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Arista Records LLC v. Usenet.com

September 16, 2010

ARISTA RECORDS LLC, ATLANTIC RECORDING CORPORATION, BMG MUSIC, CAPITOL RECORDS, LLC, CAROLINE RECORDS, INC., ELEKTRA ENTERTAINMENT GROUP INC., INTERSCOPE RECORDS, LAFACE RECORDS LLC, MAVERICK RECORDING COMPANY, SONY BMG MUSIC ENTERTAINMENT, UMG RECORDS, INC., VIRGIN RECORDS AMERICA, INC., WARNER BROS. RECORDS, INC., AND ZOMBA RECORDING LLC, PLAINTIFFS,
v.
USENET.COM, INC., SIERRA CORPORATE DESIGN, INC., AND GERALD REYNOLDS, DEFENDANTS.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., United States District Judge*fn1

OPINION & ORDER

In this copyright infringement action, this Court previously granted Plaintiffs'*fn2 motion for summary judgment in its entirety, granted Plaintiffs' motion for terminating sanctions in part, and dismissed Defendants'*fn3 cross-motion for summary judgment as moot. See Arista Records, LLC v. Usenet.com, Inc., 633 F. Supp. 2d 124, 129 (S.D.N.Y. 2009) (hereinafter the "Liability Decision"). The action was then referred to Magistrate Judge Theodore H. Katz for an inquest on damages. On February 2, 2010, Magistrate Judge Katz issued a detailed and articulate 23-page Report and Recommendation ("R&R"), in which he recommended that Defendants be held jointly and severally liable for statutory damages in the amount of $6,585,000. On February 15, 2010, Defendant Gerald Reynolds timely filed objections to Magistrate Judge Katz's R&R pursuant to 28 U.S.C. § 636(b)(1) and Federal Rule of Civil Procedure 72.*fn4 For the following reasons, after considering Reynolds's objections, and reviewing the remainder of the R&R for clear error, this Court approves, adopts, and ratifies Magistrate Judge Katz's R&R in its entirety.

I. BACKGROUND

A. Procedural History

Plaintiffs commenced this action on October 12, 2007, alleging (1) direct infringement of Plaintiffs' exclusive right of distribution, (2) inducement of copyright infringement, (3) contributory copyright infringement, and (4) vicarious copyright infringement,*fn5 for which Plaintiffs sought damages and injunctive relief. The case was referred to Magistrate Judge Katz for general pretrial supervision. Defendants' conduct during discovery was "dilatory at best, if not entirely evasive," see R&R at 2, and Magistrate Judge Katz sanctioned Defendants for spoliation of certain relevant evidence. See Arista Records, LLC v. Usenet.com, Inc., 608 F. Supp. 2d 409, 442-43 (S.D.N.Y. 2009). Plaintiffs then moved for summary judgment and sanctions pursuant to Rule 37(b)(2) (the latter based on additional misconduct by Defendants, which included "wiping" seven hard drives containing relevant evidence), and Defendants cross-moved for summary judgment based on their affirmative defense that they were protected under the safe harbor provision of the by the Digital Millennium Copyright Act ("DMCA").. In my decision of June 30, 2009, I precluded Defendants from proceeding with their affirmative defense under the DMCA's safe harbor provision, and with that Defendants' cross-motion was mooted. Further, I found that there was no issue of material fact as to Defendants' joint and several liability on all of Plaintiffs' claims. Accordingly, I referred the action to Magistrate Judge Katz for an inquest on damages.*fn6

B. Magistrate Judge Katz's Report & Recommendation

After a carefully reasoned application of section 504(c) of the Copyright Act to the facts of this case, Magistrate Judge Katz recommended that Defendants be held jointly and severally liable for $6,585,000. Plaintiffs had sought statutory damages of $131,700,000. They arrived at this number by multiplying the number of works alleged to have been infringed (878) by the maximum amount of statutory damages allowed for willful infringement ($150,000 per infringement; see 17 U.S.C. § 504(c)(2)). In response, Reynolds*fn7 did not dispute the number of works infringed but suggested that the Court award the minimum amount of damages available for innocent infringement ($200 per infringement; see id.). Thus, Reynolds urged that damages be assessed at no more than $175,600.

First, Magistrate Judge Katz noted that Plaintiffs had elected to receive statutory damages, which are based on the number of works infringed rather than the number of times a defendant infringed each work. Magistrate Judge Katz calculated the number of works infringed to be 878, noting that there was no dispute among the parties about this number. The next step in the analysis was to calculate the amount of damages to award Plaintiffs for each work infringed by Defendants. Magistrate Judge Katz considered seven relevant factors that he identified from the caselaw: (1) expenses saved and profits earned by the infringer, (2) revenues lost by the plaintiff, (3) the value of the copyright to the plaintiff, (4) the deterrent effect the award would have on those other than the infringer, (5) the willfulness of the infringer's conduct, (6) whether the infringer cooperated in providing records to assess the value of the material infringed, and (7) the likelihood that the award will discourage the defendant from repeating its infringement. See R&R at 8-9 (citing Fitzgerald Publishing Co. v. Baylor Publishing Co., 807 F.2d 1110, 1117 (2d Cir. 1986); U2 Home Entertainment, Inc. v. Hong Wei Int'l Trading, Inc., No. 04 Civ. 6189, 2008 WL 3906889 (S.D.N.Y. Aug. 21, 2008); Arclightz & Films Pvt. Ltd. v. Video Palace Inc., 303 F. Supp. 2d 356, 362 (S.D.N.Y. 2003)). In addition, Magistrate Judge Katz considered amounts that have been awarded in similar cases. Ultimately, Magistrate Judge Katz arrived at an amount of $7,500 for each work, which amounts to $6,585,000 in total. Finally, Magistrate Judge Katz rejected Defendants' argument that this amount offended due process.

C. Reynolds's Objections

Though Reynolds was represented by counsel earlier in these proceedings, he is now pro se.*fn8 His sixteen objections to Magistrate Judge Katz's R&R, some of which overlap, run on for thirty-eight pages and are accompanied by a rather thick stack of exhibits. First, Reynolds argues that because he is now pro se he does not have access to discovery documents designated "attorneys' eyes only," so he is unable to "mount any type of defense." Reynolds Objections at 8. Second, Reynolds argues that Magistrate Judge Katz's recommended damages award is unconstitutionally excessive. Furthermore, Reynolds argues that Magistrate Judge Katz committed other errors, including that it was erroneous to find that Reynolds "willfully" infringed Plaintiffs' copyrights; that there was no finding of a "clear expression" of intent to induce infringement; that it was erroneous to award damages to deter non-parties; that Magistrate Judge Katz failed to recognize that Reynolds did not profit from the infringement; that the number of works infringed was improperly calculated; and that Magistrate Judge Katz erred in his "speculation" as to Plaintiffs' lost revenue.

II. LEGAL STANDARD

This Court "may accept, reject, or modify, in whole or in part, the findings or recommendations" of a magistrate judge. 28 U.S.C. § 636(b)(1); New York District Council of Carpenters Pension Fund v. Perimeter Interiors, Inc., 657 F. Supp. 2d 410, 414 (S.D.N.Y. 2009). This Court reviews de novo those parts of the R&R to which objections are made, and reviews the remainder for clear error. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3); Perimeter Interiors, 657 F. Supp. 2d at 414. "When a party makes only generalized or conclusory objections, or simply reiterates his original arguments, the Court reviews a magistrate judge's report and recommendation for clear error." Perimeter Interiors, 657 F. Supp. 2d at 414. However, motions by pro se litigants "must be construed liberally and interpreted to raise the strongest arguments that they suggest." Triestman v. Federal Bureau of Prisons, 470 F.3d 471, 474 (2d Cir. 2006) (emphasis in original) (internal quotation marks and citations omitted).

III. DISCUSSION

A. Law of the ...


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