Fourth Circuit Affirms Personal Jurisdiction Over Non-U.S. Defendants, Upholds Extraterritorial Jurisdiction Under The Copyright Act, And Reverses It Under The Lanham Act

Tire Engineering and Distribution, LLC et al. v. Shandong Linglong Rubber Company, Ltd. et al., No. 10-2271 (4th Cir. 2012), addresses several issues of international practice. The plaintiff sued non-U.S. defendant, not in contract (where arguably there is a greater opportunity to dictate forum for the resolution of any dispute), but for conspiracy to steal tire blueprints, produce infringing tires, and sell them to that had formerly purchased them from Plaintiff. The jury awarded $26 million in damages.

Each of the three major issues addressed by the Circuit have international practice implications:

First, the Court of Appeals affirmed the finding of personal jurisdiction over the non-U.S. parties. Applying Virginia's long-arm statute, the Court of Appeals considered the three standard factors in determining personal jurisdiction:

(1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the forum state; (2) whether the plaintiff's claims arise out of those activities; and (3) whether the exercise of personal jurisdiction is constitutionally reasonable.

The Court relied on purposeful availment in the jurisdiction and the absence of any "overpowering foreign nexus".

Second, the Court addressed the extraterritorial reach of the Copyright Act claims. Observing that "[a]s a general matter, the Copyright Act is considered to have no extraterritorial effect", the Court of Appeals continued that a fundamental exception existed where extraterritorial jurisdiction did in fact exist: "'when the type of infringement permits further reproduction abroad,' a plaintiff may collect damages flowing from the foreign conduct". For this proposition the Court relied on the Second Circuit's decision (Learned Hand, J.) in Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45 (2d Cir. 1939), where "[o]nce a plaintiff demonstrates a domestic violation of the Copyright Act, then, it may collect damages from foreign violations that are directly linked to the U.S. infringement". The description given by Judge Hand in Sheldon is that

The Culver Company made the negatives in this country, or had them made here, and shipped them abroad, where the positives were produced and exhibited. The negatives were 'records' from which the work could be 'reproduced,' and it was a tort to make them in this country. The plaintiffs acquired an equitable interest in them...