Zynga, Inc. v. Vostu USA, Inc., Case No. 11–CV–02959–EJD.

• Court: U.S. District Court — Northern District of California
• Writing for the Court: EDWARD J. DAVILA
• Citation: Zynga, Inc. v. Vostu USA, Inc., 816 F.Supp.2d 824 (N.D. Cal. 2011)
• Decision Date: 16 September 2011
• Docket Number: Case No. 11–CV–02959–EJD.
• Parties: ZYNGA, INC., Plaintiff/Counter-defendant, v. VOSTU USA, INC., Vostu LLC, Vostu, Ltd., Defendants/Counter-claimants.

816 F.Supp.2d 824

ZYNGA, INC., Plaintiff/Counter-defendant,

v.VOSTU USA, INC., Vostu LLC, Vostu, Ltd., Defendants/Counter-claimants.

Case No. 11–CV–02959–EJD.

United States District Court, N.D. California,San Jose Division.

Sept. 16, 2011.

Larry W. McFarland, Dennis L. Wilson, David K. Caplan, Christopher T. Varas, Tara D. Rose, Keats McFarland & Wilson LLP, Beverly Hills, CA, for Plaintiff.

OPINION RE ORDER DISSOLVING TEMPORARY RESTRAINING ORDER AND DENYING PRELIMINARY INJUNCTION

EDWARD J. DAVILA, District Judge.

This matter came before the Court on August 23, 2011, upon an order to show cause why Vostu's requested preliminary injunction should not be entered. For the reasons set forth below, the previously-issued temporary restraining order is dissolved, the order to show cause is discharged, and no preliminary injunction will issue.

I. BACKGROUND

Zynga and Vostu ¹ make and host games that people play with their friends on social platforms like Facebook. Zynga filed the instant action (the “U.S. action”) on June 16, 2011, claiming that five of Vostu's games infringe U.S. copyrights that Zynga holds in five of its own games. Vostu raises a number of affirmative defenses, and it counterclaims for declaratory judgment of noninfringement.

On August 2, Zynga initiated a separate lawsuit in Brazil (the “Brazilian action”) based on two causes of action: copyright infringement under Brazilian law, and concorrência desleal, a Brazilian species of unfair competition. (Luedtke Decl. Ex. J, Aug. 8, 2011, ECF No. 24.) The Brazilian Action involves four of the five games at issue in this case, and names two of the three defendants which are before this Court.² On August 3, without notice to Vostu, Zynga sought and obtained a preliminary injunction from the Brazilian court (the “Brazilian injunction”) ordering the defendants in that action “to cease the use, exhibition, edition, reproduction, distribution, sale, offer for sale, vehicleing or making available” of the four games within 48 hours. (Luedtke Decl. Ex. L.) The injunction included no provision limiting its geographical scope. Upon learning of the injunction, Vostu Brazil asked the Brazilian court to reconsider its decision. The court declined, but did extend the deadline for Vostu to comply with the order until August 12. (Luedtke Decl. Ex. N.)

On August 8, four days before the Brazilian injunction went into effect, Vostu filed an ex parte application for a temporary restraining order with this Court. (Defs.' Ex Parte Mot. TRO, ECF No. 22.) The application requested that Zynga be barred from enforcing the Brazilian injunction, and that Zynga be required to stay the litigation it initiated in Brazil until the instant action is resolved. The Court solicited and received briefing from Zynga. (Order Setting Deadline for Pls. to Respond, Aug. 8, 2011, ECF No. 28; Pl.'s Opp. TRO, Aug. 10, 2011, ECF No. 29.)

On August 11, upon review of the parties' written filings, this Court found that the parties had raised serious questions as to the propriety of an anti-suit injunction and granted Vostu's application in part. (Order Granting in Part Mot. TRO, ECF No. 60.) The TRO that issued was more limited in scope than the one Vostu had requested: while Zynga was enjoined from enforcing the Brazilian injunction, it was free to continue pursuing the Brazilian action. ( Id.) Concurrent with the TRO, the Court issued an Order to Show Cause why Vostu's original proposed preliminary injunction should not issue. ( Id.) The Court invited additional briefing on the issues specific to anti-suit injunctions, and heard argument on the matter on August 23. At the August 23 hearing, the TRO was extended to August 26. (Min. Entry, ECF No. 81.)

All the while, Vostu pursued an appeal of the injunction in Brazil. On August 15, an appeals court in São Paolo stayed the Brazilian injunction pending resolution of Vostu's interlocutory appeal. At the preliminary injunction hearing before this Court, the parties agreed that the interlocutory appellate review will likely take “months” to resolve. (Tr. of Proceedings Held on Aug. 23, 2011 at 20:13–19, 33:12–19, ECF No. 82).

II. LEGAL STANDARDS

To obtain preliminary injunctive relief, a party ordinarily must demonstrate (1) that she is likely to succeed on the merits, (2) that she is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in her favor, and (4) that an injunction is in the public interest. Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). The Ninth Circuit has developed a corollary to this test: a preliminary injunction may be appropriate if there are “serious questions going to the merits” and the balance of the hardships tips sharply in the applicant's favor, so long as the applicant also shows, as Winter requires, that the injunction is in the public interest and that irreparable injury is likely. Alliance for the Wild Rockies v. Cottrell, 622 F.3d 1045, 1052 (9th Cir.2010). This approach allows for preservation of the status quo where complex legal questions require further inspection or deliberation.

Where the injunction sought would prevent a party from litigating similar claims in a foreign court, the standard is different. To obtain an anti-suit injunction, the applicant is not required to show a likelihood of success on the merits of the underlying claim. Rather, it need only demonstrate that the factors specific to an anti-suit injunction weigh in its favor. E. & J. Gallo Winery v. Andina Licores S.A., 446 F.3d 984, 991 (9th Cir.2006). Those factors are: (1) whether or not the parties and the issues are the same, and whether or not the first action is dispositive of the action to be enjoined; (2) whether the foreign litigation would frustrate a policy of the forum issuing the injunction; ³ and (3) whether the impact on comity would be tolerable. Applied Med. Distribution v. Surgical Co. BV, 587 F.3d 909, 913 (9th Cir.2009) ( citing Gallo, 446 F.3d at 991, 994).⁴

III. ANALYSIS

The August 11 TRO issued on the basis of “serious questions” as to whether an anti-suit injunction is warranted in this case. The parties briefed the issue further, and this Order considers and resolves those serious questions against the issuance of a preliminary injunction.

A. Effect of the U.S. Action on the Brazil Action

“Whether or not the parties and the issues are the same, and whether or not the first action is dispositive of the action to be enjoined” is a threshold question in the anti-suit injunction analysis. Applied Medical Distribution, 587 F.3d at 918; Gallo, 446 F.3d at 991.

1. Whether the Parties are the Same in the U.S. and Brazil Actions

Perfect identity of parties is not required for an anti-suit injunction. Rather, it suffices that the parties be affiliated in such a way that their interests coincide. See, e.g., Int'l Equity Invs., Inc. v. Opportunity Equity Partners Ltd., 441 F.Supp.2d 552, 562 (S.D.N.Y.2006).

The table below summarizes the parties in the two pending actions.

+-------------------------------------------+
                ¦                ¦U.S. Action ¦Brazil Action¦
                +----------------+------------+-------------¦
                ¦Zynga, Inc.     ¦Plaintiff   ¦Plaintiff    ¦
                +----------------+------------+-------------¦
                ¦Vostu, Ltd.     ¦Defendant   ¦Defendant    ¦
                +----------------+------------+-------------¦
                ¦Vostu USA, Inc. ¦Defendant   ¦Defendant    ¦
                +----------------+------------+-------------¦
                ¦Vostu LLC       ¦Defendant   ¦—            ¦
                +----------------+------------+-------------¦
                ¦Vostu Brazil    ¦—           ¦Defendant    ¦
                +----------------+------------+-------------¦
                ¦Google Brazil   ¦—           ¦Defendant    ¦
                +-------------------------------------------+
                

The interests of the defendants in the two actions substantially coincide. As a practical matter, the absence of Vostu LLC from the Brazil action will have no effect on whether the U.S. action might dispose of the Brazilian one. Vostu LLC does not appear to conduct any business or own any assets, and the complaint does not allege any facts against Vostu LLC specifically. ( See Kafie Decl. ¶ 3, Aug. 8, 2011, ECF No. 27.)

Likewise, the presence of the Brazilian affiliates of Vostu and Google does not defeat “sameness.” Vostu Brazil is held in trust for Vostu, Ltd. by Vostu, Ltd.'s CEO, Daniel Kafie. (Kafie Decl. ¶ 4.) Google's Brazilian affiliate is only named in the Brazil action to comply with Brazilian procedural law. (Luedtke Decl. Ex. J ¶ 22.) The Brazilian complaint specifically exempts Google Brazil from its prayer for damages; the only relief sought against Google Brazil is an injunction ordering the takedown of Vostu's games. ( Id. ¶ 79.)

Accordingly, in the temporary restraining order, this Court held that the parties in the Brazil and U.S. actions are sufficiently “the same” to issue an anti-suit injunction. The TRO invited further factual showings to rebut the conclusion made in the TRO, but none were made. The holding therefore stands.

2. Whether the Issues are the Same in the U.S. and Brazil Actions

Anti-suit injunctions are only appropriate when the domestic action is capable of disposing all of the issues in the foreign action. Applied Medical Distribution, 587 F.3d at 915. When the parties in the two actions are the same, the two questions of whether “the issues are the same” and whether “the domestic action is dispositive of the foreign action” collapse into one. Id.

Vostu argues that the purportedly copyrighted works and the alleged acts of copying are the same in both actions, and that Brazilian and American copyright law are essentially the same in all relevant respects. Vostu points to a recent Ninth Circuit case which holds that the issues need not be “identical,” but only “functionally the same.” Id. at 915–16.

Zynga responds that because copyright law is not extraterritorial, the U.S. action (which pleads only U.S. law) is incapable of...