Half-Baked: DC Circuit Rejects &pizza’s Attempt to Extend Territorial Reach of Copyright Act and Lanham Act to UK

Background

IMAPizza, LLC is the operator of the US “&pizza” restaurant chain with locations along the East Coast. Rupert Lyle and Bhasker Dhir, citizens of the UK, founded At Pizza, Ltd., a UK corporation that operates a restaurant under the trademark “@pizza” in Edinburgh, Scotland. According to IMAPizza, the owners of At Pizza designed their knock-off “@pizza” restaurant by visiting IMAPizza’s “&pizza” restaurants in the US, taking photos of them, and downloading photos of the “&pizza” restaurants from websites operating on US servers. At Pizza then used those materials to design and open its Scotland restaurant under the trademark “@pizza.”

IMAPizza filed a complaint against At Pizza in the US District Court for the District of Columbia alleging violations of the Copyright Act and the Lanham Act, trespass under District of Columbia common law, and “passing off” under UK common law. At Pizza moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction and under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The District Court held that IMAPizza made a prima facie showing of personal jurisdiction, but dismissed the complaint under Fed. R. Civ. P. Rule 12(b)(6) because the “pertinent facts arose beyond the territorial reach” of the Copyright Act and the Lanham Act.

DC Circuit Opinion

IMAPizza appealed the District Court’s decision to the US Court of Appeals for the District of Columbia Circuit. The DC Circuit reviewed the District Court’s dismissal of IMAPizza’s complaint de novo, and affirmed the dismissal.

The court explained that with regard to IMAPizza’s Copyright Act claim, the relevant question was whether IMAPizza sufficiently pleaded an act of “domestic infringement.” IMAPizza claimed that “domestic infringement” was satisfied because At Pizza: (1) downloaded IMAPizza’s copyrighted pictures of its &pizza restaurants from websites operating on servers located in the US; (2) took pictures of its &pizza restaurants in the US; and (3) under the “predicate act” doctrine, those predicate acts of infringement in the US enabled IMAPizza to recover for At Pizza’s later acts of infringement that occurred outside the US.

The court rejected IMAPizza’s first argument, holding that the relevant question for the domestic infringement analysis is “where the copying took place.” Here, the copying occurred in the UK, where At Pizza’s employees downloaded the subject photos to their computers. The location of the servers from which the downloads occurred (in the US) did not change the fact that the acts of copying occurred in the UK, where At Pizza’s employees reside and where their computers are located.

The court likewise rejected IMAPizza’s second argument that At Pizza’s photographing of its &pizza restaurants in the US constituted domestic infringement. In rejecting that argument, the court reasoned that “the Copyright Act does not create a right to prevent the taking of pictures of an architectural work ‘if the building in which the work is embodied is located in or ordinarily visible from a public place.’” Thus, At Pizza’s acts of taking photographs of the @pizza stores in the US were not acts of “domestic infringement.”

Finally, the court rejected IMAPizza’s argument under the “predicate act” doctrine, pursuant to which a court may apply the Copyright Act to foreign acts of infringement provided there was an initial infringing act in the US. The court held that the “predicate act” doctrine was inapplicable because IMAPizza failed to plead any underlying act of infringement that occurred in the US; instead, all of the alleged infringing activity occurred in the UK.

The court then turned to IMAPizza’s trademark claims under the Lanham Act. In its complaint, IMAPizza alleged trademark infringement and unfair competition under the Lanham Act based on the similarities between IMAPizza’s trademarks “and other features of its business,” and At Pizza’s marketing materials and the design of its restaurant in Edinburgh. The court began its analysis by noting that to apply the Lanham Act extraterritorially, the plaintiff must plead facts demonstrating that the defendant’s non-US acts have “some effect” on US commerce.[1] IMAPizza argued that At Pizza’s alleged acts of trademark infringement in Scotland indeed had “some effect” on US commerce because: (1) US students and tourists who purchase food from @pizza in Scotland may be familiar with the &pizza restaurants in the US; (2) a potential investor confused At Pizza with &pizza; and (3) At Pizza visited the US to further its allegedly unlawful scheme.

The DC Circuit rejected all of IMAPizza’s arguments. First, the court held that to apply the Lanham Act based upon US students and tourists buying food in Scotland would effectively extend the Lanham Act to all commercial conduct occurring anywhere in the world that US tourists visit. Second, the court held that even if a potential business partner of At Pizza were allegedly confused, IMAPizza failed to allege that this confusion caused any harm. And third, the court held that the mere acts of At Pizza’s founders visiting the US to research the &pizza restaurants did not justify applying the Lanham Act extraterritorially, as such visits to the US do not by themselves demonstrate the requisite domestic effect on US commerce. The court thus held that IMAPizza failed to plausibly allege that At Pizza’s conduct had “some effect” on US commerce, as required to invoke the Lanham Act.

The DC Circuit concluded its opinion by acknowledging the practical difficulties that its decision may impose on IMAPizza in the UK, stating that “[w]e are not blind to the difficulty IMAPizza may encounter in trying to enter the UK market now that At Pizza has established a copycat restaurant there.” However, the facts alleged by IMAPizza simply did not meet the “some effect” on US commerce test as required for Lanham Act jurisdiction.

Read the DC Circuit’s opinion here.

[1] The DC Circuit declined to decide whether to adopt the First Circuit’s “substantial effect” on US commerce test, as urged by At Pizza, or the Ninth Circuit’s “some effect” on US commerce test, as urged by IMAPizza, but noted that IMAPizza had failed to satisfy the less stringent “some effect” on US commerce test.