FILED
`
`JUL 24 2006
`
`
`
`HAROLD S. MARENUS, CLERK
`ORDERED PUBLISHED
`U.S. BKCY. APP. PANEL
`
`OF THE NINTH CIRCUIT
`UNITED STATES BANKRUPTCY APPELLATE PANEL
`OF THE NINTH CIRCUIT
`
`SC-05-1398-MaSPa
`BAP No.
`04-04938
`Bk. No.
`Adv. No. 04-90395
`
`)
`)
`)
`
`))
`
`)
`Debtors.
`______________________________)
`
`In re:
`LUCIA ALBARRAN and ANTONIO
`BARBOZA,
`
`LUCIA ALBARRAN; ANTONIO
`BARBOZA,
`
`Appellants,
`
`v.
`NEW FORM, INC.,
`
`))
`
`)
`
`))
`
`)
`) O P I N I O N
`)
`)
`
`))
`
`)
`Appellee.
`______________________________)
`
` Argued and Submitted on February 24, 2006
`at San Diego, California
`Filed - July 24, 2006
`Appeal from the United States Bankruptcy Court
`for the Southern District of California
`Honorable Peter W. Bowie, Chief Bankruptcy Judge, Presiding.
`
`
`Before: MARLAR, SMITH, and PAPPAS, Bankruptcy Judges.
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`MARLAR, Bankruptcy Judge:
`
`INTRODUCTION
`
`The debtors, who reproduce and distribute motion picture
`titles in the home video market, filed a voluntary chapter 71
`petition after a district court judgment for willful copyright
`infringement was entered against them for statutory damages plus
`interest, attorney’s fees and costs in the sum of $893,077.11.
`The judgment creditor then obtained a judgment, in bankruptcy
`court, that the debt was a nondischargeable “willful and malicious
`injury” pursuant to § 523(a)(6).
`Debtors maintain that an award of statutory damages, without
`proof of any actual damages, was not an “injury,” and that mere
`duplication of the films, without proof of sale, did not establish
`the subjective intent requirement for “willfulness.”
`We conclude that an award for statutory damages for willful
`copyright infringement is a debt for a categorically harmful
`activity, which is a nondischargeable “injury” under § 523(a)(6)
`if the bankruptcy court determines that the infringer had the
`requisite subjective intent to injure another’s property interest.
`Here, the debtors’ actual knowledge of the creditor’s copyright
`interest at the time of infringement was proof of their
`“substantial certainty” of resultant harm. Therefore, we AFFIRM.
`
`1 Unless otherwise indicated, all “Code,” “chapter” and
`“section” references are to the Bankruptcy Code, 11 U.S.C. §§ 101-
`1330 prior to its amendment by the Bankruptcy Abuse Prevention and
`Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23
`(2005). “Rule” references are to the Federal Rules of Bankruptcy
`Procedure (“Fed. R. Bankr. P.”), which make applicable certain
`Federal Rules of Civil Procedure (“Fed. R. Civ. P.”).
`-2-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`FACTS
`
`Lucia Munguia Albarran (“Albarran”) and her husband, Antonio
`Barboza (“Barboza”), (“Debtors”), operated a business for the
`duplication, distribution and sale of Spanish language films.
`This appeal concerns ten films known as the India Maria Pictures.2
`On May 15, 1999, appellee New Form, Inc. (“New Form”)
`acquired the exclusive rights to manufacture, sell and distribute
`the India Maria Pictures.
`Before New Form acquired its exclusive rights, Debtors had
`purchased a large amount of inventory of India Maria Pictures from
`Million Dollar Video Corp. (“Million Dollar Video”). Debtors also
`utilized the services of Reel Picture Productions, LLC (“Reel
`Picture”) for reproduction of the India Maria Pictures. A copy of
`each India Maria Picture ordered was made and packaged into a
`finished VHS tape product. Debtors sold the India Maria Pictures,
`but they kept no inventory or sale records.
`In late summer, 1999, New Form learned that Debtors were
`selling the India Maria Pictures. It sent Debtors a letter, dated
`September 3, 1999, advising them of New Form’s “exclusive right to
`duplicate and sell” the India Maria Pictures.
`Following their receipt of this letter, Debtors ordered 500
`VHS tape finished product copies of the India Maria Pictures from
`Reel Picture on or about September 9, 1999.
`Albarran responded to New Form by letter, on September 17,
`1999, stating that they: (1) did not know about New Form’s
`exclusive rights prior to receiving the September 3rd letter; (2)
`
`2 The ten titles are: Duro Pero Seguro; El Miedo No Anda En
`Burro; El Que No Corre Vuela; La Comadrita; La Madrecita; La
`Presidenta Municipal; O.K. (Okey) Mister Pancho; Pobre Pero
`Honrada; Sor Tequila; and Tonta Tonta Pero No Tanto.
`-3-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`were selling inventory of India Maria Pictures legally purchased
`from Million Dollar Video;3 and (3) were “open to a purchase
`proposal or to another reasonable agreement” with New Form.
`New Form sent a final warning letter on December 9, 1999.
`Debtors continued to sell the India Maria Pictures until March 20,
`2002, when New Form filed a lawsuit against them for willful
`copyright infringement in the District Court for the Central
`District of California (the “District Court Action”). The
`complaint alleged that Debtors had willfully infringed New Form’s
`copyright in the India Maria Pictures beginning on or after May
`15, 1999 and ending in 2002.
`New Form moved for partial summary judgment in the District
`Court Action, arguing that Debtors had willfully infringed its
`copyright by (1) duplication of the India Maria Pictures, and (2)
`sale and distribution of the India Maria Pictures. Following a
`hearing, the district court granted summary judgment on only one
`issue--New Form’s ownership of a valid copyright interest in the
`India Maria Pictures effective May 15, 1999 and continuing to May
`15, 2004.
`A jury trial was held in April, 2004, on the infringement by
`duplication issue.4 To establish statutory copyright infringement
`
`3 Even though New Form subsequently acquired the exclusive
`rights to those titles, federal copyright law would protect
`Debtors’ right to resell any first-acquired inventory under the
`“first sale doctrine.” Under this doctrine, the sale of a
`“lawfully made” copy of a work terminates the copyright holder’s
`authority to interfere with subsequent sales or distribution of
`that particular copy. See 17 U.S.C. § 109(a)(2004).
`4 This appeal concerns infringement by duplication, which
`was the only issue resolved in the district court trial. In
`regards to the sale and distribution infringement claim, the
`district court found that summary judgment was “not appropriate”
`because New Form had not rebutted Debtors’ evidence that they
`lawfully sold and distributed the India Maria Pictures that they
`had obtained from Million Dollar Video, under the “first sale
`(continued...)
`
`-4-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`based on duplication under the Copyright Act, 17 U.S.C. §§ 101-
`1332 (2004 & Supp. 2006), a plaintiff must prove: “(1) ownership
`of a valid copyright, and (2) copying of constituent elements of
`the work that are original.” Feist Publ’ns, Inc. v. Rural Tel.
`Serv. Co., 499 U.S. 340, 361 (1991).
`The jury instructions on infringement of copyright stated:
`If you find by a preponderance of the evidence that
`[Albarran] reproduced and/or in any manner duplicated each
`or all of the ten (10) India Maria Pictures at any time
`between May 15, 1999, and the present, you are instructed
`to find that Defendant infringed Plaintiff’s copyright
`interests for each India Maria Picture reproduced.
`
`The jury was also instructed on “willful” infringement:
`To prove willful infringement, the Plaintiff must
`prove by a preponderance of the evidence that the
`Defendants knew that they were infringing the Plaintiff’s
`copyrights or that they acted with reckless disregard as
`to whether they were doing so. If you conclude that the
`Defendants reasonably and in good faith believed that they
`were not infringing the Plaintiff’s copyrights, then you
`may not find that they willfully infringed those
`copyrights.
`The jury returned special verdicts finding that Albarran and
`Barboza had willfully infringed New Form’s copyright in each of
`the India Maria Pictures, and awarded statutory damages. Judgment
`was entered on May 10, 2004, for $750,000 ($75,000 for each of the
`ten films), plus costs and attorney’s fees; the final judgment
`amount was fixed at $893,077.11.
`Debtors filed a bankruptcy petition on May 28, 2004. New
`Form timely filed a complaint seeking to have the entire judgment
`debt declared nondischargeable as a “willful and malicious” injury
`under § 523(a)(6). It promptly moved for summary judgment, and
`requested that the bankruptcy court take judicial notice of the
`
`4(...continued)
`doctrine.” Dist. Ct. Order on Motion for Partial Summary Judgment
`(July 15, 2003), p. 13. Although the distribution issue was also
`reserved for trial, it was not resolved. See Tr. of Proceedings
`(Aug. 22, 2005), p. 20:1-24.
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`-5-
`
`

`
`record and judgment in the District Court Action.
`Debtors filed an opposition and a counter-motion for summary
`judgment. Albarran filed her declaration in which she denied any
`intent to injure New Form, and argued that the district court
`verdict and judgment were based on mere “reckless” conduct.
`In resolving the motion, the court applied collateral
`estoppel, or issue preclusion, to the district court’s finding
`that Debtors had infringed New Form’s copyright. Specifically, it
`held that Albarran was “bound by the fact that she ordered” the
`duplication of the India Maria Pictures.” Tr. of Proceedings
`(March 28, 2005), pp. 18-19.5
`Since the jury instruction had defined “willful” infringement
`as either “knowing” or “reckless” conduct, the bankruptcy court
`reserved for trial the issue of whether Debtors had the
`“subjective intent to injure [New Form] or its property, or
`subjective knowledge that injury [was] substantially certain to
`result.” Order on Summary Judgment (June 7, 2005), p. 2.
`New Form then moved for partial summary judgment on the issue
`of subjective intent. It argued that the undisputed evidence
`showed that there was no triable issue as to Debtors’ knowledge
`that an injury to New Form’s copyright was substantially certain
`to occur from their duplication of the India Maria Pictures.
`Furthermore, it argued that the undisputed evidence was that
`Debtors had sold the unlawfully duplicated India Maria Pictures.
`New Form presented the declarations of Manuel Hinostroza
`(“Hinostroza”), president of New Form, and Michael Ishayik
`
`5 The transcript was not included in the record, but is part
`of the bankruptcy court records. We may take judicial notice of
`it as well as other pleadings from the records in the underlying
`bankruptcy case which are pertinent to this appeal. O’Rourke v.
`Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58
`(9th Cir. 1989).
`
`-6-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`(“Ishayik”), president of Reel Picture. Hinostroza averred that
`New Form discovered that Debtors were duplicating and selling the
`India Maria Pictures in late summer, 1999. He introduced the
`series of letters between New Form and Albarran which gave notice
`to Debtors of New Form’s copyright on and after September 3, 1999.
`Ishayik averred that, on and after May 14, 1999, Debtors had
`ordered overflow services from Reel Picture which included
`duplication and preparation of finished product of the India Maria
`Pictures. He stated that the orders were picked up by either
`Barboza or Albarran’s son, Gustavo Munguia (“Gustavo”). The
`relevant exhibits, i.e., those dated after the September 3, 1999,
`notice to Debtors of New Form’s copyright, were as follows:
`1.
`A “Packing Slip,” dated September 9, 1999, listing
`quantities and titles of India Maria Films, and
`signed by Gustavo.
`A “Packing Slip,” dated September 14, 1999, listing
`the quantities and titles of India Maria Films
`“shipped,” totaling 2,091 reproductions. Under a
`column marked “Carrier,” were written the words,
`“will call.” At the bottom, after “Received By” was
`printed the name “Antonio Barboza C.”
`
`2.
`
`New Form’s “Statement of Uncontroverted Facts” cited the same
`exhibits for the following allegations:
`
`16. Subsequent to receiving actual written notice of
`Plaintiff’s exclusive ownership rights to the India
`Maria Pictures, Defendants ordered and received 500
`VHS Tape Finished Product copies of the India Maria
`Pictures from Reel Picture on September 9, 1999.
`Subsequent to receiving actual written notice of
`Plaintiff’s exclusive ownership rights to the India
`Maria Pictures, Antonio Barboza picked up and
`received on behalf of Defendants, 2,091 VHS Tape
`Finished Product copies of the India Maria Pictures
`from Reel Picture on September 14, 1999.
`
`17.
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`-7-
`
`

`
`Debtors filed an opposition pleading, supported by
`affidavits, in which they alleged that someone else had ordered
`the duplication of the India Maria Pictures, and that someone else
`had received and diverted the finished product.6 However, they
`did not dispute either the date of duplication or their knowledge
`of New Form’s copyright on or after September 3, 1999.
`Alternatively, they argued that the copyright violation was merely
`“technical” because there was no evidence that they sold the
`unlawfully duplicated copies rather than the inventory they had
`legally purchased from Million Dollar Video.
`At the August 22, 2005, hearing on the motion for partial
`summary judgment, the bankruptcy court first concluded that
`statutory damages, like punitive damages, would indeed support an
`“injury” under § 523(a)(6). Second, it again found that the facts
`established in the District Court Action were binding in the
`adversary proceeding. Third, in regards to Debtors’ subjective
`intent, the bankruptcy court found that Debtors had notice of New
`
`6 On appeal, Debtors have not challenged the bankruptcy
`court’s finding that they were responsible for the September,
`1999, duplication order(s), as alleged by New Form, and that issue
`has therefore been waived. Law Offices of Neil Vincent Wake v.
`Sedona Inst. (In re Sedona Inst.), 220 B.R. 74, 76 (9th Cir. BAP
`1998) (arguments not specifically and distinctly made in an
`appellant’s opening brief are deemed waived).
`Neither have Debtors argued that there is a triable issue
`regarding whether they received the finished product, and that
`issue has also been waived. Id. The bankruptcy court did not
`resolve the receipt issue, as being unnecessary to the judgment
`based solely on the infringement for duplication. Even if it had
`not been waived, we would agree that it was immaterial to this
`proceeding and did not preclude judgment. See Anderson v. Liberty
`Lobby, Inc., 477 U.S. 242, 247-48 (1986). “A ‘material’ fact is
`one that is relevant to an element of a claim or defense and whose
`existence might affect the outcome of the suit. The materiality
`of a fact is thus determined by the substantive law governing the
`claim or defense.” T.W. Elec. Serv., Inc. v. Pac. Elec.
`Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987).
`-8-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`Form’s copyright and knew they were violating it, thereafter, by
`duplicating the India Maria Pictures. It ruled:
`[T]he evidence is uncontroverted that [Debtors] knew,
`[sic] the April 19th letter.7 And I have to take the jury
`finding that the copying occurred and combine that with
`the uncontroverted evidence of the knowledge.
`
`Tr. of Proceedings (Aug. 22, 2005), p. 27:8-13.
`It entered an order granting partial summary judgment in
`favor of New Form, on September 19, 2005, which stated:
`Based on the evidence establishing Defendants’ injury
`to Plaintiff’s property rights, and [that] Defendants’
`acts were performed intentionally with knowledge that
`injury was substantially certain to occur, Plaintiffs’
`Motion for Partial Summary Adjudication . . . is GRANTED
`. . . .
`
`A judgment of nondischargeability was entered in the sum of
`$893,077.11. Debtors timely appealed the order and judgment.
`
`ISSUES
`
`Debtors have raised several issues which can be distilled to
`the following two:
`
`1.
`
`Whether an award of statutory damages for copyright
`infringement, without evidence of actual damages, can
`constitute a debt for an “injury” to property, under
`§ 523(a)(6).
`
`2.
`
`Whether the bankruptcy court erred in finding that
`Debtors, by duplicating the India Maria Pictures, had
`
`7 In fact, the first letter notice to Debtors was on
`September 3, 1999, and not April 19, 1999, for which date there is
`no letter of record. Nonetheless, the evidence was uncontroverted
`that Debtors had notice of New Form’s copyright at the time of the
`subject duplication, in September, 1999.
`-9-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`the requisite subjective intent to injure New Form.
`
`STANDARD OF REVIEW
`
`We review de novo a bankruptcy court’s decision to grant
`summary judgment. Fogal Legware of Switz., Inc. v. Wills (In re
`Wills), 243 B.R. 58, 62 (9th Cir. BAP 1999). We affirm “only if
`it appears from the record, after viewing all evidence and factual
`inferences in the light most favorable to the nonmoving party,
`that there are no genuine issues of material fact and that the
`moving party is entitled to judgment as a matter of law.” Yarbrow
`v. FDIC (In re Yarbrow), 150 B.R. 233, 236 (9th Cir. BAP 1993);
`Fed. R. Bankr. P. 7056; Fed. R. Civ. P. 56(c).
`The inquiry is “whether reasonable jurors could find by a
`preponderance of the evidence that the plaintiff [New Form] is
`entitled to a verdict . . . .” Anderson, 477 U.S. at 252. New
`Form has the initial burden of establishing the absence of a
`genuine issue of material fact. Celotex Corp. v. Catrett, 477
`U.S. 317, 323 (1986). If it meets this burden, then Debtors must
`go beyond the pleadings and identify facts, by affidavit or
`otherwise, demonstrating a genuine issue for trial. Id. at 324;
`Fed. R. Civ. P. 56(e). They "must do more than simply show that
`there is some metaphysical doubt as to the material facts."
`Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
`586 (1986). “If the evidence is merely colorable, . . . or is not
`significantly probative, . . . summary judgment may be granted.”
`Anderson, 477 U.S. at 249-50.
`We may uphold a summary judgment on any basis supported by
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`-10-
`
`

`
`the record. Nahman v. Jacks (In re Jacks), 266 B.R. 728, 733 (9th
`Cir. BAP 2001).
`
`DISCUSSION
`
`The general policy of bankruptcy law favors allowing an
`honest debtor to discharge debts and to make a fresh start free
`from the burden of past indebtedness. See Lines v. Frederick, 400
`U.S. 18, 19 (1970). Thus, because a debtor in bankruptcy is
`assumed to be poor but honest, there is a presumption that all
`debts are dischargeable unless a party who contends otherwise
`proves, with competent evidence, an exception to discharge. See
`Brown v. Felsen, 442 U.S. 127, 128-29 (1979); Hon. Barry Russell,
`BANKRUPTCY EVIDENCE MANUAL ¶ 301.60, p. 870 (2006 ed.).
`The corollary to this policy is that only the "honest but
`unfortunate" debtor is entitled to an entirely unencumbered fresh
`start. Grogan v. Garner, 498 U.S. 279, 286-87 (1991). Under the
`statute, a creditor must demonstrate nondischargeability by a
`preponderance of the evidence. Id. at 291. When applying this
`standard, "[i]n addition to what a debtor may admit to knowing,
`the bankruptcy court may consider circumstantial evidence that
`tends to establish what the debtor must have actually known when
`taking the injury-producing action." Carrillo v. Su (In re Su),
`290 F.3d 1140, 1146 n.6 (9th Cir. 2002).
`Section 523(a)(6) provides that a chapter 7 discharge does
`not discharge an individual debtor from a debt for a “willful and
`malicious injury by the debtor to another entity or to the
`property of another entity.” 11 U.S.C. § 523(a)(6). The
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`-11-
`
`

`
`“willfulness” and “maliciousness” prongs are analyzed separately.
`Su, 290 F.3d at 1146.
`Debtors have only argued the merits of the court’s ruling
`that there was a “injury” and that it was “willful.” If we
`affirm, then malice can be implied.8 See Thiara v. Spycher Bros.
`(In re Thiara), 285 B.R. 420, 434 (9th Cir. BAP 2002) (stating if
`a conversion was “willful,” then the court could imply malice).
`
`A. Statutory Damages Are a Debt for a § 523(a)(6) “Injury”
`
`In the District Court Action, New Form elected statutory
`damages, which are authorized by § 504(c) of the Copyright Act,
`and there was no evidence of actual damages. Debtors maintain
`that discharge of the debt was therefore mandated because
`§ 523(a)(6) requires an economic “injury” to property and actual
`damages. Their argument is clearly twofold: (1) whether a claim
`for copyright infringement is an “injury” to New Form’s property,
`as that term is used in § 523(a)(6); and (2) whether an award of
`statutory damages constitutes a nondischargeable “debt” for such
`injury.
`We look first to the general law to determine the nature of
`the injury. Johnson v. Miera (In re Miera), 926 F.2d 741, 745
`(8th Cir. 1991) (“The language of section 523(a)(6) is directed at
`the nature of the conduct which gives rise to the debt . . . .”)
`
`8 The “maliciousness” prong requires proof of “(1) a
`wrongful act, (2) done intentionally, (3) which necessarily causes
`injury, and (4) is done without just cause or excuse.” Petralia
`v. Jercich (In re Jercich), 238 F.3d 1202, 1209 (9th Cir. 2001).
`-12-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`Pursuant to the Copyright Clause of the Constitution,9
`Congress enacted the Copyright Act, which grants a limited
`monopoly to authors or inventors in order to give the public
`appropriate access to their work product, and to insure that such
`persons reap, for a short time, the benefit of their imagination
`and inventions. Such limited monopoly is intended to achieve an
`important public purpose: “to motivate the creative activity of
`authors and inventors by the provision of a special reward, and to
`allow the public access to the products of their genius after the
`limited period of exclusive control has expired.” Sony Corp. of
`Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984).
`Thus, “‘[t]he copyright law, like the patent statute, makes reward
`to the owner a secondary consideration.’” Id. (citation omitted).
`“‘The immediate effect . . . is to secure a fair return for an
`“author's” creative labor. But the ultimate aim is, by this
`incentive, to stimulate artistic creativity for the general public
`good.’” Id. at 432 (citation omitted).
`The Federal Copyright Act provides the owner of a copyright
`with an arsenal of remedies against an infringer who violates any
`of the owner’s exclusive rights, as set forth in the Copyright
`Act. See 17 U.S.C. §§ 501(a), 502-505. Here, in accordance with
`the statute, the district court jury instructions defined one such
`right belonging to New Form as the “exclusive right to copy,”
`which included both the right to reproduce and distribute copies
`of the India Maria Pictures. See 17 U.S.C. § 106(1), (3).
`
`9 The Copyright Clause provides that
`Congress shall have Power . . . To Promote the Progress
`of Science and useful Arts, by securing for limited
`Times to Authors and Inventors the exclusive Right to
`their respective Writings and Discoveries.
`U.S. Const., art. I, § 8, cl. 8 (2001).
`-13-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`These rights are intangible property interests. See 17
`U.S.C. § 202; 3 Melville B. Nimmer & David Nimmer, NIMMER ON
`COPYRIGHT, § 12.01[C] (LexisNexis Matthew Bender & Co. 2006) (a
`copyright is an intangible, incorporeal right). A
`nondischargeable injury need not be confined to physical damage;
`it may also include an injury to intangible personal or property
`rights. See 4 COLLIER ON BANKRUPTCY, ¶ 523.12[4], at 523-95 (Alan N.
`Resnick & Henry J. Sommer eds., 15th ed. rev. 2005) (citing Herman
`v. Remick (In re Remick), 96 B.R. 935 (Bankr. W.D. Mo. 1987)
`(willful copyright infringement)).
`Historically, and presently by preemption,10 copyright
`infringement actions subsume certain tort actions. “At common
`law, a cause of action for copyright infringement was analogous to
`several tort actions . . . .” Broadcast Music Inc. v. Blumonday,
`Inc., 818 F. Supp. 1352, 1353 (D. Nev. 1993). See generally 1
`NIMMER ON COPYRIGHT, supra, § 1.01 (discussing the Act’s impact on
`state-law claims). See also Leo Feist, Inc. v. Young, 138 F.2d
`972, 975 (7th Cir. 1943) (copyright infringement is properly
`classified as a tort and ex delicto action); Sony Corp. of Am.,
`464 U.S. at 433 (“[A]nyone who trespasses into his exclusive
`domain by using or authorizing the use of the copyrighted work in
`one of the five ways set forth in the statute, ‘is an infringer of
`the copyright.’”) (citation omitted); A. Samuel Oddi,
`“Contributory Copyright Infringement: the Tort and Technological
`Tensions,” 64 NOTRE DAME L. REV. 47, 51-52 & n.27 (1989)
`
`10 The Copyright Act preempts any actions which come within
`its scope. See 17 U.S.C. § 301. “[T]wo conditions must be
`satisfied. First, the content of the protected right must fall
`within the subject matter of copyright as described in 17 U.S.C.
`§§ 102 and 103. Second, the right asserted under state law must
`be equivalent to the exclusive rights contained in section 106 of
`the Copyright Act.” Downing v. Abercrombie & Fitch, 265 F.3d 994,
`1003 (9th Cir. 2001).
`
`-14-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`(infringement of intangible personal property is a trespass tort).
`See also Dielsi v. Falk, 916 F. Supp. 985, 992(C.D. Cal. 1996)
`(“[A] general claim for copyright infringement is fundamentally
`one founded on strict liability.”).11
`Preempted actions can range from those brought under state
`criminal statutes, to interference torts, to a conversion of
`unauthorized reproductions. See Crow v. Wainwright, 720 F.2d
`1224, 1226 (11th Cir. 1983) (finding a substantial equivalency
`between the elements of “tort of copyright infringement” under the
`federal act and the state crime of dealing in stolen property);
`Maheu v. CBS, Inc., 201 Cal. App. 3d 662, 677-78, 247 Cal. Rptr.
`304, 313 (1988) (interference with prospective economic
`advantage); 1 NIMMER ON COPYRIGHT, supra, § 1.01, § 1.01[B][1][i] &
`n.180 & 181.1 (citing conversion cases); cf. G.S. Rasmussen &
`Assocs., Inc. v. Kalitta Flying Serv., Inc., 958 F.2d 896, 904
`(9th Cir. 1992) (stating, in dicta, that a conversion action based
`on a claim of an exclusive right to copy “would surely be
`preempted by the Copyright Act.”)
`An award of statutory damages is the “debt” which may result
`from an infringer’s liability. See 11 U.S.C. 101(12) (a “debt”
`means “liability on a claim”). Under the Copyright Act, the
`infringer of a copyright is liable either for the copyright
`owner's actual damages plus any additional profits of the
`infringer, or statutory damages. 17 U.S.C. § 504(a). A copyright
`owner may elect, at any time before final judgment, to recover an
`
`11 It is appropriate to look to patent law for guidance
`because of the kinship between it and copyright law. See Sony
`Corp. of Am., 464 U.S. at 439 & n.19; Harris v. Emus Records
`Corp., 734 F.2d 1329, 1333 (9th Cir. 1984). Patent infringement
`has historically been viewed as a tort because it is an invasion
`of another’s rights. See Monsanto Co. v. Trantham (In re
`Trantham), 304 B.R. 298, 308 (6th Cir. BAP 2004); Thomson-Houston
`Elec. Co. v. Ohio Brass Co., 80 F. 712, 721 (6th Cir. 1897)
`(patent infringement is analogous to “trespass on the case”).
`-15-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`award based on statutory damages for any infringement. 17 U.S.C.
`§ 504(c)(1). A court has discretion to determine the amount of
`statutory damages within specified minimum and maximum amounts and
`guided by its sense of justice. Peer Int’l Corp. v. Pausa
`Records, Inc., 909 F.2d 1332, 1336 (9th Cir. 1990). The maximum
`amount increases in the case of a “willful” infringement. See 17
`U.S.C. § 504(c)(2).
`Such discretionary statutory damages were adopted
`“to avoid the strictness of construction incident to a law
`imposing penalties, and to give the owner of a copyright
`some recompense for injury done him, in a case where the
`rules of law render difficult or impossible proof of
`damages or discovery of profits.”
`F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 231
`(1952) (quoting Douglas v. Cunningham, 294 U.S. 207, 209 (1935)).
`The Ninth Circuit has held that awards of statutory damages
`under the Copyright Act “serve both compensatory and punitive
`purposes . . . .” Los Angeles News Serv. v. Reuters Television
`Int’l, Ltd., 149 F.3d 987, 996 (9th Cir. 1998). Because of its
`dual purpose, an award of statutory damages for copyright
`infringement may be recovered “‘whether or not there is adequate
`evidence of the actual damages suffered by plaintiff of the
`profits reaped by defendant.’" Id. (quoting Harris, 734 F.2d at
`1335); Columbia Pictures Television, Inc. v. Krypton Broadcasting
`of Birmingham, Inc., 259 F.3d 1186, 1194 (9th Cir. 2001)
`(plaintiff may elect statutory damages for copyright infringement
`regardless of the adequacy of evidence offered of actual damages
`or amount of defendant’s profits). “The availability of statutory
`damages ensures there will always be an avenue open to sanction an
`infringer and vindicate the statutory policy of discouraging
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`-16-
`
`

`
`infringement.” Jackson v. Sturkie, 255 F. Supp. 2d 1096, 1101
`(N.D. Cal. 2003).12
`Debtors contend that, even if an award of statutory damages
`is a penalty, it must be expressly excepted in § 523 in order to
`be nondischargeable. See Jett v. Sicroff (In re Sicroff), 401
`F.3d 1101, 1104 (9th Cir. 2005) (exceptions to discharge “‘should
`be confined to those plainly expressed’”) (citation omitted).
`This argument lacks merit for two reasons: first, the damages are
`for an “injury,” as that term is used in § 523(a)(6), and second,
`the nondischargeable debt encompasses the entire liability.
`
`The identical issue now before us was addressed in Star’s
`Edge, Inc. v. Braun (In re Braun), 327 B.R. 447 (Bankr. N.D. Cal.
`2005), viz, whether an award of statutory damages for intentional
`copyright infringement is a willful and malicious “injury” within
`the meaning of § 523(a)(6) even without proof of any actual
`damages. The Braun court reasoned that the award of statutory
`damages resembled court-ordered sanctions that are allowable in
`the absence of a proven economic injury, because “an act of
`copyright infringement causes harm by its very nature.” Id. at
`450. It cited Zelis v. Papadakis (In re Zelis), 161 B.R. 469, 471
`(9th Cir. BAP 1993) (sanctions imposed for filing a frivolous
`appeal necessarily caused harm to opposing party and were
`nondischargeable), aff’d in relevant part, 66 F.3d 205 (9th Cir.
`1995), and Sicroff, 401 F.3d at 1107 (holding that libel
`
`12 Furthermore, an award of statutory damages was
`particularly appropriate in this case, where Debtors failed to
`keep records of their inventory of either the India Maria Pictures
`which they obtained from Million Dollar Video or those they
`ordered to be duplicated by Reel Picture, thereby increasing the
`difficulty of ascertaining any actual damages.
`-17-
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`
`necessarily caused harm to another’s reputation and was a
`“malicious” injury, where defendant had conceded “willfulness”).
`The Braun court concluded that “if conduct necessarily causes
`harm, an independent finding of injury is unnecessary.” Braun,
`327 B.R. at 451 (emphasis added). We agree with this conclusion
`that intentional copyright infringement is a categorically harmful
`activity and thus is an “injury,” as that term is used in
`§ 523(a)(6).13
`Furthermore, Debtors’ argument that an award of statutory
`damages without proof of actual damages is not an “injury” has
`been foreclosed by cases such as Palmer v. Levy (In re Levy), 951
`F.2d 196, 199 (9th Cir. 1991), cert. denied, 504 U.S. 985 (1992)
`(holding that punitive damages are nondischargeable under
`§ 523(a)(6)) and Cohen v. de la Cruz, 523 U.S. 213, 214-15 (1998)
`(the § 523(a)(2)(A) fraud exception to discharge applies to the
`underlying debt resulting from fraud and any statutory damages and
`attorney’s fees and costs awarded on account of the debtor’s
`fraud).
`Both Levy and Cohen specifi