By Thomas Long
The commercial-activity exception to the Foreign Sovereign Immunities Act applied to the Welsh government’s tourism promotions using copyrighted photos of Dylan Thomas.
The Welsh Government engaged in commercial activity in publicizing Wales-themed events in New York, including the distribution of promotional materials featuring two copyrighted photos of poet Dylan Thomas, and the Welsh Government’s activity had substantial contact with the United States, the U.S. Court of Appeals has concluded. The Welsh Government’s lack of a "profit motive" in promoting tourism in Wales was not relevant to the question of whether its activity met the commercial-activity exception to the Foreign Sovereign Immunities Act. Because advertising was an activity routinely carried out by private companies, it was the "type" of conduct that was covered by the exception. The appellate court therefore affirmed a decision of the federal district court in New York City, which denied the Welsh Government’s motion to dismiss the rightsholders’ infringement claims on the ground of sovereign immunity (Pablo Star Ltd. v. The Welsh Government, June 8, 2020, Lynch, G.).
The copyrights to the photos were owned by related media companies organized and registered under the laws of Ireland and the United Kingdom. The Welsh Government—a political subdivision of the United Kingdom—operated a business enterprise called "Visit Wales," which was intended to encourage tourism and to promote Wales as a tourist destination. According to the plaintiffs, the Welsh Government published, displayed, and distributed copies of the photos in advertisements, publications, and other promotional materials that were specifically targeted toward the United States in general and New York residents in particular. These materials included the Visit Wales website, as well as a downloadable map and guide depicting a "Dylan Thomas Walking Tour of Greenwich Village, New York" that included one of the photos. The Welsh Government allegedly provided unauthorized copies of the photos to media companies—the Tribune Content Agency, LLC, the Pittsburgh Post-Gazette, E.W. Scripps, Co., the Journal Media Group, Inc., Treasure Coast Newspapers, the Richmond Times Dispatch, and the Miami Herald Media Co. (the "publisher defendants")—which the publisher defendants reproduced and displayed on their respective websites and in print publications.
The Welsh Government moved to dismiss the plaintiffs’ second amended complaint on the ground that it was immune from suit on the basis of sovereign immunity. Although the district court decided that the Welsh Government made a prima facie showing that it was a political subdivision of a foreign state within the meaning of the Foreign Sovereign Immunities Act (FSIA), the court determined that the plaintiffs had provided sufficient evidence to support their contention that the FSIA’s commercial-activity exception applied in this case and, therefore, that the Welsh Government was not immune from the jurisdiction of U.S. courts.
The Welsh Government appealed to the Second Circuit, challenging conclusions on both prongs of the relevant exception. First, it argued that its promotion in the United States of tourism to Wales was governmental in nature and not commercial. Second, it contended that, even if its conduct was commercial, it did not have the requisite substantial contact with the United States.
FSIA; commercial-activity exception. The FSIA provides that a foreign state is presumptively immune from the jurisdiction of United States courts. Unless a specified exception applies, a federal court lacks subject-matter jurisdiction over a claim against a foreign state. As relevant to this appeal, the FSIA’s commercial-activity exception abrogates sovereign immunity with respect to claims based on a commercial activity carried on in the United States by the foreign state. The FSIA defines "commercial activity" as "either a regular course of commercial conduct or a particular commercial transaction or act," although it leaves the term "commercial" largely undefined.
"Commercial" nature of activity. According to the court, the relevant "activity" on which the claims were based was the Welsh Government’s use of the plaintiffs’ photos to promote Wales-related tourist activities—specifically, on its wales.com web page; in the "Welsh in America 2010" booklet, the "Welsh in America" exhibition available from the Welsh Government in New York, and the "Dylan Thomas Walking Tour of Greenwich Village, New York" brochure; and in providing the photographs to media companies for publication in articles about Wales and Dylan Thomas.
Explaining that the key issue was not the "purpose" of the activity, but rather its "nature," the Second Circuit noted that the U.S. Supreme Court explained in Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992) that "the question is not whether the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives. Rather, the issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in ‘trade and traffic or commerce.’" The Supreme Court also stated in Saudi Arabia v. Nelson, 507 U.S. 349 (1993), that a foreign state engages in commercial activity "where it exercises only those powers that can also be exercised by private citizens, as distinct from those powers peculiar to sovereigns."
The Welsh Government asserted that it was acting to promote Welsh culture and tourism pursuant to a statutory mandate, and thus that it was acting as a sovereign government. The Welsh Government further argued that its actions were not undertaken from "a profit motive," but rather with the goal of enhancing the image of the country and the prosperity of its citizens This, however, described the purposes or reasons for the Welsh Government’s actions, and not what it did to accomplish its goals, the Second Circuit said.
"The means by which it pursued its goals was the publication, on-line and in print, of what are essentially advertising materials," the court said, which was "an activity that could be, and in fact regularly is, performed by private-sector businesses."
In the court’s view, the plaintiffs’ alleged injuries were based directly on the Welsh Government’s allegedly commercial conduct, specifically the unauthorized use of photographs in promotional websites and printed materials advertising tourism related to Wales. If a private entity had engaged in this conduct, it would be a proper defendant in a copyright infringement case. The fact that the activity was done by a government body pursuant to its statutory authority in order to promote tourism, rather than to make a profit, went to the activity’s purpose rather than its "outward form," the court explained. Accordingly, the Second Circuit concluded that the activity on which the infringement claims were based was commercial activity.
Substantial contact with the U.S. The court next concluded that the Welsh Government’s conduct met the second prong of the exception because it had substantial contact with the United States. The Welsh Government argued that all of its relevant activity took place in Wales or the United Kingdom. The district court determined that the substantial contact requirement was satisfied because the Welsh Government played an active role in the United States in the development and distribution in New York of promotional materials that included plaintiffs’ photographs, including by contracting with private businesses located in New York City to publish, print, display, and distribute the allegedly infringing materials. The appellate court agreed with the district court.
"The point here is not whether the Welsh Government maintained an office in New York, or whether that office was located in a consulate or a commercial office building," the Second Circuit said. "The Welsh Government’s conduct in New York reached beyond the confines of its consular office." The court further noted, "The very title of its New York campaign was "The Welsh in America" (emphasis added by court).
Accordingly, the court concluded that the lawsuit was based on a commercial activity carried out in the United States, and it affirmed the district court’s denial of the Welsh Government’s motion to dismiss.
This case is No. 19-1262-cv.
Attorneys: Nathaniel Kleinman (The McCulloch Law Firm PLLC) for Pablo Star Ltd. and Pablo Star Media Ltd. Richard J. Oparil (Arnall Golden Gregory, LLP) for The Welsh Government.
Companies: Pablo Star Ltd.; Pablo Star Media Ltd.; The Welsh Government
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