March 30, 2017

4th Circuit Upholds Client’s $26 Million Damage Award for Copyright Infringement

Prior to my joining Weisbrod, Matteis & Copley (WMC), the firm represented Alpha Mining Systems and its principal, Jordan Fishman, in a copyright infringement lawsuit against Shandong Linglong Rubber Company Ltd., et al. Linglong is a Chinese company. The jury Alpha $26 million in damages. On June 5, 2012, the Fourth Circuit Court of Appeals upheld the damages award. Even apart from the damage award the case is noteworthy in a number of respects.

Alpha is a domestic producer of highly specialized mining tires. As the 4th Circuit noted, “[p]rior to 2005 and the events giving rise to this suit, Alpha flourished in the mining-tire market with its unique and effective designs.” Alpha obtained copyrights for a number of its tire designs and “closely guarded its blueprints, as with these in hand any manufacturer could copy the company’s distinctive tires and jeopardize its market position.”

In May 2005, John Canning, a former employee of Alpha met with a then current Alpha employee, Sam Vance, and Surender Kandhari, the chairman of defendant Al Dobowi, (“AD”) to discuss AD’s entry into the mining tire business. Vance offered to supply AD with Alpha’s blueprints, customer lists, and cost information. They discussed using this information to produce and sell a line of mining tires that copied Alpha’s designs.

After the meeting, Vance developed a business plan which he forward to AD, which then also hired him. Vance, Canning and Kandhari then sought to find a tire manufacturer to produce the mining tires based on the designs stolen from Alpha. In the summer of 2005, Linglong agreed to produce the tires knowing that the designs had been stolen from Alpha. For example, in a September 2005 email, Vance and a Linglong representative discussed taking steps to slightly modify their tires to make it less obvious that they had copies Alpha’s designs. Linglong and AD produced a range of tires based on the stolen designs and started selling them in early 2006.

On appeal, the Fourth Circuit first upheld that the district court had jurisdiction over all of the defendants. Second, with respect to the copyright claim, the court rejected defendants’ assertions that the Copyright Act provides no remedy because the infringing activity occurred outside the United States and that the claim is barred by the Copyright Act’s three-year statute of limitations. In reaching this, the Court joined the Second and Ninth Circuits that have expressly adopted the predicate-act doctrine. The doctrine provides that a plaintiff may collect damages from foreign violations of the Copyright Act so long as the foreign conduct stems from a domestic infringement.

In that regard the court stated that the doctrine “strikes an appropriate balance between competing concerns, protecting aggrieved plaintiffs from savvy defendants while also safeguarding a defendant’s freedom from stale claims. Absent the predicate-act doctrine, a defendant could convert a plaintiff’s intellectual property in the United States, wait for the Copyright Act’s three-year statute of limitations to expire and then reproduce the property abroad with impunity. Such a result would jeopardize intellectual property rights and subvert Congress’s goals as engrafted on to the Copyright Act.”

Here, the Court concluded that Alpha established a domestic violation of the Copyright Act. “While in the United States, Vance and Al Dobowi unlawfully converted Alpha’s blueprints and reproduced them without authorization.” The defendants then used these designs to produce mining tires almost identical to those of Alpha and sold these tires to former customers of Alpha causing Alpha substantial damage.

The Court also rejected defendants’ contention that the predicate act doctrine should not apply when recovery of damages from a domestic violation of the Copyright Act is barred by the three-year statute of limitations. The Court agreed with the Ninth Circuit that a plaintiff may collect damages from extraterritorial conduct even if the statute of limitations bars an award based on domestic infringement. “That Alpha may not collect damages from Appellants’ domestic activities is thus of no moment to the analysis, as the district court accurately instructed the jury.”

Finally, the Court upheld Alpha’s claim for conversion under Virginia law, but dismissed the remaining claims and vacated the award of attorney’s fees.

Alpha Fourth Circuit Decision Affirming the Jury Verdict (00018177)

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