In re Outsidewall Tire Litig., 1:09cv1217 (E.D.V.A. October 18, 2010)

There was an interesting decision on the extraterritorial application of the Copyright Act and the statute of limitations this week. The plaintiffs, an individual and his trio of companies which produced mine vehicle tires, alleged that a group of defendants manufactured and distributed infringing tires. A jury returned a verdict in the plaintiffs’ favor on a series of claims including copyright infringement. Defendants moved for a new trial.

The plaintiffs alleged that the defendants manufactured the infringing tires abroad using designs that were copied in the U.S., outside of the statute of limitations. The Court found that the defendants were domestically liable for damages on the overseas infringement because the infringement was enabled by domestic, predicate acts, even though the domestic acts occurred prior to (what the Court applied as) the statute of limitations period:

Defendants next argue that the verdict should be set aside because no acts of copyright infringement occurred in the United States. As discussed in the July 21 Order, this argument is also unavailing. See July 21 Order, at 14. As an initial matter, the evidence adduced at trial plainly showed (i) that in 2005 and early 2006, Vance copied plaintiffs’ Alpha tire blueprints and modified them to create an infringing derivative work for defendants and (ii) that he did so in part in Virginia. It is true that none of these acts occurred in the United States after October 28, 2006, meaning the acts do not fall within the limitations period for the copyright claims. Indeed, both the manufacturing of the infringing tires based on Vance’s work and the sales of such tires occurred outside the United States during the relevant limitations period. While the Fourth Circuit has  [*30] not yet addressed whether extraterritorial exploitation of a copyright falls within the Copyright Act’s jurisdiction when the domestic, predicate acts occurred prior to the limitations period, the Second and Ninth Circuits have sensibly held that such infringement is covered by the Act. See L.A. News Serv. v. Reuters Tel. Int’l, Ltd., 340 F.3d 926, 928 (9th Cir. 2003); Update Art, Inc. v. Modiin Pub., Ltd., 843 F.2d 67, 73 (2d Cir. 1988). ¹⁸ Specifically, the Ninth Circuit has held that while “the Copyright Act does not apply extraterritorially, an exception may apply where an act of infringement is completed entirely within the United States and that such infringing act enabled further exploitation abroad.” L.A. News, 340 F.3d at 928; see also Update Art, 843 F.2d at 73 (in the Second Circuit, holding that although “copyright laws generally do not have extraterritorial application[,] [t]here is an exception . . . when the type of infringement permits further reproduction abroad”). This rule ensures that domestic copyright infringers cannot escape liability for their infringing acts by exploiting the fruits of their infringement in foreign markets. This rule is appropriately applied  [*31] in this case. Defendants cannot escape the reach of the Copyright Act where, as here, they initiated and committed their infringing acts in the United States and then attempted to reap the spoils of their infringement by manufacturing and selling their infringing tires abroad. Thus, they are liable for the foreign acts implementing their unlawful infringement scheme.

FOOTNOTES

18 The Sixth Circuit has also recognized that a court has subject matter jurisdiction over a copyright infringement action “as long as some act of infringement occurred in the United States,” even if most of the infringing conduct took occurred abroad. Liberty Toy Co. v. Fred ilber Co., No. 97-3177, 1998 U.S. App. LEXIS 14866, at *11 (6th Cir. June 29, 1998).

Furthermore, the fact that the domestic acts of infringement occurred outside of the limitations period is irrelevant to defendants’ liability, because the Copyright Act’s statute of limitations limits the remedy, not the substantive rights, under the Act. See Prather v. Neva Paperbacks, Inc., 446 F.2d 338, 340 (5th Cir. 1971) (holding that the limitations period would affects “the remedy only, not the substantive right” under the Copyright Act); Peter Letterese & Assocs. v. World Inst. of Scientology Enters., 533 F.3d 1287, 1320 (11th Cir. 2008)  [*32] (agreeing with the Fifth Circuit’s analysis). Accordingly, defendants are liable for their foreign acts of infringement despite the fact that the domestic acts of infringement occurred before October 28, 2006.

Finally, defendants’ argue that Virginia law was improperly applied to the claims in this action because the wrongful acts did not occur in Virginia. This assertion is plainly meritless, since there is no question that acts of infringement occurred in the Commonwealth of Virginia. The Supreme Court of Virginia has consistently held that it is the place of the wrong that determines which state’s substantive law applies. See Quillen v. International Playlex, Inc., 789 F.2d 1041, 1044 (4th Cir. Va. 1986) (citing McMillan v. McMillan, 219 Va. 1127, 253 S.E.2d 662 (1979)).