Island Software & Computer Service, Inc. v. Microsoft Corp.

413 F.3d 257, 67 Fed. R. Serv. 719, 75 U.S.P.Q. 2d (BNA) 1290, 2005 U.S. App. LEXIS 12766, 2005 WL 1514234
CourtCourt of Appeals for the Second Circuit
DecidedJune 28, 2005
DocketDocket No. 04-0744-CV
StatusPublished
Cited by7 cases

This text of 413 F.3d 257 (Island Software & Computer Service, Inc. v. Microsoft Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Island Software & Computer Service, Inc. v. Microsoft Corp., 413 F.3d 257, 67 Fed. R. Serv. 719, 75 U.S.P.Q. 2d (BNA) 1290, 2005 U.S. App. LEXIS 12766, 2005 WL 1514234 (2d Cir. 2005).

Opinion

CALABRESI, Circuit Judge.

This appeal involves, primarily, the proof needed for finding, at the summary judgment stage, that copyright infringement was “willful.” In the absence of evidence conclusively demonstrating actual, rather than constructive, knowledge of infringement, we conclude that summary judgment on the question of willfulness was inappropriate.

[259]*259I. BACKGROUND

Defendant-counter-claimant-appellee Microsoft Corporation (“Microsoft”) designs and manufacturers a number of popular software programs, each of which is covered by various copyrights and bears the company’s registered trademarks. Microsoft has created a large anti-piracy program to police its rights to these and other forms of intellectual property. As part of that program, Microsoft employs regional private investigation firms to acquire purportedly authentic Microsoft products from local retailers and then forward those products to Microsoft’s headquarters for testing.

On November 1, 2000, Nicholas Gouzien, a private investigator employed by a company participating in Microsoft’s anti-piracy program, visited Plaintiff-counter-defendant-appellant Island Software and Computer Service, Inc. (“Island”), a small software retailer and computer repairer in Coram, New York. Gouzien asked Island for copies of three Microsoft software programs — Windows 95, Windows 98, and Office 2000 Professional. An Island employee told Gouzien that Island did not have the programs at the moment. But the employee said that, in the near future, Island could obtain the software from COST, Inc. (“COST”), one of Island’s suppliers, and then send it to Gouzien. Gouz-ien agreed to this arrangement, and paid cash, in advance of delivery, for all three programs. Island charged Gouzien $60 for one unit of Windows 95, $80 for one unit of Windows 98, and $268 for one unit of Office 2000 Professional.

On November 16, 2000, Gouzien received the three requested software programs as promised. He sent them to Microsoft’s headquarters in Redmond, Washington, where they were analyzed by Kristi Lamb Bankhead, a Microsoft paralegal trained to detect counterfeit Microsoft products. Bankhead determined that the Windows 95 CD-ROM, Windows 95 packaging, and Windows 98 packaging Gouzien obtained from Island were genuine. But she found that the Windows 98 CD-ROM, the Office 2000 Professional CD-ROM, and the Office 2000 Professional packaging were counterfeit. Based on Bankhead’s conclusions, Microsoft sent Island a “cease and desist” letter on February 1, 2001, informing Island of Microsoft’s investigation and findings. In that letter, Microsoft threatened future litigation unless Island made a payment of $15,060 and identified the supplier of the counterfeit merchandise.

Rather than comply with those demands, Island filed suit in the Eastern District of New York on February 9, 2001, seeking a declaration of non-infringement of Microsoft’s trademarks and copyrights. Microsoft responded on April 6, 2001, by filing counterclaims for copyright infringement under the Copyright Act, 17 U.S.C. § 501 et seq., trademark infringement under the Lanham Act, 15 U.S.C. § 1114 et seq., false designation of origin under the Lanham Act, 15 U.S.C. § 1125 et seq., and unfair competition under New York common law. Microsoft sought both injunctive relief and statutory damages for Island’s asserted acts of infringement, and further requested that the statutory damages be enhanced on the basis of Island’s alleged willfulness in violating Microsoft’s rights.

On January 24, 2003, the district court (Wall, M.J.) denied summary judgment on Microsoft’s unfair competition claims, but granted summary judgment to Microsoft on its claims for trademark and copyright infringement. With respect to Microsoft’s trademark claim, the court determined that Microsoft’s evidence (including affidavit testimony from Gouzien and Bankhead, as well as deposition testimony from Brun-ner) established all the necessary elements, including trademark ownership and [260]*260a likelihood of consumer confusion, of trademark infringement under the Lan-ham Act. As to Microsoft’s copyright claims, the court found that Microsoft’s submission of its copyright registration forms conclusively established its ownership of the copyrights to Windows 98 and Office 2000. And the court specifically rejected as “without merit” Island’s contention that the certificates were inadmissible for want of a sworn declaration. It then concluded that, on the undisputed evidence before it, Island’s distribution of unauthorized Microsoft products violated Microsoft’s exclusive rights under 17 U.S.C. § 106. Finally, the court held that, while Brunner’s deposition testimony established a genuine issue of fact as to Brunner’s actual knowledge of Island’s infringing activities, his “constructive knowledge” and “reckless disregard” were un-controverted, and hence that a finding of willful copyright infringement was appropriate.

The district court awarded Microsoft $240,000 in statutory damages ($30,000 for each of the eight copyrighted works at issue).1 It did so after “[cjonsidering all of the relevant factors, including the finding that Island’s and Brunner’s behavior amounted to reckless disregard or willful blindness.” While the court made reference to its finding of willfulness, the damage award granted did not fall in the enhanced range authorized (though not required) to remedy willful infringement. Instead, the court awarded Microsoft the maximum in non-enhanced statutory damages under the Copyright Act. See 17 U.S.C. § 504(c). It also enjoined Island from engaging in activities that would infringe Microsoft’s intellectual property rights.

II. DISCUSSION

Island now appeals the district court’s grant of summary judgment to Microsoft. It also seeks to vacate the district court’s award of statutory damages and of a permanent injunction.

A. Standard of Review

Summary judgment may not be granted unless there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c). We review de novo a district court’s grant of summary judgment. See Holt v. KMI-Continental, Inc., 95 F.3d 123, 128 (2d Cir.1996). In so doing, we view the facts in the light most favorable to Island, and draw all reasonable inferences in its favor. See Castle Rock Entm’t, Inc. v. Carol Publ’g Group, Inc., 150 F.3d 132, 137 (2d Cir.1998).

B. Copyright Infringement

Island challenges the district court’s summary judgment on Microsoft’s copyright infringement claim. Accordingly, it is to that which we now turn.

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413 F.3d 257, 67 Fed. R. Serv. 719, 75 U.S.P.Q. 2d (BNA) 1290, 2005 U.S. App. LEXIS 12766, 2005 WL 1514234, Counsel Stack Legal Research, https://law.counselstack.com/opinion/island-software-computer-service-inc-v-microsoft-corp-ca2-2005.