Suing A Sovereign For Infringement

Although a seemingly infrequent issue, the ability to sue domestic and foreign sovereign entities in intellectual property disputes has been the subject of recent seminal U.S. Supreme Court and Appellate Court decisions. In these decisions, the Courts addressed statutes that seek to abrogate sovereign immunity to allow suits by private individuals against foreign and domestic states in intellectual property actions. While the Supreme Court has now made it clear that a state cannot be sued for copyright (or patent) infringement, the Second Circuit held that a foreign entity may be sued in U.S. courts under certain circumstances.

In Allen v. Cooper, 140 S. Ct. 994 (2020), the Supreme Court held unconstitutional the Copyright Remedy Clarification Act of 1999, a federal statute that allowed suits against states for copyright infringement. The Court’s decision followed an earlier Supreme Court decision, Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U.S. 627 (1999), holding unconstitutional a federal statute that similarly sought to abrogate a state’s sovereign immunity from suit for patent infringement.

Unlike actions against states, there is no absolute immunity from suit for a foreign sovereign in U.S. courts. Rather, such actions against a foreign sovereign are governed by the Foreign Sovereign Immunities Act (FSIA). Under FSIA, a foreign state is presumptively immune from U.S. jurisdiction unless a specific exception applies. One of the specific exceptions is commercial activity by the foreign sovereign in the United States.

Applying the FSIA commercial activity exception, the Second Circuit Court of Appeals denied the Welsh Government’s motion to dismiss Pablo Star’s complaint for copyright infringement based on sovereign immunity. The Court found the Welsh Government’s use of two photos of Dylan Thomas and his wife in promotional material for Welsh-related tourism in the United States fell within the commercial activity exception. Pablo Star Ltd. v. The Welsh Government, 961 F.3d 555 (2nd Cir. 2020).

According to FSIA, sovereign immunity does not preclude jurisdiction in U.S. courts if the action is “based…upon commercial activity carried on in the United States by the foreign state.” 28 U.S.C. Sec. 1605(a)(2). Thus, to be able to sue a foreign state for copyright infringement as commercial activity under this provision, the action must meet the two statutory requirements: first, the action must be based on “commercial activity,” and second, the activity must be carried on in the United States.

“Commercial activity” is “either a regular course of commercial conduct or a particular commercial transaction or act.” 28 U.S.C. Sec. 1603(d). “[C]ommercial activity carried on in the United States by a foreign state” is commercial activity “having substantial contact with the United States.” 28 U.S.C. Sec. 1603(e), Pablo Star, 961 F.3d at 560. Quoting the Supreme Court, the Second Circuit commented that the statute “leaves the critical term ‘commercial activity’ largely undefined.” Id., citing Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 612 (1992).

Whether the activity is considered “commercial” depends on its “nature,” “the outward form of the conduct that the foreign state performs or agrees to perform;” not its “purpose,” “the reason why the foreign state engages in the activity.” Sec. 1603(d); Pablo Star, 961 F.3d at 560- 61, citing Saudi Arabia v. Nelson, 507 U.S. 349, 361 (1993). A government’s profit motive in the activity is irrelevant. Instead, the Court looks to whether the particular actions performed are “the type of actions by which a private party engages in trade and traffic or commerce.” Pablo Star, 961 F.3d at 561, 563 (emphasis in original), Weltover, 504 U.S. at 614.

While the...