IP Law Daily, COPYRIGHT—S.D.N.Y.: Infringement claims subject to licensing agreement forum selection clause, (Jul 22, 2016)

By Jody Coultas, J.D.

The federal district court in New York City dismissed copyright and trademark infringement claims filed by Moose Toys Pty Ltd, Moose Creative Pty Ltd, Moose Enterprise Pty Ltd, and Moose Creative Management Pty Ltd because the claims were subject to a forum selection clause contained in a license agreement with defendants Creative Kids Far East Inc. and Creative Kids Far East Limited (Moose Toys Pty, Ltd. v. Creative Kids Far East Inc., July 14, 2016, Marrero, V.).

Moose Toys alleged that Creative Kids manufactured, imported, exported, and sold 19 unauthorized and counterfeit products to wholesalers, distributors, retailers, and consumers in the U.S. Creative Kids, in a letter brief, stated that the claims should be dismissed based on the forum selection clause contained in a license agreement between Moose Enterprise Pty Ltd. and Creative Kids Far East Limited. The clause explicitly stated that both parties agreed to the exclusive jurisdiction of the courts of Victoria, Australia.

Creative Kids argued that the issue of whether the products were authorized or approved by the license agreement was "inextricably intertwined" with the interpretation of the Licensing Agreement. Moose Toys maintained that the license agreement had been terminated by Moose Enterprise, and that none of the 19 products at issue were approved for manufacturing, marketing, or sale prior to termination of the agreement.

Whether the alleged infringement occurred after the Licensing Agreement was terminated requires interpretation of the Licensing Agreement, according to the court. Therefore, the instant dispute was subject to the forum selection clause.

To determine whether dismissal of a claim based on a forum selection clause is warranted, courts look at whether: (1) the clause was reasonably communicated; (2) the clause was mandatory or permissive; (3) the claims and parties were subject to the forum selection clause; and (4) the resisting party had rebutted the presumption of enforceability by showing that enforcement would be unreasonable or unjust, or that the clause was invalid.

Moose Toy’s claims derived from the license agreement because it was necessary for the court to construe the agreement in order to determine whether Creative Toys was authorized to sell the products at issue, according to the court. The provision stated that the parties submitted to the exclusive jurisdiction of the courts of Victoria, Australia, which is the type of language that courts have routinely relied upon to find that a forum selection clause is mandatory. Based on the language of the clause, the court construed it as covering disputes that arise out of, from, or under the license agreement. Whether the products were approved for use by Creative Toys prior to termination of the agreement constitutes a factual dispute, the resolution of which depended on an interpretation of the agreement. Therefore, the claims involved were subject to the forum selection clause.

The court was not convinced that Moose Toys rebutted the presumption of enforceability of the forum selection clause. There was no evidence that the clause was unjust or unreasonable. Also, there was no reason to presume that the impact of the clause had not been weighed by both parties at the time of the execution of the license agreement.

Whether the non-signatory plaintiffs are successors-in-interest or "closely related" to the signatory Moose Enterprise Pty Ltd., and therefore subject to the forum selection clause, was best determined by the Australian courts. Likewise, whether Creative U.S., a non-signatory, may enforce the clause was also a question for the Australian courts.

The case is No. 16-cv-1072 (VM).

Attorneys: Ashly Erin Sands (Epstein Drangel LLP) for Moose Toys Pty Ltd., Moose Creative Pty Ltd., and Moose Enterprise Pty Ltd. Douglas Alan Miro (Ostrolenk, Faber, LLP) for Creative Kids Far East Inc.

Companies: Moose Toys Pty Ltd.; Moose Creative Pty Ltd.; Moose Enterprise Pty Ltd.; Creative Kids Far East Inc.

Cases: Copyright Trademark NewYorkNews