Adobe Systems Incorporated v. Kornrumpf
Filing
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ORDER by Judge Claudia Wilken GRANTING PLAINTIFFS 135 MOTION FOR PARTIAL SUMMARY JUDGMENT. (ndr, COURT STAFF) (Filed on 2/1/2012)
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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
PLAINTIFF’S MOTION
FOR PARTIAL
SUMMARY JUDGMENT
(Docket No. 135)
Defendants.
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No. C 10-2769 CW
________________________________/
AND ALL RELATED CLAIMS
________________________________/
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Plaintiff Adobe Systems LLC moves for partial summary
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judgment, finding the first sale defense inapplicable and granting
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judgment in its favor on the counterclaim against it brought by
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Defendants Anthony Kornrumpf and Hoops Enterprise, LLC.1
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Defendants oppose Adobe’s motion.
Having considered the papers
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submitted by the parties and their oral arguments at the hearing,
the Court GRANTS Adobe’s motion.
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In the title of its motion, Adobe states that it seeks
summary judgment “finding no contractual release of OEM sales,”
among other things. Mot. at i. However, Adobe did not move on
this basis in its papers or address this topic in any way.
Accordingly, the Court assumes that Adobe titled its motion in
error.
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BACKGROUND2
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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.
Adobe also alleges that Defendants use, without a
license, images similar or identical to Adobe trademarks as part
United States District Court
For the Northern District of California
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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
Defendants filed counterclaims against Adobe for a
declaratory judgment of copyright misuse and violation of
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California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code
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§§ 17200, et seq.
In particular, Defendants contend that Adobe
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misuses its copyrights by asserting them in contravention of the
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first sale doctrine, as codified in 17 U.S.C. § 109.
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also assert copyright misuse and the first sale doctrine as
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affirmative defenses.
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Defendants
Answer ¶¶ 10, 23.
On January 19, 2011, the Court dismissed Defendants’ original
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counterclaims.
Docket No. 47.
Defendants then filed their First
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Amended Counterclaims, re-alleging both of their counter-claims.
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Adobe
Defendants.
not material
overruled as
has objected to some of the evidence submitted by
Because the evidence to which Adobe has objected was
to the Court’s decision, Adobe’s objections are
moot.
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Docket No. 50.
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prejudice Defendants’ counterclaim for declaratory judgment of
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copyright misuse but denied Adobe’s motion to dismiss Defendants’
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UCL counterclaim.
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On July 25, 2011, the Court dismissed with
Docket No. 94.
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. ¶ 2,
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Ex. A (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.
Defendants acknowledge that they have sold OEM copies of
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Adobe’s software and that the software they have sold comes from
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several companies, including Dell and Hewlett-Packard.
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8-9, 11; Kornrumpf Decl. ¶¶ 3, 5; Coombs Decl. ¶ 3, Ex. B
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(Kornrumpf Depo.) Tr. 20:5-6.
Opp. at 2,
Defendants admit that “[o]ne
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specific title of software that originated through Dell that
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Defendants have sold is Photoshop Elements 8.”
Opp. at 8-9.
Defendants further concede that “[o]ne specific tile of software
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that originated through Hewlett Packard Company that Defendants
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have sold is Premiere Pro CS4.”
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Id. at 11.
Defendants obtain Adobe OEM versions of software that have
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been unbundled from the hardware with which they were originally
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packaged.
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Kornrumpf Depo. Tr. 148:18-149:10.
sell the software.
Defendants then
See, e.g., id. at 14:2-6, 43:5-45:6.
When
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they sell Adobe OEM software, Defendants generally package it with
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items such as a piece of photo paper, a blank DVD, or a media card
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For the Northern District of California
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reader, which Adobe had not authorized for bundling.
Stickle
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Decl. ¶¶ 9, 10; Kornrumpf Depo. Tr. 43:12-45:16.
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not bundled OEM software that originally came with OEM hardware
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with these types of products when Defendants have sold that OEM
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software.
Defendants have
Kornrumpf Depo. Tr. 143:2-8.
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Adobe, through an investigator, made several test purchases
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of Adobe OEM software from Defendants through their eBay monikers.
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Coombs Decl. in Supp. of Mot. for Prelim. Inj. ¶ 3, Ex. B
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(Fernandez Decl.) ¶¶ 5-11; Stickle Decl. ¶¶ 9, 10.
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products it purchased were meant for an overseas market, “were
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manufactured abroad and were not meant to be imported into the
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United States.”
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Some of the
Stickle Decl. ¶ 9.
In conjunction with Defendants’ prior motion for a
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preliminary injunction, Defendants proffered evidence of a form
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contract Adobe uses with hardware manufacturers for the
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distribution of its software.
See Boyce Decl. in Supp. of Defs.’
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Mot. for Prelim. Inj., Docket No. 69, ¶ 15.
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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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Docket No. 87, ¶ 12.3.
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With their opposition to the instant motion, Defendants have
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submitted copies of Adobe’s contract with Hewlett-Packard
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governing the distribution of software, including Photoshop
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For the Northern District of California
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Elements 8, and Adobe’s contract with Dell governing distribution
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of software, including Premiere Pro CS4.
See Boyce Decl.
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¶¶ 10-13, 15-16, Exs. F, G, H, I, K, L.3
These contracts resemble
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the form contract that Defendants previously submitted.
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Adobe’s agreement with Dell is titled as a licensing
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agreement.
Boyce Decl. ¶ 10, Ex. F at 1.
In the agreement, Adobe
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specifies that Dell is granted a license and requires Dell to
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obtain a similar agreement with any third-parties prior to
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authorizing or sublicensing the software to them.
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Adobe retains ownership of intellectual property rights in the
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software and places substantial restrictions on Dell’s use of the
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software.
Id. at ¶¶ 2.1, 2.4, 2.5.
Id.
at ¶ 2.1.
Adobe also prohibits Dell
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from promulgating the software through specified means and
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requires that the software be bundled with specified Dell
hardware.
Id. at ¶¶ 2.1, 2.5; Boyce Decl. ¶ 11, Ex. G at ¶ 2.0.
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Because these exhibits were filed under seal, the Court
describes their content in general terms in this Order.
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Dell is obliged to take steps to prevent resellers from selling
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the software separately from this hardware.
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F at ¶ 2.1.
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agreement with the hardware in such a way that the user can read
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it before accessing the software media and must include Adobe’s
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Boyce Decl. ¶ 10, Ex.
Dell is required to include Adobe’s end-user license
“copyright and proprietary notices.”
Id.
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Adobe’s agreement with Hewlett Packard is also titled as a
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licensing agreement and contains terms similar to Adobe’s
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For the Northern District of California
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agreement with Dell.
Boyce Decl. ¶¶ 15-16, Exs. K, L.
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example, it requires that the software be bundled with specified
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HP hardware.
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contains similar use restrictions to those in the agreement with
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Dell.
Boyce Decl. ¶ 15, Ex. K, at ¶¶ 1.5, 3.1.
For
It also
Id. at ¶ 3.7.
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LEGAL STANDARD
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Summary judgment is properly granted when no genuine and
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disputed issues of material fact remain, and when, viewing the
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evidence most favorably to the non-moving party, the movant is
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clearly entitled to prevail as a matter of law.
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P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);
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Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.
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Fed. R. Civ.
1987).
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The moving party bears the burden of showing that there is no
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material factual dispute.
Therefore, the court must regard as
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true the opposing party’s evidence, if supported by affidavits or
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other evidentiary material.
Celotex, 477 U.S. at 324; Eisenberg,
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815 F.2d at 1289.
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in favor of the party against whom summary judgment is sought.
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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
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587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952
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F.2d 1551, 1558 (9th Cir. 1991).
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The court must draw all reasonable inferences
Material facts which would preclude entry of summary judgment
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are those which, under applicable substantive law, may affect the
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outcome of the case.
The substantive law will identify which
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facts are material.
Anderson v. Liberty Lobby, Inc., 477 U.S.
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242, 248 (1986).
United States District Court
For the Northern District of California
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Where the moving party does not bear the burden of proof on
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an issue at trial, the moving party may discharge its burden of
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production by either of two methods:
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The moving party may produce evidence negating
an essential element of the nonmoving party’s
case, or, after suitable discovery, the moving
party may show that the nonmoving party does not
have enough evidence of an essential element of
its claim or defense to carry its ultimate
burden of persuasion at trial.
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Nissan Fire & Marine Ins. Co., Ltd., v. Fritz Cos., Inc., 210 F.3d
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1099, 1106 (9th Cir. 2000).
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If the moving party discharges its burden by showing an
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absence of evidence to support an essential element of a claim or
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defense, it is not required to produce evidence showing the
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absence of a material fact on such issues, or to support its
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motion with evidence negating the non-moving party’s claim.
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Id.;
see also Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 885 (1990);
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Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991).
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the moving party shows an absence of evidence to support the
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non-moving party’s case, the burden then shifts to the non-moving
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party to produce “specific evidence, through affidavits or
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admissible discovery material, to show that the dispute exists.”
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If
Bhan, 929 F.2d at 1409.
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If the moving party discharges its burden by negating an
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essential element of the non-moving party’s claim or defense, it
Nissan, 210
United States District Court
For the Northern District of California
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must produce affirmative evidence of such negation.
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F.3d at 1105.
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burden then shifts to the non-moving party to produce specific
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evidence to show that a dispute of material fact exists.
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If the moving party produces such evidence, the
Id.
If the moving party does not meet its initial burden of
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production by either method, the non-moving party is under no
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obligation to offer any evidence in support of its opposition.
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Id.
This is true even though the non-moving party bears the
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ultimate burden of persuasion at trial.
Id. at 1107.
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DISCUSSION
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Defendants do not dispute that their counterclaim against
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Adobe is valid only if the first sale doctrine applies to this
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case and the Court finds that “Plaintiff has been selling, not
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licensing, copies of its software products to certain OEM
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companies.”
Opp. at 16.
“Copyright is a federal law protection provided to the
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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the exclusive rights . . . to distribute their works by sale or
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rental.”
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Vernor v. Autodesk, Inc., 621 F.3d 1102, 1106 (9th
“The Copyright Act
Id. at 1106-07 (citing 17 U.S.C. § 106(3)).
Copyright
infringement occurs whenever someone “violates any of the
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exclusive rights of the copyright owner,” including the exclusive
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distribution right.
17 U.S.C. §§ 106(3), 501.
“The exclusive
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For the Northern District of California
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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.”
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621 F.3d at 1107.
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provisions of section 106(3), the owner of a particular copy or
Vernor,
See 17 U.S.C. § 109(a) (“Notwithstanding the
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phonorecord lawfully made under this title, or any person
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authorized by such owner, is entitled, without the authority of
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the copyright owner, to sell or otherwise dispose of the
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possession of that copy or phonorecord.”).
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Adobe argues, and Defendants do not dispute, that the first
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sale doctrine does not apply to Adobe products that were
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manufactured abroad.
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See Omega S.A. v. Costco Wholesale Corp.,
541 F.3d 982, 985 (9th Cir. 2008) (limiting the first-sale
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doctrine to domestically-made copies of copyrighted works).
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The Ninth Circuit has also held that the first sale
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affirmative defense is unavailable to “those who are only licensed
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to use their copies of copyrighted works.”
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Vernor, 621 F.3d at
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1107.
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copy where the copyright owner (1) specifies that the user is
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granted a license; (2) significantly restricts the user’s ability
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to transfer the software;
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restrictions.”
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“[A] software user is a licensee rather than an owner of a
and (3) imposes notable use
Id. at 1111.
Defendants argue that the license agreements between Adobe
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and the OEM manufacturers do not create significant restrictions
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on the transfer of the OEM copies or impose notable use
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For the Northern District of California
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restrictions on these copies.
However, the undisputed evidence in
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the record clearly establishes that Adobe transferred a license
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rather than title to these products.
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specify that they grant a license.
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in Supp. of Defs.’ Mot. for Prelim. Inj., Ex. E ¶ 12.3; Boyce
Adobe’s license agreements
Stickle Decl. ¶ 5; Boyce Decl.
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Decl. ¶ 10, Ex. F at ¶ 2.1; Boyce Decl. ¶ 15, Ex. K at 1.
The
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licensing agreements impose significant transfer restrictions,
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including those at Stickle Decl. ¶ 5; Boyce Decl. ¶ 10, Ex. F at ¶
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2.1; ¶ 11, Ex. G at ¶ 2.0; ¶ 15, Ex. K, at ¶¶ 1.5, 3.1.
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agreements also impose significant use restrictions, such as those
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at Stickle Decl. ¶ 5; Boyce Decl. ¶ 10, Ex. F at ¶ 2.5; ¶ 15, Ex.
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K, at ¶ 3.7.
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The
Defendants further argue that Adobe does not maintain
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sufficient control over the OEM copies to support a finding that
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it remained the owner of them.
Defendants base their argument on
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UMG Recordings, Inc. v. Augusto, 628 F.3d 1178 (9th Cir. 2011).
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In UMG Recordings, the Ninth Circuit held that a music company
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transferred ownership of copies of a promotional CD, despite its
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attempts to create a license, when it shipped the CDs to
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recipients, with no prior agreement or request by the recipients
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to receive the CDs.
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UMG Recordings specifically distinguished the Vernor test that
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628 F.3d at 1182-83.
However, the court in
“applies in terms to software users,” who “are in a very different
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position from that held by the recipients of UMG’s promotional
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CDs.”
Id. at 1183.
Further, Adobe maintains far more control
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For the Northern District of California
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over the distribution of its software than the music company did
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in UMG Recordings, as evidenced by the significant distribution
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restrictions in its licensing agreements.
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Because Adobe licenses, rather than sells, its OEM software,
the Court finds that the first sale doctrine does not apply to the
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Adobe OEM software at issue in this case.
The Court also finds
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that the first sale doctrine does not apply to the Adobe OEM
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software that is manufactured abroad.
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counterclaim against Adobe and their copyright misuse and first
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sale affirmative defenses are all based on the applicability of
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the first sale doctrine to this case, the Court GRANTS Adobe’s
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motion for partial summary judgment.
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Because Defendants’ UCL
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CONCLUSION
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For the reasons set forth above, the Court GRANTS Adobe’s
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motion for partial summary judgment (Docket No. 135).
IT IS SO ORDERED.
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Dated: 2/1/2012
CLAUDIA WILKEN
United States District Judge
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United States District Court
For the Northern District of California
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