Yahoo! Inc. v. XYZ Companies et al
Filing
128
MEMORANDUM AND ORDER. For the foregoing reasons, Plaintiff's motion for judgment by default is granted, The Clerk of Court is respectfully requested to enter judgment in favor of Plaintiff and against Defendants Nakchan, Chinedu Mbonu, Chibuzor Mhonu, Ausdith Investments Ltd., and Alamin Industrial Corp., jointly and severally, in the total sum of $610,039,500 (comprising a statutory damages award of $27,000,000 under 1117(c), and a statutory damages award of $583,039,500 und er the CAN-SPAM Act). Plaintiff must file and serve its attorneys' fees award request, supported by detailed contemporaneous time records and relevant biographical and billing rate information, with a courtesy copy provided for Chambers, no late r than December 21, 2011. Any opposition to the fee request must be filed, with a courtesy copy for Chambers, by January 23, 2012. Any reply must be filed and served by February 6, 2012. Granting 110 Motion for Default Judgment. (Signed by Judge Laura Taylor Swain on 12/5/2011) (rjm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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YAHOO! INC.,
Plaintiff,
No. 08 Civ. 4581 (L TS)(THK)
-vXYZ COMPANTES
Defendants.
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MEMQRANDIJM ORDER
Plaintiff Yahoo! Inc. ("Plaintiff' or "Yahoo!") brings this action, asserting
trademark infringement, counterfeiting, unfair competition, false designation of origin, and other
related claims against Defendants Daiann Nakchan, Adebimpe F. Pogoson, Emmanuel C.
Onyema, Aisha Buhan, Chinedu Mbol1u, Chibuzor Mbonu, Chika Mbonu, Ausdith Investments
Ltd., Chen Chien-Chang, Chen Chien-Zhou, Alamin Industrial Corp., XYZ Companies 1 - 25
and John/Jane Does 1 - 25. The Comt has jurisdiction of the claims pursuant to 15 U.S.C. §
1121,28 U.S.C.
~§
1332(a)(1) and (2), and 28 U.S.c. §§ 1331 and 1338. Over the course of the
litigation, Plaintiff voluntarily dismissed its claims against Defendants Pogoson, Onyema,
Buhari, Chen Chien-Chang, Chen Chien-Zhou and Chika Mbonu.
Yahoo ~ now moves for judgment by default against remaining named Defendants
Daiann Nakchan, Chinedu Mbonu, Chibuzor Mbonu, Ausdith Investments Ltd. ("Ausdith"), and
Alamin Industrial Corp. ("Alamin") (collectively, the "Defendants"). For the reasons stated
below, Plaintiff's motion is granted and statutory damages of$610,039.500 are awarded.
YAIJOO LOTT DEE MTN.WPD
VERSION J
BACKGROUND
The uncontroverted allegations of the Third Amended Complaint (the
"Complaint") and Plaintiffs additional proffers in support ofthis unopposed motion establish
the following material facts. Defendants, a group of Thai and Nigerian individuals, a Nigerian
corporation, and a Taiwanese corporation, have, for several years, perpetuated the Yahoo!
Lottery Fraud ("Lottery Fraud"). The fraud works as follows: Defendants send hoax emails to
individuals they do not know, telling them that they have won large sums of money through
lotteries that the individuals have never entered. (Comp!.'1 34.) If an individual responds to the
initial email, Defendants inform him that he needs to pay a fee before he can collect his money.
(ld.) The hoax emaiis counterfeit the Yahoo! name and Yahoo! marks in order to mislead
recipients into thinking that the messages were sent or authorized by Yahoo! (Id.
~
35.) The
hoax emails further rely on the Yahoo! name to persuade individuals to provide personal
infonnation (names, addresses, phone numbers, bank account infonnation, etc.), which
Defendants subsequently use to further a wide range of credit and identity scams. (Id.
~
36.)
Yahoo!'s customers first brought the Lottery Fraud emails to Yahoo!'s attention in November
2006, and Yahoo! was eventually able to identify the Defendants as those responsible for the
emails.(SeeDecl.ofCarloCatajan~~5.11.Apr.28.2011.ECFNo.112)
(hereinafter "Catajan
Dec!.") Between December 2006 and May 2009, Yahoo! catalogued 11,660,790 hoax lottery
em ails that were sent through Yahoo! Mail. (Catajan Dec!. ,,8.) After increasing numbers of
Yahoo! customers began requesting clarification ofYahoo!'s role in the Lottery Fraud emails,
Yahoo! posted information on the "Spam, Viruses and Other Abuse" section of its website,
explaining that Yahoo! was in no way affiliated with or responsible for the hoax emails.
(Compl. '147; Catajan Decl. '118.)
YAIIOoLorr DcI' Mrl>.IVPI)
VERSION 11/5/11
Yahoo! filed this action on May 16, 2008, against XYZ Companies 1 - 25 and
John/Jane Does I
25. After identifying some specific perpetrators, Yahoo! filed its First
Amended Complaint, naming Daiann Nakchan, Adebimpe F. Pogoson, and Emmanuel C.
Onyema as additional defendants. On March 19, 2009, Yahoo! filed a Second Amended
Complaint that corrected some clerical errors but did not add claims or defendants. Yahoo! med
its Third Amended Complaint on November 4, 2009, naming Aisha Buhari, Chinedu Mbonu,
Chibuzor Mbonu, Chika Mbonu, Ausdith Investments Ltd., Chen Chien-Chang, Chen Chien
Zhou, and Alamin Industrial Corp. as additional defendants, and properly served all those
defendants. Claims against Defendants Pogoson, Onyema, Buhari, Chika Mbonu, Chen Chien
Chang, and Chen Chien-Zhou were subsequently dismissed, so that the only Defendants
remaining in the action are Chinedu Mbonu, Chibuzor Mbonu, Ausdith Investments Ltd., and
Alamin Industrial Corp. To date, none of these Defendants has responded to the Complaint or
otherwise appeared in this action.
Standard of Review
A grant of default judgment is a two-step process: first, the Clerk of Court files an
entry of default against a party who "has failed to plead or otherwise defend" an action, and
second, the Court, taking Plaintiff's well-pleaded allegations as true, determines whether the
complaint states a claim for relief. See Fed. R. Civ. P. 55(b); Fed. R. Civ. P. 8(b)(6); see also
Goga v. Zim Am. Integrated Shipping Servs, No. 06 Civ. 5783(LAK)(GWG), 2009 WL 320602,
at *2 (S.D.N.Y. Feb. 10,2009). Despite having had ample time to do so, Defendants have failed
to respond to Plaintiff's complaint, and the Clerk has entered a certificate of default against each
Y:dIOOLOTr DEF MTN.\\'PD
Defendant. Therefore, taking all the well-pleaded allegations in Plaintiff's complaint, except
those relating to damages, and Plaintiff's additional uncontroverted factual proffers in support of
its motion as true, the Court proceeds to the second step of the inquiry. See Transatlantic Marine
Claims Agency v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1998).
Defendants' Liability for Trademark Infringement and Violations of the CAN-SPAM Act.
A pleading must consist of "a short and plain statement of the claim showing that
the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A plaintiff need not plead "detailed
factual allegations," but the complaint must include "factual content that allows the court to draw
the reasonable inference that the defendant is liable forthe misconduct alleged." Iqbal v.
Ashcroft, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). A pleading that asserts only "labels and conclusions or a formulaic recitation of the
elements of a cause of action" is insufficient. Id. Here, Plaintiff s pleadings and additional
proffers, taken as true, are sufficient to establish the alleged violations, making a grant of default
judgment appropriate.
Plaintiff asserts the following claims: 1) trademark counterfeiting and
infringement in violation of 15 U.S.C. § 1114; 2) false designation of origin, unfair competition
and passing off in violation of 15 U.s.c. § 1125(a); 3) dilution in violation of 15 U.S.c. §
1 125(c); 4) violation of the CAN-SPAM Act, 15 U.S.c. § 7701, et seq.: 5) New York common
law trademark infringement: 6) New York state dilution; 7) deceptive trade practices; 8) civil
conspiraey; 9) violation of CalIfornia's Unsolicited Commercial E-Mail Statute, Cal. Bus. &
Prof. Code § 17529.5; and 10) violation of California's Anti-Phishing Statute, Cal. Bus. & Prof.
Vr.:RSIO;-"; 1
4
Code
&22948.2. I
Trademark Counterfeiting and Lnfringement
To establish a prima facie case for trademark infringement, a plaintiff must show:
"( 1) it has a valid mark that is entitled to protection under the Lanham Act: and that (2) the
defendant used the mark [or imitation], (3) in commerce, (4) 'in connection with the sale ... or
advertising of goods or services,' 15 U.s.c.
~
1114(1 )(a), (5) without the plaintiffs consent." .l.:
800 Contacts, Inc. v. When lJ.Com, Inc., 414 F.3d 400, 407 (2d Cir. 2005). Plaintiff must also
show that defendants' use of the mark "is likely to cause confusion ... as to the affiliation,
connection, or association of [defendant] with [plaintiffJ, or as to the origin, sponsorship, or
approval of [the defendant's] goods, services, or commercial activities by [plaintiffJ."
(quoting 15 U.s.c.
~
1125(a)(1 )(A)).
Plaintiffs complaint and proffers are sufficient to sustain its burden with respect
to Defendants' liability for trademark infringement. Plaintiff has described its registration of its
name and several Yahoo! marks (Compl. '1'129-30) and has provided copies of those valid
registrations. ({d. Ex. I.) Plaintiff alleges that Defendants perpetrate lottery scams for their
commercial gain by sending e-mail messages which intentionally counterfeit Yahoo! 's name and
the Yahoo! marks in order to mislead recipients into thinking that they have won lotteries
affiliated with Yahoo! (Compl. '1'133 - 36; Catajan Decl. Ex.2.) Plaintiff also alleges that it
never consented to Defendants' use of the Yahoo! name or Yahoo! marks (id. ,; 33), and that
Defendants' llse ofthose marks confused or deceived recipients of the Lottery Fraud emails into
believing that the emails were sent by or affiliated with Yahoo! (Id. ','1 42-43, 45-47.)
In this decision, the Court addresses claims (1), (4), and (8) and, granting the motion
as to those claims, finds consideration of the other seven claims unnecessary.
y ,\1100 I.oTT IlIT MT'l. Wi'll
The CAN-SPAM Act, 15 U.s.c. § 7701, et seq.
To establish a defendant's liability under
~
7704(a) of the CAN-SPAM Act, a
plaintiff must show that the defendant 1) transmitted commercial electronic mail messages; 2) to
a protected computer; and 3) that those messages included header infonnation or subject
headings that were materially misleading. L5 U.S.c. §§ 7704(a)(1)-(2). A protected computer
is defined as a computer "which is used in or affecting interstate or foreign commerce or
communication, including a computer located outside the United States that is used in a manner
that affects interstate or foreign commerce or communication of the United States." 18 U.S.c. §
1030(e)(2)(B) (West Supp. 2011). Plaintiff must also show that the e-mails sent by defendant
did not contain any mechanisms by which the recipient could electronically request not to
receive future electronic mailmcssages from the defendant, and that the e-mails did not clearly
identify themselves as advertisements or solicitations. 15 U.S.c. §§ 7704(a)(3), (5).
Plaintiff has alleged that Defendants initiated the transmission of numerous
commercial electronic mail messages, and that the subject headings of those emails (by
referencing the Yahoo! name) were likely to and actually did mislead recipients into believing
that the Lottery Fraud emails were authorized by Yahoo! (CompI.
~l'!
78-79.) Plaintiff has also
alleged that the Yahoo! Mail servers, through which these emails passed, are computers through
which e-mail transactions are received, stored and disseminated in interstate or foreign
commerce or communication. (ld.
'177.)
Finally, Plaintiff has alleged that Defendants' e-mails
did not include a mechanism that the recipient could use to submit a reply message requesting no
fm1her e-mails from the Defendants, and that Detendants' emails did not clearly identify
themselves as advertisements or solicitations. (Id.
~i'i
80 - 8] .) Plaintiff has also submitted
copies of several emails send by Defendants, further supporting its allegations. (Catajan Decl.
YAHOOLOI r Dl'F MTNWPD
VI:~S:O~
Ex. 3.)2 Accordingly, Plaintiffs uncontroverted allegations and proffers are sufficient to
establish that Defendants violated the CAN-SPAM Act.
Defendants Are Jointly and Severally Liable
Plaintiffs assert that Defendants should be held jointly and severally liable as
participants in a civil conspiracy under New York state common law. To prove conspiracy
under New York law, Plaintiff mLlst sho\v three elements: (1) a corrupt agreement; (2) an overt
act in fUl1herance of that agreement; and (3) membership in the conspiracy by each defEmdant.
Cofacredit v. WindsorPlumbing Supply Co., 187 F.3d 229, 240 (2d Cir. 1999). Agreements in
civil conspiracies "may be inferred from circumstantial evidence," as they are often difficult to
prove through direct evidence. ld. The Complaint and accompanying declarations allege facts
sufficient to establish that Defendants were engaged in a civil conspiracy. The Complaint
alleges that Defendants either sent or conspired with others to send the Lottery Fraud emails and
that they received a portion of the financial benefits that resulted from the messages (Compl.
~
52). Plaintiff has also offered evidence of the following: 1) Chinedu and Chibuzor Mbonu are
directors of Ausdith Investments Ltd. and Chinedu Mbonu owns the Ausdith bank account into
which proceeds frol11 the Lottery Fraud were deposited (Declaration of Shane M. McGee ~r'l 6
12, Apr. 28, 2011, ECF No. 114) (hereinafter "McGee Oecl."); 2) Oaiann Nakchan owns a bank
account into which victims of the Lottery Fraud were directed to transfer funds (McGee Dec1.
'1'1
13 - 15); 3) Alamin Industrial Corp. owns a bank account into which victims of the Lottery
Fraud were directed to transfer funds (McGee Decl.
n 16
19); 4) money was transferred
between the Ausdith and Alamin bank accollnts (McGee Decl.
~
20); and 5) Lottery Fraud
emails traced back to Alamin and Ausdith both provided winning numbers beginning with
This material is maintained under seal pursuant to an order of the Court. (See docket
entry no. 103.)
'v'IJ<.-;;rON!
11
YBM-EBS and ending with AF. (Catapm Oed Ex. 3; \IIcGee Dec1. Exs. 1,4, 5. 3) Additionally,
Plaintiff has provided the Court with copies of numerous emails, traced to Ausdith, Alamin, and
Nakchan. Apalt from minor variations in phrasing and style, the emails are strikingly similar.
. 3.)4 This circumstantial evidence is sufficient to support the reasonable
(Catajan Decl.
inference that Defendants are co-conspirators. As such, they are jointly and severally liable for
all damages resulting from the Lottery Fraud.
Monetary Relief
Statutory Damages Award Under 15 U.S.c. § 1117(c)
Under 15 U.S.c.
~
1117(c), a plaintiff may recover statutory damages rather than
actual damages or profits, particularly when. as here. "defendants have not provided sufficient
records of profits for a plaintiffto establish actual damages." Nike, Inc. v. Top Brand, No. 00
Civ. 8179(KMW)(RLE), 2006 WL 2946472, at *2 (S.D.N.Y. Feb. 27, 2006), adopted by 2006
WL 2884437 (S.D.N.Y. Oct. 6.2006); Phillip Morris USA v. A & V Minimarket, 592 F. Supp.
2d 669, 673 (S.D.N.Y. 2009) ("Section 1117(c) was enacted to address the difficulty of
calculating actual damages caused by counterfeiters."). The
COUlt
has broad discretion to award
damages as "[it] considers just," and is constrained only by the statutory maximum and
minimum. 15 U.S.c.
~
1117( c )(2). In this case,
~
1117(c )(2) provides for damages of "not less
than $1,000 or more than $2,000,000 per counterfeit mark per type of goods or services sold,
Portions of this material arc maintained under seal pursuant to an order ofthe Court.
(See docket entry no. 103.)
For example, many of the Lottery Fraud emails instruct recipients to contact customer
service representatives or prize coordinators who are described by professional titles,
including "Professor," "Reverend," "Doctor," and "Barrister." (Catajan Decl. Ex. 3.)
VERSlOl\ 1115/11
offered for sale, or distributed" in cases where infringement was willfu1. 5
Plaintiff requests maximum statutory damages of either $1,000,000 or $2,000,000
for each counterfeit Yahoo! mark, depending on whether the counterfeited mark was included in
an email distributed before or after October 13,2008.
The Court first considers Plaintiff's categorization of emails. Section 1117(c)
provides for damages to be awarded "pcr counterfeit mark per type of .. , service[]" distributed.
15 U.s.C. ~ 1117(c)(2). Plaintiff alleges that, between December 200(/' and October 12,2008,
Defendants distributed 134 different types of emails that included 816 violations of counterfeited
Yahoo! marks and that, after October 13, 2008, Defendants distributed 146 different types of
emails that included 795 violations of counterfcited Yahoo! marks.7 (Memorandum of Law in
Supp0l1 of Plaintiff's Motion for Default Judgment 20, Apr. 28, 2011, ECF No. Ill) (hereinafter
"Plaintiff's Memo. ") Characterizing each "type" of email as a separate "service," Plaintiff seeks
an award ofS816,OOO,OOO ($1 million for each of 816 separate trademark violations) for the
period fi-Oln December 2006 through October 12, 2008, and an award of $ 1,590,000,000 ($2
million for each of 795 separate trademark violations) for the period from October 13, 2008
Until October 13,2008, the maximum statutory damages award under 15 U.S.c. §
1117(c) was $100,000, or $1,000,000 if the defendant's infringement was vvillful. As
of October 13, 2008, the maximum statutory damages award available under ~ 1117
(c) increased to $200,000 and $2,000,000, respectively. See Prioritizing Resources
and Organization for Intellectual Property Act of 2008, Pub. L. No. 110-403, 122 Stat.
4256. The Court has considered both sets of parameters in detelmining the
appropriate award in this case, as the underlYl11g conduct spanned the period from
December 2006 to May 2009.
Plaintiff proffers that its records indicate hoax lottery activity going back as far as
early 200S, and that customer inquiries as to the validity of lottery communications
commenced in November 2006, but bases its damages calculations on the December
2006 to October 2008 period. (Catajan Decl_ 5.)
,r
Y AHon LOTT IWF MT'C. \\PD
through May 2009. Yahoo! 's categorization of email "types" is based on the use of specific
fraudulent "award" amounts and other identifiers
111
the varioLls lottery emails, as well as
different Yahoo! marks or combinations of marks. In SLlPPOIt of its analysis, Yahoo! cites Nike,
Inc. v. Top Brand, No. 00 Civ. 81 79(KMW)(RLE), 2006 WL 2946472 (S.D.N.Y. Feb. 27,2006),
a case involving the counterfeiting ofNike's trademarks. In that case, the court found four
different counterfeit marks and three different types of "goods" t-shirts, fleece sweatshirts, and
polo shirts and awarded $12 million in statutory damages ($1 million per mark multiplied by
the number of types of counterfeit goods). Nike, Inc, 2006 WL 2946472 at *3.
The Lottery Fraud emails at issue here are not so different from each other
functionally, aesthetically, or based on content - as to support proper characterization into 280
separate types of services. While the emails do differ in language, phrasing, layout and style,
they are all fundamentally si milar in that they promote the same scheme - falsely telling
recipients that they have won a Yahoo! sponsored lottery and asking recipients to provide their
personal information and/or pay a fee in order to claim their winnings. The differences in
phrasing and visual style of the emails are minor. The Court therefore concludes that only one
"type" of service is at issue.
Five counterfeit marks Yahoo!, Yahoo! stylized, MyYahoo!, MyYahoo!
stylized, and Yl - appeared in the Fraud Lottery emails both before and after October 13,2008.
(See Catajan DecL Exs. 2-3.) Of these five marks, the first - the Yahoo! standard character mark
- is itself the subject of five separately registered trademarks. (Declaration of Britton Payne in
Support of Plaintiffs Motion for Default.l udgment ~f~1 3-4, Nov. 30, 20 Il, ECF No. 127)
(hereinafter "Payne Dec1.") Therefore, each time Defendants counterfeit the Yahoo! standard
character mark, they actually counterfeit five registered marks for the purposes of calculating
Y AHO" L(}Tr DIY MTN. WPI)
VERSION ~2/5il!
10
damages.
==-..::;.:.;;;;;;.:.'
u.s. Dist. LEXIS
Chane\, Inc. v. Joseph Mosseri, Case No. 2:07-cv-02619-SRC-CCC, 2008
111825 (D.N..T. May 20,2008) (awarding damages per counterfeited
registration where four registrations were for the "ce" monogram and three registrations were
for the CHANEL mark). Accordingly, both before and after October 13, 2008, Defendants
counterfeited nine registered Yahoo! marks.
The Court next considers the appropriate damage amount to be awarded per each
of these nine counterfeit marks. Courts awarding statutory damages under
~
1117(c) consider
both compensatory and punitive factors, including (1) the defendants' likely profits; (2)
plaintiffs lost revenues; (3) the value of the mark; (4) whether the defendants' infringement was
will ful; (5) the extent of defendants' cooperation with the court; (6) the scale of defendants'
infringement activities; and (7) the detelTent effect ofthe award, both on defendants and others.
Sara Lee Corp. v. Bags of New York, Inc., 36 F. Supp. 2d 161, 166 (S.D.N.Y. 1999); Philip
Morris USA, 592 F. Supp. 2d at 673.
The Court lacks specific information as to either Defendants' likely profits 8 or
Plaintiff's lost revenues. However, the Yahoo! trademarks are extremely well known and
internationally recognizable and, by counterfeiting those trademarks, Defendants caused
confusion among Yahoo! customers. (Compl.
'I,r 15-31,45-49; Catajan Dec!. '118.)
Defendants' infringement was obviously willful, as the counterfeit trademarks were
identical to Yahoo's registered marks, and the structure and layout of the Lottery Fraud emails
indicate Defendants' efforts to have the fraudulent emails resemble genuine Yahoo!-affilialed
messages as closely as possible.
Plaintiff alleges that over $3,000,000 was deposited into the Alamin bank account
over the past seven years, but provides no specific information as to the source of that
money or its relation to the Lottery Fraud scheme. (McGee Dec!. 19.)
,r
'{ AHOO I OTT DEF MT~. \VfJD
II
Defendants have never responded in this action or appeared before the Court,
much less cooperated with the Court. Additionally, the scale of Defendants' infringement
activities appears significant, as Defendants sent 11,660,790 emails over a period ofless than
three years. Finally, a large damages award would have a detelTent effect on both Defendants
and other would-be perpetrators ofa similar scheme. See, e.g., !JMG Recordings, Inc. v.
MP3.com, Inc., No. 00 Civ. 472 JSR, 2000 U.S. Dist. LEXIS 13293, at * 17-18 (S.D.N.Y. Sept.
6,2000) ("the potential for huge profits in the rapidly expanding world of the Internet is the lure
... that will also tempt others to [break the law] if too Iowa level is set for the statutory damages
in this case"); Verizon Cal. Inc. v. OnlineNIC, Inc., No. C 08-2832 JF (RS), 2009 WL 2706393,
at *9 (N.D. Cal. Aug. 25,2(09) ("the number of domain names that infringe [Verizon's] marks
has decreased substantially since the entry of the clefaultjudgment on December 19,2008, and
OnlineNIC admits that 'pUblicity about the massive judgment against [it] ... gain[ ed] much
attention' in Asia beginning in late December 2008").
Therefore, the Court awards maximum damages of$I,OOO,OOO per counterfeit
Yahoo! mark per type of service provided, for a total award of $9,000,000 for Defendants'
trademark violations prior to October 13,2008, and $2,000,000 per counterfeit Yahoo! mark per
type of service provided, for a total award of $18,000,000, for Defendants' trademark violations
after October 13, 2008.
Statutory Damages underCAN-SPAM Act
Yahoo! estimates, based on a sampling analysis, that Defendants sent at least
11,660,790 Hoax Lottery Emails (an average of 383,693 per month) during the period from
December 2006 through May 2009, (Cutujan Dec.
~I
10.) Treating each email as a separate
violation under 15 U.S.c. § 7704(a)(1), Yahoo! seeks the maximum statutory award of $1 00 per
YAHOO Lon DE.c l'"lTN WPD
VFf
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