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Autodesk vs. Flores case brief (Default judgement for copyright infringement)

Apr 12th, 2017 | By | Category: Copyright Litigation

Autodesk lawsuits – Case brief (selling unauthorized software on ebay or Craigslist can lead to legal problems)

aDMCA software infringement attorney Introduction

This blog discusses the case of Autodesk, Inc. v. Flores, No. 10-CV-01917-LHK, 2011 WL 337836 (N.D. Cal. Jan. 31, 2011).  Thing is case deals with alleged copyright infringement of Autodesk software, and a default judgement that was taken when there was no answer to the complaint that was filed (which shows the important of trying to work through a software audit after receiving a letter from Autodesk).

Facts

According to the decision from the Court for the Northern District in California

“Investigation indicated that Defendant Gregorio Flores, aka Greg Flowers, had posted numerous ads on Craigslist offering various versions of several different Autodesk products, including AutoCAD® software, AutoCAD® Civil 3D® software, Autodesk® Revit® software, and Autodesk® 3ds Max® software. Handler Decl.,  Autodesk’s investigator purchased one of the products advertised by Defendants on Craigslist and received by mail a recordable digital videodisc (“DVD+R”) on which was hand-written “AUTOCAD 2010.”  Autodesk subjected the disc to forensic analysis and determined that it contained an unauthorized copy of AutoCAD® 2010 software, as well as software used to circumvent the copyright protection measures built into the AutoCAD® 2010 software.  The disc also contained instructions for installing the AutoCAD® software in conjunction with the circumvention software so that the AutoCAD® software could be run without an activation code from Autodesk.”

Allegations

As noted, the parties were unable to reach a private settlement which prompted a federal court lawsuit to be filed:
“Based on the information from its investigations, Autodesk filed the instant action on May 4, 2010, against Defendants Greg Flowers and Gregorio Flores, asserting the following four claims:
(1) copyright infringement in violation of 17 U.S.C. § 501;
(2) violation of the circumvention technology provisions of the Digital Millennium Copyright Act, 17 U.S.C. §§ 1201(a), (b);
(3) trademark infringement and counterfeiting, in violation of 15 U.S.C. §§ 1114(1) and 1125(a);
and
(4) false designation of origin, in violation of 15 U.S.C. § 1125(a).
Further investigation revealed that Guillermo Flores was the owner of the telephone number listed on the Craigslist ads and had lived at the return address listed on the package received by Autodesk’s investigator. Accordingly, on May 12, 2010, Autodesk filed a First Amended Complaint adding Guillermo as a defendant.  By June 18, 2010, Autodesk had served all Defendants with the First Amended Complaint. See Certificate of Service,
Around the same time, Autodesk also contacted Defendants to determine whether litigation might be avoided. In an initial phone conference, Autodesk was able to confirm that Defendants used the names, addresses, and phone number associated with the ads, and Defendants gave Autodesk access to one PayPal account apparently owned by Gregorio and used by Guillermo to conduct business. However, out-of-court talks eventually broke down, and Autodesk gave Defendants notice that it would seek entry of default if Defendants did not file and serve responses to the First Amended Complaint by August 23, 2010. Defendants failed to respond to the Autodesk’s pleadings, and on September 2, 2010, the clerk entered default. Autodesk now moves for entry of default judgment and issuance of a permanent injunction against all Defendants. Autodesk also seeks an award of attorney’s fees incurred in this action.”

Attorney Steve discusses Default judgment process in federal court

Federal court default judgement process

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INFORMATION ON DEFAULTS:  Under Federal Rule of Civil Procedure 55(b)(2), a party may apply to the court for entry of judgment by default. “The district court’s decision whether to enter a default judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir.1980). In exercising discretion to enter default judgment, courts typically consider the following factors: (1) the possibility of prejudice to plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning the material facts, (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir.1986).

Legal Issue

Whether Autodesk is entitled to statutory damages and/or other relief for their alleged violations of law, and if so, to what extent?

Rule of Law

Yes, the Court GRANTS Autodesk’s motion for entry of default judgment, issuance of a permanent injunction, statutory damages, and post-judgment interest. The Court DENIES the request for attorney’s fees without prejudice. Autodesk may file a renewed motion for costs and fees, with documentation establishing the reasonableness of the rates and hours sought, within 30 days of this Order.  Defendants shall pay Autodesk statutory damages in the amount of $82,500. Post-judgment interest shall accrue from the date of judgment as provided by 28 U.S.C.1961(a).  A permanent injunction hereby issues enjoining and restraining Defendants, and each of them, and their respective agents, servants, employees, successors, and assigns, and all other persons acting in concert or conspiracy with Defendants or affiliated with Defendants, from:

a. copying, reproducing, distributing, or using any unauthorized copies of Autodesk’s copyrighted software products;
b. otherwise infringing any of Autodesk’s copyrights;
c. manufacturing, importing, offering to the public, providing, or otherwise trafficking in any technologies, products, services, devices, components, or parts thereof primarily designed to or produced for the purpose of circumventing either a technological measure that effectively controls access to one or more of Autodesk’s software products or a protection afforded by such a technological measure (collectively, “Circumvention Technology”);
d. copying, reproducing, advertising, offering for sale, or distributing any goods or services in connection with the unauthorized use of any of Autodesk’s trademarks or any other marks confusingly similar thereto;
e. using in any manner any of Autodesk’s trademarks, any marks confusingly similar thereto, or reproductions, counterfeits, copies, or colorable imitations thereof in connection with any of Defendants’ goods or services in such a manner that is likely to create the erroneous belief that said goods or services are authorized by, sponsored by, licensed by, or are in some way associated with Autodesk; and
f. otherwise infringing any of Autodesk’s trademarks.
4. Pursuant to 17 U.S.C. § 503(b), 17 U.S.C. § 1203(b)(6), and 15 U.S.C. § 1118, Defendants are further ordered to immediately destroy:
a. any and all infringing copies of Autodesk’s software products;
b. any device or product involved in Defendants’ manufacture, importation, offering to the public, provision, or otherwise trafficking in any Circumvention Technology; and
c. all labels, signs, prints, packages, wrappers, receptacles, and advertisements bearing any of Autodesk’s registered trademarks without authorization; any materials containing false designations of origin, false descriptions, or misrepresentations of fact concerning Autodesk’s software products or any services or products of Defendants; any materials bearing any reproduction, counterfeit, copy, or colorable imitation of Autodesk’s registered trademarks; and all plates, molds, matrices, and other means of making the same.

Damages Analysis

The Court will NOT automatically award $150,000 per “willful copyright infringement” damages (as some of the legal demand letters you get from the intellectual property law firm may suggest).  Instead, the court will analyze the facts and evidence in the case and come up with a reasonable monetary award.  As the Court noted in this case:

“In this case, Autodesk has both alleged willful infringement, and submitted evidence that strongly supports a finding of willfulness. As noted above, Defendants posted numerous ads that used Autodesk’s registered trademarks, without authorization, to sell pirated copies of Autodesk’s copyrighted software. Many of these ads contained a “disclaimer” stating that “you’re getting a $4,000.00 program for 70 bucks.  Please save the questions like, does it come with the manual and box, etc.”  Other ads state, “if it’s cardboard and a piece of paper you want, you can pay over 1–2,000 dollars.” C. This language suggests that Defendants knew that they were offering unauthorized versions of Autodesk’s software and were at least reckless in their disregard for Autodesk’s rights in its copyrighted software and registered trademarks.
Moreover, Defendants’ products contained software and instructions specifically designed to circumvent the access protections on Autodesk’s copyrighted works.  In their advertisements, Defendants offered to install their products themselves, suggesting that they were familiar with the installation process used to override Autodesk’s access controls. (“I can install prior to payment to secure functionality.”). Defendants also referred to themselves as the “[l]ongest trusted program provider on Craigslist,” indicating that the sale to Autodesk’s investigator was not an isolated, innocent instance of infringement, but one of many unauthorized sales. These facts strongly suggest that Defendants knew that their conduct was unlawful and support a finding of willfulness.
Such a finding does not end the inquiry, however, for the district court is given broad discretion to determine the amount of statutory damages. See Peer Intern. Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir.1990).  In awarding statutory damages, courts in this District have considered whether the amount of damages requested bears a “plausible relationship” to the plaintiff’s actual damages. See Adobe Systems, Inc. v. Tilley, (N.D.Cal. Jan.19, 2010) (citing Microsoft Corp. v. Ricketts (N.D.Cal. May 24, 2007). These courts have reasoned that while the plaintiff in a copyright or trademark action is entitled to damages that will serve as a deterrent, the plaintiff is not entitled to a windfall. Tilley,
Thus, in cases where the plaintiff has identified only a few sales of infringing products, awards have ranged from $1,000 to $10,000 for each copyright or trademark infringed. See id. (awarding $10,000 per infringement based on evidence of one sale); Adobe Systems Inc. v. Brooks,  (N.D.Cal. Mar.5, 2009) (awarding $10,000 per infringement based upon one infringing sale and evidence of possible additional infringement); Ricketts,(awarding $1,000 per infringed trademark and $1,500 per infringed copyright).
In contrast, in cases where the plaintiff identifies numerous infringing transactions and evidence points to ongoing sales of infringing products, courts have awarded up to $50,000 per infringed work or mark. See Adobe Systems, Inc. v. Taveira, (N.D.Cal. Feb.27, 2009) (awarding $50,000 per mark where defendant sold at least 20 copies of counterfeit software and plaintiff alleged that over 1,000 unauthorized copies were sold).
In this case, Defendants have referred to themselves in advertisements as the “[l]ongest trusted program provider on Craigslist,”  In response to an inquiry about the AutoCAD software, Defendants wrote, “I sell several a week.”  This strongly suggests that Defendants’ conduct is not limited to a few isolated sales of unauthorized software. Additionally, the identifiable transactions in the PayPal records submitted by Autodesk indicate that Defendants made at least three sales of Autodesk software in 2009.  Moreover, as Autodesk points out, although Autodesk seeks damages based only on two copyrighted works and two trademarks, there is evidence that Defendants sold a wider range of Autodesk products and used several other Autodesk trademarks in its advertisements.
Based on these facts, this case appears to fall somewhere between Taveira, which awarded $50,000 per infringed work based on evidence of 20 sales and allegations of more than 1,000 unauthorized transactions, and Brooks, which awarded $10,000 per infringed work based on one infringing sale and evidence suggesting additional infringement. As to the copyright claims, the Court agrees that an award of $60,000 under the Copyright Act ($30,000 per infringed work) and the full $2,500 permitted under the DCMA is appropriate. By selling unauthorized copies of Autodesk software equipped with software and instructions specifically designed to circumvent access control, Defendants have essentially profited from the theft of Autodesk’s intellectual property. This conduct is egregious and forms the core of this action, and a damage award of $30,000 per work under the Copyright Act is in line with other awards in this District.
The Court finds, however, that the damages sought under the Lanham Act are somewhat duplicative of the copyright damages. Accordingly, the Court will reduce the award of damages under the Lanham Act to $10,000 for each infringed mark, for a total of $20,000. This amounts to a total award of $82,500.

Copyright Damages Explained in this Video

counterfeit software penalties

VIDEO:  If you want to know more about copyright infringement damages watch this video.

Conclusion

Selling unauthorized copies or counterfeit software on internet retail websites such as eBay, or Craigslist can lead to serious legal problems.   If you received a cease and desist letter, legal demand letter, subpoena or served a summons and complaint, contact us to discuss your legal rights.

Contact an Autodesk software defense attorney

We can be reached at (877) 276-5084.  We can assist clients facing Software Audits directly from Autodesk, which are usually brought through their intellectual property law firm of Donahue Fitzgerald in the bar area near San Francisco.  If you received a letter from the Business Software Alliance (BSA) alleging illegal installation or duplication of software we can also help.  We have helped machine shops, engineers, designers and architects in cases alleging copyright infringement and any time you see a demand for $150,000 for willful theft of software.

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We are a business and civil litigation firm with a focus on copyright infringement cases involving illegal movie downloads (torrent cases such as London Has Fallen and Malibu Media defense), software audits (ex. Microsoft audits, SPLA, Autodesk audit notification letter, Siemens PLM defense, SIIA, Adobe and Business Software Alliance defense) and other software vendors threatening piracy and infringement. We also handle cases involving internet law, anti-SLAPP, media law, right of publicity, trademarks & domain name infringement, and we have a niche practice area handling California BRE licensing disputes, accusations, subpoena response, statement of issues and investigations. We have offices in San Francisco, Beverly Hills, Newport Beach, San Diego & Phoenix, Arizona and accept federal copyright and trademark cases nationwide. All content on our website is general legal information only and not a substitute for legal advice, and should not be relied upon. Decisions to hire counsel should not be based on advertising alone. Blogs, videos and podcasts are authored by Steve Vondran, Esq. unless otherwise noted. We can be reached at (877) 276-5084.

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