Pablo Star Ltd. v. Welsh Government

Citations: 170 F. Supp. 3d 597; 2016 U.S. Dist. LEXIS 33846; 2016 WL 1056590Docket: 15-CV-1167 (JPO)

Court: District Court, S.D. New York; March 16, 2016; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The Welsh Government and several media companies face allegations of unauthorized use of two copyrighted photographs of poet Dylan Thomas, in violation of the Copyright Act. The plaintiffs, Pablo Star Ltd. and Pablo Star Media Ltd., are Irish and UK-registered companies that own the copyrights to the images titled “Just Married Dylan Thomas” and “Dylan and Caitlin at Penard.” The complaint was filed on May 11, 2015, and on June 1, 2015, the defendants, including the Welsh Government, Visit Wales, and various media outlets, submitted a motion to dismiss. They cited multiple reasons: insufficient service of process, improper venue, lack of personal jurisdiction over most Publisher Defendants, and lack of subject-matter jurisdiction due to the Welsh Government's immunity under the Foreign Sovereign Immunities Act (FSIA).

The court found that the Welsh Government was not properly served, rendering venue improper and limiting personal jurisdiction over all but one Publisher Defendant. Consequently, the motion to dismiss was largely granted. The plaintiffs contend that Visit Wales, part of the Welsh Government, has used the photographs in various promotional efforts aimed at U.S. audiences, including displaying them on its website and in materials like a downloadable map for a "Dylan Thomas Walking Tour" in New York. The First Amended Complaint includes claims for copyright infringement against all defendants, along with claims for contributory and vicarious infringement specifically against the Welsh Government.

Defendants seek dismissal of the case on multiple grounds: insufficient service of process, improper venue, lack of personal jurisdiction, and lack of subject-matter jurisdiction. The Welsh Government claims immunity from suit under the Foreign Sovereign Immunities Act (FSIA), which governs jurisdiction over foreign states in U.S. courts. Both parties agree that the Welsh Government is a political subdivision of the United Kingdom, meaning jurisdiction can only be established through the FSIA.

The parties dispute the applicability of three FSIA exceptions: the commercial activity exception, the expropriation exception, and the noncommercial tort exception. However, the Court chooses not to address the issue of immunity under the FSIA since the claims against the Welsh Government can be dismissed on other grounds.

The Court notes that while jurisdictional questions typically precede merits determinations, subject-matter jurisdiction is only crucial if a judgment on the merits is intended. A federal court has discretion to dismiss cases based on personal jurisdiction or venue before addressing subject-matter jurisdiction when it serves judicial economy and restraint. Consequently, the Court will first consider the defendants' arguments regarding improper service, lack of personal jurisdiction, and improper venue.

Service of process on a foreign state is governed exclusively by the Foreign Sovereign Immunities Act (FSIA), specifically outlined in 28 U.S.C. § 1608(a), which stipulates four sequential methods for effecting service. Plaintiffs must first attempt service using the first method, or establish its unavailability, before proceeding to subsequent methods. The methods are as follows: (1) service in accordance with any special arrangement for service; (2) if no special arrangement exists, service in accordance with an applicable international convention; (3) if the first two methods fail, sending the summons and complaint via mail requiring a signed receipt to the head of the foreign state’s ministry of foreign affairs; and (4) if service cannot be made within 30 days under the third method, sending copies to the Secretary of State for transmission through diplomatic channels. Strict compliance with these provisions is mandated, and the burden of proof for proper service lies with the plaintiff.

In this case, the plaintiffs assert they served the Welsh Government according to a special arrangement and also attempted service through the head of the Ministry of Foreign Affairs of the UK. However, their reliance on the third method is challenged because it is only valid if service cannot be achieved through the first two methods. The plaintiffs did not argue that the first method was unavailable nor did they demonstrate compliance with the second method, which involves adherence to the Hague Convention, to which the UK is a party. Consequently, the plaintiffs' failure to exhaust the requirements of the second method invalidates their service attempt under the third method, leading to a conclusion that their service was improper.

Plaintiffs assert that they served the Welsh Government in compliance with a pre-suit agreement, citing an email exchange with the Welsh Government's counsel. This exchange indicates that the Welsh Government specified that service should be directed to the Director of Legal Services, Mr. Jeffrey Godfrey, in accordance with the 1947 UK Crown Proceedings Act. However, the Welsh Government's counsel expressly stated they were not authorized to accept service, which suggests that no mutual agreement for a special arrangement was reached. Courts require clear evidence of such an arrangement, such as a contractual provision, and the existing record does not support the notion of a special service arrangement. Consequently, as strict adherence to 1608(a) is obligatory and Plaintiffs failed to comply, their claims against the Welsh Government are dismissed for improper service.

Regarding personal jurisdiction over the Publisher Defendants, the burden rests on the Plaintiffs to demonstrate such jurisdiction. To oppose a motion to dismiss for lack of personal jurisdiction, Plaintiffs must establish a prima facie case, which entails proper service of process, a statutory basis for jurisdiction, and compliance with constitutional due process.

Plaintiffs can establish jurisdiction over a defendant by submitting affidavits and supporting materials that present factual assertions, which, if accepted, would justify jurisdiction. Any factual uncertainties must be resolved in favor of the plaintiffs. However, the court is not obligated to accept allegations that are contradicted by the defendant’s affidavits or legal conclusions presented as factual allegations. If a defendant counters a plaintiff’s unsupported claims with specific testimonial evidence essential to jurisdiction, and the plaintiff fails to refute this evidence, the allegations may be considered disproven. Courts can exercise either specific or general jurisdiction; general jurisdiction allows a defendant to be sued on any claims, while specific jurisdiction limits claims to those arising from activities connected to the forum. In diversity cases, a federal court's personal jurisdiction is governed by the laws of the state where the court is located. For federal cases lacking specific jurisdictional provisions, such as those under the Copyright Act, federal courts must apply the personal jurisdiction rules of the forum state, which for this case is New York. The court also assesses whether exercising personal jurisdiction aligns with due process standards.

General jurisdiction in New York law requires that a foreign corporation is considered "doing business" in the state if it maintains a level of business activity that is more than occasional or casual, demonstrating permanence and continuity. Plaintiffs must show sustained business activity to meet this standard, while also adhering to Due Process requirements. The viability of New York's "doing business" standard has been questioned post-Daimler, which restricts general jurisdiction to cases where a corporation has contacts so substantial that it is deemed "at home" in the state. In this case, the Plaintiffs have not provided sufficient facts to establish general jurisdiction over the Publisher Defendants, as they are neither incorporated in nor have a principal place of business in New York, nor have they demonstrated substantial contacts that would meet the exceptional criteria for general jurisdiction.

Specific jurisdiction, on the other hand, requires a connection between the forum and the controversy. It applies when a non-domiciliary commits a tortious act outside New York that causes injury within the state, as outlined in New York’s long-arm statute, CPLR 302(a)(3). This statute allows for jurisdiction if the non-domiciliary regularly conducts business in New York, or expects their actions to have consequences there. While the Defendants acknowledge that the alleged copyright infringement constitutes tortious acts outside New York, the dispute lies in whether this resulted in injury within the state and whether the criteria under CPLR 302(a)(3)(i) or 302(a)(3)(ii) are satisfied.

Defendants contend that no injury occurred to a New York resident since Plaintiffs are foreign companies and not copyright owners in New York. Plaintiffs allege a form of infringement that is challenging to localize, as it involves the uploading of copyrighted materials online without charge. Despite this complexity, Plaintiffs must demonstrate a concrete and non-speculative injury to their intellectual property rights in New York. Established case law indicates that a New York copyright owner experiences an in-state injury when their work is uploaded without permission for public access, under CPLR 302(a)(3)(ii). However, Plaintiffs, organized under the laws of Ireland and the United Kingdom, do not claim residency in New York, even though they conduct some business there. The key legal question is whether a copyright owner, who does not reside or have a principal business location in New York, can assert that an injury occurred in New York for long-arm jurisdiction purposes. There is substantial legal precedent suggesting that copyright and trademark infringement injuries occur where the intellectual property is held. Since copyright is an intangible right, its location is tied to the domicile of the owner, supporting the idea that infringement injuries are felt in the state where the property is maintained.

Plaintiffs argue that copyright owners experience injury in the market of infringement due to lost potential sales, specifically claiming that their injury occurred in New York as they were denied opportunities to license and publish their photos there. This argument is rejected for two primary reasons. First, defining the market for online copyright infringement as encompassing any location with internet access would mean that such injury could be claimed in New York regardless of a plaintiff's connection to the state, contradicting New York law which requires a non-speculative and direct injury in the forum. The New York Court of Appeals has indicated that identifying the situs of injury is complicated in online infringement cases, as there is no singular location for lost business. Second, even if a specific location for injury were to be identified, it would not be New York. The key lost sales cited by Plaintiffs relate to fees from Publisher Defendants for using the photos, rather than sales to New York consumers. Therefore, a copyright owner without residency or a principal place of business in New York cannot claim that New York is the site of injury based solely on the accessibility of infringing content. As Plaintiffs failed to demonstrate that the alleged tort caused injury within New York under CPLR 302(a)(3), the court grants the motion to dismiss for lack of personal jurisdiction over the listed defendants.

The Tribune Content Agency has not participated in the motion to dismiss for lack of personal jurisdiction, resulting in the retention of claims against it. The defendants have also requested dismissal of claims against the Welsh Government for improper venue, citing Rule 12(b)(3) of the Federal Rules of Civil Procedure. Under 28 U.S.C. 1391(f), a civil action against a foreign state can be filed in specific judicial districts where significant events related to the claim occurred, where the agency is licensed or doing business, or in the District of Columbia for actions against foreign states or their subdivisions. The plaintiffs assert that venue is proper under both 1391(f)(1) and 1391(f)(3). 

In assessing a motion to dismiss for improper venue, the court can consider facts outside the complaint, favoring the plaintiff's reasonable inferences and resolving factual conflicts in their favor. The plaintiffs argue that a substantial part of the events related to their claims occurred in the relevant district. However, the Second Circuit emphasizes that the term “substantial” must be interpreted strictly, requiring significant events or omissions to have taken place in the district for proper venue. The plaintiffs have not provided specific allegations that relevant conduct occurred in the district, nor do either the plaintiffs or the Welsh Government reside in the U.S. The only identified infringing materials were available online, which is insufficient to establish that infringement occurred in the district, as all relevant actions by the Welsh Government appear to have taken place outside the U.S.

The Court determined that a significant portion of the events related to the claim did not occur in New York, making venue improper under 28 U.S.C. § 1391(f). Plaintiffs argued that the Welsh Government qualifies as an agency or instrumentality of the United Kingdom, referencing 28 U.S.C. § 1603(b). However, the Court found that this interpretation misapplies the statute, which distinguishes between foreign states and their political subdivisions, and concluded that the Welsh Government does not meet the criteria for venue. Consequently, the motion to dismiss the claims against the Welsh Government for improper venue was granted.

With the dismissal of claims against the Welsh Government and other Publisher Defendants, only the Tribune Content Agency remained as a defendant. The Court addressed two outstanding issues: first, whether Pablo Star Ltd. has standing to pursue copyright claims, as it assigned copyright ownership to Pablo Media but retained the right to sue for past infringements against specific parties. Defendants acknowledged that at least one of the plaintiffs has standing, allowing the case to proceed while further discovery is needed to resolve Pablo Star Ltd.'s standing. The motion to dismiss for lack of standing was denied without prejudice.

Second, Plaintiffs sought a preliminary injunction to prevent Defendants from using their copyrighted photographs and to impound related materials. The Court emphasized that personal jurisdiction is essential before proceeding with such motions. It outlined the requirements for a preliminary injunction in copyright cases, including a demonstration of irreparable harm and either a likelihood of success on the merits or serious questions regarding the merits. The Court found that Plaintiffs did not sufficiently demonstrate that failing to issue an injunction would cause irreparable harm.

Plaintiffs lack evidence linking any concrete harm they may suffer to the alleged infringing use by the Tribune Content Agency, and they have not shown that the agency continues to use the Photos, undermining their claim for irreparable harm necessary for an injunction. Consequently, the motion for a preliminary injunction is denied. The court grants in part and denies in part the defendants' motion to dismiss: all claims against the Welsh Government are dismissed due to improper service and venue, while claims against various Publisher Defendants are dismissed for lack of personal jurisdiction. However, the motion to dismiss claims of Plaintiff Pablo Star Ltd. for lack of standing is denied without prejudice. Plaintiffs are instructed to explain within 10 days why claims against Travel Squire and Colorado News Feed should not be dismissed for failure to prosecute. The remaining defendant, Tribune Content Agency, must respond to the First Amended Complaint within 21 days. The court closes several motions as moot. Questions about jurisdiction over foreign corporations regarding online copyright infringement remain, but plaintiffs failed to establish a prima facie case for personal jurisdiction over the Pittsburgh Post-Gazette, leading to the dismissal of claims against it. Additionally, plaintiffs did not adequately argue the applicability of New York’s long-arm statute, CPLR 302(a)(1), nor did they provide supporting facts for its application, thus the court refrains from a due process analysis. Plaintiffs' assertion regarding a U.S.-based website's maintenance does not alter jurisdictional findings.

The Holt declaration from Defendants asserts that the servers for the Welsh Government's tourism website, visitwales.com, are located in the UK, with the content also maintained there. Defendants provide a domain search document indicating the Welsh Government as the Registrant and Admin Contact. In contrast, Plaintiffs argue, based solely on this document, that the servers are in the US due to the involvement of a Delaware company as the Tech Contact. However, the court finds no evidence supporting the claim that the servers are maintained in the US or the relevant judicial district. Plaintiffs also attempt to assert claims against Visit Wales as an "agency or instrumentality" of the Welsh Government. Under the Foreign Sovereign Immunities Act (FSIA), an entity qualifies as such if it is a separate legal person and an organ of a foreign state. The court concludes that Visit Wales is not a separate legal entity but a trade name for the Welsh Government's administrative division focused on tourism promotion, which is predominantly governmental. As a result, Visit Wales does not meet the criteria under the FSIA, and the proper defendant is the Welsh Government. Consequently, even if venue and service were appropriate, all claims against Visit Wales would be dismissed.