Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc. et al

Filing 281

ORDER by Judge James Ware granting in part and denying in part 209 Motion for Judgment as a Matter of Law; granting in part and denying in part 210 Motion for Judgment as a Matter of Law; terminating 215 Motion in Limine; granting 256 Motion for Permanent Injunction; denying 269 Motion to Dismiss; denying 272 Motion for New Trial; granting in part and denying in part 273 Motion for Judgment NOV (jwlc1, COURT STAFF) (Filed on 3/19/2010)

Download PDF
Case5:07-cv-03952-JW Document281 Filed03/19/10 Page1 of 35 1 2 3 4 5 6 7 8 9 10 Louis Vuitton Malletier, S.A., v. Plaintiff, IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION NO. C 07-03952 JW ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' POST-TRIAL MOTIONS; GRANTING PLAINTIFF'S MOTION FOR A PERMANENT INJUNCTION / I. BACKGROUND In this case, Louis Vuitton Malletier, S.A. ("Plaintiff") claims that Akanoc Solutions, Inc., Managed Solutions Group, Inc., and Steven Chen (collectively, "Defendants") contributorily infringed Plaintiff's registered trademarks and copyrights. Plaintiff sought statutory damages and injunctive relief. The liability and damages issues were tried to a jury. Plaintiff requested the Court to award injunctive relief on the basis of the same evidence. After close of the evidence, Defendants made timely Motions for Judgment as a Matter of Law pursuant to Federal Rule of Civil Procedure 50(a).1 The Court took these Motions under submission and submitted the liability and damages issues to the jury. The verdict form provided for findings as to each Defendant. In the verdict, the jury found each Defendant liable for (1) willful contributory infringement of 13 of Plaintiff's trademarks, and (2) willful contributory infringement (Defendants' Rule 50(a) Motion for Judgment as a Matter of Law Regarding: Contributory Copyright Infringement Claim, hereafter, "Motion Re Copyright," Docket Item No. 209; Defendants' Rule 50(a) Motion for Judgment as a Matter of Law Regarding: Contributory Trademark Claim, hereafter, "Motion Re Trademark," Docket Item No. 210.) 1 United United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Akanoc Solutions, Inc., et al., Defendants. Case5:07-cv-03952-JW Document281 Filed03/19/10 Page2 of 35 1 2 3 4 5 6 7 8 9 10 of two of Plaintiff's copyrights. (Verdict at 6-8, 10-12, Docket Item No. 235.) The jury also found that Defendants were not entitled to the "safe harbor" provisions of the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. 1201, et seq. (Id. at 11-12.) The jury awarded: (1) statutory damages for contributory trademark infringement in the amount of $10,500,000 per Defendant, and (2) statutory damages for contributory copyright infringement in the amount of $300,000 per Defendant. (Id. at 8-9, 12-13.) Plaintiff has requested entry of judgment and has filed a Motion for Entry of Permanent Injunction. (hereafter, "Motion re Permanent Injunction," Docket Item No. 256.) Defendants have filed a timely Renewed Motion for Judgment as a Matter of Law with respect to both the copyright and trademark claims. (See Docket Item No. 273.) In the alternative, Defendants have also filed a Motion for New Trial pursuant to Federal Rule of Civil Procedure 59.2 The Court conducted a hearing on Plaintiff's Motion Re Permanent Injunction on January 25, 2010. The Court conducted a hearing on all of Defendants' post-trial Motions on February 22, 2010. This Order disposes of all pending post-trial Motions and addresses Plaintiff's entitlement to injunctive relief. II. STANDARDS Federal Rule of Civil Procedure 50 governs motions for judgment as a matter of law ("JMOL"). Under Rule 50(a), "[i]f a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may: (A) resolve the issue against the party; and (B) grant a motion for judgment as a matter of law against the party on a claim or defense . . . ." Fed. R. Civ. P. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (Defendants' Re-Stated Motion for New Trial or Other Relief Pursuant to Rule 59, hereafter, "Motion for New Trial," Docket Item Nos. 269, 272.) Defendants' Motion for New Trial puts forth essentially the same grounds as the Rule 50 Motions as to contributory infringement, but also states additional grounds based on the assessment of statutory damages and personal liability against Defendant Chen. To the extent that the Motions overlap, the Court will refer to each Motion as necessary. In addition, for the reasons stated on record, the Court terminates Docket Item No. 215. 2 2 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page3 of 35 1 2 3 4 5 6 7 8 9 10 50(a)(1); see also Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 149 (2000). The motion must be made before the case is submitted to the jury. Fed. R. Civ. P. 50(a)(2). If, as was the case here, the court does not grant a motion for judgment made under Rule 50(a), the court is considered to have submitted the action to the jury subject to the court's later deciding the legal questions raised by the motion. Fed. R. Civ. P. 50(b). The standard for granting a renewed post-verdict JMOL is the same as the standard for granting a pre-submission JMOL under Rule 50(a). Winarto v. Toshiba Am. Elecs. Components, Inc., 274 F.3d 1276, 1283 (9th Cir. 2001). A party is entitled to judgment as a matter of law if, under the governing law, there can be but one reasonable conclusion as to the verdict, and that is, a finding in favor of the moving party. (Id.) The court must draw all reasonable inferences in favor of the nonmoving party and should review all evidence in the record. Reeves, 530 U.S. at 150. III. DISCUSSION A. Defendants' Rule 50 Motion Re Contributory Copyright Infringement Defendants move for judgment on the grounds that (1) the evidence of direct infringement was insufficient to support the jury verdict, (2) the evidence as to all other elements of contributory infringement was insufficient, (3) the Court's Closing Instructions were inadequate, and (4) Defendants qualify for the safe harbor provisions of the DMCA. The Court addresses each ground in turn. 1. Direct Infringement United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants contend that they cannot be liable for contributory copyright infringement because the acts of direct infringement (1) occurred extraterritorially, (2) are based on Defendants' storage of digital images on their servers, which Defendants contend cannot be "copies" under the Copyright Act, (3) were authorized by Plaintiff, (4) were a fair use of Plaintiff's copyrights, and (5) the Closing Instructions allowing the jury to make findings unsupported by the evidence.3 Plaintiff (Motion Re Copyright at 2-5; Defendants' Supplemental Rule 50(a) Brief on Impossibility of Extraterritorial Copyright Infringement at 17-18, hereafter, "Suppl. Brief Re Copyright," Docket Item No. 244.) 3 3 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page4 of 35 1 2 3 4 5 6 7 8 9 10 contends that U.S. copyright law applies here because the direct infringement at issue occurred within the U.S.--the importation of counterfeit goods and the copying and public display of digital images of counterfeit goods on Defendants' servers--and that Defendants' other grounds are meritless.4 Contributory copyright infringement requires an underlying direct copyright infringement by a third party. Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1170 (9th Cir. 2007). To prove direct copyright infringement, a plaintiff must show (1) ownership of the alleged infringed copyright, and (2) that the alleged infringers violated an exclusive right granted under the Copyright Act. See 1159. The Copyright Act provides the copyright holder with the exclusive rights to reproduce, distribute, import, and publicly display the copyrighted work. See 17 U.S.C. 106, 602. Here, Defendants are not challenging the first prong--Plaintiff's ownership of the copyrights. Rather, Defendants focus on whether any of Plaintiff's exclusive rights were violated. a. Extraterritorial Scope of U.S. Copyright Law United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 At issue is the extent to which Defendants may be contributorily liable based on extraterritorial acts of direct copyright infringement. "[W]holly extraterritorial acts of infringement cannot support a claim under the Copyright Act." Subafilms, Ltd. v. MGM-Pathe Commc'ns Co., 24 F.3d 1088, 1095 (9th Cir. 1994) (en banc); see also Los Angeles News Serv. v. Reuters Television Int'l, Ltd., 149 F.3d 987, 990 (9th Cir. 1998). This follows from the "long-standing principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States." Subafilms, 24 F.3d at 1095 (citing EEOC v. Arabian Am. Oil Co., 499 U.S. 244, (Opposition of Plaintiff Louis Vuitton Malletier, S.A. to Defendants' Rule 50(a) Motion for Judgment as a Matter of Law Regarding: Contributory Copyright Infringement Claim at 3-5, hereafter, "Opposition Re Copyright," Docket Item No. 213; Supplemental Brief Re Applicability of U.S. Copyright and Trademark Laws to California Based Web Hosting Defendants: Request for Entry of Judgment at 3-7, hereafter, "Plaintiff Suppl. Brief," Docket Item No. 237.) 4 4 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page5 of 35 1 2 3 4 5 6 7 8 9 10 248 (1991)). For the Copyright Act to apply, "at least one alleged infringement must be completed entirely within the United States." Los Angeles News, 149 F.3d at 990-91. Unauthorized copying and public display of a copyrighted work within the United States triggers the application of U.S. copyright law. See Los Angeles News, 149 F.3d at 991; 17 U.S.C. 106. Additionally, unauthorized importation into the United States of copies acquired extraterritorially triggers the application of U.S. copyright law. BMG Music v. Perez, 952 F.2d 318, 319 (9th Cir. 1991) (citing 17 U.S.C. 602(a)). Here, the evidence established that Defendants' clients or their successors who owned or operated websites hosted on Defendants' servers sold counterfeit goods to customers in the United States.5 Plaintiff's investigator purchased numerous items from the websites hosted on Defendants' servers.6 These goods were unauthorized replicas of Plaintiff's copyrighted works that were imported into the United States. (See Coombs Decl., Ex. B at 91:14-94:7.) The importation is an act of direct infringement that occurred within the U.S. Contrary to Defendants' contention, the sale or manufacture of the goods outside the U.S. prior to importation does not place the act of importation beyond the reach of U.S. copyright law. (See Motion Re Copyright at 2.) Rather, the Copyright Act specifically provides for infringement based solely on the act of importing goods made or sold extraterritorially, if the making or selling of the goods in the U.S. would have infringed a copyright--e.g., counterfeit goods. See 17 U.S.C. 602. Thus, the acts of direct infringement were properly within the jurisdiction of the Copyright Act. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (See Declaration of J. Andrew Coombs, hereafter, "Coombs Decl.," Ex. B at 91:14-94:7, Docket Item No. 277.) The Court rejects Defendants' contention that the Closing Instructions erred in permitting the jury to find that the websites hosted on Defendants' servers "sold" counterfeit products. (Motion for New Trial at 8; Closing Instructions at 12:5-8, Docket Item No. 227.) The evidence established that the websites provided specific instructions on how to complete a purchase of the counterfeit goods, which were followed by Plaintiff's investigator. (See Declaration of James A. Lowe in Support of Defendants' Motion to Dismiss Pursuant to Rule 50 and Alternatively for a New Trial or Other Relief Pursuant to Rule 59, Ex. 1622 at 43:3-49:25, hereafter, "Lowe Decl.," Docket Item No. 270.) 5 6 5 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page6 of 35 1 2 3 4 5 6 7 8 9 10 b. Computer Data as "Copies" Under the Copyright Act At issue is whether digital image data stored on a computer may constitute a "copy" under the Copyright Act. The Copyright Act defines "copies" as "material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." 17 U.S.C. 101. "A photographic image is a work that is `fixed in a tangible medium of expression,' for purposes of the Copyright Act, when embodied (i.e., stored) in a computer's server (or hard disk, or other storage device). The image stored in the computer is the `copy' of the work for purposes of copyright law." Perfect 10, 508 F.3d at 1160. "The computer owner shows a copy `by means of a . . . device or process' when the owner uses the computer to fill the computer screen with the photographic image stored on that computer, or by communicating the stored image electronically to another person's computer." Id. The Ninth Circuit has labeled this standard the "server test." Id. at 1159. Under the server test, "a computer owner that stores an image as electronic information and serves that electronic information directly to the user (`i.e., physically sending ones and zeroes over the [I]nternet to the user's browser,' . . . ) is displaying the electronic information in violation of a copyright holder's exclusive display right." Id. Thus, the test is whether the computer at issue stores the data and serves it to users. Id. Here, the evidence established that Defendants' servers stored and served the data, including pictures, used by the websites that offered counterfeit goods for sale to U.S. customers. (See Coombs Decl., Ex. E at 62:9-13.) For example, Plaintiff's investigator accessed the websites in the course of making purchases of counterfeit goods.7 (See Coombs Decl., Exs. B at 91:14-94:7, C at United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants' contention that any sales made to Plaintiff's investigator cannot constitute direct infringement because they were sales specifically authorized by Plaintiff is without merit, as several courts have rejected this exact contention. See Olan Mills, Inc. v. Linn Photo Co., 23 F.3d 1345, 1348 (8th Cir. 1994); Atl. Recording Corp. v. Howell, 554 F. Supp. 2d 976, 985 (D. Ariz. 2008); Ryan v. Carl Corp., 23 F. Supp. 2d 1146, 1149 (N.D. Cal. 1998). 6 7 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page7 of 35 1 2 3 4 5 6 7 8 9 10 49:22-25.) Under the server test, this evidence is sufficient to show that Defendants' servers stored "copies" under the meaning of the Copyright Act. Further, the Court rejects Defendants' contention that the digital pictures of the counterfeit goods cannot constitute "copies" under the Copyright Act because Plaintiff's copyright covers only physical goods. (See Motion for New Trial at 6-7.) The Court finds no support for Defendants' position in the language of the Copyright Act, which requires only that copies of a copyrighted work be "fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." 17 U.S.C. 101. The digital pictures stored on Defendants' servers fall squarely within the statutory language. To find otherwise would render the protection of a copyright meaningless by permitting, for example, unauthorized digital copies of a paper photograph to be noninfringing simply because the copy is embodied in a different medium than the original work.8 Thus, the Court finds that the evidence was sufficient to support the jury's finding of direct copyright infringement.9 Accordingly, the Court DENIES Defendants' Motions as to direct copyright infringement. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The digital photographs stored and distributed from Defendants' servers are also unauthorized derivate works. A "derivate work" is "a work based upon one or more preexisting works." 17 U.S.C. 101. The primary authority relied on by Defendants is inapposite because it involved a photograph of a non-copyrightable work. See Ets-Hokin v. Skyy Spirits, Inc., 225 F.3d 1068, 1081 (9th Cir. 2000). Further, in light of the Court's finding that the jury had sufficient evidence to find that the computer images infringed Plaintiff's copyrights, the Court rejects Defendants' contention that the Closing Instructions to the jury improperly "invited the jury to find infringement even though the asserted copyrights do not cover the accused images." (Motion for New Trial at 8.) The Court rejects Defendants' contention that any Internet users within the U.S. who viewed the images on Defendants' servers were making a fair use of Plaintiff's copyrights. (See Motion Re Copyright at 6-7.) This contention is belied by the purpose of the "fair use" doctrine. The fair use exception to a claim of copyright infringement "permits courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster." Dr. Seuss Enters., L.P. v. Penguin Books USA, Inc., 109 F.3d 1394, 1399 (9th Cir. 1997) (internal quotation marks and citation omitted). However, the exception is limited to "the use of a copyrighted work ... for purposes such as criticism, comment, news reporting, teaching. . ., scholarship, or research." 17 U.S.C. 107. The evidence shows that Defendants' actions of storing and distributing Plaintiff's copyrighted works on its servers on behalf of its customers are designed solely for Defendants and its customers' financial gains. Thus, the fair use exception does not apply to the conduct at issue here. 7 9 8 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page8 of 35 1 2 3 4 5 6 7 8 9 10 2. Contributory Copyright Infringement Defendants move for judgment as to contributory copyright infringement on the grounds that (1) the evidence does not show that Defendants had knowledge of the direct infringement, (2) the evidence does not show that Defendants induced or materially contributed to the direct infringement, (3) the Court lacked personal jurisdiction over the direct infringers located in China, and (4) the Court's Closing Instructions failed to permit the jury to consider exculpatory evidence. (Motion for New Trial at 9-18; Motion Re Copyright at 3-4, 8-10.) Contributory copyright infringement requires (1) knowledge of another's infringement and (2) either (a) material contribution to the infringement or (b) inducement of the infringement. Perfect 10 v. Visa Int'l. Serv. Assoc. ("Visa"), 494 F.3d 788, 795 (9th Cir. 2007). The Court examines the evidence as to each requirement in turn. a. Knowledge United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants contend that the evidence as to their knowledge of the direct infringement was insufficient to support the jury's verdict on the grounds that (1) since direct infringement was not sufficiently proved, there could be no notice of direct infringement, and (2) the evidence did not show that Defendants had knowledge of specific acts of infringement. (Motion Re Copyright at 8-9; Motion for New Trial at 9-11.) Contributory liability for copyright infringement requires that the defendant "know or have reason to know" of direct infringement. See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1020 (9th Cir. 2001). Actual knowledge of infringement exists where it can be shown by a defendant's conduct or statements that it actually knew of specific instances of direct infringement. See id. Constructive knowledge exists where it can be shown a defendant should have known of the direct infringement. Id. Generally, "the copyright holder must provide the necessary documentation to show there is likely infringement." Id. at 1021 (quoting Religious Tech. Ctr. v. Netcom On-Line Commc'n Servs., Inc., 907 F. Supp. 1361, 1374 (N.D. Cal. 1995)). "[I]f a computer system operator learns of specific infringing material available on his system and fails to purge such material from the system, the operator knows of and contributes to direct infringement." Id. (citing Netcom, 907 8 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page9 of 35 1 2 3 4 5 6 7 8 9 10 F. Supp. at 1374). "[A]bsent any specific information which identifies infringing activity, a computer system operator cannot be liable for contributory infringement merely because the structure of the system allows for the exchange of copyrighted material." Id. Here, the evidence established that Defendants had ample notice of directly infringing activity occurring on dozens of websites hosted on Defendants' servers. (See Coombs Decl., Ex. E at 27:3-30:17.) Plaintiff sent many letter notices to Defendants identifying specific websites that were selling counterfeit goods infringing Plaintiff's copyrights. (See Coombs Decl., Exs. B at 94:21-25, E at 27:3-30:17; Lowe Decl., Ex. 1598.) Defendant Chen testified that these letters were often forwarded to Defendants' customers, but were ignored at times. (See Coombs Decl., Ex. C at 125:20-131:13.) Thus, the Court finds that the evidence was sufficient to support the jury's finding that Defendants knew or should have known of specific direct infringements occurring on their servers.10 b. Material Contribution United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants contend that the evidence adduced at trial was insufficient to show material contribution. (Motion Re Copyright at 9-10; Motion for New Trial at 15-17.) Contributory infringement "liability exists if the defendant engages in personal conduct that encourages or assists the infringement" activity. A&M Records, 239 F.3d at 1019. Under this standard, knowingly providing the "site and facilities" for infringing activity is a material contribution. Fonovisa v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996); see also Ellison v. Robertson, 357 F.3d 1072, 1078 (9th Cir. 2004). In the Internet context, where "a computer system operator learns of specific infringing material available on his system and fails to purge such material from the system, the operator knows of and contributes to direct infringement." Napster, Defendants' contention that they cannot be contributorily liable because the Court lacked personal jurisdiction over direct infringers in China misapprehends the requirements of contributory liability and is without support in the case law. (See Motion Re Copyright at 3-4.) The Court unquestionably had personal jurisdiction over Defendants, who conducted their business and maintained their physical facilities in San Jose, California, and who the jury ultimately found liable. (See Coombs Decl., Ex. D at 12:17-21.) The direct infringers were not parties to this case and Defendants offer no credible reason why personal jurisdiction over third party direct infringers would be necessary to a finding of contributory liability against Defendants. 9 10 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page10 of 35 1 2 3 4 5 6 7 8 9 10 239 F.3d at 1022. Computer system operators can be liable where, knowing that specific infringing materials are present on their systems and able to take "simple measures" to limit infringement, they continue to provide access to the infringing materials. Perfect 10, 508 F.3d at 1172. Thus, although liability for contributory infringement exists for an operator of a computer system that is being used, knowingly, for infringing activity, liability does not extend to the owner of the equipment who is not an operator. Here, the evidence at trial established that Defendant Managed Solutions Group, Inc., owned servers that were operated by Defendant Akanoc Solutions, Inc., and its principal, Defendant Steve Chen, to host websites that advertised and sold goods containing Plaintiff's copyrights. There was no evidence that Defendant Managed Solutions Group, Inc. sold domain names or operated the servers. Accordingly, the Court GRANTS Defendant Managed Solutions Group, Inc.'s Motion for Judgment as a Matter of Law.11 With respect to the operator Defendants, Defendant Chen testified that under his management and control, Defendant Akanoc Solutions provided servers with data storage, routers, and data bandwidth to the websites. (See Coombs Exs. D at 17:20-13:13, 172:3-10, E at 62:9-13.) There was also evidence that Defendants continued to host those websites despite receiving notice from Plaintiff of particular websites that engaged in such conduct. (See Coombs Decl., Exs. C at 125:20-131:13, E at 27:3-30:17; Lowe Decl., Ex. 1598.) Defendant Chen also testified that he rarely used several of the tools at his disposal to punish or deter the operation of the counterfeiting websites on Defendants' servers. (See Coombs Decl., Exs. C at 111:5-112:15, D at 167:15-168:23.) Thus, the Court finds that the jury had sufficient evidence to find for Plaintiff against these Defendants on this issue of material contribution.12 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Unless otherwise indicated, all further references in this Order to Defendants will be to Akanoc Solutions, Inc., and Steve Chen. The Court rejects Defendants' contention that they are entitled to judgment because the Closing Instructions did not use the words "material contribution" or provide examples of material contribution from specific cases. (See Motion for New Trial at 17.) First, the Court's instructions tracked the Ninth Circuit Model Civil Jury Instructions for contributory copyrights infringement. 10 12 11 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page11 of 35 1 2 3 4 5 6 7 8 9 10 Having examined the evidence regarding the elements of contributory copyright infringement, the Court finds that the jury had sufficient evidence to find for Plaintiff against the operator Defendants on this issue. Accordingly, the Court DENIES Defendants' Motion Re Copyright and Motion for New Trial as to contributory copyright infringement. 3. Digital Millennium Copyright Act Defendants contend that they are entitled to judgment as to contributory copyright infringement because the evidence showed that Defendants were entitled to the "safe harbor" provision of the DMCA. (Motion Re Copyright at 10-11.) The Digital Millennium Copyright Act established certain safe harbors to "provide protection from liability for: (1) transitory digital network communications; (2) system caching; (3) information residing on systems or networks at the direction of users; and (4) information location tools." Perfect 10, Inc. v. CCBill LLC ("CCBill"), 488 F.3d 1102, 1109 (9th Cir. 2007) (citing 17 U.S.C. 512(a)-(d)) (other citation omitted). These safe harbors are available to "service providers," which are defined as "entit[ies] offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user's choosing, without modification to the content of the material as sent or received." 17 U.S.C. 512(k)(1)(A). The DMCA safe harbor provisions provide an affirmative defense to a claim of copyright infringement. Perfect 10, 508 F.3d at 1158. When they apply, the safe harbors do not affect the question of liability, but merely limit the available remedies against a defendant that qualifies for such protection. See CCBill, 488 F.3d at 1109. "A service provider that qualifies for such protection is not liable for monetary relief and may be subject only to the narrow injunctive relief set forth in section 512(j)." Perfect 10, 508 F.3d at 1158. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Second, viewed in the context of the entire trial, the Closing Instructions adequately and fairly covered the issues presented and permitted the jury to make an intelligent and reasoned determination of liability. See U.S. v. Marabelles, 724 F.2d 1374, 1382-83 (9th Cir. 1984). 11 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page12 of 35 1 2 3 4 5 6 7 8 9 10 To be eligible for any of the four safe harbors under the DMCA, a service provider must first meet the threshold conditions set out in Section 512(i), including the requirement that the service provider: [H]as adopted and reasonably implemented, and informs subscribers and account holders of the service provider's system or network of, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers. CCBill, 488 F.3d at 1109 (citing 17 U.S.C. 512(i)(1)(A)). A service provider "implements" a policy "if it has a working notification system, a procedure for dealing with DMCA-compliant notifications, and if it does not actively prevent copyright owners from collecting information needed to issue such notifications." Id. "[A]n implementation is reasonable if, under appropriate circumstances, the service provider terminates users who repeatedly or blatantly infringe copyright." Id. Additionally, a service provider cannot be eligible for the safe harbor provisions of the DMCA until "the service provider has designated an agent to receive notifications of claimed infringement." 17 U.S.C. 512(c)(2). Here, the evidence established that Defendants designated an agent with the Copyright Office on November 30, 2007, approximately four months after the case was filed. (See Coombs Decl., Ex. D at 172:11-25.) At a minimum, Defendants would not be able to claim the protection of the safe harbor provisions prior to designating an agent. Furthermore, evidence that Defendants had reasonably implemented a policy to terminate repeat infringers was limited, at best. For example, Defendant Chen, the designated agent for Defendants, testified that he did not understand the DMCA's requirements as to maintaining or implementing the required policy. (See Coombs Decl., Ex. D at 174:23-176:1.) Other evidence indicated that Defendants had not terminated certain repeat offenders. (See Coombs Decl., Exs. C at 111:5-112:20, D at 196:2-197:11, E at 28:18-30:17.) Thus, the Court finds that the jury had sufficient evidence to find for Plaintiff on the issue of the applicability of the safe harbor provisions of the DMCA. Accordingly, the Court DENIES Defendants' Motion Re Copyright as to this ground. In sum, the Court DENIES Defendants' Rule 50 Motion Re Contributory Copyright Infringement. 12 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page13 of 35 1 2 3 4 5 6 7 8 9 10 B. Defendants' Rule 50 Motion Re Contributory Trademark Infringement Defendants move for judgment as a matter of law as to contributory trademark infringement on the grounds that (1) the evidence of direct infringement was insufficient to support the jury's verdict, (2) the evidence as to all other elements of contributory infringement was insufficient, and (3) the Court's Closing Instructions were inadequate. (Motion Re Trademarks at 2-13; Motion for New Trial at 2-5, 9-14.) The Court addresses each ground in turn. 1. Direct Infringement Defendant contends that it cannot be liable for contributory trademark infringement because the acts of direct infringement (1) occurred extraterritorially, and (2) the evidence otherwise failed to show use in commerce and likelihood of confusion. (Motion Re Trademarks at 2-9.) Contributory trademark infringement requires that there be an underlying direct trademark infringement by a third party. Visa, 494 F.3d at 807. To prove direct trademark infringement, a plaintiff must show (1) ownership of a valid mark, and (2) that the alleged infringer's use of the mark "is likely to cause confusion, or to cause mistake, or to deceive" consumers. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 408 F.3d 596, 602 (9th Cir. 2005) (citing 15 U.S.C. 1114(1)(a) & (b)). Here, Defendants are not challenging the first prong--Plaintiff's ownership of the trademarks. Rather, Defendants focus on whether the evidence supports the jury's finding that use of the mark was likely to cause confusion, mistake, or to deceive consumers. a. Extraterritorial Scope of U.S. Trademark Law United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 At issue is the extent to which Defendants may be contributorily liable based on extraterritorial acts of direct trademark infringement. "[T]he Supreme Court has stated that the Lanham Act provides a `broad jurisdictional grant' that extends to `all commerce which may lawfully be regulated by Congress.'" Ocean Garden, Inc. v. Marktrade Co., Inc., 953 F.2d 500, 503 (9th Cir. 1991) (citing Steele v. Bulova Watch Co., 344 U.S. 280, 283, 286 (1952)). "[T]he Lanham Act's coverage of foreign activities may be analyzed under the test for extraterritorial application of the federal anti-trust laws set forth in Timberlane." 13 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page14 of 35 1 2 3 4 5 6 7 8 9 10 Id. (citing Timberlane Lumber Co. v. Bank of America National Trust & Savings Ass'n, 549 F.2d 597 (9th Cir. 1976)). Under Timberlane, "there are three criteria that must be considered: (1) there must be some effect on American foreign commerce; (2) the effect must be sufficiently great to present a cognizable injury to plaintiffs under the federal statute; (3) the interest of and links to American foreign commerce must be sufficiently strong in relation to those of other nations." Id. With regard to the first two factors, the sale of infringing goods in a foreign country that causes financial harm to a plaintiff in the U.S. provides a sufficient effect on commerce to invoke Lanham Act jurisdiction. Id. The third factor is analyzed as a balance of seven sub-factors: (1) the degree of conflict with foreign law or policy, (2) the nationality or allegiance of the parties and the locations or principal places of business of corporations, (3) the extent to which enforcement by either state can be expected to achieve compliance, (4) the relative significance of effects on the United States as compared with those elsewhere, (5) the extent to which there is explicit purpose to harm or affect American commerce, (6) the foreseeability of such effect, and (7) the relative importance to the violations charged of conduct within the United States as compared with conduct abroad. Id. (citing Star-Kist Foods, Inc. v. P.J. Rhodes & Co., 769 F.2d 1393, 1395 (9th Cir. 1985)). The third factor favors finding jurisdiction under the Lanham Act unless there has been a "determination by [a] foreign court that the defendant has a legal right to use the marks, and that those marks do not infringe the plaintiff's mark." See id. at 503-04. Here, Plaintiff presented evidence that the websites operating on Defendants' servers in the U.S. sold counterfeit goods that were imported into the U.S. for delivery to U.S. customers. (See Coombs Decl., Exs. B at 30:1-31:2, 88:10-94:25, C at 49:22-25, 84:20-85:85:5, E at 62:9-13.) Plaintiff also presented evidence about the economic harm that they suffer as a result of the sale of such counterfeit goods. (See id., Ex. A at 161:5-166:24.) For example, Plaintiff presented testimony that it loses customers to sellers of counterfeit goods and suffers reputational harm when current or potential customers observe counterfeit versions of Plaintiff's products in the marketplace. (See id., Ex. A at 165:22-166:24.) This evidence is sufficient to satisfy the first two factors of the test for Lanham Act jurisdiction. As to the third factor, there was no evidence that a foreign jurisdiction had determined that Defendants or the direct infringers had a legal right to use Plaintiff's trademarks. Rather, the evidence that the infringing activity was directed to U.S. consumers favors 14 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page15 of 35 1 2 3 4 5 6 7 8 9 10 jurisdiction under the third factor. Moreover, although Plaintiff is headquartered in France, the evidence showed that Plaintiff maintains a substantial presence in the United States (including California), employing over 1,300 people in a manufacturing facility, a distribution center, a regional headquarters, a customer service center, and many retail stores. (See Coombs Decl., Ex. A at 161:3-163:14.) This evidence is sufficient to satisfy the third factor for Lanham Act jurisdiction. Thus, the Court finds that the direct infringement at issue was properly within the jurisdictional reach of the Lanham Act.13 Accordingly, the Court DENIES Defendants' Motion Re Trademarks as to this ground. b. Use in Commerce and Likelihood of Confusion Defendants contend that the evidence did not establish that Plaintiff's trademarks were used in commerce as required for a finding of direct trademark infringement or that any such use was likely to confuse consumers. (Motion Re Trademarks at 2-5; Motion for New Trial at 2-3.) To be liable for trademark infringement under the Lanham Act, a person must "(1) use in commerce (2) any word, false designation of origin, false or misleading description, or representation of fact, which (3) is likely to cause confusion or misrepresents the characteristics of his or another person's goods or services." Freecycle Network, Inc. v. Oey, 505 F.3d 898, 902 (9th Cir. 2007) (citing 15 U.S.C. 1125(a)). The "use in commerce" must be "in connection with the sale, offering for sale, distribution, or advertising of any goods or services." 15 U.S.C. 1114(1)(a). A mark is "used in commerce" in connection with goods when the mark is "placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, . . . or on the documents associated with the goods or their sale." 15 U.S.C. 1127. A mark United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Court rejects Defendants' contention that the Closing Instructions misstated the law regarding the extraterritorial scope of U.S. trademark law. (See Motion for New Trial at 5.) Rather, the Court's Instructions tracked Ninth Circuit law and provided the jury with adequate guidance in light of the trial as a whole. (See Closing Instructions at 7.) Additionally, for the same reasons as articulated in Section III.A.2.b, the Court rejects Defendants' contention that they cannot be liable for contributory trademark infringement because the Court lacked personal jurisdiction over direct infringers in China. (See Motion Re Trademarks at 7-8.) 15 13 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page16 of 35 1 2 3 4 5 6 7 8 9 10 is "used in commerce" in connection with services when the mark is "used or displayed in the sale or advertising of services and the services are rendered in commerce . . . ." Id. "The core element of trademark infringement is the likelihood of confusion, i.e., whether the similarity of the marks is likely to confuse customers about the source of the products." Freecycle, 505 F.3d at 902. Courts examine a nonexclusive set of factors to determine likelihood of confusion: (1) strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchaser; (7) defendant's intent in selecting the mark; and (8) likelihood of expansion of the product lines. AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979). When virtually identical marks are used with identical products or services, "likelihood of confusion [follows] as a matter of course." Brookfield Commc'ns, Inc. v. West Coast Enter. Corp., 174 F.3d 1036, 1056 (9th Cir. 1999). Here, the evidence established that websites hosted on Defendants' servers advertised, offered for sale and sold a variety of counterfeit goods imitating Plaintiff's products. (See Coombs Decl., Exs. B at 30:1-31:2, 88:10-94:25, C at 49:22-25, 84:20-85:85:5, E at 62:9-13.) The displays on the website were in connection with the sale of the counterfeit goods. The counterfeit products were advertised and sold as "replicas" of Plaintiff's products--i.e., they aimed to look exactly like Plaintiff's genuine products. (See Coombs Decl., Ex. A at 174:1-175:2.) This supports a finding that the websites and counterfeit goods were likely to confuse consumers. The jury heard testimony regarding the sales as well as the differences between the counterfeit goods and Plaintiff's genuine products.14 (See id., Ex. B at 30:1-31:2, 88:10-94:25.) The jury also had before them the trademarks allegedly infringed by the websites and counterfeit products. (See Trial Exs. 451-65.) Under this evidence, the jury found direct trademark infringement--a use in commerce of Plaintiff's marks in a United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 For the same reasons as articulated in Section III.A.1.b, the Court rejects Defendants' contention that sales to Plaintiff's investigator cannot constitute direct trademark infringement because they were "authorized." (See Motion Re Trademarks at 2-3, 9; Defendants' Supplemental Rule 50(a) Brief on Non-Application of Lanham Act to Extraterritorial Trademark Infringement at 22-23, hereafter, "Suppl. Brief Re Trademarks," Docket Item No. 245.) 16 14 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page17 of 35 1 2 3 4 5 6 7 8 9 10 manner likely to confuse consumers.15 Drawing all reasonable inferences in favor of Plaintiff as the nonmoving party, the Court finds that the evidence was sufficient to support the jury's finding in Plaintiff's favor on the issue of direct infringement.16 2. Contributory Trademark Infringement Defendants move for judgment on the grounds that (1) the evidence was insufficient to show that Defendants knew of the direct infringement, (2) the evidence was insufficient to show that Defendants were in a position to control and monitor the directly infringing activity, and (3) the Court's Closing Instructions failed to permit the jury to consider exculpatory evidence. (Motion Re Trademarks at 10-14; Motion for New Trial at 9-14.) "The tests for secondary trademark infringement are . . . more difficult to satisfy than those required to find secondary copyright infringement." Visa, 494 F.3d at 806. "To be liable for contributory trademark infringement, a defendant must have (1) `intentionally induced' the primary infringer to infringe, or (2) continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied." Id. at 807 (citing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 855 (1982)). Where a defendant supplies a service rather than a product, "[d]irect control and monitoring of the instrumentality used by a third party to infringe the plaintiff's mark [satisfies the] `supplies a product' requirement for contributory infringement." Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999). Additionally, a host who permits others to use his premises but remains "wilfully blind" to their directly infringing acts may be held liable as a contributory infringer. See Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 265 (9th Cir. 1996). The Court rejects Defendants' contention that the Closing Instructions were defective for failure to include an instruction on the Sleekcraft factors. (See Motion for New Trial at 5-6; Suppl. Brief Re Trademarks at 23.) To the contrary, the Closing Instructions included a set of factors for the jury to consider in determining likelihood of confusion that were nearly identical to the Sleekcraft factors. (See Closing Instructions at 8-9.) These instructions gave the jury ample guidance in light of the trial as a whole. The Court rejects Defendants' unsupported contention that "storage of compute code on an Internet server is not use in commerce." (Motion Re Trademarks at 4.) It is beyond dispute that the evidence showed far more than mere "storage of computer code." 17 16 15 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page18 of 35 1 2 3 4 5 6 7 8 9 10 For the reasons stated above, the Court finds the evidence insufficient with respect to Managed Solutions Group, Inc., the owner of the equipment. However, the evidence was sufficient to show that the operator Defendants knew of the direct infringement occurring on websites hosted on their servers.17 (See Section III.A.2.a.) The evidence also established that Defendants were in a position to directly control and monitor the instrumentality (the servers) used by the third party direct infringers.18 Specifically, Defendants had numerous tools at their disposal for monitoring their servers and terminating abusive users. For example, Defendants had the ability to suspend a particular user, disable IP addresses used by a particular website or, if necessary, unplug a server that contained the data for a particular website. (See Trial Ex. 21; Lowe Decl., Exs. 1598, 1622 at 116:20-117:18; Coombs Decl., Exs. B at 170:20-171:14, D at 167:15-168:13.) Under this evidence, along with the evidence of direct infringement, the jury found for Plaintiff on the issue of contributory trademark infringement. The Court finds that the evidence was sufficient to support the jury's verdict on this issue.19 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The evidence was also sufficient to show that Defendants were "willfully blind" to the direct infringement in light of the large number of infringement notices that they received. (See Lowe Decl., Ex. 1598.) The Court has previously determined that Defendants supply a service, rather than a product. (See Order Granting in Part and Denying in Part Defendants' Motion for Summary Judgment at 15-17, Docket Item No. 99.) Thus, the Court applies the "direct control and monitoring" standard. Lockheed, 194 F.3d at 984. The Court rejects Defendants' contention that the Closing Instructions were defective for failure to state that direct control and monitoring is a required element of contributory trademark infringement. (See Motion for New Trial at 13-14.) To the contrary, the Closing Instructions directed the jury to consider control and monitoring and provided adequate guidance to the jury in light of the entire trial. (See Closing Instructions at 10.) Similarly, the Court rejects Defendants' contention that the jury was not given adequate instructions regarding consideration of any actions that Defendants took after becoming aware of infringing activity on their servers. (See Motion for New Trial at 18.) The Court finds that the instructions specifically allowed the jury to consider Defendants' action or inaction after receiving notice of trademark infringement. (Closing Instructions at 10.) On this issue, no further instruction was required under Ninth Circuit law. See Los Angeles Memorial Coliseum Comm'n v. Nat'l Football League, 791 F.2d 1356, 1360 (9th Cir. 1986) ("A party is not entitled to an instruction on its theory of the case if that theory lacks support either in law or in the record."). 18 19 18 17 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page19 of 35 1 2 3 4 5 6 7 8 9 10 Accordingly, the Court GRANTS Judgement as a Matter of Law to Defendant Managed Solutions Group Inc., and DENIES the operator Defendants' Motion Re Trademarks and Motion for New Trial as to contributory trademark infringement. C. Defendants' Alternative Motion for a New Trial In the alternative, Defendants move for a new trial on several grounds: (1) insufficiency of evidence as to contributory copyright infringement, (2) insufficiency of evidence as to contributory trademark infringement, (3) improper and unconstitutional statutory damages award, and (4) improper assessment of personal liability as to Defendant Chen. Since the Court has already addressed the first two issues raised by Defendants in the context of the Rule 50 Motions,20 the Court will only consider the constitutionality of the statutory damages award and Defendant Chen's liability. Rule 59(a) states, "A new trial may be granted . . . in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States." Fed. R. Civ. P. 59(a)(1). As is apparent from the text, Rule 59 does not specify the grounds on which a motion for a new trial may be granted. See Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1035 (9th Cir. 2003). The court is "bound by those grounds that have been historically recognized." Id. Historically recognized grounds for a new trial include, but are not limited to, claims "that the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair to the party moving." Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251 (1940); see also Passantino v. Johnson & Johnson Consumer Prods., 212 F.3d 493, 510 n.15 (9th Cir. 2000). Under Rule 59(a), a new trial may be granted to all or any parties on all or part of the issues, after trial. A partial new trial is proper only if the issue to be retried is "so distinct and separable from the others that a trial of it alone may be had without injustice." Gasoline Prods. Co. v. Champlin Refining Co., 283 U.S. 494, 500 (1931); Pumphrey v. K.W. Thompson Tool Co., 62 F.3d (See Sections III.A, B.) The alternative motion for a new trial is moot as Defendant Managed Solutions Group, Inc. 19 20 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page20 of 35 1 2 3 4 5 6 7 8 9 10 1128, 1133 (9th Cir. 1995). A partial new trial solely on damages may be ordered so long as it does not involve a tangled or complex fact situation that makes it unfair to determine damages apart from liability. Wharf v. Burlington N. R.R. Co., 60 F.3d 631, 638 (9th Cir. 1995) (no injustice resulting from retrial on damages only, without reopening liability issues). In a motion for a new trial, the trial judge has discretion to weigh the evidence and assess the credibility of witnesses. Air-Sea Forwarders, Inc. v. Air Asia Co., Ltd., 880 F.2d 176, 190 (9th Cir. 1989). However, the court does not have to weigh the evidence under Rule 59 in the light most favorable to the prevailing party. Landes Constr. Co. v. Royal Bank of Can., 833 F.2d 1365, 1371 (9th Cir. 1987). 1. Statutory Damages United States District Court 11 For the Northern District of California Defendants move for judgment on the grounds that (1) the statutory damages exceeded the statutory maximums, (2) the statutory damages were unconstitutional as applied, and (3) the Closing Instructions misstated the law regarding statutory damages. (See Motion for New Trial at 23.) The Court addresses each ground in turn. a. Whether the Statutory Damages Exceeded the Statutory Maximum 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 At issue is whether the statutory damages awarded by the jury exceeded the maximum allowed under the relevant statutes. "In reviewing a jury's damages award, [courts] must uphold the jury's finding of the amount of damages unless the amount is grossly excessive or monstrous, clearly not supported by the evidence, or only based on speculation or guesswork." Los Angeles Mem'l Coliseum, 791 F.2d at 1360 (citations and quotations omitted). Statutory damages for willful copyright infringement may be awarded at a rate of up to $150,000 per violation. See 17 U.S.C. 504(c)(2). Statutory damages for willful trademark infringement may be awarded at a rate of up to $1,000,000 "per counterfeit 20 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page21 of 35 1 2 3 4 5 6 7 8 9 10 mark per type of goods or services sold, offered for sale, or distributed, as the court considers just." 15 U.S.C. 1117(c)(2).21 Here, the jury awarded statutory damages of $10,500,000 per Defendant for willful contributory infringement of 13 of Plaintiff's trademarks. (Verdict at 8-9.) The jury also awarded statutory damages of $300,000 per Defendant for willful contributory copyright infringement of two of Plaintiff's copyrights. (Id. at 12-13.) This amounts to approximately $807,692 per trademark per Defendant and $150,000 per copyright per Defendant. Thus, the damages awarded for willful infringement were within the statutory maximums.22 Accordingly, the Court DENIES Defendants' Motion for New Trial as to this ground. b. Whether the Damages Statutes were Unconstitutional as Applied United States District Court 11 For the Northern District of California Defendants contend that the damages statutes are unconstitutional as applied on the grounds that (1) the statutes violated Defendants' due process right under the Fifth Amendment because they lack adequate language to guide a jury in applying the statutes, and (2) the damages awarded were unconstitutionally excessive punitive damages. (See Motion for New Trial at 23-33.) The Court addresses each ground in turn. i. Application of the Damages Statutes by the Jury 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 At issue is whether the Court erred in allowing the jury to determine the amount of statutory damages under the Copyright Act and Lanham Act. "The right to a jury trial includes the right to have a jury determine the amount of statutory damages . . . ." Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 353 (1998). Although On October 13, 2008, the willful statutory damages provision was amended by raising the limit on statutory damages for willful infringement from $1,000,000 to $2,000,000. However, the parties agreed to apply the pre-October 13, 2008 statute in this case. (See Motion for New Trial at 19; Opposition of Plaintiff Louis Vuitton Malletier, S.A. to Defendants' Motion for New trial or Other Relief Pursuant to Rule 59 at 19, hereafter, "Opposition Re New Trial," Docket Item No. 277.) The Court rejects Defendants' contention that the Closing Instructions misstated the law regarding statutory damages. (See Motion for New Trial at 19-22.) As with Defendants' other challenges to the instructions, the Court finds that the jury received wholly adequate instructions that tracked the statutory damages language and provided the jury with ample guidance in light of the trial as a whole. 21 22 21 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page22 of 35 1 2 3 4 5 6 7 8 9 10 Feltner was decided in the context of the Copyright Act, the Supreme Court did not indicate that its rationale was tied to anything specific to that Act. Indeed, at least one circuit court has specifically held that Feltner applies to statutory damages under the Lanham Act as well. See Bar-Meir v. North American Die Casting Ass'n, 55 Fed. Appx. 389, 390-91 (8th Cir. 2003). "If statutory damages are elected, the jury has wide discretion in determining the amount of statutory damages to be awarded, constrained only by the specified maxima and minima." Dream Games of Arizona, Inc. v. PC Onsite, 561 F.3d 983, 992 (9th Cir. 2009). Here, Defendant concedes that Feltner permits a jury to determine the amount of statutory damages, but contends that "Congress has not yet amended the Lanham or Copyright Acts to guide juries." (See Motion for New Trial at 23-24.) In light of clear law permitting juries to decide the amount of statutory damages under both the Copyright Act and Lanham Act, the Court finds that Defendants' contention is without support. Thus, the Court finds that it did not err in permitting the jury to determine the amount of statutory damages. ii. Whether the Damage Award was Unconstitutionally Excessive United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 At issue is whether the amount of statutory damages awarded by the jury constituted an unconstitutionally excessive punitive damage award. "Because awards of statutory damages serve both compensatory and punitive purposes, a plaintiff may recover statutory damages `whether or not there is adequate evidence of the actual damages suffered by plaintiff or of the profits reaped by defendant . . . .'" Los Angeles News, 149 F.3d at 996. The amount to be awarded is "constrained only by the specified maxima and minima." Id. "A statutorily prescribed penalty violates due process rights `only where the penalty prescribed is so severe and oppressive as to be wholly disproportion[ate] to the offense and obviously unreasonable.'" U.S. v. Citrin, 972 F.2d 1044, 1051 (9th Cir. 1992) (quoting St. Louis, Iron Mt. & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67 (1919)). Courts routinely reject substantive due process challenges to statutory damage awards. See Verizon California Inc. v. Onlinenic, Inc., No. C 08-2832 JF, 2009 WL 2706393, at *7 (N.D. Cal. Aug. 25, 2009) (finding that a statutory damages award of $33.15 million at $50,000 per violation of 22 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page23 of 35 1 2 3 4 5 6 7 8 9 10 the Anti-cybersquatting Consumer Protection Act did not violate due process in light of evidence that the defendant registered and monetized at least 663 domain names that were confusingly similar to the plaintiff's trademarks); Centerline Equip. Corp. v. Banner Personnel Serv., Inc., 545 F. Supp. 2d 768, 777 (N.D. Ill. 2008) (rejecting the defendant's contention that a 30,000:1 ratio between potential statutory damages and actual harm to the plaintiff would violate due process); see also Zomba Enters., Inc. v. Panorama Records, Inc., 491 F.3d 574, 586-88 (6th Cir. 2007) (finding that an award against the defendant under the Copyright Act in a ratio of 44:1 in statutory damages to compensatory damages was not sufficiently oppressive to constitute a violation of due process). The Court is aware of only three cases in this district where a court found that the amount of statutory damages requested by a plaintiff would violate the defendant's due process rights. In Facebook, Inc. v. Wallace, the defendant had "engaged in a phishing and spamming scheme that ha[d] compromised the accounts of a substantial number of Facebook users." No. C 09-798 JF, 2009 WL 3617789, at *1 (N.D. Cal. Oct. 29, 2009). After the defendant defaulted, the plaintiff sought a default judgment of statutory damages in the amount of $4,264,425,900 under the CANSPAM Act and $3,247,500,000 for violations of Cal. Bus. & Prof. Code 22948.2. Id. at *2. Although the court found that the defendant's acts were egregious, it was "not persuaded that an award of statutory damages in excess of seven billion dollars is proportionate to [the defendant's] offenses." Id. Thus, the court awarded a default judgment in the total sum of $711,237,650. Id. The other two cases both involved considerations particular to the class certification context.23 In Azoiani, the court denied a motion for class certification where the plaintiff sought statutory damages of $100 to $1000 per violation that would result in a class recovery between $423 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 See Azoiani v. Love's Travel Stops and Country Stores, Inc., No. EDCV 07-90 ODW (OPx), 2007 WL 4811627 (C.D. Cal. Dec. 18, 2007); Price v. Lucky Strike Entm't, Inc., No. CV 07-960-ODW(MANx), 2007 WL 4812281 (C.D. Cal. Aug. 31, 2007). Since these cases involved claims for statutory damages under the same statute, the Court will discuss Azoiani and will note where Price differs in any substantive regard. 23 23 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page24 of 35 1 2 3 4 5 6 7 8 9 10 million and $4 billion.24 The plaintiff sought recovery under the Fair and Accurate Credit Transactions Act ("FACTA") for defendant's alleged failure to remove expiration dates from credit and debit card receipts. 2007 WL 4811627, at *1. The court found that certifying a class with that amount of damages at issue, in light of the type of violation alleged, would run contrary to the Advisory Committee Notes to Federal Rule of Civil Procedure 23(b)(3), which states that a court's "determination with respect to class certification should not bring about other undesirable results." Id. at *4. Specifically, the court found that "putting a company out of business for failing to excise the expiration dates from credit card receipts[,] especially without proof of actual harm, is the type of undesirable result that the Advisory Committee and the Ninth Circuit warned against." Id. at *5. Thus, the Court finds Azoiani and Price are distinguishable because they involved concerns relevant to the class certification process. Further, the statutory damages provisions in this case provide for damages of up to $1 million per trademark violation, in comparison to the $100 to $1000 damages range under FACTA. Here, Defendants have not shown that the award of statutory damages was "so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable." The jury awarded $10,800,000 per Defendant--an amount of damages within the statutory ranges provided in the Copyright Act and the Lanham Act. (See Section III.C.1.) Contrary to Defendants' contention, there is no requirement that the jury base the award on any evidence of actual damages suffered by Plaintiff. (See Motion for New Trial at 24.) Defendants have not cited any case, and the Court is not aware of one, where a court found a due process violation under analogous facts. Further, this amount does not approach the size of the $7 billion requested and found to be problematic in Facebook. Thus, in light of the jury's finding of willful infringement of 13 trademarks and two United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2007 WL 4811627, at *5. The potential class award at issue in Price was "between $3.3 and $33 million." 2007 WL 4812281, at *4. 24 24 Case5:07-cv-03952-JW Document281 Filed03/19/10 Page25 of 35 1 2 3 4 5 6 7 8 9 10 copyrights, the Court finds that the jury's award of statutory damages was fully permissible and not excessive under Ninth Circuit law.25 Accordingly, the Court DENIES Defendants' Motion for New Trial on the ground of statutory damages. 2. Defendant Chen's Personal Liability Defendants contend that Defendant Chen cannot be held personally liable for contributory copyright infringement and contributory trademark infringement because he acted only in his capacity as an officer of the corporate Defendants. (Motion for New Trial at 33-35.) "[A] corporate officer or director is, in general, personally liable for all torts which he authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the corporation and not on his own behalf." Comm. for Idaho's High Desert, Inc. v. Yost, 92 F.3d 814, 823 (9th Cir. 1996). "Cases which have found personal liability on the part of corporate officers have typically involved instances where the defendant was the `guiding spirit' behind the wrongful conduct, . . . or the `central figure' in the challenged corporate activity." Davis v. Metro Productions, Inc., 885 F.2d 515, 523 n.10 (9th Cir. 1989). Under such circumstances, both the corporation and the officers or directors who participated in the tortious conduct may be held liable. See Moseley v. U.S. Appliance Corp., 155 F.2d 25, 27 (9th Cir. 1946); Pai Corp. v. Integrated Sci. Solutions, Inc., No. C-06-5349 JSW, 2007 WL 1229329, at *9 (N.D. Cal. Apr. 25, 2007). "When a corporation infringes in obedience to the command of an officer with power to cause the corporation to commit or refrain from committing the infringing act, United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Court finds that Defendants' reliance on Gore's "ratio" between punitive and compensatory damages is misplaced because Gore dealt with (1) purely punitive damage awards that were (2) unconstrained by statute and (3) were awarded on top of, and as a

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.


Why Is My Information Online?