Software Freedom Conservancy, Inc. v. Best Buy Co., Inc. et al
OPINION AND ORDER:#100634 For the aforementioned reasons stated above, plaintiffs' motion to hold WD in contempt of this Court's earlier injunction against WDE pursuant to Rule 65( d) is granted. Counsel is ordered to submit information reg arding WD's ability to pay and plaintiffs' lost profits within fifteen (15) days of the issuance of this Opinion and Order. Plaintiffs are directed to submit a fee application by the same date. The Clerk of the Court is directed to close this motion (docket # 172). (Signed by Judge Shira A. Scheindlin on 8/8/2011) (js) Modified on 8/9/2011 (jab).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
CONSERVANCY, INC. and ERIK
OPINION AND ORDER
09 Civ. 10155 (SAS)
ELECTRONICS, LLC, PHOEBE
MICRO, INC., ZYXEL
COMMUNICATIONS INC. and
WESTERN DIGITAL CORPORATION,
SHIRA A. SCHEINDLIN, U.S.D.J.:
On December 14, 2009, the Software Freedom Conservancy, Inc. and
Erik Andersen ("plaintiffs") brought an action against fourteen commercial
electronics distributors for copyright infringement. Plaintiffs now move to hold
non-party Westinghouse Digital LLC ("WD") in contempt of this Court's earlier
injunction against Westinghouse Digital Electronics, LLC ("WDE") pursuant to
Rule 65(d) of the Federal Rules of Civil Procedure. For the reasons discussed
below, plaintiffs' motion is granted.
In 1999, Andersen developed software, which he contributed to an
open source computer program knO\vn as BusyBox.1 On December 14,2009,
plaintiffs filed an action for copyright infringement against fourteen companies,
including WDE.2 Plaintiffs claim that the defendants were distributing BusyBox
without plaintiffs' permission. After filing its answer and several initial
disclosures, WDE ceased responding to plaintiffs' requests for discovery.3 WDE
informed this Court that it had sold all of its assets to Credit Management
Association ("CMA") as part of a General Assignment for the Benefit of Creditors
under California law and would not defend itself in the litigation. 4 In April 2010,
See 6/1/10 Declaration of Erik Andersen in Support of Motion for
Default Judgment, or in the Alternative, Summary Judgment against Defendant
Westinghouse Digital Electronics, LLC ("Andersen Decl.") ~~ 3-4.
See Complaint ("Compl.") ~ 1.
See Software Freedom Conservancy, Inc. v. Best Buy Co., Inc., No.
09 Civ. 10155,2010 WL 2985320, at *1 (S.D.N.Y. July 27,2010) ("Software
See id. WD claims that CMA, on behalf of WDE, made the decision
to cease defending the action. See Respondent Westinghouse Digital, LLC's
Opposition to Plaintiffs' Motion to Find Westinghouse Digital, LLC in Contempt
("WD Mem.") at 1-2.
WD purchased from CMA the assets needed to operate WDE's business. 5 On June
3,2010, plaintiffs moved for a default judgment or, in the alternative, summary
judgment against WDE.6
In July of 20 10, this Court entered a default judgment against WDE
for failing to meet its discovery obligations and awarded plaintiffs permanent
injunctive relief as well as damages. 7 Plaintiffs now move to hold WD, a nonparty to the injunction, in contempt. 8
"A party may be held in contempt only if it is proven by 'clear and
convincing' evidence that the party violated a 'clear and unambiguous' order of
See Memorandum of Law in Support of Plaintiffs' Motion to Find
Westinghouse Digital, LLC in Contempt ("PI. Mem.") at 3. See also WD Mem. at
See Software Freedom 1,2010 WL 2985320, at *1.
See id. at *3.
In August of 20 10, plaintiffs moved to join WD and CMA as
defendants under Rule 2S(c) as successors in interest. This Court denied both
motions. See Software Freedom Conservancy Inc. v. Best Buy Co., Inc., - F.
Supp.2d No. 09 Civ. 10155,2011 WL 1465837, at *1 (S.D.N.Y. April 14,
2011) ("Software Freedom Ir').
the court.,,9 "In the context of civil contempt, the clear and convincing standard
requires a quantum of proof adequate to demonstrate a 'reasonable certainty' that a
Enjoining a Non-Party
"As a general matter, a court may not enjoin a non-party that has not
appeared before it to have its rights legally adjudicated."I! However, under
Federal Rule of Civil Procedure 65(d), an injunction binds not only the parties, but
also the parties' "officers, agents, servants, employees, and attorneys" and "other
persons who are in active concert or participation with [them]" as long as they
"receive actual notice of it by personal service or otherwise."!2 Under Rule 65( d),
City ofNew York v. Local 28, Sheet Metal Workers' Int 'I Ass 'n, 170
F.3d 279,282 (2d Cir. 1999) (citation omitted).
Levin v. Tiber Holding Corp., 277 F.3d 243, 250 (2d Cir. 2002)
Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 154
F.3d 1345,1351 (Fed. Cir. 1998) (citing Chase Nat 'I Bank v. City ofNorwalk, 291
U.S. 431, 436-37 (1943)).
Fed. R. Civ. P. 56(d)(2)(A)-(C). Accord Vacco v. Operation Rescue
Nat 'I, 80 F.3d 64, 70 (2d Cir. 1996) ("Rule 65(d) codifies the well-established
principle that, in exercising its equitable powers, a court cannot lawfully enjoin the
world at large. In order for a court to hold a nonparty respondent in contempt of a
court order, the respondent must either  abet the [party named in the order], or
must  be legally identified with him.") (quotation marks and citations omitted).
an organization and its agents may not circumvent a valid court
order merely by making superficial changes in the organization's
name or form, and in appropriate circumstances a court is
authorized to enforce its order against a successor ofthe enjoined
organization. Whether a new organization is the successor of an
enjoined organization depends upon the facts and circumstances
of the case. The critical inquiry is whether there is a substantial
continuity ofidentity between the two organizations. 13
"The party seeking enforcement of an order bears the burden of demonstrating that
the persons to be held in contempt are within the scope of the injunction."14
Fair Use Doctrine
Under the fair use doctrine, "the fair use of a copyrighted work ... for
purposes such as criticism, comment, news reporting, teaching ... , scholarship or
research is not an infringement of copyright." IS The fair use doctrine "permits
[and requires] 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."16
Whether the use of a work is "fair use" turns on
(1) the purpose and character of the use, including whether such
use is of a commercial nature or is for nonprofit educational
Vacca, 80 F.3d at 70 (citations omitted) (emphasis added).
17 U.S.C. § 107.
Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569,577 (1993)
(quotation marks and citation omitted) (alterations in original).
(2) the nature of the copyrighted work;
(3) the amount and substantiality ofthe portion used in relation to
the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of
the copyrighted work. 17
"The last factor is undoubtedly the single most important element of fair use.,,18
"Although defendants bear the burden of proving that their use was fair, ... they
need not establish that each of the factors set forth in § 107 weighs in their
favor." I 9
WD argues that plaintiffs' allegations do not support a finding of
contempt for the following reasons: (1) WD does not fall under Rule 65(d)
because it is not a successor to WDE; (2) its posting of the BusyBox code on its
website was done pursuant to an Order from the Federal Communications
Commission ("FCC") and (3) its use of BusyBox on its website is a fair use?O I
address each argument in tum.
17 U.S.C. § 107.
Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566
NXIVM Corp. v. Ross Inst., 364 F.3d 471,477 (2d Cir. 2004).
See WD Mem. at 3.
Because There Is a Substantial Continuity of Identity Between
WD and WDE, WD Is Within the Scope, and in Contempt of, the
This Court previously held that WD is not a successor in interest to
WDE under Rule 26(c).21 However, the question now before the Court is whether
WD falls within the scope of the injunction under Rule 65(d) based on a
"substantial continuity of identity" between WD and WDE.22
The hallmarks of a "substantial continuity of identity" clearly exist. 23
Plaintiffs claim, and WD does not dispute, that WD acquired all the assets
necessary to carry on WDE's business and continues to use the same trade name
See Software Freedom 11,2011 WL 1465837, at *1.
As plaintiffs have pointed out, WD has applied the wrong "substantial
continuity" test in arguing that it is not a successor ofWDE. See Plaintiffs' Reply
Memorandum of Law in Support of Their Motion to Find Westinghouse Digital,
LLC in Contempt ("PI. Reply Mem.") at 1-2 n.l. As noted earlier, the appropriate
test in determining whether a non-party can be held in contempt is the "substantial
continuity" test under Rule 65(d), not the federal common law test for successor
See, e.g, Stotter Division of Graduate Plastics Co., Inc. v. District 65,
United Auto Workers, AFL-CIO, 991 F.2d 997, 1001 (2d Cir. 1993) ("In the
instant case, such continuity clearly exists - the same plant is being operated, the
Stooter name is being used, the same products are being made with the same
equipment and methods of production, all the Stotter employees were retained by
GPC, and employee benefits are calculated based on service time with both Stotter
and web address.
Nor does WD dispute that it occupies the same location as
WDE and operates with many of the same employees, including the same
President and Counsel. In fact, WD admits that "WD employs many of [WDE's]
former officers and employees.,,25 Finally, WD does not dispute that it had actual
notice of the injunction against WDE and has continued to post BusyBox software
on its website. 26
Instead, WD contends that it does not fall within the scope of the
injunction under the theory that it is a "substantial continuation" of WDE because
(1) it was not formed as a means to evade this Court's injunction and (2) it
acquired WDE's assets before the issuance of the injunction against WDE?7 As to
WD's first argument, a court need not find that an organization was formed as a
means to circumvent an injunction in order to hold a non-party in contempt. 28 This
See PI. Reply Mem. at 3.
WDMem. at 9.
See id. at 3. See also PI. Mem. at 3.
See WD Mem. at 9.
See, e.g, Walling v. Reuter, Inc., 321 U.S. 671, 674 (1944) ("Not only
is such an injunction enforceable by contempt proceedings against the corporation,
its agents and officers and those individuals associated with it in the conduct of its
business, but it may also, in appropriate circumstances, be enforced against those
to whom the business may have been transferred, whether as a means of evading
the judgement or for other reasons.") (emphasis added).
type of scienter is only necessary under the "aiding and abetting" theory of nonparty liability.29
WD next argues that it purchased WDE's assets before the injunction
was issued and before plaintiffs even moved for an injunction, barring any
potential for a finding of contempt. 30 Plaintiffs respond that, although the
injunction had not yet been issued when WD purchased WDE's assets, the
copyright infringement suit, seeking injunctive relief, was already a pending
See Additive Controls, 154 F.3d at 1353 ("[Defendant's] contention is
more properly directed at the scienter requirement for acting in active concert and
participation."). Accord National Spiritual Assembly ofBaha'is ofthe U.S. Under
Hereditary Guardianship, Inc. v. National Spiritual Assembly ofthe Baha'is ofthe
U.S., Inc., 628 F.3d 837,849 (7th Cir. 2010) (explaining the two categories of
non-parties potentially bound by an injunction).
Plaintiffs allude to the "aiding and abetting" theory in their brief. See
PI. Mem. at 3-4 ("To be sure ... [WD] and [WDE] acted in concert to bring about
a result forbidden by the injunction, namely the continued distribution of
infringing versions of Plaintiffs' copyrighted BusyBox software."). To the extent
that plaintiffs argue WD is aiding and abetting WDE, plaintiffs' argument must
fail because WDE entered bankruptcy proceedings in 2010. See Additive
Controls, 154 F.3d at 1354 ("[Defendant] contends that the district court found
him in contempt based on his actions 'in active concert or participation' with
AdCon, although AdCon has been dormant for years. If that were the basis for the
contempt finding, we would agree; one cannot act in concert with an inactive
See WD Mem. at 9.
See PI. Mem. at 5 ("[WDE] acquired as part of their transaction the
very software that violates the injunction, knowing full well that there was an
In Golden State Bottling v. NLRB, the Supreme Court held that a
purchaser who acquires assets can be held liable under Rule 65( d) if the assets
were purchased with knowledge of the order. 32 And as noted by the Federal
Circuit in Kloster Speedsteel AB v. Crucible Inc., courts have "repeatedly found
privity where, after a suit begins, a nonparty acquires assets of a defendant
infringer.,,33 Like the non-party purchaser in Kloster Speedsteel, WO purchased
WOE's assets with knowledge of the pending litigation. This knowledge, coupled
with the significant operational overlap between WO and WOE, leads me to
conclude that a "substantial continuity of identity" exists between WOE and WO
for the purposes of Rule 65( d). As a successor in interest, WO is therefore bound
by the injunction against WOE.
outstanding software copyright claim against the products containing that
See 414 U.S. 168, 180 (1973) ("We hold that a bonafide purchaser,
acquiring, with knowledge that the wrong remains unremedied ... may be
considered in privity with the predecessor for purposes of Rule 65( d).") (citations
793 F.2d 1565, 1583 (Fed. Cir. 1986) (overruled on other grounds)
(emphasis added). In Kloster Speedsteel, the district court found in favor of
plaintiff for patent infringement and permanently enjoined the defendant and its
"successor in interest" from infringing plaintiffs patents. The Federal Circuit then
found that, under Rule 65(d), the injunction also applied to Kloster, a non-party
purchaser of the infringing assets, even though at the time of the purchase, the
judgement had not been rendered.
WD's Affirmative Defenses
Perhaps in anticipation of this Court's finding that it is WDE's
successor for the purposes of Rule 65(d), WD argues that use of the BusyBox
software "cannot be considered an act of copyright infringement."34
The 2008 FCC Order
WD asserts that plaintiffs' contempt motion is based solely on WD's
maintenance ofWDE's old website, which allegedly contains the copyrighted
BusyBox code. 35 WD then argues that posting the firmware on its website cannot
amount to copyright infringement because WD was ordered to do so by the FCC. 36
WD relies on two cases in support of this affirmative defense. WD first cites to
SmithKline Beecham Consumer Healthcare, L.P. v. Watson Pharmaceuticals, Inc.,
where the Second Circuit found no copyright liability when the Food and Drug
Administration ("FDA") directed the defendants, pursuant to the Federal Food,
Drug, and Cosmetics Act ("FFDCA"), to use labeling nearly identical to the
plaintiffs copyrighted guide and tape. 37 The SmithKline Beecham court found
WDMem. at 7.
See id. at 2.
See id. at 4.
See 211 F.3d 21 (2d Cir. 2000).
significant that "the Amendments [to the FFDCA] require that the labeling for the
[defendant's] generic drug be the 'same' as the labeling for the [plaintiff's]
pioneer drug. ,,38
In April 2008, the FCC issued a Consent Decree relating to an
investigation ofWDE's interstate shipment of television receivers that did not
comply with FCC V -Chip technology requirements. 39 Pursuant to the Consent
Decree, the FCC terminated the investigation and, in return, WDE agreed to
adhere to several requirements, including "assist[ing] customers ... in
downloading appropriate firmware from its website ... [and making] the firmware
available on its website for a period of five years.,,40 WD argues that its use of
BusyBox software cannot be a copyright violation because, similar to the FDA's
order in SmithKline Beecham, the FCC Order directed WD to post the BusyBox
firmware on its website. 41 Unlike the FDA requirements in SmithKline Beecham,
however, the FCC Order does not require WD to use the BusyBox software.
[d. at 27.
See FCC Consent Decree, In the Matter of Westinghouse Digital
Electronics, LLC ("FCC Consent Decree"), Ex. A to Declaration of Kenneth
Randall in Support of Respondent Westinghouse Digital, LLC's Opposition to
Plaintiffs' Motion to Find Westinghouse Digital, LLC in Contempt.
See WD Mem. at 4.
Rather, the FCC Order only requires that WD make "appropriate firmware"
available. WD has not carried its burden of showing that it is incapable of
obeying both the FCC Order and respecting plaintiffs' copyright. Therefore,
WD's argument must fai1. 42
Fair Use Doctrine
WD also argues that the fair use doctrine shields it from liability for
copyright infringement. 43 WD points to Gulfstream Aerospace Corp. v. Camp
Systems International, Inc., where a federal court allowed defendant's copying of
Gulfstream's airplane repair manuals pursuant to the fair use doctrine. 44
Examining the fourth, and most important, fair use factor, the Gulfstream court
found that defendant's use of the manual did not adversely affect the market for
the manuals. 45 The court emphasized that granting copyright protection to the
let alone to their secondary use - would not further the aims
WD also argues that posting the BusyBox firmware on its website
cannot amount to copyright infringement because the injunction applies only to
activity done "without permission" and WD is acting with the FCC's permission.
See id. at 7. This argument is unavailing. The "permission" in the injunction
clearly refers to the plaintiffs' permission.
See id. at 5.
See 428 F. Supp. 2d 1369 (S.D. Ga. 2006).
See id. at 1379-80.
of copyright laws because "not only is the content of the manuals specified by
regulation, but also the format of the manuals is specified so that an aircraft
manufacturer may not add unnecessary sections to give the manuals a 'creative' or
This case is easily distinguishable from Gulfstream. Unlike the
manuals at issue in that case, the BusyBox software was not "written in
accordance with federal guidelines that significantly prescribe[ d] [its] content and
a fact that led the Gulfstream court to conclude that "much, if not all, of
Gulfstream's manuals are not copyrightable."48 WD does not even attempt to
argue that the BusyBox software itselfis not subject to copyright protection. What
is more, even assuming the truth ofWD's assertion that "the fimlware posted on
[its] website cannot be read by humans and has no use or value except when
installed on the specific Mora television model for which it was written," that fact
See id. at 1380 (noting that the purpose of copyright law is to promote
the progress of science and useful arts).
Id. at 1376 (emphasis in original). Accord id. at 1380-81 ("It would
be especially egregious [to protect Gulfstream's manual] since Gulfstream is
required by federal regulations to produce the manuals anyway. Again, those
federal regulations leave Gulfstream little room to make decisions regarding either
format or the content of those manuals.").
Id. at 1376. Accord id. at 1380-81 ("[G]ranting copyright protection
under these facts would not serve the purposes of copyright law ....").
does not establish that "there cannot be any effect on the market for BusyBox.,,49
Under such logic, any use of copywritten work would be "fair" as long as that use
did not result in the copywritten work's unauthorized reproduction by anyone
other than the putative infringer. Because WD has not met its burden of
demonstrating that its use of the BusyBox software would not affect the value of
plaintiffs' copyright, WD' s fair use defense fails.
Plaintiffs request that this Court award (I) coercive and compensatory
damages, (2) attorneys' fees and costs, and (3) an order for WD to deliver all
infringing articles to plaintiffs for disposition. 50
"The imposition of civil contempt sanctions may serve dual purposes:
to secure future compliance with court orders and to compensate the party that has
been wronged."51 To the extent the sanction is coercive, "[t]he district court is
counseled to consider several factors in calculating a fine including the character
WD Mem. at 6 (reasoning that "those who want to use it must acquire
it from BusyBox.net or some other source").
See PI. Mem. at 4.
Paramedics Ectromedicina Comerical, Ltda v. GE Medical Sys., 369
F.3d 645, 657 (2d Cir. 2004).
and magnitude of the ham1 threatened by continued contumacy, the probable
effectiveness of any suggested sanction in bringing about compliance and the
contemnor's ability to pay."52 If the fine is compensatory and paid directly to the
other party, the court has less discretion and "'the sanction should correspond at
least to some degree with the amount of damages. ",53
Unlike in Software Freedom I, plaintiffs here do not elect statutory
damages and have made no recommendations to this Court as to the appropriate
amount of coercive and compensatory damages. Without further information, I am
unable to determine the proper amount of damages. The parties are therefore
ordered to submit information regarding WD's ability to pay and plaintiffs' lost
profits due to WD's unauthorized use of BusyBox 54 within fifteen (15) days of the
date of this Order. I reserve decision on the amount of coercive and compensatory
damages until these submissions are received.
Attorneys' Fees and Costs
"It is well settled in this Circuit that costs, including reasonable
Id. at 657-58 (quotations and citations omitted).
Id. at 658 (quoting King v. Allied Vision, Ltd., 65 F.3d 1051,1058 (2d
Plaintiffs allege that BusyBox is an open source computer program
without a profit-making mission. See Compi. ~~ 21-23.
attorneys' fees, may be awarded to the party who prosecutes a contempt motion as
an appropriate compensatory sanction for contumacious behavior."55 As in
Software Freedom 1, I find that an award of attorneys' fees is both appropriate and
'''in line with the statutory goal of deterrence. ",56 Plaintiffs are directed to submit
a fee application within fifteen (15) days of the date of this Order detailing their
costs and expenses in connection with this litigation.
Forfeiture of Infringing Articles
WD is also ordered to deliver all infringing articles to plaintiffs for
disposition under the same rationale as that provided in Software Freedom 1.57
For the aforementioned reasons stated above, plaintiffs' motion to
hold WD in contempt of this Court's earlier injunction against WDE pursuant to
Rule 65( d) is granted. Counsel is ordered to submit information regarding WD's
ability to pay and plaintiffs' lost profits within fifteen (15) days of the issuance of
this Opinion and Order. Plaintiffs are directed to submit a fee application by the
New York State Nat 'I Org./or Women v. Terry, 952 F. Supp. 1033,
1043 (S.D.N.Y. 1997) (citations omitted).
Software Freedom I, 2010 WL 2985320, at *4 (quoting KepnerTregoe, Inc. v. Vroom, 186 F.3d 283,289 (2d CiT. 1999)).
See id. (ordering WDE to tum over all infringing articles to plaintiffs
pursuant to 17 U.S.C. § 503(b)).
same date. The Clerk of the Court is directed to close this motion (docket # 172).
New York, New York
August 8, 2011
Daniel B. Ravicher, Esq.
Aaron Williamson, Esq.
Michael A. Spiegel, Esq.
Software Freedom Law Center
1995 Broadway, 17th Floor
New York, New York 10023-5882
For Respondent Westinghouse Digital, LLC:
Barry M. Kazan, Esq.
Thompson Hine LLP
335 Madison Avenue, 12th Floor
New York, New York 10017
For Westinghouse Digital Electronics, LLC:
Kyle Bradford Fleming, Esq.
Baker & Daniels
111 East Wayne Street, Suite 800
Fort Wayne, Indiana 46802
Sarah Hawa Bawany Yousuf, Esq.
Balber, Pickard, Battistoni, Maldonado & Van Der Tuin
1370 Avenue of the Americas
New York, New York
For Phoebe Micro, Inc.:
Andrew Kaver, Esq.
The Law Office of Andrew M. Kaver
32 Broadway, Suite 1710
New York, New York 10004
Brian Scott Cohen, Esq.
Cohen Law Group, P.C.
1220 Broadway, Suite 708
New York, New York 10001
For Zyxel Communications Inc.:
David Leichtman, Esq.
Robins, Kaplan, Miller & Ciresi LLP
601 Lexington Avenue, Suite 3400
New York, New York 10022
Emily Bab Kirsch, Esq.
599 Lexington Avenue
New York, New York 10022
Shiou-Jin Christine Hwang Yang, Esq.
Law Offices of S.1. Christine Yang
17220 Newhope Street, Suite 101-102
Fountain Valley, California 92708
For Western Digital Corporation:
Ognjan Varbanov Shentov, Esq.
Jones Day (Cleveland)
901 Lakeside Avenue
Cleveland, Ohio 44114
Lynn Michelle Marvin, Esq.
Stela Christina Tipi, Esq.
Jones Day (NYC)
222 East 41 st Street
New York, New York
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