Expediters International of Washington, Inc. v. Direct Line Cargo Management Services, Inc.
995 F.Supp. 468 (1998)
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Rule of Law:
Authorizing acts of copyright infringement from within the United States constitutes direct infringement actionable under the U.S. Copyright Act, even if the infringing acts themselves occur entirely outside the United States.
Facts:
- A Taiwanese company, CMS-Taiwan, developed a proprietary freight consolidation software program (the 'Software').
- CMS-Taiwan initially had an affiliation with defendant Direct Line Cargo Management Services, Inc. (DLCMS-USA) and a group of Asian companies, granting them a license for limited use of the Software.
- The Asian affiliates also entered into confidentiality agreements with CMS-Taiwan, limiting their use of the Software.
- CMS-Taiwan later became affiliated with plaintiff Expediters International (EI) and assigned all rights to the Software to EI.
- Upon this new affiliation, CMS-Taiwan's relationship with DLCMS-USA and its Asian affiliates terminated, and their license to use the Software expired on September 15, 1993.
- The parties agreed to a 60-day transition period, ending November 15, 1993, allowing DLCMS-USA limited continued use of the Software for specific customers.
- After the transition period expired, EI alleged that DLCMS-USA directed its Asian affiliates to continue using the Software to generate shipping manifests, which were then transmitted to and used by DLCMS-USA for its business operations in New Jersey.
Procedural Posture:
- Expediters International of Washington, Inc. ('EI') filed a complaint against Direct Line Cargo Management Services, Inc. ('DLCMS-USA') in the U.S. District Court for the District of New Jersey, alleging copyright infringement, trade secret misappropriation, and breach of contract.
- EI simultaneously moved for a preliminary injunction and a temporary restraining order (TRO).
- The district court entered a TRO, temporarily restraining DLCMS-USA from using the software for any purpose other than serving five specific clients.
- Defendant DLCMS-USA subsequently filed motions for summary judgment on all of EI's claims.
- The parties consented to the jurisdiction of a United States Magistrate Judge to hear and decide the summary judgment motions.
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Issue:
Does authorizing acts of copyright infringement that occur entirely outside the United States, from a location within the United States, constitute direct copyright infringement under the U.S. Copyright Act?
Opinions:
Majority - Magistrate Judge Pisano
Yes, authorizing acts of copyright infringement from within the U.S. constitutes direct infringement, even if those acts occur entirely abroad. The court rejected the Ninth Circuit's view in Subafilms, which required a domestic act of direct infringement for liability to attach. Instead, the court adopted the reasoning of Curb v. MCA Records, Inc., finding that the plain language of Section 106 of the Copyright Act, which grants copyright owners the exclusive right 'to do and to authorize' reproduction, creates direct liability for the act of authorization itself. The court reasoned that in a modern global economy, allowing a U.S. entity to escape liability by simply directing a foreign agent to perform infringing acts would thwart the purpose of the Copyright Act. Because EI presented sufficient evidence to create a genuine issue of material fact as to whether DLCMS-USA had the motive and ability to authorize its Asian affiliates' infringing use of the Software, summary judgment on the copyright claim is denied.
Analysis:
This decision contributes to a circuit split on the extraterritorial application of the U.S. Copyright Act, siding with a more expansive view of liability. By treating domestic authorization of foreign infringement as direct, rather than contributory, infringement, the court lowers the bar for holding U.S. companies accountable for orchestrating piracy abroad. This interpretation is particularly significant in the digital age, where cross-border infringement can be initiated instantaneously, making it a crucial precedent for cases involving international software licensing and digital content distribution. The opinion also reinforces the viability of related state-law claims by clearly applying the 'extra element' test to prevent federal preemption of trade secret and contract disputes that involve breaches of duties beyond mere copying.
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