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`FILED'OOfl.G 1413:51USllC{RP
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`UNITED STATES DISTRICT COURT
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`DISTRICT OF OREGON
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`PRECISION AUTOMATION, INC., a
`Washington Corporation, TIGERSTOP
`LLC, an Oregon Corporation,
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`Plaintiffs,
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`v.
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`TECHNICAL SERVICES, INC., an Iowa
`Corporation, and DAVID KREVANKO, an
`individual,
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`Defendants.
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`ACOSTA, Magistrate Judge:
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`Civ. No. 07-707-AC
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`FINDINGS AND
`RECOMMENDATION
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`Defendants Technical Services, Inc. and David Krevanko (collectively "Defendants"), filed
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`1 - FINDINGS AND RECOMMENDATION
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`{KPR}
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`
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`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 2 of 9 Page ID#: 2623
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`a Motion to Dismiss Portions ofPlaintiffs' Second Amended Complaint, on June 2, 2008. Plaintiffs
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`Precision Automation, Inc. and TigerStop LLC (collectively "Plaintiffs") oppose the motion.
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`Defendants' motion should be granted in part and denied in part.
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`Introduction
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`Defendants move to dismiss portions ofPlaintiffs, Second Amended Complaint (hereinafter
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`"Complaint") on the following grounds:
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`(1) the court lacks subject matter jurisdiction over
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`Plaintiffs' unregistered copyrights; and (2) Plaintiffs' claim for willful copyright infringementfails
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`to state a claim upon which relief can be granted. The court will address each of Defendants'
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`arguments in turn.
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`.L.
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`Subject Matter Jurisdiction
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`Discussion
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`In their motion, Defendants argue that the court lacks subject matter jurisdiction over
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`Plaintiffs' asserted copyrights, to the extent that they are not yet registered with the United States
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`Copyright Office. The Copyright Act ("the Act") states:
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`"no action for infringement of the
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`copyright in any United States work shall be instituted until registration ofthe copyright claim has
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`been made in accordance with this title." 17 U.S.c. 411(a) (2008). In other words, until a work is
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`registered, federal courts lack subject matter jurisdiction over claims of copyright infringement.
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`Courts differ in their interpretation of what constitutes "registration" for purposes of
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`conferring subject matter jurisdiction. "Specifically, does registration occur when the Register of
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`Copyrights issues a certificate ofregistration or does it occur when the registration is pending after
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`the applicant has initiated the process by depositing a copy ofthe work, along with an application
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`and filing fee, with the Copyright Office?" Just Water Heaters Inc. v. Affordable Water Heaters,
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`2 - FINDINGS AND RECOMMENDATION
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`{KPR}
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`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 3 of 9 Page ID#: 2624
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`2006 WL 449136, *2 (N.D. Cal. Feb. 23, 2006). When Defendants filed this motion, only one of
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`Plaintiffs' two asserted copyrights had been registered, but Plaintiffs have since demonstrated that
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`both images are registered.
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`(Kolitch Declaration, Exhibit H.) However, the effective date of
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`Plaintiffs' copyright registrations is still relevant to this motion, because Defendants argue that
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`Plaintiffs' dilatory conduct entitles them to costs and attorney fees. Thus, the point at which
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`Plaintiffs' copyrights were effectively registered bears on this issue.
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`The Ninth Circuit has not yet decided this issue and district courts in this circuit do not agree.
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`Some district courts have concluded that conferringjurisdiction on claims with pending registrations
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`is inappropriate. One court "reasoned that because Section 41 O(a) ... 'indicates that the Copyright
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`Office, not the applicant, registers a claim, and that examination is a prerequisite to registration,' the
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`Section 'cuts against plaintiffs' position of automatic registration. ", Just Water Heaters Inc., 2006
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`WL 449136 at *3 (citing Ryan v. Carl Corporation, 1998 WL 320817 at *2 (N.D. Cal. June 15,
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`1998)). According to another court, this approach "could support an infringement action prior to
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`receiving a certificate or denial thereofand without satisfying the condition that Congress included
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`for bringing actions upon rejection, that is, to give notice to the Copyright Office." Id. (citing Brush
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`Creek Media, Inc. v. Boujaklian, 2002 WL 1906620 at *4 (N.D. Cal. Aug. 19,2002)). Still another
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`court stated that it "[could not] accept the idea that an applicant can confer a copyright on his work
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`. . . merely by depositing materials and a fee with the Copyright Office. Such a notion goes against
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`the language of the [Copyright] Act, which requires registration or refusal of registration by the
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`Register of Copyrights as a prerequisite to filing suit." Id.
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`The Act includes an important exception to its jurisdictional prerequisite of registration:
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`"where the deposit, application, and fee required for registration have been delivered to the
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`3 - FINDINGS AND RECOMMENDATION
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`{KPR}
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`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 4 of 9 Page ID#: 2625
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`Copyright Office in proper fonn and registration has been refused, the applicant is entitled to
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`institute an action for infringement ifnotice thereof, with a copy of the complaint, is served on the
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`Register ofCopyrights." 17U.S.C. §411(a). As Nimmer writes: ''by virtue ofthat language, aparty
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`who seeks to register may proceed to litigate the claim, regardless ofwhether the Copyright Office
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`ultimately issues the certificate, or by contrast denies it." 2 Nimmer on Copyright § 7.16[B][I]
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`(2008). Therefore, it follows that "[o]nce the Copyright Office receives Plaintiffs application, he
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`can bring a claim for copyright infringement. The receipt of Plaintiffs application satisfies
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`§ 411(a)'s jurisdictional requirement, whether or not the application is granted or denied, and
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`whether or not the application precedes or follows the alleged infringement." Dielsi v. Palk, 916 F.
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`Supp. 985, 994 n.6 (C.D. Cal. 1996) (citing NIMMER ON COPYRIGHT § 7.16[B](1) n.39) (emphasis
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`in original). See also In reNapster, 191 F. Supp. 2d 1087,1101 (N.D. Cal. 2002) (citing § 410(d)
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`and concluding that "works with pending registrations will be given the benefit ofthe presumption
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`of ownership.").
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`This court is persuaded by the latter reasoning. The plain language of the Act states that
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`jurisdiction may lie regardless of whether the application for registration is approved or denied by
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`the Copyright Office. Therefore, regardless of the ultimate outcome, a pending application for
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`registration meets the jurisdictional prerequisite ofthe Act and the court will have jurisdiction over
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`an action relating to the work, whether it is ultimately registered or unregistered. For this reason,
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`the court should assume jurisdiction over Plaintiffs' copyright claims with respect to both allegedly
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`infringed photographs. l
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`1 Because the court finds jurisdiction based on the filing of the application itself, it need
`not reach the question of whether registration of a single claim can confer jurisdiction on
`additional unregistered claims. And, because the jurisdictional requirement is by submitting the
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`4 - FINDINGS AND RECOMMENDATION
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`{KPR}
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`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 5 of 9 Page ID#: 2626
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`2.
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`Failure to State a Claim - Willful Infringement
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`When Plaintiffs amended their complaint, for the second time, on May 15, 2008, they added
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`two separately stated claims:
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`copyright
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`infringement and willful copyright
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`infringement.
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`(Complaint 11, ~~ 46-47.) Under the heading "COPYRIGHT INFRINGEMENT," Plaintiffs allege
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`that Defendants violated Plaintiff "TigerStop's exclusive rights under 17 U.S.c. § 106" and thus
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`committed "copyright infringement under 17 U.S.C. §§ 501 et seq." ld. at ~ 46. Plaintiffs also
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`alleged, under the heading "WILLFUL COPYRIGHT INFRINGEMENT," that Defendants' "acts
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`of copyright infringement were committed both with knowledge that their conduct constituted
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`copyright infringement and for purposes ofcommercial advantage or private financial gain. Thus,
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`defendants' copyright infringement was willful pursuant to 17 U.S.c. §§ 501 et seq." ld. at ~ 47.
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`Plaintiffs state their alleged damages for Defendants' alleged copyright infringement in the
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`section titled "PRAYER FOR RELIEF." ld. at 13-14, ~~ 14-15. Specifically, Plaintiffs seek
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`"preliminary and permanent injunctions restraining and enjoining" Defendants from infringement
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`of Plaintiffs copyrights.
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`ld. at ~ 14. In addition, Plaintiffs seek compensation for the copyright
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`infringement, "including profits lost by plaintiffs as a result ofdefendants' copyright infringement,
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`and any profits by TSI resulting from that infringement pursuant to 17 U.S.C. § 504." !d. at ~ 15.
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`Notably, Plaintiffs' prayer for relief does not include a claim for attorney fees arising from
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`Defendants' copyright infringement, pursuant to 17 U.S.C. § 505.
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`Defendants argue that Plaintiffs' allegation of''willful copyright infringement" fails to state
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`a claim upon which relief can be granted, in violation of the Federal Rule of Civil Procedure
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`copyright application, the court need not consider whether Plaintiffs engaged in dilatory conduct
`in securing actual registration ofthe photographs at issue.
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`5 - FINDINGS AND RECOMMENDATION
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`{KPR}
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`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 6 of 9 Page ID#: 2627
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`12(b)(6). FED. R. Crv. P. 12(b)(6) (2008). Specifically, Defendants contend that a claim ofwillful
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`infringement is only relevant where the claim gives rise to statutory damages. For this proposition,
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`Defendants point out that the section ofthe Act devoted to remedies mentions willful infringement
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`only as a prerequisite for increased statutory damages. See 17 U.S.C. § 504(c)(2) ("hI a case where
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`the copyright owner sustains the burden of proving, and the court finds, that infringement was
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`committed willfully, the court in its discretion may increase the award ofstatutory damages to a sum
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`of not more than $150,000."). Because statutory damages are available only when registration is
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`made within three months ofpublication, Plaintiffs are not entitled to them. See 17 U.S.C. § 412(2)
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`(2008) ("no award of statutory damages or of attorney's fees .
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`.
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`. shall be made for .
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`.
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`. any
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`infringement ofcopyright commenced after first publication ofthe work and before the effective date
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`ofits registration, unless such registration is made within three months after the first publication of
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`the work."). Therefore, Defendants reason, ifPlaintiffs cannot claim statutory damages, Plaintiffs
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`cannot state a claim for willful infringement as a matter oflaw.
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`Plaintiffs implicitly agree that, under the Copyright Act, they are not entitled to statutory
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`damages for Defendants' alleged copyright infringement.
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`See Plaintiffs' Response 6 ("The
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`Copyright Act does not preclude a fmding ofwillfulness when statutory damages are unavailable.'').
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`However, Plaintiffs argue that a finding of willful infringement is relevant not only to statutory
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`damages, but also to the issue of attorney fees and as an exception to the defense of laches. 2
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`2 Regarding the willfulness exception to the defense oflaches, the Ninth Circuit has
`recognized this exception and, in doing so, extended willfulness beyond its application to
`statutory damages. See Danjaq LLC v. Sony Corp., 263 F.3d 942,957 (9th Cir. 2001) ("Thus,
`for purposes of the willfulness exception to laches, just as for the willfulness augmentation of
`statutory copyright damages, the teffil willful refers to conduct that occurs with knowledge that
`the defendant's conduct constitutes copyright infringement.") (internal quotation marks and
`citation omitted). Because, at oral argument, Defendants stipulated that they would not assert the
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`6 - FINDINGS AND RECOMMENDATION
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`{KPR}
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`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 7 of 9 Page ID#: 2628
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`Therefore, Plaintiffs argue, an allegation ofwillful infringement is relevant in this case and may be
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`properly pleaded.
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`The payment ofattorney fees in a copyright infringement action is authorized by § 505: "In
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`any civil action under this title, the court in its discretion may allow the recovery of full costs by or
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`against any party other than the United States or an officer thereof Except as otherwise provided
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`by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of
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`the costs." 17 U.S.c. § 505 (2008). This remedy provision is distinct from the remedy provision
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`that governs statutory damages. Plaintiffs may, in this case, claim costs and attorney fees arising out
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`of Defendants alleged copyright infringement.
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`Like the increased remedy for statutory damages, willfulness is relevant to a court's
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`determination whether to award attorney fees to the prevailing party.
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`In Dunn & Fenley, LLC v.
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`Allen, 2007 U.S. Dist. LEXIS 75292 (D. Or. Oct. 9, 2007), Judge Jelderks wrote: "[t]hough a
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`finding that infringement was willful does not in itself compel an award of attorney fees, it is an
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`important factor favoring an award ofthose fees." (quoting Historical Research v. Cabral, 80 F.3d
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`377, 379 (9th Cir. 1996) (internal quotation marks omitted).) The Ninth Circuit has implicitly
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`acknowledged that willfulness bears on an award ofattorney fees: "In the case at bar, the plaintiffs
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`prevailed by summaryjudgment on the issue ofliability. The plaintiffs, however, failed to prove the
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`main issue at trial which was whether the defendants acted willfully. Thus, the district court did not
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`abuse its discretion when it ordered that both sides must bear their own attorneys' fees." Grateful
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`DeadProductions v. Auditory Odyssey, 1996 U.s. App. LEXIS 1626, *7-8 (9th Cir. 1996) (wherein
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`defense of laches against Plaintiffs' claim for copyright infringement, the court will confine its
`reasoning to Plaintiffs' claim for attorney fees.
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`7 - FINDINGS AND RECOMMENDATION
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`{KPR}
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`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 8 of 9 Page ID#: 2629
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`plaintiffs, the prevailing party, were not awarded attorney fees under § 505). Therefore, regardless
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`ofwhether statutory damages are available to Plaintiffs, willful infringement may bear on Plaintiffs'
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`entitlement to attorney fees and is therefore relevant to the present case.
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`Even so, the relevance of willfulness to attorney fees does not itselfcreate a separate cause
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`of action for willful copyright infringement. Chapter 5 of the Copyright Act establishes statutory
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`provisions for "Copyright Infringement and Remedies." 17 U.S.C. § 501 et seq. Section 501 creates
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`a cause ofaction for "Infringement of copyright." To state a claim for copyright infringement, "a
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`plaintiff must show:
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`(l) ownership of a valid copyright and (2) copying by the defendant of
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`protectable elements ofthe work." CDN Inc. v. Kapes, 197 F.3d 1256, 1258 (9th Cir. 1999). No
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`finding related to intent, including willfulness, is needed to establish this violation. Only upon
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`establishing infringement will the court consider willfulness, for purposes ofestablishing statutory
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`damages, attorney fees, or an exception to the defense of laches. Therefore, "willful copyright
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`infringement" may not be separately pleaded because it does not constitute a separate and
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`independent claim for relief. Rather, willfulness is properly introduced as evidence bearing on the
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`type of damages for infringement, whether attorney fees will be awarded, and whether the defense
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`of laches is available. Thus, Defendants' argument that willful copyright infringement does not
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`constitute a separate claim, but "is onlymentioned as a way to alter the remedy for infringement, not
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`as a standalone claim" (Defendants' Reply 4 n.1) is well taken, and their separately pleaded claim
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`for willful copyright infringement should be dismissed.
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`In its review ofthe pleadings, the court noted that Plaintiffs' prayer for reliefdoes not include
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`a request for attorney fees arising from Defendants' alleged copyright infringement. Therefore,
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`Plaintiffs should be given leave to amend their complaint to (1) properly characterize the allegation
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`8 - FINDINGS AND RECOMMENDATION
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`{KPR}
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`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 9 of 9 Page ID#: 2630
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`ofwillful copyright infringement; and (2) include a request for attorney fees in the prayer for relief,
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`pursuant to 17 U.S.C. § 505.
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`Conclusion
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`For the reasons stated, Defendants' Motion to Dismiss Portions of Plaintiffs' Second
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`Amended Complaint (#122) should be granted in part and denied in part. The court also
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`recommends that Plaintiffs be granted leave to amend their pleading as outlined above.
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`Scheduling Order
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`The above Findings and Recommendation will be referred to a United States District Judge
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`for review. Objections, if any, are due no later than August 28, 2008. Ifno objections are filed,
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`review of the Findings and Recommendation will go under advisement on that date.
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`Ifobjections are filed, any party may file a response within fourteen days after the date the
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`objections are filed. Review ofthe Findings and RecoI)lIIlendation will go under advisement when
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`the response is due or filed, whichever date is earlier.
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`DATED this 14th day of August, 2008.,';,;a
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`JOHNV. ACOSTA
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`...ynited States Magistrate Judge
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`9 - FINDINGS AND RECOMMENDATION
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`{KPR}