Gayton Law

Intellectual Property – Copyright

UMG Recordings, Inc. v. Kurbanov, No. 19-1124 (4th Cir. 2020)

In this appeal from the United States District Court for the Eastern District of Virginia to the Fourth Circuit, decided on January 26, 2020, the question before the court was whether the defendant, Tofig Kurbanov, d/b/a flvto.biz, a/k/a 2conv.com , was subject to specific personal jurisdiction based on a copyright infringement claim. The district court found that he was not subject to personal jurisdiction. The Fourth Circuit disagreed and reversed the decision and remanded to the district court for further proceedings.

Background

The two websites at issue, flvto.biz and 2conv.com, offered a stream-ripping service where audio tracks were extracted from online music video provider that were converted to .MP3files. Although the extractions were made primarily from YouTube videos, the technology allowed rips from many sources, including some purposes which were not illegal, however, the technology had the ability to circumvent content access control measures put in place to prevent stream-ripping activity. Under the Kurbanov websites terms of service, the sites’ visitors agreed that they were subject to personal jurisdiction in Russia, as well as other countries, by using the service. The users did not pay to use the services. The sites make money indirectly through advertising brokers. There were at least two brokers in the United States. The product features, in which advertisers were interested, were geolocation and geotargeting. The sites’ privacy policy stated that IP addresses, countries of origin and other information may be collected. However, the court made clear that Kurbanov had no direct contractual relationship with the advertisers and the websites were not advertised in the United States or elsewhere. Even without advertising, the websites “attracted over 300 million visitors from over 200 distinct countries” including 30 million users from the US between 10/2017 and 9/2018. Over this same time period, there were almost 600,000 visitors from Virginia to both sites. The domain names are registered with GoDaddy, a US-based domain name registrar and the domain suffixes are managed by Virginia companies, Neustar and VeriSign, and have servers hosted by Amazon Web Services, which has servers in Virginia. Kurbanov conducted his work physically in Russia, and did not work on the sites in the United States. He didn’t have any employees in the US, nor a visa for US travel.

The plaintiff appellants, UMG Recordings, Capital Recordings, Warner Bros Records, Atlantic Recording, Elektra Entertainment, Fueled by Ramen, Nonesuch Records, Sony Music, Arista Records. LAFace Records and Zomba Recording claimed that the Kurbanov’s websites facilitated music piracy and asserted 5 copyright claims.

Kurbanov filed a motion to dismiss stating that the court did not have personal jurisdiction over him. The district court agreed, and granted his motion to dismiss, without deciding on the copyright claims.

Court Analysis

Whether a court in Virginia can assert personal jurisdiction, personal jurisdiction has to be consistent with constitutional due process. For Virginia, the rules are 4(k)(1) and 4(k)(2). The Fourth Circuit synthesized the specific jurisdiction rules into a 3-prong test. Specifically: 1) the extent that defendant purposefully availed itself of conducting activities in the state; 2) whether the plaintiffs’ claims arose out of the activities conducted in the state; 3) whether the exercise of personal jurisdiction was constitutionally reasonable. According to the court, interactions between Virginians and the websites was sufficient to show purposeful availment to conducting business in Virginia in the form of advertisements targeted toward Virginia customers from which it derived financial benefits. In addition, Kurbanov registered a DMCA agent with the Copyright Office which would grant his websites some safe harbor protections. This, along with domain name registrar contacts, server hosting, and US based advertising brokers supported personal jurisdiction, meeting the first prong.

The Fourth Circuit also found that Kurbanov directed activities to Virginia by having websites accessed by Virginia-based customers through location based advertising, satisfying the second prong.

Under both prongs, the Fourth Circuit found that the copyright infringement claims arose from Virginia-directed activities. Because the district court did not analyze whether the exercise of personal jurisdiction was reasonable, the Fourth Circuit remanded this issue to the district court.

Establishing personal jurisdiction related to entirely web-based services is an ongoing legal issue. Website owners would do well to pay attention to how the Fourth Circuit crafted this decision by finding several ties to the US as well as Virginia and linked advertising targeted toward Virginia residents. For those who are concerned about their own geotargeted or geolocation advertising campaigns or stream-ripping abuses, please contact Gayton Law.

Intellectual Property – Copyright and Trademark

IMAPizza, LLC v. At Pizza, Limited, No. 18-7168 (D.C. Cir. July 17, 2020)

Jurisdiction and copyright, along with trademark infringement claims, is a popular topic. This second case involves DMV local chain, &pizza, and an infringement suit against a Scotland-based restaurant, @pizza.

Background

This is an appeal from the US District Court for the District of Columbia to the US  Court of Appeals for the DC Circuit which dismissed the copyright and trademark infringement claims by &pizza against @pizza.

IMAPizza owns a restaurant chain called &pizza, which has several DC and other East Coast locations. It was considering expanding its operations to the UK. At Pizza, is a UK company operating its @pizza operation in Edinburgh, Scotland. According to IMAPizza, @pizza owners toured some &pizza restaurants and decided to copy both their operation methods and appearance. They also took photos in person and downloaded others from &pizza websites. When the @pizza owners returned to the UK, they started a business called &pizza limited, but later renamed it At Pizza. Once &pizza owners found out, they sued At Pizza for copyright infringement, trademark infringement, unfair competition, as well as trespass and passing off under UK law. At Pizza filed a motion to dismiss the case for lack of personal jurisdiction and failure to state a claim for which relief can be granted by the court.

The district court dismissed the case because &pizza failed to show with sufficient facts that the court had jurisdiction over the defendant and failed to show how the alleged infringements were within the power of the court to grant a remedy. &pizza did not show a domestic violation of its copyrights, that the trademark infringement claims were within the territorial limits of the act, and that the district court had jurisdiction regarding the UK passing off claims.

Court Analysis

Copyright – For &pizza to show copyright infringement, it had to show that there was ownership of a valid copyright and that there was copying of original elements of the copyright protected work. The Copyright Act only governs actions in the US. IMAPizza says that @pizza downloaded copyright protected images from US-based servers, so it was an act of domestic infringement. The court responded that since IMAPizza could not show that the infringing copying was fixed in the United States, the Copyright Act did not apply. Transmission of the photos over the internet was not sufficient for the Act to apply. IMAPizza also claimed that @pizza owners infringed when they took photos of &pizza locations which resulted in similar buildings. However, because the infringing result was in the UK, the Copyright Act did not apply. Also, taking photos in a place open to the public was not sufficient to prove copyright infringement.

Trademark-Lanham Act – IMAPizza claimed that @pizza copied its trademarks and other design features which would likely create confusion between &pizza and @pizza. According to the court, the impact of such confusion would have to be experienced in the US in order for the Lanham Act to apply. IMAPizza did not provide any evidence that US travelers going to @pizza in the UK caused it to lose US customers.

Because IMAPizza alleged, but did not adequately show how At Pizza impacted US commerce, the US Court of Appeals for the DC Circuit affirmed the US District Court for the District of Columbia decision.

To establish personal jurisdiction related to copyright, trademark and unfair competition claims to foreign entities must be firmly based on impact in the US. This was successfully shown in the UMG case, but not in this case. Because &pizza did not have a registered trademark with the USPTO, it had to rely on common law trademark and unfair competition laws which would only apply to domestic US infringement, and as a result, it could not take advantage of international trademark protection which would permit the court’s enforcement jurisdiction beyond the US. If you have questions about trademarks for your business, contact Gayton Law.

Contracts – Covid-19 and SBA

If your company has availed itself of the Paycheck Protection Program, lenders have been provided guidance by the SBA to process borrower loan forgiveness applications. There are two SBA created forms, Form 3508 and 3508EZ, although your lender may have created its own equivalent forms. Your business may apply before the end of the 8-week or 24-week covered period depending on whether you have used all of the loan proceeds for which forgiveness is being requested. The SBA Procedural Notice is quite detailed, so please review thoroughly in order to help ensure that your company is prepared. The link to the SBA Procedural Notice can be found here.

Publications and Education

Publications

Legal Aspects of Engineering, Design and Innovation 10^th edition by Cynthia Gayton, February 2017.

This edition is available through the publisher, Kendall-Hunt publishers and on Amazon.com in paper and e-book form. This book is used in several engineering courses and is a useful reference for anyone interested in contracting, intellectual property, engineering practice, and other general legal issues. This new edition includes separate chapters for each intellectual property type, introduces and explanation of blockchain smart contracts, discusses trends in product liability, and has recent case law to highlight chapter topics. It also expands from a primarily engineering perspective to include design professionals and innovation-specific coverage.

Guide to Copyrights & Trademarks for CryptoCreatives by Cynthia Gayton, January 2019.

This guide is available as an e-book on Amazon.com and is intended to introduce basic contract, copyright and trademark concepts for the benefit of creatives in the crypto and digital art communities. It covers the art and music market, provides an introduction to contracts and smart contracts, and briefly explains copyright and trademarks.

Education

Cynthia Gayton made two digital, blockchain, art and copyright presentations since January 2020.The first was at the Rare Art Festival in May and the CADAF event in June.

Thank you for reading and for your business!

The information contained in this post is for general guidance on matters of general interest only. The application and impact of laws can vary widely based on specific facts. The information contained in this post should not be construed as a substitute for consultation with professional advisors. Certain links in this post connect to other websites maintained by third parties over whom Gayton Law has no control. Gayton Law makes no representations as to the accuracy or any other aspect of information contained in other websites.

© 2020 Gayton Law

Filed under: Blockchain, Contracts, Copyrights, Intellectual Property, Small Business, Technology, Trademark Tagged: | contracts, Copyright, IP, Lanham Act, trademark