Rhapsody alleged that defendants infringed the copyright in
its business management software.
Rhapsody allegedly granted defendant CVA a nontransferable license to
use its product, Exceed MRP, but that CVA and its parent company, INOX India
Limited, developed an infringing work and used it to manage their
businesses. The software assists
businesses in tracking orders and managing business operations, and was
allegedly tailored to suit CVA’s specific needs. Though the exact details of the contract are
disputed, Rhapsody alleged that it specified that the software couldn’t be
modified or reverse engineered and could be loaded onto a maximum of one computer
or server.
In 2009, INOX bought a 70% interest in CVA; they make the
same things and represent on their combined website that “INOX India and CVA
are ONE” and refer to themselves as a “joint entity” called “INOXCVA.” After
learning of the acquisition, Rhapsody sent INOX a letter, copied to CVA,
reminding them that the software couldn’t be transferred to any other party or
modified. INOX hired a company called
VCAN India (against which a default judgment was entered here) to develop new
business management software for CVA.
Rhapsody alleged that the new software, INOVA, infringed Rhapsody’s
software; that INOX regularly accesses the infringing software on CVA’s Texas
server, and that INOX (in concert with VCAN and CVA) removed Rhapsody’s
copyright management information embedded in Rhapsody’s software and
fraudulently placed its own indicia of ownership on the infringing software, in
violation of the DMCA. (If this software
isn’t sold, can the removal have aided copyright infringement in any way? If not, does §1202 apply at all?)
Rhapsody sued for copyright infringement, violations of 17
USC §1202(a) and (b) (removal of CMI and provision of false CMI), and violations
of the Lanham Act.
The court first found personal jurisdiction over INOX,
though INOX argued that it didn’t transact business in Texas, had no place of
business in Texas, didn’t employ Texas residents, and was merely CVA’s parent
company. But the evidence suggested that
INOX hired VCAN to prepare INOVA for CVA, whose server is in Texas; it directly
participated in the development of INOVA; and it regularly logged into CVA’s
Texas server to use Rhapsody’s software and INOVA to view data. Plus, it allegedly sold products made and
designed with the use of INOVA. (Not
sure why that last makes any difference at all; that doesn’t even mention those
products being sold into the US, but even if they were, that can’t be relevant
to personal jurisdiction over copyright infringement.)
INOX argued that logging into and viewing a program on a
Texas server wasn’t infringement, citing Cartoon Network LP v. CSC Holdings,
Inc., 536 F.3d 121 (2d Cir. 2008), and claiming that its acts weren’t
fixation. But MAI v. Peak held that copying occurs when a program is loaded into
RAM, and other courts have held that loading software into RAM can create an
infringing copy. Rhapsody’s evidence
suggested that INOX accessed the two programs long enough for an INOX employee
to view the copyrighted content and evaluate the data “displayed thereon” (is
the work an audiovisual work or a software program?). At this stage, Rhapsody had made out its
prima facie case. The causes of action
arose out of or related to INOX’s forum contacts; there was evidence that INOX
knew the software was on CVA’s Texas server and regularly logged into it to use
the software. “Numerous courts have
exercised personal jurisdiction over nonresident defendants where the minimum
contacts with the forum consisted of committing a tort through accessing a
server located in the forum state.” Thus, the burden was INOX to show that the
exercise of jurisdiction would be unfair, which it did not do, given Texas’s
strong interest in protecting its citizens from copyright infringement and DMCA
violations, and INOX’s past practice of sending principals and employees to
Texas to manage its subsidiary.
INOX then argued that American copyright law doesn’t apply
to extraterritorial acts of infringement, but the court found that at least
part of an act of infringement was alleged in the US. Logging onto the Texas server and engaging in
infringing acts would suffice (though Rhapsody needed to amend its complaint to
clearly allege this).
The Lanham Act claim presented a Dastar problem: Rhapsody alleged that INOX “deceived both
prospective and current customers regarding the origin of the Exceed MRP
Software and the derivative work, the INOVA Software,” and “[a]ny statements
made regarding ownership of the INOVA software and/or Exceed MRP Software to
prospective and/or current customers … are likely to cause confusion, mistake,
or deception as to origin, sponsorship, or approval of their goods by Plaintiff
when none exists.” The complaint was “rather vague” as to whether it alleged
that INOX copied Rhapsody’s copyrighted work or that INOX took tangible copies
of Rhapsody’s software, removed Rhapsody’s marks, and sold them as INOX’s
own. If only the former, then the claim
might fail as a matter of law. The
pleadings were currently insufficient; if Rhapsody chose to replead a Lanham
Act claim, it would need to attend to precedent.
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