Freeplay Music, LLC v. RIGOL Technologies USA, Inc.

Background

Freeplay Music, LLC alleged that RIGOL Technologies USA, Inc. and RIGOL Technologies, Inc. used five musical compositions and sound recordings—“Highway Five,” “Can Do,” “English Channel,” “Topaz,” and “Clear”—in product advertising and promotional videos without a license. The videos were posted to YouTube and Facebook between March 5, 2014, and February 7, 2017. Freeplay asserted copyright infringement, contributory copyright infringement, and unjust enrichment against both defendants, and vicarious copyright infringement against RIGOL Inc.

RIGOL Inc. is described as a multinational technology company and electronics manufacturer headquartered in Beijing, China. RIGOL USA is its wholly owned subsidiary, organized under Ohio law and with its principal place of business in Beaverton, Oregon. Freeplay attempted to serve both defendants by serving RIGOL USA in Oregon. An employee of RIGOL USA accepted service on behalf of both companies. RIGOL Inc. challenged personal jurisdiction and the adequacy of service.

Issues and Legal Standards

RIGOL Inc. moved under Federal Rule of Civil Procedure 12(b)(2) for dismissal based on lack of personal jurisdiction and under Rule 12(b)(5) for insufficient service of process. The court explained that personal jurisdiction generally requires proper service, a statutory basis for jurisdiction, and compliance with constitutional due process. For the service issue, the court applied Federal Rule 4 and considered whether serving RIGOL USA could count as serving the foreign parent.

Under the court’s analysis, service on a U.S. subsidiary could substitute for service on a foreign parent only if Freeplay showed either that the subsidiary was the parent’s general agent in New York or that the subsidiary was so controlled by the parent that it was a “mere department,” rather than a separate entity. The court also considered New York’s long-arm statute and Federal Rule 4(k)(2), which can provide jurisdiction over a defendant sued under federal law when the defendant is not subject to jurisdiction in any state and has sufficient contacts with the United States as a whole.

Court’s Analysis

The court found that Freeplay had not properly served RIGOL Inc. Although the companies shared common ownership, the court found no showing of financial dependence or disregard for corporate formalities. The evidence instead supported RIGOL USA’s assertions that it was largely financially independent, maintained separate accounts, managed its daily operations, made distributor decisions, filed its own tax returns, maintained separate insurance, and operated its own marketing and sales activities. The court also found no evidence that RIGOL Inc. approved the videos after RIGOL USA edited them or required RIGOL USA to use them. Therefore, RIGOL USA was not shown to be a “mere department” of RIGOL Inc., and service on RIGOL USA did not properly serve RIGOL Inc.

The court rejected Freeplay’s request for alternative service under Rule 4(f)(3), which permits court-authorized service by means other than the usual methods for serving a foreign defendant. Freeplay had not shown good reasons why it could not have attempted service under the Hague Convention, the international agreement governing service of judicial documents abroad. The court denied the alternative-service request without prejudice.

The court then considered personal jurisdiction assuming that effective service might still be made. It rejected Freeplay’s arguments under New York’s long-arm statute. Freeplay had not shown a sufficient connection between RIGOL Inc. and New York through alleged New York distributors, a direct sale to a New York customer, a possible licensing relationship, or commercial gain connected to a New York copyright owner. The court also found that Freeplay had not shown an injury located in New York. It characterized the alleged harm primarily as lost licensing opportunities and economic losses, rather than the kind of widespread and location-independent internet piracy that could establish the copyright owner’s location as the injury site under the precedent discussed by the court.

The court also found that Freeplay had not established jurisdiction under Rule 4(k)(2). Freeplay offered evidence that RIGOL Inc. was not incorporated in the United States and had no headquarters or offices here, which could support the absence of general jurisdiction in Oregon. But Freeplay did not show that specific jurisdiction would be unavailable in Oregon or explain why exercising jurisdiction there would be unreasonable. The court therefore found that Freeplay had not met its burden under Rule 4(k)(2).

Finally, the court denied Freeplay’s request for limited jurisdictional discovery. Freeplay had not identified what information it expected to obtain or explained how that information would affect the jurisdictional analysis, including the location of the injury or Oregon’s potential jurisdiction.

Disposition

Judge Edgardo Ramos granted RIGOL Inc.’s motion to dismiss for lack of personal jurisdiction. The court directed the clerk to terminate the motion and terminate RIGOL Inc. as a party. The court separately denied Freeplay’s request for jurisdictional discovery and denied its request for alternative service without prejudice. The opinion did not decide whether the alleged copyright infringement or unjust enrichment occurred on the merits.