Pacific Stock, Inc. v. MacArthur & Company Inc. et al

Filing 21

Magistrate Judge's FINDINGS AND RECOMMENDATION To Grant Plaintiff's Motion For Entry of Default Judgment As To Defendant Dream Communications, Inc. re 17 . Signed by Judge BARRY M. KURREN on 9/10/12. (gls, )CERTIF ICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
PACIFIC STOCK, INC.,
Plaintiff,
vs.
MACARTHUR & COMPANY INC.,
dba, MACARTHUR & COMPANY
SOTHEBY’S INTERNATIONAL
REALTY, a Hawaii Corporation;
DREAM COMMUNICATIONS INC.,
a California Corporation; GAYLE
CHING; JOHN DOES 1-10; JANE
DOES 1-10; DOE CORPORATIONS
1-10; DOE PARTNERSHIPS 1-10; and
DOE ASSOCIATIONS 1-10,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

CIVIL NO. 11-00720 JMS/BMK
(Copyright Infringement)
MAGISTRATE JUDGE’S FINDINGS
AND RECOMMENDATION TO
GRANT PLAINTIFF’S MOTION FOR
ENTRY OF DEFAULT JUDGMENT
AS TO DEFENDANT DREAM
COMMUNICATIONS, INC.

MAGISTRATE JUDGE’S FINDINGS AND RECOMMENDATION TO
GRANT PLAINTIFF’S MOTION FOR ENTRY OF DEFAULT
JUDGMENT AS TO DEFENDANT DREAM COMMUNICATIONS, INC.
Plaintiff PACIFIC STOCK, INC.’s Motion for Entry of Default
Judgment as to Defendant Dream Communications, Inc. filed herein on June
20, 2012, [Doc. #17] having come on for hearing before the Court, the
Honorable Barry M. Kurren, Magistrate Judge presiding, with J. Stephen
Street appearing for the plaintiff and there being no appearance and no

written submission by or on behalf of the Defendant DREAM
COMMUNICATIONS, INC., the Court, after full consideration of
Plaintiff’s motion and the entire record herein, makes the following
Findings and Recommendation:
FINDINGS OF FACT
1. This is an action for preliminary and permanent injunctive relief and
damages against Defendant DREAM COMMUNICATIONS INC.
(hereinafter “Defendant Dream Communications”) for copyright
infringements in willful violation of the United States Copyright Act, 17
U.S.C. §§ 101 et seq. and for violations of the Digital Millennium
Copyright Act 17 U.S.C. §1202.
2. This Court has jurisdiction over the subject matter of this action under 28
U.S.C. §§ 1331 and 1338(a). Venue is proper in this district under 28
U.S.C. § 1400(a) and 28 U.S.C. §§ 1391(b) and 1391(c).
3. Plaintiff filed its Complaint herein on December 1, 2011.
4. Defendant Dream Communications was given a written request for
waiver of service pursuant to the terms of Rule 4(d) FRCP together with
a certified copy of the Complaint and Summons, but it failed to waive
service.

2

5. Defendant Dream Communications was personally served on April 19,
2012, and the Proof of Service was filed as Doc. #13 in this action.
Based upon the service date of April 19, 2012, its Answer to the
Complaint was due on May 10, 2012.
6. Defendant Dream Communications has failed to appear or otherwise
respond to Plaintiff’s Complaint.
7. The Clerk of the Court entered a default against Defendant Dream
Communications on May 17, 2012, Doc. # 14.
8. The photographic work at issue in this case was created by Doug Perrine,
a photographer who is represented by Plaintiff Pacific Stock. The
photographic work at issue was registered by Plaintiff Pacific Stock, as
agent for claimant Doug Perrine, with the United States Copyright
Office. By written assignment, Doug Perrine has assigned co-ownership
of all rights, title and interest in the copyrights to Pacific Stock. The
official registration number for the photographic work is VA 1-249-922,
effective April 26, 2004.
9. Doug Perrine incurred substantial time and expense in creating the
photographic work, and Pacific Stock has invested substantial time and
expense in marketing the licensing of the photographic work.

3

10.

In late 2010, Plaintiff learned that Defendants were using the
photographic work on a website operated by Defendant Dream
Communications: http://megadreamhomes.com ,

Page URLs:
http://www.megadreamhomes.com/Home153811.html
http://www.megadreamhomes.com/Home~id~153811~imageIndex~2.htm
http://www.megadreamhomes.com/Home~id~153811~imageIndex~3.htm
http://www.megadreamhomes.com/Home~id~153811~imageIndex~4.htm
http://www.megadreamhomes.com/Home~id~153811~imageIndex~5.htm
http://www.megadreamhomes.com/Home~id~153811~imageIndex~6.htm
http://www.megadreamhomes.com/Home~id~153811~imageIndex~7.htm
http://www.megadreamhomes.com/Home~id~153811~imageIndex~8.htm
http://www.megadreamhomes.com/Agent8519.html
Image URLs:
http://www.megadreamhomes.com/images/153/153811/153811_3_full.jpg
http://www.megadreamhomes.com/images/photos4/8519.jpg

11.

These uses were without obtaining license or consent from Plaintiff or
Doug Perrine, thus violating the exclusive rights of the copyright owners
to reproduce, adapt, display, distribute, and/or create derivative works
under 17 U.S.C. § 106.

12.

Where Plaintiff’s copyrighted works are legitimately available for
licensing, they are associated with copyright management information.
Defendants intentionally removed copyright management information
from association with the photographic work at issue for their uses of that
photographic work without the authority of Plaintiff or the law. Because
the pages on Defendant Dream Communication’s website contained
4

multiple copies of the photographic work in question at high resolution
without Plaintiff’s copyright management information, Plaintiff has been
injured in its ability to license the work. Compounding the injury,
Defendant Dream Communications provided its own false copyright
management information in association with its ongoing use of the work.
13.

Plaintiff attempted to resolve the claim with Defendants for the
ongoing use of the image in violation of Plaintiff’s copyright. Although
Defendant Dream Communications removed the image from several of
the listing pages, it failed or refused to remove the image from the
website at Image URL:
http://www.megadreamhomes.com/images/photos4/8519.jpg, and from
Page URL: http://www.megadreamhomes.com/Agent8519.html.

14.

Defendants’ ongoing infringing use of the image after notification
necessitated legal action. Plaintiff and Defendants MacArthur and Ching
have settled the claims against MacArthur and Ching, specifically
reserving Plaintiff’s claims against Defendant Dream Communications.

15.

Defendant Dream Communications is doing business in the State of
Hawaii, specifically by soliciting and advertising listings luxury
properties for Hawai’i realtors.

5

16.

Defendant Dream Communications has misappropriated Plaintiff’s
copyrighted photographic work and engaged in unauthorized use and
copying of Plaintiff’s photographic work. Defendant Dream
Communications’ acts constitute copyright infringement under the
United States Copyright Act, 17 U.S.C. §§ 101 et. seq.

17.

Because Defendant Dream Communications continued to use the
image for its own commercial purposes after it was given notice of the
infringement, it has demonstrated willful infringement, which, unless
restrained, may continue, causing irreparable damage to Plaintiff, for
which Plaintiff has no adequate remedy of law.

18.

Defendant Dream Communication’s unlawful use of a copy of
Plaintiff’s original photographic work without license has diminished the
value of the original photographic work by diluting the market and
destroying the distinctiveness of the photographic work and its identity as
being the exclusive property of Plaintiff.

19.

Defendant Dream Communication’s unlawful acts have been and are
interfering with and undermining Plaintiff’s ability to market Plaintiff’s
own original photographic work, thereby impairing the value and
prejudicing the sale by Plaintiff of its own photographic work. Plaintiff
is entitled to a temporary and permanent injunction restraining Defendant

6

Dream Communication from engaging in further acts of copyright
infringement.
20.

Defendant Dream Communications, by its unauthorized appropriation
and use of Plaintiff’s original photographic work, has been engaging in
acts of unfair competition, unlawful appropriation, unjust enrichment,
wrongful deception of the purchasing public, and unlawful trading on
Plaintiff’s goodwill and the public acceptance of Plaintiff’s original
photographic work.

21.

As a direct and proximate result of Defendant Dream
Communication’s wrongful acts, Plaintiff has suffered and continues to
suffer lost profits and damages. Plaintiff is entitled to recover from
Defendant Dream Communications the damages it has sustained as a
result of these wrongful acts. Plaintiff is unable to ascertain the extent of
the monetary damages it has suffered by reason of Defendant Dream
Communication’s acts of copyright infringement.

22.

Plaintiff is further entitled to recover any gains, profits, or advantages
Defendant Dream Communication has obtained as a result of its wrongful
acts. Because Defendant Dream Communication has failed to answer,
Plaintiff is unable to ascertain the full extent of the gains, profits, and
advantages it has realized by its acts of copyright infringement

7

23.

Plaintiff is entitled to and has elected to recover from Defendant
Dream Communications statutory damages for its willful violations of
Plaintiff’s copyright. Plaintiff is further entitled to costs and reasonable
attorneys’ fees.
CONCLUSIONS OF LAW

A. To the extent that the foregoing findings of fact are more properly
conclusions of law, they shall be treated as such, and, to the extent that
the following are more properly findings of fact, they shall be treated as
such.
B. The Complaint alleges a claim for copyright infringement, in violation of
the Copyright Act, 17 U.S.C. §101 et seq, and a claim for removal or
alteration of copyright management information, and providing false
copyright management information, in violation of the Digital
Millennium Copyright Act, 17 U.S.C. § 1202 (a) and (b).
C. There are two elements to a claim for copyright infringement: a plaintiff
must allege (1) ownership of a valid copyright and (2) copying of
constituent elements of the work that are original. Funky Films, Inc. v.
Time Warner Entm't Co., L.P., 462 F.3d 1072, 1076 (9th Cir. 2006);
Pacific Stock, Inc. v. Pearson Edu., Inc. 2012 U.S. Dist. LEXIS 3337
(U.S.D.C. HI, Jan. 11, 2012) Copy. L. Rep. (CCH) P30,186. Plaintiffs

8

have pled facts to establish the necessary elements of copyright
infringement.
D. To establish the Digital Millennium Copyright Act violation, Plaintiff
must establish that Defendant Dream Communications has committed
acts prohibited in 17 U.S.C. §1202(a) or (b)
§ 1202. Integrity of copyright management information
(a) False Copyright Management Information.—No person shall
knowingly and with the intent to induce, enable, facilitate, or conceal
infringement—
(1) provide copyright management information that is false, or
(2) distribute or import for distribution copyright management
information that is false.
(b) REMOVAL OR ALTERATION OF COPYRIGHT MANAGEMENT
INFORMATION. — No person shall without the authority of the
copyright owner or the law —
(1) intentionally remove or alter any copyright
management information,
E. The DMCA provides for minimum statutory damages in the sum of not
less than $2,500 or more than $25,000 as to each violation. Copyright
management information includes the name of the author and title of the
work. Plaintiffs have pled facts to establish the necessary elements of the
Digital Millennium Copyright Act violation.
F. "With respect to the determination of liability and the default judgment

9

itself, the general rule is that well-pled allegations in the complaint
regarding liability are deemed true." Fair Housing of Marin v. Combs,
285 F.3d 899, 906 (9th Cir. 2002); see DIRECTV, Inc. v. Hoa Huynh,
503 F.3d 847, 854 (9th Cir. 2007); TeleVideo Sys., Inc. v. Heidenthal,
826 F.2d 915, 917-18 (9th Cir. 1987) see also Fed. R. Civ. P. 8(b)(6).
The entry of default conclusively establishes the facts as to liability, but
not damages. See Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th
Cir. 1977). While the court may conduct a hearing to determine damages,
see Fed. R. Civ. P. 55(b)(2), the court can rely on evidence submitted by
Plaintiffs Fed. R. Civ. P. 55(b)(2); see Fustok v. ContiCommodity Servs.,
Inc., 873 F.2d 38, 40 (2d Cir. 1989).
G. As a general rule, “any doubts as to the propriety of a default are usually
resolved against the party seeking a default judgment.” VonGrabe v.
Sprint PCS, 312 F. Supp. 2d 1313, 1319 (S.D. Cal. 2004) (citing Pena
v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985)).
H. In determining whether to grant default judgment, the court should
consider the following factors:
(1) the possibility of prejudice to the plaintiff, (2) the merits of
plaintiff’s substantive claim, (3) the sufficiency of the complaint,
(4) the sum of money at stake in the action; (5) the possibility of a
dispute concerning material facts; (6) whether the default was due
to excusable neglect, and (7) the strong policy underlying the
Federal Rules of Civil Procedure favoring decisions on the merits.
10

Twentieth Century Fox Film Corp. v. Streeter, 438 F. Supp. 2d 1065, 1070
(D. Ariz. 2006) (quoting Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir.
1986)). See also Parr v. Club Peggy, Inc. , Civ. No. 11-00505 JMS-BMK,
2012 U.S. Dist. LEXIS 24785 (USDC HI 2012).
I. The Eitel factors favor Plaintiff: (1) Defendant’s failure to file an answer
in this action prejudices Plaintiff’s ability to obtain a prompt and efficient
resolution; (2) Plaintiffs have demonstrated that Defendant has violated
Plaintiff’s copyrights and has violated the DMCA. (3) Plaintiff’s
complaint sufficiently sets forth the elements to support the claims under
the Copyright Act and the DMCA; and (4) the amount of money at stake
relative to the cost of continued litigation makes the matter appropriate
for default judgment.
J. Two of the seven factors are neutral because Defendants have not
appeared in this action: (1) the possibility of a dispute concerning
material facts, and (2) whether the default was due to excusable neglect,
however, any possible argument as to excusable neglect is implausible,
given the extended period of time that Defendant has failed to appear in
the case. Although the last factor, the strong policy favoring decisions on
the merits, favors denial of the motion, on balance, the record strongly
favors granting the default judgment.
11

DAMAGES
Statutory Damages for Willful Copyright Infringement
K. Pursuant to 17 U.S.C. § 504(c), “A plaintiff may elect statutory damages
regardless of the adequacy of the evidence offered as to his actual
damages and the amount of the defendant’s profits.” Columbia Pictures
Indus., Inc. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186, 1194
(9th Cir. 2001) (citation omitted). Plaintiff is entitled to an award of
damages of no less than $750.00 per work and, for a willful infringement,
no more than $150,000.00 per work for Defendants’ violation of the
Copyright Act. 17 U.S.C. § 504(c)(1) and (2).
L. In determining the amount of statutory damages, district courts will generally
consider the following: (1) the savings to the defendants and profits reaped by
the defendants as a result of the infringement; (2) revenue lost by the plaintiff;
(3) the deterrent value of the award; and (4) the defendant's state of mind, i.e.
whether the infringement was wilful or innocent. See Cross Key Pub. Co.,
Inc., v. Wee Inc., 921 F. Supp. 479 (W.D. Mich. 1995) (considering infringer's
refusal to obtain license; continued violation of copyright despite warning; and
amount operator would owe under proper license); Cass Country Music Co. v.
C.H.L.R., Inc., 896 F. Supp. 904 (E.D. Ark. 1995) (considering the amount of
money the defendant saved, the amount the plaintiff lost, and the defendant's

12

state of mind); Polygram Intern. Pub., Inc. v. Nevada/TGI, Inc., 855 F. Supp.
1314 (D. Mass. 1994)(citing deterrence as an additional factor). Thus, while a
plaintiff need not prove actual damages in order to receive statutory damages,
statutory damages should bear some relationship to actual damages. Fitzgerald
Pub. Co. v. Baylor Pub. Co., 670 F. Supp. 1133 (E.D.N.Y. 1987).
M. In the instant case, the savings to Dream Communications and the amount
lost by Pacific Stock are the amount that Dream Communications would have
had to pay Pacific Stock to license its photographs. The license fees for the
uses of the image in question would have totaled $7,505.00, as detailed in the
Declaration of Barbara Brundage, Pacific Stock’s President (plus $353.64 in
State of Hawaii general excise tax, for a total of $7,858.64). Pacific Stock
determined its loss by calculating the license fee for each use of the image at
the website for the term in years of its use.
N. In Warner Bros. Entertainment v. Caridi, 346 F. Supp. 2d 1068 (C.D.
Ca. 2004), the plaintiff sought enhanced statutory damages after an entry
of default judgment against defendants who had engaged in unauthorized
copying and distribution of two movie “screeners” the plaintiff had
loaned them for award consideration. Id. at 1069-71. The federal district
court noted that, “[b]ecause of the entry of default, the allegations in [the
plaintiff’s] Complaint must be taken as true. Thus, since [the plaintiff]

13

alleged willful infringement, the Court must take [the plaintiff’s]
allegation of willful infringement as true.” Id. at 1074. In that case, the
plaintiff sought statutory damages under 17 U.S.C. § 504(c)(2) for a sum
of not more than $150,000.00 per work. Id. The court found that the
egregiousness of the conduct in that case was compounded by the
defendants’ failure to proffer any defense, and warranted an award of
enhanced statutory damages of $150,000.00 per work. Id.
O. Because of Defendant Dream Communication’s default, Plaintiff’s
allegations of willful infringement should be taken as true. Additionally,
as in Warner Bros., the Defendants’ conduct was clearly egregious.
Here, Defendant Dream Communications is a publisher of an on-line
magazine listing residential real estate with a minimum value of ten
million dollars. As such, Dream Communications should be familiar
with copyright laws and the cavalier disregard for those laws in
continuing to use the image at its commercial websites after it originally
received notice of the infringement is particularly egregious. The
deterrent purpose of statutory damages is important here to discourage
future acts of scofflaw. Moreover, as in Warner Bros., the egregious
conduct was compounded by Defendants’ failure to bother to proffer any
defense to Plaintiff’s Complaint.

14

P. Although Plaintiff is entitled to seek $150,000.00 per work for
Defendant’s willful infringement of the image in this case, Plaintiff asks
that the Court award it statutory damages under 17 U.S.C. § 504(c)(1) for
the willful copyright infringement in the amount of no less than $35,000
representing enhanced damages that are a multiple of standard licensing
fees.
Statutory Damages for DMCA Violation
Q. Additionally, pursuant to 17 U.S.C. § 1203(c), Plaintiff is entitled to an

award of damages of no less than $2,500.00 for each violation of 17
U.S.C. § 1202 and no more than $25,000.00 for each violation, See 17
U.S.C. § 1203(c)(3)(B).
R. Based upon the entry of default, Plaintiff’s allegations of Defendants’

removal of copyright management information and placing false
copyright information on the image at Defendant Dream
Communication’s website should be taken as true. See Warner Bros.,
346 F. Supp. 2d at 1071. Although Plaintiff may seek up to $25,000 for
each violation 17 U.S.C. § 1202, Plaintiff seeks no less than $10,000 for
the DMCA violation.
Attorneys’ Fees and Costs
S. Pursuant to 17 U.S.C. § 505, entitled “Remedies for infringement: Costs

15

and attorney’s fees,” and 17 U.S.C. § 1203, entitled “Civil Remedies,”
the Court in its discretion may allow the recovery of full costs and
reasonable attorneys’ fees to the prevailing party.
T. Reasonable attorney’s fees are generally based on the traditional
“lodestar” calculation set forth in Hensley v. Eckerhart, 461 U.S. 424,
433 (1983). See Fisher v. SJB-P.D., Inc., 214 F.3d 1115, 1119 (9th Cir.
2000). The court must determine a reasonable fee by multiplying “the
number of hours reasonably expended on the litigation” by “a reasonable
hourly rate.” Hensley, 461 U.S. at 433. Second, the court must decide
whether to adjust the lodestar amount based on an evaluation of the
factors articulated in Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70
(9h Cir. 1975), which have not been subsumed in the lodestar
calculation. See Fisher, 214 F.3d a 1119 (citation omitted).
U. The factors the Ninth Circuit articulated in Kerr are:
(1) the time and labor required, (2) the novelty and difficulty of the
questions involved, (3) the skill requisite to perform the legal service
properly, (4) the preclusion of other employment by the attorney due
to acceptance of the case, (5) the customary fee, (6) whether the fee
is fixed or contingent, (7) time limitations imposed by the client or
the circumstances, (8) the amount involved and the results obtained,
(9) the experience, reputation, and ability of the attorneys, (10) the
“undesirability” of the case, (11) the nature and length of the
professional relationship with the client, and (12) awards in similar
cases.

16

Kerr, 526 F.2d at 70. Factors one through five have been included in the
lodestar determination. See Morales v. City of San Rafael, 96 F.3d 359,
364 n.9 (9th Cir. 1996). Once calculated, the “lodestar” is presumptively
reasonable. See Pennsylvania v. Delaware Valley Citizens’ Council for
Clean Air, 483 U.S. 711, 728 (1987); see also Fisher, 214 F.3d at 1119 n.4
(stating that the lodestar figure should only be adjusted in rare and
exceptional cases).
V. Plaintiff requests the following lodestar amount for attorney’s fees it
incurred in this case as detailed in the attached Declaration of Counsel:
J. STEPHEN STREET

Hours
18.8

Rate/Hour
$ 300.00

$

Amount

5,640.00

Additionally, Plaintiff seeks to recover the Hawaii General Excise Tax
related to those fees in the amount of $265.75.
In determining whether an hourly rate is reasonable, the Court
considers the experience, skill, and reputation of the attorney requesting
fees. See Webb v. Ada County, 285 F.3d 829, 840 & n.6 (9th Cir. 2002).
The reasonable hourly rate should reflect the prevailing market rates in the
community. See id.; see also Gates v. Deukmejian, 987 F.2d 1392, 1405
(9h Cir. 1992), as amended on denial of reh’g, (1993) (noting that the rate
awarded should reflect “the rates of attorneys practicing in the forum
district”). Although attorneys are required to provide evidence that the rate
17

charged is reasonable, See Jordan v. Multnomah County, 815 F.2d 1258,
1263 (9th Cir. 1987), this Court is aware of the prevailing rates in the
community, having had the opportunity to review fee requests of many
attorneys.
In considering the Declaration of Counsel and the breakdown of fees
sought, under the standards discussed above, the Court has determined that
the appropriate award of attorneys fees and tax in this matter is Five
Thousand Nine Hundred and Five Dollars and Seventy-Five Cents
($5,905.75) and costs of suit in the amount of Five Hundred Eighty-Three
Dollars and Forty-Five Cents ($583.45).
RECOMMENDATION
Based upon the foregoing findings of fact and conclusions of law, it is
hereby recommended that Default Judgment be entered in Plaintiff’s favor
and against Defendant Dream Communications, Inc. and that Defendant
pay to Plaintiff $45,000 in statutory damages, $5,905.75 in attorney’s fees,
and costs in the amount of $583.45.

18

IT IS SO FOUND AND RECOMMENDED.
DATED: Honolulu, Hawaii, September 10, 2012

/s/ Barry M. Kurren
United States Magistrate Judge

19