. Pinkberry, at *5–6.
If not for the court’s consideration of the third factor, the effect on the commerce in relation to other countries, the extraterritorial reach could have been characterized as perhaps overreaching. Fortunately, the multifactor balancing test that the court engaged in as part of its consideration of this third factor reflected a sensibility and respect for notions of international comity that could be instructive for considerations of the reach of U.S. laws protecting other categories of intellectual property.
The third element is dependent on the balancing of seven factors: (1) the degree of conflict with foreign law or policy; (2) the nationality or allegiance of the parties and the locations or principal places of business of any corporations involved, (3) the extent to which an order by a U.S. court can be expected to achieve compliance with the Lanham Act, (4) the relative significance of effects on the United States as compared with those elsewhere, (5) the extent to which there is an explicit purpose to harm or affect U.S. commerce, (6) the foreseeabilitiy of such effect, and (7) the relative importance to the violations charged of conduct that occurred within the United States as compared with conduct abroad.
Pinkberry, at *6 (citing Star-Kist, 769 F.2d at 1395–96).
First, the court looked at the degree of conflict with foreign law. Because the plaintiff brought a trademark cancellation proceeding in Japan that was still pending, the court held that this factor weighed against the plaintiff. Next, the court looked at the parties’ nationality and the location of their principal places of business. Because all the parties were U.S. nationals or had locations here, the court held that this factor weighed in favor of the plaintiff. Then the court looked at the likelihood that the court would be able to ensure that the parties to the litigation complied with its order. Here again, because the parties were all connected to the United States, the court held that this factor weighed in favor of the plaintiff. Next, the court compared the effect of the conduct on the United States with the effect on other countries. Although the court concluded there might be some effect on U.S. commerce, the greatest effect here was on Japanese commerce (namely, the plaintiff’s ability to sell its frozen yogurt under its brand in Japan); therefore, the court held that this factor weighed against the plaintiff. Then the court looked at whether there was an explicit intent to harm U.S. commerce and whether this harm was foreseeable. Here, because of the pendency of the trademark cancellation proceedings in Japan, the court held that these factors were neutral; if the cancellation proceedings went in the defendants’ favor, it is clear that these two factors would favor the defendants, but at that stage of the proceedings, the factors did not favor any party. Finally, the court considered the relative importance of the allegations of conduct occurring within the United States and abroad. The court held that there were important acts that took place in both Japan and the United States and decided that this factor was also neutral. Looking at all the factors, the court found two in favor of the plaintiff, two in favor of the defendants, and the remaining three neutral, and chose therefore not to exercise extraterritorial jurisdiction over the dispute. Pinkberry, at *6–11.
The final category of intellectual property we will consider is copyright. Have U.S. courts and enforcement authorities approached the enforcement of U.S. copyright law to foreign activity in the same manner as for the above categories of intellectual property? Let’s start by looking at what the Copyright Act says.
Historically, the Copyright Act has not clearly defined its territorial scope, unlike, for example, the Patent Act. Does that mean U.S. courts ignore conduct outside the United States in enforcing the copyright law? The short answer is no. How, then, have the courts given extraterritorial reach to the Copyright Act?
Update Art, Inc. v. Modiin Publishing, Ltd. The Second Circuit considered the reach of the U.S. Copyright Act in Update Art, Inc. v. Modiin Publishing, Ltd., 843 F.2d 67 (2d Cir. 1988). In this case, the plaintiff, a New York corporation, owned the exclusive rights worldwide to publish and distribute a piece of artwork. The defendant, an Israeli corporation, was in the publishing business, and one of its newspapers, Maariv, in circulation in Israel, included a weekend edition that was also distributed in New York. In one of these weekend editions, a reproduction of the artwork was included, without the plaintiff’s permission, which prompted the plaintiff to sue in part for copyright infringement.
After the matter was heard by the federal magistrate, who found in favor of the plaintiff, the defendant raised the defense of lack of subject-matter jurisdiction, arguing that the Copyright Act had no extraterritorial application in Israel. On appeal, the Second Circuit affirmed the magistrate’s ruling. The court started by acknowledging that “[i]t is well established that copyright laws generally do not have extraterritorial application.” Id. at 73. However, the court emphasized that there was an exception to this general rule if the complained-of infringement was of the type that “permits further reproduction abroad.” Id. at 73. Even then, the court ultimately focused on the existence of some additional specific conduct in the United States that made it easier to infringe abroad.
Los Angeles News Service v. Reuters Television International, Ltd. The Ninth Circuit similarly expressed a willingness to police conduct that occurred outside the United States in Los Angeles News Service v. Reuters Television International, Ltd., 149 F.3d 987 (9th Cir. 1998). In this case, an independent news organization sued several television news agencies for copyright infringement arising from the unauthorized use abroad of work that was copyrighted in the United States. The court ultimately held that the claim could proceed because there was a specific infringing act that occurred in the United States (the copying of the news feeds and subsequent dissemination overseas), not merely the authorization for conduct to occur completely overseas. As a result, the court could entertain a claim under the Copyright Act to provide remedies for extraterritorial misconduct, because an act occurred in the United States as well. Id. at 992.
Palmer v. Braun. The Eleventh Circuit then went one step further, holding as a matter of law that the court had subject-matter jurisdiction over a copyright infringement action brought by a plaintiff against a foreign competitor where the foreign competitor imported copies of the infringing publication into the United States to sell to customers in the United States. Palmer v. Braun, 376 F.3 1254, 1258 (11th Cir. 2004). The court drew an analogy to a district court decision from the Western District of New York, GB Marketing USA Inc. v. Gerolsteiner Brunnen GmbH & Co., 782 F. Supp. 763, 772–73 (W.D.N.Y. 1991), in which the court found subject-matter jurisdiction over a distributor’s copyright infringement action against a foreign bottler where the bottler applied the infringing labels in Germany but also intended for these labels to be used specifically for marketing in the United States, packaged the labeled bottles for shipment to the United States, and sold the labeled bottles to a company that in turn imported them into the United States.
Litecubes, LLC v. Northern Light Products, Inc. It is interesting that the Federal Circuit in Litecubes, LLC v. Northern Light Products, Inc., 523 F.3d 1353 (Fed. Cir. 2008), held that the question of whether in a given instance a claim can be pursued under the Copyright Act for extraterritorial conduct should not be viewed as a jurisdictional matter under the act (because the act does not explicitly set forth such a territorial limitation) but should instead be viewed as a factual element of the claim that the plaintiff must prove. In so holding, the court explicitly decided not to go as far as the Palmer court in the Eleventh Circuit. Litecubes, 523 F.3d at 1367–68. The court ultimately held that the copyright claim was established against the plaintiff’s foreign competitor, who sold the infringing work from Canada to customers in the United States and then shipped the infringing work to those U.S. buyers.
Omega, S.A. v. Costco Wholesale Corp. Then, in 2008, the Ninth Circuit weighed in once more on the extraterritorial reach of the Copyright Act in Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008). In this case, the plaintiff manufactured its watches in Switzerland. The watches included an engraved design copyrighted in the United States. The defendant obtained watches bearing the copyrighted design from the “gray market,” the market for genuine products that are made overseas and bear a given mark or copyright and that are bought and imported into the United States by third parties. Id. at 984 (citing Parfums Givenchy, Inc. v. Drug Emporium, Inc., 38 F.3d 477, 481 n.6 (9th Cir. 1994)). The defendant then sold them in the United States. Although the plaintiff had authorized the initial foreign sale of the watches, it had not authorized the subsequent importation of these watches into the United States or the defendant’s sales of the watches. The defendant argued that the plaintiff’s initial foreign sale precluded the claim for copyright infringement.
The district court ruled in the defendant’s favor, and the plaintiff appealed. The Ninth Circuit reversed, holding that the “first sale” doctrine, which would have otherwise extinguished the plaintiff’s rights to control the distribution of its copyrighted works once the first sale of the work occurred, did not apply here because the sale at issue did not occur in the United States, even if the sale was of an item bearing a U.S. registered copyright. Id. at 985. The court characterized its analysis as the product of a “more robust version . . . of the Copyright Act” in which “the Act presumptively does not apply to conduct that occurs abroad even when that conduct produces harmful effects within the United States.” Id. at 988. The court demanded “something” more for the Copyright Act to apply, and that something more was copying in the United States, which did not occur. In December 2010, the Supreme Court considered an appeal from the Ninth Circuit’s decision in Omega but affirmed the Ninth Circuit in a per curiamopinion. Costco Wholesale Corp. v. Omega, S.A., No. 08-1423 (Dec. 2010) (slip op.).
What Does the Future Hold?
The decisions discussed above in the context of the various categories of intellectual property vary in their willingness to acknowledge the degree to which U.S. laws are used to govern conduct taking place outside the United States. It is noteworthy that, with one exception in the case of the extraterritorial reach of the Lanham Act as analyzed by the Pinkberry court, the courts have typically paid little more than lip service to notions of international comity in analyzing the reach of the relevant law. Instead, the courts have typically justified policing overseas conduct using the simple touchstone inquiry of whether the misuse of intellectual property is being engaged in to further the importation of products into the United States. If so, then the courts are willing to entertain the lawsuit because this is not viewed as a “pure” extraterritorial assertion of jurisdiction. Is this right?
Clearly, with the ongoing globalization of commerce, international solutions must be reached that harmonize the treatment of activities so that no one country, including the United States, can unilaterally assert jurisdiction without due consideration of the interests of other countries whose intellectual property legal regimes would be equally equipped to mete out justice for conduct occurring outside the United States.
Unfortunately, the most recent events shaping the future of U.S. intellectual property law point us in a different direction. On January 5, 2012, the U.S. Department of Justice (DOJ) filed a broad multi-count indictment against a file-sharing website, Megaupload.com, and several related websites, along with the principals of the various websites. United States v. Kim Dotcom, No. 1:12CR3 (E.D. Va. Jan. 5, 2012). Within this indictment, the DOJ included three counts of criminal copyright infringement and authorized efforts to seize a large variety of property in the name of the defendants. None of the individual named defendants is a U.S. citizen or otherwise resides in the United States, and the relevant websites are also maintained outside U.S. borders. As the indictment details, however, the various defendants allegedly made great deals of money trafficking in the unlawful dissemination of U.S. copyrighted works and paid individuals in the United States to facilitate this dissemination. After the grand jury indicted the defendants, the DOJ proceeded to oversee the arrest of the individual defendants across the globe, executed numerous search warrants in the United States and abroad, and seized in excess of $50 million in assets. Press release, Justice Department Charges Leaders of Megaupload with Widespread Online Copyright Infringement (Jan. 19, 2012); see also Megaupload Busted: Can Kim Dotcom Win the Copyright Fight?, "Int’l Bus. Times," Jan. 23, 2012.
As commentators have pointed out, there are numerous troubling signs in the Megaupload indictment from the perspective of extraterritorial assertion of jurisdiction. As mentioned above, the principals and offending websites are maintained largely outside the United States. Although some ancillary activities have taken place through the United States, arguably the bulk of the offending activity took place outside the country. Further, the relevant statutes underpinning the indictment, including the criminal copyright infringement statute, do not expressly provide that it reaches overseas criminal activity. Asher Hawkins, Fighting Megaupload Piracy with . . . Piracy?, "Legal as She Is Spoke," Jan. 20, 2012. In fact, the lawyers representing Megaupload shared this concern. On May 30, 2012, defendant Megaupload filed a motion to dismiss the criminal indictment for lack of personal jurisdiction, noting that Megaupload, a Hong Kong corporation with no U.S. agents or offices, was not properly served with process and, as a matter of law, cannot be properly served in this U.S. criminal case because it neither waived service of process nor has any U.S.-based agents to accept service of process. United States v. Kim Dotcom, No. 1:12-CR-3 (E.D. Va. May 30, 2012).
There have been legislative efforts to address the issue as well. The Stop Online Piracy Act (SOPA), which was introduced in the House of Representatives, and its Senate counterpart, the PROTECT IP Act (PIPA), were ostensibly focused on U.S. regulation of activity on non-U.S. websites. SOPA and PIPA, as originally envisioned, would have required anyone maintaining a website to guarantee that no copyrights are violated on any site to which they are linked, even to sites maintained outside the United States. In the event such linked sites carried content infringing U.S. copyrights, the acts would have provided U.S. enforcement authorities with the power to require Internet service providers to block access to the infringing websites. Marcel Rosenbach and Gregor Peter Schmitz, Battle Lines Drawn in Global Copyright Confrontation, "Der Spiegel Online," Jan. 25, 2012.
The outcome of the Megaupload litigation will prove quite telling on the question of the reach of U.S. intellectual property laws. Ironically, a positive outcome in that litigation for the DOJ may galvanize the DOJ to enhance its enforcement efforts against other alleged online counterfeiters and copyright and trademark infringers, without the need for the previously introduced legislation, SOPA and PIPA, both of which, ironically, met their own legislative demise (at least for now) shortly after the announcement of the Megaupload indictment.
Keywords: international litigation, extraterritorial, intellectual property, copyright infringement, international comity, Lanham Act, piracy, trademark
Manjit Gill is an attorney in the Miami, Florida, area.