General Motors Corp. v. Ignacio Lopez De Arriortua

Citations: 948 F. Supp. 684; 41 U.S.P.Q. 2d (BNA) 1490; 1996 U.S. Dist. LEXIS 18053; 1996 WL 697733Docket: 96-71038

Court: District Court, E.D. Michigan; December 2, 1996; Federal District Court

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General Motors Corporation (GM) and Adam Opel AG (Opel) filed a lawsuit against several defendants, including Volkswagen AG (VW) and individuals from the "Lopez Group." The suit alleges theft of trade secrets and conspiracy. GM, an American corporation, and Opel, its wholly-owned German subsidiary, argue that key individuals, primarily Jose Ignacio Lopez and others who left GM in March 1993, colluded with VW to unlawfully transfer confidential information. Lopez, who was a high-ranking executive at GM, resigned and joined VW shortly after leaving GM, along with several other former GM employees. The court, presided over by District Judge Edmunds, denied the defendants' motions to dismiss the specific counts of the complaint related to these allegations during a hearing on October 28, 1996. The ruling emphasized the ongoing legal proceedings regarding the alleged secret communications and agreements between Lopez and VW concerning the transfer of GM's confidential business plans and trade secrets.

In March 1993, the Lopez Group Defendants left GM and Opel to join VW, reportedly taking over 20 cartons of stolen documents. Plaintiffs claim that the Defendants copied these documents into VW's systems and subsequently destroyed the originals to cover up the theft. On March 7, 1996, Plaintiffs filed suit, alleging violations of the Lanham Act (15 U.S.C. § 1126) and the Copyright Act (17 U.S.C. § 101 et seq.). They assert that VW has utilized the stolen trade secrets to lower costs and boost market share. The Defendants moved to dismiss the claims under the Lanham Act and Copyright Act, but the court denied these motions.

The court outlined the standard for a motion to dismiss under Fed. R. Civ. P. 12(b)(6), emphasizing that it must view the complaint favorably to the plaintiff and accept all factual allegations as true. The complaint must include sufficient allegations to support a legal claim.

Regarding the Lanham Act, all Defendants except Alvarez, Piazza, and Versteeg sought dismissal of Count 3, which asserts a violation of the Paris Convention, incorporated into the Lanham Act. Defendants argued that the Lanham Act does not integrate substantive provisions of the Paris Convention, contending that the convention only mandates equal trademark protection for foreign citizens. Legal opinions are divided on whether section 44(b) of the Lanham Act incorporates these substantive rights. The Act prohibits trademark infringement and "passing off," and it grants rights stipulated by international treaties concerning unfair competition. Sections 44(b), (h), and (i) of the Lanham Act clarify that foreign citizens and U.S. citizens are entitled to protection against unfair competition and can access remedies for infringement.

The excerpt outlines the obligations of signatory nations under the Paris Convention for the Protection of Industrial Property, specifically regarding unfair competition. Key points include:

1. **Obligation to Protect Against Unfair Competition**: Signatory countries must provide effective protection to their nationals against unfair competition, defined broadly as any competition contrary to honest practices in industrial or commercial matters (Article 10bis).

2. **Definition of Unfair Competition**: The concept of unfair competition under the Paris Convention is broader than the traditional American common law definition, drawing on a more liberal interpretation common in European nations.

3. **National Treatment Principle**: The Paris Convention establishes a principle of "national treatment," which requires member countries to offer foreign nationals the same protections as their own citizens under domestic law. It does not extend the trademark laws of one nation to have extraterritorial effects.

4. **Judicial Interpretations**: Courts have interpreted the Paris Convention and the Lanham Act as providing limited protection against unfair competition. In *Vanity Fair Mills, Inc. v. T. Eaton Co.*, the Second Circuit ruled that a U.S. company could not sue a Canadian company for trademark violations occurring in Canada, emphasizing that national laws should not apply beyond their territories.

5. **Subsequent Case Law**: Similar interpretations were upheld in cases like *Majorica S.A. v. Majorca International, Ltd.*, where Spanish law was not applied in the U.S. under the Paris Convention, and in *L'Aiglon Apparel, Inc. v. Lana Lobell, Inc.*, which clarified that the convention does not create a federal law of unfair competition for domestic disputes between U.S. citizens.

These points reinforce that the Paris Convention primarily aims to ensure fair competition while respecting the territorial application of national laws.

Other courts have established that the Lanham Act includes international agreements, as seen in Toho Co. v. Sears, Roebuck & Co., where a Japanese company successfully sued an American company for unfair competition. The court affirmed that sections 44(b) and (h) of the Lanham Act implement a treaty between the U.S. and Japan, allowing the Japanese company to assert the same claims as an American company, including trademark infringement and state law unfair competition claims. The treaty mandated national treatment, ensuring Toho received federal protections equivalent to domestic companies under the Lanham Act and applicable state laws. 

Further judicial interpretations have extended this principle, recognizing that the Lanham Act also incorporates the substantive provisions of the Paris Convention, thereby establishing a federal law of unfair competition in international contexts. In Maison Lazard et Compagnie v. Manfra, Tordella & Brooks, the court ruled that a French company’s claim of unfair competition against an American firm for misappropriating exclusive sales rights was valid under the incorporated provisions of the Paris Convention. This ruling aligns with previous decisions, affirming that foreign entities have federal claims under the Lanham Act and the Paris Convention against American companies for trademark infringement and unfair competition.

The Lanham Act's purpose is to provide rights and remedies as stipulated by international treaties, with specific subsections detailing the protections afforded to foreign nationals. Subsection (b) ensures foreigners receive necessary benefits under conventions, while subsection (h) guarantees protection against unfair competition. Additionally, subsection (i) clarifies that U.S. citizens are entitled to the same rights as foreign citizens, emphasizing Congress's intention to incorporate these substantive rights into U.S. law.

The incorporation of the treaty was designed to include additional rights, necessitating the enactment of section 44(i); interpreting section 44(b) merely as a requirement for "national treatment" would render section 44(i) redundant. Courts are obligated to interpret statutes in a way that gives effect to every word, thus avoiding superfluity. Legislative history indicates that Congress intended to extend rights to both foreigners and citizens, addressing concerns that U.S. citizens should receive equal protection against unfair competition as foreigners. The final version of subsection 44(i) aims to equalize the rights of citizens and foreigners regarding trade-mark protection and unfair competition, aligning with the broader prohibitions of the Paris Convention. Although an earlier draft proposed a broad definition of "unfair competition," it was deemed too expansive and ultimately deleted. However, the final statute retains similar language to the deleted section, establishing effective protection against unfair competition for foreigners under section 44(h). Consequently, both Opel and GM seek to enforce claims under these sections. The assertion that the Lanham Act does not apply extraterritorially is incorrect; Congress can regulate foreign commerce with significant effects on U.S. commerce, as established by relevant case law, including instances where conspiratorial actions span both the U.S. and foreign jurisdictions. Thus, the Lanham Act can apply when conduct occurs within the U.S. or has substantial effects domestically, even if the initial actions took place abroad.

Plaintiffs allege direct and contributory copyright infringement in Count 4 of the complaint, arguing that Defendants induced or contributed to infringing activities with knowledge. Defendants' motion to dismiss is unsupported by merit on several grounds. First, they argue that GM cannot sue for infringement of unregistered works; however, Plaintiffs have sufficiently alleged infringement of eight copyrighted works, and Opel can sue on unregistered works under the Berne Convention. Second, Defendants assert that the Copyright Act does not apply to authorized copying due to the Lopez Group's access to the documents, but Plaintiffs claim unauthorized copying occurred without permission from either plaintiff. Third, Defendants contend that the Copyright Act excludes extraterritorial copying, but infringement applies if any copying happens within the U.S. Plaintiffs are not required to specify which works each Defendant copied; it suffices to state a claim under 12(b)(6), where the court must view allegations favorably to the plaintiff. The complaint details that Defendants copied or directed others to copy Plaintiffs’ works in the U.S. for theft facilitation and assisted in transporting documents abroad. Defendants are alleged to have acted with knowledge, supporting a claim for copyright infringement. Lastly, Defendants claim the court lacks federal question jurisdiction, arguing the core issue is theft of trade secrets; however, cited cases are not applicable as they involve breach of contract in addition to copyright claims.

The court has denied all motions to dismiss counts 3 and 4 from the defendants, which include VW, Piech, Neumann, VWOA, and Lytle. The denial is based on the court's review of the pleadings and the legal reasoning previously provided. The court references a prior order regarding personal jurisdiction from November 26, 1996, and notes that defendants claim certain individuals had employment contracts with Opel in Germany rather than GM in the U.S. Additionally, the court addresses the Paris Convention's requirements for legal remedies related to commercial bribery and acknowledges that while the specific rights under the Convention may be unclear, they do exist. The defendants' assertion that the Convention’s interpretation would negate diversity jurisdiction in unfair competition cases is deemed overstated, as the court's ruling is specific to this case. The court confirms it maintains federal question jurisdiction due to the Lanham Act's incorporation of the Paris Convention's provisions, which apply to international disputes.