1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CNC SOFTWARE, LLC, Case No. 22-cv-02488-EMC
8 Plaintiff, ORDER ADOPTING IN PART 9 v. MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION 10 GLOBAL ENGINEERING LIMITED GRANTING PLAINTIFF’S MOTION LIABILITY COMPANY, et al., FOR DEFAULT JUDGMENT 11 Defendants. Docket Nos. 29, 33 12 13 14 I. INTRODUCTION 15 Plaintiff CNC Software, LLC (“CNC”) brought this case against Defendants Global 16 Engineering LLC (“Global”) and Edwin Escobar, President of Global, for copyright infringement 17 in violation of the Copyright Act, 17 U.S.C. § 101 et seq., for violation of the Digital Millennium 18 Copyright Act’s anticircumvention prohibitions, 17 U.S.C. §§ 1201 and 1203, and for breach of 19 contract. See Docket No. 1 (Complaint). CNC alleges that Defendants illegally pirated CNC’s 20 Mastercam® software. Id. Defendants have neither opposed the action nor appeared. Now 21 pending before this Court is CNC’s motion for default judgment. In the motion, CNC seeks actual 22 damages, a permanent injunction, attorney’s fees, costs, and post-judgment interest pursuant to 28 23 U.S.C. § 1961(a). See Docket No. 29 (“Mot.”) at 13–20. 24 For the following reasons, this Court ADOPTS IN PART the Magistrate Judge’s Report 25 and Recommendation GRANTING Plaintiff’s motion for default judgment. 26 II. FACTS AND PROCEDURAL HISTORY 27 CNC is a Connecticut company in the CAD/CAM (“Computer Aided Design/Computer 1 software applications. See id. ¶ 26. Mastercam® is CNC’s “flagship product,” and it is used in a 2 variety of industries including aerospace, medicine, and transportation. See id. Mastercam® is 3 protected by at least thirteen United States copyrights owned by CNC. See id. ¶¶ 12–24. 4 CNC licenses use of Mastercam® to its customers. See id. ¶ 34. The number of 5 simultaneous users of Mastercam® is limited by the number of licenses purchased. See id. CNC 6 prevents unauthorized use of Mastercam® through a “Security Mechanism.” See id. CNC’s 7 license agreement provides that licensees cannot use the Mastercam® software without the 8 “Security Mechanism” and that Mastercam® can detect the installation or use of illegal copies of 9 the Mastercam® software and collect and transmit data about those illegal copies. See id. 10 To illegally use Mastercam®, hackers reverse engineer the “Security Mechanism” and then 11 provide processes and utilities to bypass the license enforcement agreement. See id. ¶ 34. These 12 processes and utilities mimic the license verification technology such that the pirated software can 13 function as if it were properly licensed Mastercam® software. See id. These pirated software 14 programs that mimic properly licensed programs are referred to as “cracked” licenses. See id. 15 The illegally obtained software and the cracked copies can be downloaded by other end-users for 16 free or for deeply discounted prices. See id. ¶¶ 32, 35. 17 Piracy Detection and Reporting Security Software (PDRSS) allows software providers to 18 identify software piracy and provides the identity and location of organizations using the pirated 19 software. See id. ¶ 37. CNC embeds PDRSS within their software. See id. ¶ 40. Using the 20 PDRSS within Mastercam®, CNC identified Defendants as using pirated versions of 21 Mastercam®. See id. ¶ 48. CNC identified at least 4,000 instances of Defendants using pirated 22 versions of Mastercam® on at least eleven computers owned by Defendants or its employees 23 between February 16, 2018, and April 22, 2022 See id. ¶ 52. 24 CNC attempted to contact Defendants to resolve the illegal use of Mastercam® on multiple 25 occasions. See id. ¶¶ 55–62. Defendants ignored most of this outreach; when they finally 26 responded on February 16, 2022, no agreement was reached. See id. During these outreach 27 attempts and associated discussions, Defendants continued to use pirated versions of Mastercam® 1 On April 22, 2022, CNC filed this suit against Defendants for direct copyright 2 infringement and contributory and vicarious copyright infringement. See Compl. On June 14 and 3 September 8, 2022, CNC served Defendants a copy of documents for service. See Docket No. 19 4 (Certificate of Service); Docket No. 29-2 (Declaration of Milord A. Keshishian (“Keshishian 5 Decl.”)) ¶¶ 2–3. Defendants did not respond. CNC then filed a request for an entry of default, 6 which was entered by the Clerk of the Court for Mr. Escobar and Global on October 3, 2022, and 7 November 29, 2022, respectively. See Docket Nos. 21, 27. 8 On January 5, 2023, CNC filed this motion seeking actual damages, a permanent 9 injunction, fees and costs, and post-judgment interest pursuant to 28 U.S.C. § 1961(a). See Mot. at 10 13–20. On January 23, 2023, Magistrate Judge Thomas Hixson asked CNC for supplemental 11 briefing regarding its request for attorney’s fees. See Docket No. 30. CNC filed the supplemental 12 briefing on February 10, 2023. See Docket No. 32. 13 On January 26, 2023, CNC filed its “proposed findings of fact and conclusions of law” 14 with Judge Hixson. See Docket No. 31. On March 23, 2023, Judge Hixson issued his report and 15 recommendations on Plaintiff’s motion, which fully adopted Plaintiff’s proposal. See Docket No. 16 33. That same day, the case was reassigned to this Court. 17 III. LEGAL STANDARD 18 A. Standard of Review of a Magistrate Judge’s Recommendation 19 District courts review proposed findings and recommendations of magistrate judges de 20 novo. See 28 U.S.C. § 636(b)(1)(C) (“A judge of the court may accept, reject, or modify, in whole 21 or in part, the findings or recommendations made by the magistrate judge.”). 22 B. Entry of a Default Judgment 23 Federal Rule of Civil Procedure 55(b)(2) permits a district court, following default by a 24 defendant and request by a party, to enter a default judgment. Fed. R. Civ. Proc. 55(b)(2). “The 25 district court’s decision whether to enter default judgment is a discretionary one.” Aldabe v. 26 Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). 27 “With the exception of facts relating to damages, courts must take as true all other factual 1 416 F. Supp. 3d 948, 962 (N.D. Cal. 2019). “However, a defendant is not held to admit facts that 2 are not well-pleaded or to admit conclusions of law.” DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 3 847, 854 (9th Cir. 2007) (internal quotation marks omitted). “A default judgment must not differ 4 in kind from, or exceed in amount, what is demanded in the pleadings.” Fed. R. Civ. Proc. 54(c). 5 In Eitel v. McCool, the Ninth Circuit enumerated seven factors to consider when 6 considering a motion for a default judgment:
7 Factors which may be considered by courts in exercising discretion as to the entry of a default judgment include: (1) the possibility of 8 prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at 9 stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, 10 and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 11 12 782 F.2d 1470, 1471–72 (9th Cir. 1986). There, the Ninth Circuit also noted that “default 13 judgments are ordinarily disfavored . . . [and that] [c]ases should be decided upon their merits 14 whenever reasonably possible.” Id. at 1472. 15 IV. ANALYSIS 16 A. Threshold Jurisdictional Issues 17 Before ruling on the merits of a motion for default judgment, the Court must confirm that it 18 has jurisdiction over the subject matter of the litigation and the parties involved. See In re Tuli, 19 172 F.3d 707, 712 (9th Cir. 1999). 20 1. Subject Matter Jurisdiction 21 Section 1338 of Title 28 of the U.S. Code provides that “[t]he district courts shall have 22 original jurisdiction of any civil action arising under any Act of Congress relating to . . . 23 copyrights.” 28 U.S.C. § 1338. This Court thus has subject matter jurisdiction. 24 2. Personal Jurisdiction 25 a. Basis for Personal Jurisdiction 26 Global is a domestic limited liability company with its headquarters in California. See 27 Compl. ¶ 2. Global is therefore subject to the general personal jurisdiction of this Court. See 1 The Court has personal jurisdiction over Mr. Escobar, the President of Global, because he 2 is domiciled in California, the forum state. See Compl. ¶ 5; Seiko Epson Corp. v. Straightouttaink, 3 L.P., 2021 WL 7448739, at *3 (N.D. Cal. Dec. 8, 2021), report and recommendation adopted sub 4 nom. Seiko Epson Corp. v. Straightouttaink, L.P., 2022 WL 740919 (N.D. Cal. Jan. 28, 2022). 5 Venue is proper under 28 U.S.C. § 1391(a)(2) because a substantial part of the events or omissions 6 giving rise to the claim occurred in this district. 7 b. Service of Process 8 “A federal court does not have jurisdiction over a defendant unless the defendant has been 9 served properly under [Federal Rule of Civil Procedure 4].” Direct Mail Specialists, Inc. v. Eclat 10 Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988). Notice of service must be 11 “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency 12 of the action and afford them an opportunity to present their objections.” Mullane v. Cent. 13 Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950). 14 On September 8, 2022, Global confirmed receipt of the documents and returned a signed 15 Waiver of Service of Summons to Plaintiff’s counsel pursuant to Federal Rule of Civil Procedure 16 4(d)(1). Keshishian Decl. ¶ 1; Docket No. 18. CNC personally served Mr. Escobar on June 14, 17 2022, pursuant to Federal Rule of Civil Procedure 4(e)(2)(A). See Keshishian Decl. ¶ 2. 18 Neither Defendant responded to the complaint and the Court subsequently entered default 19 judgment against both Defendants. See Docket Nos. 21, 27. All procedural requirements for entry 20 of default judgment have been satisfied. 21 B. Eitel Factors 22 Application of the seven Eitel factors counsels in favor of a default judgment. 23 1. The Possibility of Prejudice 24 In evaluating the first factor, the possibility of prejudice, “[c]ourts have found such 25 prejudice when a defendant has failed to appear or defend against a suit, and the plaintiffs could 26 not otherwise seek relief.” Vietnam Reform Party, 416 F. Supp. 3d at 962. Plaintiffs filed this 27 action almost one year ago and have yet to receive a response from Defendants. Defendants’ 1 and securing compensation for past infringement. See id. (“Because Defendants . . . have not 2 appeared in this long-running action, Plaintiff would be prejudiced absent a default judgment 3 because it would have no other recourse to prevent infringement by Defendants.”). The first factor 4 weighs in favor of Plaintiffs. 5 2. Merits and Sufficiency of the Claims 6 “The second and third Eitel factors consider the merits and sufficiency of a plaintiff's 7 claims.” Vietnam Reform Party, 416 F. Supp. 3d at 962. “These two factors are often analyzed 8 together and require courts to consider whether a plaintiff has state[d] a claim on which [it] may 9 recover.” Id. (internal quotation marks omitted). “Of all the Eitel factors, courts often consider 10 the second and third factors to be the most important.” Id. (internal quotation marks omitted). 11 a. Digital Copyright Infringement 12 The Copyright Act provides monopoly protection to “original works of authorship.” See 13 17 U.S.C. §§ 101–103. “To establish [copyright] infringement, two elements must be proven: (1) 14 ownership of a valid copyright, and (2) copying of constituent elements of the work that are 15 original.” Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). Both are 16 easily met here. 17 First, CNC points to thirteen unique copyrights that it owns related to Mastercam®. See 18 Compl. ¶¶ 12–24. This satisfies the first element. 19 “To prove the ‘copying’ element, a plaintiff must catch the defendant in the act or can 20 demonstrate (1) circumstantial evidence of the defendant’s access to the copyrighted work; and (2) 21 substantial similarity between the copyrighted work and the defendant's work.” CNC Software, 22 Inc. v. T D Mfg., Inc., No. SACV819CV1444JLSJDE, 2020 WL 2042330 at *3 (C.D. Cal. Mar. 23 24, 2020). As in T D Mfg., here, “copying is established because the pirated software is a cracked 24 version of the licensed software.” Id.; see Compl. ¶ 48. Every time Defendants loaded the 25 cracked software onto their computers, they infringed on Plaintiff’s copyright, and CNC was able 26 to “catch [D]efendants in the act” using the PDRSS embedded within Mastercam®. See Compl. ¶ 27 40; MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 520 (9th Cir. 1993) (affirming “the 1 copyright through the unlicensed use of MAI software at Peak headquarters”); T D Mfg., Inc., 2 2020 WL 2042330 at *3 (“Defendants’ loading of the pirated software onto their several 3 computers and unlicensed use of the software constitutes copyright infringement.”). 4 Mr. Escobar, as President of Global, is also directly liable for Global’s infringement. In its 5 complaint, CNC alleges that the pirated Mastercam® software was used almost 4,000 times across 6 at least eleven computers owned or controlled by Defendants. See Compl. ¶¶ 52–54. “[A] 7 corporate officer who participates in the commission of a tort may be held individually liable, 8 regardless of whether the officer acted on behalf of the corporation in the course of official duties 9 and regardless of whether the corporate veil is pierced.”1 In re JUUL Labs, Inc., Mktg., Sales 10 Pracs., & Prod. Liab. Litig., 497 F. Supp. 3d 552, 670 (N.D. Cal. 2020); see also Michaelis v. 11 Benavides, 61 Cal. App. 4th 681, 686, 71 Cal. Rptr. 2d 776, 778–79 (1998) (finding respondent 12 “personally liable for the negligent act by his direct participation and decisionmaking” which 13 “prevent respondent from using the corporate veil to shield himself from personal liability”); 14 Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999) (holding 15 that an officer cannot “hide behind the corporation where he is an actual participant in the tort”). 16 This principle applies because corporate officers “individually owe a duty of care, independent of 17 the corporate entity’s own duty, to refrain from acting in a manner that creates an unreasonable 18 risk of personal injury to third parties.” Universal Church, Inc. v. Standard Constr. Co. of San 19 Francisco, Inc., No. 14-CV-04568-RS, 2015 WL 7753211, at *3 (N.D. Cal. Dec. 2, 2015). 20 CNC has also sufficiently shown that Defendants’ actions were willful. “[A] finding of 21 ‘willfulness’ in [the copyright] context can be based on either ‘intentional’ behavior, or merely 22 ‘reckless’ behavior.” In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008). In the Complaint, 23
24 1 The Court notes that CNC does not argue an alter ego theory. Under the “alter ego” equitable doctrine, “[a] corporate identity may be disregarded—the ‘corporate veil’ pierced—where an 25 abuse of the corporate privilege justifies holding the equitable ownership of a corporation liable for the actions of the corporation,” such as “when the corporate form is used to perpetuate a fraud, 26 circumvent a statute, or accomplish some other wrongful or inequitable purpose.” Troyk v. Farmers Grp., Inc., 171 Cal. App. 4th 1305, 1341 (2009). But there is no need to pierce the 27 corporate veil “where officers direct, order, or participate in the company’s tortious conduct” to 1 Plaintiffs identified six occasions on which they reached out to Defendants to discuss the illegal 2 use of Mastercam®. See Compl. ¶¶ 55–65. Mr. Escobar responded to one of those messages and 3 said that he wanted to discuss the unlicensed use of Mastercam®, but little came of those 4 discussions and the illegal use continued. See id. ¶¶ 60–61. Prior to Mr. Escobar’s response, 5 Defendants actions were at least reckless. Defendants ignored CNC’s attempts to contact them 6 and, at best, failed to follow up on allegations that they were illegally using Mastercam®. And 7 after Mr. Escobar’s response, Defendants knew that their continued use of Mastercam® was illegal 8 because CNC explained as much to Mr. Escobar. Defendants nevertheless continued to use 9 Mastercam®. Further, CNC has explained that downloading and using unlicensed versions of 10 Mastercam® cannot be done unwittingly. See id. ¶ 51. Rather, accessing an unlicensed version of 11 Mastercam® “is a multi-step process that requires willful and deliberate action to circumvent the 12 PDRSS and other components of the Security Mechanism that are put in place to deter and detect 13 unlicensed use of software.” Id. CNC has thus carried its burden of showing that Defendant’ 14 illegal use of Mastercam® was willful. CNC has satisfied the elements of digital copyright 15 infringement for purposes of the second and third Eitel factors. 16 b. Mr. Escobar’s Contributory/Vicarious Copyright Infringement 17 Mr. Escobar is liable for contributory copyright infringement if he had “knowledge of the 18 infringing activity and induce[d], cause[d], or materially contribute[d] to the [activity].” Perfect 19 10, Inc. v. Amazon.com, Inc., 487 F.3d 701, 727 (9th Cir. 2007); overruled on other grounds by 20 Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 160 (2010). “In addition, a party is vicariously 21 liable for the infringement of another if it has a right and ability to control the infringing activity 22 and derives a direct financial benefit from that activity.” T D Mfg., Inc., 2020 WL 2042330 at *4 23 (citing Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 931 n.9 (2005)); see 24 also Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1021 (9th Cir. 1985) (“A 25 corporate ‘officer or director is, in general, personally liable for all torts which he authorizes or 26 directs or in which he participates, notwithstanding that he acted as an agent of the corporation and 27 not on his own behalf.’”). Here, Mr. Escobar was made aware of the infringing activity when he 1 Escobar “directed [Mastercam®’s] unauthorized use,” despite his knowledge that the use was 2 illicit. See id. ¶ 65; T D Mfg., Inc., No. SACV819CV1444JLSJDE, 2020 WL 2042330 at *4 3 (finding sole shareholder of a company vicariously liable for infringement of CNC’s Mastercam® 4 copyrights because he “was informed on numerous occasions of the pirated Mastercam® software 5 installed and used on TDM’s computers, but did not take any measures to prevent the 6 infringement”). Because this Court “must take as true all [non-damages-related] factual 7 allegations pled in the complaint,” the Court can conclude that Mr. Escobar knew of and directed 8 Global’s illicit use of Mastercam®. Vietnam Reform Party, 416 F. Supp. 3d at 962. CNC has thus 9 satisfied the elements of the vicarious infringement claim against Mr. Escobar for purposes of the 10 second and third Eitel factors. 11 3. Money at Stake 12 “For this factor, ‘the court must consider the amount of money at stake in relation to the 13 seriousness of Defendant’s conduct.’” Id. (quoting Pepsico, Inc. v. Cal. Sec. Cans, 238 F. Supp. 14 2d 1172, 1176 (C.D. Cal. 2002)). “Default judgment is appropriate when the sum at stake is 15 tailored to the defendant’s specific misconduct.” Id. “The Court may consider a plaintiff’s 16 declarations, calculations and other documentations of damages.” Id. Precisely as in T D Mfg., 17 “Defendants engaged in the illegal copying . . . and use of pirated software for numerous years and 18 ignored numerous cease and desist demands.” Id. Moreover, like in T D Mfg., CNC has 19 conservatively requested only one year’s worth of damages. See Kennedy Decl. ¶ 92; id. 20 (“Defendants caused lost annual royalties for CNC, yet CNC is only seeking damages for only one 21 year of royalties and support for four computers.”). Here, “the damages sought are within a 22 conservative and permissible range, [so] such an award is not disproportionately large for the 23
24 2 Paragraph 7 of the Kennedy Declaration says that CNC is seeking damages related only to six computers, although it is confident that pirated versions of Mastercam® were copied onto at least 25 ten computers controlled by Defendants. See Kennedy Decl. ¶ 9. That conservative approach was cited by Judge Hixson in his recommendation. See Docket No. 33 at 10. And yet, paragraph 9 of 26 that Declaration appears to calculate actual damages based on all ten of the identified computers. See Kennedy Decl. ¶ 9 (“Based on Defendants’ infringement of the Mastercam® software suite 27 via 10 separate computers, CNC has been damaged in the amount of $870,000.00. Despite CNC’s 1 purposes of this factor.” Id. 2 4. Possibility of Dispute over Material Facts 3 “Where a plaintiff has filed a well-pleaded complaint, the possibility of dispute concerning 4 material facts is remote.” Wecosign, Inc. v. IFG Holdings, Inc., 845 F. Supp. 2d 1072, 1082 (C.D. 5 Cal. 2012) (citation omitted); see also Landstar Ranger, Inc. v. Parth Enterprises, Inc., 725 F. 6 Supp. 2d 916, 922 (C.D. Cal. 2010) (“Since [plaintiff] has supported its claims with ample 7 evidence, and defendant has made no attempt to challenge the accuracy of the allegations in the 8 complaint, no factual disputes exist that preclude the entry of default judgment.”). Here, CNC has 9 sufficiently pled its claims and Defendants have chosen not to contest the action. Thus, the 10 possibility of a dispute over material facts is slim. This factor weighs in favor of a default 11 judgment. 12 5. Whether Default was Due to Excusable Neglect 13 “The sixth Eitel factor considers the possibility that the default resulted from excusable 14 neglect.” PepsiCo, 238 F. Supp. 2d at 1177. “This factor favors a default judgment when the 15 defendant has been properly served or the plaintiff demonstrates that the defendant is aware of the 16 lawsuit.” T D Mfg., Inc., 2020 WL 2042330 at *5. Here, Defendants were repeatedly contacted 17 about the infringement, served with the required documents, and nevertheless have not appeared. 18 There is nothing to suggest that their failure to appear was due to excusable neglect. This factor 19 thus weighs in favor of default judgment. 20 6. Policy Favoring Deciding a Case on the Merits 21 While courts prefer to dispose of litigation on the merits, “Defendants’ refusal to 22 participate in this litigation made a decision on the merits impossible.” T D Mfg., Inc., 2020 WL 23 2042330 at *5; see Vietnam Reform Party, 416 F. Supp. 3d at 970 (“[D]eciding the case on the 24 merits is impossible where a party refuses to participate.”); PepsiCo, Inc., 238 F. Supp. 2d at 1177 25 (“Under Fed. R. Civ. P. 55(a), termination of a case before hearing the merits is allowed whenever 26 a defendant fails to defend an action.”). Defendants’ failure to respond tilts this factor in favor of 27 a default judgment. 1 default judgment is appropriate. 2 C. Relief Sought 3 Unlike allegations regarding liability, allegations regarding damages listed in the complaint 4 are not taken as true. See Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (“The 5 general rule of law is that upon default the factual allegations of the complaint, except those 6 relating to the amount of damages, will be taken as true.”); see also Fed. R. Civ. Proc. 55(b)(2)(B) 7 (“The court may conduct hearings or make referrals . . . it needs to . . . determine the amount of 8 damages.”). 9 1. Actual Damages 10 Section 504(a) of Title 17 of the U.S. Code permits a copyright infringement plaintiff to 11 recover “the copyright owner’s actual damages and any additional profits of the infringer.” 17 12 U.S.C. § 504(a). “The moving party has the burden to prove up damages.” United States v. 13 Sundberg, No. C-09-4085 EMC, 2011 WL 3667458 at *6 (N.D. Cal. Aug. 22, 2011). “Where the 14 amount of damages is liquidated or capable of ascertainment from definite figures contained in 15 documentary evidence or detailed affidavits, the Court may enter default judgment without a 16 hearing on damages.” Id. (internal quotation marks omitted). “[I]n situations where the infringer 17 could have bargained with the copyright owner to purchase the right to use the work, actual 18 damages are what a willing buyer would have been reasonably required to pay to a willing seller 19 for plaintiffs’ work.” Jarvis v. K2 Inc., 486 F.3d 526, 533–34 (9th Cir. 2007). 20 “Actual damages are usually determined by the loss in the fair market value of the 21 copyright, measured by the profits lost due to the infringement or by the value of the use of the 22 copyrighted work to the infringer.” Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 708 23 (9th Cir. 2004). “[I]t is not improper . . . to consider either a hypothetical lost license fee or the 24 value of the infringing use to the infringer to determine actual damages, provided the amount is 25 not based on undue speculation.” Id. at 709 (internal quotation marks omitted). 26 While Defendants’ failure to appear has prevented CNC from pursuing discovery to 27 identify the precise value of the damages, CNC has nonetheless come forward with evidence of 1 Mastercam®. CNC has identified ten computers with different usernames that used pirated 2 Mastercam® software. See Docket No. 29-3 (Declaration of Jacqueline Kennedy (“Kennedy 3 Decl.”)) ¶ 7. Jacqueline Kennedy, CNC’s Software Protection and Anti–Piracy Manager, further 4 declared to the Court that the pirated versions of Mastercam® used by Defendants were licensed 5 at $73,950 per seat per year with a mandatory per seat maintenance fee of $13,050, adding to a 6 total per seat per year cost of $87,000. See id. ¶ 8. Therefore, CNC has made a sufficient showing 7 that it is entitled to $870,000 in actual damages ($87,000 per seat x 10 seats). See T D Mfg., 2020 8 WL 2042330 at *5 (“CNC is entitled to its actual damages of a full suite Mastercam®® license 9 comprising $75,500.00 per computer and annual maintenance of $8,604 per computer . . . Thus, 10 based on the four hostnames (i.e. computers) identified in the PDRSS data, CNC is entitled to 11 actual damages of $336,416.00.”) (internal citation omitted). The Court thus awards CNC actual 12 damages of $870,000. 13 2. Permanent Injunction 14 “A permanent injunction is an appropriate remedy in default judgment cases involving 15 claims of copyright infringement.” T D Mfg., 2020 WL 2042330 at *6. Section 502(a) of Title 17 16 of the U.S.C. specifically provides that “[a]ny court having jurisdiction of a civil action arising 17 under this title may . . . grant temporary and final injunctions on such terms as it may deem 18 reasonable to prevent or restrain infringement of a copyright.” 17 U.S.C. § 502(a). “A permanent 19 injunction is appropriate where a plaintiff shows: (1) irreparable harm; (2) that monetary damages 20 are inadequate; (3) that the balance of hardships favors plaintiff; and (4) that an injunction would 21 benefit the public interest.” T D Mfg., 2020 WL 2042330 at *6 (citing eBay Inc. v. 22 MercExchange, L.L.C., 547 U.S. 388, 391–92 (2006)). 23 a. Irreparable Harm and Adequacy of Monetary Damages 24 “Jeopardy to [a corporation’s] competitive position caused by copyright infringement 25 satisfies the irreparable harm requirement.” Id. “The threat of the loss of prospective customers, 26 goodwill, or reputation also supports a finding of irreparable harm.” Id. “These intangible 27 injuries are irreparable because quantifying their harm is impractical, and such injuries cannot be 1 CNC alleges in its complaint that software that has been hacked or modified to use a 2 cracked license “may also contain malware that can damage computer systems, and/or infiltrate 3 the computer network and the data on that network.” Compl. ¶ 34. Permitting end-users to utilize 4 this lower-quality, malware-ridden version of Mastercam® would constitute a future injury to 5 CNC’s business and reputation. “Thus, a permanent injunction is the only remedy available to 6 CNC to limit the potential of future injury.” T D Mfg., 2020 WL 2042330 at *6 (citing Apple Inc. 7 v. Psystar Corp., 673 F. Supp. 2d 943, 950 (N.D. Cal. 2009) (money damages are insufficient 8 where they would not prevent defendant from continuing to infringe on copyrights), aff’d in part 9 and remanded in part on other grounds, 658 F.3d 1150 (9th Cir. 2011)). 10 b. Balance of Hardships 11 The balance of hardships weighs in favor of granting a permanent injunction. “While CNC 12 will be severely harmed by the continued infringement of its software, the harm to Defendants if 13 injunctive relief is granted is remote.” T D Mfg., 2020 WL 2042330 at *6. “While Defendants 14 will be able to continue in business, it will simply have to do without using pirated software.” Id. 15 “Therefore, any potential harm to Defendants is slight in comparison to the potential injury 16 suffered by CNC if an injunction does not issue.” Id. 17 c. Public Interest 18 “It is virtually axiomatic that the public interest can only be served by upholding copyright 19 protections, and correspondingly, preventing the misappropriation of the skills, creative energies, 20 and resources which are invested in the protected work.” T D Mfg., 2020 WL 2042330 at *6 21 (quoting Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1255 (3rd Cir. 1983)). 22 “Here, Defendants’ competitors’ interests would be protected because their project bids would not 23 be undercut by Defendants’ bids, where Defendants avoid software costs through use of pirated 24 software.” Id. “Injunctions are regularly issued pursuant to the mandate of Section 502, because 25 the public interest is the interest in upholding copyright protections.” Id. (quoting Arista Records, 26 Inc. v. Beker Ent., Inc., 298 F. Supp. 2d 1310, 1314 (S.D. Fla. 2003)). The public interest prong 27 also weighs in favor of granting a permanent injunction. 1 3. Destruction of Infringing Software 2 Section 503(a) of Title 17 of the U.S. Code provides that “the district court may order the 3 impounding, on such terms as it may deem reasonable . . . of all copies . . . claimed to have been 4 made or used in violation of the exclusive right of the copyright owner.” 17 U.S.C. § 503(a). 5 “Based on Defendants’ past conduct and continued wrongful use of the infringing software after 6 notice, it is possible that Defendants are still using and operating the Mastercam® software on 7 devices disconnected from the Internet.” T D Mfg., 2020 WL 2042330 at *6; Kennedy Decl. ¶ 10. 8 Accordingly, the Court orders that Defendants must, within 30 days of the entry of judgment in 9 this matter, both (1) delete all infringing software from their computers and (2) file with the Clerk 10 of this Court and serve CNC a report in writing, under oath, setting forth in detail the manner and 11 form in which they have complied with the injunction. See T D Mfg., 2020 WL 2042330 at *6 12 (ordering the same procedure in granting default judgment against defendants who failed to 13 appear). 14 4. Attorney’s Fees 15 In addition to permitting the recovery of costs, 17 U.S.C. § 505 allows a district court to 16 “allow the recovery of reasonable attorney’s fee to the prevailing party.” 17 U.S.C. § 505. 17 “Attorneys’ fees are proper when a court grants a default judgment.” Discovery Commc’ns., Inc. 18 v. Animal Planet, Inc., 172 F. Supp. 2d 1282, 1291 (C.D. Cal. 2001).3 19 When determining reasonable attorney’s fees in a copyright infringement action, “[t]he 20 [C]ourt determines reasonable attorneys’ fees according to the lodestar analysis, which multiplies 21
22 3 Typically, when evaluating a request for attorney’s fees in a copyright infringement case, courts in the Ninth Circuit consider “(1) the degree of success obtained; (2) frivolousness; (3) motivation; 23 (4) the objective unreasonableness of the losing party's factual and legal arguments; and (5) the need, in particular circumstances, to advance considerations of compensation and deterrence.” 24 Ent. Rsch. Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211, 1229 (9th Cir. 1997). However, in a default judgment case, the factors are easily met. CNC has obtained full success, 25 their complaint was not shown to be frivolous, they were motivated to recover legally cognizable damages, there was no objecting party to make any arguments, and attorney’s fees are warranted 26 to deter both Defendants’ substantive copyright infringement and their unresponsiveness to CNC’s filings. Consequently, most courts awarding attorney’s fees under 17 U.S.C. § 505 in a default 27 judgment case don’t address the factors from Genesis. See, e.g., T D Mfg., 2020 WL 2042330 at 1 the number of hours reasonably expended on the matter by a reasonable hourly rate.” Erickson 2 Prods. Inc. v. Kast, No. 13-CV-05472-DMR, 2022 WL 408436 at *3 (N.D. Cal. Feb. 10, 2022) 3 (citing Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). 4 “The party seeking fees bears the initial burden of establishing the hours expended 5 litigating the case and must provide detailed time records documenting the tasks completed and 6 the amount of time spent.” Erickson, 2022 WL 408436 at *3. “The requesting party also has the 7 burden to demonstrate that the rates requested are in line with the prevailing market rate of the 8 relevant community.” Id. (internal quotation marks omitted). “Typically, ‘affidavits of the 9 plaintiffs’ attorney and other attorneys regarding prevailing fees in the community and rate 10 determinations in other cases . . . are satisfactory evidence of the prevailing market rate.’” Id. 11 (quoting United Steelworkers of Am. v. Phelps Dodge Corp., 896 F.2d 403, 407 (9th Cir. 1990)). 12 a. Reasonableness of Hourly Billing Rate 13 CNC seeks $575/hour for the work of two senior attorneys with 24 and 19 years of 14 experience, respectively; $435/hour for a senior associate attorney with four years of experience; 15 $300/hour for one associate attorney with two years of experience; and $195/hour for legal 16 assistants, paralegals, and law clerks. See Docket No. 32 at 1–2. These rates “are in line with the 17 prevailing market rate” in the Northern District of California. See, e.g., Facebook, Inc. v. Holper, 18 No. 20-CV-06023-JCS, 2022 WL 17167958 (N.D. Cal. Sept. 27, 2022), report and 19 recommendation adopted as modified, No. C 20-06023 WHA, 2022 WL 17169836 at *15 (N.D. 20 Cal. Nov. 22, 2022) (determining that “$530 per hour for second-year associates . . . up to $725 21 per hour for a senior associate with significant practice experience . . . up to $780 per hour for a 22 counsel with nearly twenty years of experience . . . and up to $1,165 per hour of an office 23 managing partner with thirty years of experience . . . are within the reasonable range of the local 24 market); Recouvreur v. Carreon, 940 F. Supp. 2d 1063, 1070 (N.D. Cal. 2013) (approving 25 attorney’s fees of $700/hour for an attorney with more than 20 years of experience and that “has 26 spoken at several law schools and bar meetings, and has served as lead counsel on a number of 27 trademark cases”); Joe Myeress v. USA World Bus. Serv., Inc., No. 16-CV-05236-YGR (SK), 1 Myeress v. USA World Bus. Serv., Inc., No. 16-CV-05236-YGR, 2017 WL 976916 (N.D. Cal. 2 Mar. 14, 2017) (finding “$415 an hour for lead associate counsel with 8 years of experience, $395 3 an hour an associate with 4 years of experience and paralegal assistance at $295 per hour” 4 reasonable); In re LinkedIn User Priv. Litig., 309 F.R.D. 573, 591 (N.D. Cal. 2015) (noting that 5 “reasonable hourly rates . . . for paralegals and litigation support staff [range] from $150 to $240” 6 in the Bay Area). The Court finds CNC’s hourly billing rates to be reasonable. 7 b. Reasonableness of Hours Billed 8 “[D]istrict courts have a duty to ensure that claims for attorneys’ fees are reasonable, and a 9 district court does not discharge that duty simply by taking at face value the word of the prevailing 10 party’s lawyer for the number of hours expended on the case.” Vogel v. Harbor Plaza Ctr., LLC, 11 893 F.3d 1152, 1160 (9th Cir. 2018) (internal quotation marks and citations omitted). “Rather, a 12 district court must ensure that the winning attorneys have exercised billing judgment.” Id. 13 (internal quotation marks omitted). “In a case in which a defendant fails to appear or otherwise 14 defend itself, however, the burden of scrutinizing an attorney’s fee request—like other burdens— 15 necessarily shifts to the court.” Id. 16 Here, CNC has submitted a detailed schedule of the amount spent on each billed task. See 17 Docket No. 32-1 (Supplemental Declaration of Milord A. Keshishian (“Keshishian Supp. Decl.”)) 18 Exhs. 5–6. CNC explains that its attorneys expended 34.5 hours of work (across all three cost 19 buckets) and its legal assistants/paralegals/law clerks expended 16.6 hours of work in support of 20 their request of $19,743.50 in attorney’s fees. See Docket No. 32 at 6–7; Appendix Table 1. The 21 Court agrees with Magistrate Judge Hixson that CNC’s schedule does not suggest duplicative 22 billing or an unreasonably high number of hours, but that CNC has included a small number of 23 clerical or secretarial tasks in their schedule. See Docket No. 33 (Recommendation) at 19. The 24 Supreme Court in Missouri v. Jenkins held that “purely clerical or secretarial tasks should not be 25 billed at a paralegal rate, regardless of who performs them.” 491 U.S. 274, 288 n.10 (1989). 26 “When clerical tasks are billed at hourly rates, the court should reduce the hours requested to 27 account for the billing errors.” Nadarajah v. Holder, 569 F.3d 906, 921 (9th Cir. 2009). 1 events—were interspersed with non–clerical tasks. See Keshishian Supp. Decl., Exhs. 5–6; League 2 of Wilderness Defs./Blue Mountains Biodiversity Project v. Turner, 305 F. Supp. 3d 1156, 1171 3 (D. Or. 2018), appeal dismissed sub nom. League of Wilderness Defs./Blue Mountains 4 Biodiversity Project v. United States Forest Serv., 2019 WL 4453723 (9th Cir. Mar. 8, 2019) 5 (including court filings as among clerical tasks); Hernandez v. Spring Charter Inc., 2020 WL 6 1171121 at *7 (N.D. Cal. Mar. 11, 2020) (including calendaring as among clerical tasks). 7 8 TABLE 1: ATTORNEY’S FEE SCHEDULE WITH CLERICAL TASKS 9 UNDERLINED Dat Employee Hours Rate Dollars Task 10 e 4/22 SVT 0.70 $435 $304.50 A103 Draft/revise L210 Pleadings: 11 /22 Finalize and file 0.70 $435.00 Complaint, Civil Cover Sheet, Report 12 re Copyright, and Proposed Summons; Update docket and 13 calendar relevant events. 9/14 JH 0.20 $195 $39.00 Check status; Review Case 14 /22 Management Order; Update docket and calendar relevant events. 15 9/26 JH 0.50 $195 $97.50 Finalize and file Request to Enter /22 Default (Edwin Escobar); Escobar); 16 Serve via U.S. Mail; Update docket and calendar relevant events. 17 10/4 SVT 0.20 $435 $87.00 Review Entry Default Judgment re /22 Escobar and Notice $435.00 of 18 Default Judgment Procedure; Correspondence to John re deadlines; 19 Update docket and calendar relevant events. 20 10/1 EM 0.50 $195 $97.50 Finalize and file POS on Notice of 4/22 Default Judgment Procedures; File 21 update - Court docket ECF No. 23 (POS re Ntc of Default Judgment 22 Procedures) Update docket and calendar relevant events. 23 1/6/ EM 0.50 $195 $97.50 File update – Court docket ECF 23 No(s). 29 (Motion for Default 24 Judgement); Update docket and calendar relevant events; Serve 25 Defendants Motion for Default Judgment by mail and personal 26
27 When clerical tasks and interspersed with non-clerical tasks, courts in the Northern District of 1 Hernandez, 2020 WL 1171121, at *7; see also Crandall v. Starbucks Corp., 2016 WL 2996935, at 2 *4 (N.D. Cal. May 25, 2016) (deducting 0.1 per clerical task for entries interspersed with non- 3 clerical tasks). There are 2.6 total hours that include clerical tasks, 0.9 billed at $435/hour and 1.7 4 billed at $195/hour. As Magistrate Judge Hixson explained, that would represent a 0.09 hour and 5 0.17 hour reduction at those rates, respectively, leading to a total attorney’s fees reduction of 6 $72.30 ($435 x 0.09 + $195 x 0.17). 7 c. Lodestar Calculation 8 Factoring in above noted reduction in attorney’s fees, the Court awards attorney’s fees of 9 $19,671.20 (the requested amount of $19,743.50 less $72.30). See Appendix Table 1 (breakdown 10 of fee request by employee). 11 5. Costs 12 Section 505 of Title 17 of U.S. Code allows a district court to “allow the recovery of full 13 costs by or against any party.” 17 U.S.C. § 505. “Congress has specified six categories of 14 litigation expenses that qualify as ‘costs’” in 28 U.S.C. §§ 1821 and 1920, and courts may not 15 award litigation expenses beyond those enumerated in the statutes. Rimini St., Inc. v. Oracle USA, 16 Inc., 139 S. Ct. 873, 876 (2019). 17 CNC seeks costs totaling $635.21, comprised of the $402 filing fee, $180 for the process 18 server to serve the summons and complaint, and $53.21 in mailing fees. See Keshishian Decl. 19 ¶ 12, Keshishian Suppl. Decl. ¶ 8. Filing fees are allowable under 28 U.S.C. § 1920. See 28 20 U.S.C. § 1920 (allowing recovery of “[f]ees of the clerk and marshal”); Cummings v. Dolby 21 Lab’ys, Inc., No. 220CV04443ODWPVCX, 2021 WL 1564455 *3 (C.D. Cal. Apr. 20, 2021) 22 (applying Rimini St. and finding “that Defendants’ request for $400 for filing fees is appropriate”). 23 However, CNC relies on abrogated case law to support their request for service of process 24 and mailing fees. All the cases cited by Plaintiff were decided before the Supreme Court decided 25 Rimini St. and narrowed the types of costs that can be recovered in a copyright infringement 26 action. See, e.g., Kourtis v. Cameron, 358 F. App’x 863 (9th Cir. 2009); ExperExchange, Inc. v. 27 Doculex, Inc., No. C–08–03875 JCS, 2010 WL 1881484, at *12 (N.D. Cal. May 10, 2010); Yue v. 1 Trustees of Const. Industry and Laborers Health and Welfare Trust v. Redland Ins. Co., 460 F.3d 2 1253, 1258–1259 (9th Cir. 2006). Service of process and mailing costs are not enumerated in 3 either 28 U.S.C. § 1821 or § 1920, and the CNC has been unable to locate any case law awarding 4 those costs after Rimini St. Therefore, this Court rejects Magistrate Judge Hixon’s 5 recommendation to grant CNC the full $635.21 requested and award only $400 in costs to CNC. 6 6. Interest 7 “Interest shall be allowed on any money judgment in a civil case recovered in a district 8 court.” 28 U.S.C. § 1961(a); Autodesk, Inc. v. Flores, 2011 WL 337836, at *10 (N.D. Cal. Jan. 9 31, 2011) (awarding post-judgment interest in a default judgment proceeding). “Such interest 10 shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 11 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal 12 Reserve System, for the calendar week preceding the date of the judgment.” 28 U.S.C. § 1961(a). 13 Accordingly, the Court awards any interest that accrues according to the applicable rate pursuant 14 to § 1961(a). 15 V. CONCLUSION 16 For the foregoing reasons, the Court GRANTS CNC’s motion for default judgment. It 17 awards CNC actual damages of $870,000; a permanent injunction; an order directing Defendants 18 to destroy any infringing software from their computers; attorney’s fees of $19,671.20; costs of 19 $400; and any interest that accrues from the date of the default judgment. 20 TABLE 2: SUMMARY OF HOURS EXPENDED PER EMPLOYEE 21 Employee Title Hours Rate Dollars 22 John McInnes Copyright 15.7 $575 $9,027.50 Enforcement 23 Counsel Milford Litigation 0.6 $575 $345.00 24 Keshishian Counsel Stephanie Trice Litigation 16.3 $425 $7,090.50 25 Counsel 26 Evan Chavez Litigation 1.9 $300 $570.00 Counsel 27 Allison Olivia Legal Assistant 5.9 $195 $1,150.50 Emily Mifflin Paralegal 8.7 $195 $1,696.50 1 Excluded (2.7) $195 ($526.50) 2 Clerical Tasks Total $19,743.50 3
4 This order disposes of Docket Nos. 29 and 33. 5
6 IT IS SO ORDERED. 7
8 Dated: May 12, 2023 9
10 ______________________________________ 11 EDWARD M. CHEN United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27