Arista Records LLC et al v. Lime Wire LLC et al

Filing 262

DECLARATION of Brian G. Mendonca in Opposition re: 234 MOTION for Permanent Injunction.. Document filed by Lime Wire LLC, Lime Group LLC, Mark Gorton. (Attachments: # 1 Exhibit A)(Sommer, Michael)

Exhibit A

UNITED STATES DISTRICT COURT SOUTHERNDISTRICT OF NEW YORK ARISTA RECORDS LLC,

USOf SUN\' D(I' ;\ ,I Mt-. NT bLtt": "uNICALl Y DnC ˘:

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DArE R-tE~f-'
8822

--~-ot·,.l-.J-6~. .
.-....~.... . (HB) (THK)

et

al., 07 civ.

Plaintiffs, -againstUSENET.COM, INC., et al.,

AMENDED! REPORT AND RECOMMENDATION (PRO SE)

TO: HON. HAROLD BAER, JR., UNITED STATES DISTRICT JUDGE FROM: THEODORE H. KATZ, UNITED STATES MAGISTRATE JUDGE. On October Recording Records, Records, Music Inc., 12, 2007, Plaintiffs Arista Capital Records Records, Group, Recording Inc., Inc., Virgin and LLC, Atlantic Inc., Inc., Caroline Interscope Sony BMG America, LLC

--------------------------------x

Defendants.

Corporation, Inc., LaFace Elektra Records

BMG Music,

Entertainment LLC, Maverick

Company, Records

Entertainment, Warner Brothers

UMG Recordings, Records,

Zomba copyright

Recording infringement

(collectively, action Corporate collectively,
(See

"Plaintiffs") Defendants Inc.

commenced this Usenet.com, and Gerald

against Design,

Inc.

( "UCI" ) ,

Sierra
/I

("Sierra"), seeking dated

Reynolds

("Reynolds, relief. also 17, First

"Defendants"), ("Compl. 1/), ("Am. widespread vis-a-vis

damages and injunctive Oct. , 12, dated of of 2007 i Sept. their see

Complaint

Amended Plaintiffs sound

Complaint alleged

Compl.")

2008. ) in the

infringement a network

copyrights called

recordings,

computers

Amended Report and Recommendation corrects a reference to I This the entry of a default judgment made on page 22 of the original Report and Recommendation. It is otherwise identical.
-1-

USENET.2 by their

According director access to

to

Plaintiffs, sole

Defendants shareholder, a fee,

UCI and Sierra, Defendant where

led

and the

Reynolds, to

provided Defendants'

USENET for freely

subscribers of copyrighted

services

could without in fact,

access

"millions

sound recordings," subscribers Plaintiffs' This pretrial Defendants' As a result, certain Inc., Plaintiffs premised Defendants affirmative Copyright relevant 608 F. were, works. case

authorization encouraged

from the copyright and enticed to

owners; download

(See Am. Compl. referred

~~ 2-3.) to the if this course not Court of entirely for for general

was previously

supervision. conduct this

Throughout was dilatory, Court sanctioned See Arista 442-43

discovery, evasive. of

at best,

Defendants Records, (S.D.N.Y.

spoliation

evidence. Supp. for 2d 409,

LLC v. 2009).

Usenet.com, Thereafter, sanctions, Defendants. on their

moved on

summary

judgment

and terminating misconduct judgment the by based Digital

additional cross-moved defense of

discovery for summary

protection safe harbor dated

under

Millennium

Act's

("DMCA")

provision. June 30, 2009, District motion Judge in its

By Opinion Harold Baer, Jr.

and Order, granted

Plaintiffs'

summary judgment

Despite the similarity between the name of Defendant Usenet.com, Inc. and the network to which it provides USENET), the two are indeed distinct. Defendant UCI number of websites through which one can gain access USENET. To avoid any confusion, the network will be as the "USENET," and Defendant Usenet.com, Inc. will to as "UCI."
2

access (the is one of a to the referred to be referred

-2-

entirety, and

granted

Plaintiffs' Defendants'

terminating cross-motion Inc., 633

sanctions as F. moot. Supp.

motion See 2d that

in part, Arista 129 was

dismissed LLC 2009).

Records, (S.D.N.Y. no material

v.

Usenet.com, Specifically, of fact as

124, there

Judge Baer concluded to Defendants' of
j oint

issue for (1)

and

several

liability right

direct under

infringement 17 U.S.C. contributory infringement.

Plaintiffs' (2)

exclusive inducement infringement; of

of distribution, infringement; vicarious Judge

§ 106(3); copyright See from

copyright and (4)

(3)

copyright Baer

id.

at

159.

In their

addition, affirmative provision. Defendants' this 2009; Court

"preclude[d] of at protection 142. moot.

Defendants under The latter the

asserting safe

defense
II

DMCA's conclusion was then

harbor rendered

Id.

cross-motion for an inquest dated Dec.

The action

referred June

to 30,

on damages. 15, 2009.)3

(See Order,

dated

Order, In their

pre-inquest no principled per work

submissions, basis to

Plaintiffs

contend less Court

that than enter

they the an

"simply

have

seek any amount ask that the

maximum award

and therefore

3 Defendants Sierra and UCI have each filed for bankruptcy in the District of North Dakota. On November 3, 2009, the United States Bankruptcy Court for the District of North Dakota lifted the automatic stay with respect to both corporate Defendants. Thus, Judge Baer's Summary Judgment Order and this Court's determination of damages applies with equal force as against all Defendants. (See Order, dated Dec. II, 2009.) The Court will refer to the Defendants collectively throughout this Report and Recommendation. All parties have consented to a determination of damages by this Court, rather than a jury. (See Stipulation, dated July 16, 2009; Stipulation, dated Dec. 28, 2009.)

-3-

award of $131,700,000." and Mem. Conclusions
II ),

(See Plaintiffs' Law, dated Plaintiff Findings Reply the Sept. s' of

Proposed II, Reply Fact
2009

Findings ("Pls.' of

of Fact Damages Law in of Law, at

of see

at

4i

also

Memorandum and Conclusions at
2.)

Support dated this that

of Their Oct.
13,

Proposed
2009

("Pls.'

Mem."),

They arrive

amount they of .

by multiplying Defendants

number of works

owned by Plaintiffs (878), willful by the maximum infringement

allege

to have infringed available for

amount

statutory

damages

($150,000) In ownership instead statutory

response, of these

Defendant works the or

Reynolds the

does not of

dispute works the

Plaintiffs' but

number

infringed,

suggests

that

Court

should for

award

minimum amount of
($200).4

damages

available

innocent Proposed

infringement Findings

(See Defendant's Conclusions
13. )

Reply

to Plaintiffs' Oct. 15,

of Fact
lI ),

and at

of Law, dated

2009 ("Def.'s

Damages Mem.

For Plaintiffs work, for

the

reasons

that statutory

follow,

this

Court

recommends

that per

be awarded a total

damages in the of $6,585,000.

amount of $7,500

damages award

4In

light of the automatic stay imposed by the Bankruptcy Court at the time of the pre-inquest submissions with respect to Defendants UCI and Sierra, only Defendant Reynolds submitted briefing on the issue of damages. He did so in propria persona, although he was represented by counsel for the majority of the proceedings in this case, including the summary judgment motions. All Defendants have since consented to this Court's determination of damages based on the brief filed by Defendant Reynolds. (See Stipulation, dated Dec. 28, 2009.)
-4-

DISCUSSION I. Calculation Under for either the (1) profits 17 U.S.C. statutory activities. 504(c} the of of Statutory Copyright the of
§

Damages Under the "an infringer owner's of actual

Copyright is

Act liable any

Act, copyright the

copyright damages or (2) have for I.) in

and

additional damages./I receive infringing Section part, that

infringer Here, as plaintiffs

statutory elected Defendants' to

504(a}

damages

compensation Damages Mem. at Act

(See PIs.' the may in the less

Copyright recover action, than

provides,

relevant for all work, as the Island 257,

owner

"statutory with respect

damages

infringements in court

involved not just."

to anyone $30,000 see also

a sum of

$750 or more
§

than
i

considers

17 U.S.C. Inc. a court v.

504 (c) (1)

Software 262-63

& Computer (2d Cir. 2005).

Serv., If it

Microsoft determines

Corp., that the per 413 and an had

413 F.3d

infringement infringement. F.3d at 263. to of of

was willful, See 17 U.S.C.

however,
§

may award up to $150,000 Island "was acts its not Software, aware

504 (c) (2);

Conversely, believe copyright, statutory
§

if that the

a defendant his or her in

no reason

constituted

infringement the award

court to

discretion not less

may reduce than $200."

damages

a sum of

17 U. S. C.

504 (c) (2). Statutory damages under of works the Copyright not Act are calculated the number of based times a

on

the

number

infringed,
-5-

defendant Group, Inc. v. Inc.,

infringed

each work. 538, Ltd., 540

See WB Music (2d Cir. 2006);

Corp. Twin

v.

RTV Commc'n

445 F.3d Int'l, v.

Peaks Prods., 1993) i U2 6189 v. *1

Publ'ns Inc.

996 F.2d

1366,

1381 Inc., Aug. 2008

(2d Cir.

Home Entm't,

Hong Wei Int'l at Civ. *11

Trading,

No. 04 Civ. 2008)
i

(JFK) , 2008 WL 3906889, NBC Universal, (S.D.N.Y. Feb. No. 28, 06 2008).

(S.D.N.Y. (SAS) ,

21,

Smith at

5350

WL 612696,

A. The Number of Plaintiffs works. works motion To reach that as they seek this

Works damages

Infringed for the infringement include with Plaintiffs 195 PIs.' their of 878 separate of the 683

number,

Plaintiffs

each

submitted

in connection owned by

summary judgment and infringed identified Mem. at by via 8-10.) nor of and

indisputably as well as report. dispute Plaintiffs' the by which Court

Defendants, Plaintif
f

an

additional (See

works

s'

expert do not

Damages

Defendants do they

Plaintiffs' count. will briefly

ownership Nevertheless, outline this motion

of these for the number. for

works, the sake

dispute

completeness, methodology Plaintiffs that log Defendants data

evidence

Plaintiffs in

reached their

demonstrated infringed (1)

summary judgment a limited subscribers; (3) downloads set of (2) by

683 works downloads former by

by submitting Defendants' and

showing by

downloads Plaintiffs' Judge Baer

Defendants' forensic accepted

employees; (See PIs.' submissions

investigators. Plaintiffs'

Damages Mem. at 9.) as "uncontroverted

-6-

evidence Arista

of

unauthorized LLC, their 633 F.

reproduction Supp. 2d at for

of 149.

[Plaintiffs']

works."

Records, To support

damages the to expert Judge

claim report Baer

an additional of Dr. Richard liability. 19,

195 works, Waterman -

Plaintiffs previously Declaration Decl. ") . ) content (See id. percentage authorized work id.

resubmit submitted of Dr. Dr.

to

determine Feb.

(See

Richard

Waterman, conducted for the

dated

2009 ("Waterman analysis of the

Waterman offered Although music free files

a statistical to Defendants' his for analysis download

previously ~ 3.) of for

download crux of

subscribers. was to that show the were not - his (See Waterman's purposes of

available

distribution

- a staggering 195 works Judge Baer

94.17

percent

uncovered ~~ 11-13

an additional
&

owned by Plaintiffs. accepted Dr. for LLC,

Ex.

4.)

testimony the 2d

as "reliable judgment] Plaintiffs

and relevant, motion." now

and admissible Arista Records, the

[summary at 145. label

633 F. Supp. of several in 10, 2009 10, Sept.

submit attesting

declarations

record these 2009 ("Leak 2009 9,

representatives

to Plaintiffs' of JoAn Cho, dated

ownership dated Sept. dated Sept. 10, Sept. dated

195 works. (UCho Decl."); Decl."); ("McMullan ("Palerm light prior of

(See Declaration Declaration Declaration Decl."); Decl.") Plaintiffs' of

of Wade Leak, Alasdair of

McMullan, Silda

Declaration .}

Palerm,

2009 In

uncontroverted that this evidence

submissions is relevant,

and Judge reliable

Baer's

determination

-7-

and

admissible,

the

Court to

concludes

that for

Plaintiffs the

have

established of

entitlement

statutory

damages

infringement

878 wo rks ." B. Amount Plaintiffs of Damages for request PIs.' Each Infringed for 7-8.) each Work of the 878 infringed that

$150,000 Mem. at

works. Defendants' should disagree explained total

(See

Plaintiffs

argue

conduct at the

was willful statutory

and egregious, maximum. While

and thus, the Court for infringed the

damages does not reasons work -a

be set that

Defendants' an award of

conduct of $7,500

was willful, for - is each

below,

damages A court

amount has broad

$6,585,000 discretion

sufficient. the specific
§

to determine under Fitzgerald 1986). (1) (2) copyright on those the the

amount See Baylor this and the the

of

statutory

damages to be awarded 413 F.3d 1110, at 265;

17 U.S.C. Publ'g In

504(c).

Island Publ'q,

Software, 807 F.2d

Co. v. exercising

1116

(2d Cir. consider

discretion, profits plaintiff; deterrent

a court earned by

should the

expenses

saved lost by (4) infringer;

infringer; of the award

revenues

(3) the value effect of the

to the plaintiff; other than the

5

878 is not an insubstantial number, Plaintiffs likely While could have proven a significantly larger number of infringements but for Defendants' misconduct in discovery. Indeed, the bulk of Plaintiffs' numbers (683) are based on what they uncovered prior to Defendants' spoliation of relevant evidence. And Dr. Waterman's report, uncovering an additional 195 works, was based on only a sampling of 1,800 music files, culled down from over five million files previously available to Defendants' subscribers. (See Waterman Decl. ~ 4.)
-8-

(5)

the

willfulness cooperated

of in

the

infringer's records the

conduct; to

(6)

whether the value

the of

infringer

providing and (7) from 1117; Ltd.

assess

the material discourage Fitzgerald, *11; Arclightz 362 the

infringed; defendant at Pvt.

likelihood its

the award will See at

repeating

infringement. 2008 WL 3906889, Inc.,

807 F.2d Films (S.D.N.Y.

U2 Home Entm't, v. Video Palace

303 F. Supp.

2d 356, 1.

2003). Profits revenues volume by charging of data fees ten, of their customers downloaded. $7.95, or a

Defendants'

Defendants monthly fee,

generated on the

based who

a subscriber either $4.95,

Subscribers $11.95, could

paid

monthly up to two, per

download for

or twenty subscribers of

gigabytes could Gerald

of data, an

respectively; unlimi dated and ted Sept. 2009,

$18.95 of data.

month,

download Reynolds,

amount 30,

(See Declaration Decl."), 16,301
J.)

2009

("Reynolds had Ex. the

Ex. K.) and

In the years

2008

Defendants (See id., were

15,100 Court's monthly $200,000. the

subscribers, calculations, revenues to

respectively. these subscribers of

By this of gross

source

Defendants these year

somewhere paid an

between their

$100,000 fees not

and for

Assuming of the the

subscribers (and such

monthly is

entirety given two

assumption subscriber $1.2

unreasonable across the

relatively Defendants and 2009.

consistent earned Further,

numbers

years),

between although

and $2.4 million data

during has only

each of 2008 been provided

subscriber

-9-

for prior

2008 and 2009, to this

Defendants

operated (See PIs.' that

their

business

for

ten years 19.) In of

litigation.

Damages

Mem. at

addition, Defendants' music, for

Plaintiffs subscribers

demonstrated used their

approximately primarily music highly

42 percent

services of all or

to download files likely Supp. available to be

and approximately download consisted

94 percent of infringing

infringing 131-33;

material. see also id. at

See Arista 157

Records that users

LLC, "there

633 F. is

2d at that

(stating

no doubt

infringement During produced $l.2, and

constitutes the course balance million Gianni

a draw for of this

of Defendants' Defendants show gross income

service"). have of also $1.1, (See 2009 is

litigation, which of

annual $l.3 of

sheets, for P. Ex. each

2005,

2006, dated

and 2007. Sept. gross data for 11, income

Declaration ("Servodidio therefore above. those a loss line

Servodidio, 3.) with list $57,000 The Court

Decl."), relatively

Defendants' the their

consistent however,

subscriber net income $195,000 accept First,

outlined each of and

Defendants, years of

as approximately $51,000 in 2007. for

in 2005, cannot reasons.

in 2006, these

bottom-

numbers

as accurate deduct

several of

Defendants gross (See

inexplicably income id.) which Further, for

upwards label

$1 million

from

each year's Fee."

what

they offer their

"Cost

of Goods Sold/Service for this

Defendants reduces

no explanation profits by legal

behemoth 75 to each of

expense,

approximately expenses for

85 percent. 2005, 2006,

Defendants

deduct

-10-

and

2007

in

the

amount id.) in the on the all

of

$80,000, The

$85,000,

and

$256,000, in to legal this

respectively. expenses litigation, their order identify Defendants earning profits to for

(See 2007 filed based is in

substantial related Defendants defending while profits, their year

increase directly may not this the it

likelihood

same year. money spent

deflate in

action, Court is clear potentially infringing

reduce with exact

their

damages.

Thus,

cannot that

certainty

Defendants' from per also to

consistently more than $1

profited million have taking steps

business, from their

act.Lv i t Le s ."

Plaintiffs is

submitted dissipate Plaintiffs' assets his

evidence assets.

that (See of and any

Defendant Servodidio Reynolds moved to

Reynolds Decl.

~ 5 (indicating that residence from

that

investigation to his wife by

has revealed a large

he transferred in liens Florida,

unencumbered law).)

mortgages 2. With "the online

and protected Revenues respect Lost to

by Florida

by Plaintiffs lost revenues, Plaintiffs argue that works

their

unauthorized directly

availability [sic] has

of the plaintiffs' impacted the

copyrighted legitimate,

authorized

6Defendants

argue that an alleged infringer who charges a monthly fee for access to the USENET has not derived "a financial benefit directly attributable to the infringing activity." (See Def.'s Damages Mem. at 7-8 (citing Religious Tech. Ctr. v. Netcom On-line Commc'n Servs., Inc., 907 F. Supp. 1361, 1366-67 (N.D. Cal. 1995)).) Judge Baer has already considered and rejected this argument. See Arista Records LLC, 633 F. Supp. 2d at 156 ("Here, it is apparent from the record that Defendants earn a financial benefit from infringement."). direct -11-

digital compete

market with

for

those

works,

as those

legitimate downloads 20.) not that

markets

cannot

the unlimited (PIs.' contend their damages (Def.'s that actual entirely

unauthorized Damages Mem. at Plaintiffs injuries, for "did

[Defendants] on the

facilitated." other hand, of

Defendants, even attempt instead, of

to offer of and

evidence statutory deterrence."

seeking, purposes 19.) are not

an award

punishment

Damages Mem. at Plaintiffs to receive copyright rendered, award of

As an initial actual U.S.C. before

matter,

required

to prove

any

damages upon electing
§

statutory

damages. at

See 17 any time

504 (c) (1) judgment
profits,

("the is an

owner to

may elect,
instead

final

recover,

of

actual

damages and

statutory have

damages") direct - even

(emphasis harm to if such that music to be In

added). their

In any event, business not

Plaintiffs

established conduct

by Defendants' quantified. of either the

infringing Plaintiffs content files or

harm is over 94

easily

have demonstrated in highly Defendants' likely

percent were

news groups infringing. the course

infringing Records

See Arista of their

LLC, 633 F. Supp. discovery still available these impeded

2d at 131-33. by Defendants'

limited abuses

flagrant songs that

discovery

- Plaintiffs

managed to uncover to their subscribers. the

878

Defendants subscribers

made freely who downloaded channels of

Had those through certainly

songs purchased Plaintiffs that

same have

legitimate received

commerce,

would

revenues.

The Court
-12-

recognizes

subscribers

might

not

necessarily for free.

have purchased Nonetheless, with month that $1.29

every there

song that is for

they

otherwise that the

downloaded some 15,000 gigabytes

no question downloading

subscribers of data per

an appetite would have

multiple

likely

made purchases. typically via are services de minimis. the at fact times, that had only $20,000 sell each as (See they over $1.29 in who

Defendants of these

contend for

because per lost

Plaintiffs download,

878 songs iTunes,

such

Apple's Def.'s operated 15,000 on

Plaintiffs' 18.) for

revenues

Damages Mem. at their subscribers. Plaintiffs per song, song. of business

Defendants ten years,

ignore and,

Thus,

while

each song may have cost have on lost the as number much of as

iTunes,

could depending

revenues downloaded 3. It The list popular recording sales.
/I

subscribers

each

The Value is undisputed of 878 works sound

Plaintiffs' that Plaintiffs'

Copyrights copyrights "are hold great value. the most known dollars songs to in by

infringed for

by Defendants nationally hundreds 22.) of

some of

recordings

and internationally millions of includes

artists, (Pls.' the

grossing

Damages Mem. at Spice Girls,

The list

Van Halen, few.

Guns N'Roses,

and Aerosmith,

name a

(See id.) 4. Next, Deterrent the Court Effect must of the Award the deterrent effect themselves. on both See

consider as well

other

potential

infringers

Defendants

-13-

Fitzgerald, Defendants freely Studios, 2000) are

807 are not

F.2d alone via

at

1117.

It pursuit

is

well

documented

that works City

in their internet III

to make Plaintiffs' See 2d 294, Universal 335 property No. 106-216

available Inc. v.

downloads. F. Supp.

Reimerdes,

(S.D.N.Y. piracy (1999) assisted The

("Copyright, endemic [ . ] ") ; piracy part deter

and more broadly, see of also intellectual world of is conduct only H.R.

intellectual Rep. property advanced therefore has

("[C]opyright in large

flourishes, technologies.") great. been nothing

by today's future

need to

infringers

Similarly, egregious, curb their and it

Defendants' seems that

short

of will

a significant They not

damages award only

abusive exclusive works,

practices. rights but to they

disregarded of

Plaintiffs' their with Court 142;

distribution also defied

and reproduction the in LLC, judicial sanctions 633 F.

protected their

process by this 2d at

discovery Baer.

misconduct, See Arista LLC, of look

resulting Records

and Judge Arista 5.

Supp.

Records Defendants' the Value not of

608 F. Supp. in

2d at

441-43. Records decisions to Assess in See, this e. g.,

Cooperation the Material further

Providing Infringed the of 2d prior

One need action Arista to learn

than lack Supp. "wiping"

Defendants' 633 alia, key F.

cooperation. at 139-42 hard

Records for, potentially to avoid

LLC, inter

(sanctioning of trips data, to to

Defendants sending Europe

seven on

drives paid

witnesses

all-expense false

depositions,

and providing -14 -

sworn responses

interrogatories); (sanctioning server data .

Arista Defendants and destruction Their Despite used their

Records for, of inter

LLC, alia,

608

F.

Supp.

2d at of

429-43 relevant

spoliation incriminating unquestionably

"highly has that

promotional prejudiced of Defendants' music likely 878 works - 94 to be

materials") Plaintiffs. subscribers percent infringing Defendants of relevant 6. of

misconduct the fact

42

percent to or

services of

primarily infringing could only

download highly

which material infringed

consisted - Plaintiffs

uncover

that

due to Defendants'

destruction

and concealment

evidence. Defendants' and the is willful willful willful perhaps Infringement most significantly, of Defendants' the Court must An that its

Finally, consider infringement conduct that Cir. this

nature if "the

conduct.

defendant or perhaps v. at

had knowledge recklessly GFI,

represented

infringement Hamil Twin

disregarded 97 (2d in the

possibility." 1999); context accord

America ( Inc. Peaks, the 996 F.2d

193 F. 3d 92, "willfulness disregarded

1382.

means that that its to

defendant represented the

recklessly infringement.

possibility is not

conduct show that

A plaintiff that v. its PAJ,

required constituted

defendant

had knowledge rnc.

actions Inc., citations

an infringement." 112 (2d Cir.2001) . argue that Defendants

Yurman Design, (internal quotation

262 F.3d 101, omitted)

marks and

Plaintiffs

"intentionally

engaged

in,

-15-

fostered [their)

and personal

facilitated financial point

widespread benefit."

copyright (Pls.' destruction

infringement Damages Mem. at or concealment have

for 15.) of

As support, "the very

they

to Defendants' log records

server direct

that (~id.

would at 16),

demonstrated as Judge in the to foster 2d

widespread Baer's process

infringement" that Defendants infringement" users."

as well

conclusions of

were "active with Records "an

participants intent

copyright by their

infringement at
148,

Arista

LLC,

633 F. Supp.

153. however, [their (Def.'s "innocent" contend that they "had an no reason to of that under and

Defendants, believe copyright." they the that are that

conduct]

constituted 8.)

infringement maintain protected the

Damages Mem. at infringers, that USENET Defendants their counsel is also cannot

Defendants are

actions advised

DMCA's safe because

harbor, the use,"

them of of

same,

"capable be held City liable

substantial in accordance

noninfringing with
417,

Sony Corp.
104 S.

Of Am. v.
774 (1984)

Universal

Studios,

Inc.,

464

U.S.

Ct.

(See Def.'s newly other

Damages Mem. at minted arguments advice were of

1-6.)7 counsel

Notwithstanding argument, rejected all of

Defendants' Defendants'

previously 2d at

by Judge Baer.

See Arista

Records

LLC, 633 F. Supp.

7

Defendants have also argued that their conduct is not willful according to standards set forth in several bankruptcy cases. (See Def.'s Damages Mem. at 13-14.) Those cases bear no relevance here.
-16-

153

(concluding

that

Defendants by their their

evinced users"); affirmative

an id.

"intent at 142

to

foster

copyright "Defendants under

infringement from asserting

(precluding

defense

of protection for discovery

the DMCA's safe id. that . at 156 "the

harbor (rejecting

provision"

as a sanction reliance Defendants'

abuses); the fact

Defendants' uses for

on Sony due to service are

noninfringing

immaterial")

Defendants' without of merit.

remaining Defendants To the

argument have not contrary, that privilege. might

- advice previously

of

counsel asserted

- is

also

an advice to

counsel

defense.

Defendants support (See PIs.' as from this

have declined position, Mem. at

produce basis

the communications of attorney-client may not use the

on the 5-6.) and a

Reply

Defendants sword, claim

the very

privilege documents

a both

a shield that

protecting support their Inc. at *4 v.

disclosure infringement. 472 Further,

they

"innocence" MP3.com,

of copyright Inc., 6, No.

See UMG 2000 WL

Recordings, 1262568, alleged their As

00 Civ.

(JSR),

(S. D.N. Y. on to counsel

Sept. is

2000) on

Defendants' written by 2-5.) is

reliance attorneys

premised (See Def.'s

a letter

Plaintiffs. point

Damages Mem. at advocacy defense v. *5 Carol (S.D. letter of Wright Ind. by

Plaintiffs to See,

correctly support e.g.,

out,

an

insufficient on counsel. Inc., 1992)

Defendants' Wildlife

purported EXp. Corp. at is

reliance Sales, Aug. 13,

NO. IP-89-844-C,

1992 WL 597841, "advice of counsel

(noting

that

proved

the

letter

-17-

counsel adversary")

sends .

his

client,

not

the

letter

counsel

sends

his

The Court conduct backbone
F.

has

little

difficulty Indeed, copyright

concluding

that

Defendants' "formed the

was willful. of 2d [Defendants'] at 153.

infringement Arista to

business Defendants'

model." "intent

Records induce or

LLC, 633 foster

Supp.

infringement could conclude ability to

. was unmistakable, otherwise." to control do so in Id. at

and no reasonable 154. Defendants

factfinder had the

"unfettered but at declined 157.8 7. In it is

access

to news groups would curb

on the USENET," Id.

a way that

infringement.

Application light not of the multiple that statutory factors courts that a court must consider, across file the

surprising of

have

issued That said,

awards in

entire cases,

spectrum the results

damages.

sharing of

have been somewhat more consistent. music for their own private plaintiffs of

In cases enjoyment,

individuals and default and courts

who download or lose award,

on summary judgment, the statutory minimum

typically work.

seek,

$750 per

8

Reynolds also argues - as he did before Judge Baer Defendant that he cannot be held personally liable for the actions of the corporate Defendants. (See Def.'s Damages Mem. at 13.) This argument is also without merit. Reynolds, the director and sole shareholder of both companies, played a "ubiquitous role" in the activities of the corporate Defendants, and was ~personally and intimately involved in many of the activities that form the basis of Defendants' copyright liability." Arista Records LLC, 633 F. Supp. 2d at 158. -18-

~,

Sony BMG Music at *1

Entm't

v.

Thurmond, Nov. 24,

No. 2009)

06 civ. (imposing

1230

(DGT) ,

2009 WL 4110292, damages then of

(E.D.N.Y.

statutory and v. *3

$750 per

infringement

where

individual

downloaded Inc. at

distributed No. Aug. 06

copyrighted Civ. 28, 4435 2007) chosen to Inc.

recordings); (LTS) (THK) (same). to take have
r

UMG Recordings, 2007 the WL 2438421, other hand,

Francis, (S.D.N.Y. individuals strategies ~,

On more faced

those

who have and proceed Records at a *9 full

aggressive stiffer Civil (after three

litigation awards. No. four See,

trial, v.

Capitol

Thomas-Rasset, Jan. 22, 2010) awarded

06-1497, years times of the from

2010 WL 291763, litigation statutory $80,000 Entm't Mass. and

(D. Minn. trial, per jury

judge infringement; previously

minimum, per v. Dec. work

$2,250 the No.

this awarded)

was reduced
i

that

Sony BMG Music at *17 fair (D. use

Tenenbaum, 7, 2009) jury of

07cvl1446-NG,

2009 WL 4547019, eleventh per or hour

(rejecting previously

defendant's awarded who are facilitate e.g., that

defense, In businesses awards 1262568, internet held

after cases or

$22,500 the

work). operators infringement, Inc., 2000 WL an be of

defendants that See,

owners or induce

services

are

even larger. at *6

UMG Recordings, defendants, who

(concluding that facilitated per

operated would

service liable for

digital CD9 for

music which

downloads, plaintiffs

$25,000

prove

9Although

it appears that this case ultimately settled, Judge Rakoff later entered a final judgment against the defendants in the amount of $53,400,000 in statutory damages. See Docket Entry -19-

infringement); 2089367, against without internet of court Pay at *4

see also (E.D.N.Y. of

BMG Music July 19, store so).

v.

Pena,

No.

05 CV 2310, $35,000

2007 WL per work

2007) selling In

(awarding

owners authority

a retail to do

copyrighted

recordings against out to

addition,

many cases infringement

businesses for sizeable in $10 addition Jeff Times,

alleged

to have induced See Jeremy N.Y. record million Calls (Grokster it

settle Kazaa Said

amounts. Settlement, million to to $115

W. Peters, Nov. and I,

$10 Million to pay in
i

Times, labels

2006

(Kazaa picture earlier Music $50

agrees studios,

motion in an

pledged Quits agrees

agreement) Files, million a Deal pay N.Y.

Leeds, Nov.
i

Grokster 8, 2005

on Sharing

to pay up to

in damages) with Napster, to

Matt N.Y. settle

Richtel, Times,

Songwriters Sept. 25,

and Publishers 2001 (Napster

Reach to

agrees

$36 million Taking into

copyright all of

lawsuits). the foregoing factors and the egregious deterrence, song, of statutory for and, that the thus, amount. for

consideration to the Court, profits,

evidence conduct, the Court

presented their

particularly and the $7,500

Defendants' objective per of

handsome that

concludes of $6,585,000, Defendants'

an award of adequately gross

infringed

a total damages. years the

serves -

the not

purposes net per profits year, of

income

2005 through total damages

2007 exceeded award is, in

$1 million part,

reflective

162, UMG Recordings, (JSR) (entered Nov.

Inc. v. MP3.com, 14, 2000). -20-

Inc.,

No. 00 Civ.

0472

Although song -

far

from

the amount of is $7,500 sufficient

requested per to song deter

by Plaintiffs is ten not is times only

- $150,000 the

per

an award This

statutory but that

minimum. other

Defendants, of the fact

potential

infringers. Defendants stay

The Court previously lifted, Defendant filed

mindful for

the corporate the automatic them. contrary,

bankruptcy.

However,

has been

and a judgment Reynolds,

may be entered his claims

against to the

In addition, appears In is

despite

to have at least fact, evidence concealing

some resources

to satisfy to the the

a monetary Court District his that

judgment. Reynolds court to

has been presented his assets, an order Order.

actively

leading

appoint with Exs. Court a

a receiver Preliminary

and enter Injunction

enforcing (See

compliance Decl. the

Servodidio Finally,

11 & 12.) rejects Defendants' argument (See Def.'s the question that a large

damages award at 20-24.) statutory

would

offend

due process. has pondered due process 331 F.3d 13,

Damages Mem. of whether v. In the damages in a

The Second Circuit damages could Entm't the Co., raise L.P.,

concerns. 22

See Parker 2003) dicta,

Time Warner that case,

(2d Cir. in of

Second

Circuit

considered, the recovery a class award, action out of

hypothetical by each

question

of whether plaintiff in

statutory could all result

individual

"devastatingly proportion class." to the Id.

large actual

damages

reasonable plaintiff and thus,

harm suffered case is not

by members of the a class action,

The instant

-21-

does not have award cited

raise "no

the case the

same concerns. where range (See PIs.' the in Court fashioning lost is without has a court

As Plaintiffs has found by 8.)

note, a statutory Congress

Defendants damages to be

within

prescribed Reply

unconstitutional." discussed relevant profits above, factors and

Mem. at

Further, all

and as of the

carefully its award,

considered including

Defendants' Defendants'

Plaintiffs' argument

revenues. merit.

Accordingly,

due process

CONCLUSION For recommends and severally, Pursuant Federal (14) Rules from Fed. the the that reasons set forth above, this Court respectfully jointly

a judgment for to of statutory 28 Civil U.S.C.

be entered damages in
§

against the (1) (c) parties to file

Defendants, amount and shall written of Rule

$6,585,000.10 72 of the

636(b) the report and (e). with

Procedure, of P. of this 6(a) the

have

fourteen

days

service R. Civ. Clerk of the

objections. shall delivered united be to

See also filed the with

Such objections extra Baer, copies Jr.,

Court,

chambers Judge, of for

Honorable Street,

Harold

States the Any must result be in

District chambers requests directed

500 Pearl

New York,

N.Y. 500

10007,

and to

the

undersigned, of Failure

Room 1660, time for

Pearl

Street.

an extension

filing

objections will

to Judge Baer.

to file

objections

lOIn a prior submission to the Court, Plaintiffs they were deferring any request for attorneys' dated Sept. 8, 2009.) -22-

indicated that fees. (See Order,

a waiver Arn,

of

those 140,

objections 147-48,

for

purposes

of appeal. 471

See Thomas v. Mario v. P

474 U.S.

106 S. Ct. 758,

466,

(1985); 2002);
i

& C Food Mkts., Superintendent, Health curiam) and .

Inc.,

313 F.3d 162,

766

(2d Cir. 2000) 16

Spence v. v. Sec'y of (per

219 F.3d Human Servs.,

174 (2d Cir. F.2d
IS,

Small Cir.

892

(2d

1989)

Respectfully

Submitted,

THEODOREH. KATZ / UNITED STATES MAGISTRATE JUDGE Dated: February 2, 2010 New York, New York

~.j!~

-23-