Geophysical Service, Inc. v. TGS-NOPEC Geophysical Co.

Case: 15-20706 Document: 00513906008 Page: 1 Date Filed: 03/10/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 15-20706
Fifth Circuit
FILED
March 10, 2017
GEOPHYSICAL SERVICE, INCORPORATED, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
TGS-NOPEC GEOPHYSICAL COMPANY,
Defendant - Appellee
Appeals from the United States District Court
for the Southern District of Texas
Before HIGGINBOTHAM, ELROD, and HIGGINSON, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Canada has a law that requires companies who gather seismic data
about the Earth’s substructure to submit their findings to the Canadian
government. After a period of confidentiality, the Canadian agency that
compiles this data is then apparently permitted to release it to members of the
public upon specific request. In this case, a Houston company requested
seismic data from this Canadian agency pursuant to that law, and the
Canadian agency sent copies of a particular Canadian company’s seismic data
to the United States. The Canadian company then sued the Houston company,
alleging copyright infringement.
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We are called upon to determine whether the act of state doctrine forbids
a United States court from considering the applicability of copyright’s first sale
doctrine to foreign-made copies when the foreign copier was a government
agency. We hold that it does not. We must also decide whether the
inapplicability of the Copyright Act to extraterritorial conduct bars a
contributory infringement claim based on the domestic authorization of
entirely extraterritorial conduct. We hold that it does. Accordingly, we affirm
in part, reverse in part, vacate in part, and remand.
I.
The parties compete in the seismic data industry, using off-shore
technological equipment to bounce sound waves off the ocean floor. The
reflected sound waves bring information about the rock layers beneath the
earth’s crust, information nigh useless until geophysicists digitally create
“seismic lines,” paper copies of which are known as “seismic sections.” A
seismic line is a cross section of the area surveyed that incorporates
professional interpretation of the information gathered and puts it into a useful
format. The result is a copyright-protected geological “picture” of the
subterranean structure in the area surveyed, useful to the oil and gas industry
in locating hydrocarbons. These pictures are often licensed to oil and gas
explorers.
Plaintiff-Appellant Geophysical Service, Inc. (“Geophysical”) is a
Canadian corporation based in Calgary, operating under Canadian law. The
Canada-Newfoundland and Labrador Offshore Petroleum Board (“CNLOP
Board”), established by Canadian legislation, regulates energy exploration to
ensure worker safety, environmental protection and safety, effective
management of land, maximum hydrocarbon recovery and value, and benefits
to the government. Under Canadian law and the regulations of the CNLOP
Board, companies are required to provide the CNLOP Board with a copy of
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each seismic line they create, and the Board is required to keep these
submissions confidential for ten years. 1 Geophysical provided copies of its
seismic lines to the Board.
In 1999, Defendant-Appellee TGS-NOPEC Geophysical Co. (“TGS”) e-
mailed the CNLOP Board to request copies of thirty-three of Geophysical’s old
seismic lines. Pursuant to that request, and apparently acting under the
authority of the Canadian legislation that established it, 2 the CNLOP Board
directed a private copy service in Canada to prepare copies of Geophysical’s old
seismic lines and send them by courier to TGS in Houston. The Board billed
TGS $97.75 in shipping and handling costs. Geophysical discovered this
transaction years later, in 2013.
With the requested copies of Geophysical’s seismic lines in hand, TGS
performed its own seismic surveys in the same locations surveyed by
Geophysical and captured in its seismic lines. Geophysical also alleges that
TGS prepared additional copies of Geophysical’s seismic lines, distributed
them to third parties, removed their copyright management information, and
prepared derivative works from them.
Learning that the CNLOP Board had furnished the seismic lines,
Geophysical filed this suit in the Southern District of Texas. Its complaint
alleged that it held a valid copyright in its seismic lines and that TGS
committed direct copyright infringement, committed contributory copyright
infringement, and unlawfully removed Geophysical’s copyright management
information from its works. TGS filed a motion under Rule 12(b)(6) to dismiss
the complaint, or alternatively, to abstain. The district court first ruled that
1 The parties dispute what the Board is lawfully permitted to do after this ten-year
period. We offer no view on this dispute.
2 Geophysical challenged this regulatory regime in Canada. A Canadian appeals court
is currently hearing the case.
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the CNLOP Board had an implied license to create copies of Geophysical’s
seismic lines, so TGS’s importation of them was protected by the first sale
doctrine, and that any other claims were insufficiently pled, but that
Geophysical could amend its complaint to add sufficient allegations.
Geophysical did not amend, but instead moved for reconsideration of the
district court’s initial order, which the court granted. Its new order is the
subject of this appeal.
In its final judgment, the district court ruled that Geophysical failed to
state a claim for direct infringement or removal of copyright management
information because its allegations in support of those claims were speculative
and conclusory. It further ruled that Geophysical could not maintain a claim
for contributory infringement because the direct infringement upon which that
claim was predicated occurred extraterritorially, and alternatively, because
the act of state doctrine forbade the court from passing on the legality of the
CNLOP Board’s actions. Finally, the district court ruled that to the extent
Geophysical claimed importation of infringing material, that claim was barred
because the act of state doctrine and “extraterritoriality principles” required
the court to find that the copies were lawfully made.
The district court then dismissed Geophysical’s complaint with prejudice
and awarded TGS its attorneys’ fees and costs upon TGS’s motion. Geophysical
timely appealed both the dismissal and fee award.
II.
1.
“We review a district court’s grant of a motion to dismiss de novo.” 3 We
review whether a district court applied the correct legal standard for attorneys’
3 Boyd v. Driver, 579 F.3d 513, 515 (5th Cir. 2009).
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fees de novo. 4 We review a district court’s ultimate award of attorneys’ fees for
abuse of discretion. 5
2.
Turning first to our jurisdiction, as we must, 6 we see only one
jurisdictional issue: TGS’s contention that, as Geophysical did not allege
domestic copyright infringement, its claims are beyond the territorial reach of
the Copyright Act. 7 Some cases treat the territorial reach of the Copyright Act
as an issue of jurisdiction, 8 so we turn first to this question. 9
We are persuaded that the Copyright Act’s insistence that infringing
conduct be domestic offers an essential element of a copyright infringement
plaintiff’s claim, not of jurisdiction. As Arbaugh v. Y&H Corp. 10 explained:
If the Legislature clearly states that a threshold limitation on a
statute’s scope shall count as jurisdictional, then courts and
litigants will be duly instructed and will not be left to wrestle with
the issue. . . . But when Congress does not rank a statutory
limitation on coverage as jurisdictional, courts should treat the
restriction as nonjurisdictional in character. 11
4 Hogan Sys., Inc. v. Cybresource Int’l, Inc., 158 F.3d 319, 325 (5th Cir. 1998),
overturned on other grounds by Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979 (2016).
5 Id.
6 See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999) (“[S]ubject-matter
delineations must be policed by the courts on their own initiative even at the highest level.”)
(citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94-95 (1998)).
7 See Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1376 (2013) (Ginsburg, J.,
dissenting) (“The Copyright Act, it has been observed time and again, does not apply
extraterritorially.” (citing United Dictionary Co. v. G. & C. Merriam Co., 208 U.S. 260, 264
(1908))); see also Subafilms, Ltd. v. MGM-Pathe Commc’ns Co., 24 F.3d 1088, 1095-98 (9th
Cir. 1994) (en banc).
8 See, e.g., Peter Starr Prod. Co. v. Twin Cont’l Films, Inc., 783 F.2d 1440 (9th Cir.
1986); Palmer v. Braun, 376 F.3d 1254 (11th Cir. 2004); Rundquist v. Vapiano SE, 798 F.
Supp. 2d 102 (D.D.C. 2011).
9 See Steel Co., 523 U.S. at 94 (“Without jurisdiction the court cannot proceed at all in
any cause.”) (quoting Ex parte McCardle, 74 U.S. 506, 514 (1868)).
10 546 U.S. 500 (2006).
11 Id. at 515-16 (citations omitted).
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The Copyright Act does not express its limit on territorial reach. That limit
arises from the background presumption that legislation reaches only domestic
conduct. 12 Because the domestic boundary is not “clearly state[d]” to “count as
jurisdictional,” we “treat the restriction as nonjurisdictional in character.” 13
Though the Court has never confronted the precise question before us,
analogous cases applying Arbaugh confirm that the issue is not one of
jurisdiction. Section 10(b) of the Securities Exchange Act’s implicit
requirement of domestic conduct is nonjurisdictional, 14 and a different
threshold requirement of the Copyright Act is nonjurisdictional. 15 We are
persuaded that bounding the reach of the Copyright Act to territorial conduct
presents a question of the merits of the claim, not the jurisdiction of the court. 16
III.
1.
A claim of copyright infringement has two elements: (1) ownership of a
valid copyright; and (2) copying constituent elements of the work that are
copyrightable. 17 This appeal concerns the second element.
Geophysical advanced three claims in the district court: direct
infringement, contributory infringement, and unlawful removal of copyright
management information. Geophysical’s direct infringement claim as
presented to the district court consisted of two distinct components: first, that
TGS unlawfully imported copies of Geophysical’s seismic lines; second, that
12 See Subafilms, 24 F.3d at 1095-96.
13 See Arbaugh, 546 U.S. at 515-16.
14 Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247, 253-54 (2010).
15 Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 166 (2010) (applying the Arbaugh test
to conclude that the registration requirement in the Copyright Act was a “precondition to suit
that supports nonjurisdictional treatment”).
16 Accord Litecubes, LLC v. N. Light Prods., Inc., 523 F.3d 1353, 1368 (Fed. Cir. 2008).
17 Bridgmon v. Array Sys. Corp., 325 F.3d 572, 576 (5th Cir. 2003).
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TGS thereafter prepared additional copies, prepared derivative copies, and
distributed those copies to the public.
However, Geophysical’s briefing on appeal shifts ground, focusing
entirely on the importation component of its direct infringement claim and its
contributory infringement claim. “An appellant abandons all issues not raised
and argued in its initial brief on appeal.” 18 To the extent that Geophysical’s
claim of direct infringement was based on alleged actions taken by TGS after
receiving the imported copies, it now abandons those allegations on appeal, as
well as any claim of unlawful removal of copyright management information.
Dismissal of those aspects of Geophysical’s claims is not before us.
2.
Two claims remain: direct infringement by importation and contributory
infringement.
A. Direct Infringement by Importation
The district court dismissed Geophysical’s claim of unlawful importation
on two independent grounds. First, it found that Geophysical had failed to
plead unlawful importation in its complaint. Second, it found that amendment
was futile: Geophysical’s unlawful importation claim would be barred because
the act of state doctrine and “extraterritoriality principles” required the court
to find that the copies made by the CNLOP Board were “lawfully made” within
the meaning of the first sale doctrine.
1. Failure to Plead
We are not persuaded that Geophysical failed to plead a claim for
unlawful importation. Under § 602 of the Copyright Act, importation into the
United States of copyrighted work without the copyright holder’s permission
is actionable as infringement of the copyright holder’s exclusive right to
18 Cinel v. Connick, 15 F.3d 1338, 1345 (5th Cir. 1994) (emphasis removed).
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distribute. 19 Unauthorized importation of copyrighted work is a statutorily
established method of demonstrating infringement of one of the exclusive
rights afforded by § 106 of the Copyright Act and is not itself a separate claim
that must be separately pleaded. 20
Geophysical’s complaint pleads that TGS imported copies of its
copyrighted seismic lines:
[O]n March 29, 1999, TGSN solicited CNLOPB to copy and
distribute to TGSN copies of the . . . Works. . . . [O]n or about April
9, 1999, CNLOPB copied and distributed the . . . Works to TGSN
by courier to TGSN in Houston, Texas.
It further alleges, under the heading “Direct Copyright Infringement,”
violation of Geophysical’s exclusive right to distribute. The complaint did not
state that “unauthorized importation” or some variant partially formed the
basis of Geophysical’s direct infringement claim, but its substance was
sufficient, and we turn to the merits of Geophysical’s direct infringement claim
alleging unlawful importation.
2. Merits
On the merits of Geophysical’s importation claim, TGS defended on the
basis that its importation of copies of Geophysical’s seismic lines was protected
by the first sale doctrine because the copies were “lawfully made.” TGS offered
19 17 U.S.C. § 602(a)(1) (“Importation into the United States, without the authority of
the owner of copyright under this title, of copies or phonorecords of a work that have been
acquired outside the United States is an infringement of the exclusive right to distribute
copies or phonorecords under section 106, actionable under section 501.”); Quality King
Distribs., Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135, 145 (1998) (“[Section] 602(a) merely
provides that unauthorized importation is an infringement of an exclusive right ‘under
section 106.’”).
20 Cf. Warren v. John Wiley & Sons, Inc., 952 F. Supp. 2d 610, 620 (S.D.N.Y. 2013)
(“[T]he plain language of the statute makes clear that an exportation of a copyrighted work
without the permission of the copyright owner is merely a type of copyright infringement,
rather than a separate cause of action. Thus, . . . the unauthorized import or export of copies
under § 602 are simply additional examples of infringement under § 106.”).
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the district court several alternative bases by which to find that the copies it
imported were lawfully made: (1) because the act of state doctrine required the
court to deem the actions of the CNLOP Board lawful; (2) because Canadian
law authorized the CNLOP Board to make the copies; and (3) because
Geophysical had granted the CNLOP Board an implied license to create copies
of its works, making their creation “lawful” under United States copyright
principles. In finding that amendment would be futile, the district court was
persuaded by the act of state argument. It ruled that Geophysical’s claim of
unlawful importation would be barred by the first sale doctrine because the act
of state doctrine required it to find “lawful” the actions of the CNLOP Board, a
Canadian government agency. It did not reach the question of whether
Canadian or United States law governed whether the copies were “lawfully
made.”
Ultimately, we disagree with the application of the act of state doctrine
here, for reasons we will describe. But first, we turn to the principles of the
first sale doctrine.
i. First Sale Doctrine
The Copyright Act vests in copyright holders several enumerated
exclusive rights that they enjoy over their copyrighted works. 21 It is clear that
one of those rights is the exclusive right “to distribute copies or phonorecords
of the copyrighted work to the public by sale or other transfer of ownership, or
by rental, lease, or lending.” 22 But § 106 is equally clear that each of those
exclusive rights is “[s]ubject to sections 107 through 122,” 23 which establish
various limitations on the enumerated exclusive rights. Relevant here is § 109,
which limits the copyright owner’s exclusive right to distribute:
21 17 U.S.C. § 106.
22 Id. § 106(3).
23 Id. § 106.
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Notwithstanding the provisions of section 106(3), the owner of a
particular copy or phonorecord lawfully made under this title, or
any person authorized by such owner, is entitled, without the
authority of the copyright owner, to sell or otherwise dispose of the
possession of that copy or phonorecord. 24
This “first sale doctrine” found its way into United States copyright law
long before it was codified as § 109 in the current Copyright Act in 1976. 25 It
reflects the fundamental principle of copyright that ownership of the copyright
in a work is distinct from ownership of the material object that embodies the
work. 26 When a copyright owner transfers or authorizes transfer of a copy or
phonorecord embodying his copyright, he does not surrender his copyright, but
he does mostly surrender control of the material object. 27 The copyright owner
will not be heard to complain of his transferee’s transferring the material object
in a way that might otherwise foul the exclusive right to distribute.
The doctrine of “first sale” is somewhat of a misnomer. 28 The limitation
embodied in § 109 does not depend on whether the copyright owner’s initial
disposition was by sale; the only prerequisite is that the copy or phonorecord
in question be “lawfully made.” 29 Accordingly, nations elsewhere in the world
with similar copyright regimes refer to the principle as the “exhaustion
doctrine,” reflecting the notion that the copyright owner “exhausts” his
24 17 U.S.C. § 109(a).
25 4 WILLIAM F. PATRY, PATRY ON COPYRIGHT § 13:18 (Sept. 2016 update).
26 Id. § 13:15 (citing Columbia Pictures Indus., Inc. v. Redd Horne, Inc., 749 F.2d 154,
159 (3d Cir. 1984)); see also 17 U.S.C. § 202 (“Ownership of a copyright, or of any of the
exclusive rights under a copyright, is distinct from ownership of any material object in which
the work is embodied.”).
27 See 17 U.S.C. § 202.
28 PATRY, supra note 25, at § 13:15.
29 Id.; UMG Recordings, Inc. v. Augusto, 628 F.3d 1175, 1179 (9th Cir. 2011)
(“Notwithstanding its distinctive name, the [first sale] doctrine applies not only when a copy
is first sold, but when a copy is given away or title is otherwise transferred without the
accouterments of a sale.”).
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distribution right in a copy or phonorecord upon first transfer of that copy or
phonorecord. 30
Section 109 by its plain terms limits only the exclusive right to
distribute. The owner of a lawfully made copy or phonorecord is still forbidden
from copying it, preparing derivative works based on it, publicly performing it,
or publicly displaying it, any of which would violate one of the copyright
owner’s other exclusive rights (absent some other limitation or defense). 31
Section 602 of the Copyright Act establishes that unauthorized
importation into the United States of copies or phonorecords acquired outside
the United States is infringement of the § 106(3) exclusive right to distribute. 32
Because this “importation right” is merely a corollary of the distribution right,
it is similarly limited by the first sale doctrine. 33 Accordingly, importation into
the United States of lawfully made copies or phonorecords, even where the
copyright holder has not authorized such importation, is protected by § 109.
In Kirtsaeng v. John Wiley & Sons, Inc. [Kirtsaeng I], 34 the Supreme
Court held that the first sale doctrine protects importers of lawfully made
copies no matter where in the world those copies were made. In Kirtsaeng I,
plaintiff Wiley published textbooks in the United States and authorized its
wholly owned subsidiary, Wiley Asia, to manufacture and publish essentially
identical textbooks in Thailand. 35 Defendant Kirtsaeng took advantage of the
substantially lower prices for the Asian versions of the textbooks by having his
friends and family purchase Wiley textbooks in Thailand, then ship them to
30 PATRY, supra note 25, at § 13:15.
31 See 17 U.S.C. § 106(1)-(2), (4)-(6).
32 17 U.S.C. § 602.
33 Quality King Distribs., Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135, 144 (1998).
34 133 S. Ct. 1351 (2013).
35 Id. at 1356.
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him in the United States so that he could resell them for a profit at a lower
price than the comparable American version. 36
Wiley sued Kirtsaeng, alleging that his unauthorized importation of its
textbooks amounted to infringement of Wiley’s § 106(3) exclusive right to
distribute by virtue of § 602’s prohibition on unauthorized importation of
copyrighted works. 37 Kirtsaeng defended by invoking the first sale doctrine,
pointing out that the textbooks he acquired were “lawfully made” and that he
acquired them legitimately, so he was permitted to import and resell the
textbooks without the copyright owner’s permission. 38 Wiley argued that the
first sale doctrine protected only copies made in the United States or its
territories, insisting that the phrase “lawfully made under this title” in § 109
imposed a geographic limitation restricting the lawful making of copies to
places where the United States Copyright Act is the law. 39
Wiley’s view was shared at the time by the Second and Ninth Circuits. 40
That view was plausible because the Supreme Court case that originally had
applied the first sale doctrine to importation claims had involved a situation
where the copies were made in the United States, exported, and then
subsequently reimported. 41 However, the Court in Kirtsaeng I declined to limit
the application of the first sale doctrine to importation claims to those facts.
Instead, it held that the first sale doctrine applies to copies of a copyrighted
work lawfully made abroad. 42
36 Id.
37 Id. at 1357.
38 Id.
39 Id. at 1357-58.
40 Id. at 1357.
41 Quality King, 523 U.S. at 138-39; see Kirtsaeng I, 133 S. Ct. at 1355.
42 Kirtsaeng I, 133 S. Ct. at 1355-56.
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The instant case implicates a question left open by Kirtsaeng I. Upon the
Court’s determination that “lawfully made under this title” could mean
lawfully made anywhere, there was no argument to be made—and indeed
Wiley did not argue—that the imported textbooks were not lawfully made.
Wiley expressly assigned to Wiley Asia the rights to publish, print, and sell
Wiley’s textbooks in Thailand, so the imported textbooks were indisputably
lawfully made. 43 Once the question of the geographic scope of § 109 was
resolved, there was no question before the Court whether the creation of the
Thai textbooks was lawful or unlawful, or whose law applied to make that
determination. Kirtsaeng I therefore leaves open the difficult interpretive
puzzle of what it means for a copy manufactured abroad to have been “lawfully
made under this title” within the meaning of § 109. 44
The facts of the instant case supply a good example of the puzzle: as in
Kirtsaeng I, the copies imported into the United States here were
manufactured abroad, but unlike in Kirtsaeng I, the parties dispute whether
those copies were lawfully made. TGS would have us look to Canadian law to
determine the lawfulness of the Board’s making of the copies—it points to the
fact that Canadian law appears to authorize the CNLOP Board to release
copies of data submitted to it after ten years. Geophysical asks us instead to
look to United States copyright principles—it points to the fact that the U.S.
Copyright Act lacks a similar provision, so the CNLOP Board’s making copies
of Geophysical’s works would have been unlawful had U.S. law applied.
Applying foreign law seems to contradict the plain language of § 109, which
asks whether copies were “lawfully made under this title,” presumably
referring to the title in which it appears, the Copyright Act. But applying
43 Id. at 1356.
44 2-8 MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT
§ 8.13[B][3][c][v] (2016).
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United States law seems to foul the principle that the Copyright Act has no
extraterritorial application, and creates some conceptual awkwardness where,
like here, the foreign-made copies were made pursuant to some legal regime
that finds no analog in United States law.
We decline to resolve this issue here, as the district court did not reach
it, having found primarily that Geophysical failed to plead an importation
claim, and alternatively, that the act of state doctrine required a finding of
“lawfulness” regardless of whose law applied. The parties have yet to brief the
proper interpretation of § 109—an issue that ought in the first instance be
passed on by the able district court. We will remand for determination of the
proper standard by which to assess whether imported copies made abroad were
lawfully made under § 109 and application of that standard.
As mentioned, the district court did not need to engage this analysis
because it found that the act of state doctrine mandated a finding that CNLOP
Board’s making of the copies was lawful. We turn now to that doctrine.
ii. Act of State Doctrine
This case presents yet another wrinkle: the foreign-made copies in
question were created by a Canadian government agency. The district court
accepted TGS’s argument that, because the act of state doctrine bars United
States courts from deciding that a foreign government acted unlawfully, the
court was required to find the copies made by the CNLOP Board “lawfully
made” within the meaning of § 109. We disagree.
The act of state doctrine “limits, for prudential rather than jurisdictional
reasons, the adjudication in American courts of the validity of a foreign
sovereign’s public acts.” 45 The doctrine applies to bar an action when “the relief
45 Walter Fuller Aircraft Sales, Inc. v. Republic of Phil., 965 F.2d 1375, 1387 (5th Cir.
1992).
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sought or the defense interposed would have required a court in the United
States to declare invalid the official act of a foreign sovereign performed within
its own territory.” 46 Though seemingly international in character, the doctrine
is founded in concerns of domestic separation of powers, “reflecting the strong
sense of the Judicial Branch that its engagement in the task of passing on the
validity of foreign acts of state may hinder the conduct of foreign affairs.” 47 “Act
of state issues only arise when a court must decide—that is, when the outcome
of the case turns upon—the effect of official action by a foreign sovereign.” 48 It
can apply “even if the defendant is a private party, not an instrumentality of a
foreign state, and even if the suit is not based specifically on a sovereign act.” 49
We find that the question presented by the first sale doctrine, whether
imported copies were “lawfully made,” is different in kind from the question
whether the copy-maker acted illegally or invalidly. Hence, the first sale
question is outside the scope of the act of state doctrine even when the foreign
copy-maker is a government agency. The Copyright Act, which does not apply
extraterritorially, does not operate against the CNLOP Board in Canada.
Evaluating the first sale defense in connection with TGS’s importation of copies
made by the Board does not decide whether the CNLOP Board is a copyright
infringer, which would be a prohibited inquiry.
We find United States v. Portrait of Wally 50 persuasive. There, a New
York district court ruled that the act of state doctrine did not forbid it from
considering the rightful ownership of a portrait even though several steps in
the chain of possession were questionable transfers to and from the Austrian
46 W.S. Kirkpatrick & Co., Inc. v. Envt’l Tectonics Corp., Int’l, 493 U.S. 400, 405 (1990).
47 Id. at 404 (internal quotations omitted).
48 Id. at 406.
49 Callejo v. Bancomer, S.A., 764 F.2d 1101, 1113 (5th Cir. 1985).
50 663 F. Supp. 2d 232 (S.D.N.Y. 2009).
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government. 51 That court held that it was “not being asked to invalidate any
action by an Austrian governmental authority, but only to determine the effect
of such action, if any, on [the portrait]’s ownership.” 52 By analogy here, even a
ruling in favor of Geophysical will not invalidate any action by the Canadian
government, but only determine the effect of such action on the right of United
States citizens to import copies that a Canadian agency made. Indeed, even if
upon remand the district court finds that the copies were not “lawfully made
under this title,” that ruling only restricts TGS’s (and others’) ability to freely
import the copies. Any determination will not speak to the validity of the
Canadian government’s actions, only whether those actions support lawful
importation into the United States by a private party.
Further, the rationale behind the act of state doctrine does not support
its application here. 53 We are unable to see—and TGS, which bears the
burden, 54 makes no convincing argument—how passing on TGS’s first sale
defense will “imperil the amicable relations between governments and vex the
peace of nations.” 55 Finding that the act of state doctrine reaches a discrete,
ministerial act like preparing the copies here is a reach too far. 56 In sum,
disagreeing with the application here of the act of state doctrine, we must
reverse the dismissal of Geophysical’s importation claim.
51 Id. at 247-48.
52 Id. at 248.
53 See W.S. Kirkpatrick & Co., 493 U.S. at 409 (“[S]ometimes, even though the validity
of the act of a foreign sovereign within its own territory is called into question, the policies
underlying the act of state doctrine may not justify its application.”).
54 Bigio v. Coca-Cola Co., 239 F.3d 440, 453 (2d Cir. 2000).
55 Jimenez v. Aristeguieta, 311 F.2d 547, 558 (5th Cir. 1962) (quoting Oetjen v. Cent.
Leather Co., 246 U.S. 297, 304 (1918)).
56 Cf. Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287, 1294 (3d Cir. 1979)
(grant of patents not the type of sovereign activity that would be of substantial concern to the
executive branch in its conduct of international affairs).
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iii. Extraterritoriality
The inapplicability of the United States Copyright Act to extraterritorial
conduct provides no defense to Geophysical’s importation claim. It is
undisputed that TGS imported the copies of Geophysical’s seismic lines into
Houston, Texas by causing the CNLOP Board to send them there. Therefore,
the act of importation occurred in the United States and is actionable under
the Copyright Act depending on the resolution of TGS’s first sale defense. To
the extent the district court’s dismissal of Geophysical’s importation claim
rested on “extraterritoriality principles,” we disagree.
3. Summary
We reverse the district court’s dismissal of Geophysical’s direct
infringement claim to the extent it alleged unauthorized importation, and
remand that claim to the district court. Upon remand, the district court must
first decide whose law governs the determination whether the copies imported
by TGS were “lawfully made” under § 109. It must then apply the legal
principles that it determines to govern. For example, if the district court finds
that Canadian law controls the inquiry, then it may be helpful to await the
input of the Canadian courts on Geophysical’s challenge to the CNLOP Board’s
practice of making and releasing copies of seismic lines. Alternatively, if the
district court finds that United States law controls, then it may revisit its
initial inclination that Geophysical granted the CNLOP Board an implied
license—though the creation of an implied license, which turns on the
copyright holder’s intent, is a fact question.
B. Contributory Infringement
Geophysical also asserted a claim of contributory infringement, seeking
to hold TGS liable as a contributory infringer to the CNLOP Board’s direct
infringement in creating copies of Geophysical’s seismic lines without
Geophysical’s permission. The district court ruled that both the territoriality
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limit of the Copyright Act and the act of state doctrine independently barred
this claim. We affirm on the basis of extraterritoriality.
Contributory infringement is “intentionally inducing or encouraging
direct infringement.” 57 The direct infringement that Geophysical alleges to
support its contributory infringement claim is the CNLOP Board’s creation of
unauthorized copies of its seismic lines. This claim is subtly, but importantly,
distinct from Geophysical’s importation claim. Where Geophysical’s
importation claim, as we have discussed, seeks to impose liability on TGS for
the act of unauthorized importation of unlawful copies, its contributory
infringement claim seeks to impose liability on TGS for intentionally
encouraging or inducing the CNLOP Board to create those copies regardless of
what the CNLOP Board did with them thereafter. Unlike Geophysical’s
importation claim, its contributory infringement claim turns on whether the
CNLOP Board directly infringed Geophysical’s copyright.
As explained, domestic conduct is a necessary element of a copyright
infringement plaintiff’s claim. 58 But if, as alleged here, the defendant induced
or encouraged in the United States infringement that then occurred outside the
United States, we face an issue that neither the Supreme Court nor we have
addressed. We find the Ninth Circuit’s decision in Subafilms, Ltd. v. MGM-
Pathe Communications Co. 59 instructive.
In Subafilms, the en banc Ninth Circuit held that “when the assertedly
infringing conduct consists solely of the authorization within the territorial
boundaries of the United States of acts that occur entirely abroad[,] . . . such
allegations do not state a claim for relief under the copyright laws of the United
57 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005).
58 See supra Part II(2).
59 24 F.3d 1088 (9th Cir. 1994) (en banc).
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States.” 60 That holding was founded on the view that the term “to authorize”
in § 106 of the Copyright Act was not intended to give rise to a protectable right
of authorization in copyright holders, but rather to invoke the pre-existing
doctrine of contributory liability. 61 And under that doctrine, there can be no
liability for contributory infringement “unless the authorized or otherwise
encouraged activity itself could amount to infringement.” 62
We are not persuaded by authority to the contrary. In Curb v. MCA
Records, Inc., 63 a district court outside of the Ninth Circuit rejected the holding
of Subafilms, persuaded that “Subafilms relies upon a peculiar interpretation
of the scope and nature of the authorization right in 17 U.S.C. § 106.” 64 We are
not persuaded that there is any such “authorization right.” The structure of §
106 offers a numbered list of six protectable exclusive rights in copyright
holders; “to authorize” is not among them:
Subject to sections 107 through 122, the owner of copyright
under this title has the exclusive rights to do and to authorize any
of the following:
(1) to reproduce the copyrighted work in copies or
phonorecords;
(2) to prepare derivative works based upon the
copyrighted work;
(3) to distribute copies or phonorecords of the
copyrighted work to the public by sale or other
transfer of ownership, or by rental, lease, or
lending;
(4) in the case of literary, musical, dramatic, and
choreographic works, pantomimes, and motion
pictures and other audiovisual works, to perform
the copyrighted work publicly;
60 Id. at 1089.
61 Id. at 1092.
62 Id.
63 898 F. Supp. 586 (M.D. Tenn. 1995).
64 Id. at 594.
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(5) in the case of literary, musical, dramatic, and
choreographic works, pantomimes, and pictorial,
graphic, or sculptural works, including the
individual images of a motion picture or other
audiovisual work, to display the copyrighted work
publicly; and
(6) in the case of sound recordings, to perform the
copyrighted work publicly by means of a digital
audio transmission. 65
The phrase “to authorize” appears in the preamble to the list of exclusive rights
alongside “to do.” We believe that this structure supports the conclusion that
“to do” and “to authorize” refer to direct and contributory infringement,
respectively, but that infringement in either case must be predicated on one of
the listed exclusive rights. So codified, the doctrine of contributory
infringement requires that the underlying direct infringement upon which it
is predicated be actionable under the Copyright Act. 66
In short, we follow the holding of the Ninth Circuit in Subafilms. Where
a copyright plaintiff claims contributory infringement predicated on direct
infringement that occurred entirely extraterritorially, the plaintiff has stated
no claim. Geophysical alleges that TGS authorized in Houston the CNLOP
Board to infringe Geophysical’s copyright in Canada by creating copies in
Canada and then exporting them. This fails to state a claim of contributory
infringement because it alleges authorization of alleged direct infringement
that occurred entirely extraterritorially. The district court correctly dismissed
the claim on that basis.
This result is not changed by the fact that the underlying alleged direct
infringement involved the CNLOP Board’s exportation of allegedly infringing
material to the United States. That the United States was the destination does
65 17 U.S.C. § 106.
66 PATRY, supra note 25, at § 21:46.
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not convert the CNLOP Board’s conduct into domestic conduct for the purpose
of the Copyright Act. The act of “exportation” occurred entirely in Canada, and
is beyond the reach of the Copyright Act notwithstanding the destination. This
division of cross-border conduct into discrete acts of “exporting” from one
country and “importing” into another is supported by the Copyright Act, which
does the same. 67
Because we affirm on the basis of extraterritoriality, we need not
consider whether the act of state doctrine would bar Geophysical’s contributory
infringement claim.
IV.
Because we remand this case for further development on one of
Geophysical’s claims, and because of a relevant intervening Supreme Court
decision, we vacate the district court’s award of attorneys’ fees and costs. Upon
remand, the district court is free to entertain a motion for attorneys’ fees and
costs after its disposition of Geophysical’s remaining claim, mindful of the
Supreme Court’s recent guidance on awards of attorneys’ fees in copyright
cases. 68 We leave to the district court to apply the standard announced in
Kirtsaeng II. It may consider in its entertainment of that motion the dismissal
of the claims that we affirm here, but in the interest of allowing it to give full
consideration and apply the appropriate standard, we vacate its award.
V.
We affirm the district court’s dismissal of Geophysical’s direct
infringement claim to the extent that it was based on infringing acts by TGS
after it received copies of Geophysical’s seismic lines. We affirm the district
court’s dismissal of Geophysical’s claim of removal of copyright management
67 See 17 U.S.C. § 602(a)(1)-(2).
68 Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979 (2016) [Kirtsaeng II].
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information. We reverse the district court’s dismissal of Geophysical’s direct
infringement claim to the extent that it was based on importation of unlawfully
made copies and remand for further proceedings on that claim in light of the
principles discussed here. We affirm the district court’s dismissal of
Geophysical’s contributory infringement claim. We vacate the district court’s
award of attorneys’ fees and costs, which the district court may reconsider at
the appropriate time after its disposition of the remanded claim.
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