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Leopona, Inc. v. UK Cycling Events, Ltd.

United States District Court, W.D. Washington, Seattle

June 6, 2018

LEOPONA, INC. D.B.A. AUDIOSOCKET, A Delaware corporation, et al., Plaintiffs,
v.
UK CYCLING EVENTS, LTD., a private limited company registered in the United Kingdom, et al., Defendants.

          ORDER DENYING DEFENDANTS' MOTION TO DISMISS

          RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This matter comes before the Court on Defendants UK Cycling Events, Ltd. (“UKCE's”) and Gareth Roelofse's Motion to Dismiss under Rules 12(b)(2) and 12(b)(6). Dkt. #19. Plaintiff Leopona, Inc. (d/b/a Audiosocket) and the artists suing for copyright infringement (collectively “Plaintiffs”) oppose this Motion. Dkt. #32. For the reasons stated below, the Court DENIES Defendants' Motion.

II. BACKGROUND[1]

         Plaintiff Leopona, Inc., (herein “Audiosocket”) is a Delaware corporation with offices in Seattle, Washington and New Orleans, Louisiana. The remaining Plaintiffs are related companies and music artists.

         Audiosocket is a music licensing and technology company founded in 2009. Audiosocket manages a catalog of over 64, 000 songs created and produced by independent artists. The company's main purpose is to find licensing opportunities for these songs. Most licensing activity is focused on locating and securing placements in films, television shows, ad campaigns, video games and digital media. A small set of Audiosocket clients license the music for streaming in in-store retail environments. Audiosocket issues more than 1000 licenses per month.

         Audiosocket's revenue is driven by licensing fees, as it retains 50% of the gross licensing revenue and 50% of all performance royalty revenue, which is paid via performing rights societies such as ASCAP, BMI and SESAC. Audiosocket's Standard Artist Agreement allows the artists to retain ownership of both the master sound recording and the publishing rights in their music composition. Under its Artist Agreements, artists give Audiosocket permission to promote their music to potential licensees for commercial purposes.

         Audiosocket uses technology to “watermark” its licensed songs, encoding inaudible data each time it is uploaded or downloaded. This allows rights holders/owners to track copyrights and to ensure intellectual property is protected and properly used. Through that technology, Audisocket alleges that between May 18, 2012, and October 20, 2016, UK Cycling employees Gareth Roelofse and Jon Gilbert executed 34 license agreements (collectively, the “License Agreements”) for the music tracks specified in the upper section of Exhibit A to the Complaint. See Dkt. #1 at 15.

         These first 34 licenses were so-called “Personal Licenses.” For two to four dollars, the Personal Licenses granted Gilbert and Roelofse a perpetual right to use certain music tracks licensed by Audiosocket “solely for personal, non-commercial use.” These Licenses allow individuals to create personal videos and post them to the web while acknowledging and paying a nominal fee, however the Personal Licenses further stated, “[f]or the avoidance of doubt, Licensee may not use the Licensed Tracks in (or on) any: . . . Advertisement or promotion of a product, service or brand.” See Dkt. #33-1 at 2.[2] The Personal Licenses also stated “[a]ny dispute arising out of or relating to this License shall be commenced in the federal or state courts located in King County, Washington.” Id. at 3. The tracks subject to the Personal Licenses are identified in the upper section of Exhibit A. See Dkt. #1 at 15. In addition to the 34 Personal Licenses identified above, Mr. Roelofse also purchased one Professional Photographer/Videographer License (sometimes referred to as a “Wedding License”) which for $35 allows professional photographers and videographers to use the licensed music tracks as part of professionally-produced videos and slideshows they then sell. Consistent with that limited use, and the relatively minor charge associated with the License, the Professional Photographer/Videographer License Agreements expressly prohibit the use of licensed tracks for advertising purposes. These Agreements state: “[f]or the avoidance of doubt, Licensee may not use the Licensed Track in (or on) any: . . . Advertisement or promotion of a product, service, or brand except [the Licensee's own videography business], ” and also include the same forum selection clause as above. Dkt. #33-1 at 5-7. The track subject to the Professional Photographer/Videographer License is identified in the lower section of Exhibit A. See id.

         Plaintiffs allege that, despite these License Agreement restrictions, Defendants used the 35 licensed tracks 42 times as the soundtracks for uploaded YouTube videos that promoted UKCE bicycle tours. The videos also allegedly promoted other products and brands. According to the Complaint, these commercials remained on YouTube, actively advertising UK Cycling Events services and the products of its partners to tens of thousands of viewers, until December 2016, when Audiosocket informed the Defendants of their breaches and infringements.

         III. DISCUSSION

         A. Legal Standard under Rule 12(b)(2)

         When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court has jurisdiction over the defendant. Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154, (9th Cir. 2006) (citing Harris Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122, 1128-29 (9th Cir. 2003)). However, this demonstration requires that the plaintiff “make only a prima facie showing of jurisdictional facts to withstand the motion to dismiss.” Id. (citing Doe v. Unocal, 248 F.3d 915, 922 (9th Cir. 2001) (internal citations omitted)). Moreover, for the purpose of this demonstration, the court resolves all disputed facts in favor of the plaintiff. Id.

         The general rule is that personal jurisdiction over a defendant is proper if it is permitted by a long-arm statute and if the exercise of that jurisdiction does not violate federal due process. Id. Jurisdiction can be established by general or specific jurisdiction. The Ninth Circuit relies on a three-prong test for analyzing a claim of specific personal jurisdiction: (1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802, 2004 (citing Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987)). The plaintiff bears the burden of satisfying the first two prongs of the test. Id. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established in the forum state. If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the defendant to “present a compelling case” that the exercise of jurisdiction would not be reasonable. Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-78, 85 L.Ed.2d 528, 105 S.Ct. 2174 (1985)). “A showing that a defendant purposefully availed himself of the privilege of doing business in a forum state typically consists of evidence of the defendant's actions in the forum, such as executing or performing a contract there.” Id. By taking such actions, a defendant “purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Id. (citing Hanson v. Denckla, 357 U.S. 235, 253, 2 L.Ed.2d 1283, 78 S.Ct. 1228 (1958)). In return for these “benefits and protections, a defendant must -- as a quid pro quo - “submit to the burdens of litigation in that forum.” Id. (citing, inter alia, Burger King, 471 U.S. at 476). The reasonableness determination requires the consideration of several factors, including (1) the extent of the defendant's purposeful interjection into the ...


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