Foreign Company Liable for U.S. Infringement Despite Shipping F.O.B.

For purposes of determining whether U.S. copyright law applies to sales of infringing goods to Unites States customers, the method of shipping is irrelevant. That is the holding in recent decision from the Northern District of Illinois in Zimnicki v. General Foam Plastics and Nixan Int’l.

Some readers of this blog may remember the difference between a contract that provides for delivery to a shipper “Free On Board” or “FOB” and delivery "Delivery Ex Ship" or "DES."  When goods are delivered FOB, title passes to the purchaser when the seller delivers them to the shipper at the port of departure, and the purchaser bears the risk of loss thereafter. In a DES contract, the risk of loss remains with the seller until the goods are actually delivered to the buyer at the port of arrival.  Perhaps the best news about the Zimnicki decision is that copyright lawyers can forget all this.

In Zimnicki, the copyright owner brought suit for violation of U.S. copyright against the both the U.S. distributor, General Foam, and the overseas manufacturer, Nixan. Nixan received the order in Hong Kong, manufactured the goods in Hong Kong, and then shipped them to Yantian China, where General Foam’s shipper shipped them FOB to General Foam in the U.S.  Nixan argued that it could not be liable for U.S. infringement because its only activity was in China, where title passed when the goods were shipped F.O.B.

The court rejected that defense, declining the invitation to exalt form over substance for fear that it would “encourage gamesmanship." The court held that the sale and delivery to the U.S. took place in one seamless transaction and constituted a distribution by sale in the U.S., regardless of whether title passed F.O.B.