# Yellow Submarine, Hard Borders: Subafilms v. MGM-Pathe and the Limits of U.S. Copyright Abroad

> The en banc Ninth Circuit held that authorizing inside the U.S. acts of infringement that occur entirely overseas does not state a claim under the Copyright Act, cabining the law's reach at the water's edge.

Topic: Copyright  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/subafilms-v-mgm-pathe-extraterritorial-authorization/


It began with the most famous animated submarine in pop history. When MGM/UA and Warner Bros. released home-video copies of The Beatles' *Yellow Submarine* around the world, the film's original backers, Subafilms and Hearst, sued for copyright infringement — and pressed the theory that even foreign videocassette sales could be reached by U.S. copyright law because the decision to distribute had been authorized from American soil. In *Subafilms, Ltd. v. MGM-Pathe Communications Co.*, 24 F.3d 1088 (9th Cir. 1994) (en banc, decided May 13, 1994), the full Ninth Circuit rejected that theory and held, through Judge Dorothy W. Nelson, that authorizing within the United States acts of infringement occurring entirely abroad does not state a claim under the Copyright Act. The decision drew a firm line at the nation's borders and remains the leading statement of the presumption against extraterritorial copyright liability.

## At a glance

- **Case:** *Subafilms, Ltd. v. MGM-Pathe Communications Co.*, Nos. 91-56248, 91-56289 & 91-56379, 24 F.3d 1088 (9th Cir. May 13, 1994) (en banc).
- **Court:** U.S. Court of Appeals for the Ninth Circuit, en banc; opinion by Circuit Judge Dorothy W. Nelson.
- **Posture:** Rehearing en banc after a panel had affirmed liability for foreign distribution; the en banc court vacated the foreign-distribution portions of the judgment.
- **Holding:** Mere authorization in the United States of acts of infringement that occur entirely outside the United States — and are therefore not themselves cognizable under U.S. law — does not state a claim under the Copyright Act.
- **Significance:** Overruled *Peter Starr Production Co. v. Twin Continental Films* on this point and entrenched the presumption against extraterritorial application of U.S. copyright.

The dispute traced back to a 1967 agreement under which United Artists financed and distributed *Yellow Submarine*. Decades later, after home video transformed the market, UA's successors — MGM/UA and Warner Bros. — released the film on videocassette both domestically and overseas. Subafilms and Hearst, the joint venturers behind the film, claimed those releases exceeded the rights granted and sued for copyright infringement and breach of contract. A panel of the Ninth Circuit initially upheld liability and damages tied to the foreign distribution, relying on the circuit's own *Peter Starr* precedent. The court then took the case en banc to reconsider that foundation.

## The authorization theory and why it failed

The plaintiffs' core legal move was to invoke the Copyright Act's grant of an exclusive right "to authorize" the enumerated uses of a work, found in 17 U.S.C. Section 106. Because MGM/UA had authorized the foreign distribution from the United States, the argument ran, the domestic act of authorization was itself an act of infringement reachable under U.S. law, even though the actual copying and distribution happened abroad. That was the reasoning of *Peter Starr*, which had treated domestic authorization of overseas infringement as independently actionable.

Judge Nelson's opinion dismantled the theory. The right "to authorize," the court explained, was added by Congress to clarify that contributory infringers could be held liable; it did not create a new, free-standing wrong divorced from any underlying infringing act. Authorization is meaningful only in relation to a primary infringement that the Copyright Act actually reaches. If the primary act — the foreign reproduction and distribution — is not itself cognizable under U.S. law because it occurs entirely abroad, then there is no actionable infringement for the domestic authorization to be secondarily liable for.

## The presumption against extraterritoriality

Behind the textual analysis lay a bedrock canon: legislation of Congress is presumed to apply only within the territorial jurisdiction of the United States unless a contrary intent clearly appears. The court found nothing in the Copyright Act overcoming that presumption for wholly foreign conduct. It was, the opinion noted, "well established" that U.S. copyright laws have no extraterritorial reach, so acts of infringement completed entirely abroad are simply outside the statute.

Allowing the authorization theory to capture foreign distribution would have effectively projected American copyright law across the globe, the court warned, and would have intruded on the copyright regimes of other sovereign nations. International copyright relations are instead governed by treaties such as the Berne Convention, under which each country applies its own law to infringements occurring within its borders. A U.S. plaintiff harmed by foreign copying must generally look to the law of the place where the infringement occurred, not to the U.S. Copyright Act.

## What the en banc court actually did to the judgment

The remedy followed directly from the holding. The en banc court overruled *Peter Starr* to the extent it held domestic authorization of wholly extraterritorial acts actionable, and it vacated the portions of the panel's disposition and the district court's judgment that rested on foreign distribution. That included the share of the damages award attributable to overseas videocassette sales, the related attorney's-fees award, and the injunctive relief insofar as it was premised on U.S. copyright violations arising from authorization of foreign distribution.

What survived was the domestic dimension of the case. Conduct occurring inside the United States remained governed by U.S. copyright law in the ordinary way; only the attempt to reach purely foreign acts through a domestic authorization theory was foreclosed. The case thus stands not for the proposition that overseas infringement is always beyond redress, but for the narrower and durable rule that the U.S. Copyright Act is not the vehicle for redressing it.

## Open questions

- **What counts as "entirely" abroad?** *Subafilms* addressed wholly foreign acts; cases mixing some domestic conduct with foreign exploitation continue to test where the predicate-act line falls.
- **Does any domestic infringement open the door to foreign damages?** Later courts have debated whether a completed U.S. infringement can support recovery of profits earned overseas, an issue *Subafilms* did not squarely resolve.
- **How far does the authorization right extend?** By tethering authorization to a cognizable primary act, the decision left open how the right operates in novel digital and cross-border distribution scenarios.

## Implications

- **Plan transactions, not lawsuits, for foreign markets.** Rightsholders cannot rely on U.S. courts to police purely foreign exploitation; contracts must allocate worldwide rights and choose governing law expressly.
- **Sue where the infringement happens.** The practical remedy for overseas copying is litigation under the destination country's copyright law, often invoking Berne Convention national-treatment principles.
- **The authorization right is derivative, not independent.** A domestic act of authorizing only creates liability if it is tied to an infringement the Copyright Act actually reaches.
- **Damages can be carved at the border.** Courts will excise the foreign-distribution components of damages, fees, and injunctions when liability rests on extraterritorial conduct.
- **Draft injunctions with territorial precision.** Relief premised on U.S. copyright cannot validly reach conduct occurring entirely outside the country.

## Frequently asked questions

**What did Subafilms decide about U.S. copyright law overseas?**
The en banc Ninth Circuit held that merely authorizing within the United States acts of infringement that occur entirely abroad does not state a claim under the U.S. Copyright Act, because the predicate foreign acts are themselves outside the statute's reach.

**What case did Subafilms overrule?**
It overruled *Peter Starr Production Co. v. Twin Continental Films* insofar as that decision held that domestic authorization of wholly extraterritorial infringement was actionable under U.S. copyright law.

**Can a rightsholder ever reach foreign infringement?**
Generally not under the U.S. Copyright Act for conduct occurring entirely abroad. The usual remedy is to sue under the copyright laws of the countries where the infringement occurs, often relying on international conventions like the Berne Convention.

## Authorities and sources

- Full opinion text, *Subafilms, Ltd. v. MGM-Pathe Communications Co.*, 24 F.3d 1088 (9th Cir. 1994) (en banc) (Public.Resource.Org): https://law.resource.org/pub/us/case/reporter/F3/024/24.F3d.1088.91-56289.91-56379.91-56248.html
- Case report (CaseMine): https://www.casemine.com/judgement/us/5914be02add7b049347a5a6e
- Harvard H2O case page: https://h2o.law.harvard.edu/cases/4075
- 17 U.S.C. Section 106 (exclusive rights, including the right "to authorize") (Cornell LII): https://www.law.cornell.edu/uscode/text/17/106