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Cengage Learning, Inc. v. Shi

United States District Court, S.D. New York

March 21, 2017



          VERNON S. BRODERICK, United States District Judge:

         Plaintiffs Cengage Learning, Inc., Elsevier, Inc., McGraw-Hill Global Education Holdings, LLC, Pearson Education, Inc., and John Wiley & Sons, Inc., (collectively “Plaintiffs”) brought this copyright and trademark action against Defendant Mike Shi (“Shi”), doing business as and (the “Websites, ” and collectively with Shi, “Defendants”). Before me is the detailed and thorough Report and Recommendation of Magistrate Judge Frank Maas issued on September 3, 2015, (Doc. 45 (“Report” or “R&R”)), recommending that Plaintiffs be awarded $5 million in statutory damages under the Copyright Act, plus prejudgment interest from the date the Complaint was filed, calculated at the rate set forth in 28 U.S.C. § 1961. (R&R at 14.) The Report also recommends that a permanent injunction be entered against further infringing activities by Defendants. (Id.) Plaintiffs filed an objection to the Report on September 16, 2015, arguing that they are entitled to the full $16, 590, 000 in statutory damages which they requested, but otherwise agreeing with the Report's conclusions. (See Pls.' Resp. at 2; Pls.' Proposed Findings & Conclusions ¶¶ 62, 63.)[1]Because I agree with Magistrate Judge Maas's determination that Plaintiffs statutory damages should be limited to those under the Copyright Act, and that $5, 000, 000 is an appropriate amount to compensate Plaintiffs for their losses and to deter Defendants' infringing conduct, I ADOPT the Report and Recommendation in its entirety, and grant Plaintiffs' Motion for Default Judgment and Permanent Injunction Against Defendants.

         I. Factual and Procedural Background

         The facts set forth in the Report are incorporated herein by reference unless otherwise noted. On November 1, 2013, Plaintiffs initiated this action by filing their complaint, asserting claims against Defendants for trademark and copyright infringement. (“Compl.”).[2] While the precise nature of the claims is laid out in more detail in the Report, the Complaint broadly alleges that Plaintiffs are educational publishers and that Defendants are repeated infringers of Plaintiffs' intellectual rights who advertise and sell unauthorized copies of Plaintiffs' materials in the United States through the Websites. (Id. ¶¶ 2, 3.)

         Defendants never answered Plaintiffs' Complaint. On May 20, 2014, Plaintiffs filed a request for default against Defendants, (Doc. 23), and a declaration in support of the request for default, (Doc. 24). The Clerk of Court entered a Certificate of Default against Defendants on May 23, 2014. (Doc. 25.) Plaintiff sought, and I issued, an Order to Show Cause on August 26, 2014, (Doc. 27), which was served on Defendants via electronic mail on September 3, 2014, (Doc. 36), directing Defendants to show cause why an order should not be issued granting Plaintiff a default judgment. I held a show cause hearing on October 14, 2014, for which Defendant failed to appear, and I referred the action to Magistrate Judge Frank Maas for an inquest as to liability and damages. (See 10/14/2014 Tr.)[3]

         On October 29, 2014, Magistrate Judge Maas issued a Scheduling Order instructing that by December 23, 2014, Plaintiffs file an inquest memorandum, accompanied by supporting affidavits and exhibits, setting forth Plaintiff's proof of damages, including the costs of this action and, if applicable, Plaintiff's reasonable attorney's fees, together with proposed findings of fact and conclusions of law. (Doc. 41.) Magistrate Judge Maas further directed that Defendants file any opposition on or before January 6, 2015. (Id.)

         Plaintiffs filed their Proposed Findings of Fact and Conclusions of Law on December 23, 2014. (Doc. 44.) Plaintiffs sought $13, 590, 000 dollars in statutory damages under the Copyright Act, (Pls.' Proposed Findings & Conclusions ¶ 62), $3, 000, 000 in statutory damages under the Lanham Trademark Act, (id. ¶ 63), and an injunction permanently barring Defendants from engaging in a host of allegedly infringing activities, (id. ¶ 64).

         On September 3, 2015, Magistrate Judge Maas issued the Report recommending $5, 000, 000 in damages under the Copyright Act, along with prejudgment interest from the date the Complaint was filed, November 1, 2013, and that Defendants be permanently enjoined from further infringing on Plaintiffs' copyrights and trademarks. (R&R at 14.) The Report notified the parties that written objections were due within fourteen days of the service of the Report. On September 16, 2015, Plaintiffs filed an objection to the Report. (Doc. 46.)

         On November 22, 2016, Plaintiffs submitted a letter identifying subsequent authority supporting an award of statutory damages under both the Copyright Act and the Lanham Act. (Doc. 47.) The authority at issue is Innovation Ventures, LLC v. Ultimate One Distrib. Corp., 176 F.Supp.3d 137 (E.D.N.Y. 2016). The Court in Innovation Ventures awarded statutory damages under both the Copyright Act and the Lanham Act, stating:

The court finds that the injuries suffered by plaintiffs for trademark and copyright infringement are distinct, as contemplated by Congress in enacting two separate statutory schemes, neither of which precludes recovery under both statutes. Here, the damages sustained from defendants' copyright and trademark infringement are separate even though they arose from the same product.

Id. at 175. Plaintiffs requested that I consider their objection in light of Innovation Ventures, decline to adopt those aspects of Magistrate Judge Maas's Report finding Plaintiffs should not be awarded statutory damages under both the Copyright Act and the Lanham Act, (R&R at 9), and “award them statutory damages under the Lanham Act, in addition to the Copyright Act.” (Doc. 47 at 3.)

         II. Legal Standard

         In reviewing a magistrate judge's report and recommendation, a district court “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1). Parties may raise specific, written objections to the report and recommendation within fourteen days of being served with a copy of the report. Id; see also Fed. R. Civ. P. 72(b)(2). When a party submits a timely, specific objection, a district court reviews de novo the parts of the report and recommendation to which the party objected. 28 U.S.C. § 636(b)(1); see also Fed. R Civ. P. 72(b)(3). With regard to a report and recommendation that is not objected to, or the unobjected-to portions of a report and recommendation, a district court reviews the report and recommendation, or the unobjected-to portion thereof, for clear error. DiPilato v. 7-Eleven, Inc., 662 F.Supp.2d 333, 339 (S.D.N.Y. 2009); Lewis v. Zon, 573 F.Supp.2d 804, 811 (S.D.N.Y. 2008); Wilds v. United Parcel Serv., Inc., 262 F.Supp.2d 163, 169 (S.D.N.Y. 2003). When a party makes only conclusory or general objections, or simply reiterates the original arguments, the Court will review the Report strictly for clear error. See Pearson-Fraser v. Bell Atl., No. 01-CV-2343, 2003 WL 43367, at *1 (S.D.N.Y. Jan. 6, 2003).

         “Even when a default judgment is warranted based on a party's failure to defend, the allegations in the complaint with respect to the amount of damages are not deemed true.” Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999). “A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c). The Court “should take the necessary steps to establish damages with reasonable ...

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