Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 1 of 27
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF CALIFORNIA
`----oo0oo----
`
`UMG RECORDINGS, INC.,
`A Delaware corporation,
`UNIVISION MUSIC LLC, a
`Delaware limited liability
`company, DISA LLC, a Delaware
`limited liability company, and
`FONOVISA, INC., a California
`corporation,
`Plaintiffs,
`
`v.
`DISCO AZTECA DISTRIBUTORS,
`INC.,
`
`Defendant.
`_____________________________/
`AND RELATED COUNTERCLAIM.
`
`NO. CIV. S-04-2611 FCD DAD
`
`MEMORANDUM AND ORDER
`
`----oo0oo----
`This matter is before the court on plaintiffs UMG
`Recordings, Inc. and Fonovisa LLC and plaintiffs and
`counterdefendants Univision Music LLC and Disa LLC (collectively
`“plaintiffs”) motion for summary judgment or, alternatively,
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 2 of 27
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`partial summary judgment.1 By the motion, plaintiffs seek: (1) a
`judgment of liability against defendant Disco Azteca
`Distributors, Inc. (“defendant” or “Disco Azteca”) for copyright
`infringement of 38 of plaintiffs’ works ; (2) a determination
`that defendant’s infringement was “willful” within the meaning of
`Section 504 of the Copyright Act, 17 U.S.C. § 504(c)(2); and (3)
`a judgment of non-liability in favor of counterdefendants
`Univision Music LLC and Disa LLC (“counterdefendants”) on
`defendant’s counterclaim for copyright infringement.
`Defendant does not oppose the motion with respect to its
`direct liability for copyright infringement,2 but argues that a
`finding of willfulness cannot be made as a matter of law because
`triable issues of fact remain regarding its state of mind.
`Likewise, defendant argues that judgment of non-liability in
`favor of counterdefendants cannot be made as triable issues of
`fact exist as to whether counterdefendants infringed defendant’s
`copyrights in two sound recordings.
`For the reasons set forth below, the court GRANTS IN PART
`and DENIES IN PART plaintiffs’ motion. Considering plaintiffs’
`
`Because oral argument will not be of material
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`assistance, the court orders this matter submitted on the briefs.
`See E.D. Cal. Local Rule 78-230(h).
`The court acknowledges that defendant did not expressly
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`state in its opposition that it did not oppose plaintiffs’ motion
`with respect to a finding of liability of infringement; however,
`aside from one bald denial of liability in its Statement of
`Disputed Facts (under the heading “Contentions of Law”),
`defendant’s papers do not address the issue of liability at all,
`and at times, make reference to the fact that the court will/may
`find liability. (Opp’n, filed July 21, 2006, at 4, 5.) Indeed,
`the entirety of defendant’s opposition focuses on the issue of
`“willfulness,” and as such, the court finds that defendant
`concedes liability for copyright infringement. The only
`contested issue is whether that infringement was “willful.”
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 3 of 27
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`evidence proffered in support of the motion and defendant’s non-
`opposition thereto, the court grants plaintiffs’ motion as to
`liability and finds that defendant directly infringed 38 of
`plaintiffs’ copyrighted works. However, the court cannot find,
`as a matter of law, that said infringement was “willful.” On
`that issue, triable issues of fact remain. As to defendant’s
`counterclaim for infringement, plaintiffs’ motion is also granted
`as defendant’s counterclaim is based on a right to attribution
`(i.e., the provision of proper credit to Disco Azteca and the
`writer of the original song on plaintiffs’ CDs) which is not a
`protected right under the Copyright Act.
`BACKGROUND
`
`Plaintiffs
`A.
`Plaintiffs are record companies engaged in the business of
`creating, manufacturing, distributing, and selling musical and
`sound recordings. (Def.’s Resp. to Pls.’ Stmt. of Undisputed
`Facts [“SUF”], filed July 21, 2006, ¶ 1.) Plaintiffs are the
`owners or exclusive United States licensees of 38 musical works,
`listed on Schedules A and B to the Second Amended Complaint, and
`have sold and distributed these works throughout the United
`States. (SUF ¶ 2.)
`B.
`Disco Azteca
`Disco Azteca is in the business of selling and distributing
`sound recordings both as a wholesaler and in retail outlets that
`it owns and operates. (SUF ¶ 3.) Disco Azteca operates
`warehouses in Stockton, California and Chicago, Illinois and
`eleven retail stores throughout California and Nevada. (SUF ¶
`4.) The owners of Disco Azteca, Arturo, Humberto, Jose and
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 4 of 27
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`Christiano Sanchez (the “Sanchezes”), have been involved in the
`music business since 1974. (SUF ¶ 5.) In addition to Disco
`Azteca, the Sanchezes also own and/or operate a recording company
`called Mar International S.A. (“Mar International”) and a music
`publishing company called Jarabe Publishing Company (“Jarabe”),
`which operate out of the same office as Disco Azteca. (SUF ¶ 6.)
`Through Mar International, the Sanchezes have created 300 CDs
`that have collectively sold hundreds of thousands of copies, and
`Jarabe controls and/or owns thousands of copyrights in musical
`works which have been distributed in the United States and
`abroad. (SUF ¶ 7.) The Sanchezes arrange for the copyrights in
`these works to be registered with the United States Copyright
`Office. (Id.)
`From 1985 until about three years ago, Mar International was
`a member of an anti-piracy organization called ALARM, which
`conducted raids for the purpose of confiscating counterfeit
`products, and created educational materials about piracy and
`copyright law. (SUF ¶ 8.) For over 20 years, when legal issues
`arise, Disco Azteca employs outside counsel (David White,
`defendant’s counsel in this case). (SUF ¶ 9; Def.’s Stmt. of
`Disputed Facts [“DDF”], filed July 21, 2006, ¶ 1.) Jose Sanchez
`(“Sanchez”) testified that he is familiar generally with the
`copyright laws and the protections they afford to copyrighted
`musical work, and he has, over the years, come to understand the
`Copyright Act’s prohibition on “parallel imports.”3 (SUF ¶ 10.)
`
`The term “parallel imports” refers to “[r]ecords of
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`foreign manufacture that are imported to and sold in the United
`States in violation of exclusive distribution rights.” CBS, Inc.
`v. Casino Record Distributors of Florida, Inc., 654 F. Supp. 677,
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 5 of 27
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`Although, Disco Azteca has not been involved previously in a
`copyright lawsuit, and has not had prior experience dealing with
`the issue of parallel imports. (DDF ¶ 2.)
`C.
`Plaintiff’s Cease & Desist Letter to Disco Azteca
`On March 5, 2003, after receiving information that Disco
`Azteca may have purchased or imported parallel imports of
`plaintiffs’ work, plaintiff UMG Recordings, Inc. (“UMG”) sent a
`letter, in English and Spanish, to Disco Azteca at both its
`Stockton, California and Cicero, Illinois addresses, asking Disco
`Azteca to cease and desist from:
`purchasing, importing and/or causing to be imported
`for distribution, sale, or other exploitation in the
`United States copies of records manufactured outside
`the United States, which contain copies of various
`master recordings owned exclusively by UMG Recordings,
`Inc. . . . . (SUF ¶ 11.)
`The letter referenced Section 602(a) of the Copyright Act and
`cited specific case law on the prohibition of parallel imports.
`(Id.)
`
`Defendant, however, maintains that it first learned of
`plaintiffs’ copyright claims when defendant was served with the
`complaint in this action on February 25, 2005. (Certif. of
`Service, filed March 9, 2005.) According to Sanchez, while it
`appears that UMG’s letter was received and signed for by an
`employee of defendant, he declares it was never brought to his
`attention, and thus, he never responded to it. UMG did not
`attempt to contact defendant further, prior to filing the instant
`lawsuit on December 9, 2004 (plaintiffs filed an amended
`
`678 (S.D. Fla. 1987); 17 U.S.C. § 602(a) (prohibiting the
`importation, without the copyright owner’s permission, of copies
`acquired outside the United States).
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 6 of 27
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`complaint on February 23, 2005). Sanchez states that he first
`saw the March 5, 2003 letter in March 2006, during the course of
`this litigation.4 (DDF ¶ 9.)5
`D.
`Disco Azteca’s Infringing Conduct
`Between March 2003 and July 2005, plaintiffs’ investigators
`visited Disco Azteca’s retail stores and identified hundreds of
`parallel-import versions of plaintiffs’ copyrighted CDs
`(including those listed on Schedule A to the Second Amended
`Complaint) offered for sale by Disco Azteca. (SUF ¶ 14.) In
`2003, Disco Azteca had been purchasing phonorecords6 directly
`from plaintiffs, but plaintiffs temporarily ceased selling to
`Disco Azteca because it had failed to comply with plaintiffs’
`
`Sanchez testified that he found the letter in a box in
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`his office. While he testified he does not recall reading the
`letter prior to that discovery in March 2006, he concedes that it
`is his company’s policy that if a letter of this type is received
`by an employee that it should be forwarded to him, but in this
`case, it was not. (Sanchez Dep., 37:18-38:21, 41:2-42:8, Ex. J
`to Goldman Decl., filed July 7, 2006.)
`Defendant’s Statement of Disputed Facts is wholly based
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`on the declaration of Jose Sanchez, filed July 21, 2006.
`Plaintiffs filed objections to each and every paragraph of said
`declaration. (Evid. Objs. to Sanchez Decl., filed July 28,
`2006.) The court reviewed the objections and hereby overrules
`them; the objections are largely based on irrelevancy
`contentions, and for the reasons set forth below, Sanchez’
`testimony is relevant to the willfulness determination, and to
`the extent plaintiffs claim Sanchez has contradicted his
`deposition testimony in this declaration, the court relies on his
`deposition testimony where any conflict exists, although the
`court notes that any such conflict is minor.
`Phonorecords is a term used in legal definitions to
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`refer to physical recordings of songs, such as vinyl LPs,
`cassette tapes, and compact discs. See 17 U.S.C. § 101 (defining
`“phonorecords” as “material objects in which sounds, . . ., are
`fixed by any method now known or later developed, and from which
`the sounds can be perceived, reproduced, or otherwise
`communicated, either directly or with the aid of a machine or
`device. . . .”)
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 7 of 27
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`credit policy and had fallen behind on paying plaintiffs’
`invoices.7 (SUF ¶ 13.) To obtain inventory during these periods
`when plaintiffs halted distribution, Disco Azteca began
`purchasing CDs from a Mexico-based company called Musical Del
`Norte. (SUF ¶ 15; DDF ¶ 5.) Sanchez testified that Musical Del
`Norte’s salesman told him that the product he was purchasing came
`from “the warehouses of Universal, Fonovisa, [and] Univision” in
`Mexico, and that Musical Del Norte was authorized to export
`product from Mexico into the United States on behalf of
`plaintiffs--that “everything [was] legal.” (SUF ¶s 16, 17.) The
`salesman assured Disco Azteca that Musical Del Norte’s product
`was legitimate and that its distribution to Disco Azteca for sale
`in the United States was permitted. (DDF ¶ 5.)
`Sanchez relied on these statements and did not attempt to
`verify the salesman’s representations by either obtaining
`documentation from Musical Del Norte or contacting plaintiffs to
`confirm Musical Del Norte was an authorized distributor. (SUF ¶
`19.) Sanchez testified, at that time, he was primarily concerned
`about keeping Disco Azteca profitable, and that the relationship
`with Musical Del Norte enabled the company to “come out of a
`hole” financially. (SUF ¶ 21.) The shipments from Musical Del
`Norte were delivered from Tijuana, Mexico by Musical Del Norte to
`Disco Azteca in California. (SUF ¶ 16.)
`
`For decades previously, Disco Azteca purchased
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`inventory directly from plaintiffs–-some millions of copies of
`plaintiffs’ recordings. (DDF ¶ 3.)
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 8 of 27
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`Disco Azteca purchased around 8,0008 CDs from Musical Del
`Norte in 2003 and 2004, some for equal and some for lower than
`the wholesale prices offered by plaintiffs. (SUF ¶ 22.) The
`packaging on plaintiffs’ CDs purchased by Disco Azteca indicated
`that they had been manufactured by plaintiffs’ Mexico-based
`affiliates, and the packaging was entirely in Spanish. (SUF ¶
`28.) Sanchez testified that when he inspected the product he
`received from Musical Del Norte, he only looked to see if
`plaintiffs’ respective names appeared on the label copy of the
`CDs, i.e., “Universal” or “Univision.” Sanchez did not check to
`see whether the product was identified as being manufactured in
`the United States or abroad. (SUF ¶ 29.) No one else at Disco
`Azteca conducted any further inspection of the product received
`from Musical Del Norte. (SUF ¶ 30.) Additionally, Disco Azteca
`does not have any procedures or policies which would prevent
`parallel imports or counterfeit product from being sold in its
`stores; it does not have a written policy, or any other
`procedure, to inform its employees that the sale of parallel
`imports is illegal, and it does not have any employee designated
`to perform such an inspection of the product it receives from
`suppliers. (SUF ¶ 31.)
`Disco Azteca’s invoices from Musical Del Norte identified
`all of the works listed on Schedule A of the Second Amended
`Complaint as among the CDs Disco Azteca purchased from Musical
`
`In his declaration submitted on the motion, Sanchez
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`declared that “[d]efendant bought a total of 6400 units from
`Musical over approximately 18 months.” (Sanchez Decl., ¶ 8.)
`This conflicts with his deposition testimony, and as such, the
`court does not consider this new testimony and instead relies
`herein on Sanchez’ deposition testimony on this issue.
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`Del Norte. (SUF ¶ 24.) Plaintiffs never licensed Disco Azteca
`or Muscial Del Norte to import from Mexico into the United States
`CDs containing their copyrighted works. (SUF ¶ 23.)
`In addition to the parallel imports, plaintiffs’
`investigators also discovered that Disco Azteca was selling a
`“pirate” (unauthorized) compilation containing a number of
`plaintiffs’ copyrighted works. (SUF ¶ 25.) Plaintiffs did not
`authorize any of their copyrighted works to appear on the pirated
`compilation, and never authorized anyone to reproduce or
`distribute any of the copyrighted works in the form contained on
`the pirate compilation. (SUF ¶ 26.) Disco Azteca does not
`dispute that the pirate compilation was purchased at one of its
`retail stores, but it asserts that it has “no idea where the one
`disc (called “Latin Hip Hop”) came from” because it is not listed
`in any of Disco Azteca’s records and has never been ordered from
`any company. (DDF ¶ 11.) Disco Azteca posits that while its
`employees are instructed not to accept returns without a receipt,
`it is possible that in this case, merchandise not originally
`purchased by Disco Azteca was inadvertently received and
`mistakenly stocked. (Id.)
`When defendant was served with the complaint, it immediately
`stopped purchasing from Musical Del Norte. However, it continued
`to sell the product previously purchased from Musical Del Norte.
`(SUF ¶ 32; DDF ¶ 10.) Under defendant’s tracking system, it was
`impossible to determine where the units purchased from Musical
`Del Norte were located within defendant’s stores. Defendant’s
`system tracks units by title not by source; consequently,
`defendant could determine the number of units of a particular
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`title that it had in stock, but it could not determine from whom
`they were purchased. Therefore, the titles purchased from
`Musical Del Norte were sold by defendant during the pendency of
`this litigation, along with other titles purchased directly from
`plaintiffs. (SUF ¶ 33; DDF ¶ 10.)
`During the same time it purchased from Musical Del Norte,
`Disco Azteca purchased over 400,000 units of other titles from
`plaintiff. (DDF ¶ 7.) Accordingly, the units from Musical Del
`Norte accounted for about 2% of Disco Azteca’s purchases for the
`time period. (Id.) In or around 2005, plaintiffs relaxed their
`credit policies and resumed regular distribution to Disco Azteca.
`Since that time, Disco Azteca has purchased several million
`dollars worth of inventory from plaintiffs, including
`approximately 500,000 units in 2005. (DDF ¶ 8.)
`E.
`Disco Azteca’s Counterclaim
`In its counterclaim, Disco Azteca asserts that it is the
`“copyright owner by assignment of exclusive rights under
`copyright with respect to certain copyrighted sound recordings
`embodied in [its] phonorecords,” entitled “Chavo Romero” and “Mis
`Cartas.” (Counterclaim, filed March 24, 2005, ¶ 16, Sch. A.)
`Disco Azteca alleges that plaintiffs have imported unlawful
`parallel imports of versions of these copyrighted recordings.
`(Id. at ¶s 16-18, 20, Sch. A.; SUF ¶s 34-35.)
`However, at his deposition, Sanchez admitted that Disco
`Azteca has received and accepted royalty payments from
`counterdefendants for the alleged uses of these songs, and that
`the sole basis of the counterclaim is Disco Azteca’s contention
`that counterdefendants failed to provide written credit to Disco
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`Azteca on the album packaging. (SUF ¶ 36.) Sanchez specifically
`disavowed any claim for damages other than for the allegedly
`incorrect credits:
`Q:
`I guess what I’m asking you is the way that
`you’ve been harmed is if it turns out you haven’t
`been paid royalties at the full statutory rate;
`correct?
`A:
`No. The way we’ve been damaged is by not
`giving credit to the right composer and to the
`right publishing company. That’s the way we’ve
`been damaged.
`Q:
`Any other way?
`A:
`Not that I can think of.
`(Sanchez Dep., 195:10-19, Ex. J. to Goldman Decl.)9
`STANDARD
`The Federal Rules of Civil Procedure provide for summary
`judgment where "the pleadings, depositions, answers to
`interrogatories, and admissions on file, together with the
`affidavits, if any, show that there is no genuine issue as to any
`material fact." Fed. R. Civ. P. 56(c); see California v.
`Campbell, 138 F.3d 772, 780 (9th Cir. 1998). The evidence must
`be viewed in the light most favorable to the nonmoving party.
`See Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en
`banc).
`The moving party bears the initial burden of demonstrating
`the absence of a genuine issue of fact. See Celotex Corp. v.
`Catrett, 477 U.S. 317, 325 (1986). If the moving party fails to
`meet this burden, "the nonmoving party has no obligation to
`
`Sanchez now maintains, in his declaration, that
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`plaintiffs’ payment of royalties has been “arbitrary and
`irregula[r],” apparently implying that plaintiffs have not made
`all payments due. However, as set forth below, the court must
`disregard said testimony as it contradicts his deposition
`testimony. Block v. City of Los Angeles, 253 F.3d 410, 419 n. 2
`(9th Cir. 2001).
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`produce anything, even if the nonmoving party would have the
`ultimate burden of persuasion at trial." Nissan Fire & Marine
`Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000).
`However, if the nonmoving party has the burden of proof at trial,
`the moving party only needs to show "that there is an absence of
`evidence to support the nonmoving party's case." Celotex Corp.,
`477 U.S. at 325.
`Once the moving party has met its burden of proof, the
`nonmoving party must produce evidence on which a reasonable trier
`of fact could find in its favor viewing the record as a whole in
`light of the evidentiary burden the law places on that party.
`See Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th
`Cir. 1995). The nonmoving party cannot simply rest on its
`allegations without any significant probative evidence tending to
`support the complaint. See Nissan Fire & Marine, 210 F.3d at
`1107. Instead, through admissible evidence the nonmoving party
`"must set forth specific facts showing that there is a genuine
`issue for trial." Fed. R. Civ. P. 56(e).
`ANALYSIS
`Defendant’s Liability for Infringement
`A.
`A claim of copyright infringement under federal law,
`requires proof that (1) the plaintiff had a valid copyright in
`the work allegedly infringed and (2) the defendant infringed the
`plaintiff’s copyright by violating one of the exclusive rights
`that 17 U.S.C. § 106 bestows upon the copyright holder. See
`Marder v. Lopez, 450 F.3d 445, 453 (9th Cir. 2006). “The legal
`or beneficial owner of an exclusive right under a copyright is
`entitled . . . to institute an action for any infringement of
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`that particular right committed while he or she is the owner of
`it.” 17 U.S.C. § 501(b). A plaintiff need not demonstrate the
`defendant’s intent to infringe the copyright in order to
`demonstrate copyright infringement. Educational Testing Service
`v. Simon, 95 F. Supp. 2d 1081, 1087 (C.D. Cal. 1999) (copyright
`infringement “is a strict liability tort”). Specifically
`applicable to this case, Section 602(a) of the Copyright Act
`provides:
`
`Importation into the United States, without
`the authority of the owner of copyright under
`this title, of copies or phonorecords of a work
`that have been acquired outside the United States
`is an infringement of the exclusive right to
`distribute copies of phonorecords under section
`106, actionable under section 501.
`17 U.S.C. § 602(a).10
`Here, defendant does not dispute the facts and supporting
`evidence proffered by plaintiff to establish defendant’s
`liability, and thus, a finding of liability for infringement is
`mandated. Specifically, defendant does not dispute that: (1)
`plaintiffs own the copyrights in the 38 musical works at issue on
`this motion;11 (2) in 2003, defendant began purchasing CDs from a
`
`Section 106(3) of the Copyright Act grants the
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`copyright owner the exclusive right: “to distribute copies of the
`copyrighted work to the public by sale or other transfer of
`ownership, or by rental, lease or lending.” 17 U.S.C. § 106(3).
`Section 501(a) of the Copyright Act provides that “[a]nyone who
`violates any of the exclusive rights of the copyright owner as
`provided by sections 106 through 122 . . . is an infringer of the
`copyright.” 17 U.S.C. § 501(a).
`Plaintiffs’ copyright certificates constitute prima
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`facie evidence of the validity of the copyrights and of the facts
`stated in the certificates, including ownership. 17 U.S.C. §
`401(c); Wildlife Express Corp. v. Carol Wright Sales, Inc., 18
`F.3d 502, 507 (7th Cir. 1994) (“A certificate of registration
`from the U.S. Register of Copyrights constitutes prima facie
`evidence of the validity of a copyright.”)
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`Mexico-based company called Musical Del Norte; (3) Musical Del
`Norte brought these CDs from Tijuana, Mexico to defendant in
`California; (4) among the CDs purchased from Musical Del Norte
`were the musical works at issue on the motion; (5) between March
`2003 and July 2005, plaintiffs’ investigators identified hundreds
`of parallel import versions of plaintiffs’ copyrighted CDs
`offered for sale at defendant’s retail locations; (6) defendant
`sold plaintiffs’ copyrighted works purchased from Musical Del
`Norte; and (7) plaintiffs never licensed defendant or Musical Del
`Norte to import from Mexico into the United States CDs containing
`their copyrighted works. (SUF ¶s 2, 1412-16, 23-24, 3213.)
`Further, defendant does not dispute that the pirated compilation
`was purchased at one of its retail stores, and that plaintiffs
`did not authorize any of their copyrighted works to appear on the
`pirated compilation. (SUF ¶ 26-27.)14
`Under these undisputed facts, plaintiffs are entitled to a
`judgment of liability against defendant for copyright
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`That defendant “lacks sufficient information to respond
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`to [Undisputed Fact No. 14]” does not raise a genuine issue of
`material fact sufficient to defeat summary judgment. Plaintiffs
`have proffered evidence to support this fact (concerning its
`investigators’ discovery of parallel imports at defendant’s
`facilities), and defendant has offered no evidence in rebuttal;
`thus, the fact is properly deemed undisputed.
`Defendant concedes, in its “Disputed” Fact No. 10, that
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`plaintiffs’ “titles purchased from Musical were sold along with
`the same titles purchased from Plaintiffs.” (DDF ¶ 10.)
`Defendant asserts that it has “no record” of how the
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`pirated compilation got into its retail store, and that its
`return policies are designed to prevent the receipt of such
`goods. (DDF ¶ 11.) However, copyright infringement is a strict
`liability tort, and because defendant has no defense for its sale
`of the pirated compilation, plaintiffs are entitled to summary
`judgment as to liability. See Los Angeles News. Serv. v. Conus
`Comm. Co., Ltd., 969 F. Supp. 579, 584 (C.D. Cal. 1997).
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`infringement.
`Defendant’s only reference to a possible defense in this
`action is its statement in the factual background of its
`opposition that: “The units were brought by Musical into the
`United States and delivered; Defendant did not import them.”
`(Opp’n at 2:23-24.) Even assuming the truth of this statement
`and interpreting it as an argument in opposition to plaintiffs’
`infringement claims, defendant would still not prevail on the
`motion. The fact that defendant did not actually import the CDs
`is irrelevant to the determination of liability. Columbia
`Broadcasting Systems, Inc. v. Scorpio Music Distributors, Inc.,
`569 F. Supp. 47, 48-49 (E.D. Pa. 1983) (“[T]he question whether
`defendant was the importer need not be resolved . . . [T]he
`copyright holder may proceed against any member of the chain of
`distribution.”) Defendant provides no contrary authority;
`indeed, defendant does not discuss the issue in the body of its
`analysis, let alone provide any legal authority in support of its
`factual assertion.
`B.
`Willful Infringement
`Section 504(c)(2) of the Copyright Act provides in pertinent
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`part:
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`In a case where the copyright owner sustains
`the burden of proving, and the court finds, that
`infringement was committed willfully, the court
`in its discretion may increase the award of
`statutory damages to a sum of not more than
`$150,000 [per work].”
`17 U.S.C. § 504(c)(2).15 A plaintiff sustains its burden of
`
`Otherwise, the maximum recovery per work is $30,000.
`15
`17 U.S.C. § 504(c)(1) (providing that the copyright owner may
`elect to recover, instead of actual damages and profits, an award
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`proving willfulness “by showing [the] defendant knew or should
`have known it infringed [the plaintiff’s] copyrights . . . .
`Willful does not mean malicious, rather, it means with knowledge,
`whether actual or constructive.” Basic Books, Inc. v. Kinko’s
`Graphics Corp, 758 F. Supp. 1522, 1543 (S.D. N.Y. 1991) (internal
`quotations and citation omitted); accord Peer Int’l Corp. v.
`Pausa Records, Inc., 909 F.2d 1332, 1335 (9th Cir. 1990).
`Alternatively, willfulness is shown where “the defendant
`recklessly disregarded the possibility that its conduct
`represented infringement.” Yurman Design, Inc. v. PAJ, Inc., 262
`F.3d 101, 112 (2nd Cir. 2001) (internal quotations and citation
`omitted); Sega Enterprises Ltd. v. MAPHIA, 948 F. Supp. 923, 936
`(N.D. Cal. 1996). “Willful blindness is knowledge, in copyright
`law . . . as it is in the law generally . . . . [A] deliberate
`effort to avoid guilty knowledge is all the law requires to
`establish a guilty state of mind.” In re Aimster Copyright
`Litigaton, 334 F.3d 643, 650 (7th Cir. 2003).
`Willfulness need not be proven directly but may be inferred
`from the defendant’s conduct. N.A.S. Import, Corp. v. Chenson
`Enters., Inc., 968 F.2d 250, 252 (2nd Cir. 1992). “To refute
`evidence of willful infringement, [a defendant] must not only
`establish its good faith belief in the innocence of its conduct,
`it must also show that it was reasonable in holding such a
`belief.” Peer Int’l, 909 F.2d at 1336.
`“Generally, a determination as to willfulness requires an
`assessment of a party’s state of mind, a factual issue that is
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`$30,000 [for each infringement] as the court considers just”).
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 17 of 27
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`not usually susceptible to summary judgment.” Sega Enterprises,
`948 F. Supp. at 936; Frank Music Corp. v. Metro-Goldwyn-Mayer,
`Inc., 772 F.2d 505, 515 (9th Cir. 1985). Rather, the
`determination of willfulness is ordinarily a question of fact for
`the jury. Hearst Corp. v. Stark, 639 F. Supp. 970, 980 (N.D.
`Cal. 1986). However, where the relevant facts are admitted or
`otherwise undisputed, willfulness can be appropriately resolved
`on summary judgment. Peer Int’l, 909 F.2d at 1335-36; Sega
`Enterprises, 948 F. Supp. at 936. Although in reaching this
`decision, as in any summary judgment proceeding, the court must
`resolve questions of fact in favor of the non-moving party, here
`defendant, and must draw all justifiable factual inferences in
`the non-moving party’s favor. Anderson v. Liberty Lobby, Inc.,
`477 U.S. 242, 255 (1986).
`Here, plaintiffs contend that defendant has no evidence to
`contradict the following undisputed facts, which they argue
`demonstrate defendant’s actual and/or constructive knowledge that
`its conduct constituted copyright infringement and/or, at a
`minimum, defendant’s reckless disregard for plaintiffs’ rights:
`(1)
`Defendant admits that the CDs it purchased from
`Musical Del Norte were “parallel imports;”
`Defendant admits that it knows that parallel imports
`are illegal unless authorized;
`(3) Defendant admits that other than relying on the
`representations of Musical Del Norte that it was
`an authorized distributor, defendant did not do
`anything to verify whether the product it received
`was authorized;
`Defendant admits the packaging on the CDs purchased
`from Musical Del Norte indicated that the CDs had
`been manufactured for plaintiffs’ Mexico-based
`affiliates, and was entirely in Spanish;
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`(2)
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`Case 2:04-cv-02611-FCD-DAD Document 60 Filed 08/14/06 Page 18 of 27
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`(5)
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`(6)
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`(7)
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`Defendant admits that Sanchez only conducted a cursory
`review of the product it received from Musical Del
`Norte to see if plaintiffs’ respective names appeared
`on the CDs, and did not verify whether the product
`was made in the United States or abroad;
`Defendant admits that no further review of these CDs
`was conducted;
`Defendant admits that it has no procedures or policies
`to prevent parallel imports or counterfeit goods from
`being sold at its retail stores;
`Defendant admits it purchased and sold the parallel
`import versions of plaintiffs’ CDs in order to keep its
`business profitable; and
`Defendant admits that it continued to sell the
`infringing CDs after it received notice of this
`lawsuit.
`(SUF ¶ 10, 15-17, 19-21, 24, 28-32.)16 While said facts ar