United States: Spanski Enterprises, Inc. v. Telewizja Polska, S.A.: How Far Is Too Far When It Comes To The Extraterritorial Reach Of US Copyright Law?

As a general matter, acts of copyright infringement that occur outside the jurisdiction of the United States are not actionable under U.S. copyright law. "The Copyright Act, it has been observed time and again, does not apply extraterritorially." Kirstaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351, 1376 (2013) (Ginsburg, J. dissenting). The general prohibition against the extraterritorial application of U.S. copyright law has been interpreted to mean that (1) purely extraterritorial conduct is not actionable in U.S. courts, but (2) extraterritorial conduct that crosses international borders and results in infringing conduct within the United States remains actionable under U.S. copyright laws. M. Nimmer & D. Nimmer, Copyright § 17.02 p. 17-28 (2015).

In Spanski Enterprises, Inc. v. Telewizja Polska, S.A., (Case No. 17-7051), the Court of Appeals for the District of Columbia will have to determine whether U.S. copyright law extends to situations in which the entirety of the defendant's conduct occurred outside the territorial limits of the U.S., and the only allegedly infringing conduct occurring in the U.S. resulted from activities undertaken by plaintiff's own lawyers.

The Spanski Enterprises case grows out of a dispute between the creator of Polish language television programming and its exclusive U.S. licensee. The defendant is Poland's government-owned national television network that produces and is the copyright owner of much of the programming televised over its network in Poland. The plaintiff is the exclusive U.S. distributor for various television programs produced by the defendant. In addition to televising these programs in Poland, the defendant operates a video-on-demand (VOD) website in Poland that allows viewers to stream the defendant's programs to their computers. The parties' distribution agreement included a provision in which the defendant agreed to impose a United States "geo-bloc" on its VOD streaming service to prevent U.S. consumers from streaming the programming appearing on the defendant's website. In violation of this provision, the defendant used versions of its programming that did not contain any geo-blocs, thus potentially allowing viewers in the U.S. to stream the programming to their computers in the U.S.

Though acknowledging that it could have sued the defendant for breach of the distribution agreement, the plaintiff elected instead to obtain copyright registrations for 51 of the programs and sue the defendant for infringing the plaintiff's public performance rights. Thus, the question presented to the district court was whether the defendant, acting entirely outside the U.S., could nonetheless be held liable for making available non-geo-blocked versions of its programming on its website in Poland. As the district court acknowledged, the only evidence that supported the plaintiff's claims of infringement in the U.S. were the activities of the plaintiff's own lawyers, who streamed the programming to their domestic law office computers. Despite the absence of evidence that anyone else in the U.S. ever accessed the defendant's VOD website in Poland in order to stream the copyrighted performances into the U.S., the district court nonetheless concluded that the defendant had willfully infringed the plaintiff's public performance rights. Spanski Enterprises, Inc. v. Telewizja Polska, S.A., 222 F. Supp. 3d 95, 106-107 (2016). Ultimately, the district court awarded the plaintiff over $3 million in statutory damages. Spanski Enterprises, Inc. v. Telewizja Polska, S.A., No. 12-cv-957 (TSC), 2017 WL 598465 (D.D.C. Feb. 14, 2017).

Surprisingly, the district court gave almost no consideration of whether defendant's purely extraterritorial conduct gave rise to a cognizable claim under the U.S. Copyright Act. The only reference to the subject is in the opinion's final footnote, where the court states:

"While the infringing content was streamed from overseas into the U.S., "with respect to extraterritoriality, the Court adopts the reasoning in Automattic Inc. v. Steiner, from the Northern District of California, which held that copyright infringement that commenced abroad but was completed in the United States was not wholly extraterritorial, and thus the Copyright Act covered the defendant's conduct.'"

222 F. Supp. 3d at 113, n.3.

The basis for the district court's reliance on the Automattic case is puzzling in light of the significantly different factual situation that gave rise to the claims in that case. In Automattic, the defendant, a resident of the United Kingdom, sent repeated communications to the plaintiff website operator in California demanding the removal of particular blog posts by the plaintiff blogger as "infringing." In response to the defendant's demands, the plaintiff website owner expended time and financial resources investigating the defendant's claims. Ultimately, the website operator concluded the claims were false and misleading. The website operator and the blogger then brought suit against the defendant in California under section 115(f) of the Digital Millennium Copyright Act for making misrepresentations and abusing the takedown system.

The district court found two separate grounds on which the defendant's conduct was subject to the jurisdiction of federal courts in California – neither of which are present in the Spanski Enterprises matter. First, the website operator had required the defendant to accept the operator's terms of service as a condition for filing his takedown notice. Those terms included a forum selection clause identifying "state and federal courts located in San Francisco County, California" as the "proper venue for disputes arising" from use of the website operator's site. Automattic Inc. v. Steiner, 82 F. Supp. 3d 1011, 1021 (N.D. Cal. 2015). The district court found that by agreeing to the website operator's terms of use, the defendant had "consented[ed] to personal jurisdiction in California." Id. at 1022. Second, the court found that the defendant's multiple communications of his allegedly fraudulent takedown notices to the website operator in California satisfied the requirements for exercise of California's long-arm jurisdictional statute, which the court found to be "coextensive with federal due process requirements." Id. By contrast, the defendant in Spanski Enterprises never overtly sought to avail itself of the benefits of U.S. laws.

Moreover, the court in Automattic stated unequivocally that in order to satisfy jurisdictional requirements, it is necessary to demonstrate "'something more' than a 'foreign act with foreseeable effects in the forum state' to justify the assertion of personal jurisdiction." Id. at 1023, quoting Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1088 (9^th Cir. 2000). The necessity of showing "something more" was not addressed by the district court in Spanski Enterprises. Instead, the district court focused on the defendant's inability to provide a credible explanation for its conduct. The district court found that the standard configuration for the defendant's Copyright Management System (CMS) was to geo-bloc access from computers in the U.S. From this, the district court concluded that the defendant must have intentionally revised the designations in its CMS in order to create non-geo-blocked copies and then tried to conceal that fact by "intentional[ly] manipulat[ing]" documents produced during discovery in order to conceal the creation of the non-geo-blocked versions. 222 F. Supp. 3d at 106-107. However, despite such patently improper conduct, there was no finding that the defendant had undertaken any other affirmative conduct to induce U.S. viewers to access its Polish website. Thus, the district court found that the defendant had infringed the rights of the U.S. copyright holder merely by permitting programming to appear on its website in Poland that was not geo-blocked for the U.S. Such conduct seems considerably less than the "something more" required by the Automattic case.

Further complicating matters is that resolution of whether U.S. copyright law reaches the defendant's conduct in this case may hinge on whether the Copyright Act requires the plaintiff to show that the defendant engaged in "volitional conduct" as a prerequisite to finding liability. Even though copyright liability is sometimes referred to as a strict liability offense, courts have nonetheless required the plaintiff to demonstrate that the defendant engaged in some "volitional conduct" that resulted in the infringement. See, e.g., Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121, 131 (2d Cir. 2008) ("[V]olitional conduct is an important element of direct liability."); CoStar Group., Inc. v. LoopNet, Inc., 373 F.3d 544, 555 (4^th Cir. 2004) ("[W]e hold that the automatic copying, storage, and transmission of copyrighted materials, when instigated by others, does not render an ISP strictly liable for copyright infringement under §§ 501 and 106 of the Copyright Act."). Here, the defendant contends it cannot be held liable for infringement because its VOD content delivery system is not itself infringing and that any unauthorized performances of the programs in the U.S. was caused by its website users (in this case, plaintiff's lawyers) who selected the content to view and thereby automatically triggered the transmission to the requesting party's computer.

Resolving this issue will necessarily require the Court of Appeals to determine (1) whether the Copyright Act may be interpreted to impose a separate "volitional conduct" requirement following the Supreme Court's decision in American Broadcasting Cos., Inc. v. Aereo, Inc., 134 S.Ct. 2498 (2014); and (2) if the Copyright Act does impose such a requirement, whether a showing of "volitional conduct" amounts to requiring the plaintiff to show that the defendant was the "proximate cause" of the infringing conduct.

This appeal also raises the issue whether the defendant's automated VOD delivery system is shielded from liability under the Supreme Court's decision in Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984). In Sony, the Supreme Court ruled that the manufacturer of the Betamax machine could not be held contributorily liable for its customers' infringing activities because the device was "capable of commercially significant noninfringing uses." Id. at 442. As the Court explained, "[T]he sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses." Id. Similarly, the defendant argues that it cannot be liable for copyright infringement because the maintenance of non-geo-blocked programming on the defendant's VOD website for the roughly 38 million Polish speakers who live in Poland constitutes a substantial noninfringing use.

Finally, this appeal raises the issue of whether copyright liability can be predicated solely on a party's failure to take additional precautions that would prevent others from engaging in infringing conduct. As noted above, the parties specifically negotiated a provision in the distribution agreement requiring the defendant to geo-bloc access to its Polish VOD system. This is seemingly a recognition by the parties that such geo-blocking is not required as a matter of law. However, the district court's ruling now elevates geo-blocking to a legal necessity in order to avoid being sued in U.S. courts for copyright infringement. As one court has warned, such an extension of the territorial reach of U.S. copyright law "would effectively mandate geo-blocking for any website operator seeking to avoid suit in the United States," which in turn "could limit U.S. residents' access to what is appropriately called the World Wide Web." (Triple Up Ltd. v. Youku Tudon Inc., 235 F. Supp. 3d 15, 25 (D.D.C. 2017) (emphasis in original). Given the stakes involved, we hope the Court of Appeal's decision in Spanski Enterprises clarifies the factual showing necessary to extend U.S. copyright liability to transnational transmissions of copyrighted works over the internet.

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