Adobe Systems Incorporated v. Kornrumpf

Filing 136


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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 ADOBE SYSTEMS INCORPORATED, 5 6 7 8 Plaintiff, v. HOOPS ENTERPRISE LLC; and ANTHONY KORNRUMPF, United States District Court For the Northern District of California 11 ORDER GRANTING IN PART PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION (Docket No. 109) Defendants. 9 10 No. C 10-2769 CW ________________________________/ AND ALL RELATED CLAIMS ________________________________/ 12 13 Plaintiff Adobe Systems Incorporated seeks a preliminary 14 injunction preventing Defendants Anthony Kornrumpf and Hoops 15 Enterprise, LLC from engaging in any business whatsoever with 16 unauthorized Adobe products pending the outcome of this 17 litigation. Defendants oppose the motion. Having considered the 18 papers filed by the parties and oral arguments, the Court GRANTS 19 20 Adobe’s motion in part. 21 BACKGROUND 22 Adobe initiated this copyright and trademark infringement 23 lawsuit on June 24, 2010, alleging that Defendants sell Adobe 24 software through the use of the Internet auction site eBay and the 25 website, among other services, and that Adobe 26 has not licensed Defendants to make or distribute copies of its 27 software. 28 Adobe also alleges that Defendants use, without a 1 license, images similar or identical to Adobe trademarks as part 2 of their online business. 3 Copyright Act, 17 U.S.C. §§ 101, et seq., and the Lanham Act, 15 4 U.S.C. §§ 1501, et seq. 5 6 Adobe seeks relief pursuant to the Adobe states that it distributes software for which it holds the copyright pursuant to restricted licensing agreements and does 7 not transfer title to the software at any time. Coombs Decl. ¶ 4, 8 9 Ex. C (Stickle Decl.) ¶ 5. The licensing agreements restrict the United States District Court For the Northern District of California 10 use, location of distribution, transfer and sometimes who is 11 qualified to obtain the product. 12 software that Adobe distributes is Original Equipment Manufacturer 13 (OEM) products that are distributed in a bundle with approved 14 hardware components. Id. Id. at ¶ 7. One type of restricted The bundles are 15 product-specific and Adobe’s product may not be unbundled and sold 16 separately or re-bundled with products not previously approved by 17 18 19 Adobe. Id. In conjunction with Defendants’ prior motion for a 20 preliminary injunction, Defendants proffered evidence of a 21 contract Adobe uses with hardware manufacturers for the 22 distribution of its software. 23 See Boyce Decl. in Supp. of Defs.’ Mot. for Prelim. Inj., Docket No. 69, ¶ 15. The contract states 24 that Adobe provides only licenses to the manufacturer and that the 25 26 manufacturer “shall not at any stage have title to the physical 27 property or the Intellectual Property in the Software Products.” 28 Boyce Decl. in Supp. of Defs.’ Mot. for Prelim. Inj., Ex. E 2 1 ¶ 12.3. 2 the “actual contracts executed by Adobe do not match the 3 ‘template’ previously provided,” Opp. at 12, Defendants do not 4 offer copies of these contracts, describe how they differ from the 5 contract previously offered into evidence, or argue that the 6 While Defendants state that discovery has revealed that actual contracts differ from the restrictive terms described above 7 in the Stickle declaration. 8 9 Defendants purchase OEM versions of software that have been United States District Court For the Northern District of California 10 unbundled from the hardware with which they were originally 11 packaged. 12 Tr.) 80:24-82:15; Kornrumpf Decl. ¶¶ 2, 5. 13 other software products as well, the majority of their business is 14 based on Adobe products. Coombs Decl. ¶¶ 2, 5, Ex. A ¶ 2, Ex. D (Kornrumpf Depo. While Defendants sell Kornrumpf Decl. ¶ 13. Until earlier 15 this year, Defendants resold the OEM software through eBay. Id. 16 at ¶¶ 8, 13. The resold software was sometimes sold by itself and 17 18 was sometimes packaged with items such as a piece of photo paper, 19 a blank DVD, or a media card reader, which Adobe had not 20 authorized for bundling. 21 Decl.) ¶¶ 5-11; Stickle Decl. ¶¶ 9, 10; Kornrumpf Depo. Tr. 22 44:2-24. 23 Coombs Decl. ¶ 3, Ex. B (Fernandez Adobe, through an investigator, made several test purchases of Adobe OEM software from Defendants through their eBay 24 monikers. Fernandez Decl. ¶¶ 5-11; Stickle Decl. ¶¶ 9, 10; Boyce 25 26 27 28 Decl. ¶ 10, Ex. 3. In October and November 2010 and April 2011, Adobe, through the Software and Information Industry Association (SIIA), sent 3 1 take-down notices to eBay regarding Defendants’ sale of Adobe OEM 2 products through that website. 3 Decl. in Support of Pl.’s Opp. to Defs.’ Mot. for a Prelim. Inj., 4 Docket No. 75, ¶ 3, Ex. M. 5 eBay ceased allowing Defendants to sell Adobe products through its 6 Kornrumpf Decl. ¶¶ 6, 13; Wang After receiving the notices this year, website, until and unless Defendants provide eBay with a court 7 order or other resolution of the instant lawsuit allowing 8 9 United States District Court For the Northern District of California 10 Defendants to resume these sales. Kornrumpf Decl. ¶ 13. On July 20, 2011, Adobe’s investigator purchased an OEM copy 11 of Adobe Acrobat 8 Standard from Defendants’ website. Boyce Decl. 12 ¶ 10, Ex. 3. 13 18, 2011, Adobe learned that Defendants have also continued to 14 sell Adobe OEM products through other means, including to other During its deposition of Defendants on August 16 and 15 suppliers and directly to other past customers, and that they 16 intend to continue to do so. Kornrumpf Depo. Tr. 21:16-23:11; 17 18 103:13-23. 19 On November 2, 2011, Adobe filed the instant motion seeking a 20 preliminary injunction prohibiting Defendants from engaging in any 21 business whatsoever with any unauthorized Adobe products, pending 22 the outcome of this litigation. 23 LEGAL STANDARD 24 “A plaintiff seeking a preliminary injunction must establish 25 26 that he is likely to succeed on the merits, that he is likely to 27 suffer irreparable harm in the absence of preliminary relief, that 28 the balance of equities tips in his favor, and that an injunction 4 1 is in the public interest.” 2 Inc., 555 U.S. 7, 20 (2008). 3 injunction could issue where the likelihood of success is such 4 that serious questions going to the merits were raised and the 5 balance of hardships tips sharply in plaintiff’s favor,” so long 6 Winter v. Natural Res. Def. Council, Alternatively, “a preliminary as the plaintiff demonstrates irreparable harm and shows that the 7 injunction is in the public interest. Alliance for the Wild 8 9 United States District Court For the Northern District of California 10 Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011) (citation and internal quotation and editing marks omitted). A court employs a sliding scale when considering a 11 12 plaintiff’s showing as to the likelihood of success on the merits 13 and the likelihood of irreparable harm. 14 approach, the elements of the preliminary injunction test are Id. “Under this 15 balanced, so that a stronger showing of one element may offset a 16 weaker showing of another.” Id. 17 DISCUSSION 18 Defendants argue that Adobe has not established any of the 19 20 relevant factors under Winter and that their proposed injunction 21 is overly broad. 22 I. 23 Likelihood of Success on the Merits Adobe argues that it is likely to succeed on the merits, 24 because it licenses, rather than sells, its software and retains 25 26 the right to distribution of the software, and Defendant sells 27 Adobe’s OEM software in violation of Adobe’s licensing 28 restrictions on these products. 5 1 “Copyright is a federal law protection provided to the 2 authors of ‘original works of authorship,’ including software 3 programs.” 4 Cir. 2010) (citing 17 U.S.C. §§ 101-103). 5 confers several exclusive rights on copyright owners, including 6 Vernor v. Autodesk, Inc., 621 F.3d 1102, 1106 (9th “The Copyright Act the exclusive rights . . . to distribute their works by sale or 7 rental.” Id. at 1106-07 (citing 17 U.S.C. § 106(3)). Copyright 8 9 infringement occurs whenever someone “violates any of the United States District Court For the Northern District of California 10 exclusive rights of the copyright owner,” including the exclusive 11 distribution right. 12 distribution right is limited by the first sale doctrine, an 13 affirmative defense to copyright infringement that allows owners 14 of copies of copyrighted works to resell those copies.” 17 U.S.C. §§ 106(3), 501. “The exclusive Vernor, 15 621 F.3d at 1107. However, this affirmative defense is 16 unavailable to “those who are only licensed to use their copies of 17 18 copyrighted works.” 19 than an owner of a copy where the copyright owner (1) specifies 20 that the user is granted a license; (2) significantly restricts 21 the user’s ability to transfer the software; 22 notable use restrictions.” 23 Id. “[A] software user is a licensee rather and (3) imposes Id. at 1111. Defendants do not dispute the evidence that they distribute 24 Adobe software in a way that does not comply with the restrictions 25 26 that Adobe has placed on distribution. Instead, Defendants’ 27 opposition relies entirely on their challenge to Adobe’s argument 28 that the first sale doctrine is not applicable to this case. 6 1 However, there is substantial evidence before the Court, which 2 Defendants have not submitted any evidence to rebut, that Adobe’s 3 distribution agreements meet the Vernor requirements, namely that 4 they specify that the user is granted a license, they 5 significantly restrict the user’s ability to transfer the 6 software, and they impose notable use restrictions. 7 Accordingly, the Court finds that Adobe has made a strong 8 9 showing that it is likely to prevail on its copyright infringement United States District Court For the Northern District of California 10 claim. 11 II. 12 Irreparable Harm Adobe argues that, without an injunction, it will suffer 13 irreparable harm, because of the placing of unauthorized goods 14 into the stream of commerce, damage to customer confidence that 15 Adobe will provide them with a high quality, genuine product, 16 backed by quality customer service, interference with Adobe’s 17 18 ability to ensure that their products are only bundled with high 19 quality goods and loss of the unique personality and allure of its 20 products. 21 22 23 Defendants’ primary argument against a finding of irreparable harm is the amount of time that it took for Adobe to file for a preliminary injunction. Defendants argue that Adobe 24 knew that Defendants continued to sell these products throughout 25 26 27 the pendency of this action and cannot now credibly argue that it is at risk of irreparable harm. 28 7 1 The evidence in the record does not support Defendants’ 2 argument. 3 Defendants offer proof only that Adobe knew that Defendants were 4 continuing to sell the products on eBay, not through other 5 channels. 6 For most of the time since the lawsuit was filed, That Adobe knew that Defendants were selling their products on eBay does not undercut a finding of irreparable harm, 7 because Adobe took steps to stop Defendants from selling their 8 9 products on eBay by taking action directly with eBay. There is United States District Court For the Northern District of California 10 evidence in the record that Adobe learned of the continued sales 11 through means other than eBay in two ways: through its 12 investigator’s purchase of an OEM copy of Adobe Acrobat 8 Standard 13 from Defendants’ website on July 20, 2011; and through a 14 deposition that took place on August 16 and 18, 2011. See 15 Kornrumpf Depo. Tr. 1; Boyce Decl. ¶ 10, Ex. 3. Adobe filed this 16 motion on November 2, 2011. Thus, Adobe filed this motion about 17 18 two and a half to three and a half months after it found out that 19 Defendants were continuing to sell its products through means 20 other than eBay. 21 weighs slightly against a finding of irreparable harm, it is not 22 determinative when compared to the harm of which Adobe complains. 23 However, while this relatively short delay Defendants also argue that the harm that Adobe complains of 24 is “negligible at best.” Opp. at 10. Defendants state that Adobe 25 26 27 has already been paid for the software by the OEM manufacturer and that Defendants are selling the unaltered and authentic OEM 28 8 1 software in “sleeve only packaging,” the same condition that Adobe 2 allows manufacturers to sell the software to users. 3 Id. at 10-11. However, Defendants’ argument fails to recognize the 4 differences between the Adobe’s OEM software and retail software, 5 which harms their customers’ experiences and Adobe’s reputation. 6 Adobe testifies that its OEM software generally does not come with 7 the same level of customer service as its retail software and that 8 9 unauthorized sales harm its relationship and reputation with United States District Court For the Northern District of California 10 consumers when Adobe is unable to provide support to consumers who 11 did not know they were receiving restricted software, which Adobe 12 testifies has happened many times. 13 Defendants’ sale of unbundled OEM products also interferes with 14 Adobe’s attempts to control distribution of software and offer Stickle Decl. ¶¶ 7, 12. 15 discounted licenses to those who fall into a particular category, 16 such as those who have purchased a particular piece of hardware. 17 18 19 Id. at ¶¶ 6-7. The harm to Adobe’s reputation, goodwill and ability to 20 control the distribution of its software is sufficient to 21 establish irreparable harm. 22 Corp., 673 F. Supp. 2d 943, 949, 949 n.2 (N.D. Cal. 2009), aff’d, 23 See, e.g., Apple Inc. v. Psystar 658 F.3d 1150 (9th Cir. 2011) (citing Rent-a-Center, Inc. v. 24 Canyon Television & Appliance, 944 F.2d 597, 603 (9th Cir. 1991)). 25 26 Further, the fact that the harm that Adobe will suffer is 27 difficult to quantify also supports a finding of irreparable harm. 28 Rent-a-Center, 944 F.2d at 603 (upholding district court’s finding 9 1 that damages that are “difficult to valuate . . . thus constituted 2 possible irreparable harm”). 3 III. Balance of Equities 4 5 6 Defendants argue that, if the requested injunction is granted, their business “would be effectively shut down,” and that thus the balance of hardships weighs in their favor. However, 7 Defendants’ sworn statements do not actually support a finding 8 9 that they will no longer be able to conduct any business United States District Court For the Northern District of California 10 whatsoever if the proposed preliminary injunction were issued. 11 Further, being prevented from selling software that one is not 12 authorized to sell does not constitute a hardship. 13 the Court finds that, in light of the irreparable harm to Adobe 14 described above, the balance of equities favors Adobe. Accordingly, 15 IV. The Public Interest 16 Both parties agree that the relevant question for this factor 17 18 is whether the proposed injunction will disserve the public 19 interest, not whether it will promote the public interest. 20 at 4; Reply, at 7. 21 interest will be disserved by the proposed injunction, and instead 22 seek to refute Adobe’s argument that the public interest will be 23 Opp. Defendants make no argument that the public served by prohibiting deceptive practices that mislead customers. 24 Defendants repeat their earlier argument that customers are not 25 26 misled by their sales activity, because they sell genuine Adobe 27 products. However, Defendants again do not address the previously 28 described evidence of the differences between Adobe’s OEM and 10 1 retail products. 2 injunction is in the public interest. 3 V. 4 5 6 Accordingly, the Court finds that a preliminary Breadth of the Requested Preliminary Injunction The Court, however, is persuaded by Defendants’ argument that the proposed preliminary injunction is overly broad, because it prohibits them from “engaging in any business whatsoever with any 7 unauthorized Adobe products” without specifying what the 8 9 prohibited business practices and products are. Accordingly, the United States District Court For the Northern District of California 10 Court limits the preliminary injunction to prohibit Defendants 11 from “selling, offering for sale, distributing, or transferring 12 any Adobe Original Equipment Manufacturer (OEM) product separately 13 from the hardware with which it was licensed to be distributed.” 14 CONCLUSION 15 For the reasons set forth above, Adobe’s motion for a 16 preliminary injunction is GRANTED in part (Docket No. 109). A 17 18 19 preliminary injunction will be entered as a separate document. IT IS SO ORDERED. 20 21 22 Dated: 12/16/2011 CLAUDIA WILKEN United States District Judge 23 24 25 26 27 28 11

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