United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 6, 2002 Decided June 4, 2002
No. 01-7104
Scandinavian Satellite System, AS,
Appellant
v.
Prime TV Limited, et al.,
Appellees
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Appeal from the United States District Court
for the District of Columbia
(No. 00cv02482)
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Gary C. Tepper argued the cause for appellant. With him
on the brief was Caroline Turner English.
Robert B. Rosen argued the cause for appellees. With him
on the brief was Richard K. Coplon.
Before: Edwards, Henderson, and Garland, Circuit Judges.
Opinion for the Court filed by Circuit Judge Edwards.
Edwards, Circuit Judge: Appellant Scandinavian Satellite
System ("SSS") claims rights under an exclusive copyright
license to broadcast programming created by Pakistan Televi-
sion Corporation ("PTV"), a government-owned enterprise
based in Pakistan that produces news and entertainment
programs. On May 25, 1998, PTV granted Sports Star
International ("SSI"), a Pakistani company, an exclusive li-
cense to broadcast PTV programming. On July 1, 1998, SSI,
in turn, granted SSS, a Norwegian company, the exclusive
rights to broadcast PTV programming outside of Pakistan.
SSS intended to use Prime TV Limited ("Prime TV"), a
British company, to broadcast PTV programming in Europe.
Finally, on February 17, 1999, SSS executed a Joint Venture
Agreement with SSI, authorizing SSI to assume control over
Prime TV, which previously had been a wholly owned subsid-
iary of SSS, and transferring the exclusive license to broad-
cast PTV programming from SSS to Prime TV.
SSS now sues Prime TV and two individual defendants for
copyright infringement, claiming that Prime TV violated
SSS's copyright by broadcasting, or preparing to broadcast,
PTV programming in the United States. SSS also contends
that the SSS/SSI Joint Venture Agreement is null and void
because it was executed under duress. In answer to SSS's
complaint, Prime TV moved to dismiss the case on three
grounds: lack of personal jurisdiction; principles of interna-
tional comity arising from related lawsuits in Pakistan; and
the existence of forum selection clauses in the disputed
SSS/SSI contracts that required the parties to resolve their
disputes pursuant to arbitration in Pakistan.
SSS's action is based on a claim of copyright infringement
under 17 U.S.C. ss 106 and 602. The District Court, howev-
er, saw the case differently. The District Court ruled that,
because the "Joint Venture Agreement is at the core of this
action," Scandinavian Satellite Sys., AS v. Prime TV Ltd.,
146 F. Supp. 2d 6, 10 (D.D.C. 2001), the action is principally
one for contract rescission, not copyright infringement. The
trial court also held that, even if the Joint Venture Agree-
ment were voided - "which is necessary for SSS to maintain a
copyright action - SSS would have no cause to seek relief
under the copyright laws, since Prime [TV] would be its
wholly owned subsidiary." Id. at 18. The District Court
therefore held that it had no subject matter jurisdiction to
decide the case, because the matter did not arise under an act
of Congress relating to copyrights. See 28 U.S.C. s 1338(a)
(federal courts have subject matter jurisdiction over matters
"arising under any Act of Congress relating to patents, plant
variety protection, copyrights and trade-marks").
Because we find that the District Court has subject matter
jurisdiction over appellant's complaint, we reverse and re-
mand for further proceedings. SSS's complaint is founded on
a claim of copyright infringement arising under the Copyright
Act for which it seeks declaratory and injunctive relief from
appellees' infringing conduct. This is sufficient to establish
subject matter jurisdiction under 28 U.S.C. s 1338(a). It
does not matter that appellees may interpose a contract
defense based on the Joint Venture Agreement; rather, the
important point here is that SSS's claim rests solely on its
asserted copyright license. Furthermore, we reject the Dis-
trict Court's holding that SSS has no cause to seek relief from
Prime TV, because Prime TV is purportedly SSS's wholly
owned subsidiary. The mere claim of a parent-subsidiary
relationship is not enough to decide this issue, for the court
must first determine whether SSS does in fact control Prime
TV. Indeed, in this case, Prime TV claims to be controlled by
SSI, not SSS.
Because the District Court erred in dismissing the case
solely on the basis of subject matter jurisdiction and, thus,
failed to rule on appellees' numerous other arguments for
dismissal, we reverse and remand for further proceedings.
I. Background
PTV executed an agreement with SSI in May 1998 granting
SSI "[e]xclusive world wide rights" to use PTV programming.
See Am. Compl.pp 7, 8, reprinted in Joint Appendix ("J.A.")
227; Agreement Between PTV and SSI 1 (May 25, 1998),
reprinted in J.A. 237. SSI then transferred exclusive rights
to SSS to broadcast PTV programming outside of Pakistan.
See Agreement Between SSI and SSS p 1 (July 1, 1998),
reprinted in J.A. 234. SSS, then the sole shareholder of
Prime TV, planned on using Prime TV to broadcast PTV
programming in Europe. Am. Compl. p 13, reprinted in J.A.
228. However, in February 1999, before SSS had undertaken
any broadcast operations, Raja Nasir Hussain, the principal
of SSS, signed a Joint Venture Agreement with SSI. Id.
p 14. The Joint Venture Agreement gave SSI a controlling
interest in Prime TV and transferred SSS's license to broad-
cast PTV programming to Prime TV. Id. p 14. Hussain now
claims that defendant Yusaf Baig Mirza "coerced" him into
signing the Joint Venture Agreement by threatening Hussain
and his family. Id. pp 14, 16.
SSS filed suit in the District Court seeking a declaratory
judgment that SSS (not Prime TV) owns the copyright in
PTV programming, damages for copyright infringement, an
injunction barring Prime TV from using PTV programming,
and attorney's fees. Id. pp 26, 29. SSS's complaint asserts
that "Prime [TV] will broadcast, or has broadcasted PTV
Programming in the District of Columbia," and that "Prime
[TV] is importing into the United States, without the authori-
ty of the owner of [the] copyright, copies ... of PTV Pro-
gramming ... in order to broadcast PTV Programming in
the United States for profit." Id. pp 19-20. The defendants
moved to dismiss the case, arguing that the choice of law and
choice of forum clauses in all three contracts required the
resolution of any disputes to take place in Pakistan under
Pakistani law; that the principles of international comity
dictated that the District Court defer to two pending court
actions in Pakistan involving the same controversy; and that
the court had no personal jurisdiction over the defendants.
See Defs.' Mem. in Supp. of Mot. to Dismiss, reprinted in J.A.
22.
Before ruling on the motion to dismiss, the District Court
sent a letter to counsel requesting briefing on whether the
court had subject matter jurisdiction over the case and
whether SSI was an indispensable party under Rule 19 of the
Federal Rules of Civil Procedure. See Letter to Counsel
(March 12, 2001), reprinted in J.A. 344. All parties subse-
quently agreed that the District Court properly had subject
matter jurisdiction over the dispute. The District Court,
however, granted the defendants' motion to dismiss, holding
that the court had no subject matter jurisdiction over the
dispute because the action was one for contract rescission, not
copyright infringement:
The necessity of determining whether the Joint Venture
Agreement was executed under duress - and, as a result,
whether it is null and void - essentially preempts SSS'
copyright claim. If the contract is found to be valid, then
SSS has no rights to broadcast PTV Programming, and it
cannot assert any copyright action. If the agreement is
voided, SSS maintains the rights to the PTV Program-
ming - but also retains its controlling interest as the sole
shareholder in Prime. So while SSS would own the
copyright license (assuming that the License Agreement
was not terminated), the defendants in this action would
be (1) a wholly-owned subsidiary of SSS [Prime TV], and
(2) two individuals who would have no control over that
subsidiary. [T]his unique posture means that this action
does not "arise under" the federal copyright laws, but
amounts to nothing more than a straightforward contract
action for rescission of the Joint Venture Agreement.
Scandinavian Satellite, 146 F. Supp. 2d at 10. SSS appeals
from this decision.
II. Discussion
The District Court dismissed appellant's complaint for lack
of subject matter jurisdiction solely on a motion to dismiss.
Therefore, in addressing this issue, we "must accept as true
all of the factual allegations contained in the complaint."
Swierkiewicz v. Sorema N.A., 122 S. Ct. 992, 995 n.1 (2002).
28 U.S.C. s 1338(a) grants district courts subject matter
jurisdiction to hear "any civil action arising under any Act of
Congress relating to ... copyrights." As this case demon-
strates, the scope of federal subject matter jurisdiction to
hear contract disputes involving copyright ownership "poses
among the knottiest procedural problems in copyright juris-
prudence." 3 Melville B. Nimmer & David Nimmer, Nimmer
on Copyright s 12.01[A] (2002). It is clear that not every
complaint that mentions the Copyright Act "arises under"
that law for the purposes of s 1338(a). See, e.g., Bassett v.
Mashantucket Pequot Tribe, 204 F.3d 343, 347 (2d Cir. 2000).
Thus, for example, a "suit on a contract does not 'arise under'
the copyright laws even though a copyright may have been
the subject matter of the contract." 13B Charles Alan
Wright et al., Federal Practice and Procedure s 3582 (2d ed.
1984). However, the mere existence of an underlying con-
tract dispute in a suit relating to a copyright does not deprive
a court of jurisdiction to hear an action for copyright infringe-
ment. See 28 U.S.C. s 1367; Bassett, 204 F.3d at 355. So
where does this take us?
Fortunately, the search for the proper analytical frame-
work pursuant to which to assess claims of subject matter
jurisdiction under s 1338(a) is not painstaking. In T.B.
Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir. 1964), in a seminal
opinion by Judge Henry Friendly, the Second Circuit held
that
an action "arises under" the Copyright Act if and only if
the complaint is for a remedy expressly granted by the
Act, e.g., a suit for infringement or for the statutory
royalties for record reproduction, or asserts a claim
requiring construction of the Act, ... or, at the very
least and perhaps more doubtfully, presents a case where
a distinctive policy of the Act requires that federal
principles control the disposition of the claim.
Id. at 828 (citations omitted). This decision has guided the
federal courts for many years in judicial determinations of
subject matter jurisdiction under s 1338(a). See, e.g., Gibral-
tar, P.R., Inc. v. Otoki Group, Inc., 104 F.3d 616, 619 (4th Cir.
1997); Royal v. Leading Edge Prods., Inc., 833 F.2d 1, 2 (1st
Cir. 1987). Recently, in Bassett, the Second Circuit reaffirm-
ed the reach of T.B. Harms, holding that federal courts have
jurisdiction to hear a dispute under s 1338(a) "[w]hen a
complaint alleges a claim or seeks a remedy provided by the
Copyright Act." 204 F.3d at 355. We agree with these
holdings of our sister circuit, for we can find no better
interpretation of s 1338(a).
Appellees cite International Armor & Limousine Co. v.
Moloney Coachbuilders, Inc., 272 F.3d 912 (7th Cir. 2001), in
an effort to defend the District Court's judgment in this case.
International Armor involves an application of s 1338(a) to
an alleged trademark infringement. Moloney, a car customiz-
er, sold his business assets, including the name "Moloney
Coach Builders," and agreed not to compete in certain ways
with the buyer. Id. at 913. The buyer subsequently com-
plained about Moloney's use of his name in his new enter-
prise; Moloney then filed suit, seeking a declaration that the
use of his name did not violate the Lanham Act. 15 U.S.C.
s 1125. The buyer counterclaimed, arguing that Moloney's
use of his name violated the parties' sales contract and the
Lanham Act. Id. The Seventh Circuit held that, because
"the only serious dispute is how the contracts ... allocate
ownership rights in the Moloney name and business history,
... [t]he dispute arises under the law of contracts; any
trademark claims are entirely derivative of the contract is-
sues." Id. at 916. The court therefore concluded that the
case did not "arise under" 28 U.S.C. s 1338(a) and dismissed
the case for lack of subject matter jurisdiction. Id. at 918.
In reaching this conclusion, the court in International
Armor construed T.B. Harms as holding that "a dispute
about the ownership of a copyright does not arise under
federal law." Id. at 915. Respectfully, we believe that this is
a misguided interpretation of the T.B. Harms test. And it
surely does not square with the Second Circuit's application
of T.B. Harms in Bassett, a point conceded by appellees'
counsel during oral argument. Furthermore, in our view, the
Seventh Circuit's position is premised on an unduly narrow
and unrealistic reading of s 1338(a).
Countless copyright ownership disputes indubitably arise
under an Act of Congress relating to copyrights. For exam-
ple, a dispute that turns on whether a copyrighted work was
created independently or as a "work made for hire" is an
ownership dispute that unquestionably arises under the
Copyright Act. See Cmty. for Creative Non-Violence v. Reid,
490 U.S. 730 (1989). Similarly, as even the court in Interna-
tional Armor recognized, a dispute over copyright ownership
that seeks a remedy that is only available under the Copy-
right Act also arises under federal law. See 272 F.3d at 916-
17; see also Bassett, 204 F.3d at 355. Therefore, when a
complaint alleges a claim or seeks a remedy provided by the
Copyright Act, subject matter jurisdiction under s 1338(a) is
not lost merely because a contract ownership dispute may be
implicated.
The appellant in the instant case, unlike the complainant in
International Armor, sought remedies expressly provided by
the Copyright Act, i.e., injunctive relief to halt claimed in-
fringement and attorney's fees. See 17 U.S.C. s 502(a) (au-
thorizing injunctive relief); id. s 505 (authorizing award of a
"reasonable attorney's fee"). Appellant therefore satisfied
the requirement of T.B. Harms that the complaint must
involve "a remedy expressly granted by the Act." 339 F.2d at
828. It does not matter that the appellees may raise a
contract defense which rests on the disputed Joint Venture
Agreement. What matters is that SSS's claim rests solely on
its asserted copyright license. SSS plausibly asserts that the
July 1, 1998 agreement between SSI and SSS granted SSS an
exclusive copyright license to broadcast PTV programming
outside of Pakistan and that this copyright has been infring-
ed. On a motion to dismiss, the District Court was limited to
these allegations in the complaint; therefore, Prime TV's
purported contract defense did not defeat the court's jurisdic-
tion to hear the complaint. Cf. Taylor v. Anderson, 234 U.S.
74, 75 (1914) (stating "whether a case is one arising under the
Constitution or a law or treaty of the United States, in the
sense of the jurisdictional statute, ... must be determined
from what necessarily appears in the plaintiff's statement of
his own claim in the bill or declaration").
* * * *
The District Court justified its dismissal of appellant's case
on an alternative ground: the trial court held that if the Joint
Venture Agreement is found not to bar SSS's lawsuit, SSS
still would have no claim under the copyright laws, because
SSS (the parent company) could not sue Prime TV (its wholly
owned subsidiary). The District Court assumed that "a
parent company cannot sue its wholly-owned subsidiary for
infringement without violating basic principles of corporate
and copyright law." Scandinavian Satellite, 146 F. Supp. 2d
at 18. We disagree.
"Corporations may bring actions against each other, even if
... one corporation is the parent or subsidiary of the other."
9 Victoria A. Braucher, et al., Fletcher Cyclopedia of the
Law of Private Corporations s 4229 (1999). It is true that
the law sometimes disregards the separate corporate forms of
parent and subsidiary corporations to hold one accountable
for the actions of another, especially when a failure to do so
"would work fraud or injustice." Taylor v. Standard Gas &
Elec. Co., 306 U.S. 307, 322 (1939); see also First Nat'l City
Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S.
611, 632 (1983) (declining "to adhere blindly to the corporate
form where doing so would cause such an injustice"). Howev-
er, before it can be found that a parent and subsidiary are
one entity in the eyes of the law, it must first be determined
whether the subsidiary is in fact controlled by the parent.
See, e.g., NLRB v. Deena Artware, Inc., 361 U.S. 398, 403
(1960).
In this case, Prime TV claims to be controlled by SSI, not
SSS; and, belatedly, SSS claims that Hussain, not SSS, owns
Prime TV. The District Court, at a minimum, must deter-
mine the actual relationship between SSS and Prime TV,
including whether the extent of control exercised by SSS over
Prime TV rises to the level necessary to disregard their
separate corporate identities. Without any such analysis, the
District Court had no basis upon which to conclude that SSS
was precluded from suing Prime TV.
The appellees cite Copperweld Corp. v. Independence Tube
Corp., 467 U.S. 752 (1984), for the proposition that a parent
and its wholly owned subsidiary have a "complete unity of
interest," and, therefore, must be viewed as one. Id. at 771.
Copperweld, however, addressed the limited issue of whether
a parent corporation and its wholly owned subsidiary are
legally capable of conspiring with one another under s 1 of
the Sherman Act, 15 U.S.C. s 1. Id. at 777. That inquiry
focused on "Congress' decision to exempt unilateral conduct
from s 1 scrutiny," not the extent of control exercised by
every parent company over a subsidiary. Id. at 776. Be-
cause Copperweld does not purport to answer the question
now facing this court, it is not dispositive. Instead, we are
guided by the basic principle that "ownership, alone, of capital
stock in one corporation by another, does not create an
identity of corporate interest between the two companies."
Chicago, Milwaukee & St. Paul Ry. Co. v. Minneapolis Civic
& Commerce Ass'n, 247 U.S. 490, 500 (1918). The unity of
interest cannot be determined without an examination of the
control exercised by the parent over the subsidiary.
* * * *
We will therefore reverse the District Court's dismissal on
grounds of subject matter jurisdiction and remand the case
for further proceedings. On remand, SSS faces a number of
hurdles, any one of which may well result in another dismiss-
al. One issue, recognized but not decided by the District
Court, is whether SSI is an indispensable party to this action
under Rule 19 of the Federal Rules of Civil Procedure.
Another issue is whether SSS's claims for relief are moot, in
whole or in part, because SSS's copyright license has expired.
Another is whether the forum selection clauses in the disput-
ed agreements preclude appellant's action in this forum. Yet
another potentially dispositive issue is whether the action
should be dismissed in consideration of international comity,
because of the pending litigation in Pakistan. And, finally, if
SSS does in fact own and control Prime TV, then there may
be a question as to whether SSS has standing to sue Prime
TV. We leave these matters to the District Court to decide
in the first instance.
III. Conclusion
For the foregoing reasons, the judgment of the District
Court is reversed and the case is remanded for further
proceedings.