IP Law Daily Hyatt must face claims for posting infringing photos of Chinese hotel on its website
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Monday, December 7, 2020

Hyatt must face claims for posting infringing photos of Chinese hotel on its website

By Pamela C. Maloney, J.D.

The posting on hyatt.com of photographs showing use of allegedly infringing headboard design for guestrooms at Hyatt hotel in China gave a federal court jurisdiction only over the Illinois-based hotel entities.

A federal district court in Chicago had personal and subject matter jurisdiction over timely an infringement action filed by an American design company in which the company alleged that the posting on hyatt.com of photographs showing that one of the company’s designs had been used without permission to create the headboards used in the guestrooms at a Hyatt hotel in China infringed the designer’s copyright. However, the claims were limited to the Hyatt entities based in Illinois because the court had no basis for exercising personal jurisdiction over the China-based Hyatt subsidiaries that operated the website, nor did the court have any basis for exercising jurisdiction over the China-based company that allegedly copied the designs (Kinon Surface Design, Inc. v. Hyatt International Corp., December 4, 2020, Kendall, V.).

A Singapore-based design interior design firm contacted Kinon Surface Design, a Florida corporation that designed decorative panels for placement in hotels, residences, retail establishments, offices, and the like, to work on design to be used as headboards in the guestrooms of the Grand Hyatt Dalian in China, which was under construction. China Resources, the company constructing the mock-up rooms for purposes of evaluating interior design specifications, purchased two sheets of the headboard design and installed them in the mock-up rooms. After viewing the designs, the construction company sought a quote from Kinon to supply headboards for the 750 guestrooms in the new hotel, but the parties could not come to an agreement on the price. About four years later, the founder and president of Kinon visited the hotel’s website—hyatt.com—to discern what headboards had been chosen and discovered photographs that appeared to show his design being used as the headboards. He then searched various travel websites for photos of the hotel and found pictures of the guest rooms that depicted his work as headboards.

Alleging that its owned valid copyrights under U.S. and Chinese copyright law in the design used for the headboards, Kinon filed an infringement action against the Hyatt Corporation in the Southern District of Florida. A jury returned a verdict of nonliability (Kinon I), finding that, among other things: (1) the Hyatt corporation did not have access to the work; (2) the photos that appeared on hyatt.com were strikingly similar to the work such that the similarity was unlikely to occur unless there was copying; (3) the alleging infringing photos on hyatt.com were not created independently; (4) the photographs had no intrinsic, functional use beyond displaying the appearance of the headboard design or conveying useful information; and (5) Kinon had suffered a loss, but Hyatt Corporation had not cause the loss. Kinon then filed and voluntarily dismissed a second case for the same alleged infringement in the Southern District of Florida in which several travel websites, China Resources, Hyatt International Corporation (HIC), Hyatt International Technical Services (HITS), Hyatt of China (HOC), and Hyatt International Hotel Management (HIHM") were named as defendants. Kinon then filed the instant action in Illinois against the Hyatt defendants and China Resources. The defendants moved to dismiss the claims.

Issue preclusion. The Hyatt defendants moved to dismiss on the ground of issue preclusion, arguing that the infringement claims related to the posting of pictures on hyatt.com had been litigated in Kinon I. The court concluded that issue preclusion did not apply because the issues sought to be litigated in the instant case were not the same as those litigated in Kinon I. Specifically, the issue in Kinon I was whether Hyatt Corporation infringed Kinon’s copyright by posting images of the design work on hyatt.com. The issue in the case at bar was whether the Hyatt defendants, none of which were defendants in Kinon I, had infringed Kinon’s copyright by posting the images to hyatt.com. The jury’s verdict form in Kinon I made it clear that the jury correctly understood those to be separate questions because it found that Hyatt Corporation did not copy the work, but that the Work had indeed been copied and that Kinon had been injured by that copying.

Judicial estoppel. The court also rejected the Hyatt defendants’ argument that the doctrine of judicial estoppel barred the claims against them because the instant action was premised on a theory of liability that was inherently contradictory to the theory advanced in Kinon I. Although Kinon’s allegations that the Hyatt Corporation was responsible for the dissemination of images of the copyrighted work on hyatt.com were inconsistent with the allegations in this case that the Hyatt defendants were responsible for that same dissemination, that inconsistency did not give the impression that the Kinon I court was misled or that Kinon intended to deceive either court. Nor did the apparent inconsistency enable Kinon to derive an unfair advantage, who was litigating the alleged infringement of its copyrighted design for the third time. Finally, it did not impose an unfair detriment on the Hyatt defendants because they were entirely different entities from those named as defendants in Kinon I.

Subject matter jurisdiction. The Hyatt defendants’ claim that U.S. courts had no jurisdiction over extraterritorial acts of infringement was rejected as a basis for dismissal because the relevant act of alleged infringement was the unauthorized distribution of images of the copyrighted work on the hotel’s website to people viewing those images in the United States. In light of admissions by in-house counsel for Hyatt Corporation that the website and domain name were owned by the Hyatt Corporation, but the site for international hotels was managed and updated by a Hyatt international subsidiary, the court concluded that the Hyatt defendants could be held liable for the allegedly unauthorized dissemination of the photographs in the United States.

However, neither HIC nor HITS could be vicariously liable for China Resources’ copying of the headboard design. China Resources committed this alleged infringement in China and, thus, the court lacked jurisdiction to adjudicate that claim. Furthermore, the predicate act doctrine, which had not been adopted by the Seventh Circuit, did not apply to the instant action because China Resources’ foreign infringement was the predicate to the Hyatt defendants alleged domestic infringement, not the other way around.

Personal jurisdiction. HOC, HIHM, and China Resources moved to dismiss the infringement claims on the ground that the court lacked personal jurisdiction over them. Each of these entities had its principal place of business in China and none of them were "at home" in Illinois, the court determined. Furthermore, none of them had established minimum contacts with the state of Illinois so as to justify personal jurisdiction by the forum state. According to the court, the posting of copyrighted images on a website was not enough to establish adequate minimum contacts as to HOC and HIHM because the activity was not directed toward the residents of Illinois, the companies had no particular affiliation with Illinois, and the potential customers of the hotel in China did not reside predominantly in Illinois. Thus, these two entities were dismissed from the case.

The court also lacked personal jurisdiction over China Resources because its allegedly infringing activities took place entirely in China. China Resources allegedly procured the "knock-off versions of the headboard design for use in the hotel in China, not in Illinois. Although China Resources did contract with Illinois-based entities, that conduct was not related to the copyright infringement issues raised by Kinon. Thus, China Resources was dismissed from the case for lack of personal jurisdiction.

Statute of limitations. Viewing the allegations in the complaint in favor of Kinon, the court found that it was not until 2018 that the company’s president became aware that images depicting unauthorized copies of his headboard design appeared in photos on hyatt.com. There was no basis for assuming at this stage in the litigation that he should have known this sooner because it could be construed that the images the president saw only showed the mock-up designs that he sold to China Resources, not images of illegal copies of the design. Based on the facts in the record, the filing of the lawsuit in 2019 was well within the three-year limitations period provided by the Copyright Act.

Forum non conveniens. Having dismissed China Resources from the case, the court determined that the remaining infringement claims pertained to the alleged dissemination of the images of the protected design on hyatt.com by Illinois-based entities. Given that an entire case pertaining to website-based infringement had already been litigated in the United States and that most of the witnesses who would testify at trial were located in Chicago, it was clear that the issue could be resolved in the United States. The court rejected the Hyatt defendants’ contention that keeping the case in the United States would require the court to apply Chinese law. If the case were filed in a Chinese court, that court would have to apply U.S. copyright law and, therefore, both forums would be equally required equally to deal with the complication of applying foreign law. In addition, requiring Kinon to refile the case in China would add more costs and take more time.

This case is No. 1:19-cv-07736.

Attorneys: Yanling Jiang (JiangIP LLC) for Kinon Surface Design Inc. Cynthia Salazar (Lewis Brisbois Bisgaard & Smith LLP) for Hyatt International Corp., Hyatt International Technical Services, Inc., Hyatt of China Ltd. and Hyatt International Hotel Management [Beijing] Co., Ltd.

Companies: Kinon Surface Design Inc.; Hyatt International Corp.; Hyatt International Technical Services, Inc.; Hyatt of China Ltd.; Hyatt International Hotel Management [Beijing] Co., Ltd.

MainStory: TopStory Copyright TechnologyInternet IllinoisNews GCNNews

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