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Microsoft Corp. v. Atek 3000 Computer Inc.

July 23, 2008

MICROSOFT CORPORATION, A WASHINGTON CORPORATION, PLAINTIFF,
v.
ATEK 3000 COMPUTER INC., A NEW YORK CORPORATION D/B/A ATEK 3000, AND JOHN DOE, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Townes, United States District Judge

MEMORANDUM and ORDER GRANTING DEFAULT JUDGMENT

On December 4, 2006, plaintiff Microsoft Corporation commenced this action against defendant Atek 3000 Computer, Inc. pursuant to the Lanham Act, 15 U.S.C. § 1051, et seq., for infringement, false designation of origin, false description, and false representation, the Copyright Act, 17 U.S.C. § 501, et seq., for infringement, and New York common law for unfair competition.*fn1 In substance, plaintiff alleges that defendant distributed copies of Microsoft software that infringed its copyrights and trademarks despite receiving from plaintiffs a cease and desist letter. Plaintiff seeks the imposition of a constructive trust and an accounting as well as injunctive relief, damages, and reasonable attorneys' fees and costs.

On January 26, 2007, plaintiff filed an affidavit of service indicating that it had served the summons and complaint on defendant by personal delivery to its managing agent on December 4, 2007. Upon plaintiff's motion, on June 18, 2007, the Clerk of Court properly noted defendant's default in the action. Thereafter, on October 30, 2007, plaintiff moved for a default judgment, seeking an award of statutory damages, attorneys' fees, costs, and a permanent injunction. For the reasons set forth below, plaintiff's motion for a default judgment is granted, and it is awarded statutory damages and a permanent injunction. Plaintiff's motion for attorneys' fees and costs is denied without prejudice to refiling with a proper showing that the fees and costs actually incurred are reasonable.

A. The Consequences of Defendant's Default

"While a party's default is deemed to constitute a concession of all well pleaded allegations of liability, it is not considered an admission of damages." Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); see also Chen v. Jenna Lane, Inc., 30 F. Supp. 2d 622, 623 (S.D.N.Y. 1998). Accordingly, by defaulting in this case, defendant has conceded the complaint's well-pleaded allegations regarding plaintiff's claims under the Copyright Act, the Lanham Act, and New York common law.

The Copyright Act "gives the copyright owner the exclusive right to reproduce a copyrighted work and to distribute copies of the work . . . [and] 'to establish infringement, two elements must be proven (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.'" Microsoft Corp. v. McGee, 490 F. Supp. 2d 874, 878 (S.D. Ohio 2007) (quoting Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361 (1991)); see also Island Software and Computer Service, Inc. v. Microsoft Corp., 413 F.3d 257, 260 (2d Cir. 2005) ("copyright infringement under federal law requires proof that (1) the plaintiff had a valid copyright in the work allegedly infringed and (2) the defendant infringed the plaintiff's copyright by violating one of the exclusive rights that 17 U.S.C. § 106 bestows upon the copyright holder.") (internal quotation marks and citation omitted). Here, plaintiff sufficiently alleges that defendant committed copyright infringement. First, plaintiff alleges that it is the "sole owner of Windows XP Pro and the corresponding Certificates of Registration," and attaches a copy of the federal registration certificate for the subject copyright, TX 5-407-055 ("Windows XP Professional"). Compl. ¶ 19, Exh. 1. Thus, given defendant's default, plaintiff has sufficiently established its valid ownership of the copyright. See McGee, 490 F. Supp. 2d at 878; see also Troll Co. v. Uneeda Doll Co., 483 F.3d 150, 154 (2d Cir. 2007) ("We recognize that the registration is not prima facie evidence of ownership because it was made more than five years after the first publication. Nevertheless, it may carry some evidentiary weight.") (citing 17 U.S.C. § 410(c)). Second, plaintiff alleges that defendant infringed this copyrighted software "by distributing infringing materials in the United States without approval or authorization from Microsoft." Compl. ¶ 20. Thus, plaintiff has established that defendant committed copyright infringement.

Plaintiff asserts two claims under the Lanham Act. With respect to plaintiff's first claim, for trademark infringement, the Act prohibits the unauthorized "reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion." New York Stock Exchange, Inc. v. New York, New York Hotel LLC, 293 F.3d 550, 554 (2d Cir. 2002) (quoting 15 U.S.C. § 1114(1)(a)). Plaintiff's second claim, for false designation of origin, false description, and false representation is brought under Section 43(a) of the Act, which prohibits the use of "any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which is likely to cause confusion . . . ." Arrow Fastener Co., Inc., v. Stanley Works, 59 F.3d 384, 390 n. 4 (2d Cir. 1995) (quoting 15 U.S.C. § 1125(a)(1)); see also McGee, 490 F. Supp. 2d at 879. Thus, to state a claim under either one of its claims under the Lanham Act, plaintiff "need only show that they own a valid trademark and that the defendants' use of the trademark is likely to cause confusion regarding the source of the product." Chanel, Inc. v. Xiao Feng Ye, No. CV-06-3372, 2007 WL 2693850, at *2 (E.D.N.Y. Sept. 12, 2007) (quoting Tanning Research Laboratories, Inc. v. Worldwide Import & Export Corp., 803 F.Supp. 606, 608-09 (E.D.N.Y. 1992)); see also Tiffany (NJ) Inc. v. eBay, Inc., No. 04 Civ. 4607, 2008 WL 2755787, at *48 (S.D.N.Y. July 14, 2008) ("[Plaintiff's] Section 43(a) claims are governed by the same legal analysis as its federal infringement claims").

Here, plaintiff sufficiently alleges that defendant committed trademark infringement. First, plaintiff alleges that it has duly and properly registered the subject trademarks and service marks, and attaches copies of the federal registrations for the subject marks: 1,200,236 ("MICROSOFT"); 1,256,083 ("MICROSOFT"); 1,872,264 ("WINDOWS"); and 2,744,843 ("COLORED FLAG DESIGN"). Compl. ¶ 9, Exhs. 2-5. Thus, given defendant's default, plaintiff has sufficiently established its valid ownership of the subject trademarks and service marks.*fn2 Second, plaintiff alleges that the infringing materials defendant has and continues "to use, offer, advertise, market, install, or distribute are likely to cause confusion, mistake, or deception as to their sources, origin, or authenticity." Compl. ¶ 30. In addition, plaintiff alleges that defendant's conduct included the use of "displays, logos, icons, graphic designs, and/or packaging virtually indistinguishable from Microsoft['s ] visual designs, in connection with its goods and services." Compl. ¶ 42. Plaintiff further alleges that defendant's acts were done with the purpose of misleading, deceiving, or confusing the public. Compl. ¶¶ 32, 43. Thus, plaintiff has established that defendant committed trademark infringement with respect to the aforementioned trademarks and service marks. In addition, plaintiff has established that defendant's acts constitute false designation of origin, false description, and false representation in violation of the Lanham Act.

Plaintiff also alleges that defendant's copyright and trademark infringement was committed willfully because it continued its actions despite being apprised of plaintiff's registered copyrights and its infringing conduct. Compl. ¶¶ 12-15, 22-23. These allegations, when deemed admitted, are sufficient to find that defendant's conduct was willful. See McGee, 490 F. Supp. 2d at 880. In addition, defendant's default in this action "support the finding of willfulness." Peer Intern. Corp. v. Max Music & Entertainment, Inc., No. 03 Civ. 996, 2004 WL 1542253, at *3 (S.D.N.Y. July 9, 2004) (Report and Recommendation of Freeman, M.J.); see also McGee, 490 F. Supp. 2d at 880. Therefore, plaintiff has established that defendant's violations of the Copyright and Lanham Acts were willful.

"The essence of the tort of unfair competition under New York common law is the bad-faith misappropriation, for the commercial advantage of one person, a benefit or property right belonging to another [person]." Lorillard Tobacco Co. v. Jamelis Grocery, Inc., 378 F. Supp. 2d 448, 456 (S.D.N.Y. 2005) (internal quotation marks and citation omitted) (alteration in original). As a result of plaintiff establishing that defendant willfully violated Sections 32 and 43(a) of the Lanham Act, it has also established that defendant's acts constituted unfair competition under New York common law because "common law unfair competition claims [under New York law] closely resemble Lanham Act claims except insofar as the state law claim may require an additional element of bad faith or intent. Nadel v. Play-By-Play Toys & Novelties, Inc., 208 F.3d 368, 383 (2d Cir. 2000) (quotation omitted); see also Lorillard Tobacco, 378 F. Supp. 2d at 456 ("It is well-established that the elements necessary to prevail on causes of action for trademark infringement and unfair competition under New York common law mirror the Lanham Act claims.") (internal quotation marks and citation omitted); Pfizer, Inc. v. Y2K Shipping & Trading, Inc., No. 00 CV 5304, 2004 WL 896952, at *7 (E.D.N.Y. Mar. 26, 2004) ("Since Plaintiff has established infringement and unfair competition claims under the Lanham Act, it has necessarily also done so under common law."). Thus, plaintiff has established that defendant's acts constitute unfair competition under New York common law. Accordingly, plaintiff's motion for a default judgment is granted.

B. Statutory Damages

Under both the Copyright and Lanham Acts, plaintiff may elect to recover statutory damages in lieu of actual damages at any time before final judgment is rendered, and statutory damages are particularly appropriate where a defendant has defaulted. 17 U.S.C. § 504(c); 15 U.S.C. § 1117(c); see also Phillip Morris USA Inc. v. Marlboro Express, No. CV-03-1161, 2005 WL 2076921, at *8 (E.D.N.Y. Aug. 26, 2005); Sara Lee Corp. v. Bags of New York, Inc., 36 F. Supp. 2d 161, 165 (S.D.N.Y. 1999). In addition, "[a] successful plaintiff in a combined copyright and trademark infringement action is entitled to separate awards of statutory damages under both the Copyright Act and the Lanham Act when a defendant has infringed both the owner's trademarks and copyrights." Microsoft Corp. v. Black Cat Computer Wholesale, Inc., 269 F. Supp. 2d 118, 123 (W.D.N.Y. 2002) (citing Nintendo of America, Inc. v. Dragon Pacific International, 40 F.3d 1007, 1011 (9th Cir. 1994)); see also McGee, 490 F. Supp. 2d at 881. In this case, plaintiff elects to recover statutory damages under both Acts.

The Copyright Act permits a minimum award of $750 and a maximum award of $30,000 per copyright violation, and enhanced damages up to $150,000 per copyright if the infringement is willful. 17 U.S.C. § 504(c). Similarly, the Lanham Act permits a minimum award of $500 and a maximum award of $100,000 per trademark infringed, and enhanced damages up to $1,000,000 per mark infringed if the infringement is willful. 15 U.S.C. § 1117(c). Although plaintiff is entitled to an award of enhanced statutory damages because it has established that defendant acted willfully, it only seeks the maximum award for non-willful infringement under both Acts. Thus, plaintiff seeks $300,000 under the Lanham Act for the infringement of three unique marks, and $30,000 under the Copyright Act for the infringement of a single copyright, for a total of $330,000.

The Court finds that the amount of statutory damages sought by plaintiff is reasonable and in conformity with awards courts have previously granted it for statutory damages. See, e.g., McGee, 490 F. Supp. 2d at 882 (after defendants' default, awarding Microsoft statutory damages under the Copyright and Lanham Act for the maximum award for non-willful infringement for five marks and seven copyrights, totaling $710,000); Microsoft Corp. v. Sellers, 411 F. Supp. 2d 913, 921 (E.D. Tenn. 2006) (on summary judgment, awarding Microsoft statutory damages under both Acts for the maximum award for non-willful infringement for four marks and two copyrights, totaling $460,000); Black Cat Computer, 269 F. Supp. 2d at 123 (on summary judgment, awarding Microsoft statutory damages ...


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