Apr 12 2010
So many emails to pile through my inbox, but ironically, many of them are about the Foreign Corrupt Practices Act. In light of the recent things happening with Avon in China (see e.g., this post at the Wall Street Journal’s law blog), it seems like FCPA compliance and enforcement is coming towards MNCs doing business in China. What better time to get educated on the FCPA?
Dec 16 2009
Apparently, there is a crackdown on corrupt officials and organized crime in Chongqing. Others caught up in the sting? Defense lawyers. It’s like the tuna nets that end up picking up a few dolphins along the way. The only problem is this: the defense lawyer here is just doing his job. At least, he’s doing his job, in my opinion, as any normal defense advocate would do here.
The details after the jump.
May 12 2009
Here’s something truly new with firms… an international firm is building up its LITIGATION practice in China. (Okay, Hong Kong, which is arguably part of and not part of China) But this news story really caught my eye since I’ve been seeing the trend being more IP or corporate as a focus. (or the generic term “China practice”) Skadden’s decided to break the mold. More after the jump.
Apr 06 2009
A friend forwarded an email to me about an interesting seminar that will cover “Antitrust and Intellectual Property Economics and Litigation in China”. Yes, sounds like a mouthful, and this could easily be a semeter-long course in law school. But in that regard, it should prove to be really interesting. The seminar is happening at the Palace Hotel, 2 New Montgomery Street, San Francisco, CA on April 23, 2009 at 4:30pm. Did I forget to mention its also free MCLE?
Unlike many of the conferences I post but cannot go to, I actually plan on attending this one. More information after the jump.
Mar 18 2009
Looks like Chinese manufacturers are causing yet another legal fuss here. This time its drywall. CNN ran an article yesterday entitled “ Chinese-made drywall ruining homes, owners say“. It seems that people in multiple states–Florida and Louisiana–are having issues with dry wall emitting corrosive gases. And it’s gotten bad enough to not only trigger three law suits, but three separate class actions. (2 in Florida, 1 in Louisiana)
CNN reports:
Officials are looking into claims that Chinese-made drywall installed in some Florida homes is emitting smelly, corrosive gases and ruining household systems such as air conditioners, the Consumer Product Safety Commission says.
The Florida Health Department, which is investigating whether the drywall poses any health risks, said it has received more than 140 homeowner complaints. And class-action lawsuits allege defective drywall has caused problems in at least three states — Florida, Louisiana and Alabama — while some attorneys involved claim such drywall may have been used in tens of thousands of U.S. homes.
Mar 12 2009
It’s been busy at work, but its awfully hard to not post something like this when I see it. The American Lawyer ran an article (free suscription required) called “ China Gets Litigious” and it actually sounded interesting. (yes, I think I am a litigator at heart still…) Wang Shengjun, the president of the Supreme People’s Court laid out the statistics before the National People’s Congress. (and provided to Xinhua… not that I am surprised):
Litigation activity in China is growing at a rapid pace, according to a report issued Tuesday by the nation’s top judge.
Wang Shengjun, , described the increase in court cases in a speech to the National People’s Congress. Highlights of Wang’s remarks were provided beforehand to the official Xinhua news agency.
The actual statistics after the jump.
Jan 21 2009
Practicing Law Institute (PLI) is having a conference on International Arbitration and Mediation on March 24, 2009. The live program takes places in New York City, NY, but with webcast available. (and “groupcast” in Pittsburg and Philadelphia)
Dec 29 2008
I didn’t think I’d be seeing any interesting resolution of the milk scandal from earlier this year that would be worth posting… but lo and behold, Yahoo decided to post an article ( h/t to China Digital Times) entitled “ Chinese Dairies to Compensate Melamine Victims“. I’d seen news about the Sanlu trials, but didn’t think anything special enough to comment about them. (that may change of course) But here’s the article, which triggered some thoughts:
Chinese dairy companies that sold melamine-tainted milk are ready to pay compensation to the families of the nearly 300,000 children who became ill or died from drinking contaminated infant formula, a state news agency reported Saturday.
Twenty-two dairy producers will make a one-time cash payment to the victims’ families, China’s Dairy Industry Association announced, although it did not disclose an amount, the official Xinhua News agency said.
“The money for compensation is in place now and will soon be handed to the people who have custody of the sickened children through various channels,” the association said. The group did not specify a date.
The issue of compensation for the young victims has been a highly sensitive one, with Chinese courts so far not accepting any lawsuits filed by the families.
It’s interesting to consider that the courts refuse to accept lawsuits, and that payment up until this point has been handled only by the government. (in an attempt to tide public unrest and excessive use of the legal system) Now it looks like the companies are ready to turn in a compensation package… but more than that, I wonder if this is more or less the formal apology to the people.
People who understand the U.S. legal system understand that often these sort of tort cases go on because plaintiffs want an apology. And they proceed to trial because of “principle”. Settlement is sometimes the goal of plaintiffs, but often, more so the goal of the lawyers involved. (and yes, I’ve done plaintiff’s work) I think that many of the plaintiffs I’ve represented would have gladly taken less if the company was crazy enough to just admit liability and issue an apology. (that never happens for PR, liability, and a whole host of other reasons) But what if they did?
And so I am left wondering if Sanlu and other dairies are making this event into a pay-off or an apology… the former would place them in good company with American corporations. The latter would place them into foreign territory… and yet, everyone already knows the companies sold tainted goods. The court of public opinion is already against them. And what better way to stave off lawsuits than to just give the darn apology? Is it that hard? It is in America. Perhaps this isn’t the case in China… I’m curious as to how the companies are going to maneuver the PR around this case. I hope its an apology… its about time someone finally stepped up to the plate and owned up to their mistakes.
Yes, Chinese dairies, I hope your performance shames American companies. That would be a sight to see!
Dec 08 2008
Finally, part 3 of my series. One way that plaintiffs often try to get their international copyright violations heard in U.S. courts is by alleging that a U.S. based defendant aided the infringement. To my knowledge, there are two types of contributory infringment: vicarious and contributory. I have not seen any cases on point within my Circuit as to vicarious. However, it appears that Subafilms (which was the basis for part 1 of this series) directly addresses contributory infringement in a way that severely limits what plaintiffs may actually get away with.
The Ninth Circuit held that it is axiomatic that activity outside the United States, “not constituting an infringement cognizable under the Copyright Act, cannot serve as the basis for holding liable under the Copyright Act one who is merely related to that activity within the United States.” Subafilms, Ltd. v. MGM-Pathe Comm’ns Co., 24 F.3d 1088, 1093 (9th Cir. 1994) (en banc). A party cannot be held liable for contributory infringement unless the authorized or encouraged activity itself amounted to copyright infringement. Id. at 1092.
The Subafilms court held that a movie studio that “licensed” infringing DVD’s to international markets could not be held liable under U.S. Copyright Act. Why? Because the violation occurred abroad… and not in the United States. So even if a U.S. based defendant contributed to what would amount to infringment in China, Japan, Russia, etc., that is not sufficient to be held liable in the U.S. The only way to get a third party on the hook is in a situation where the infringement took place in America.
Practically speaking, if there is infringement that happens abroad, Subafilms knocks out liability against the primary infringer and any contributing third parties or additional defendants.
Bottom line: unless a plaintiff can demonstrate that authorized activity fell under the Copyright Act in America, then parties may not be held liable for contributory infringement… because there is simply no copyright infringement.
For plaintiffs: You have to demonstrate that copyright infringement happened in the United States if you want to use the Federal Copyright Act. Otherwise, you need to take the case to international courts or U.S. state courts. The former may not yield you much because damages are low… but then again, so are damages in the latter without statutory damages under the FCA. Your best bet is an injunction in international court.
So if you can’t show infringement in the U.S., its a business decision: do you want to spend that much money for that little in damages?
For defendants: This is your lucky day if this happens to match your facts. You can argue that the court has no subject matter jurisdiction over federal copyright claims, and thus, likely knock this case into international courts or U.S. state courts. And in the state courts, plaintiffs don’t get ridiculously high statutory damage, so its a win for you.
For those of you who missed parts 1 and 2, they are here:
Nov 14 2008
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!
Nov 12 2008
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!
Oct 25 2008
Just wanted to post quickly about more and more melamine developments. The first is not Sanlu, believe it or not. Not milk. It’s eggs. CNN published an article entitled “ Hong Kong finds excessive melamine in eggs“. Here is an excerpt:
HONG KONG, China (AP) — Excessive levels of the industrial chemical melamine in Chinese eggs might be traced to fertilizer fed to chickens, the Hong Kong government said.
In a statement late Saturday, the government said it found 4.7 parts per million of melamine in the eggs produced by a division of China’s Dalian Hanwei Enterprise Group based in the northeastern port city Dalian.
The legal limit of melamine in Hong Kong is 2.5 ppm.
Hong Kong Secretary for Food and Health York Chow said the melamine may have come from fertilizer fed to chickens that laid the eggs. “The preliminary opinion experts have given us is that there is a problem with the fertilizer,” Chow told reporters.
Chow said Hong Kong officials will step up checks of eggs imported from China.
This really has got to stop. But unfortunately, without severe legal and/or regulatory penalties, the only way that this sort of stuff will ever stop is when the bottom line gets hurt… badly. (like I am betting Sanlu will probably never recover its profitability)
That being said, it sure doesn’t help the perceptions of China here in the U.S. I had some acquaintances I know decide to stop buying Chinese produce because of some rather suspect tasting stuff in some pears recently. It didn’t seem to matter that no one got sick. The normal reaction is that this stuff must be no good because its from China. I don’t necessarily agree with the reasoning, but I do note this: the public perception around these parts is getting worse… and this is the SF Bay Area. No wonder Obama and Biden get so much support when they bad mouth China (or Japan/Korea for that matter) in the rest of this country…
The other thing I wanted to highlight was something that Stan Abrams caught. (Dan Harris also posted on it, and I commented on both) I am not going to comment at length right now, but depending on how interesting the complaint is, I just might have to chime in… in a more in-depth manner than just commenting. From Radio Free Asia:
Parents of Chinese children who died or became ill after drinking infant milk formula contaminated with melamine say they will sue a subsidiary of a Chinese milk powder manufacturer based in the U.S. state of Maryland.
A member of one of the affected families surnamed Liu said Qingdao Shengyuan Milk Co. Ltd., a dairy products manufacturer based in the eastern China city of Qingdao, had a Delaware-registered investment subsidiary with offices in Maryland, rendering it subject to U.S. law.“We have signed a contract with a Maryland-based lawyer who will represent us in this collective compensation suit,” Liu said.
“There are milk victim parents who are willing to pay for the legal fees and expenses and who want to pursue justice in the United States,” he said.
Very very interesting. Will post more if and when more developments happen with this.
