2005 International Law Update, Volume 11, Number 9 (September)

2005 International Law Update, Volume 11, Number 9 (September)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

CHILD ABDUCTION

Third Circuit reverses District Court’s denial of father’s petition for return of child from U.S. to Australia under child abduction convention based on father’s lack of consent to child’s permanent change of residence

Five-year-old Torin Baxter and his parents, Mr. Henry Baxter (petitioner) and Mrs. Jody Amanda Baxter (respondent) lived together as a family in the Australian outback. The harshness of their environment made it unsuitable for the child, thereby prompting petitioner’s and respondent’s decision that respondent and Torin should travel to the United States. On September 2, 2003, respondent and Torin began living in Delaware. Within two weeks of her arrival, respondent began an intimate relationship with one Mr. Stidham. Fourteen days later, respondent and Torin moved in with Mr. Stidham, demanding a divorce from petitioner shortly thereafter.

Invoking the Hague Convention on the Civil Aspects of International Child Abduction, [Oct. 25, 1980, T.I.A.S. 11670; 19 I.L.M. 1501], petitioner asked the Delaware federal court to order Torin’s expedited return to Australia. Both Australia and the U. S. are bound by the Convention. One issue was whether petitioner had agreed that respondent’s trip to Delaware was to be a permanent relocation. After a full evidentiary hearing, the court determined that petitioner had consented to Torin’s permanent removal to the U.S.; this defeated his claim that respondent’s retention of the child was wrongful as required by the Convention. Petitioner filed an appeal. The U.S. Court of Appeals for the Third Circuit reverses.

In the Court’s view, the Hague Convention seeks to secure the prompt return of wrongfully removed or retained children and to protect parental custody rights and access. Under Article 3, the removal or retention of a child is “wrongful” where it is in breach of the rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention; and where, at the time of removal or retention, those rights were actually being exercised, either jointly or alone, or would have been so exercised but for the removal or retention.

Determining claims of wrongful removal or retention raises four subissues: (1) when the removal or retention at issue occurred, (2) the country in which the child was habitually resident prior to the removal or retention, (3) whether removal or retention breached the custody rights of the petitioner, and (4) whether the petitioner was exercising those custody rights at the time of the removal or retention.

The Third Circuit rules that the District Court had erroneously found that petitioner had consented to the child’s permanent move to the U. S. The record rather demonstrates the couple’s indecision regarding their next permanent residence. The Court further finds that the lower court had not properly addressed whether Torin’s removal breached petitioner’s custody rights, or whether petitioner had been exercising his custody rights at the time of the removal or retention. Respondent claimed that, since their arrival in the U. S., petitioner had “provided no financial support and his only contact with his son consisted of infrequent phone calls.” [Slip op. 6]

The Court holds, however, that the record does show that respondent was in the U.S. for only a short period of time before she told petitioner that she intended to remain in Delaware with Torin. “Reduced contact or lack of financial support over such a short period of time is insufficient under the Convention to demonstrate that a parent has ceased exercising custody rights.” Id. Therefore, there is no evidence that petitioner had abandoned these rights.

The Court further finds that the inquiry does not end with a showing of petitioner’s consent to Torin’s removal from Australia. Rather, if his consent was conditional and respondent had breached those conditions, then a trial court must also examine any wrongful retention claim. Parental consent to the removal of a child to another country for a short period under specified circumstances does not allow the retention of the child abroad beyond those conditions or circumstances. While petitioner did agree to Torin’s visit to the U.S., the Court sees nothing in the record to suggest that petitioner had approved of the child’s permanent retention abroad.

Respondent apparently did not decide to stay in Delaware until she fell for Mr. Stidham. Thus, her decision thereafter was much more than a mere “intervening event,” as the lower court surmised; rather it amounted to a radical departure from her arrangement with petitioner before her trip to Delaware. Petitioner’s consent to respondent’s and Torin’s going abroad was narrow in scope and respondent’s actions reached far beyond it. Therefore, the Third Circuit sets aside the District Court’s finding that petitioner had consented to Torin’s permanent removal from Australia and remands the case for further proceedings.

Citation: Baxter v. Baxter, 2005 WL 2233259; No. 04-3228 (3rd Cir. Sept. 15, 2005).

CHILD ABDUCTION

In proceeding to enforce Texas damages judgment against mother who abducted child to Russia, English Court of Appeal (Civil Division) reverses dismissal for lack of jurisdiction over defendant since she had taken part in the divorce proceedings where decree had ordered child’s retention in Hague Convention nation though plaintiff had sought damages under Texas family law rather than contempt of decree

In 1990, Lawrence Robert Whyte [plaintiff or the father] married Marsha Whyte [defendant or the mother] in 1990. A child, Nina, was born in January 1995. In September 1995, one of them filed divorce proceedings in the District Court of Harris County, Texas; it led to a final decree in January 1998. The court entered it with both parties’ agreement and accompanied by submission to the court’s jurisdiction. The decree designated both parties as Nina’s “Joint Managing Conservators” but granted the father “primary physical residence” in Texas.

The decree consisted of about 25 pages of the most detailed provisions in relation to Nina’s residence, care and contact with her parents. It specifically provided for Nina’s time with each parent, and her delivery by the one to the other; clause 15 explicitly enjoined either parent from taking Nina to a country not party to the Hague Convention on the Civil Aspects of International Child Abduction, in force for U. S. July 1,1988 [T.I.A.S. 11670]. The clear purpose of that clause is to facilitate control of any breach of the custody orders.

The decree also spelled out sanctions for breach of its terms. For example, Clause 20 provided that a party violating the terms of the decree would be liable for any costs and fees reasonably incurred by the other as a result of the violation. Finally, a note reminded the parties that breach of the order was a contempt of court, punishable by imprisonment.

Flouting the divorce decree in August 1998, defendant exploited one of her periods of agreed custody to abduct Nina to the Russian Republic, a country not one of the over fifty parties to the Convention. She refused to return her. After proceedings in the Russian courts, those courts declined to honor the Texas decree and awarded custody to the defendant.

In desperation, the father had Nina seized in Russia and returned to Texas in December 2001. The defendant’s flagrant defiance of the Texas court order, and the dislocation, distress and trauma that Nina had to go through as a result -- having been at the time of the abduction three and a half years old -- were obvious to the forum court.

The plaintiff, however, did not proceed against the defendant under the divorce decree’s penal provisions; instead he filed proceedings against her under chapter 42 of the Texas Family Code. That allows for damages for “interference with possessory interest in child”. They may include the costs of recovering possession; “mental suffering and anguish” suffered by the plaintiff because of defendant’s disregard of the court’s order as to possession; and punitive damages in respect of actions done with malice. The Texas court ended up ruling for plaintiff in March 2003. It awarded him as against the defendant $867,219 for the costs of getting Nina back; $500,000 for pain and suffering; and $250,000 in punitive damages, totaling over $1.6 million. The defendant took no part in these proceedings. It is that order that the plaintiff seeks to enforce in the English courts. The High Court of Justice dismissed on the grounds of lack of jurisdiction and plaintiff appealed. The Court of Appeal (Civil Division) unanimously allows the appeal.

The Court points out that “Murthy v Sivajothi [1999] 1 WLR 467 adopted the principle that, where the [party] makes a related claim in the sense discussed in the United States authorities and reflected in our own RSC Ord. 16 r. 8(1)(c), that party submits to judicial jurisdiction to resolve “any question or issue relating to or connected with the original subject matter of the action. Whether a particular claim should be regarded as related in this sense must always be a question of fact and degree.”[¶ 6]

The present Court then declares. “These issues have usually been discussed in commercial or property cases, as was Murthy itself. The principle stated [there] is, however, in my view particularly apt for application in a case within the family jurisdiction, where proceedings may affect [a] wide range of the aspects of the parties lives. And it is particularly apposite in the present case. The [original] Texas decree was, if not all about Nina, then at least to a very large extent about her. She was the subject matter of that action. A breach of the orders about Nina in that action was not merely something relating to or connected with the original subject matter, but actually part of the original subject matter itself.” [¶ 7]

“That the mother, by her defiance of the divorce decree, submitted to the penalties available to the court for breach of that decree is not affected at all by the fact that the father chose to proceed under the expansive chapter 42, rather than confine himself to the more limited recourse provided by the decree itself. Chapter 42 is part of the Texas Family Code, and is clearly recognised in that jurisdiction as an inherent part of the protection to be provided to families who have the misfortune to have their affairs regulated by the courts. It is quite impossible to say that the mother did not submit to that regime when she submitted to the divorce decree that it enforces.” [¶ 8]

“The judge [below] was not pressed with the full force of Murthy, because the case seems to have been presented to him through the medium of an earlier appeal in this court, [2004] EWCA Civ 35, in which an attempt was made to enforce the chapter 42 order against the second defendant, who is the mother of Mrs. Whyte.”

“She had become involved in the divorce proceedings because, as a co‑owner of property with Mrs. Whyte, she had been required to sign a release of various interests as part of the financial settlement in the divorce. Even if, which this court thought doubtful, she had thereby submitted to those divorce proceedings, she had not done so in any way that made it fair or reasonable to say that she had also submitted to proceedings that related, not to the financial aspects of the divorce, but to the custody of Nina, with which the second defendant was not concerned. That case therefore gives no help in the very different issue that is before us. If that had been made clearer to the judge I am satisfied that he would have seen this case in a different light.” [¶ 9]

The appellate court allows the appeal, declares that the courts of this country have jurisdiction to entertain a claim against the mother based on the chapter 42 decree of the Texan court, and remands the proceedings to the Queens Bench Division.

One of the concurring Justices adds the following observation. “The objection to jurisdiction seems to me to depend on the purely technical point that the father elected to seek the redress to which he was clearly entitled by originating petition under chapter 42 rather than by an application in the divorce proceedings. Had he obtained an order for the reimbursement of his costs and expenses under clause 20 of the consent order the mother would clearly have no ground on which to contest jurisdiction. He might have limited his order under chapter 42 to the reimbursement of the same costs and expenses. That only illustrates how unrealistic it would be to find a submission to the jurisdiction in the first instance but not in the second.” [¶ 12]

Citation: Whyte v. Whyte, 2005 WL 1650632 (CA (Civ Div)), [2005] EWCA Civ. 858.

JURISDICTION

Ontario Court of Appeal rules that libel suit by recent provincial resident against U.S. newspaper and reporters lacks “real and substantial” connection to Ontario required for assumption of jurisdiction

Cheickh Bangoura (plaintiff) sued the Washington Post and three of its reporters Messrs. Branigin, Rupert, and Buckley (defendants) plus the United Nations and Fred Eckhard (later dropped from the case) over two newspaper articles, which he claims are defamatory. When the Post published the articles in January 1997, plaintiff was working for the United Nations in Nairobi, Kenya. The articles had to do with plaintiff’s behavior in a prior position with the U.N. in the Ivory Coast.

Plaintiff was born and raised in Guinea on Africa’s west coast. Between 1987 and 1993, he served with the United Nations in Austria. In September 1993, he was seconded to the United Nations Drug Control Program (UNDCP) in the Ivory Coast as assistant regional director for West Africa, where he remained until December of 1994. The U. N. then transferred him to the UNDCP in Nairobi, Kenya under a contract that was to expire at the end of January 1997. In Kenya, Mr. Bangoura was assistant regional director of the UNDCP regional office for Eastern and Southern Africa.

On Sunday, January 5, 1997, the Washington Post published an article under the headline, “Cloud of Scandal Follows UN Drug Control Official: Boutros‑Ghali Ties Allegedly Gave Protection”. The article refers specifically to plaintiff and alleges that his UN colleagues had accused him of sexual harassment, financial improprieties and nepotism during his tenure in the Ivory Coast. The article suggests that he had evaded punishment in part by invoking close ties to Mr. Boutros‑Ghali, the former UN Secretary General, a close friend of plaintiff’s father‑in‑law. The UN suspended plaintiff from his job as assistant regional director on January 9, 1997.

On Friday, January 10, 1997, the Washington Post published a second article under the headline, “UN Removes African from Drug Agency: Controversial Envoy’s Misconduct Cited”. The second article repeated the previous allegations of misconduct.

In February 1997, plaintiff joined his wife and two children in Montreal, where they had moved in December 1996. He and his family lived in Montreal until June 2000, when they moved to Ontario in the Brampton area. Plaintiff filed this action in April 2003. In his statement of claim, plaintiff asked for the following relief against the Washington Post. First, he wanted the court to order the Post to remove the offending articles from its web site and to publish a retraction.

Moreover, he also sought damages of $5 million for intentional interference with prospective economic advantage and inducing a breach of employment contract. In addition, he wanted damages of $1 million each for intentional infliction of mental anguish, for negligence for its refusal to retract and to promptly remove the damaging statements from its web site. Finally, he demanded $2 million in punitive damages.

William Branigin lived in Washington, D.C. in 1997. He now lives in Reston, Virginia, a Washington suburb. James Rupert was a foreign correspondent for the Washington Post in Abidjan, Ivory Coast. He now lives in the state of New York. Steven Buckley was a foreign correspondent for the Washington Post in Nairobi, Kenya. He now lives in Florida.

WP Company LLC carries on business as The Washington Post. It is a wholly owned subsidiary of The Washington Post Company, which has its head office in the city of Washington. The circulation of the Washington Post on Sunday, January 5, 1997, was about 1,106,968. The Post distributed roughly 95% of its newspapers in the Washington metropolitan area. About 781,704 copies of the Washington Post went out on Friday, January 10, 1997 ‑‑ over 95% in the greater District of Columbia area. In both instances, only 7 copies got to subscribers in Ontario.

The Post also published the two challenged articles on the Washington Post Web site, making them available free of charge for fourteen days following publication. Only one person in Ontario, plaintiff’s counsel, has accessed the articles through the paid archive. The Washington Post has a small office in Toronto for use by a reporter for news-gathering purposes.

At the time of publication, the plaintiff did not live in Ontario. When he filed this action, more than six years after the publication of the articles, plaintiff had been an Ontario resident for about three years.

The newspaper defendants challenged the jurisdiction of the Ontario courts over them. They urged that there is no real and substantial connection between this action and Ontario or between the Post and Ontario. In dismissing the motion, the Superior Court of Justice held that it was appropriate for the Ontario courts to take jurisdiction. The Washington Post and its reporters appealed the order of the motion judge.

The appellate court seems to agree that the motion judge had rightly analyzed the jurisdictional situation under the eight factors spelled out in Muscutt v. Courcelles (2002), 60 O.R. (3d) 20 (C.A.). Nevertheless, it unanimously allows the appeal on the grounds that the judge had misapplied these factors in this case.

The first element is the extent of the link between the forum and plaintiff’s lawsuit. “The connection between Ontario and [plaintiff’s] claim is minimal at best. In fact, there was no connection with Ontario until more than three years after the publication of the articles in question. Even if the connection is significant, however, the case for assuming jurisdiction is proportional to the degree of damage sustained within the jurisdiction. It is difficult to justify assuming jurisdiction against an out‑of‑province defendant unless the plaintiff has suffered significant damage within the jurisdiction.” [¶ 22]

Plaintiff’s affidavit asserting local damage was not helpful to his case. “No details are provided. The distribution of the articles was minimal. Only [plaintiff’s] lawyer accessed the two articles on the Washington Post Internet database. Whatever damages were suffered by [plaintiff’s] losing his job with the UN, more than three years before he took up residence in Ontario, are not damages suffered in Ontario. In my view, there is no evidence that [he] has suffered significant damages within Ontario.” [¶ 23]

On the second factor, the motion judge held that the defendants had no connection to Ontario. He did note “that the Washington Post is a major newspaper which is ‘often spoken of in the same breath as the New York Times and the London Telegraph.’”

In the Court’s view, “there is no significant connection between the Washington Post defendants and Ontario. I cannot agree with the motion judge when he concluded that the appellants ‘should have reasonably foreseen that the story would follow the plaintiff wherever he resided.’ It was not reasonably foreseeable in January 1997 that [plaintiff] would end up as a resident of Ontario three years later. To hold otherwise would mean that a defendant could be sued almost anywhere in the world based upon where a plaintiff may decide to establish his or her residence long after the publication of the defamation.” [¶ 25]

The third factor is the degree of unfairness, if any, to the defendant in assuming jurisdiction. On this the motions judge opined that: “[w]hile the personal defendants have no connection to Ontario, the Post is a newspaper with an international profile, and its writers influence viewpoints throughout the English‑speaking world. I would be surprised if it were not insured for damages for libel or defamation anywhere in the world, and if it is not, then it should be.”[¶ 26] The Court of Appeal disagrees, however, pointing to the complete lack of record evidence about the Post’s insurance coverage.

Element 4 inquires whether there would be any unfairness to the plaintiff in not assuming jurisdiction. “Although unfairness to the plaintiff in not assuming jurisdiction might often be a powerful factor within a Muscutt analysis, it must be remembered that the plaintiff had no connection with Ontario until more than three years after the publication of the articles in question. ... If the plaintiff’s evidence does not support such a [real and substantial] connection elsewhere within the Muscutt analysis, it becomes increasingly difficult to accord weight to this factor.” [¶ 29]

The fifth factor looks at the involvement of other parties in the suit. “The motion judge stated ... that ‘the involvement of other defendants residing respectively in New York and Florida is a factor, in my view, in favour of the plaintiff’s choice of forum.’ In my view, [however], the fact that two of the personal defendants now live in New York and Florida does not favour Ontario. This factor relates more to a forum conveniens argument than to the assumption of jurisdiction. In any event, the main defendant, the Washington Post, is located in Washington, D.C., and the remaining personal defendant, William Branigin, resides in nearby Virginia.” [¶¶ 30-31]

The forum court’s willingness to recognize and enforce an extra‑provincial judgment rendered on the same jurisdictional basis constitutes element number 6. On this, the Court declares that, “it must be remembered that on the evidence presented before the motion judge, the articles did not reach significantly into Ontario. As I have mentioned, [plaintiff’s] lawyer was the only person in Ontario to access the two articles on the Washington Post Internet database. ... [Taking this element too far] could lead to Ontario publishers and broadcasters being sued anywhere in the world with the prospect that the Ontario courts would be obliged to enforce foreign judgments obtained against them.” [¶ 34]

Finally, the Courts should inquire the extent to which comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere support Ontario jurisdiction. “In considering this factor, the motion judge referred to New York Times Co. v. Sullivan, 376 U.S. 254, 280 (1964), a judgment of the United States Supreme Court, and Hill v. Church of Scientology, [1995] 2 S.C.R. 1130, a judgment of the Supreme Court of Canada. In New York Times v. Sullivan, the United States Supreme Court held that public officials could only succeed in a defamation claim where they could establish that the defamatory statement was made ‘with knowledge that it was false or with reckless disregard of whether it was false or not.’ In Hill v. Scientology, the Supreme Court of Canada refused to adopt the so‑called actual malice rule in New York Times v. Sullivan.”

“Courts in the District of Columbia and in other American jurisdictions have uniformly held that libel judgments rendered in foreign courts where the law does not comport with the principle set forth in New York Times Co. v. Sullivan and its progeny are repugnant to the public policy of those jurisdictions and must therefore be denied recognition.” [¶¶ 36-37]

The court below chalked this up to a lamentable lack of comity. The Court of Appeal disagrees. “The motion judge’s conclusion does not take into account that the rule in New York Times v. Sullivan is rooted in the guarantees of freedom of speech and of the press under the First Amendment of the U. S. Constitution. In any event, the reality is that American courts will not enforce foreign libel judgments that are based on the application of legal principles that are contrary to the actual malice rule.”

“Although the Supreme Court of Canada has rejected the rule for perfectly valid reasons, it is, in my view, not correct to say that the American courts’ unwillingness to enforce a Canadian libel judgment is ‘an unfortunate expression of lack of comity’. Canada and the U.S. have simply taken different approaches to a complex area of the law, based upon different policy considerations related to freedom of speech and the protection of individual reputations. The Supreme Court of Canada has recognized that Canadian courts may refuse to enforce a judgment of a foreign court which is deemed to be contrary to the Canadian concept of justice.” [¶¶ 39-40].

“As a result of the above analysis, I conclude that the motion judge erred in his application of the Muscutt factors. This leads me to conclude further that there is simply no real and substantial connection between this action and Ontario and that it is not appropriate for the courts of Ontario to assume jurisdiction.” [¶ 46]

Citation: Bangoura v. Washington Post, C41379, 2005 WL 2254668 (Ont. C.A.) 2005, Carswell Ont . 4343 (Sept. 16).

PATENTS

In patent dispute between two major corporations, as matter of first impression, Federal Circuit finds that foreign-replicated copies of U.S. software are “supplied” abroad and hence may constitute infringement within the meaning of U. S. patent laws

The AT & T Corporation owns a patent for certain speech-encoding technology, Reissue Patent 32,580. To advance the international distribution of its Windows software, the Microsoft Corporation provides certain copies of the master versions to foreign computer manufacturers and authorized foreign “replicators.” Such copies of Microsoft Windows are installed on foreign-assembled computers and sold abroad. AT & T claimed that Microsoft’s Windows software contained certain speech codes that allegedly infringe its patent.

AT & T eventually sued Microsoft for patent infringement in a New York federal court. Microsoft sought to keep out any evidence of liability under 35 U.S.C. Section 271(f) for the replication abroad of Microsoft’s Windows operating system from a master version sent from the U.S. Section 271(f) provides, in relevant part: “Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention ... in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer. ...”

The parties eventually agreed to a stipulated final judgment holding Microsoft liable, but reserving its right to appeal. This is that appeal. The U.S. Court of Appeals for the Federal Circuit affirms over a dissent.

Microsoft has argued on appeal (1) that the master versions of its Windows software are not “components” within the meaning of Section 271(f); and (2) that such copies made abroad are not “supplied” from the U.S. The Court had decided the first issue while this case was pending. In Eolas Techs. Inc. v. Microsoft Corp., 399 F.3d 1325 (Fed. Cir. 2005), this Court held that software code may qualify for patenting, and that software could constitute a “component” of a patented invention.

The remaining matter of first impression then, is whether the software copies made abroad are “supplied” within the meaning of Section 271(f). The Court finds that there may be liability for such replication abroad.

“... Microsoft has taken full advantage of the replicable nature of software to efficiently distribute Windows® internationally. At the same time, however, Microsoft posits that Section 271(f) liability should attach only to each disk that is shipped and incorporated into a foreign-assembled computer. ... We reject this theory of liability as it fails to account for the realities of software distribution. ... [W]e cannot disregard the nature of the relevant technology and business practices underlying a particular litigation.”

“It is inherent in the nature of software that one can supply only a single disk that may be replicated – saving material, shipping, and storage costs – instead of supplying a separate disk for each copy of the software to be sold abroad. All such resulting copies have essentially been supplied from the United States. Where there are competing interpretations of a statute that imposes liability for certain acts, an interpretation that allows liability to attach only when a party acts in an unrealistic manner is unlikely to be correct. ... We therefore reject Microsoft’s reading of Section 271(f).”[Slip op. 4]

The dissenter opines that the foreign manufacture of a mere component of a patented product cannot create liability in the U.S. under Section 271(f).

“The court’s proposition today that ‘the ‘supplying’ of software commonly involves generating a copy’ does not actually distinguish software components from physical components of other patented inventions. The only true difference between and supplying software components and physical components is that copies of software components are easier to make and transport. The ease of copying a patented component is not the proper basis for making distinctions under Section 271(f).”

“Possibly recognizing defects in its reasoning, this court limits its novel uncommon construction of ‘supplies’ to ‘software ‘components,’ [emphasis in original] [because for those inventions] the act of copying is subsumed in the act of ‘supplying,’ ...’ Rather than ‘according the same treatment to all forms of invention,’ ... this court creates a new rule that foreign copying of a component of a patented invention shipped from the U.S. gives rise to liability in the U.S. Apparently this rule applies only to software inventions. This application of ‘supplies’ solely to software components ignores this court’s case law that refuses to discriminate based on the field of technology. ... The language of Section 271(f) does not discriminate based on field or form of technology, yet this court invents such a distinction.” [Slip op. 7]

Finally, the dissenter notes that the infringed-upon party has other remedies available for acts that occur abroad: it can enforce its foreign patent. The dissenter explains: “Section 271(f) protects foreign markets from domestic competitors. Section 271(f) does not, or at least did not until today, protect foreign markets from foreign competitors. This court’s expansion of Section 271(f) to offer protection to foreign markets from foreign competitors distorts both the language and the policy of the statute. This court should accord proper respect to the clear language of the statute and to foreign patent regimes by limiting the application of Section 271(f) to components literally ‘shipped from the United States.’ ...” [Slip op. 9]

Citation: AT & T Corp. v. Microsoft Corp., 414 F.3d 1366 (Fed. Cir. 2005).

REVENUE RULE

After remand from U. S. Supreme Court, Second Circuit reinstates its earlier opinion that common law “revenue rule” barred civil action by European Community and several Member States against tobacco companies for their alleged support of cigarette smuggling to avoid local taxation

The European Community, various of its Member States, as well as certain Departments of the country of Colombia (plaintiffs) brought an action alleging that certain tobacco companies were directing and facilitating cigarette smuggling. Among other claims, plaintiffs alleged violations under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sections 1961-1968 (RICO). The district court dismissed the smuggling-related claims as barred by the Revenue Rule. The common law Revenue Rule provides generally that U. S. courts may not interpret and enforce foreign revenue laws.

Plaintiffs appealed, arguing that certain amendments to RICO had abrogated the Revenue Rule. In the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, Pub.L. No. 107-56, 115 Stat. 272 (Patriot Act), congress had added certain smuggling or export control violations to the list of RICO acts under 18 U.S.C. Section 1956(c)(7). Disagreeing with plaintiffs, the U. S. Court of Appeals for the Second Circuit held in European Community v. RJR Nabisco, Inc., 355 F.3d 123 (2d Cir. 2004) (EC I) that the Revenue Rule does preclude civil suits brought by foreign sovereigns under RICO to recover lost tax revenues and law enforcement costs caused by smuggling. See 2004 International Law Update 41.

On certiorari, the Supreme Court vacated and remanded the case for reconsideration in light of Pasquantino v. United States, 125 S.Ct. 1766 (2005). It held that the Revenue Rule did not apply to the criminal prosecutions of smugglers under 18 U.S.C. Section 1343. European Community v. RJR Nabisco, 125 S.Ct. 1968 (2005). The Court, however, specifically declined to express a view as to “whether a foreign government, based on wire or mail fraud predicate offenses, may bring a civil action under [RICO] for a scheme to defraud it of taxes.” 125 S.Ct. at 1771.

On reconsideration, the Second Circuit now holds that Pasquantino does not affect the findings of EC I. It reinstates its opinion in EC I, and affirms the judgment of the district court as to the judgments in European Community v. RJR Nabisco, Inc., No. 02-7330, and Department of Amazonas v. Philip Morris Companies, No. 02-7325, and vacates and remands as to European Community v. Japan Tobacco, Inc., No. 02-7323, for further proceedings consistent with this opinion and the re-instated opinion in EC I.

“Pasquantino considered whether the revenue rule precluded a criminal prosecution for wire fraud under 18 U.S.S. Section 1343 for use of interstate wirings as part of a scheme to smuggle liquor into Canada. The Supreme Court first determined that Canada’s right to collect tax money was ‘property’ for purposes of the statute, and that a plot to smuggle liquor into Canada was a scheme to defraud Canada of that right to collect tax money. ... Thus, the plain language of the statute created liability for this type of smuggling. ... The Court then held that the revenue rule did not preclude criminal prosecutions of this kind.”

“None [of the cited cases applying the revenue rule] involved a domestic sovereign action pursuant to authority conferred by a criminal statute. The difference is significant. An action by a domestic sovereign enforces the sovereign’s own penal law. A prohibition on the enforcement of foreign penal law does not plainly prevent the Government from enforcing a domestic criminal law. [...]”

“The Supreme Court also analyzed the question in light of the purposes of the revenue rule and found that concerns about sovereignty and separation of powers were not implicated where the United States government brings a criminal prosecution. ... First, in light of the government’s decision to prosecute, the Court found ‘little risk of causing the principal evils against which the revenue rule was traditionally thought to guard: judicial evaluation of the policy-laden enactments of other sovereigns.’ ... The fact of the prosecution implies an assessment of risk by the executive branch on which the courts may rely. ‘[W]e may assume that by electing to bring this prosecution, the Executive has assessed this prosecution’s impact on this Nation’s relationship with Canada, and concluded that it poses little danger of causing international friction.’ ...”

“Second, the Court found concerns about separation of powers greatly diminished where the government brings prosecution within the bounds of a statute created by Congress. [...]

The present civil lawsuit, on the other hand, is brought by foreign governments, not by the United States. Moreover, the executive branch has given us no signal that it consents to this litigation. ... In short, the factors that led the Pasquantino Court to hold the revenue rule inapplicable to Section 1343 smuggling prosecutions are missing here.” [Slip op. 5-6]

Citation: The European Community v. RJR Nabisco, Inc., 2005 WL 2210646 (2d Cir. September 13, 2005). See also related case of European Court of First Instance in Joined Cases T-377/00, T-379/00, T-380/00, T-260/01 and T-272/01 (15 January 2003), 2003 International Law Update 52.

SERVICE OF PROCESS

In Seventh Circuit, Court rules that Civil Rule 4(m) which requires perfection of service within 120 days from filing of suit does not apply to service outside United States

Nylok Corporation (plaintiff) makes and sells a variety of fasteners. They are blue in color, and this federally recognized blue trademark distinguishes plaintiff’s fasteners from the products of competitors. On November 17, 2003, plaintiff filed a complaint in an Illinois federal court against Fastener World Incorporation, Nasalok Coating Corporation, Unilock Industrial Co., and Nypatch Industrial Co., four Taiwanese corporations and one Korean corporation (defendants), alleging trademark infringement.

To perfect service on these foreign corporations, plaintiff hired Celeste Ingalls, a professional process server who specializes in the service of civil process in foreign countries. Ingalls prepared the necessary documents (e.g., translation of complaint and court-executed rogatory letters) and sent them to the proper Taiwanese and Korean government entities on December 30, 2003. Plaintiff also forwarded copies of all filings and motions to the defendants via Federal Express and has discussed settlement agreements with each party.

On February 10, 2004, the district court notified plaintiff that it had to achieve service within 120 days from the date of filing under Rule 4(m). It provides: “If service of the summons and complaint is not made upon a defendant within 120 days after the filing of the complaint, the court, upon motion or on its own initiative after notice to the plaintiff, shall dismiss the action without prejudice as to that defendant or direct that service be effected within a specified time; provided that, if the plaintiff shows good cause for the failure, the court shall extend the time for service for an appropriate period. This subdivision does not apply to service in a foreign country pursuant to subdivision (f) or (j)(1).”

On February 23, plaintiff moved for clarification, urging that Rule 4(m) does not apply to foreign service as in this case. Nevertheless, the court dismissed the case on March 26 for lack of service. Plaintiff appealed. The U. S. Court of Appeals for the Seventh Circuit reverses and remands.

As the Court explains: “The explicit language of this rule makes it very clear that the 120‑day limit is inapplicable in cases involving service in a foreign country. This rule seems to recognize that the timeliness of foreign service is often out of the plaintiff's control. Nylok offers proof that service of process in Taiwan generally takes between six and twelve months and in Korea it can exceed four months.”

“Because district courts need to be able to control their dockets, we have stated that the amount of time allowed for foreign service is not unlimited. See O'Rourke Bros. Inc. v. Nesbitt Burns, Inc., 201 F.3d 948, 951-52 (7th Cir.2000) (expressing disagreement with Ninth Circuit view that under Rule 4(m), ‘there is apparently no time limit for [foreign] service’). If, for example, a plaintiff made no attempt to begin the process of foreign service within 120 days, it might be proper for a court to dismiss the claim.”

“Nylok, however, made every effort to serve the defendants in a timely manner. Two days after filing the complaint in this case, Nylok hired Ingalls and instructed her to take the steps necessary to effectuate service. The appropriate materials were sent to the authorized agencies in Taiwan and Korea 41 days later. The next step involved waiting for the agencies to forward the materials to the applicable Taiwanese and Korean judicial authorities who would then serve the defendants. Under this system, although Nylok took all of the necessary affirmative steps, it could not control the timing of service.” [807]

Citation: Nylok Corp. v. Fastener World Inc., 396 F.3d 805 (7th Cir. 2005).

TERRORISM

Fourth Circuit upholds military detention of U.S. citizen allegedly involved in terrorist organization since Joint Resolution by Congress has given U.S. President authority to do so

Jose Padilla is a U.S. citizen who allegedly joined al Qaeda’s forces in Afghanistan. Authorities arrested him in May 2002 at Chicago’s O’Hare International Airport when he returned allegedly to carry out terror assignments. The U. S. President designated Padilla as an “enemy combatant” because the U. S. is “at war” with al Qaeda. Padilla’s detention is allegedly necessary to prevent him from further aiding al Qaeda in its attacks on the U. S. Since being designated an “enemy combatant,” Padilla has been residing in a naval brig in South Carolina.

The facts appear to show that Padilla had joined al Qaeda some time in 2000 while on a religious pilgrimage to Saudi Arabia. He later received weapons training, and was armed and present in a combat zone during al Qaeda/Taliban fights against U. S. forces.

In July 2002, Padilla filed the present habeas corpus petition in South Carolina district court, claiming that his detention violated his constitutional rights. See also related proceeding in 2004 International Law Update 102. The district court held that Padilla’s detention violated the Constitution, that the President has no authority to detain Padilla under these circumstances, and that the government must either charge him criminally or let him go. The government appealed.

The U. S. Court of Appeals for the Fourth Circuit reverses. The Court concludes that the President does have the authority to detain a U.S. citizen under those circumstances based on the Authorization for Use of Military Force Joint Resolution (AUMF) passed by Congress after the events of September 11, 2001.

In this case, the President relied on the AUMF. It provides that “the President is authorized to use all necessary and appropriate force against those ... persons he determines planned, authorized, committed, or aided the terrorist attacks ...” Pub.L. No. 107-40, Section 2(a), 115 Stat. 224 (September 18, 2001). The U. S. Supreme Court has interpreted the AUMF in Hamdi v. Rumsfeld, 124 S.Ct. 2633 (2004), see also 2004 International Law Update 101. There, the Court found that the AUMF authorized the military detention of Yaser Esam Hamdi, a U.S. citizen who reportedly fought alongside Taliban forces in Afghanistan.

“The ‘narrow question,’ ... addressed by the Court in Hamdi was ‘whether the Executive has the authority to detain citizens who qualify as ‘enemy combatants,’ ... The controlling plurality of the Court answered that narrow question in the affirmative, concluding, based upon ‘longstanding law-of-war principles,’ ... that Hamdi’s detention was ‘necessary and appropriate’ within the meaning of the AUMF because ‘[t]he capture and detention of lawful combatants and the capture, detention, and trial of unlawful combatants, by ‘universal agreement and practice,’ are ‘important incident[s] of war,’‘ ... The rationale for this law-of-war principle ... is that ‘detention to prevent a combatant’s return to the battlefield is a fundamental incident of waging war.’ ...”

“As the AUMF authorized Hamdi’s detention by the President, so also does it authorize Padilla’s detention. ... Padilla unquestionably qualifies as an ‘enemy combatant’ as that term was defined for purposes of the controlling opinion in Hamdi. ... Like Hamdi, Padilla associated with forces hostile to the United States in Afghanistan. ... And, like Hamdi, Padilla took up arms against United States forces in that country in the same way and to the same extent as did Hamdi. ... Because, like Hamdi, Padilla is an enemy combatant, and because his detention is no less necessary than was Hamdi’s in order to prevent his return to the battlefield, the President is authorized by the AUMF to detain Padilla as a fundamental incident to the conduct of war.” [Slip op. 7]

The Court also rejects Padilla’s particular arguments that his detention is unlawful. First, it does not matter that the authorities seized Padilla on American soil while they had arrested Hamdi abroad. The Hamdi opinion and other precedent suggests that the place of arrest is irrelevant. Second, Padilla’s detention is not unnecessary because he may be criminally charged. Criminal prosecution may not necessarily achieve the purpose of preventing the detainee’s return to the battlefield. Third, the AUMF is clear enough to allow detention of individuals like Padilla if necessary to prevent further attacks.

Citation: Padilla v. Hanft, 2005 WL 2175946; No. 05-6396 (4th Cir. Sept. 9, 2005).

Portugal and U.S. sign legal assistance and extradition agreements. On July 14, 2005, the U.S. Secretary of State and the Portuguese Foreign Minister signed agreements on extradition and mutual legal assistance between Portugal and the United States. The Extradition Agreement supplements and updates a 1908 bilateral treaty. In general, such treaties empower each nation to call upon the other to supply witnesses and documents to the other for use in criminal proceedings. They also increase the ability of each party to search suspect bank accounts and to form joint investigative teams. On the other hand, the Mutual Legal Assistance Agreement sets up a formal relationship between the two nations never before covered by a treaty. This agreement sets up mechanisms for obtaining custody of fugitives charged with contemporary types of crimes such as money‑laundering and trafficking in human beings. In these ways, both arrangements make our police and prosecutors better able to work together in bringing conventional criminals to justice, as well as resisting international terrorism on both sides of the Atlantic. Both Agreements are part of a program to enter into bilateral agreements with all twenty‑five EU member states to implement twin 2003 agreements on extradition and mutual legal assistance between the United States and the European Union. Citation: U. S. Department of State Fact Statement of July 14, 2005; M2 Presswire, Friday, July 15, 2005; 2005 M2 Communications Ltd. (All rights reserved).

Arbitration panel rejects claim of NAFTA violation by U. S. On August 10, 2005, the U.S. State Department announced that a three‑member North American Free Trade Agreement arbitration tribunal has just dismissed a $970 million claim filed by Methanex, a Canadian methanol producer, challenging California’s regulations of the gasoline additive MTBE. The U.S. views this ruling as supporting the prerogative of states to take legal action to protect the health of its citizens and the local environment without colliding with the investment protection provisions of international trade agreements and investment treaties. The claimant, Methanex Corp., submitted its claim to arbitration in 1999 contending that California’s ban of the use of MTBE in gasoline contravened NAFTA’s investment protections. The arbitrators unanimously dismissed Methanex’s claim on jurisdictional grounds. They went further and opined that, even if they had jurisdiction, the claim lacked merit. In a reportedly unprecedented step, the Tribunal also ordered Methanex to pay the U.S. more than $4 million in legal costs and arbitral expenses. Citation: In the Matter of an International Arbitration under Chapter 11 of the North American Free Trade Agreement and the UNCITRAL Arbitration Rules Between: Methanex Corporation and United States of America; Press Statement #2005/774, Office of Deputy Spokesman, U. S. Department of State, Wednesday, August 10, 2005.

Senegal obtains grant from U. S. to aid in Millennium Challenge program. On July 20, 2005, the closing day of the African Growth and Opportunity Act (AGOA) Forum, the United States and The Republic of Senegal signed a $6.5 million U.S. Millennium Challenge Corporation (MCC) compact development grant agreement. The U. S. grant is designed to aid Senegal in laying a foundation for its major agreement with the MCC. Senegal’s compact plans to develop a large‑scale industrial, commercial and residential site. The proposed project would address one of the greatest obstacles to poverty alleviation and economic growth in Senegal ‑- the lack of supportable room for commercial and industrial growth on the Dakar Peninsula. In addition to Senegal, the MCC has approved funding for compact development or implementation with the Kingdom of Lesotho, and the Republics of Cape Verde, Ghana, Madagascar, Georgia and Nicaragua. In the 10 months since it began accepting country proposals, MCC has approved about $640 million in compacts, compact development and threshold program funding in nine different countries. Citation: Millennium Challenge Corporation Congressional Notification of June 30, 2005 (available at www.mca.gov); AllAfrica, Inc., Washington, D. C., Wednesday, July 20, 2005 (byline of U. S. Department of State).

U. N. Security Council tightens sanctions against terrorists. On July 29, 2005, the United Nations Security Council unanimously adopted Resolution 1617 which reaffirms and toughens prior international sanctions against Al-Qaida (al Qaeda), the Taliban and their associates. This Resolution advances the international community’s efforts to oppose terrorism in three important ways. First, it more clearly identifies terrorists who are subject to UN sanctions. Second, it authorizes an effective set of standards and practices for executing the financial sanctions imposed on them. Finally, it promotes cooperation among various counter‑terrorism committees and bodies. Additionally, 1617 enlarges the mandate of the Analysis and Monitoring Team, which aids the Council to supervise the carrying out of these sanctions. Resolution 1617 also carries forward a combined list of terrorists related to the Taliban, Usama bin Laden, and Al‑Qaida. Inclusion on the list activates international duties upon all UN member countries, ordering them to freeze the assets and to deter the travel of listed individuals. It also tries to block the sale of arms and military equipment to them. Citation: Media Note #2005/758, Office of Spokesman, U.S. Department of State, Washington, D.C., Wednesday, August 3, 2005; United Nations Security Council press release SC8468 (29 July 2005).

Chilean Supreme Court dismisses some charges against Pinochet. The day after stripping General Augusto Pinochet of his head-of-state immunity on certain human rights charges, the Chilean Supreme Court dismisses the charges against him on other similar charges arising out of abuses by his regime between 1973 and 1990. The same panel had turned down the prosecution’s appeal from the ruling by a lower court that Pinochet’s poor health made him unfit to stand trial. Pinochet still faces dozens of criminal actions against him and has lost his immunity in two of them. He also may have to confront tax evasion charges pertaining to his bank accounts in other countries. Though an appeals court had removed Pinochet’s immunity for these cases, that question is on appeal. Chilean law reportedly requires that the courts decide immunity questions in each separate case brought against the claimant. Citation: Findlaw Legal News, Santiago, Chile, Thursday, September 15, 2005, T-17:31:25Z; News report “Pinochet loses immunity” (September 15, 2005), available at www.theaustralian.news.com.au.

United States announces worldwide coalition against wildlife trafficking. The Convention on International Trade in Endangered Species of Wild Fauna and Flora, in force on July 1, 1975 [27 U.S.T. 1087; T.I.A.S. 8249; 993 U.N.T.S. 243] has been in effect for thirty years. As of January 1, 2003, 164 nations were parties, including the United States. Nevertheless, today there is a flourishing black market in the trafficking of wildlife and animal parts worth about $10 billion per year. This trade is driving tigers, elephants, rhinos, rare birds and many other species to the brink of extinction. Initiated by the U. S. and announced on September 23, 2005, a Global Coalition Against Wildlife Trafficking is being formed to focus world attention on these problems. The G-8 nations agreed in July to assist countries in enforcing the Convention and existing domestic laws. The environment ministers of the Southeast Asian nations where the problem seems most acute, are soon expected to develop a regional wildlife anti-trafficking law. The following institutions have already agreed to take part including the Save the Tiger Fund, the Smithsonian Institution, Traffic International, WildAid, the Wildlife Conservation Society and the American Forest & Paper Association. Citation: Media Note #2005/882, Office of Spokesman, U.S. Department of State, Friday, September 23, 2005 at 11:07 a.m.; The State Department’s brochure on this topic is available on the website www.state.gov.

U.S. President issues 2006 drug majors designations. Presidential Determination No. 2005-36 updates executive branch designations of major drug transit or major illicit drug-producing countries pursuant to Section 706(1) of the Foreign Relations Authorization Act, Public Law 107-228. On September 15 last, the President listed for 2006: Afghanistan, The Bahamas, Bolivia, Brazil, Burma, Colombia, Dominican Republic, Ecuador, Guatemala, Haiti, India, Jamaica, Laos, Mexico, Nigeria, Pakistan, Panama, Paraguay, Peru, and Venezuela. The memorandum to the State Department cautions that “a country’s presence on the Majors List is not necessarily an adverse reflection of its government’s counternarcotics efforts or level of cooperation with the United States. ... One of the reasons that major drug transit or illicit drug producing countries are placed on the list is the combination of geographical, commercial and economic factors that allow drugs to transit or be produced despite the concerned government’s most assiduous enforcement measures.” Citation: White House Press Release, issued at Washington, D. C., September 15, 2005; U.S. Department of State press release of September 15, 2005 [For full text, see www.state.gov.]