In a recent discussion of a major copyright infringement case with an attorney colleague, he expressed surprise that a corporate officer had been held personally liable for a copyright infringement that had been committed by a corporation.
Most of us in law school learn that the corporate shield will protect corporate officers from liability for most actions of officers, with possible exceptions such as liability for unpaid payroll, gross negligence or criminal activity. In the Copyright Litigation Handbook (West 2006), Chapter 6 deals with drafting a copyright infringement complaint. Section II covers drafting the caption and personal liability of corporate officers.
In a recent copyright infringement action, Riverdeep Interactive Learning, Ltd. v. MPS Multimedia, Inc., 2006 WL 3797962 (N.D. Cal.)(Slip Copy) 12/22/2006, a corporate officer was named personally as a defendant for copyright infringements seeking "damages against MPS and Chen for their knowing and willful infringement of RIL's copyrights." The allegations against the officer were contained in a single paragraph:
"Chen, as MPS' President and CEO, directs, controls and ratifies the actions of MPS including the unlicensed and unauthorized replication and distribution of Riverdeep software."
Mr. Chen brought a motion to dismiss pursuant to Rule 12(b)(6). He lost. The court accepted Plaintiffs argument that corporate officers "are personally liable for the corporation's copyright and trademark infringements when they are a 'moving, active conscious force' behind the corporation's infringement." (citing Novell, Inc. v. Unicom Sales, Inc., 2004 WL 1839117, *17 (N.D. Cal. 2004).
Practice Tip for Lawyers: Where an investigation reveals that there is sufficient evidence of copyright infringement to file a complaint, a plaintiff may include a very conclusory allegation such as the bolded text above to hold a corporation's top officer personally liable. Defendants who reflexively make 12(b)(6) motions should really think twice - not only may you lose, but your client may be tagged with your adversary's legal fees on the motion.
Postscript. The defendants brought a motion challenging federal subject matter jurisdiction pursuant to Rule 12(b)(1), raising a plausible argument that the case was a contract case that belonged in state court because it was a dispute between parties over a license agreement, rather than a copyright infringement case. The court engaged in the T.B. Harms analysis and rejected that argument. The defendant also brought a motion for a more definite statement under Rule 12(e) of the Federal Rules of Civil Procedure. He lost that, too. The court noted that the two instances in which a Rule 12(e) motion are proper are 1. when the claim is unintelligible or 2. where the complaint is so general that an ambiguity arises in determining the nature of the claim or the parties against whom it is being made." (citing Sagan v. Apple Computer, 874 F. Supp. 1072, 1077 (C.D. Cal. 1994).
Saturday, December 30, 2006
Copyright Infringement Complaint: Selecting Defendants (Ch 6)
Labels: copyright infringement, personal liability for copyright infringement, piercing the corporate veil, subject matter jurisdiction, t.b. harms test, willful infringement
Partner in Manhattan law firm Dunnington Bartholow & Miller LLP in New York City litigating in federal and state courts and arbitrations. Experienced trial and appellate practitioner. Author: Copyright Litigation Handbook (Thomson Reuters 2015-2016). The New York Law Journal called it "an indispensable guide". Serve on the Board of Directors of the Federal Bar Association, served as Chair of the Circuit Vice Presidents, Vice President for the Second Circuit and General Counsel. Member Board of Governors, National Arts Club. President, Network of Bar Leaders (2013-2014). Attorney advertising disclaimer - prior results do not guarantee success. The statements and opinions voiced here are my own and not of my law firm.