===Microsoft Corp. v. E & M Internet Bookstore, Inc.===, Slip Copy 2008 WL 191346 (N.D. Cal 2008) Decided: January 22, 2008
FACTS: Defendant, E & M Bookstore, Inc., a.k.a. Chen, sold Microsoft products on the auction website eBay. Between April 17 and June 13, 2006, eBay sent the defendant approximately 65 “takedown†notices regarding the Microsoft products that the defendant was attempting to sell on eBay. During the same time some of these notices were sent, an investigator for Microsoft purchased two products from the defendants off of eBay, including one copy of Microsoft Windows XP Professional SP2 and one copy of Microsoft Office 2003 Professional. Microsoft later analyzed both of these products and found them to be counterfeit. Microsoft also claimed that during this time they received two complaints from customers about counterfeit products sold to them by the defendants. On May 26, Microsoft sent an to e-mail to the defendant, Chen, warning him that they had received samples of counterfeit Microsoft software distributed by him through his eBay auction site and further stated that he should verify the legitimacy of his supplier(s). Microsoft sent a subsequent e-mail again warning Chen against continued purchasers of software from authorized distributors. Chen failed to follow any of the warnings and on October 27, 2006, Microsoft filed a complaint against the defendant alleging: 1) copyright infringement; 2) trademark infringement; and 3) false designation of origin.
PROCEDURAL HISTORY:
1.On October 27, 2006, Microsoft filed suit against E & M Bookstore, Inc., a.k.a., Chen, for copyright infringement, trademark infringement, and false designation of origin.
2.Defendant filed an answer on November 27, 2006 and an amended answer on February 16, 2007.
3.On May 25, 2007 the parties reached a preliminary settlement in which the defendant agreed to pay Microsoft $35,000. The settlement was never finalized because the defendant stopped responding to all communications from his attorney.
4.Defendant’s counsel moved to withdraw on September 28, 2007 due to his/her inability to reach Chen.
5.On November 13, 2007 the Court order Chen to appear in person on November 29 and show good cause why he should not be deemed in default. The defendant did not show up.
6.On January 8, 2008, Microsoft filed a motion for summary judgment, seeking damages, as well as an award for attorney’s fees and a permanent injunction against the defendant.
7.On January 17, 2008, defendant’s counsel submitted a response to the motion stating that he/she had received no communications from the defendant and that there was no opposition to the plaintiff’s motion for summary judgment.
8.Defendant never appeared at summary judgment hearing, even though notified of it by counsel.
9.On January 22, 2008, District Judge Alsup, for the United States District Court for the Northern District of California granted Microsoft’s motion for summary judgment and awarded enhanced damages and attorney’s fees to Microsoft.
ISSUE: As a matter of law, did the defendant, E & M Internet Bookstore, Inc., infringe on the copyrights and trademarks held by Microsoft when it sold counterfeits of Microsoft’s products, bearing the “Microsoft†trademark, on their auction site on eBay?
HOLDING: Yes. The U.S. District Court for the Northern District of California held that there was no genuine issue of material fact regarding the issue of the defendant’s copyright and trademark infringement of Microsoft’s valid copyrights and trademarks, and thus Microsoft was entitle to summary judgment as a matter of law.
REASONING:
1. Copyright Infringement
To succeed on claim of copyright infringement the plaintiff must prove that he/she owns a valid copyright and that the defendant infringed that copyright. According the U.S. District Court for the Northern District of California, Microsoft met this burden. Microsoft clearly owned valid copyrights to their products and the court records indicated that the Chen had sold two counterfeit products on May 2, 2006. The defendant submitted no contrary evidence to its selling of counterfeit products, thus the Court concluded that there was no genuine issue of fact for trial and granted Microsoft’s motion for summary judgment for copyright infringement.
2.Trademark Infringement
The Court granted Microsoft’s motion for summary judgment for trademark infringement because it concluded that Microsoft had satisfied proof under the Lanham and again the defendant offered no contrary evidence to create a genuine issue of material fact for trial. Under the Lanham Act, 15 U.S.C. § 1114(1), the plaintiff must prove that the defendant’s commercial use of a “reproduction, counterfeit, copy, or colorable imitation of a registered mark†is likely to “cause confusion.†The Court stated that the record supported a finding of trademark infringement because Microsoft held properly registered trademarks and the defendant sold two counterfeit Microsoft products over the internet on May 2, 2006. The Court further reasoned that a reasonable consumer would likely be confused about the authenticity of a counterfeit product bearing the “Microsoft†trademark, which according to the court was further supported by the fact that Microsoft had actually received calls from confused customers who had unknowingly purchased the counterfeit products from the defendant. Since the defendant offered no evidence to contradict that by Microsoft, the Court concluded that there was no genuine issue of material fact as to the issue of trademark infringement and granted Microsoft’s motion for summary judgment.
3.Damages
Damages under both the Copyright Act and the Lanham Act are statutorily defined. Under 504(c) of the Copyright Act a plaintiff may elect to recover statutory damages rather than actual damages. In that case, a district court may award from $750 to $30,000 per copyright infringement and up to $150,000 per willful infringement. Under the Lanham Act, a district court may award “not less than $500 or more than $10,000 per counterfeit mark per type of goods or services sold…†15 U.S.C. § 1117(c). The Lanham Act also allows enhanced damages up to $1 million for willful infringement. Here Microsoft argued that it was entitled to enhance damages because the defendant willfully infringed its copyrights and trademarks and requested $45,000 in damages based on that willful infringement. The Court concluded that the recorded supported a finding of willful infringement by the defendant. According to the Court and under the Copyright Act, willful infringement occurs when the defendant knowingly infringed or acted with reckless disregard concerning the copyright holder’s rights (citing Knitwaves, Inc., v. Lollytags, Ltd., 71 F.3d 996, 1010-1011 (2nd Cir. 1995). The Court found willful infringement based on the fact that the defendant had received 65 takedown notices from eBay and still continued to sell counterfeit material. Furthermore, the defendant continued to buy from unauthorized distributors despite the written warnings from Microsoft. Thus, according to the Court the continued sale of the products on eBay despite warnings constituted willful infringement and thus entitled Microsoft to enhanced damages. The Court also granted Microsoft’s motion for award of attorney’s fees in the amount of $5,000, based on the willful nature of the infringement and based on the importance of deterring the sale of counterfeit products.
4.Permanent Injunction
The U.S. District Court for Northern District of California concluded that a permanent injunction against the defendant from selling anymore “Microsoft†products on eBay was an appropriate remedy based on the willful nature of the infringement. The Court followed a Ninth Circuit case, which held that a permanent injunction may be an appropriate remedy even where plaintiff did not introduce any concrete evidence that the defendant would infringe in the future. (See Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132 (9th Cir. 1986)). The U.S. District Court for Northern California enjoined E & M Internet Bookstore, Inc. from engaging in or assisting any other person in engaging in the sale of counterfeit software covered by Microsoft’s registered copyrights and bearing Microsoft’s registered trademarks or imitations thereof.
ANALYSIS: Although the Court in this case seemed to be trying to make a statement regarding the selling of counterfeit products bearing a trademarked name, it is likely that this judgment was against a judgment proof plaintiff. However, this was Microsoft, so the award of $45,000 in damages and $5,000 for attorney’s fees is just chump change to them, but the decision for them was probably worth millions. Even still, I wonder if the defendant had not skipped out and had actually presented any contrary evidence, a fact which the court repeated numerous times in its opinion, if it really would have made any difference. The only evidence the defendant could have offered to maybe combat that of Microsoft’s, was to maybe show his distributor was authorized and that it was some kind of fluke that the two customers that complained to Microsoft received counterfeit products. However, if Chen actually did have an authorized distributor, I would see no reason why he essential disappeared and failed to present that evidence. Furthermore, I agree with the Court that the defendant most likely was guilty of willful infringement since he was warned numerous times both by eBay and Microsoft about the “Microsoft†products he was selling on eBay. I would like to know why Chen reached a preliminary settlement with Microsoft and then completely stopped responding to both his attorney and the any orders by the Court.
FACTS: Defendant, E & M Bookstore, Inc., a.k.a. Chen, sold Microsoft products on the auction website eBay. Between April 17 and June 13, 2006, eBay sent the defendant approximately 65 “takedown†notices regarding the Microsoft products that the defendant was attempting to sell on eBay. During the same time some of these notices were sent, an investigator for Microsoft purchased two products from the defendants off of eBay, including one copy of Microsoft Windows XP Professional SP2 and one copy of Microsoft Office 2003 Professional. Microsoft later analyzed both of these products and found them to be counterfeit. Microsoft also claimed that during this time they received two complaints from customers about counterfeit products sold to them by the defendants. On May 26, Microsoft sent an to e-mail to the defendant, Chen, warning him that they had received samples of counterfeit Microsoft software distributed by him through his eBay auction site and further stated that he should verify the legitimacy of his supplier(s). Microsoft sent a subsequent e-mail again warning Chen against continued purchasers of software from authorized distributors. Chen failed to follow any of the warnings and on October 27, 2006, Microsoft filed a complaint against the defendant alleging: 1) copyright infringement; 2) trademark infringement; and 3) false designation of origin.
PROCEDURAL HISTORY:
1.On October 27, 2006, Microsoft filed suit against E & M Bookstore, Inc., a.k.a., Chen, for copyright infringement, trademark infringement, and false designation of origin.
2.Defendant filed an answer on November 27, 2006 and an amended answer on February 16, 2007.
3.On May 25, 2007 the parties reached a preliminary settlement in which the defendant agreed to pay Microsoft $35,000. The settlement was never finalized because the defendant stopped responding to all communications from his attorney.
4.Defendant’s counsel moved to withdraw on September 28, 2007 due to his/her inability to reach Chen.
5.On November 13, 2007 the Court order Chen to appear in person on November 29 and show good cause why he should not be deemed in default. The defendant did not show up.
6.On January 8, 2008, Microsoft filed a motion for summary judgment, seeking damages, as well as an award for attorney’s fees and a permanent injunction against the defendant.
7.On January 17, 2008, defendant’s counsel submitted a response to the motion stating that he/she had received no communications from the defendant and that there was no opposition to the plaintiff’s motion for summary judgment.
8.Defendant never appeared at summary judgment hearing, even though notified of it by counsel.
9.On January 22, 2008, District Judge Alsup, for the United States District Court for the Northern District of California granted Microsoft’s motion for summary judgment and awarded enhanced damages and attorney’s fees to Microsoft.
ISSUE: As a matter of law, did the defendant, E & M Internet Bookstore, Inc., infringe on the copyrights and trademarks held by Microsoft when it sold counterfeits of Microsoft’s products, bearing the “Microsoft†trademark, on their auction site on eBay?
HOLDING: Yes. The U.S. District Court for the Northern District of California held that there was no genuine issue of material fact regarding the issue of the defendant’s copyright and trademark infringement of Microsoft’s valid copyrights and trademarks, and thus Microsoft was entitle to summary judgment as a matter of law.
REASONING:
1. Copyright Infringement
To succeed on claim of copyright infringement the plaintiff must prove that he/she owns a valid copyright and that the defendant infringed that copyright. According the U.S. District Court for the Northern District of California, Microsoft met this burden. Microsoft clearly owned valid copyrights to their products and the court records indicated that the Chen had sold two counterfeit products on May 2, 2006. The defendant submitted no contrary evidence to its selling of counterfeit products, thus the Court concluded that there was no genuine issue of fact for trial and granted Microsoft’s motion for summary judgment for copyright infringement.
2.Trademark Infringement
The Court granted Microsoft’s motion for summary judgment for trademark infringement because it concluded that Microsoft had satisfied proof under the Lanham and again the defendant offered no contrary evidence to create a genuine issue of material fact for trial. Under the Lanham Act, 15 U.S.C. § 1114(1), the plaintiff must prove that the defendant’s commercial use of a “reproduction, counterfeit, copy, or colorable imitation of a registered mark†is likely to “cause confusion.†The Court stated that the record supported a finding of trademark infringement because Microsoft held properly registered trademarks and the defendant sold two counterfeit Microsoft products over the internet on May 2, 2006. The Court further reasoned that a reasonable consumer would likely be confused about the authenticity of a counterfeit product bearing the “Microsoft†trademark, which according to the court was further supported by the fact that Microsoft had actually received calls from confused customers who had unknowingly purchased the counterfeit products from the defendant. Since the defendant offered no evidence to contradict that by Microsoft, the Court concluded that there was no genuine issue of material fact as to the issue of trademark infringement and granted Microsoft’s motion for summary judgment.
3.Damages
Damages under both the Copyright Act and the Lanham Act are statutorily defined. Under 504(c) of the Copyright Act a plaintiff may elect to recover statutory damages rather than actual damages. In that case, a district court may award from $750 to $30,000 per copyright infringement and up to $150,000 per willful infringement. Under the Lanham Act, a district court may award “not less than $500 or more than $10,000 per counterfeit mark per type of goods or services sold…†15 U.S.C. § 1117(c). The Lanham Act also allows enhanced damages up to $1 million for willful infringement. Here Microsoft argued that it was entitled to enhance damages because the defendant willfully infringed its copyrights and trademarks and requested $45,000 in damages based on that willful infringement. The Court concluded that the recorded supported a finding of willful infringement by the defendant. According to the Court and under the Copyright Act, willful infringement occurs when the defendant knowingly infringed or acted with reckless disregard concerning the copyright holder’s rights (citing Knitwaves, Inc., v. Lollytags, Ltd., 71 F.3d 996, 1010-1011 (2nd Cir. 1995). The Court found willful infringement based on the fact that the defendant had received 65 takedown notices from eBay and still continued to sell counterfeit material. Furthermore, the defendant continued to buy from unauthorized distributors despite the written warnings from Microsoft. Thus, according to the Court the continued sale of the products on eBay despite warnings constituted willful infringement and thus entitled Microsoft to enhanced damages. The Court also granted Microsoft’s motion for award of attorney’s fees in the amount of $5,000, based on the willful nature of the infringement and based on the importance of deterring the sale of counterfeit products.
4.Permanent Injunction
The U.S. District Court for Northern District of California concluded that a permanent injunction against the defendant from selling anymore “Microsoft†products on eBay was an appropriate remedy based on the willful nature of the infringement. The Court followed a Ninth Circuit case, which held that a permanent injunction may be an appropriate remedy even where plaintiff did not introduce any concrete evidence that the defendant would infringe in the future. (See Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132 (9th Cir. 1986)). The U.S. District Court for Northern California enjoined E & M Internet Bookstore, Inc. from engaging in or assisting any other person in engaging in the sale of counterfeit software covered by Microsoft’s registered copyrights and bearing Microsoft’s registered trademarks or imitations thereof.
ANALYSIS: Although the Court in this case seemed to be trying to make a statement regarding the selling of counterfeit products bearing a trademarked name, it is likely that this judgment was against a judgment proof plaintiff. However, this was Microsoft, so the award of $45,000 in damages and $5,000 for attorney’s fees is just chump change to them, but the decision for them was probably worth millions. Even still, I wonder if the defendant had not skipped out and had actually presented any contrary evidence, a fact which the court repeated numerous times in its opinion, if it really would have made any difference. The only evidence the defendant could have offered to maybe combat that of Microsoft’s, was to maybe show his distributor was authorized and that it was some kind of fluke that the two customers that complained to Microsoft received counterfeit products. However, if Chen actually did have an authorized distributor, I would see no reason why he essential disappeared and failed to present that evidence. Furthermore, I agree with the Court that the defendant most likely was guilty of willful infringement since he was warned numerous times both by eBay and Microsoft about the “Microsoft†products he was selling on eBay. I would like to know why Chen reached a preliminary settlement with Microsoft and then completely stopped responding to both his attorney and the any orders by the Court.