The opinion of the court was delivered by: Hurley, Senior District Judge
MEMORANDUM OF DECISION & ORDER
Plaintiff, Microsoft Corporation, ("Plaintiff" or "Microsoft") commenced this lawsuit asserting various causes of action premised on Defendants alleged distribution of counterfeit or unlicensed software and components. Presently before the Court is Plaintiff's motion for partial summary judgment against Defendants Mitchell S. Ackerman ("Mitchell Ackerman") and Lee K. Ackerman ("Lee Ackerman").*fn1 For the reasons set forth below, the motion is granted in part and denied in part.
The following facts are undisputed unless otherwise noted.*fn2
I. Microsoft and Its Products
Microsoft is a Washington corporation that develops, advertises, markets, distributes, and licenses a number of computer software programs.
Microsoft's software programs are recorded on magnetic diskettes and/or CD-ROMs, and they are packaged and distributed together with associated proprietary materials such as user's guides, user's manuals, end user license agreements, and other components. Microsoft incorporates various security features into its software components, including hidden features and features that are difficult to replicate. Additionally, Microsoft distributes Certificates of Authenticity and Certificate of Authenticity Labels (sometimes referred to as "COAs," "COA labels" or "COALs"), which are special certificates or labeling components distributed with Microsoft software programs in order to help end-users verify whether they have genuine Microsoft software. COA labels are manufactured with holograms, heat sensitive threads and other security features that make unauthorized duplication difficult. According to Microsoft, it is common for sellers of counterfeit and infringing software to use counterfeit or illicit COA labels in order to deceive consumers into believing they are purchasing genuine Microsoft software. Microsoft's software identification specialists use these security features to determine whether the software is counterfeit or non-counterfeit.
Microsoft has registered a number of trademarks with the United States Patent and Trademark Office, including but not limited to "MICROSOFT," "WINDOWS," "POWERPOINT," and "OUTLOOK", which are used to identify Microsoft computer programs and computer programming services. Microsoft has never consented to Defendants' use of Microsoft's trademarks for counterfeit purposes.
The Ackermans operated an Internet-based business through a company website where customers could purchase purported Microsoft software, and through at least three accounts at various times on the eBay Internet auction website. Defendants operated these businesses using, inter alia, the name "Advanced Software Solutions." Mitchell Ackerman was president of the incorporated entity, AGA Solutions. He personally participated in the business by buying, selling and advertising the infringing software and related components, and personally received extensive proceeds from the business. Lee Ackerman was vice-president of operations for the corporation AGA Solutions. She personally took an active role in its management and finances, had check signing authority for the corporation, and received extensive financial draws from the proceeds of the business. The Ackermans were the owners of AGA Solutions and its only full time employees.
The primary outlet for Defendants' sales was through a website registered to Mitchell Ackerman at www.asoftwaresolutions.com. The opening page of this website represented that Defendants sold only "100% Genuine Products." Defendants' website described their business as "New York's fastest growing provider of Software and end-to-end IT Solutions," and included a picture of what purported to be a store with the "Advanced Software Solutions" name. In fact, there was no record of a store by the name "Advanced Software Solutions" in Jericho or the surrounding communities. Surveillance conducted by Microsoft revealed that Defendants were operating the business from their residence in Jericho, New York and were utilizing a private mailbox at a nearby UPS Store.
Microsoft obtained samples of the software purchased from Defendants and compared them to genuine software samples. The samples purchased from Defendants' business were obtained from four sources: (a) individuals and businesses who contacted Microsoft after purchasing software from Defendants, (b) Microsoft's own investigation and test purchases, (c) the United States Customs Service, and (d) the Nassau County Police (which searched and seized products at Defendants' residence).
Beginning approximately in May 2002, Microsoft received numerous complaints from individuals and businesses that contacted Microsoft about software they had allegedly purchased from Defendants. Most customer complaints originated through an on-line validation service that Microsoft provides to the public, which allows customers to verify whether their software is a genuine Microsoft product. Between approximately July 29 and September 28, 2005, Microsoft received and analyzed eighteen (18) samples of Microsoft Windows XP Pro that had been voluntarily submitted to Microsoft by sixteen (16) unrelated individuals located throughout the nation, each of whom contacted Microsoft after purportedly purchasing the software from Defendants. The analyses resulted in the following findings: all 18 CD-ROMs (software) that were submitted to Microsoft were counterfeit; all 10 COA labels that were submitted to Microsoft were counterfeit; and all seven user's manuals that were submitted to Microsoft were counterfeit. On or about October 27, 2005, Microsoft received and analyzed a sample of Microsoft Office 2003 Pro and a sample of Microsoft Windows XP Pro that had been voluntarily submitted by a business in Wisconsin that contacted Microsoft claiming to have purchased the software from Defendants. That analysis resulted in a finding that the CD-ROMs (software), COA labels and user's manuals were counterfeit. Finally, on or about October 21, 2002, Microsoft received and later analyzed a sample of Microsoft Office 2000 Premium that had been voluntarily submitted by an individual in Rhode Island who contacted Microsoft and reported purchasing the software from Defendants. That analysis determined that the CD-ROM (software) was genuine, but had been tampered by the placement of a sticker over the words "Not for Resale" on the disc.
B. Microsoft's Investigation
As a result of these customer complaints, Microsoft initiated its own investigation led by Tom Montgomery, Senior Investigator for Microsoft. As the investigation intensified between May and November 2005, multiple software orders were placed by private investigators working at Mr. Montgomery's direction. The orders were made using the on-line ordering feature on Defendants' site.
More specifically, between approximately May 31, 2005 and October 27, 2005, Microsoft received and analyzed samples of Microsoft Windows XP Pro (twice), Microsoft SQL Server 2000 Standard Edition, and Microsoft Office 2003 Pro that separately had been purchased by a private investigator from Defendants' site at www.asoftwaresolutions.com. Microsoft analyzed this software and determined that the CD-ROM (software), COA labels and user's manuals were counterfeit. On or about April 4, 2004, Microsoft received and analyzed a sample of Microsoft Office 2000 Premium that had been purchased by a private investigator from Defendants' website. That analysis determined that the CD-ROM (software) was genuine, but the product key had been tampered. Finally, six separate test purchases conducted by Microsoft between September 11, 2002 and October 11, 2005 also established that Defendants were also selling genuine Microsoft software that was not for resale or that Defendants were not licensed or authorized to sell, such as software provided pursuant to academic or volume licensing agreements. In his deposition, ...