Case4:04-cv-04367-CW Document48 Filed09/01/05 Page1 of 7
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`IO GROUP INC.,
`Plaintiff,
`
` v.
`METROPOLE NEWS GROUP, LLC, et al.,
`Defendants.
` /
`
`No. C-04-04367 CW (EDL)
`REPORT AND RECOMMENDATION
`RE: PLAINTIFF’S MOTION FOR
`DEFAULT JUDGMENT
`
`On October 15, 2004, Plaintiff IO Group filed this action against Defendants Metropole New
`Group, Easy Planet, Rainbow Zone and two individual Defendants for, inter alia, copyright
`infringement and unauthorized commercial use of a photograph. After entry of default on May 12,
`2005, Plaintiff filed a motion for default judgment, which was referred to the undersigned Magistrate
`Judge pursuant to Civil Local Rule 72-1. The motion came on for hearing on August 30, 2005.
`Attorney Gill Sperlein appeared for Plaintiff. Defendants did not file an opposition to Plaintiff’s
`motion and did not appear at the hearing.
`Background
`In its complaint, Plaintiff alleges the following facts: Plaintiff, doing business as Titan
`Media, produces, markets and distributes adult entertainment products, including Internet website
`content, videos, DVDs and photographs. Compl. ¶ 2. Defendant Metropole News Group, doing
`business as Defendant Easy Planet, doing business as www.rainbow_zone.com, maintains a highly
`interactive subscription-based website for adult entertainment images. Id. ¶¶ 3-4, 25. On two
`occasions, Plaintiff’s employees discovered a number of Plaintiff’s copyrighted photographs being
`publicly displayed by and through www.rainbow_zone.com. Id. ¶¶ 26, 28. Defendants reproduced,
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`For the Northern District of California
`For the Northern District of California
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`United States District Court
`United States District Court
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`Case4:04-cv-04367-CW Document48 Filed09/01/05 Page2 of 7
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`distributed and publicly displayed more than 764 copyrighted photographs. Id. ¶¶ 26, 28, 30.
`In October 2004, Plaintiff sent a cease-and-desist letter to Defendants, demanding that they
`remove all of Plaintiff’s proprietary content from www.rainbow_zone.com and that they refrain
`from any future use of Plaintiff’s content. Compl. ¶ 27; Declaration of Gill Sperlein Decl. ¶ 8.
`Subsequently, Defendants removed the images from the website. See Sperlein Decl. ¶ 9. On
`February 23, 2005, Plaintiff purchased a membership to www.rainbow_zone.com and Plaintiff’s
`employee discovered 64 additional new photographs on Defendants’ website, for a total of 783
`photographs. Burford Decl. ¶ 6. On February 24, 2005, Defendants summarily cancelled Plaintiff’s
`membership without explanation. Compl. ¶ 28.
`Default Judgment
` Federal Rule of Civil Procedure 55(b)(2) authorizes the Court to enter judgment against a
`defendant against whom a default has been entered, assuming that defendant is not an infant, is not
`incompetent or in military service. Defendants here are not unrepresented minors, incompetent or in
`military service. See Sperlein Decl. ¶ 4.
`“The general rule of law is that upon default the factual allegations of the complaint, except
`those relating to the amount of damages, will be taken as true.” Geddes v. United Financial Group,
`559 F.2d 557, 560 (9th Cir. 1977) (citing Pope v. United States, 323 U.S. 1, 12 (1944)). In
`exercising its discretion to grant default judgment, the court may consider the following factors: (1)
`the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claims; (3) the
`sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a
`dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the
`strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. See
`Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Generally, upon entry of default, the
`factual allegations of the complaint are taken as true, except for those relating to damages. See
`Televideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir.1987).
`Here, the Eitel factors weigh in favor of default judgment. Most importantly, the substantive
`claims in the complaint appear to have merit and the complaint is sufficient to state those claims. A
`claim for copyright infringement has two elements: (1) ownership of the copyright; and (2)
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`Case4:04-cv-04367-CW Document48 Filed09/01/05 Page3 of 7
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`infringement by the defendant. See Kling v. Hallmark Cards, Inc., 225 F.3d 1030, 1037 (9th Cir.
`2000). In its complaint, Plaintiff alleges that each of the photographs at issue is registered with the
`Copyright Office and the Defendants reproduced, distributed and publicly displayed the photographs
`on www.rainbow_zone.com without permission. Compl. ¶¶ 29, 32, 43. Therefore, Plaintiff has
`alleged sufficient facts to state a claim for copyright infringement.
`California Civil Code section 3344(a) regarding unauthorized commercial use of a
`photograph states: “[a]ny person who knowingly uses another’s name, voice, signature, photograph,
`merchandise, or goods, or for purposes of advertising or selling or soliciting purchases of, products,
`merchandise, goods or services, without such person’ prior consent . . . shall be liable for any
`damages sustained by the person or persons injured as a result thereof.” The copyright act does not
`preempt this section of the Civil Code. See Downing v. Abercrombie & Fitch, 265 F.3d 994, 1004-
`05 (9th Cir. 2001). In its complaint, Plaintiff alleges that models in the photographs at issue
`executed written agreements with Plaintiff through which Plaintiff became the exclusive proprietor
`of the models’ rights of publicity in the photographs. Compl. ¶ 70. Plaintiff alleges that Defendants
`infringed those rights by displaying the photographs for commercial gain without Plaintiff’s consent.
`Compl. ¶ 72. Therefore, Plaintiff has alleged sufficient facts to state a claim for relief under section
`3344(a).
`The remaining Eitel factors also weigh in favor of granting default judgment. First, if the
`motion were denied, Plaintiff would likely be without a remedy; Plaintiff attempted to reach a
`compromise with Defendants but was unsuccessful. See Sperlein Decl. ¶ 9; see Pepsico, Inc. v. Cal.
`Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002) (“If Plaintiffs’ motion for default judgment
`is not granted, Plaintiffs will likely be without other recourse for recovery.”). Second, the amount of
`money sought is not completely disproportionate or unreasonable given the number of copyrighted
`images that Defendants copied. Finally, because Defendants did not file an answer to the complaint,
`there is little to suggest that there is a possibility of a dispute concerning material facts, and it is
`unlikely that Defendants’ default was due to excusable neglect, especially when Plaintiffs served its
`motion for default judgment on Defendants, but still received no response.
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`Case4:04-cv-04367-CW Document48 Filed09/01/05 Page4 of 7
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`Accordingly, the motion for default judgment should be granted. The remaining issue is the
`amount of the judgment.
`Damages
`Copyright infringement
`1.
`A copyright infringer is liable for either the actual damages incurred or statutory damages.
`See 17 U.S.C. § 504(a). Plaintiff concedes that it cannot prove the former. Statutory damages are
`assessed by the Court in the range between $750 and $30,000 per work, increased to $150,000 in
`cases of willful infringement. See 17 U.S.C. § 504(c).
`Here, Plaintiff argues that Defendants should pay at least $2,500.00 per work infringed, for a
`total of $1,957,500.00 ($2,500 x 783 photographs). Because Plaintiff believes that the infringement
`was willful, Plaintiff argues that Defendants should pay $7,500.00 per work, which represents treble
`damages, for a total of $5,872,500.00 ($7,500 x 783 photographs).
`In support of Plaintiff’s request for $2,500.00 per work infringed, Plaintiff has submitted the
`declaration of Keith Webb, its vice-president of marketing and legal affairs. Attached to Mr.
`Webb’s declaration is a form license for use of Plaintiff’s images. See Webb Decl. Ex. A. That
`license provides for a one-time license of an image and states that Plaintiff shall be compensated
`$2,500.00 in liquidated damages per image for the unauthorized use of an image. See Webb Decl. ¶
`8. Also attached to Mr. Webb’s declaration is a legal statement of Plaintiff’s intellectual property
`rights, which is posted on its website. See Webb Decl. Ex. B. The legal statement provides in part:
`“Each individual photograph or image contained on our web pages or portion thereof contained in
`this site has a retail value of $2,500.00 U.S. and is only available when ordered from the author.”
`See id. at 1.
`This type of evidence of damages does not always justify an award of $2,500.00 per
`photograph on default judgment. Compare IO Group v. Bench, C-04-3116 CRB (JCS) (awarding
`$2,500.00 per work infringed), with IO Group v. Ryan, C-02-5140 RMW (finding $1,000.00 per
`work to be the appropriate amount) and IO Group v. Adkins, 2005 WL 1492381 (N.D. Cal.) (same).
`The Court is persuaded by the latter cases. The form license offered by Plaintiff is just that -- a
`form. Plaintiff failed to provide any evidence of actual licenses negotiated with third parties.
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`Case4:04-cv-04367-CW Document48 Filed09/01/05 Page5 of 7
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`Further, the form license does not show what a third party would pay for a license; it simply
`describes the penalty for unauthorized use. Also, the legal statement of intellectual property rights is
`an unsubstantiated claim that the images are each worth $2,500.00. Plaintiff failed to submit any
`evidence that a third party in the marketplace has actually paid $2,500.00 per image or that in
`negotiations, Plaintiff would never accept anything but $2,500.00.
`The Court concludes that Plaintiff should receive $1,000.00 per work infringed. An award of
`more than the statutory minimum of $750 per image is warranted because of the large number of
`images copied and the fact that Plaintiff limits distribution of its images to maintain their value. See
`Webb Decl. ¶¶ 4, 6, 7. An award greater than $1,000.00 was not justified because there is not
`extensive evidence of willfulness and no evidence that Defendants enjoyed profits of $1,000 or more
`per image.
`The remaining question is whether the infringement was willful; the Court recommends
`against finding willfulness. Compare IO Group v. Purser, C-04-2823 SBA and IO Group v. Carlin,
`C-03-3344 CW, with Adkins, 2005 WL 1492381. The Court does not credit any allegations in the
`complaint regarding willfulness because those allegations go to damages. See, e.g., IO Group v.
`Ward, C-03-5285 JSW (“IO Group’s allegations of willfulness bear directly on the question of
`damages; the assertion here that Defendant acted willfully is insufficient to justify enhanced
`damages in this instance.”). However, Plaintiff provided evidence that Defendants display works of
`numerous other producers without licensing or otherwise obtaining permission for such use. See
`Webb Decl. ¶ 12. Plaintiff argues that willfulness is shown because Defendants continued to
`infringe in February 2005 even after the lawsuit was filed, and because Defendants would not
`negotiate a settlement. See Sperlein Decl. ¶ 9. Plaintiff also points to Defendants’ failure to respond
`to this lawsuit as evidence of willfulness. Also, Defendants cancelled Plaintiff’s website
`membership without notice which thwarted Plaintiff’s efforts to look for infringing material.
`Plaintiff also contends that the sheer number of instances of infringement demonstrates that this was
`not accidental copying.
`The Court is not convinced that the unwillingness to settle and the failure to participate in
`this lawsuit constitute willfulness. By contrast, re-posting infringing material on a website even
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`Case4:04-cv-04367-CW Document48 Filed09/01/05 Page6 of 7
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`after receiving a cease-and-desist letter and a lawsuit and after initially deleting the photographs is
`classic willful conduct. See Perfect 10 v. Talisman, 2000 U.S. Dist. LEXIS 4564 at 5 (C.D. Cal.
`Mar. 27, 2000) (holding that when a defendant “ knew or should have known that . . . photographs
`belonged to someone else at the time that it posted them on its website [the defendant’s]
`infringement . . . was willful.”). In this case, however, there is no evidence that Defendants would
`have known that the re-posted photographs belonged to Plaintiff; Plaintiff itself states that it has
`discovered “well over one hundred websites illegally publishing its copyright protected works.”
`Webb Decl. ¶ 14. Defendants may have obtained Plaintiff’s copyrighted material from another
`source with no reason to believe the material was Plaintiff’s. See IO Group v. Bench, C-04-3116
`CRB (JCS) (“In other words, Defendant could have obtained the photograph at issue from one of the
`many web sites that has pirated Plaintiff’s images and further, could reasonably have believed that
`the photograph was not protected by copyright.”).
`Because the Court recommends against finding willfulness, Plaintiff’s motion for default
`judgment should be granted for copyright infringement in the amount of $783,000 ($1,000.00 x 783
`works).
`California Civil Code section 3344(a)
`2.
`For violation of California Civil Code section 3344(a), “the person who violated the section
`shall be liable to the injured party or parties in an amount equal to the greater of seven hundred fifty
`dollars or the actual damages suffered by him or her as a result of the unauthorized use, and any
`profits from the unauthorized use that are attributable to the use and are not taken into account in
`computing the actual damages.” Cal. Civ. Code § 3344(a). Plaintiff seeks an award of the minimum
`amount -- $750.00 per work. This is an appropriate damage award given the language of the statute.
`Remedies under this section are cumulative. See Cal. Civil Code § 3344(g).
`Therefore, the Court recommends granting Plaintiff’s motion for default judgment for
`violation of California Civil Code section 3344(a) in the amount of $587,250.00 ($750.00 x 783
`works).
`Conclusion
`The Court recommends granting Plaintiff’s motion for default judgment in the total amount
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`of $1,370,250.00. Any party may serve and file specific written objections to this recommendation
`within ten (10) business days after being served with a copy. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P.
`72(b); Civil Local Rule 72-3 . Failure to file objections within the specified time may waive the
`right to appeal the District Court’s order.
`IT IS SO ORDERED.
`Dated: September 1, 2005
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`ELIZABETH D. LAPORTE
`United States Magistrate Judge
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