Case4:09-cv-01085-PJH Document32 Filed12/23/09 Page1 of 9
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
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`ADOBE SYSTEMS, INC.,
`Plaintiff,
`
`v.
`GARY TILLEY, ET AL.,
`Defendants.
`_____________________________________/
`
`No. C-09-01085 PJH (JCS)
`
`REPORT AND RECOMMENDATION RE
`PLAINTIFF’S MOTION FOR ENTRY OF
`DEFAULT JUDGMENT [Docket No. 23]
`
`I.
`
`INTRODUCTION
`In this copyright and trademark infringement action, Plaintiff Adobe Systems, Inc.
`(“Adobe”) brings a Motion for Entry of Default Judgment (“Motion”) in which it seeks default
`judgment, an award of statutory damages, post-judgment interest and a permanent injunction against
`Defendants Gary Tilley and Denise Black. A hearing on the Motion was held on Friday, December
`4, 2009 at 1:30 p.m. In addition, Adobe submitted supplemental materials on December 10, 2009.
`For the reasons stated below, it is recommended that the Motion be GRANTED.
`II.
`BACKGROUND
`Adobe is a corporation organized under the laws of the state of Delaware with its principal
`place of business in San Jose, California. First Amended Complaint (“FAC”), ¶ 7. “Adobe is a
`global leader in developing and distributing innovative computer software.” FAC, ¶ 2. It owns the
`copyrights to titles that include Acrobat, Create Suite, Dreamweaver, Flash, Illustrator, Pagemaker,
`Photoshop and Shockwave. FAC, ¶ 8 & Ex. A (non-exhaustive list of Adobe copyright
`registrations). Adobe’s products bear its trademarks, which include Adobe, Acrobat, Creative Suite,
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`Dreamweaver, Flash Illustrator, Macromedia, Pagemaker, Photoshop, Postscrip, Reader and
`Shockwave. FAC, ¶ 9.
`Adobe filed its initial complaint in this action on March 11, 2009, naming Gary Tilley and
`Does 1-10 as defendants. On May 27, 2009, Adobe filed an amended complaint to add Denise
`Black as a defendant. In the amended complaint, Adobe alleges that Gary Tilley is an individual
`who resides in Ararat, North Carolina and does business on Amazon.com under the seller name
`“dsupply.” FAC, ¶ 12. Adobe alleges that Denise Black is an individual who resides in Walnut
`Cove, North Carolina and also does business on Amazon.com under the seller name “dsupply.”
`FAC, ¶ 13. Adobe alleges that Defendants sell pirated versions of Adobe’s products, including at
`least Adobe Photoshop CS3 Extended, on Amazon.com, and use images that are confusingly similar
`or identical to Adobe’s trademarks. FAC, ¶¶ 15-17. Allegedly, Defendants have also obtained a
`substantial feedback rating through Amazon.com’s feedback system, which further confuses
`consumers and aids in even wider distribution of the unauthorized copies of Adobe’s software.
`FAC, ¶ 18. Based on these allegations, Adobe asserts two claims against Defendants, for Copyright
`Infringement (Claim One) and Trademark Infringement (Claim Two). Adobe seeks actual damages
`and a permanent injunction in the First Amended Complaint, as well as an award of attorneys’ fees.
`The original complaint was served on Defendant Gary Tilley on April 2, 2009. Declaration
`of Annie S. Wang (“Wang Decl.”), ¶ 2. The First Amended Complaint was served on both
`defendants on May 29, 2009. Id. Although Defendant Denise Black exchanged emails with
`Plaintiff’s counsel, neither defendant filed a responsive pleading or otherwise appeared in this
`action. Id., ¶ 4. The Court entered default under Fed.R. Civ.P. 55(a) against both defendants on
`September 2, 2009. Adobe now brings a motion for entry of default judgment.
`In the Motion, Adobe seeks statutory damages under Section 1117(c) of the Lanham Act,
`requesting a total of $250,000.00 for willful counterfeiting of five trademarks, that is, $50,000.00 for
`each infringed trademarks, as well as post-judgment interest under 28 U.S.C. § 1961(a). Adobe also
`seeks entry of a permanent injunction prohibiting Defendants from infringing Adobe’s copyrights
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`and trademarks.1 In support of the Motion, Adobe provides a declaration by the owner and principal
`of Effective Piracy Enforcement documenting a purchase by one of its employees, via Amazon.com,
`of a product called “Adobe Photoshop CS3 Extended [Old Version] (DVD-ROM).” See Declaration
`of Christopher D. Johnson (“Johnson Decl.”), ¶¶ 3-6. According to Mr. Johnson, the order was
`placed on October 21, 2008. Id., ¶ 3; see also Ex. A (Amazon.com web page showing product and
`reflecting 3 lifetime ratings for the seller dsupply). On October 27, 2008, the employee received a
`package showing the return address as “Gary Tilley, PO Box 46, Ararat NC 27007-0046.” Id., ¶ 5 &
`Ex. C. The package contained one disc labeled “Adobe Photoshop CS3” and another labeled
`“Adobe Creative Suite 3.” Id., ¶ 6 & Ex. D.
`In its supplemental declaration, filed after the hearing, Plaintiff provides evidence that
`Denise Black was listed as the owner of the Amazon.com seller “D Supply.” See Supplemental
`Declaration and Exhibits in Support of Motion for Default Judgment (“Supp. Decl.”).
`III.
`ANALYSIS
`A.
`Legal Standard Regarding Entry of Default Judgment
`Pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure, the court may enter a
`default judgment where the clerk, under Rule 55(a), has previously entered the party’s default based
`upon failure to plead or otherwise defend the action. Fed. R. Civ. P. 55(b). A defendant’s default,
`however, does not automatically entitle the plaintiff to a court-ordered default judgment. Draper v.
`Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986). The district court has discretion in its decision to
`grant or deny relief upon an application for default judgment. Aldabe v. Aldabe, 616 F.2d 1089,
`1092 (9th Cir. 1980); Lau Ah Yew v. Dulles, 236 F.2d 415, 416 (9th Cir. 1956) (affirming district
`court’s denial of default judgment). The court may consider the following factors in deciding
`whether to enter a default judgment:
`(1) the possibility of prejudice to the plaintiff, (2) the merits of
`plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4)
`
`1Although the proposed order submitted with Plaintiff’s default judgment motion also asks that
`the Court include a provision requiring that Defendants turn over all infringing products in their
`possession for destruction, Plaintiff stated at oral argument that it had no evidence as to whether
`Defendants have any such products and stipulated that this provision could be omitted from the
`injunction.
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`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.
`
`Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).
`In considering the sufficiency of the complaint and the merits of the plaintiff’s substantive
`claims, facts alleged in the complaint not relating to damages are deemed to be true upon default.
`Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977); Fed. R. Civ. P. 8(d). On the other
`hand, a defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law.
`Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). As a result,
`where the allegations in a complaint are not “well-pleaded,” liability is not established by virtue of
`the defendant’s default and default judgment should not be entered. Id.
`Damages or other forms of relief awarded are constrained by the rule that judgment by
`default “must not be different in kind from, or exceed in amount, what is demanded in the
`[complaint].” Fed. R. Civ. P. 54(c).
`Eitel Factors
`B.
`1.
`Excusable Neglect
`There is no evidence in the record that Defendants’ failure to appear was a result of
`excusable neglect. Rather, Defendants failed to appear after the complaint in this action was
`personally served upon them, indicating that their failure to appear was willful. This factor therefore
`favors entry of default judgment.
`2.
`Possibility of Prejudice to Plaintiff
`To the extent that Defendants have failed to appear in this action, Adobe will be left without
`a remedy if default judgment is not entered in its favor. Therefore, this factor favors entry of default
`judgment.
`
`Allegations and Substantive Merits of Claims
`3.
`Because the allegations of the complaint are deemed true by virtue of Defendants’ default,
`the Court considers the merits and the allegations of the complaint together.
`a.
`Copyright Infringement
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`A prima facie case of direct copyright infringement requires that a plaintiff establish: (1)
`ownership of the allegedly infringed material; and (2) that the alleged infringer violated at least one
`exclusive right granted to the copyright holders under 17 U.S.C. § 106. See Marder v. Lopez, 450
`F.3d 445, 453 (9th Cir. 2006); A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir.
`2001). Section 106, in turn, gives copyright owners the exclusive right to authorize the
`reproduction of copyrighted work. 17 U.S.C. § 106(1). Here, Adobe has alleged that it owns the
`copyright to its software products, including the product that Defendants have allegedly copied
`without authorization, Adobe Photoshop CS3 Extended. Adobe also included with its complaint a
`list of its copyright registrations that includes the same product. See FAC, Ex. A at 3. Therefore,
`Adobe has satisfied both elements of a copyright claim.
`b.
`Trademark Infringement
`To prevail on a trademark infringement claim, a holder of a registered service mark must
`show that another person is using: (1) any reproduction, counterfeit, copy or colorable imitation of a
`mark; (2) without the registrant’s consent; (3) in commerce; (4) in connection with the sale, offering
`for sale, distribution or advertising of any goods; (5) where such use is likely to cause confusion, or
`to cause a mistake or to deceive. 15 U.S.C. § 1114(1)(a); Century 21 Real Estate Corp. v. Sanlin,
`846 F.2d 1175, 1178 (9th Cir. 1988). Neither intent nor actual confusion are necessary to
`establishing a likelihood of confusion. Id.
`Here, Adobe has alleged that it is the owner of a number of trademarks that are registered with
`the United States Patent and Trademark Office (“PTO”), that Defendants used the marks to sell
`pirated copies of Adobe’s software over the internet and that as a result of their activities, consumers
`were duped into believing they had purchase authentic Adobe software. In addition, Adobe presented
`the trademark registrations for a number of its marks in support of the Motion. See Declaration of
`Chris Stickle (“Stickle Decl.”), ¶ 3 & Ex. E. These allegations and evidence are sufficient to
`establish that Defendants infringed upon plaintiff’s trademark. See Adobe Systems Incorporated v.
`Marmoletos, 2009 WL 1034143 (N.D. Cal. April 16, 2009) (J. Alsup)(holding that where owner of
`trademarks alleged that defendants had distributed counterfeited versions of its software products on
`the Internet, claims were sufficient to establish liability on default judgment motion); Adobe Systems,
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`Inc. v. Brooks, 2009 WL 593343 (N.D. Cal. Mar. 5 2009) (J. Whyte) (same); Adobe Systems, Inc. v.
`Taveira, 2009 WL 506861 (N.D. Cal. Feb. 27, 2009) (J. Hamilton) (same); Microsoft Corp. v.
`Ricketts, 2007 WL 1520965 (N.D.Cal. May 24, 2007) (J. Alsup) (same). Finally, at oral argument,
`Plaintiff’s counsel identified the five marks it alleges were infringed by the sale of the product that
`was sold to Plaintiff, namely, A, A Adobe, Photoshop, Adobe Photoshop and Creative Suite, all of
`which can be seen in Exhibit D to Plaintiff’s default judgment motion.
`4.
`Conclusion
`Based on consideration of the factors discussed above, it is recommended that default
`judgment be entered against Defendants on both the copyright and trademark infringement claims.
`C.
`Statutory Damages
`Under the Lanham Act, a plaintiff may elect to recover an award of statutory damages for
`actions involving the use of a counterfeit mark at any time before final judgment is entered. 15
`U.S.C. § 1117(c). In particular, section 1117(c) provides for the following statutory damages;
`(1) not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or
`services sold, offered for sale, or distributed, as the court considers just; or
`(2) if the court finds that the use of the counterfeit mark was willful, not more than $2,000,000
`per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the
`court considers just.
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`15 U.S.C. § 1117(c). Willful infringement means “with knowledge that the defendant's conduct
`constitutes . . . infringement.” Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1335 n. 2 (9th
`Cir.1990) (addressing willful infringement under Copyright Act); see also Philip Morris USA, Inc. v.
`Castworld Prods., Inc., 219 F.R.D. 494, 500 (C.D. Cal. 2003) (holding that “courts faced with
`determining statutory damages under the Trademark Act [may] analogize[] to the body of case law
`interpreting a similar provision in the Copyright Act). Willfulness can also be inferred from a
`defendant's failure to defend. Philip Morris USA, Inc.Prods., Inc., 219 F.R.D. at 500. The Court is
`given broad discretion to determine the amount of statutory damages to be awarded. Peer Intern.
`Corp., 909 F.2d. at 1336 (9th Cir. 1990).
`Here, Adobe asserts that Defendants’ conduct was willful and therefore, its request for
`$250,000 in statutory damages – which is significantly less than the maximum award allowable in
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`cases of willful counterfeiting – is reasonable. In determining the appropriate amount of statutory
`damages for trademark infringement, the Court finds instructive decisions of other judges in this
`district who have addressed similar requests. In particular, courts in this district have considered
`whether the amount of damages requested bears or “plausible relationship” to Plaintiff’s actual
`damages. See Rickets, 2007 WL 1520965 at * 4 (citing Chanel, Inc. v. Doan, 2007 WL 781976, *5
`(N.D.Cal. Mar.13, 2007) (Walker, J.) (granting plaintiff's request for statutory damages on default
`judgment where plaintiff's request bore a plausible relationship to the defendant's profits from
`infringement)).
`These courts have noted that while the plaintiff in a trademark or copyright infringement case
`is entitled to damages that will serve as a deterrent, it is not entitled a windfall. Id. Thus, in Rickets,
`the Court held that where the plaintiff had requested over three million dollars in statutory damages
`but had presented evidence that only three units of counterfeit software had been sold by the
`defendants, a more appropriate award of statutory damages was $1,000 for each trademark infringed
`and $1,500 for each copyright infringed. Similarly, in Brooks, where Adobe requested a total of
`$250,000 for five infringed trademarks, that is, $50,000 per infringed trademark (as requested in this
`case), the court reduced the amount of statutory damages to $10,000 per infringed trademark on the
`basis that Adobe had presented evidence of only a single sale of the infringing software. 2009 WL
`593343 at * 4. In contrast, in Taveira, the court awarded $50,000 per trademark infringement where
`the complaint alleged that the defendants had made “thousands” of sales of the counterfeit software
`and the plaintiff also presented actual evidence that defendants had sold many copies of the
`counterfeit software and planned to continue selling counterfeit software for another six months.
`2009 WL 506861 at * 6.
`Here, the evidence and allegations, as well as Defendants’ failure to appear in this action, are
`sufficient to establish willfulness. On the other hand, in this case, as in Brooks, there is evidence of
`only one sale of counterfeit Adobe software. Even if the feedback rating showing three lifelong
`ratings were sufficient to support an inference that Defendants had sold three units of infringing
`software, the Court concludes that an award of $50,000 per infringement would be a windfall.
`Rather, it is recommended that Adobe be awarded $10,000 per trademark infringement, that is
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`$50,000 in statutory damages.
`D.
`Permanent Injunction
`Under 17 U.S.C. 502(a), a court may enter an injunction against a defendant to prevent future
`copyright infringement. Likewise, injunctive relief is available to prevent future trademark
`infringement under the Lanham Act. 15 U.S.C. § 1116. In light of Defendants’ past infringement
`and their failure to appear in this action, injunctive relief is warranted. Therefore, it is recommended
`that Adobe’s request for a permanent injunction be GRANTED.
`E.
`Post-Judgment Interest
`Pursuant to 28 U.S.C. § 1961(a), “[i]nterest shall be allowed on any money judgment in a civil
`case recovered in a district court.” Post-judgment interest under this section “shall be calculated from
`the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity
`Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the
`calendar week preceding. . . the date of the judgment.” Therefore, it is recommended that the Court
`GRANT Adobe’s request for post-judgment interest.
`IV.
`CONCLUSION
`It is recommended that the Court GRANT the Motion. Default judgment should be entered
`against both defendants. Adobe should be awarded statutory damages in the amount of $50,000, for
`which Defendants shall be jointly and severally liable, as well as post-judgment interest under 28
`U.S.C. § 1961. Further, a permanent injunction should be entered against Defendants as follows:
`The Defendants and their agents, servants, employees and all persons in active concert and
`participation with them who receive actual notice of the injunction are hereby restrained and
`enjoined from:
`a) Infringing Plaintiff’s Copyrights and Trademarks, either directly or contributorily,
`in any manner, including generally, but not limited to manufacturing, importing,
`distributing, advertising, selling and/or offering for sale any merchandise which
`features any of Plaintiff’s Copyrights and Trademarks, and, specifically, importing,
`manufacturing, distributing, advertising, selling and/or offering for sale the Counterfeit
`Product or any other unauthorized products which picture, reproduce, copy or use the
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`likenesses of or bear a substantial similarity to any of Plaintiff’s Copyrights and
`Trademarks;
`b) Importing, manufacturing, distributing, advertising, selling and/or offering for sale
`in connection thereto any unauthorized promotional materials, labels, packaging or
`containers which picture, reproduce, copy or use the likenesses of or bear a confusing
`similarity to any of Plaintiff’s Copyrights and Trademarks;
`c) Engaging in any conduct that tends falsely to represent that, or is likely to confuse,
`mislead or deceive purchasers, the Defendants’ customers and/or members of the
`public to believe, the actions of Defendants, the products sold by Defendants, or the
`Defendants themselves are connected with Plaintiff, are sponsored, approved or
`licensed by Plaintiff, or are affiliated with Plaintiff;
`d) Affixing, applying, annexing or using in connection with the importation,
`manufacture, distribution, advertising, sale and/or offer for sale or other use of any
`goods or services, a false description or representation, including words or other
`symbols, tending to falsely describe or represent such goods as being those of
`Plaintiff.
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`Dated: December 23, 2009
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`JOSEPH C. SPERO
`United States Magistrate Judge
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