Unregistered Copyright Does Not Preclude Federal Jurisdiction

Capping off an October trio of copyright decisions, the Eleventh Circuit in Fastcase, Inc. v. Lawriter, LLC, 2018 WL 5318148 (11th Cir. Oct. 29, 2018), confirmed that the failure to register a copyright does not defeat federal subject-matter jurisdiction (though it may doom an infringement claim under Rule 12(b)(6)).  The court also held that a plaintiff’s potential liability may be considered as part of the amount in controversy when assessing diversity jurisdiction.

Fastcase and Lawriter are competitors in the market for legal research services.  Their dispute concerns access to the Georgia Administrative Rules and Regulations.  Georgia’s Secretary of State is statutorily required to publish the regulations to the public.  Fastcase, under a contract with the State Bar of Georgia, is paid by the Bar to provide a database of Georgia law, including the regulations, to Bar members.  To keep its database current, Fastcase visits the regulations’ official webpage, which historically has been maintained by the Secretary of State.  In 2015, however, the Secretary entered into a contract with Lawriter under which Lawriter publishes the regulations on the Secretary’s website in exchange for a $5,000 quarterly fee—though the fee is waived if Lawriter sells a “complete set” of the regulations to a third party, which the contract allows it to do.

Shortly after entering into its contract with the Secretary, Lawriter sent Fastcase a letter asserting that Fastcase was violating Lawriter’s rights by providing fee-based access to the regulations.  Thereafter, Fastcase filed an action in federal court seeking declaratory relief and a permanent injunction.  While the case was pending, Lawriter added to the Secretary’s website a “terms of use” policy stating, among other things, that “if you access or use this website in violation of this agreement, you agree that Lawriter will suffer damages of at least $20,000.”  The district court dismissed the case for lack of subject-matter jurisdiction.  Fastcase filed a second action in federal court, invoking the court’s jurisdiction under 28 U.S.C. § 1338(a) (concerning copyright claims) and its diversity jurisdiction.  The district court again dismissed the case on jurisdictional grounds, citing the fact that Lawriter held no registered copyright and determining that the amount in controversy did not exceed $75,000.

The Eleventh Circuit, in an opinion written by Judge Tjoflat and joined by Judge Jordan and Judge Robert Lewis Hinkle, visiting from the Northern District of Florida, reversed.  The fact that Lawriter had no registered copyright might subject a hypothetical infringement claim to dismissal under Rule 12(b)(6), but under the Supreme Court’s decision in Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010), the non-registration of a copyright “does not restrict a federal court’s subject-matter jurisdiction.”  So the district court had jurisdiction under 28 U.S.C. § 1338(a).

And Fastcase’s claim also presented the required amount in controversy for diversity jurisdiction purposes.  Noting that a plaintiff invoking federal diversity jurisdiction with a claim for unspecified damages “bears the burden of proving by a preponderance of the evidence that the claim on which jurisdiction is based exceeds the jurisdictional minimum,” the court found that Fastcase met its burden by its reference to the $20,000 liquidated damages provision in the “terms of use” policy:  “Because violating these terms as few as four times would subject Fastcase to a threat of liability in excess of $75,000, we conclude that Fastcase’s potential liability was not too speculative to satisfy the amount-in-controversy requirement.” The court noted that the district court’s reliance on cases holding that the value of injunctive relief for jurisdictional purposes is determined by the potential benefit to the plaintiff, rather than from the defendant’s perspective, was misplaced:  “it does not follow from the plaintiff-viewpoint rule that the plaintiff’s potential liability cannot count toward the amount in controversy.”

Posted by Valerie Sanders.

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