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February 2013

Ninth Circuit Increases Copyright Infringement Defendants' Susceptibility to Personal Jurisdiction

In Washington Shoe Co. v. A-Z Sporting Goods, Inc., Nos. 11-35166 and 11-35206, 2012 U.S. App. LEXIS 25667, at *1 (9th Cir. Dec. 17, 2012), the Ninth Circuit reversed the district court’s dismissal of a copyright infringement action for lack of personal jurisdiction. In its decision, the Ninth Circuit clarified the application of “purposeful direction” and “effects” test outlined by the Supreme Court in Calder v. Jones, 465 U.S. 783 (1984), in determining personal jurisdiction over copyright infringement defendants. The Ninth Circuit held that the defendant-appellee, an Arkansas-based shoe retailer, was subject to personal jurisdiction in Washington based on the retailer’s knowledge and alleged infringement of a copyright held by the plaintiff-appellant, a Washington-based shoe manufacturer.

Background

The Parties

Plaintiff-appellant Washington Shoe Company (“Washington Shoe”) is a Washington-based shoe manufacturer in business for over 100 years. Washington Shoe, 2012 U.S. App. LEXIS 25667 at *1-2. In particular, Washington Shoe manufactured popular children’s rain boots bearing copyrighted designs referred to as “Ditsy Dots” and “Spider.” Id. Defendant-appellee A-Z Sporting Goods, Inc. (“A-Z”) is an Arkansas-based retailer that sells outdoor gear and sporting goods. Id. at *2. A-Z’s retail operations are largely conducted at its brick-and-mortar store in Arkansas. A-Z did not have an interactive website that allowed customers to order products online nor did A-Z sell any products online. Id.

Between 2007-2009, Washington Shoe and A-Z shared a business relationship, through which A-Z purchased items from Washington Shoe. A Washington Shoe salesman regularly visited A-Z’s Arkansas store to assess A-Z’s ordering needs and provided A-Z with brochures and catalogs of Washington Shoes's products, including any applicable copyright notifications. Id.

The Infringing Activity

During one of the salesman’s visits to A-Z, he noticed that A-Z was offering and displaying Washington Shoe’s “Ditsy Dots” and “Spider” rain boots. The salesman knew that he had never sold A-Z these particular rain boots, which were later determined to be infringing knock-offs. Id. A-Z admitted that it purchased the rain boots from a Chinese company but denied that the boots had any indication that the designs were subject to copyright. Id. at *2-3.

Washington Shoe’s counsel subsequently sent two cease and desist letters, informing A-Z that the rain boot designs were copyrighted and demanding that A-Z cease sales of the boots and surrender an accounting of past sales. Id. In response, A-Z proceeded to remove the boots from its store but sold them to a thrift store. Id. Washington Shoe filed suit for copyright infringement, trade dress infringement, and unfair competition in the United States District Court for the Western District of Washington. Id. at *3-4. A-Z filed a motion to dismiss the suit for lack of personal jurisdiction or alternatively, for improper venue. Id. The district court allowed limited jurisdictional discovery to determine A-Z’s sales activities in Washington. The district court ultimately granted A-Z’s motion to dismiss and Washington Shoe appealed. Id.

The Purposeful Direction and Effects Test Clarified

Following the Supreme Court’s seminal opinion in International Shoe Co. v. Washington, 326 U.S. 310 (1945), the Ninth Circuit has articulated a three-part test sufficient minimum contacts subjecting a defendant to specific personal jurisdiction in a forum state as follows:

  1. The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
  2. the claim must be one which arises out of or relates to the defendant’s forum-related activities; and
  3. the exercise of personal jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.

Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. 2010) (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir.2004)).

In Washington Shoe, the Ninth Circuit focused upon the purposeful direction aspect of the first prong of the minimum contacts test. Distinguishing “purposeful availment” from “purposeful direction,” the court clarified that the former applies to suits arising out of contract while the latter applies to torts. Specifically, the court explained that “‘[i]n tort cases, we typically inquire whether a defendant ‘purposefully direct[s] his activities at the form state, applying an ‘effects’ test that focuses on the forum in which the defendant’s actions were felt, whether or not the actions themselves occurred within the forum.’” Washington Shoe, 2012 U.S. App. LEXIS 25667 at *7-8 (citing Yahoo! Inc. v. La Ligue Contre Le Racisme, 433 F.3d 1199, 1206 (9th Cir. 2006)). The effects test requires that the “defendant. . . have (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.” Washington Shoe, 2012 U.S. App. LEXIS 25667 at *8-9. In other words, “courts may exercise personal jurisdiction over a defendant who engages in an intentional act that causes harm in the forum state, even if that act takes place outside of the forum state.” Id.

Intentional Act

The court first examined “whether A-Z ‘committed an intentional act’ when it” purportedly “willfully infringed Washington Shoe’s copyright” by selling and offering for sale, the rain boots bearing the copyrighted designs. Id. (citations omitted). The court defined “intentional act” as “an external manifestation of the actor’s intent to perform an actual, physical act in the real world, not including any of its actual or intended results.” Id. at *11. Applying this test, the court determined that A-Z’s purchasing and subsequently selling the boots notwithstanding Washington Shoe’s cease and desist letters constituted an “intentional act” under the effects test. Id. at *11-12.

Express Aiming

The court then proceeded to examine whether A-Z’s “conduct was expressly aimed at the state of Washington,” Washington Shoe’s principal place of business. According to the court, “specific jurisdiction exists when ‘the defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state.’” Id. at 15.

In the case of 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.” Id. The court further explained that “[b]ecause the harm caused by an infringement of the copyright laws must be felt at least at the place where the copyright is held, we think that the impact of a willful infringement is necessary directed there as well.” Id. at *23-24 (emphasis in original). A “copyright is the right to control” the copyrighted work, including the “exclusive rights to display, reproduce, or distribute copies. . . and to prepare derivative works.” Id. at *24 (citing the Copyright Act, 17 U.S.C. § 101, et seq.). And where the “copyrights are held by corporations, the ‘right to control the work’ will typically be exercised where the corporation is located. The impact of an intentional violation of that right is necessarily directed at that location.” Washington Shoe, 2012 U.S. App. LEXIS 25667 at *24.

The court found that A-Z had expressly aimed its alleged copyright infringement at Washington state, where Washington Shoe’s headquarters were located. Specifically, the court found that there was an ongoing relationship between Washington Shoe and A-Z, wherein the A-Z received catalogs of Washington Shoe’s merchandise, including the rain boots at issue, thereby “making A-Z aware of both the existence of the Ditsy Dot and Spider boots and Washington Shoe’s copyright.” Id. at *14. Moreover, A-Z sold the boots in its Arkansas store, where Washington Shoe’s footwear was also offered, thus “placing the infringing items in direct competition with Washington Shoe’s copyrighted boots.” Id. When A-Z was informed of their allegedly infringing activity by the cease and desist letters, A-Z nevertheless proceeded to sell the boots. Id. Based on these factual allegations, if sustained, the court determined that A-Z’s conduct constituted a willful violation of Washington Shoe’s copyright. Id. Notably, the court clarified that a defendant’s intentional act and its known impact “need not coincide” to satisfy the “express aiming” requirement; jurisdiction exists in the plaintiff’s home forum when the defendant’s “acts are performed for the very purpose of having their consequences felt in the forum state.” Id. at *16. Thus, although A-Z’s willfully infringing acts allegedly occurred in Arkansas, where the infringing boots were displayed and sold, the acts were expressly aimed at Washington state to the extent that A-Z “knew or should have known that Washington Shoe is a Washington company.” Id. at *24.

Causing Harm that the Defendant Knows Is Likely to Be Suffered in the Forum

The court also determined that A-Z knew the harm arising out of its alleged infringement of Washington Shoe’s copyright would be felt in Washington state. “The economic loss caused by the intentional infringement of a plaintiff’s copyright is foreseeable.. . and it is foreseeable that the loss will be inflicted both in the forum where the infringement took place and where the copyright holder has its principal place of business.” Id. at *26. Accordingly, the court held that A-Z was subject to specific jurisdiction in Washington and A-Z could “reasonably anticipate being haled into court” in Washington. Id. at *27.

Intellectual Property



Intellectual Property