Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 1 of 9 Page ID#: 2622
`
`FILED'OOfl.G 1413:51USllC{RP
`
`UNITED STATES DISTRICT COURT
`
`DISTRICT OF OREGON
`
`PRECISION AUTOMATION, INC., a
`Washington Corporation, TIGERSTOP
`LLC, an Oregon Corporation,
`
`Plaintiffs,
`
`v.
`
`TECHNICAL SERVICES, INC., an Iowa
`Corporation, and DAVID KREVANKO, an
`individual,
`
`Defendants.
`
`ACOSTA, Magistrate Judge:
`
`Civ. No. 07-707-AC
`
`FINDINGS AND
`RECOMMENDATION
`
`Defendants Technical Services, Inc. and David Krevanko (collectively "Defendants"), filed
`
`1 - FINDINGS AND RECOMMENDATION
`
`{KPR}
`
`

`
`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 2 of 9 Page ID#: 2623
`
`a Motion to Dismiss Portions ofPlaintiffs' Second Amended Complaint, on June 2, 2008. Plaintiffs
`
`Precision Automation, Inc. and TigerStop LLC (collectively "Plaintiffs") oppose the motion.
`
`Defendants' motion should be granted in part and denied in part.
`
`Introduction
`
`Defendants move to dismiss portions ofPlaintiffs, Second Amended Complaint (hereinafter
`
`"Complaint") on the following grounds:
`
`(1) the court lacks subject matter jurisdiction over
`
`Plaintiffs' unregistered copyrights; and (2) Plaintiffs' claim for willful copyright infringementfails
`
`to state a claim upon which relief can be granted. The court will address each of Defendants'
`
`arguments in turn.
`
`.L.
`
`Subject Matter Jurisdiction
`
`Discussion
`
`In their motion, Defendants argue that the court lacks subject matter jurisdiction over
`
`Plaintiffs' asserted copyrights, to the extent that they are not yet registered with the United States
`
`Copyright Office. The Copyright Act ("the Act") states:
`
`"no action for infringement of the
`
`copyright in any United States work shall be instituted until registration ofthe copyright claim has
`
`been made in accordance with this title." 17 U.S.c. 411(a) (2008). In other words, until a work is
`
`registered, federal courts lack subject matter jurisdiction over claims of copyright infringement.
`
`Courts differ in their interpretation of what constitutes "registration" for purposes of
`
`conferring subject matter jurisdiction. "Specifically, does registration occur when the Register of
`
`Copyrights issues a certificate ofregistration or does it occur when the registration is pending after
`
`the applicant has initiated the process by depositing a copy ofthe work, along with an application
`
`and filing fee, with the Copyright Office?" Just Water Heaters Inc. v. Affordable Water Heaters,
`
`2 - FINDINGS AND RECOMMENDATION
`
`{KPR}
`
`

`
`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 3 of 9 Page ID#: 2624
`
`2006 WL 449136, *2 (N.D. Cal. Feb. 23, 2006). When Defendants filed this motion, only one of
`
`Plaintiffs' two asserted copyrights had been registered, but Plaintiffs have since demonstrated that
`
`both images are registered.
`
`(Kolitch Declaration, Exhibit H.) However, the effective date of
`
`Plaintiffs' copyright registrations is still relevant to this motion, because Defendants argue that
`
`Plaintiffs' dilatory conduct entitles them to costs and attorney fees. Thus, the point at which
`
`Plaintiffs' copyrights were effectively registered bears on this issue.
`
`The Ninth Circuit has not yet decided this issue and district courts in this circuit do not agree.
`
`Some district courts have concluded that conferringjurisdiction on claims with pending registrations
`
`is inappropriate. One court "reasoned that because Section 41 O(a) ... 'indicates that the Copyright
`
`Office, not the applicant, registers a claim, and that examination is a prerequisite to registration,' the
`
`Section 'cuts against plaintiffs' position of automatic registration. ", Just Water Heaters Inc., 2006
`
`WL 449136 at *3 (citing Ryan v. Carl Corporation, 1998 WL 320817 at *2 (N.D. Cal. June 15,
`
`1998)). According to another court, this approach "could support an infringement action prior to
`
`receiving a certificate or denial thereofand without satisfying the condition that Congress included
`
`for bringing actions upon rejection, that is, to give notice to the Copyright Office." Id. (citing Brush
`
`Creek Media, Inc. v. Boujaklian, 2002 WL 1906620 at *4 (N.D. Cal. Aug. 19,2002)). Still another
`
`court stated that it "[could not] accept the idea that an applicant can confer a copyright on his work
`
`. . . merely by depositing materials and a fee with the Copyright Office. Such a notion goes against
`
`the language of the [Copyright] Act, which requires registration or refusal of registration by the
`
`Register of Copyrights as a prerequisite to filing suit." Id.
`
`The Act includes an important exception to its jurisdictional prerequisite of registration:
`
`"where the deposit, application, and fee required for registration have been delivered to the
`
`3 - FINDINGS AND RECOMMENDATION
`
`{KPR}
`
`

`
`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 4 of 9 Page ID#: 2625
`
`Copyright Office in proper fonn and registration has been refused, the applicant is entitled to
`
`institute an action for infringement ifnotice thereof, with a copy of the complaint, is served on the
`
`Register ofCopyrights." 17U.S.C. §411(a). As Nimmer writes: ''by virtue ofthat language, aparty
`
`who seeks to register may proceed to litigate the claim, regardless ofwhether the Copyright Office
`
`ultimately issues the certificate, or by contrast denies it." 2 Nimmer on Copyright § 7.16[B][I]
`
`(2008). Therefore, it follows that "[o]nce the Copyright Office receives Plaintiffs application, he
`
`can bring a claim for copyright infringement. The receipt of Plaintiffs application satisfies
`
`§ 411(a)'s jurisdictional requirement, whether or not the application is granted or denied, and
`
`whether or not the application precedes or follows the alleged infringement." Dielsi v. Palk, 916 F.
`
`Supp. 985, 994 n.6 (C.D. Cal. 1996) (citing NIMMER ON COPYRIGHT § 7.16[B](1) n.39) (emphasis
`
`in original). See also In reNapster, 191 F. Supp. 2d 1087,1101 (N.D. Cal. 2002) (citing § 410(d)
`
`and concluding that "works with pending registrations will be given the benefit ofthe presumption
`
`of ownership.").
`
`This court is persuaded by the latter reasoning. The plain language of the Act states that
`
`jurisdiction may lie regardless of whether the application for registration is approved or denied by
`
`the Copyright Office. Therefore, regardless of the ultimate outcome, a pending application for
`
`registration meets the jurisdictional prerequisite ofthe Act and the court will have jurisdiction over
`
`an action relating to the work, whether it is ultimately registered or unregistered. For this reason,
`
`the court should assume jurisdiction over Plaintiffs' copyright claims with respect to both allegedly
`
`infringed photographs. l
`
`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
`
`4 - FINDINGS AND RECOMMENDATION
`
`{KPR}
`
`

`
`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 5 of 9 Page ID#: 2626
`
`2.
`
`Failure to State a Claim - Willful Infringement
`
`When Plaintiffs amended their complaint, for the second time, on May 15, 2008, they added
`
`two separately stated claims:
`
`copyright
`
`infringement and willful copyright
`
`infringement.
`
`(Complaint 11, ~~ 46-47.) Under the heading "COPYRIGHT INFRINGEMENT," Plaintiffs allege
`
`that Defendants violated Plaintiff "TigerStop's exclusive rights under 17 U.S.c. § 106" and thus
`
`committed "copyright infringement under 17 U.S.C. §§ 501 et seq." ld. at ~ 46. Plaintiffs also
`
`alleged, under the heading "WILLFUL COPYRIGHT INFRINGEMENT," that Defendants' "acts
`
`of copyright infringement were committed both with knowledge that their conduct constituted
`
`copyright infringement and for purposes ofcommercial advantage or private financial gain. Thus,
`
`defendants' copyright infringement was willful pursuant to 17 U.S.c. §§ 501 et seq." ld. at ~ 47.
`
`Plaintiffs state their alleged damages for Defendants' alleged copyright infringement in the
`
`section titled "PRAYER FOR RELIEF." ld. at 13-14, ~~ 14-15. Specifically, Plaintiffs seek
`
`"preliminary and permanent injunctions restraining and enjoining" Defendants from infringement
`
`of Plaintiffs copyrights.
`
`ld. at ~ 14. In addition, Plaintiffs seek compensation for the copyright
`
`infringement, "including profits lost by plaintiffs as a result ofdefendants' copyright infringement,
`
`and any profits by TSI resulting from that infringement pursuant to 17 U.S.C. § 504." !d. at ~ 15.
`
`Notably, Plaintiffs' prayer for relief does not include a claim for attorney fees arising from
`
`Defendants' copyright infringement, pursuant to 17 U.S.C. § 505.
`
`Defendants argue that Plaintiffs' allegation of''willful copyright infringement" fails to state
`
`a claim upon which relief can be granted, in violation of the Federal Rule of Civil Procedure
`
`copyright application, the court need not consider whether Plaintiffs engaged in dilatory conduct
`in securing actual registration ofthe photographs at issue.
`
`5 - FINDINGS AND RECOMMENDATION
`
`{KPR}
`
`

`
`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 6 of 9 Page ID#: 2627
`
`12(b)(6). FED. R. Crv. P. 12(b)(6) (2008). Specifically, Defendants contend that a claim ofwillful
`
`infringement is only relevant where the claim gives rise to statutory damages. For this proposition,
`
`Defendants point out that the section ofthe Act devoted to remedies mentions willful infringement
`
`only as a prerequisite for increased statutory damages. See 17 U.S.C. § 504(c)(2) ("hI 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 ofstatutory damages to a sum
`
`of not more than $150,000."). Because statutory damages are available only when registration is
`
`made within three months ofpublication, Plaintiffs are not entitled to them. See 17 U.S.C. § 412(2)
`
`(2008) ("no award of statutory damages or of attorney's fees .
`
`.
`
`. shall be made for .
`
`.
`
`. any
`
`infringement ofcopyright commenced after first publication ofthe work and before the effective date
`
`ofits registration, unless such registration is made within three months after the first publication of
`
`the work."). Therefore, Defendants reason, ifPlaintiffs cannot claim statutory damages, Plaintiffs
`
`cannot state a claim for willful infringement as a matter oflaw.
`
`Plaintiffs implicitly agree that, under the Copyright Act, they are not entitled to statutory
`
`damages for Defendants' alleged copyright infringement.
`
`See Plaintiffs' Response 6 ("The
`
`Copyright Act does not preclude a fmding ofwillfulness when statutory damages are unavailable.'').
`
`However, Plaintiffs argue that a finding of willful infringement is relevant not only to statutory
`
`damages, but also to the issue of attorney fees and as an exception to the defense of laches. 2
`
`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
`
`6 - FINDINGS AND RECOMMENDATION
`
`{KPR}
`
`

`
`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 7 of 9 Page ID#: 2628
`
`Therefore, Plaintiffs argue, an allegation ofwillful infringement is relevant in this case and may be
`
`properly pleaded.
`
`The payment ofattorney fees in a copyright infringement action is authorized by § 505: "In
`
`any civil action under this title, the court in its discretion may allow the recovery of full costs by or
`
`against any party other than the United States or an officer thereof Except as otherwise provided
`
`by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of
`
`the costs." 17 U.S.c. § 505 (2008). This remedy provision is distinct from the remedy provision
`
`that governs statutory damages. Plaintiffs may, in this case, claim costs and attorney fees arising out
`
`of Defendants alleged copyright infringement.
`
`Like the increased remedy for statutory damages, willfulness is relevant to a court's
`
`determination whether to award attorney fees to the prevailing party.
`
`In Dunn & Fenley, LLC v.
`
`Allen, 2007 U.S. Dist. LEXIS 75292 (D. Or. Oct. 9, 2007), Judge Jelderks wrote: "[t]hough a
`
`finding that infringement was willful does not in itself compel an award of attorney fees, it is an
`
`important factor favoring an award ofthose fees." (quoting Historical Research v. Cabral, 80 F.3d
`
`377, 379 (9th Cir. 1996) (internal quotation marks omitted).) The Ninth Circuit has implicitly
`
`acknowledged that willfulness bears on an award ofattorney fees: "In the case at bar, the plaintiffs
`
`prevailed by summaryjudgment on the issue ofliability. The plaintiffs, however, failed to prove the
`
`main issue at trial which was whether the defendants acted willfully. Thus, the district court did not
`
`abuse its discretion when it ordered that both sides must bear their own attorneys' fees." Grateful
`
`DeadProductions v. Auditory Odyssey, 1996 U.s. App. LEXIS 1626, *7-8 (9th Cir. 1996) (wherein
`
`defense of laches against Plaintiffs' claim for copyright infringement, the court will confine its
`reasoning to Plaintiffs' claim for attorney fees.
`
`7 - FINDINGS AND RECOMMENDATION
`
`{KPR}
`
`

`
`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 8 of 9 Page ID#: 2629
`
`plaintiffs, the prevailing party, were not awarded attorney fees under § 505). Therefore, regardless
`
`ofwhether statutory damages are available to Plaintiffs, willful infringement may bear on Plaintiffs'
`
`entitlement to attorney fees and is therefore relevant to the present case.
`
`Even so, the relevance of willfulness to attorney fees does not itselfcreate a separate cause
`
`of action for willful copyright infringement. Chapter 5 of the Copyright Act establishes statutory
`
`provisions for "Copyright Infringement and Remedies." 17 U.S.C. § 501 et seq. Section 501 creates
`
`a cause ofaction for "Infringement of copyright." To state a claim for copyright infringement, "a
`
`plaintiff must show:
`
`(l) ownership of a valid copyright and (2) copying by the defendant of
`
`protectable elements ofthe work." CDN Inc. v. Kapes, 197 F.3d 1256, 1258 (9th Cir. 1999). No
`
`finding related to intent, including willfulness, is needed to establish this violation. Only upon
`
`establishing infringement will the court consider willfulness, for purposes ofestablishing statutory
`
`damages, attorney fees, or an exception to the defense of laches. Therefore, "willful copyright
`
`infringement" may not be separately pleaded because it does not constitute a separate and
`
`independent claim for relief. Rather, willfulness is properly introduced as evidence bearing on the
`
`type of damages for infringement, whether attorney fees will be awarded, and whether the defense
`
`of laches is available. Thus, Defendants' argument that willful copyright infringement does not
`
`constitute a separate claim, but "is onlymentioned as a way to alter the remedy for infringement, not
`
`as a standalone claim" (Defendants' Reply 4 n.1) is well taken, and their separately pleaded claim
`
`for willful copyright infringement should be dismissed.
`
`In its review ofthe pleadings, the court noted that Plaintiffs' prayer for reliefdoes not include
`
`a request for attorney fees arising from Defendants' alleged copyright infringement. Therefore,
`
`Plaintiffs should be given leave to amend their complaint to (1) properly characterize the allegation
`
`8 - FINDINGS AND RECOMMENDATION
`
`{KPR}
`
`

`
`Case 3:07-cv-00707-AC Document 154 Filed 08/14/08 Page 9 of 9 Page ID#: 2630
`
`ofwillful copyright infringement; and (2) include a request for attorney fees in the prayer for relief,
`
`pursuant to 17 U.S.C. § 505.
`
`Conclusion
`
`For the reasons stated, Defendants' Motion to Dismiss Portions of Plaintiffs' Second
`
`Amended Complaint (#122) should be granted in part and denied in part. The court also
`
`recommends that Plaintiffs be granted leave to amend their pleading as outlined above.
`
`Scheduling Order
`
`The above Findings and Recommendation will be referred to a United States District Judge
`
`for review. Objections, if any, are due no later than August 28, 2008. Ifno objections are filed,
`
`review of the Findings and Recommendation will go under advisement on that date.
`
`Ifobjections are filed, any party may file a response within fourteen days after the date the
`
`objections are filed. Review ofthe Findings and RecoI)lIIlendation will go under advisement when
`
`the response is due or filed, whichever date is earlier.
`
`DATED this 14th day of August, 2008.,';,;a
`
`JOHNV. ACOSTA
`,
`...ynited States Magistrate Judge
`
`9 - FINDINGS AND RECOMMENDATION
`
`{KPR}