CHINA ESQUIRE

Having said what I did in my previous post, you may be wondering if there really is anything else to follow up.  My answer: of course there is!  (that’s why this is a 3 part series, and not a one shot deal)

What happens now when there is some sort of contract or written agreement that would vest jurisdiction (and of course, venue) in the United States in such a situation?  I can imagine a number of scenarios for this.  (1) You have a shrinkwrap license that somehow makes its way overseas.  (2) You have an exclusive distribution agreement for your music in particular countries.  (3) You have an end user license agreement (”EULA”) each time you install software.  (4) Any other scenario which involves a written license or agreement…  use your imagination.

And then you have as part of that license or agreement that subject matter jurisdiction is vested in some court located in the United States.  Not just venue, but jurisdiction.  And you include in your agreement that the parties agree that U.S. copyright law should apply to any and all disputes.  Okay…  so that should make things fullproof?  That you can write your way around Subafilms and get a U.S. court to apply the federal Copyright Act?  You might think so, and it seems intuitive to some of the corporate types.   And if you’re the plaintiff, you might even argue so to the court.

My response?  You’re still out of luck.  There is a general axiom in civil procedure that a contract can’t hand jurisdiction to the courts.  Where a court lacks subject matter jurisdiction, the parties cannot simply vest it by agreement.  Kolbe v. Trudei, 945 F. Supp. 1268, 1270 (D. Ariz. 1996).  In Kolbe, the court specifically rejected an argument that a licensing agreement that contained a forum selection clause granted jurisdiction to the District of Arizona over infringing French translations.  The court held that “parties cannot agree to invest this Court with subject matter jurisdiction.  Either subject matter jurisdiction exists or it does not exist, a matter independent of the parties’ agreement.”  Id.

So, the hard work that your corporate lawyer did to ensure that jurisdiction and venue were established in the United States may still be worth something if the copyright infringement took place in America.  But if you’re overseas, then that hard work is worth nothing.  Period.

If you represent plaintiffs, don’t think that your EULA or other agreement will save you.  It won’t.  You need to get another way to connecting things to the U.S., or else, it just won’t fly in federal court.  (at least, it won’t in the 9th Circuit)

If you represent defendants, then just argue Kolbe and the general axiom.  It’s quite obvious.

Third installment coming soon!

I’ve been wanting to do this series of posts for some time now.  In fact, I’ve been sitting on the materials for this for months…  as you can tell, I’d more or less taken a brief blogging hiatus, just posting stuff here and there.  I don’t believe I can return to the sort of posting that I used to do–pretty much 1 article every day–but I will attempt to keep my posts here interesting and relevant.

That being said, one thing that often happens in representing international companies in lawsuits is that you will inevitably sue or be sued for international copyright violations.  (think of your clients’ employees downloading pirated mp3s, pirated software, or whatever else)  Now there are plenty of methods to seek redress. If those happen in the United States, of course, you can use federal copyright law.  But what if the copyright violation ultimately happens in China or Japan?  (or whatever country you can pick)  Even if the plaintiff is a U.S. based company, and the method of copyright violation occurs by broadcast signal or internet coming from the U.S., my personal take is that the plaintiff is out of luck… at least, it is in the 9th Circuit.

Violations of the Copyright Act must occur within the United States.  In general, “United States copyright laws do not have extraterritorial effect, and therefore, infringing actions that take place entirely outside the United States are not actionable.”  Subafilms, Ltd. v. MGM-Pathe Comm’ns Co., 24 F.3d 1088, 1091 (9th Cir. 1994) (en banc); Peter Starr Prod. Co. v. Twin Continental Films, Inc., 783 F.2d 1440, 1442-1443 (9th Cir. 1986).  The en banc panel reiterated that the Copyright Act’s extraterritorial limitations are an “undisputed axiom”.  Id. at 1095.  “At least one alleged infringement must be completed entirely within the United States.”  Allarcom Pay Television, Ltd. v. Gen. Instrument Corp., 69 F.3d 381, 387 (9th Cir. 1995); see also Danjac, LLC v. Sony Corp., 1998 U.S. Dist. LEXIS 22231, at *22 (C.D. Cal. 1998) (scope of injunction limited to domestic activities).  A plain reading of Subafilms ends up being fatal to would-be plaintiffs.

Further, my take is that Allarcom is pretty instructive too.  There, the plaintiff was authorized by the Canadian government to be the exclusive provider of English subscription television, which included exclusive rights to movie producers such as Paramount and Touchstone.  Allarcom, 69 F.3d at 383.  Defendant Showtime had the right to exhibit many of the same movies in the United States.  Id. at 384.  Defendant General Instrument manufactured a device that descrambled satellite television signals, which allowed unauthorized users to receive protected content, including Showtime.  Users in Canada purchased General Instrument’s device and used it to unscramble Showtime content.  Allarcom filed a complaint in federal district court against defendants for copyright infringement.  The court held that the Copyright Act did not apply to infringement in Canada.  Id. at 387.  Because the signal that was transmitted by Showtime from the United States was received and decoded in Canada, the Ninth Circuit held that “the potential infringement was only completed in Canada once the signal was received and viewed.”  Id.

Bottom line: the alleged infringment must take place in America, on American soil.  At least, that’s how I read the law to be.

So, what does this all mean for you?  For plaintiff’s counsel: do your homework.  And if you have a client who is going ballistic, wanting to sue in the U.S. in federal court even if the violation wasn’t here, then you need to tell them firmly that it won’t fly in court.  See if you can somehow tie the activities to the U.S., because you will have to do that later.

For defense counsel: It means if your client is being threatened with a federal copyright case, do your investigation.  Make sure that you know where the violation happened.  If it’s a broadcast or download situation, you may need an expert to discuss why the violation wasn’t U.S. based.  But don’t sweat it too much unless plaintiff’s attorneys are just patently unreasonable.

2 more parts coming on this shortly!

And it also seems like everyone who is trying to implement one is also having a harder time trying to get it off the ground quickly.  Hopefully it will at least be done in a “timely manner”…  I say this because I’ve been watching the U.S. news and noticed that the bailout package hasn’t been in the news (of course, there were elections), but the news that has trickled out appears to show that the bailout needs more time to take effect than everyone was hoping for.

Well, here comes China with their stimulus package, courtesy of the Wall Street Journal, “ China Sets Big Stimulus Plan In Bid to Jump-Start Growth” ( h/t to China Venture News, that was quick):

China unveiled an economic stimulus program it billed as totaling $586 billion, aiming to bolster domestic demand and help avert a global recession.

Though the two-year package appeared to include some previously announced measures, its size was clearly designed to revive the fading confidence of Chinese businesses and consumers, and impress foreign governments. Asian shares rallied sharply early Monday on the Chinese announcement, with benchmark stock indexes in Tokyo, Hong Kong and Shanghai all jumping close to or above 5% in the early hours of trading.

The announced sum of four trillion yuan represents about 16% of China’s economic output last year, and is roughly equal to the total of all central and local government spending in 2006. New spending of even half that amount would be substantial next to China’s six trillion yuan annual budget for this year.

The plan includes spending in housing, infrastructure, agriculture, health care and social welfare, and features a tax deduction for capital spending by companies.

Although Chinese officials have been meeting daily on the financial crisis, most observers hadn’t expected leaders to reach final consensus on a stimulus plan until an annual economic-policy meeting scheduled for the end of this month. The rapidity of the response underscored the government’s concern about the growing risks of a real downturn.

The rapid response of the government’s concerns are, of course, well placed.  As the news media trumps the looming downturn (borderline Great Depression, which I think is slightly extreme), it’s absolutely killed investor confidence.  In other words, the self fulfilling prophecy is happening.  So China wades into the waters, which is impressive.  But stuff like this takes time…

China’s economy won’t be able to absorb so much spending immediately: Economists expect one or two more quarters of slowing growth at a minimum before a rebound could take hold.

Beijing has long held that economic growth of at least 8% is needed to provide the improvement of employment and incomes the ruling Communist Party relies on for popular support. China’s growth has slowed to its weakest pace in five years, with output expanding just 9% in the third quarter from a year earlier after gaining nearly 12% in 2007.

That’s the ultimate kicker though.  Change–any sort of change–takes time.  Hopefully what China enacts will come in time to help the global economy. Sadly, that may not be the case.

Well, it’s what I had expected.  Now that the media battle is over, let’s get focused on getting back to work.  I truly hope that Barack Obama ends up being a more positive figure to China and China/foreign trade now that he can stop talking tough for his constituents, and also, be a little more realistic about our nations’ mutual need for one another in a global economy.

Even CNN ran an article a few weeks back (had it sitting in my inbox) entitled “ Why the U.S. Needs China“:

China’s economy is not going to grind to a halt. But even a marginal slowdown could hurt large U.S. firms. Many of them have been able to offset sluggish growth in the United States with sales to China and other developing markets.

And it’s not certain that China’s economy will continue to keep expanding at such a rapid pace in the next few years if this credit crunch continues to persist for much longer.

There is already some evidence to suggest that the two nations may need to work together to avert more global economic pain.

When the Fed announced a coordinated interest rate cut on Oct. 8 with banks in Europe and Canada, China’s central bank also lowered interest rates that day.

The Fed’s announcement didn’t mention the Chinese rate cut and China’s central bank didn’t acknowledge the rate cuts in the United States and Europe. But does anyone honestly think that the United States and China coincidentally decided on the same day to lower interest rates?

Make no mistake. The two countries clearly realize they need each other and that economic hardship suffered by the other is not good for either. China may not have the exact problems that the U.S. does but its third-quarter GDP slowdown is definitely a sign that the credit crunch is hitting China as well.

Mr. Obama, I hope one of your people is listening.

It’s already late for many of my readers, that’s fine.  I should’ve posted earlier.

I think its already pretty obvious where I’ve stood on the McCain v. Obama issue.  I may well be a loser today, but I just can’t get over the rhetoric for Obama…  of course, Obama is a lawyer–and answers questions like one: dodging questions, not giving anything substantive wherever possible, etc.  Anyways, my thoughts were here:

mccain and obama personally weigh in on china

joe biden’s china stances

I know this flies directly against my fellow China law bloggers like Stan.  I’ll admit that Obama is more intelligent, sharp, and charismatic.  I just don’t like him as our next President.