(June 23, 2020) On June 8, 2020, the U.S. Court of Appeals for the Second Circuit affirmed a lower court decision that the Welsh government is not immune under the Foreign Sovereign Immunities Act (FSIA) from a private lawsuit alleging claims of copyright infringement because of the commercial-activity exception to the FSIA. (Pablo Star Ltd. v. Welsh Government, No. 19-1262, slip op. (June 8, 2020).)
The plaintiffs hold the copyright for two photographs of Welsh poet Dylan Thomas and his wife Caitlin Macnamara. The Welsh government used the photographs in advertisements and marketing materials that promoted tourism to Wales in the United States. Even after plaintiffs sent a cease and desist notice, the Welsh government continued to use the photographs in their tourism promotion materials. The plaintiffs sued the Welsh government for copyright infringement. The Welsh government moved for dismissal on the basis of sovereign immunity under the FSIA. The U.S. District Court of the Southern District of New York denied the Welsh government’s motion on the grounds that the exception to immunity under the FSIA for commercial activity applied to the Welsh government’s acts. (Pablo Star Ltd. v. Welsh Government, 378 F. Supp. 3d 300 (S.D.N.Y. 2010).) The Welsh Government appealed.
Under the FSIA, codified at 28 U.S.C. § 1602 et seq., a foreign government is presumptively immune from the jurisdiction of United States courts unless an exception applies. One such exception is for a foreign government’s commercial activity in the United States. “Commercial activity” is defined in the statute as “either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose.” (28 U.S.C. § 1603(d).) A “commercial activity carried on in the United States by a foreign state” is defined as “commercial activity carried on by such state and having substantial contact with the United States.” (28 U.S.C. § 1603(e).)
The Welsh government argued that its use of the photographs in tourism promotion materials was not a commercial activity because it was promoting Welsh tourism in accordance with Welsh statutory authority, and thus it was acting as a sovereign government. The Court of Appeals determined that while the reasoning behind the Welsh government’s activity was to fulfill a government goal, the nature of the activity was the publication of advertising materials. If any private persons or entities had undertaken the same activity and used copyrighted photographs, they would have been proper defendants to a lawsuit for copyright infringement. There is “nothing quintessentially governmental about using a photograph … to advertise or promote travel and tourism” even if such activity is undertaken by a government in accordance with its statutory authority. (Pablo Star Ltd., slip op. at 22.) Accordingly, the court concluded that the activity undertaken by the Welsh government was a commercial activity.
The Welsh government also argued that its activity within the United States did not meet the “substantial contact” threshold because all relevant planning and distribution of the marketing materials took place from Wales, the United Kingdom, or an office within its consulate territory in New York. However, the court found that the conduct clearly “reached beyond the confines” of the consular office. (Pablo Star Ltd., slip op. at 25.) The marketing materials included exhibition displays and printed maps and brochures that could have been useful only if widely distributed. Furthermore, some of the materials were printed in New York by New York companies under contract with the Welsh government. The court concluded that the evidence demonstrated that the Welsh government’s commercial activity had substantial contact with the United States.
The court accordingly affirmed the district court’s judgment that the commercial-activity exception to the FSIA justified denying the Welsh government’s motion to dismiss the case on the grounds of sovereign immunity.