Zimnicki v. General Foam Plastics Corp.

Court denies defendant’s motion for summary judgment, holding that the location of infringement is an element of an infringement claim, not a question of subject matter jurisdiction, and that the alleged infringement took place at least partly inside the U.S. where defendant sold allegedly infringing products manufactured in China to a purchaser located in the U.S., even though purchaser took title to the products in China.

Plaintiff filed suit for copyright infringement against defendant Nixan International Ltd., a Hong Kong company, and General Foam Plastics, a U.S. company with an office in Virginia. Plaintiff alleged that General Foam placed an order with Nixan for “lighted reindeer products” that infringed her copyright in her “decorative deer” designs. There is no dispute that the allegedly infringing products were manufactured in China and transported to the U.S. by a third-party.

Defendant Nixan moved for summary judgment, arguing that the court lacks subject matter jurisdiction because any alleged act of direct infringement occurred entirely outside the U.S. Specifically, Nixan asserted that it shipped the products to a port in Yantian, China, where General Foam took legal title to the products and arranged for them to be shipped to the U.S. by a third-party.

First, recognizing that some authorities treat extraterritoriality as a jurisdictional bar, the court held that the location of infringement is an element of an infringement claim, not a question of subject matter jurisdiction. The court stated that “there is no indication that Congress intended extraterritorial limitations on the scope of the Copyright Act to limit the subject matter jurisdiction of the federal courts.”

The court then turned to whether the infringement occurred inside or outside the U.S. According to the court, Nixan sold allegedly infringing goods manufactured in China directly to a U.S. purchaser for resale to consumers in the U.S. Nixan argued that the transactions were structured in such a way that it “distributed” the allegedly infringing products “by sale” entirely in China. Plaintiff argued that the infringing act occurred at least partly in the U.S. because that is where General Foam, the purchaser, is located.

The court agreed with the plaintiff, rejecting Nixan’s argument that the distribution by sale occurs where title (and therefore the risk of loss) passes to the purchaser (adopting the standard articulated in Litecubes, LLC v. Northern Light Products, Inc., 523 F.3d 1353 (Fed. Cir. 2008)). As the court explained, “We are not persuaded that the shipment to Yantian, and the interposition of a third-party ‘freight forwarder,’ are significant. As far as we can tell, the products were delivered overland from Heyuan to Yantian because Yantian has a port and Heyuan does not. There is no evidence that General Foam, a Virginia corporation based in Norfolk, has any physical presence in Yantian. And we do not see why it should matter whose ‘shipper’ the party uses – the ‘sale’ between Nixan and General Foam is still direct. It appears that the sale and delivery to the United States occurred in one seamless transaction – or a series of such transactions. Either way, we are not persuaded that we should parse the transaction in the technical way that Nixan has asked us to do. To rule otherwise would encourage gamesmanship.”