ITSI T v. Productions, Inc. v. California Authority of Racing Fairs

Citations: 785 F. Supp. 854; 1992 WL 41609Docket: CIV. S-89-1686 LKK

Court: District Court, E.D. California; March 3, 1992; Federal District Court

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ITSI T.V. Productions, Inc., the plaintiff, has brought a copyright infringement complaint against multiple defendants, including the California Authority of Racing Fairs (CARF) and Hipodromo de Agua Caliente. The case, overseen by Chief Judge Emeritus Karlton, centers on the jurisdictional claim that Caliente is not liable for copyright infringement occurring in the U.S. ITSI, an Illinois corporation operating in California, contracted with CARF in 1983 to provide closed-circuit television services for horse racing. From 1986 to 1988, CARF transmitted ITSI's televised horse races via satellite for off-track betting purposes, utilizing brokers like Video Sports America (VSA) to disseminate the broadcasts to remote locations.

Caliente, a Mexican corporation operating horse racing tracks and off-track betting sites in Mexico, had a contract with VSA to receive and distribute ITSI's broadcasts. This contract, which explicitly stated there was no agency relationship with Caliente, involved VSA providing Caliente with a coded signal and necessary equipment to display the broadcasts in Mexico. The contract with VSA continued until March 1988, when it was assigned to Telecom Broadcasting, Inc. (TBI). VSA's president, Edward M. Spector, indicated that VSA handled all necessary services for Caliente’s operations to ensure compliance with legal requirements for wagering activities. The court ultimately granted Caliente’s motion to dismiss due to lack of subject matter jurisdiction, asserting that ITSI failed to demonstrate Caliente's liability for copyright infringement within U.S. jurisdiction.

In May 1988, Caliente initiated efforts to contract directly with California race tracks for audio-visual signals. Contracts were executed between Caliente and the Los Angeles County Fair (LACF) on July 25, 1988, and August 16, 1989, as well as with CARF on June 22, 1988, and May 26, 1989. These agreements granted Caliente exclusive rights to use, transmit, receive, and disseminate audio-visual signals. The plaintiff alleges that CARF, various fairs, race tracks, brokers, and off-track betting entities infringed on its copyright by broadcasting horse race shows without authorization.

Regarding subject matter jurisdiction, the burden lies with the party invoking federal jurisdiction. Under Federal Rule of Civil Procedure 12(b)(1), if the challenge is facial, the court presumes the factual allegations are true and grants the motion only if the plaintiff fails to allege an essential element for jurisdiction. A complaint may be dismissed if it does not arise under federal law, presents no case or controversy, or is not described by jurisdictional statutes. If the jurisdictional challenge is a "speaking motion," where the truth of jurisdictional facts is attacked, the court may hear evidence regarding jurisdiction prior to trial if the issues are separable. However, if the jurisdictional issue is intertwined with the merits, the determination should wait until factual issues are resolved.

In this case, the defendant's motion to dismiss is a "speaking motion" that exceeds the pleadings, intertwining jurisdictional and substantive issues regarding Caliente's potential liability for copyright infringement occurring outside the U.S. Summary judgment standards apply, as the initial ruling found the plaintiff had not provided evidence of Caliente's liability for infringement within U.S. territory. Consequently, the court allowed for additional discovery on Caliente’s liability for acts occurring in the U.S., leading to reargument and supplemental briefs on the matter. The court is now analyzing its subject matter jurisdiction over the plaintiff's copyright infringement claims against Caliente.

Plaintiff claims ownership of a copyright in audiovisual works, specifically horse race shows, asserting that copyright protection applies if the work is fixed in a tangible medium. The court, for the purpose of evaluating the defendant's motion to dismiss based on jurisdiction, presumes that the videotaped transmissions are copyrightable and that the plaintiff holds the copyright. 

Under the Copyright Act of 1976, copyright owners possess exclusive rights to reproduce, create derivative works, distribute, and publicly perform their works. A secondary transmission of a primary performance is considered infringement if the primary transmission is not broadly accessible but restricted to specific audiences. The Act holds that individuals may be directly liable for copyright infringement by performing or authorizing infringing actions. The phrase "to authorize" in the Act is intended to clarify the liability of contributory infringers, suggesting that liability extends to those who enable others to infringe.

Additionally, the concept of third-party liability is addressed, indicating that a defendant can be jointly liable for the direct infringement of others under contributory or vicarious liability doctrines. Vicarious liability requires the defendant to have the ability to supervise infringing activities and to possess a significant financial interest in the copyrighted works, without needing to prove knowledge of the infringement. The distinction between contributory and vicarious liability is acknowledged but not strictly defined in the courts.

A defendant may be held contributorily liable for copyright infringement if they knowingly induce or materially contribute to another's infringing actions. The liability hinges on the defendant's knowledge and participation, with an objective standard for knowledge that includes awareness of the copyrighted status of the product and the ongoing infringement. Mere quantitative contributions are insufficient for liability; direct or primary infringement must be established first.

Regarding subject matter jurisdiction, U.S. copyright laws do not extend extraterritorially, meaning infringing acts occurring entirely outside the U.S. are not actionable in U.S. federal courts. To establish jurisdiction, the plaintiff must demonstrate that the defendant is liable for an act of infringement occurring within the U.S. Jurisdiction is present when a defendant "authorizes" infringement in the U.S., even if the actual infringing acts occur abroad. Furthermore, if a domestic infringement leads to profits derived from overseas reproduction, plaintiffs may impose a constructive trust on those profits.

One district court ruled that third-party liability, including "authorization," requires a direct act of infringement to be actionable. However, there is disagreement with this interpretation. In Danjaq, the court found it lacked jurisdiction over authorization claims not culminating in primary infringement. This conclusion is contested, as it did not consider the application of Rule 12(b)(1) standards in handling intertwined jurisdictional and merits issues. The Peter Starr court determined that subject matter jurisdiction exists for claims alleging authorization in the U.S. of extraterritorial displays, aligning with the provisions of 17 U.S.C. 106 and 501.

The court is obligated to follow the Ninth Circuit's ruling in Peter Starr, which establishes that subject matter jurisdiction exists when a plaintiff claims that a defendant in the U.S. has authorized the display, performance, or copying of the plaintiff's copyrighted work abroad. Importantly, the act of "authorization" is considered a direct act of copyright infringement, making the location of the act irrelevant for jurisdictional purposes. Under the 1976 Copyright Act, copyright holders have the exclusive rights to perform or authorize certain acts, and infringement occurs if either right is violated. 

For the court to exercise subject matter jurisdiction over the plaintiff's claims against Caliente for direct infringement, the plaintiff must demonstrate that Caliente committed direct acts of infringement within the U.S. Additionally, a defendant can be held liable for infringement through contributory or vicarious liability based on another's direct infringement. However, it is sufficient for the plaintiff to show that the direct infringement occurred in the U.S.; the defendant's own acts leading to liability do not need to occur domestically.

The distinction between subject matter jurisdiction and personal jurisdiction is crucial, as subject matter jurisdiction pertains to the claim's validity in court, while personal jurisdiction concerns the defendant's connections to the forum state. A defendant can be found liable for actions outside the U.S. that contribute to infringement occurring within the country, but this may not establish personal jurisdiction over the defendant.

Applying summary judgment standards, the plaintiff must show genuine factual disputes regarding Caliente's direct infringement or its vicarious or contributory liability for actions taken within the U.S. The plaintiff claims that Caliente displayed copyrighted shows through satellite simulcast in Mexico between 1986 and 1988. However, this claim does not allow for jurisdiction as the actions took place outside the U.S. The plaintiff also argues that Caliente authorized the display of these shows via contracts executed in the U.S., which is a point of contention for jurisdictional consideration.

Caliente cannot authorize itself to perform ITSI's copyrighted works, even if VSA, LACF, or CARF could be liable for their authorization of Caliente's extraterritorial performances. For the court to have subject matter jurisdiction over plaintiff's claims against Caliente, the plaintiff must present evidence that Caliente is either contributorily or vicariously liable for copyright infringement by others in the U.S. 

1. **Vicarious Liability**: The plaintiff argues that Caliente is vicariously liable for VSA's direct copyright infringements in the U.S. To oppose Caliente's summary judgment motion, the plaintiff must show that Caliente had the right and ability to supervise VSA's infringing activities and had a direct financial interest in these acts. Although Caliente may benefit financially from VSA's actions, there is no evidence that Caliente had the ability to control VSA, as VSA had access to ITSI's signal independently of any contract with Caliente.

2. **Contributory Liability**: The plaintiff also claims Caliente could be contributorily liable for acts by CARF, LACF, or VSA. To establish this, the plaintiff must demonstrate that Caliente knew or should have known about the infringement and contributed to it. However, there is no evidence suggesting Caliente was aware of any infringement by CARF, LACF, or VSA, nor has the plaintiff provided sufficient evidence to support this claim. The lack of evidence regarding Caliente’s state of mind fails to meet the necessary burden for summary judgment.

Due to the absence of evidence showing Caliente's direct involvement in copyright infringement, the court lacks subject matter jurisdiction over the claims against Caliente. The plaintiff also seeks to amend the complaint to include allegations under Mexican copyright law for acts occurring in Mexico. However, the court expresses reluctance to engage with foreign law without sufficient justification, which the plaintiff has not provided. Consequently, all copyright infringement claims against Caliente are dismissed for lack of subject matter jurisdiction.

Defendant's motion to dismiss includes claims of ineffective service of process and lack of personal jurisdiction. However, the court has determined that it lacks subject matter jurisdiction over the plaintiff's claims, rendering the other dismissal grounds unnecessary for consideration. The court outlines undisputed background facts relevant to the motion and notes that the exhibits submitted by the plaintiff lack supporting affidavits or declarations. Despite this, the court will consider the evidence as the defendant has not objected to its use. The document references the standards for summary judgment but does not elaborate on them. 

It provides definitions from the Copyright Act regarding audiovisual works, which are described as series of related images intended for public display through machines, accompanied by sound. Copies are defined as material objects where a work is fixed, allowing for perception or reproduction. The act of performing a work publicly is explained, covering situations where performances occur in public spaces or are transmitted to them. The definitions extend to how audiovisual works are displayed and transmitted, including distinctions between primary and secondary transmissions. A secondary transmission is not considered infringement if it meets specific criteria related to FCC regulations and the integrity of the primary signal. The term "authorize" was added to the Copyright Act in 1976, reflecting a significant change in the legal framework since the 1909 Act.

The Supreme Court has used "vicarious" and "contributory" liability interchangeably, indicating that such liability arises when a party has the authority to control the use of copyrighted works and allows their use without the copyright owner's permission. Contributory liability can stem from direct infringement or an ongoing relationship between the direct infringer and the contributory infringer. It includes two types: personal conduct that furthers the infringement and the provision of means to infringe, but merely supplying means that can be used non-infringing does not equate to liability. 

In the case of Peter Starr, the Ninth Circuit ruled that a defendant could be liable for authorizing copyright infringement through a contract, which was signed in Los Angeles. The Modiin and Peter Starr cases relied on the Second Circuit's decision in Robert Stigwood, which held that domestic acts must contribute to infringing actions abroad to establish liability. 

In P. D Int'l, the court found that it had subject matter jurisdiction over claims against Cunard for showing a copyrighted videotape on its cruise ships because an infringing act (copying) occurred domestically in Florida. The court did not clarify whether the infringing act was Halsey's copying or Cunard's request for the copy, but it suggested that Halsey's act was the basis for Cunard's contributory liability.

The court determines it lacks subject matter jurisdiction unless the plaintiff demonstrates that the defendant is liable for a direct act of infringement within the United States. The plaintiff's claim under the Copyright Act pertains to unauthorized "performance" of its copyrighted work rather than "display." Performance involves showing images in sequence, while display refers to showing individual images sequentially. The plaintiff argues that the simultaneous transmission of shows during horse races constitutes performance.

Evidence presented indicates that in August 1985, Caliente entered into a contract with VSA to receive and distribute audiovisual signals of live horse racing, which included a coded signal of the plaintiff's shows and necessary equipment for viewing. The contract clarifies that no agency relationship exists between Caliente and VSA, despite VSA facilitating legal compliance for Caliente.

Additionally, Professor Nimmer's argument is referenced, asserting that copyright infringement can be adjudicated in courts outside the jurisdiction where it arose, unlike patent cases. However, this generalization does not address whether specific foreign laws have administrative requirements for copyright validity.

Even if jurisdiction were established over the plaintiff's claim regarding Mexican copyright law, the court would not exercise jurisdiction due to forum non conveniens, as it would create significant challenges in interpreting and applying Mexican law.