Adobe Systems Incorporated v. Kornrumpf
Filing
136
ORDER by Judge Claudia Wilken GRANTING IN PART PLAINTIFFS 109 MOTION FOR A PRELIMINARY INJUNCTION. (ndr, COURT STAFF) (Filed on 12/16/2011)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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ADOBE SYSTEMS INCORPORATED,
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Plaintiff,
v.
HOOPS ENTERPRISE LLC; and ANTHONY
KORNRUMPF,
United States District Court
For the Northern District of California
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ORDER GRANTING IN
PART PLAINTIFF’S
MOTION FOR A
PRELIMINARY
INJUNCTION
(Docket No. 109)
Defendants.
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No. C 10-2769 CW
________________________________/
AND ALL RELATED CLAIMS
________________________________/
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Plaintiff Adobe Systems Incorporated seeks a preliminary
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injunction preventing Defendants Anthony Kornrumpf and Hoops
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Enterprise, LLC from engaging in any business whatsoever with
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unauthorized Adobe products pending the outcome of this
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litigation.
Defendants oppose the motion.
Having considered the
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papers filed by the parties and oral arguments, the Court GRANTS
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Adobe’s motion in part.
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BACKGROUND
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Adobe initiated this copyright and trademark infringement
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lawsuit on June 24, 2010, alleging that Defendants sell Adobe
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software through the use of the Internet auction site eBay and the
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website www.lookoutdeals.com, among other services, and that Adobe
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has not licensed Defendants to make or distribute copies of its
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software.
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Adobe also alleges that Defendants use, without a
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license, images similar or identical to Adobe trademarks as part
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of their online business.
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Copyright Act, 17 U.S.C. §§ 101, et seq., and the Lanham Act, 15
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U.S.C. §§ 1501, et seq.
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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
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not transfer title to the software at any time.
Coombs Decl. ¶ 4,
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Ex. C (Stickle Decl.) ¶ 5.
The licensing agreements restrict the
United States District Court
For the Northern District of California
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use, location of distribution, transfer and sometimes who is
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qualified to obtain the product.
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software that Adobe distributes is Original Equipment Manufacturer
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(OEM) products that are distributed in a bundle with approved
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hardware components.
Id.
Id. at ¶ 7.
One type of restricted
The bundles are
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product-specific and Adobe’s product may not be unbundled and sold
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separately or re-bundled with products not previously approved by
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Adobe.
Id.
In conjunction with Defendants’ prior motion for a
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preliminary injunction, Defendants proffered evidence of a
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contract Adobe uses with hardware manufacturers for the
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distribution of its software.
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See Boyce Decl. in Supp. of Defs.’
Mot. for Prelim. Inj., Docket No. 69, ¶ 15. The contract states
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that Adobe provides only licenses to the manufacturer and that the
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manufacturer “shall not at any stage have title to the physical
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property or the Intellectual Property in the Software Products.”
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Boyce Decl. in Supp. of Defs.’ Mot. for Prelim. Inj., Ex. E
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¶ 12.3.
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the “actual contracts executed by Adobe do not match the
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‘template’ previously provided,” Opp. at 12, Defendants do not
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offer copies of these contracts, describe how they differ from the
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contract previously offered into evidence, or argue that the
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While Defendants state that discovery has revealed that
actual contracts differ from the restrictive terms described above
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in the Stickle declaration.
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Defendants purchase OEM versions of software that have been
United States District Court
For the Northern District of California
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unbundled from the hardware with which they were originally
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packaged.
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Tr.) 80:24-82:15; Kornrumpf Decl. ¶¶ 2, 5.
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other software products as well, the majority of their business is
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based on Adobe products.
Coombs Decl. ¶¶ 2, 5, Ex. A ¶ 2, Ex. D (Kornrumpf Depo.
While Defendants sell
Kornrumpf Decl. ¶ 13.
Until earlier
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this year, Defendants resold the OEM software through eBay.
Id.
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at ¶¶ 8, 13.
The resold software was sometimes sold by itself and
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was sometimes packaged with items such as a piece of photo paper,
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a blank DVD, or a media card reader, which Adobe had not
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authorized for bundling.
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Decl.) ¶¶ 5-11; Stickle Decl. ¶¶ 9, 10; Kornrumpf Depo. Tr.
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44:2-24.
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Coombs Decl. ¶ 3, Ex. B (Fernandez
Adobe, through an investigator, made several test
purchases of Adobe OEM software from Defendants through their eBay
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monikers.
Fernandez Decl. ¶¶ 5-11; Stickle Decl. ¶¶ 9, 10; Boyce
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Decl. ¶ 10, Ex. 3.
In October and November 2010 and April 2011, Adobe, through
the Software and Information Industry Association (SIIA), sent
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take-down notices to eBay regarding Defendants’ sale of Adobe OEM
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products through that website.
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Decl. in Support of Pl.’s Opp. to Defs.’ Mot. for a Prelim. Inj.,
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Docket No. 75, ¶ 3, Ex. M.
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eBay ceased allowing Defendants to sell Adobe products through its
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Kornrumpf Decl. ¶¶ 6, 13; Wang
After receiving the notices this year,
website, until and unless Defendants provide eBay with a court
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order or other resolution of the instant lawsuit allowing
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United States District Court
For the Northern District of California
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Defendants to resume these sales.
Kornrumpf Decl. ¶ 13.
On July 20, 2011, Adobe’s investigator purchased an OEM copy
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of Adobe Acrobat 8 Standard from Defendants’ website.
Boyce Decl.
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¶ 10, Ex. 3.
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18, 2011, Adobe learned that Defendants have also continued to
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sell Adobe OEM products through other means, including to other
During its deposition of Defendants on August 16 and
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suppliers and directly to other past customers, and that they
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intend to continue to do so.
Kornrumpf Depo. Tr. 21:16-23:11;
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103:13-23.
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On November 2, 2011, Adobe filed the instant motion seeking a
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preliminary injunction prohibiting Defendants from engaging in any
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business whatsoever with any unauthorized Adobe products, pending
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the outcome of this litigation.
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LEGAL STANDARD
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“A plaintiff seeking a preliminary injunction must establish
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that he is likely to succeed on the merits, that he is likely to
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suffer irreparable harm in the absence of preliminary relief, that
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the balance of equities tips in his favor, and that an injunction
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is in the public interest.”
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Inc., 555 U.S. 7, 20 (2008).
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injunction could issue where the likelihood of success is such
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that serious questions going to the merits were raised and the
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balance of hardships tips sharply in plaintiff’s favor,” so long
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Winter v. Natural Res. Def. Council,
Alternatively, “a preliminary
as the plaintiff demonstrates irreparable harm and shows that the
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injunction is in the public interest.
Alliance for the Wild
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United States District Court
For the Northern District of California
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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
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plaintiff’s showing as to the likelihood of success on the merits
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and the likelihood of irreparable harm.
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approach, the elements of the preliminary injunction test are
Id.
“Under this
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balanced, so that a stronger showing of one element may offset a
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weaker showing of another.”
Id.
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DISCUSSION
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Defendants argue that Adobe has not established any of the
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relevant factors under Winter and that their proposed injunction
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is overly broad.
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I.
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Likelihood of Success on the Merits
Adobe argues that it is likely to succeed on the merits,
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because it licenses, rather than sells, its software and retains
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the right to distribution of the software, and Defendant sells
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Adobe’s OEM software in violation of Adobe’s licensing
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restrictions on these products.
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“Copyright is a federal law protection provided to the
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authors of ‘original works of authorship,’ including software
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programs.”
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Cir. 2010) (citing 17 U.S.C. §§ 101-103).
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confers several exclusive rights on copyright owners, including
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Vernor v. Autodesk, Inc., 621 F.3d 1102, 1106 (9th
“The Copyright Act
the exclusive rights . . . to distribute their works by sale or
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rental.”
Id. at 1106-07 (citing 17 U.S.C. § 106(3)).
Copyright
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infringement occurs whenever someone “violates any of the
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For the Northern District of California
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exclusive rights of the copyright owner,” including the exclusive
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distribution right.
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distribution right is limited by the first sale doctrine, an
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affirmative defense to copyright infringement that allows owners
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of copies of copyrighted works to resell those copies.”
17 U.S.C. §§ 106(3), 501.
“The exclusive
Vernor,
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621 F.3d at 1107.
However, this affirmative defense is
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unavailable to “those who are only licensed to use their copies of
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copyrighted works.”
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than an owner of a copy where the copyright owner (1) specifies
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that the user is granted a license; (2) significantly restricts
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the user’s ability to transfer the software;
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notable use restrictions.”
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Id.
“[A] software user is a licensee rather
and (3) imposes
Id. at 1111.
Defendants do not dispute the evidence that they distribute
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Adobe software in a way that does not comply with the restrictions
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that Adobe has placed on distribution.
Instead, Defendants’
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opposition relies entirely on their challenge to Adobe’s argument
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that the first sale doctrine is not applicable to this case.
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However, there is substantial evidence before the Court, which
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Defendants have not submitted any evidence to rebut, that Adobe’s
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distribution agreements meet the Vernor requirements, namely that
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they specify that the user is granted a license, they
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significantly restrict the user’s ability to transfer the
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software, and they impose notable use restrictions.
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Accordingly, the Court finds that Adobe has made a strong
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showing that it is likely to prevail on its copyright infringement
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For the Northern District of California
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claim.
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II.
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Irreparable Harm
Adobe argues that, without an injunction, it will suffer
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irreparable harm, because of the placing of unauthorized goods
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into the stream of commerce, damage to customer confidence that
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Adobe will provide them with a high quality, genuine product,
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backed by quality customer service, interference with Adobe’s
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ability to ensure that their products are only bundled with high
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quality goods and loss of the unique personality and allure of its
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products.
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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
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knew that Defendants continued to sell these products throughout
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the pendency of this action and cannot now credibly argue that it
is at risk of irreparable harm.
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The evidence in the record does not support Defendants’
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argument.
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Defendants offer proof only that Adobe knew that Defendants were
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continuing to sell the products on eBay, not through other
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channels.
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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,
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because Adobe took steps to stop Defendants from selling their
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products on eBay by taking action directly with eBay.
There is
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For the Northern District of California
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evidence in the record that Adobe learned of the continued sales
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through means other than eBay in two ways: through its
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investigator’s purchase of an OEM copy of Adobe Acrobat 8 Standard
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from Defendants’ website on July 20, 2011; and through a
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deposition that took place on August 16 and 18, 2011.
See
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Kornrumpf Depo. Tr. 1; Boyce Decl. ¶ 10, Ex. 3.
Adobe filed this
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motion on November 2, 2011.
Thus, Adobe filed this motion about
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two and a half to three and a half months after it found out that
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Defendants were continuing to sell its products through means
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other than eBay.
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weighs slightly against a finding of irreparable harm, it is not
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determinative when compared to the harm of which Adobe complains.
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However, while this relatively short delay
Defendants also argue that the harm that Adobe complains of
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is “negligible at best.”
Opp. at 10.
Defendants state that Adobe
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has already been paid for the software by the OEM manufacturer and
that Defendants are selling the unaltered and authentic OEM
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software in “sleeve only packaging,” the same condition that Adobe
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allows manufacturers to sell the software to users.
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Id. at 10-11.
However, Defendants’ argument fails to recognize the
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differences between the Adobe’s OEM software and retail software,
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which harms their customers’ experiences and Adobe’s reputation.
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Adobe testifies that its OEM software generally does not come with
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the same level of customer service as its retail software and that
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unauthorized sales harm its relationship and reputation with
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For the Northern District of California
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consumers when Adobe is unable to provide support to consumers who
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did not know they were receiving restricted software, which Adobe
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testifies has happened many times.
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Defendants’ sale of unbundled OEM products also interferes with
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Adobe’s attempts to control distribution of software and offer
Stickle Decl. ¶¶ 7, 12.
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discounted licenses to those who fall into a particular category,
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such as those who have purchased a particular piece of hardware.
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Id. at ¶¶ 6-7.
The harm to Adobe’s reputation, goodwill and ability to
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control the distribution of its software is sufficient to
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establish irreparable harm.
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Corp., 673 F. Supp. 2d 943, 949, 949 n.2 (N.D. Cal. 2009), aff’d,
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See, e.g.,
Apple Inc. v. Psystar
658 F.3d 1150 (9th Cir. 2011) (citing Rent-a-Center, Inc. v.
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Canyon Television & Appliance, 944 F.2d 597, 603 (9th Cir. 1991)).
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Further, the fact that the harm that Adobe will suffer is
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difficult to quantify also supports a finding of irreparable harm.
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Rent-a-Center, 944 F.2d at 603 (upholding district court’s finding
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that damages that are “difficult to valuate . . . thus constituted
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possible irreparable harm”).
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III. Balance of Equities
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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,
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Defendants’ sworn statements do not actually support a finding
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that they will no longer be able to conduct any business
United States District Court
For the Northern District of California
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whatsoever if the proposed preliminary injunction were issued.
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Further, being prevented from selling software that one is not
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authorized to sell does not constitute a hardship.
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the Court finds that, in light of the irreparable harm to Adobe
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described above, the balance of equities favors Adobe.
Accordingly,
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IV.
The Public Interest
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Both parties agree that the relevant question for this factor
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is whether the proposed injunction will disserve the public
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interest, not whether it will promote the public interest.
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at 4; Reply, at 7.
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interest will be disserved by the proposed injunction, and instead
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seek to refute Adobe’s argument that the public interest will be
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Opp.
Defendants make no argument that the public
served by prohibiting deceptive practices that mislead customers.
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Defendants repeat their earlier argument that customers are not
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misled by their sales activity, because they sell genuine Adobe
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products.
However, Defendants again do not address the previously
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described evidence of the differences between Adobe’s OEM and
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retail products.
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injunction is in the public interest.
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V.
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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
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unauthorized Adobe products” without specifying what the
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prohibited business practices and products are.
Accordingly, the
United States District Court
For the Northern District of California
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Court limits the preliminary injunction to prohibit Defendants
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from “selling, offering for sale, distributing, or transferring
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any Adobe Original Equipment Manufacturer (OEM) product separately
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from the hardware with which it was licensed to be distributed.”
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CONCLUSION
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For the reasons set forth above, Adobe’s motion for a
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preliminary injunction is GRANTED in part (Docket No. 109).
A
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preliminary injunction will be entered as a separate document.
IT IS SO ORDERED.
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Dated:
12/16/2011
CLAUDIA WILKEN
United States District Judge
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