Case 6:07-cv-06079-TC Document 54 Filed 09/16/08 Page 1 of 10 Page ID#: 210
`Case 6:07—cv—06079—TC Document 54
`Filed 09/16/08
`Page 1 of 10 Page ID#: 210
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`FH-Efi'08$P161464usnc43nE
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE DISTRICT OF OREGON
`
`er’-‘r~ Ito‘-PFTQ.
`Civ. No.-9?=6fi?39*TC
`
`FINDINGS OF FACT AND
`CONCLUSIONS OF LAW
`
`STEVEN L. MCNAMARA,
`
`Plaintiff ,
`
`VS.
`
`UNIVERSAL COMMERCIAL SERVICES,
`INC., an Arizona Corporation,
`and SABINE SHARP, an individual,
`
`Defendants.
`
`--.2-—a-a~—r=a-..v-.4-../nu:-_a-.2-_a-._a-._a-._a-..—
`
`Coffin, Magistrate Judge:
`
`Plaintiff brought this copyright infringement action against
`
`defendants after copyrighted material that he authored was posted
`
`on GlendaleDesigns.com,
`
`a website
`
`controlled by defendant
`
`Universal Commercial Services,
`
`Inc.
`
`Defendants assert
`
`their
`
`infringement was
`
`innocent or,
`
`in the alternative,
`
`that it was
`
`fair use, and that plaintiff is estopped from asserting copyright
`
`infringement because he failed to use technology to protect the
`
`content.
`
`This court has jurisdiction pursuant
`
`to 28 U.S.C.
`
`§
`
`l338(a)
`
`("The district court shall have original jurisdiction of
`
`any civil action arising under any Act of Congress relating to
`
`1 Findings of Fact and Conclusions of Law
`
`

`
`Case 6:07-cv-06079-TC Document 54 Filed 09/16/08 Page 2 of 10 Page ID#: 211
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`Filed 09/16/08
`Page 2 of 10 Page ID#: 211
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`U-J
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`copyrights[.]")
`
`and 28 U.S.C.
`
`§ 1331 (federal question).
`
`On March
`
`20,
`
`2008,
`
`summary
`
`judgment was
`
`granted in
`
`plaintiff's favor against defendants‘ affirmative defense of
`
`misuse but denied on the issue of defendants‘
`
`infringement
`
`liability (#25).
`
`The matter was tried to the court on August 26,
`
`2008.
`
`The parties stipulated to the following facts as set out in
`
`the pretrial order and as agreed to at the pretrial conference:
`
`1. Plaintiff Steven McNamara,
`
`a resident of Oregon,
`
`is an
`
`author and a sole proprietor of an internet business known as
`
`AdCracker.com,
`
`a "tool
`
`to create world—class advertising and
`
`marketing ideas."
`
`2. Plaintiff has a valid copyright (registration # TX 6-425-
`
`8ll) in the written material at issue, an original work entitled
`
`"How to write a creative brief"
`
`(the "subject article").
`
`From
`
`1999-2005, AdCracker.com published the article.
`
`The article was
`
`also available as part of
`
`a package for sale on plaintiff's
`
`website.
`
`3. Defendant Universal Commercial Services,
`
`Inc., d.b.a.
`
`Glendale Designs,
`
`is a corporation organized under the laws of
`
`Arizona with its principal place of business
`
`in Glendale,
`
`Arizona.
`
`4. Defendant Sabine Sharp is an individual and a corporate
`
`officer of Universal Commercial Services
`
`and a
`
`resident of
`
`Glendale, Arizona.
`
`5. Universal Commercial Services operates
`
`a website at
`
`http://www.glendaledesigns.com.
`
`The business provides website
`
`2 Findings of Fact and Conclusions of Law
`
`

`
`Case 6:07-cv-06079-TC Document 54 Filed 09/16/08 Page 3 of 10 Page ID#: 212
`Case 6:07—cv—06079—TC Document 54
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`Page 3 of 10 Page ID#: 212
`
`design and search engine optimization services.
`
`6.
`
`Defendant
`
`Sharp
`
`posted
`
`the
`
`subject
`
`article
`
`on
`
`glendaledesigns.com sometime in the fall of 2006.
`
`7.
`
`In December 2006, plaintiff's attorney sent a letter to
`
`defendant Sharp in which plaintiff demanded removal of
`
`the
`
`subject
`
`article
`
`from
`
`the
`
`glendaledesigns.com website.
`
`Plaintiff's letter demanded a payment of $300,000 by January 15,
`
`2007. The letter threatened that if defendants did not "meet the
`
`terms set forth above, we will seek recovery of additional fees
`
`and damages." The letter stated that defendants "should also be
`
`aware that copyright
`
`infringement may constitute one or more
`
`Criminal Offenses," and that
`
`"we believe this case meets the
`
`standard for criminal culpability," and "will pursue criminal
`
`charges against all appropriate persons in your company if this
`
`case is not settled."
`
`8. After receiving the letter, defendant Sharp immediately
`
`removed the subject article from her website.
`
`9. Plaintiff
`
`and defendant operate different
`
`types of
`
`businesses and are not in direct competition.
`
`Conclusions of Law
`
`Based on the foregoing facts,
`
`I have come to the following
`
`conclusions:
`
`1. Plaintiff has made out a prima fagie case of copyright
`
`infringement. First, plaintiff owns
`
`the rights to the subject
`
`article;
`
`second,
`
`defendants violated at
`
`least
`
`one of his
`
`exclusive rights to the material.
`
`gee A & M Records,
`
`Inc. v.
`
`Napster, 239 F.3d 1004, 1013 (9th Cir. 2001)
`
`("Plaintiffs must
`
`3 Findings of Fact and Conclusions of Law
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`Case 6:07-cv-06079-TC Document 54 Filed 09/16/08 Page 4 of 10 Page ID#: 213
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`Page 4 of 10 Page ID#: 213
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`satisfy two requirements to present a prime fagie case of direct
`
`infringement:
`
`(1)
`
`they must
`
`show ownership of
`
`the allegedly
`
`infringed material and (2)
`
`they must demonstrate that the alleged
`
`infringers violate at
`
`least one exclusive right granted to
`
`copyright holders under l7 U.S.C. § 106.") Defendants published
`
`the subject article on their website without permission from or
`
`attribution to plaintiff.
`
`In addition, defendants reproduced
`
`approximately 75% of
`
`the subject article verbatinn violating
`
`plaintiff's rights to reproduce the copyrighted work, 17 U.S.C.
`
`§ 106 (l),
`
`to prepare derivative works, 17 U.S.C. § 106 (2), and
`
`to display the copyrighted work publicly, 17 U.S.C. § 106 (5).
`
`2. Defendants‘ use of the subject article was not fair use.
`
`Under the fair use defense, copyright law recognizes limitations
`
`on copyrights
`
`for
`
`the use of works
`
`for certain purposes,
`
`including "criticism,
`
`comment, news reporting,
`
`teaching
`
`scholarship,
`
`[and]
`
`research."
`
`17 U.S.C. § 107.
`
`The burden of
`
`proving fair use lies with the defendant. Campbell v. Acuff—Rose
`
`Music, Inc., 510 U.S. 569, 590 (1994).
`
`Courts consider
`
`four
`
`factors to determine whether a use
`
`constitutes fair use:
`
`(1) The purpose and character of the use,
`
`including whether the use is commercial or for nonprofit use;
`the nature
`of
`the
`copyrighted work;
`(3)
`the
`amount
`
`(2)
`and
`
`substantiality of the portion taken; and (4)
`
`the effect of the
`
`use upon the potential market.
`
`17 U.S.C. § 107.
`
`II’
`The first factor looks at whether defendants‘ work merely
`
`supersedes
`
`the objects of
`
`the original creation," or
`
`"adds
`
`something new, with a further purpose or different character,
`
`altering the first with new expression, meaning, or message; it
`
`4 Findings of Fact and Conclusions of Law
`
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`

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`Case 6:07-cv-06079-TC Document 54 Filed 09/16/08 Page 5 of 10 Page ID#: 214
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`asks,
`
`in other words, whether and to what extent the new work is
`
`'transformative.'" Campbell, 510 U.S. at 579 (internal citation
`
`omitted).
`
`The purpose of defendants‘ use,
`
`to attract customers
`
`to their website, was commercial. Defendants further used search
`
`engine optimization techniques
`
`to make
`
`the article search-
`
`friendly.
`
`The subject article was used to generate business.
`
`The use of the subject article was not
`
`transformative, but an
`
`exact copy with minor edits.
`
`Further,
`
`the nature of the work was factual and instructive;
`
`while it also constituted a creative work,
`
`the second factor does
`
`not weigh in favor of fair use. Moreover,
`
`the amount of the
`
`subject article taken for use
`
`on defendants‘ website was
`
`substantial. Plaintiff's Exhibit 5 highlights the portions of
`
`his Adcracker article that were copied verbatim by defendants in
`
`the GlendaleDesigns
`
`ad—-approximately
`
`75% of
`
`the
`
`text
`
`of
`
`defendants‘ article is identical
`
`in wording to the copyrighted
`
`material.
`
`Finally,
`
`the effect of the use on the potential market is
`
`the most
`
`important element of the fair use doctrine. Harper &
`
`Row Publishers,
`
`Inc. v. Nation Enterprises,
`
`471 U.S. 539, 566
`
`(1985).
`
`When the use is a commercial one,
`
`a
`
`likelihood of
`
`future harm to the potential market is presumed, unless the work
`
`is transformative of the original.
`
`Cam bell, 510 U.S. at 590.
`
`Plaintiff was not
`
`in direct market competition with defendants,
`
`therefore the effect on the potential market
`
`is de ndnimis.
`
`However, defendant did not pay for
`
`the use of plaintiff's
`
`copyrighted material,
`
`and both parties were using the subject
`
`article jJ1 an advertising capacity txa draw business ‘to their
`
`5 Findings of Fact and Conclusions of Law
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`Case 6:07-cv-06079-TC Document 54 Filed 09/16/08 Page 6 of 10 Page ID#: 215
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`websites. There was a potential for customer confusion.
`
`In
`
`sum,
`
`the
`
`factors
`
`discussed
`
`above weigh
`
`against
`
`defendants‘ claim of fair use, and this court concludes that it
`
`was not fair use.
`
`3. Plaintiff is not estopped from asserting the copyright.
`
`A plaintiff
`
`is estopped "if he has aided the Defendant
`
`is
`
`infringing or otherwise induced to infringe." Quinn v. Detroit,
`
`23 F. Supp. 2d 741, 753 (E.D. Mich. 1998). Defendant failed to
`
`prove
`
`that plaintiff
`
`knew of
`
`the
`
`infringing conduct,
`
`that
`
`plaintiff intended that she rely upon his conduct or acted so
`
`that she had a right to believe that it was intended,
`
`that she
`
`was
`
`ignorant of
`
`the true facts,
`
`and
`
`that
`
`she relied upon
`
`plaintiff's conduct
`
`to her detriment.
`
`gee Carson v. Dynegy,
`
`gngé, 344 F.3d 446, 453 (5th Cir. 2003).
`
`In fact, when plaintiff
`
`learned of the infringement, he took immediate action to request
`
`that defendants remove the material from their website. Further,
`
`defendant has failed to prove that plaintiff had means available
`
`to protect
`
`the material further.
`
`Finally, defendant admitted
`
`that she knew that she was not the author of the subject article.
`
`Plaintiff is therefore not estopped from asserting his copyright.
`
`4. Defendants‘
`
`infringement was
`
`not
`
`innocent.
`
`An
`
`infringement is considered innocent when a defendant proves by a
`
`preponderance of
`
`the evidence that
`
`she was unaware that her
`
`actions constituted infringement,
`
`and she had no
`
`reason to
`
`believe that her acts constituted infringement.
`
`17 U.S.C.
`
`§
`
`504(c)(2).
`
`Even if defendant Sharp's testimony can be taken as
`
`true (that she received the subject article in an e—mail from an
`
`uncertain source and that the source did not contain a copyright
`
`6 Findings of Fact and Conclusions of Law
`
`

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`notice), a simple word search on the internet would have revealed
`
`that the original source of the article was Adcracker.com. Both
`
`plaintiff's website and another website on which the article
`
`appeared (MarketingProfs.com) contained a clear attribution to
`
`plaintiff and a copyright notice.
`
`Defendant has significant
`
`experience in search engine optimization techniques,
`
`and an
`
`obvious word search for "creative brief" on the internet would
`
`have easily led her to plaintiff's website where she would have
`
`discovered the copyrighted subject article.
`
`Moreover, defendant provided no documentary
`
`evidence of an e—mail from Namibia, which she believes contained
`
`the subject article without attribution. Defendant's testimony
`
`about a computer disc crash and the source of the article was
`
`unpersuasive. Defendant‘s infringement was not innocent.
`
`5.
`
`I decline to exercise my discretion to increase damages
`
`for willful
`
`infringement.
`
`An infringement
`
`is willful where a
`
`defendant was actually aware
`
`that her actions constituted
`
`infringement or acted with reckless disregard for, or willful
`
`blindness to,
`
`the rights of the copyright owner, or should have
`
`known that her actions constituted infringement.
`
`Island Software
`
`& Computer Serv.,
`
`Inc. v. Microsoft Corp., 413 F.3d 257, 263 (2d
`
`Cir. 2005);
`
`17 U.S.C.
`
`§ 504(c)(2)
`
`(if the court
`
`finds
`
`that
`
`infringement was committed willfully, the court in its discretion
`
`may increase the award of statutory damages). Because, for the
`
`reasons discussed below,
`
`I decline to exercise my discretion to
`
`increase statutory damages due to willfulness,
`
`I do not address
`
`it further.
`
`6. Plaintiff requests statutory damages.
`
`The Copyright Act
`
`7 Findings of Fact and Conclusions of Law
`
`

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`provides for statutory damages as follows:
`
`this
`of
`(2)
`clause
`by
`provided
`as
`Except
`(1)
`the copyright owner may elect, at any time
`subsection,
`before final judgment is rendered,
`to recover,
`instead
`of actual damages and profits, an award of statutory
`damages for all infringements involved in the action,
`with respect
`to any one work,
`for which any one
`infringer is liable individually,.
`in a sum of not
`less than $750 or more
`than $30,000 as
`the court
`considers just
`.
`.
`.
`.
`
`In a case where the copyright owner sustains the
`(2)
`burden
`of
`proving,
`and
`the
`court
`finds,
`that
`infringement was committed willfully,
`the court in its
`discretion may increase the award of statutory damages
`to a sum of not more than $150,000
`
`17 U.S.C.
`
`§ 504(c)(1)—(2).
`
`For
`
`the "innocent
`
`infringer," the
`
`court has discretion to lower the statutory damages to not
`
`lower
`
`than $200 if the infringer sustains the burden of proving that she
`
`was not
`
`aware
`
`and had no
`
`reason to believe that her acts
`
`constituted an infringement of copyright.
`
`17 U.S.C. § 504(c)(2).
`
`Courts have wide discretion in determining the amount of statutory
`
`damages within the
`
`allowable
`
`range.
`
`fiee Columbia Pictures
`
`Television,
`
`Inc. v. Krypton Broad. of Birmingham, Inc., 259 F.3d
`
`1186, 1194 (9th Cir. 2001).
`
`The court notes that, even if defendants‘ conduct can be
`
`considered willful,
`
`I decline to exercise my discretion to
`
`increase the award above the $750 to $30,000 range for
`
`the
`
`following reasons:
`
`First,
`
`the subject article was not itself a product
`
`that
`
`plaintiff sold separately to his clients or customers.
`
`It can
`
`best be described as an introductory sampler of more complete and
`
`detailed pointers for writing a creative basic brief in the field
`
`8 Findings of Fact and Conclusions of Law
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`of advertising that plaintiff offered for sale on a CD—ROM.'
`
`Defendants did not sell a competing product. Rather, Sharp and
`
`Universal are in the website design business. What defendant did,
`
`in essence, amounted to plagiarizing the bulk of plaintiff's ad
`
`promoting his product and tailoring it to fit her non—competing
`
`product.
`
`The analogy presents itself of a seller of hunting
`
`rifles who authors
`
`an article on his website describing in
`
`eloquent prose the essence of a "great hunt," with the ending
`
`being a pitch for a particular rifle touted for its accuracy and
`
`reliability.
`
`The article is duly copyrighted.
`
`Along comes a
`
`purveyor of binoculars, who posts the article virtually word for
`
`word on her website, but modifies the ending to promote not a
`
`competing rifle but a set of binoculars.
`
`There is infringement
`
`because the original author did not authorize the use, but there
`
`is similarly little potential for actual damages because the ad
`
`itself is not for sale and the products are not
`
`in competition.
`
`Second, plaintiff's demand letter was highly inappropriate
`
`in threatening to refer a matter for criminal prosecution unless
`
`a demand for money was satisfied; such a tactic is itself arguably
`
`a violation of the law.2 Thus, applying a deterrence factor in
`
`setting statutory damages cuts both ways under the circumstances
`
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`1 The Adcracker CD—ROM featured four types of briefs for ad
`agencies: Basic Brief, Quick Brief, Creative Director's Brief, and
`24 Advanced Brief.
`The subject article was described as a chapter of the
`Basic Brief presentation, and this "chapter" was not sold as a
`separate item.
`
`25
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`"Whoever, under a threat of informing,
`2 18 U.S.C. § 873 states:
`or as consideration for not
`informing, against any violation of any
`law of the United States, demands or receives any money or other
`valuable thing, shall be fined under this title or imprisoned not more
`than a year, or both."
`
`9 Findings of Fact and Conclusions of Law
`
`

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`28
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`of this case. Suffice it to say that the court is not persuaded
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`that
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`defendants‘
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`infringing
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`conduct,
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`especially
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`when
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`counterbalanced by plaintiff's
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`egregious
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`demand,
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`justifies
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`statutory damages in the higher range of 17 U.S.C. § 504(c)(2).
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`Conclusion
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`This is somewhat of an unusual case. Plaintiff copyrighted
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`an ad that was tailored to his product: a CD—ROM that contained
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`tips on how to write creative briefs in the advertising industry.
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`Defendants lazily lifted the ad (even accepting Sharp's testimony
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`at face value,
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`the search tools to find plaintiff's website and
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`thus his copyright notice were literally at her fingertips), and
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`tailored it to fit their non?competing product.
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`In doing so,
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`however, defendants did not cause plaintiff any actual damages,
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`nor did they present a reasonable potential for actual damages.
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`Plaintiff,
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`in turn,
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`responded to defendants‘ copyright violation
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`by inappropriately threatening criminal prosecution unless they
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`paid him the exorbitant sum of $300,000.
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`In light of all the circumstances, I award statutory damages
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`in the amount of $1,000.
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`Dated this
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`‘f
`day of September, 2008.
`
`
`
`THOMAS M.
`
`FFIN
`
`United Stat Magistrate Judge
`
`10 Findings of Fact and Conclusions of Law