Geophysical Serv. Inc. v. TGS-NOPEC Geophysical Co., 850 F.3d 785 (5th Cir. 2017) [click for opinion]
Under Canadian law, companies that gather seismic data about the earth's structure must submit their findings to the Canada-Newfoundland and Labrador Offshore Petroleum Board ("CNLOP"). CNLOP must keep this information confidential for ten years, after which they may provide the information to the public upon request. TGS-NOPEC Geophysical Company ("TGS") requested and obtained copies of the data ("copies") provided to CNLOP by a Canadian competitor, Geophysical Services, Inc. ("GSI"). CNLOP sent the copies to TGS in Houston, Texas.
GSI, alleging it held a valid copyright in its data, sued TGS in the Southern District of Texas for direct copyright infringement, contributory copyright infringement, and for unlawfully removing GSI's copyright management information. The district court dismissed GSI's complaint with prejudice. On appeal, the Fifth Circuit only considered those claims alleged in GSI's initial appeal brief: (1) direct infringement based on TGS's importation of the copies, and (2) contributory infringement based on TGS intentionally encouraging or inducing the CNLOP to create those copies.
Regarding the first claim, GSI claimed TGS's unauthorized importation of the copies was direct infringement of its copyright. TGS defended its position using the "first sale doctrine," which provides that the owner of a particular copy lawfully made is entitled to sell or dispose of that copy without requiring further authorization by the copyright owner. The court agreed that the "first sale doctrine" applies to copies of copyrighted material lawfully made abroad. However, the court was left with the question of what it means for a copy made abroad to have been "lawfully made under this title." 17 U.S.C. § 109. TGS argued that Canadian law should apply, and GSI argued U.S. law should apply, when defining "lawfully made."
The district court did not squarely address the first sale issue because it found the act of state doctrine—which bars U.S. courts from deciding that a foreign government acted unlawfully—qualified the copies as "lawfully made." On appeal, the Fifth Circuit disagreed, finding that "any determination will not speak to the validity of the Canadian government's actions, only whether those actions support lawful importation into the United States by a private party." The court also found the rationale behind the act of state doctrine, to preserve amicable relations between governments, did not support its application. Consequently, the court reversed the dismissal of GSI's importation claim and remanded for the district court to decide whether Canadian or United States law governs the determination of "lawfully made."
The court then considered GSI's second claim: whether TGS was liable for contributory infringement by "intentionally inducing or encouraging direct infringement" by CNLOP. Unlike the importation claim, the contributory infringement claim pivoted on whether CNLOP itself directly infringed GSI's copyright, conduct which occurred extraterritorially, as the copies were made in Canada. The court found that TGS's authorization of those acts and the exportation of the copies to the United States did not convert CNLOP's extraterritorial conduct into actionable domestic conduct, and thus GSI failed to state a claim of contributory infringement.