The World in U.S. Courts: Spring 2017 - Intellectual Property – Copyright | March.10.2017
Plaintiff Geophysical Service is a Canadian company in the business of creating “seismic lines”—visual cross-sections of land below the earth’s surface from seismological data. Under Canadian law, it is required to submit all such seismic lines to a Canadian governmental entity, which in turn is authorized to release copies upon request after a ten-year waiting period. Defendant TGS-NOPEC (TGS) is a Texas company that obtained copies of 33 of Geophysical’s lines and is alleged to have used them in such manner as to have committed copyright infringement through importation, and contributory copyright infringement. TGS sought to dismiss the case on grounds that Geophysical failed to allege US domestic copyright infringement, as the law required.
The Court of Appeals acknowledged that the Copyright Act has no extraterritorial effect, and concluded preliminarily that that the requirement of a US act of infringement is not “jurisdictional,” just an element that must be shown for a violation to be made out. It also acknowledged that infringement could be shown by proof of an unauthorized importation into the US of material that infringes a US copyright.
The Court of Appeals then identified the key substantive issue in the case: whether TGS’s initial copying of Geophysical seismic lines obtained from a Canadian governmental agency was “lawful,” and therefore that Geophysical’s copyright was thereby “exhausted” pursuant to what has become known in the US as the “first sale doctrine.” If that were the case, importation of the lawfully-made copies would not be an act of infringement. The Court of Appeals noted that the question had been left open by the US Supreme Court’s 2013 decision in the Kirtsaeng case, which held that the rights of a US copyright holder were “exhausted” even if the first sale of a copyrighted article occurred outside the US. In that case, the owner of textbooks lawfully manufactured and purchased outside the US was found to be free under US Copyright law to bring the books back into the US for resale. There was no question in Kirtsaeng that the books had been “lawfully” made and purchased; in the present case, many questions of lawfulness arose regarding Geophysical’s importation of seismic lines given to it by the Canadian government agency. The Court of Appeals determined it did not yet have to resolve these questions because the appeal could be resolved on other grounds.
First, the Court of Appeals rejected the argument that the “act of state” doctrine prohibited US courts from considering Geophysical’s infringement claim. That doctrine gives US federal courts discretion to decline to decide cases where their resolution might “invalidate the official act of a foreign sovereign performed with its own territory.” Here, the Court of Appeals determined, no such threat was posed. Even if the lawfulness of the Canadian agency’s action were to be considered, it would only be to determine whether Geophysical’s importation was lawful; no determination would be made whether the Canadian agency’s action was valid.
Second, the Court of Appeals determined that Geophysical’s importation—implemented through its direction that the Canadian agency send copies of the TGS seismic lines to Geophysical’s headquarters in Texas—was a US domestic act and therefore not outside the scope of the US Copyright Act.
A different result obtained for Geophysical’s claim that TGS committed “contributory infringement” in connection with its causing the Canadian agency to distribute copies of the seismic lines. Any such claim would have involved actions by the TGS in the US to cause the Canadian agency to have allegedly infringed Geophysical’s copyrights, in Canada. But the Court of Appeals held that US conduct that induced infringement outside the US was not US domestic infringement and therefore was outside the scope of the Copyright Act. The fact that the Canadian agency’s action involved the shipment of allegedly infringing works to the US was deemed irrelevant.