US Forum-Selection Clause Upheld

In this blog, we typically review forum-selection cases in the context of internet-related contracts and software licenses. A recent decision out of the US Supreme Court squarely addressed the issue of forum-selection clauses in a construction contract. While this is not an intellectual property case, it is instructive for Canadian companies entering into any contract in the US.

To review, a “forum-selection clause” is a provision in a contract which picks a particular country or province or state for the resolution of disputes – put another way, it’s the place where litigation would be started in the event of a dispute.

In Atlantic Marine Construction Co., Inc. v. U.S. District Court For The Western District of Texas, [Link to Decision] the US Supreme Court indicated that where the parties have elected to include a forum-selection clause in their contract, that clause “represents [their] agreement as to the most proper forum,” and should be “given controlling weight in all but the most exceptional cases.”.

The Court went on to say that:

  • First, if one party defies the forum-selection clause by commencing a lawsuit in another jurisdiction, that party has the burden of convincing the court that the case shouldn’t be transferred to the forum named in the agreement.
  • Second, “the court should not consider the parties’ private interests aside from those embodied in the forum-selection clause; it may consider only public interests.” Public-interest factors will not typically override the forum-selection clauseexcept in very unusual cases.
  • Lastly, if a party is bound by a forum-selection clause and they choose to flout those contractual obligations by filing a lawsuit in a different forum, then they don’t get the benefit of applying the choice-of-law rules in the jurisdiction in which they filed. In other words, they can’t improve their chances of success by filing in a state with favourable choice-of-law rules. They will be bound by the choice-of-law rules of the forum named in the forum-selection clause.

The US Supreme Court has confirmed that forum-selection clauses should be upheld in the US.

Calgary – 07:00 MST

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“Dope!” Does Not Indicate Consent

It is rare for a case to combine energy drinks, copyright law, DJs, rap and snowboarding in Canada. The court’s decision in Beastie Boys v. Monster Energy Co. is such a case.

In this recent decision of the United States District Court (S.D. New York), Monster Energy defended a copyright infringement claim brought by the rap-group Beastie Boys. The Beastie Boys allegations centred around Monster’s use of a remix track, known as Megamix, originally created by the DJ known as Z-Trip. The remix of well-known Beastie Boys hits was created by Z-Trip with the permission of the band – in fact they had invited the DJ to mix the track in 2011 in order to promote a Beastie Boys album.

At a Canadian snowboarding event in 2012, an executive from Monster approached the DJ to get permission to use the remix for Monster’s promotional video of the event. It was these discussions that became the focus of the Court’s analysis of Monster’s defence that it had obtained a license from the DJ for the use of the remix. After producing the video with the remix included, Monster sent a copy to the DJ who responded “Dope!”, as DJs will. Monster took this exclamation as an affirmation of the terms of a license granting permission to use the song for Monster’s promotional purposes. The DJ testified that this term merely expressed approval for how cool he looked in the video. The Court concluded that no reasonable person would consider the term “Dope!” to constitute “clear, unambiguous and unequivocal” acceptance of license terms for the use of the remix. As a result, there was no valid consent or license granted.

Calgary – 07:00 MST

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Internet Sales Tax Update

We recently reported on a case out of New York State, which dealt with the question of sales tax liability in the case of online sales. That decision (in v. New York Taxation Dept. and the companion case of v. New York Taxation Dept.) decided that internet retailers are required to collect sales taxes on purchases by New York residents even if the retailers have no physical presence in the state.

The U.S. Supreme Court has decided to let this decision stand (without offering any reasons). Congress is currently considering a legislative response to this issue through the proposed Marketplace Fairness Act. Large retailers such as Amazon have the means to negotiate a solution with tax authorities on a state by state basis, but smaller companies simply do not have that leverage.

Canadian online retailers selling into the U.S. will want to seek advice on sales tax issues to ensure their tax collection and remittance policies are compliant in the United States.

Calgary – 07:00 MST

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