Adobe Systems Incorporated et al v. SKH Systems, Inc. et al
Filing
36
ORDERED DENYING Motion to Exclude Evidence # 32 ; GRANTING 29 Motion for Summary Judgment. Signed by Judge Sam Sparks. (td)
L.
i.
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT oF2DTh&S 27 PH
AUSTIN DIVISION
ADOBE
SYSTEMS
J:
16
INCORPORATED,
AUTODESK, INC., and CNC SOFTWARE, INC.,
Plaintiffs,
-vs-
SKH SYSTEMS, INC. and CHORNG (JACK)
HWANG, individually and d/b/a JACK'S
LAPTOPS,
Defendants.
ORDER
BE IT REMEMB ERED on this day the Court reviewed the file in the above-styled cause, and
specifically Plaintiffs Adobe Systems Incorporated (Adobe), Autodesk Inc. (Autodesk), and CNC
Software, Inc. (CNC) (collectively, Plaintiffs)' Motion for Summary Judgment [#29], Defendant
Chorng "Jack" Hwang (Hwang)'s Response and Motion to Exclude Evidence [#32], and Plaintiffs'
Reply [#3 3] in support. Having reviewed the documents, the governing law, and the file as a whole,
the Court now enters the following opinion and orders.
Background
I.
The Parties
Plaintiffs produce an assortment of software products for use in a variety of technology,
including computers. Compi. [#1] ¶ 11. Plaintiffs have obtained copyright registrations for each of
their software products and market, distribute, and license their products under federally registered
trademarks (the Marks). Id. ¶ 12; Mot. Summ. J. [#29] Ex. A (Registrations))
Specifically, Adobe produces the Adobe CS6 products, which are all individually copyrighted with the United States
Copyright Office. Compl. [#1-2] Ex. A (Adobe Copyright Registrations) at 2-6. Adobe owns the ADOBE registered
mark for computer programs and computer services. Id. [#1-3] Ex. B (Adobe Trademark Registration) at 2. Autodesk
produces the AutoCAD 2012 software products, which are also copyrighted. Id. [#1-4] Ex. C (AutoDesk Copyright
Registrations) at 2-5. Autodesk owns both AUTODESK and AUTODESK AUTOCAD registered marks. Id. [#1-5] Ex.
1
V
Plaintiffs use a product activation system to protect their software from piracy. Id. ¶ 39. This
system requires customers to enter a key or serial number to activate Plaintiffs' software on their
computers. Id. Alternatively, customers can contact Plaintiffs' activation servers via the internet to
have the key or serial number transmitted directly to the computer. Id. Each copy of Plaintiffs'
software has a unique key or serial code, and customers must purchase a license from Plaintiffs to
receive the key or serial code to activate the software. Id. ¶ 41.
Hwang is the director and president of Defendant SKH Systems, Inc., a corporation registered
in Texas to sell computers and software. Compl.
[#1]
¶ 42. Doing business under the name
"Jack's
Laptops," Hwang sells refurbished laptops, USB drives, and hard drives preloaded with software.
Id.
¶ 42. Hwang markets the refurbished technology using platforms such as Craigslist and Facebook.
Id.
Through the Business Software Alliance
(BSA),2
Plaintiffs learned Hwang was allegedly
advertising, selling, and activating unlicensed versions of Plaintiffs' software since at least August
2014.
Mot. Summ. J. [#29] at 3. Plaintiffs hired a private investigator, Paul Brick, to learn more. Mot.
Summ. J.
II.
[#29]
at
3-4;
id.
[#29-16]
Ex. D (Brick Dccl.)
The Investigation
During a series of recorded phone calls and meetings, Mr. Brick confirmed Hwang was
selling and activating unauthorized copies of Plaintiffs' software.
See generally
Brick Decl. Mr.
Brick first called Hwang on June 3, 2016 using the number listed on Facebook for Jack's Laptops.
D (Autodesk Trademark Registrations) at 2-9. Finally, CNC produces software such as Mastercam X5 and Mastercam
X9, also copyrighted, and owns the MASTERCAM registered mark. Id. [#1-6] Ex. E (CNC Copyright Registrations)
at 2-4; id. [#1-7] Ex. F (Mastercam Trademark Registration).
The BSA advocates on behalf of the global software industry before governments and in the international marketplace,
raises awareness about the risks associated with software piracy, and takes action against illegal software use. Mot.
Summ. J. [#29-2] Ex. B (Mahmood Decl.).
2
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Id. ¶ 3. In the initial call, Mr. Brick indicated he was "not looking to buy just one laptop with a
couple pieces of software." Brick Deci. Ex.
1
(June 3, 2016 Tr.) at 9:l8-10:19. Rather Mr. Brick
stated he had access to a large quantity of computers and needed to "get stuff like CS 6, AutoCAD,
some science programs,
. . .
design type stuff for these online gaming companies in Austin." id.
Hwang responded "when I sell stuff like that.
activator.
.
.
.
. .
you're not buying a license. You're buying an
And that's what I tell people." id. at 11:7-11. In addition, Hwang repeatedly
represented he possessed, could install, and could activate unlicensed software. See generally id. He
also noted that "[a] lot of people who buy my stuff are students
.
.
.
[o]r, you know, single
contractors" who cannot afford expensive software. Id. at 13:1-11. Additionally, Hwang explained
"the caveat is right up front, [customers have] got to know that they're buying unlicensed software;
and I never build programs without telling people that." Id. at 14:18-21.
Toward the end of first conversation, Mr. Brick proposed a relationship where he would
develop connections with companies seeking to buy computers loaded with software and Hwang
would work in a customer service capacity. See Id. at 13:14-14:21. The two men discussed how such
a relationship would function. See
Id.
at 15:22-23:25. Hwang indicated "I sell a lot of laptops to
small companies like that. Guys buy five laptops." Id. at 29:20-22. However, Hwang expressly
warned Mr. Brick companies needed to be told they were buying unlicensed software. Id. at 30: 1-4.
Hwang conditioned working with Mr. Brick on companies knowingly assuming the risk of using
unlicensed software. Id. at 30:6-17. In response, Mr. Brick indicated he would check with his
potential clients and perhaps Hwang could start with one computer. Id. at 30:20-22.
The Court cites the CM/ECF page numbers for clarity as the Brick Declaration and its supporting exhibits each feature
their own page numbers.
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In subsequent conversations, Hwang quoted Mr. Brick prices for installing and activating
various unlicensed software programs. Brick Deci. ¶ 4-5. On June 8, 2016, Hwang and Mr. Brick
met at a coffee shop where Hwang sold, installed, and activated a series of unlicensed software on
Mr. Brick's laptop computer for $290. Id. ¶J 9-10. Mr. Brick observed Hwang using a computer
program to bypass the software's product activation system. Id. ¶ 12.
During the meeting, Mr. Brick returned to the idea of continuing relationshipa partnership
where Mr. Brick would furnish the laptops and customers and Hwang would install and activate
unlicensed software, answer customer service questions, and keep the software running. Id. Hwang
repeated that customers must be informed the software was unlicensed but agreed to move forward
with such a partnership. Brick Decl. Ex. 7 (June 8, 2016 1:31 p.m. Tr.) at 83:3-19; 87:4-23.
III.
Current Suit
Plaintiffs filed this suit on January 9, 2017, against Hwang and SKH Systems,
Inc.4
(collectively, Defendants) alleging trademark infringement and counterfeiting violating 15 U.S.C.
§
1114, unfair competition violating 15 U.S.C.
§
501, and circumvention of copyright protections violating 17 U.S.C.
§
1125(a), copyright infringementviolating 17 U.S.C.
Hwang filed an answerpro se on January 26, 2017.
See
§
1201(a).
See
Compl. [#1].
Answer [#10].
Five days after Hwang answered the lawsuit, Mr. Brick sent Hwang text messages asking
follow-up questions about the unlicensed software Mr. Brick purchased from Hwang on June 8,
2016. Brick Decl. ¶ 13. Mr. Brick also inquired whether Hwang could "do another machine" and
Hwang responded affirmatively. Id.; Brick Deci. Ex.
8
(Text Messages).
SKH Systems, Inc. failed to answer the lawsuit, and the Clerk of the Court entered default against SK}I Systems, Inc.
on April 10, 2017. See Clerk's Entry of Default [#18].
In April 2017, Plaintiffs and Hwang agreed to entry of a preliminary injunction prohibiting
Hwang "and any person or entity acting in concert with, or at his direction" from (1) "selling or
offering for sale any computers loaded with Plaintiffs' software; (2) installing or activating
[Plaintiffs'] software products by using counterfeit product key codes or serial numbers, and (3)
destroying or deleting any evidence relevant to Plaintiffs' claims of copyright and trademark
infringement." Agreed Prelim. Inj. [#23] at 1-2.
In response to each of Plaintiffs' discovery requests, Hwang asserted "his right under the
Fifth Amendment of the U.S. Constitution not to answer this question, on the grounds that he may
incriminate himself." Mot. Summ. J. [#29-17] Ex. E (Def.'s Discovery Resps.).
Plaintiffs now move for summary judgment, which is ripe for review.
Analysis
I.
Legal StandardSummary Judgment
Summary judgment shall be rendered when the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine dispute as to any material fact and
that the moving party is entitled to judgment as a matter of law.
v.
Catrett, 477 U.S. 317, 323-25 (1986); Washburn
v.
FED. R.
Civ. P. 56(a); Celotex Corp.
Harvey, 504 F.3d 505, 508 (5th Cir. 2007).
A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could
return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). When ruling on a motion for summary judgment, the court is required to view all inferences
drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec.
Indus. Co.
v.
Zenith Radio, 475 U.S. 574, 587 (1986); Washburn, 504 F.3d at 508. Further, a court
"may not make credibility determinations or weigh the evidence" in ruling on a motion for summary
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judgment. Reeves
v.
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477
U.S. at 254-55.
Once the moving party makes an initial showing that there is no evidence to support the
nonmoving party's case, the party opposing the motion must come forward with competent summary
judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere
conclusory allegations are not competent summary judgment evidence, and thus are insufficient to
defeat a motion for summary judgment. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343
(5th Cir. 2007). Unsubstantiated assertions, improbable inferences, and unsupported speculation are
not competent summary judgment evidence. Id. The party opposing summary judgment is required
to identify specific evidence in the record and to articulate the precise manner in which that evidence
supports his claim.Adams
v.
Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006). Rule
56 does not impose a duty on the court to "sift through the record in search of evidence" to support
the nonmovant's opposition to the motion for summary judgment. Id.
"Only disputes over facts that might affect the outcome of the suit under the governing laws
will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Disputed fact
issues that are "irrelevant and unnecessary" will not be considered by a court in ruling on a summary
judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the
existence of an element essential to its case and on which it will bear the burden of proof at trial,
summary judgment must be granted. Celotex, 477 U.S. at 322-23.
II.
Application
Plaintiffs move for summary judgment against Hwang, arguing the evidence shows they are
entitled to judgment as a matter of law on each of their claims. Hwang does not contest Plaintiffs'
allegations of willful trademark infringement, unfair competition, willful copyright infringement,
and circumvention of copyright protections. Instead, Hwang only disputes the validity and
admissibility of the evidence from Mr. Brick's investigation and the extent of Plaintiffs' recovery.
Hwang asks the Court to exclude the evidence obtained by Mr. Brick's investigation.
As described below, Plaintiffs are entitled to summary judgment on their trademark
infringement, unfair competition, and copyright infringement claims even without considering the
evidence from Mr. Brick's investigation. The Court also finds the investigation evidence is
admissible and Plaintiffs are entitled to summary judgment on their claim Hwang circumvented their
copyright protections. Thus, Plaintiffs are entitled to summary judgment on all claims. The Court
therefore awards Plaintiffs appropriate relief.
A.
Liability
i. Trademark Infringement and Unfair Competition
To succeed on a claim of trademark infringement, a plaintiff must "first establish ownership
in a legally protectible mark, and second,.
confusion." Amazing Spaces, Inc.
v.
. .
show infringement by demonstrating a likelihood of
Metro Mini Storage, 608 F.3d 225, 235 (5th Cir. 2010)
(quotation omitted). And, "[a]s a general rule, the same facts which would support an action for
trademark infringement would also support an action for unfair competition." Tinker, Inc.
v.
Poteet,
No. 3:14-CV-2878-L, 2017 WL4351304, at *6 (N.D. Tex. Sept. 30,2017) (quotingMarathonMfg.
Co. v. Enerlite Prod. Corp., 767 F.2d 214, 217 (5th Cir. 1985)). The key inquiry for both claims is
"whether the challenged mark is likely to cause confusion." Marathon Mfg. Co., 767 F.2d at 217
(citation omitted).
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Here, Plaintiffs provide evidence to satisfy their trademark infringement and unfair
competition claims. First, Plaintiffs provide copies of the federal registrations for the Marks, which
are sufficient to show ownership in legally protectible marks. See generally Registrations; see also
Amazing Spaces, Inc., 608 F.3d at 237 ("[P]roof of the registration of a mark with the PTO
constitutes prima facie evidence that the mark is valid and that the registrant has the exclusive right
to use the registered mark in commerce with respect to the specified goods or services."). Second,
Plaintiffs show a likelihood of confusion because Plaintiffs demonstrate Hwang used Plaintiffs'
exact marks in advertising the sale of used laptops loaded with unauthorized copies of Plaintiffs'
software. See Mot. J. Summ. [#29-3] Ex. B-i (2014-2016 BSA Analysis) (reporting Jack Laptop's
advertisements offering to sell software products using Plaintiffs' Marks); id. [#29-4] Ex. B-2
(2016-20 17 BSA Analysis); see also Paulsson Geophysical Servs., Inc.
v.
Sigmar, 529 F.3d 303,
311(5th Cir. 2008) (confirming a full likelihood of confusion analysis is not required when marks
are identical). Thus, Plaintiffs have presented a prima facie case for trademark infringement and
unfair competition. Hwang does not offer defenses or otherwise challenge Plaintiff's motion for
summary judgment. Thus, Plaintiffs are entitled to summary judgment on their trademark
infringement and unfair competition claims.
ii. Copyright Infringement
To establish copyright infringement, a plaintiff must demonstrate: "(1) ownership of a valid
copyright, and (2) copying of constituent elements of the work that are original." Feist Publ 'n, Inc.
v.
Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). The defendant bears the burden of establishing
the affirmative defense that a license existed authorizing his use of the copyrighted material.
Lulirama Ltd., Inc.
v.
Axcess Broad. Servs., Inc., 128 F.3d 872, 884 (5th Cir. 1997).
Plaintiffs provide copies of the copyright registrations for the software products at issue,
Registrations at 2-29, satisfying the first element of their copyright infringement claim. See Geoscan,
Inc.
of Tex.
v.
Geotrace Techs., Inc., 226 F.3d 387, 393 (5th Cir. 2000) (noting fulfillment of the
statutory formalities necessary to register a copyright shows ownership in software for the purposes
of a valid copyright). Also, Plaintiffs supply evidence showing how Hwang marketed, sold, and
distributed copies of Plaintiffs' copyrighted software. See 2014-2016 BSA Analysis; 2016-2017
BSA
Analysis.5
Hwang does not argue his use of the copyrighted material was licensed or
authorized. As a result, Plaintiffs are entitled to summary judgment on their copyright infringement
claim.
iii. Circumvention of Copyright Protection
The federal circumvention provision mandates "[n] o person shall circumvent a technological
measure that effectively controls access to a work protected under this title." 17 U.S.C.
§
1201 (a)( 1 )(A). To "circumvent a technological measure" means to "descramble a scrambled work,
to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a
technological measure without the authority of the copyright owner."Id.
§
1201 (a)(3)(A). "However,
because § 1201(a)(1) is targeted at circumvention, it does not apply to the use of copyrighted works
after the technological measure has been circumvented." MGE UPS Sys., Inc.
v.
GE Consumer &
Indus., Inc., 622 F.3d 361, 366 (5th Cir. 2010) (citation omitted) (emphasis in original). Thus, a
plaintiff must establish a defendant circumvented copyright protections and did not merely use
copyrighted materials after circumvention occurred. See id.
Plaintiffs also highlight how Hwang advertised he was selling "a machine with $2000[] worth of software loaded on
it for $280 ...... Mot. Summ. J. [#29] at 6-7 (citing Def.'s Dec. 20,2013 Facebookpost). Such language implies Hwang
sought to compete with Plaintiffs by selling the unlicensed versions of their copyrighted software at lower prices. See
id.
Plaintiffs' only evidence for their circumvention claim derives from Mr. Brick's
investigation.
See
Mot. Summ. J. [#29] at 11-12 (citing Brick Deci. ¶ 12). Without Mr. Brick's
observation Hwang used a computer program to bypass the software's product activation system,
the Court cannot determine whether Hwang merely used the copyrighted works after the
technological measure was circumvented or performed the circumvention himself. Thus, the Court
must rule on Hwang's motion to exclude the results of Mr. Brick's investigation.
In asking the Court to exclude the results of Mr. Brick's investigation, Hwang essentially
argues Mr. Brick entrapped Hwang by proposing "a large-scale business venture, under which the
two of them would offer sales and support for unlicensed software.. . ." Resp. Mot. Summ. J. [#32]
at 3. Hwang therefore contends the Court should exclude Mr. Brick's declaration and the transcripts
of the meetings and calls because (1) Mr. Brick's conduct contradicts traditional notions of justice
and fairness; (2) Mr. Brick's conduct was outside the range of conduct deemed acceptable by other
courts for pretext investigations; and (3) Mr. Brick's declaration and the transcript "are hearsay and
[the] transcripts lack foundation." Id.
The Court finds Hwang's arguments unpersuasive and therefore denies Hwang's motion to
exclude. Most importantly, Hwang' s foundational argument Mr. Brick entrapped him into agreeing
to a large, illegal business venture is contradicted by the evidence. The evidence reflects Hwang was
operating a large-scale business venture selling hundreds of computers loaded with Plaintiffs'
software before Mr. Brick's investigation began.
See
2014-2016 BSA Analysis; 2016-2017 BSA
Analysis. And Hwang himself indicated he previously conducted ventures similar to the one
proposed by Mr. Brick. June 3, 2016 Tr. at 29:20-22 ("I sell a lot of laptops to small companies like
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that. Guys buy five laptops."). Thus, there is no indication Mr. Brick's conduct contradicts traditional
notions ofjustice and fairness.
Additionally, the cases cited by Hwang are either irrelevant to the specific facts of this case
or support the admission of the evidence from Mr. Brick's investigation. See Resp. Mot. Summ. J.
[#32] at 5-7 (first citing Apple Corp Ltd., MPL v. Int'l Collectors Soc., 15 F. Supp. 2d 456 (D.N.J.
1998); thenciting Gidatex, S.r.L. v. Campaniello Imports, Ltd., 82 F. Supp. 2d 119 (S.D.N.Y. 1999);
and then citing A. V. by Versace, Inc.
v.
Gianni Versace, S.p.A., No. 96 CIV. 972 1PKLTHK, 2002
WL 2012618, at *9 (S.D.N.Y. Sept. 3, 2002)). Hwang offers no case where a court excluded
evidence obtained through a pretext investigation. See Apple Corp Ltd., MPL, 15 F. Supp. 2d at
473-76 (holding attorneys' use of undercover investigators posing as customers of defendants to
detect ongoing violations of consent decree did not violate New Jersey's attorney discipline rules);
Gidatex, S.r.L., 82 F. Supp. 2d at 126 (noting "[attorney] ethical rules should not govern situations
where a party is legitimately investigating potential unfair business practices byuse of an undercover
[investigator] posing as a member of the general public engaging in ordinary business transactions
with the target" and holding the evidence obtained may be admitted); A. V. by Versace, Inc., 2002
WL 2012618, at *9 (holding evidence obtained by undercover investigation was admissible and
remarking that courts "have frequently admitted evidence, including secretly recorded conversations
by investigators posing as consumers in trademark disputes")
Finally, Hwang's recorded statements are not hearsay, and Plaintiffs lay a proper foundation
to admit the transcripts of the investigation's calls and meetings. Hwang' s statements are admissions
by a party opponent and therefore not hearsay. See FED. R. Evm. 801(d)(2)(A) (specifying that a
statement offered against an opposing party and made by the party in an individual or representative
-11-
capacity is not hearsay). Plaintiffs offer sufficient evidence to show the transcripts of the meetings
and calls are what Plaintiffs claim they are. Comp.
FED. R. EvD.
901(a) ("To satisfy the requirement
of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient
to support a finding that the item is what the proponent claims it is."), with Brick Decl.
¶fJ
1-9
(specifying the date, time, and method of contact for each recorded interaction with Defendant).
Hwang does not attempt to argue the recording or the transcripts are inaccurate. See Resp. Mot.
Summ. J. [#32] at 9-10.
Thus, the Court denies Hwang's motion to exclude and considers the evidence from Mr.
Brick's investigation. The investigation evidence highlights how Mr. Brick observed Hwang using
a program to circumvent Plaintiffs' access control technology. See Brick Deci. ¶ 12. Specifically,
Mr. Brick describes how Hwang' s program bypassed the need for a product activation key by "trying
different combinations of characters until it finds a key combination that works and can be used to
activate the software." Id. Such evidence is sufficient to show Hwang improperly circumvented
Plaintiffs' copyright protection measures on one occasion. Plaintiffs offer no other evidence
indicating Hwang circumvented Plaintiffs' copyright protections at any other time.6
iv. Willful Infringement
Willful infringement requires reckless disregard of a copyright or trademark holder's rights.
Graper
v.
Mid-Continent Cas. Co., 756 F.3d 388, 395 & n.7 (5th Cir. 2014). Here, the record
6
In the Fifth Circuit, a party may invoke the Fifth Amendment privilege against self-incrimination during the discovery
process of a civil proceeding. Davis-Lynch, Inc. v. Moreno, 667 F.3d 539, 547 (5th Cir. 2012), as revised (Jan. 12,
2012). And courts may draw an inverse inference from a defendant's invocation of the Fifth Amendment on summary
judgement. However, a court cannot decide an issue on summary judgment on the basis of the invocation of the Fifth
Amendment alone; there must be independent evidence in addition to the invocation. Sec. & Exch. Comm 'n v. Sethi
Petroleum, LLC, 229 F. Supp. 3d 524, 532 (E.D. Tex. 2017) (citing State Farm Life Ins. Co. v. Gutterman, 896 F.2d
116, 119 & n.2 (5th Cir. 1990)). Such independent evidence has not been presented here.
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demonstrates Hwang wilfully infringed Plaintiffs' copyrights and trademarks and continued to do
so even after this lawsuit was filed. Plaintiffs provide evidence Hwang advertised, sold, and
distributed unlicensed versions of Plaintiffs' copyrighted software while using Plaintiffs' exact
trademarks. Hwang's statements on Facebook and to Mr. Brick show Hwang's acts were done
knowingly and intentionally. Therefore, the Court finds Hwang willfully infringed on Plaintiffs'
copyrights and trademarks and Plaintiffs' damages should be enhanced accordingly. See
id.
at 395
(reiterating that willfulness covers knowing violations).
B.
Relief
Plaintiffs seek permanent injunctive relief, statutory damages, and attorneys' fees and costs.
Attempting to limit Plaintiffs' relief, Hwang offers an unsupported, two-paragraph declaration he
sold an average of three laptops a month and earned no more than $25,200 in income from these
sales. See Resp. Mot. Summ. J. [#32-1] Ex. A (Hwang Deci.). In light of Hwang's assertion of Fifth
Amendment privilege, the Court refuses to consider Hwang's last-minute declaration partially
withdrawing his assertion of privilege.
See Davis-Lynch,
Inc.,
667 F.3d at
547-48 (holding district
court did not error in striking affidavit where defendant withdrew his Fifth Amendment privilege to
respond to motion for summary judgment via an affidavit where the eleventh-hour withdrawal
appeared "to be an attempt to abuse the system or gain an unfair advantage"). To allow Hwang to
provide previously withheld information at the summary judgment stage would place Plaintiffs at
a significant and unfair disadvantage. See
id.
at 548 & n.20 (collecting cases denouncing a party's
withdrawal of Fifth Amendment privilege to defend against a summary judgment motion). The Court
will now address each category of relief requested by Plaintiffs.
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i.
Permanent Injunction
Plaintiffs seek injunctive relief and an impounding of all infringing materials. Permanent
injunctions are available to plaintiffs when the court deems an injunction reasonable to prevent
further infringement of copyright and trademark rights. 17 U.S.C.
§
502; 15
u.s.c. §
1116.
Plaintiffs submitted evidence showing Hwang continued to sell unlicensed versions of
Plaintiffs' software and use the Marks despite the filing of this lawsuit. Although Hwang ultimately
agreed to a preliminary injunction in this case, a permanent injunction is appropriate to prevent
Hwang from infringing on Plaintiffs' marks and copyrights in the future. See MGE UPS Sys., Inc.,
622 F.3d at 371 (affirming grant of preliminary injunction in copyright case where infringer still
possessed infringing materials).
ii. Statutory Damages
a. Copyright Infringement
A plaintiff in a copyright infringement suit may choose to pursue statutory damages for
copyright infringement, even if the statutory damages amount to less than the actual damages the
plaintiff experienced. Broadcast Music Inc.,
v.
Xanthas, Inc., 855 F.2d 233, 236 (5th Cir. 1988).
Statutory damages for copyright infringement range from $750 to $30,000 per instance of
infringement. 17 U.S.C.
§
504(c). A court may award any amount of statutory damages it considers
just, so long as the award does not exceed the statutory maximum. Id. Where a copyright owner
proves infringement was committed willfully, the court may increase the award of statutory damages
to a sum of not more than $150,000. Id.
To determine where an award should lie on the range of statutory damages, courts consider
factors such as: "the willfulness of the defendant's conduct, the deterrent effect of an award on both
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the defendant and on others, the value of the copyright, whether the defendant has cooperated in
providing necessary records to assess the value of the infringing material, and the losses sustained
by the plaintiff" Commercial Law League ofAm., Inc.
v.
George, Kennedy & Sullivan, LLC, No.
CIV.A. H-07-0315, 2007 WL 2710479, at *3 (S.D. Tex. Sept. 14, 2007).
Plaintiffs seek the statutory maximum of $150,000 for each of nineteen copyrights violated
by Hwang, requesting a total of $2,850,000. Given the wilfulness of Hwang' s conduct, his continued
infringement after this lawsuit was filed, and the need for deterrence, an award of statutory damages
in excess of the minimum is appropriate. There is no evidence of the value of copyrights, the value
of the infringing material, or any losses sustained by Plaintiffs other than attorneys' fees and costs
in this suit. Given these facts and awards by courts in this circuit in similar cases, this Court awards
Plaintiffs statutory damages in the amount of $25,000 for each copyright infringed upon. See Rovio
Entm 't, Ltd. v. GW Trading LLC, No. 5:1 3-CV- 1 079-XR, 2016 WL 4126657, at *6 (W.D. Tex. Aug.
2, 2016) (awarding $25,000 per copyright work infringed). It is undisputed Hwang willfully
infringed nineteen copyrighted works, and the Court therefore awards Plaintiffs a total of $475,000.
b. Trademark Infringement
Similarly, a trademark owner may elect to recover statutory damages "not less than $1,000
or more than $200,000 per counterfeit mark." 15 U.S.C.
§
1117(c). If the trademark infringement
is willful, the statutory maximum increases to $2,000,000 per counterfeit mark. Id. Plaintiffs request
$250,000 for each of the trademarks upon which Hwang willfully infringed, totaling $1,000,000. In
determining the amount of statutory damages for trademark infringement, courts often look to the
same factors assessed in awarding statutory damage for copyright infringement. See Coach, Inc.
v.
Brightside Boutique, No. 1:1 1-CA-20 LY, 2012 WL 32941, at *4 (W.D. Tex. Jan. 6,2012), report
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and recommendation adopted (W.D. Tex. Mar. 16, 2012) (collecting cases where courts applied the
factors for assessing the size of statutory damages under 17 U.S.C.
damagesunder 15 U.S.C.
§
§
504(c) to assessing statutory
1117(c)).
Again, the wilfulness of Hwang' s conduct, the continued infringement after this lawsuit was
filed, and the need for deterrence favor Plaintiffs. The court therefore awards Plaintiffs higher than
the statutory minimum. Looking to similar cases in this circuit, the court finds an award of$ 100,000
per mark infringed is appropriate to accomplish the dual goals of compensation and deterrence. See
Coach, Inc., 2012 WL 32941, at *5 (awarding $100,000 per mark per type of good infringed and
collecting cases where $100,000 was awarded per mark per good infringed). Therefore, the Court
awards $100,000 for each of the four trademarks infringed, totaling $400,000.
c. Circumvention of Copyright Protection
A party succeeding on a claim of circumvention of copyright protection may elect to recover
statutory damages for each violation "in the sum of not less than $200 or more than $2,500 per act
of circumvention, device, product, component, offer, or performances of service, as the court
considers just." 17 U.S.C.
§
1
203(c)(3)(A).
Plaintiffs seek the statutory maximum of $2,500 for the circumvention of sixteen separate
product registrations, requesting a total of $40,000. Plaintiffs appear to ask the Court to infer Hwang
used key generation software to circumvent Plaintiffs' access control technology for sixteen product
registrations from the single occasion of circumvention observed by Mr. Brick because Hwang
asserted his Fifth Amendment right against self-incrimination and refused to answer Plaintiffs'
discovery requests. See Mot. Summ. J. [#29] at 16-17 & n.34. The Court declines to do so without
Plaintiffs do not identif' which sixteen product registrations they claim Hwang circumvented.
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evidence, direct or circumstantial, showing Hwang circumvented Plaintiffs' copyright protections
on other occasions.
Instead, the Court awards the maximum statutory damages, $2,500, for the one occasion of
circumvention for which Plaintiffs provided evidence.
iii. Costs & Attorneys' Fees
Plaintiffs request an award of attorneys' fees and costs for prevailing on their copyright
infringement claims under 17 U.S.C.
§
505 and trademark infringement claims under 15
u.s.c. §
1117.
At the conclusion of a copyright action, a court "may allow the recovery of full
[and] may also award a reasonable attorney's fee to the prevailing party as part
U.S.C.
§
505. The total amount
costs....
of the costs."
17
of costs and attorneys' fees a plaintiff may recover is left to the
discretion of the court. Id. Courts deciding requests for attorneys' fees and costs in a copyright
infringement case "must take into account a range of considerations." Kirtsaeng v. John Wiley &
Sons, Inc., 136 5. Ct. 1979, 1989 (2016). Specifically, the deciding court must give "substantial
weight to the reasonableness of the losing party's position" but must also consider other
circumstances relevant to granting fees such as a need for deterrence, a party's litigation misconduct,
or frivolousness. Id. at 1983, 1985, 1989.
Plaintiffs have shown they are entitled to attorneys' fees and costs under 17 U.S.C.
§
505.
Hwang failed to offer any objectively reasonable explanation for the distribution of unlicensed
versions of Plaintiffs' software. Considering the prolonged nature of Hwang's business operations
and Hwang's
willful
copyright infringement, the need for deterrence is strong. An award of
reasonable attorneys' fees is appropriate.
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By contrast, attorneys' fees are awarded in trademark cases only in "exceptional
to the prevailing party." 15 U.S.C.
§
cases...
1117. "An exceptional case is one where the violative acts can
be characterized as malicious, fraudulent, deliberate, or willful." SevenUp Co.
v.
CocaCola Co.,
86 F.3d 1379, 1390 (5th cir. 1996) (internal quotation marks omitted). The prevailing party has the
burden to show, by clear and convincing evidence, "a high degree of culpability on the part of the
infringer, for example, bad faith or fraud,' and a few cases have gone so far as to require 'very
egregious conduct." Id. (quoting Tex. Pig Stands v. HardRock Cafe Int'l, 951 F.2d 684, 696-97 &
n. 25 (5th Cir. 1992); Moore Bus. Forms, Inc. v. Ryu, 960 F.2d 486, 491(5th Cir. 1992)). "A district
court should decide whether a case is exceptional by examining all the facts and circumstances."
CJC Holdings, Inc.
v.
Wright & Lato, Inc., 979 F.2d 60, 65 (5th Cir. 1992). "The determination as
to whether a case is exceptional is left to the sound discretion of the trial court." SevenUp, 86 F.3d
at 1390.
The Court finds this case is an exceptional trademark case meriting an award of attorneys'
fees. Hwang deliberately used Plaintiffs' exact marks in advertising the sale of computers to solicit
sales. Plaintiffs have proven by clear and convincing evidence Hwang possessed a high degree of
culpability.
In particular, Plaintiffs ask the Court to award $35,899.50 in attorneys' fees and costs based
on what counsel "routinely charge[s]
. . .
in intellectual property as well as commercial matters[.]"
Mot. Summ. J. [#29-18] Ex. F (Davidson Decl.) at ¶ 6. Yet, because counsel reduced its hourly rates
for its attorneys and paralegals,"[t]he total amount of attorney's fees incurred in connection with this
case is $27,790.00." Id. ¶ 7. With reported costs and expenses of $625.00, Plaintiffs represents the
attorneys' fees and costs of this suit to total $28,415.00. Id.
Plaintiffs fail to specify the precise hourly rates charged for this case or the specific tasks
performed by their attorneys and paralegals. In seeking to recover for paralegal work, this failure is
particularly troubling. Paralegal work can only be recovered as attorneys' fees if the work is legal
rather clerical.
Vela
v.
City of Houston,
276 F.3d 659, 681 (5th Cir. 2001). Plaintiffs provide no
evidence by which the Court can determine if the paralegals' work was legal or clerical.
See
Davidson Dccl. The Court therefore declines to award Plaintiffs paralegal expenses.
Plaintiffs do indicate their attorneys expended 69.4 hours on this case in filing the pleadings,
communicating with Hwang before he retained counsel, moving for a preliminary injunction,
obtaining an agreed preliminary injunction, and successfully moving for summary judgment.
¶J 6,
See id.
8. Because Plaintiffs do not provide the hourly rates charged by their attorneys, the Court
awards attorneys' fees at a rate of $300 per hour, the 2015 median hourly rate charged by attorneys
in the Austin area.
See STATE
BAR OF TExAS, 2015 HOuRLY FACT SHEET (Aug. 2016) at 8.
Therefore, the Court awards Plaintiffs a total of $20,820 in attorneys fees for 69.4 hours at a rate of
$300 per hour.
Conclusion
In sum, the Court DENIES Hwang's motion to exclude the evidence collected from Mr.
Brick's investigation. Finding no genuine dispute as to any material fact, the Court GRANTS
Plaintiffs' motion for summary judgment. Furthermore, the Court GRANTS Plaintiffs relief as
described within this opinion. Such relief will be finally awarded when the Court issues a final
judgment in favor of Plaintiffs against Hwang.
However, Plaintiffs have failed to address the Clerk's Entry of Default concerning Defendant
SKH Systems, Inc., which was entered on April 10, 2017. Default Entry [#18]. Plaintiffs have yet
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to move for default judgment against SKH Systems, Inc. and therefore the claims against SKH
Systems, Inc. remain. See New YorkLife Ins.
V.
Brown, 84 F.3d 137 (5th Cir. 1996) (distinguishing
between entry of default and a default judgment). Within twenty days of the entry of this order,
Plaintiffs must show cause for the failure to prosecute or the Court will dismiss Plaintiffs' claims
against SKH Systems, Inc. and enter a final judgment.
Accordingly,
IT IS THEREFORE ORDERED that Defendant Chorng "Jack" Hwang's Motion to
Exclude Evidence [#32] is DENIED;
IT IS FURTHER ORDERED that Plaintiffs' Motion for Summary Judgment [#29]
is GRANTED; and
IT IS FINALLY ORDERED that Plaintiffs shall show cause for the failure to
prosecute their claims against Defendant SKH Systems, Inc. within TWENTY (20) DAYS
of the entry of this order or the Court will dismiss Plaintiffs' claims against Defendant SKH
Systems, Inc. and enter a final judgment in this case.
SIGNED this the
day of December 2017.
7ap
U
SAM SPARKS
UNITED STATES DISTRICT JUDGE
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