Software Freedom Conservancy, Inc. v. Westinghouse Digital Electronics, LLC
Software Freedom Conservancy, Inc. v. Westinghouse Digital Electronics, LLC
Opinion of the Court
OPINION AND ORDER
I. INTRODUCTION
On December 14, 2009, the Software Freedom Conservancy, Inc. and Erik Andersen (“plaintiffs”) brought an action against fourteen commercial electronics distributors for copyright infringement. Plaintiffs now move to hold non-party Westinghouse Digital LLC (“WD”) in contempt of this Court’s earlier injunction against Westinghouse Digital Electronics, LLC (“WDE”) pursuant to Rule 65(d) of the Federal Rules of Civil Procedure. For the reasons discussed below, plaintiffs’ motion is granted.
II. BACKGROUND
In 1999, Andersen developed software, which he contributed to an open source computer program known as BusyBox.
In July of 2010, this Court entered a default judgment against WDE for failing to meet its discovery obligations and awarded plaintiffs permanent injunctive relief as well as damages.
A. Contempt
“A party may be held in contempt only if it is proven by ‘clear and convincing’ evidence that the party violated a ‘clear and unambiguous’ order of the court.”
B. Enjoining a Non-Party
“As a general matter, a court may not enjoin a non-party that has not appeared before it to have its rights legally adjudicated.”
an organization and its agents may not circumvent a valid court order merely by making superficial changes in the organization’s name or form, and in appropriate circumstances a court is authorized to enforce its order against a successor of the enjoined organization. Whether a new organization is the successor of an enjoined organization depends upon the facts and circumstances of the case. The critical inquiry is whether there is a substantial continuity of identity between the two organizations.13
“The party seeking enforcement of an order bears the burden of demonstrating that the persons to be held in contempt are within the scope of the injunction.”
C.Fair Use Doctrine
Under the fair use doctrine, “the fair use of a copyrighted work ... for purposes such as criticism, comment, news reporting, teaching ..., scholarship or research is not an infringement of copyright.”
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
*487 (2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.17
“The last factor is undoubtedly the single most important element of fair use.”
IV. DISCUSSION
WD argues that plaintiffs’ allegations do not support a finding of contempt for the following reasons: (1) WD does not fall under Rule 65(d) because it is not a successor to WDE; (2) its posting of the BusyBox code on its website was done pursuant to an Order from the Federal Communications Commission (“FCC”) and (3) its use of BusyBox on its website is a fair use.
A. Because There Is a Substantial Continuity of Identity Between WD and WDE, WD Is Within the Scope, and in Contempt of, the Injunction
This Court previously held that WD is not a successor in interest to WDE under Rule 26(c).
The hallmarks of a “substantial continuity of identity” clearly exist.
WD next argues that it purchased WDE’s assets before the injunction was issued and before plaintiffs even moved for an injunction, barring any potential for a finding of contempt.
In Golden State Bottling v. NLRB, the Supreme Court held that a purchaser who acquires assets can be held liable under Rule 65(d) if the assets were purchased with knowledge of the order.
B. WD’s Affirmative Defenses
Perhaps in anticipation of this Court’s finding that it is WDE’s successor for the purposes of Rule 65(d), WD argues that use of the BusyBox software “cannot be considered an act of copyright infringement.”
1. The 2008 FCC Order
WD asserts that plaintiffs’ contempt motion is based solely on WD’s maintenance of WDE’s old website, which allegedly contains the copyrighted Busy-Box code.
In April 2008, the FCC issued a Consent Decree relating to an investigation of WDE’s interstate shipment of television receivers that did not comply with FCC V-Chip technology requirements.
WD also argues that the fair use doctrine shields it from liability for copyright infringement.
This case is easily distinguishable from Gulfstream. Unlike the manuals at issue in that case, the BusyBox software was not “written in accordance with federal guidelines that significantly prescribed] [its] content and format” — a fact that led the Gulfstream court to conclude that “much, if not all, of Gulfstream’s manuals are not copyrightable.”
C. Remedies
Plaintiffs request that this Court award (1) coercive and compensatory damages, (2) attorneys’ fees and costs, and (3) an order for WD to deliver all infringing articles to plaintiffs for disposition.
1. Damages
“The imposition of civil contempt sanctions may serve dual purposes: to secure future compliance with court orders and to compensate the party that has been wronged.”
Unlike in Software Freedom I, plaintiffs here do not elect statutory damages and have made no recommendations to this Court as to the appropriate amount of coercive and compensatory damages. Without further information, I am unable to determine the proper amount of damages. The parties are therefore ordered to submit information regarding WD’s ability to pay and plaintiffs’ lost profits due to WD’s unauthorized use of BusyBox
2. Attorneys’ Fees and Costs
“It is well settled in this Circuit that costs, including reasonable attorneys’ fees, may be awarded to the party who prosecutes a contempt motion as an appropriate compensatory sanction for contumacious behavior.”
3. Forfeiture of Infringing Articles
WD is also ordered to deliver all infringing articles to plaintiffs for disposition under the same rationale as that provided in Software Freedom 1.
V. CONCLUSION
For the aforementioned reasons stated above, plaintiffs’ motion to hold WD in contempt of this Court’s earlier injunction against WDE pursuant to Rule 65(d) is granted. Counsel is ordered to submit information regarding WD’s ability to pay and plaintiffs’ lost profits within fifteen (15) days of the issuance of this Opinion and Order. Plaintiffs are directed to submit a fee application by the same date. The Clerk of the Court is directed to close this motion (docket # 172).
SO ORDERED.
. See 6/1/10 Declaration of Erik Andersen in Support of Motion for Default Judgment, or in the Alternative, Summary Judgment against Defendant Westinghouse Digital Electronics, LLC ("Andersen Decl.”) ¶¶ 3-4.
. See Complaint ("Compl.”) ¶ 1.
. See Software Freedom Conservancy, Inc. v. Best Buy Co., Inc., No. 09 Civ. 10155, 2010 WL 2985320, at *1 (S.D.N.Y. July 27, 2010) ("Software Freedom I").
. See id. WD claims that CMA, on behalf of WDE, made the decision to cease defending the action. See Respondent Westinghouse Digital, LLC's Opposition to Plaintiffs' Motion to Find Westinghouse Digital, LLC in Contempt ("WD Mem.”) at 1-2.
. See Memorandum of Law in Support of Plaintiffs' Motion to Find Westinghouse Digital, LLC in Contempt ("PI. Mem.”) at 3. See also WD Mem. at 9.
. See Software Freedom I, 2010 WL 2985320, at *1.
. See id. at *3.
. In August of 2010, plaintiffs moved to join WD and CMA as defendants under Rule 25(c) as successors in interest. This Court denied both motions. See Software Freedom Conservancy Inc. v. Best Buy Co., Inc., 783 F.Supp.2d 648, 651 (S.D.N.Y. 2011) (“Software Freedom II ”).
. City of New York v. Local 28, Sheet Metal Workers’ Int’l Ass'n, 170 F.3d 279, 282 (2d Cir. 1999) (citation omitted).
. Levin v. Tiber Holding Corp., 277 F.3d 243, 250 (2d Cir. 2002) (citation omitted).
. Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 154 F.3d 1345, 1351 (Fed.Cir. 1998) (citing Chase Nat’l Bank v. City of Norwalk, 291 U.S. 431, 436-37, 54 S.Ct. 475, 78 L.Ed. 894 (1943)).
. Fed.R.Civ.P. 56(d)(2)(A)-(C). Accord Vacco v. Operation Rescue Nat’l, 80 F.3d 64, 70 (2d Cir. 1996) ("Rule 65(d) codifies the well-established principle that, in exercising its equitable powers, a court cannot lawfully enjoin the world at large. In order for a court to hold a nonparty respondent in contempt of a court order, the respondent must either [1] abet the [party named in the order], or must [2] be legally identified with him.”) (quotation marks and citations omitted).
. Vacco, 80 F.3d at 70 (citations omitted) (emphasis added).
. Id.
. 17 U.S.C. § 107.
. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994) (quotation marks and citation omitted) (alterations in original).
. 17 U.S.C. § 107.
. Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985).
. NXIVM Corp. v. Ross Inst., 364 F.3d 471, 477 (2d Cir. 2004).
. See WD Mem. at 3.
. See Software Freedom II, 783 F.Supp.2d at 651.
. As plaintiffs have pointed out, WD has applied the wrong "substantial continuity” test in arguing that it is not a successor of WDE. See Plaintiffs' Reply Memorandum of Law in Support of Their Motion to Find Westinghouse Digital, LLC in Contempt (“PL Reply Mem.”) at 1-2 n.l. As noted earlier, the appropriate test in determining whether a non-party can be held in contempt is the “substantial continuity” test under Rule 65(d), not the federal common law test for successor liability.
. See, e.g., Stotter Division of Graduate Plastics Co., Inc. v. District 65, United Auto Workers, AFL-CIO, 991 F.2d 997, 1001 (2d Cir. 1993) ("In the instant case, such continuity clearly exists — the same plant is being operated, the Stooter name is being used, the same products are being made with the same equipment and methods of production, all the Stotter employees were retained by GPC, and employee benefits are calculated based on service time with both Stotter and GPC”).
. See Pl. Reply Mem. at 3.
. WD Mem. at 9.
. See id. at 3. See also Pl. Mem. at 3.
. See WD Mem. at 9.
. See, e.g, Walling v. Reuter, Inc., 321 U.S. 671, 674, 64 S.Ct. 826, 88 L.Ed. 1001 (1944) ("Not only is such an injunction enforceable by contempt proceedings against the corporation, its agents and officers and those individuals associated with it in the conduct of its business, but it may also, in appropriate circumstances, be enforced against those to whom the business may have been transferred, whether as a means of evading the judgement or for other reasons.”) (emphasis added).
. See Additive Controls, 154 F.3d at 1353 (“[Defendant’s] contention is more properly directed at the scienter requirement for acting in active concert and participation.”). Accord National Spiritual Assembly of Baha’is of the U.S. Under Hereditary Guardianship, Inc. v. National Spiritual Assembly of the Baha’is of the U.S., Inc., 628 F.3d 837, 849 (7th Cir. 2010) (explaining the two categories of non-parties potentially bound by an injunction).
Plaintiffs allude to the "aiding and abetting” theory in their brief. See PI. Mem. at 3-4 ("To be sure ... [WD] and [WDE] acted in concert to bring about a result forbidden by the injunction, namely the continued distribution of infringing versions of Plaintiffs’ copyrighted BusyBox software.”). To the extent that plaintiffs argue WD is aiding and abetting WDE, plaintiffs’ argument must fail because WDE entered bankruptcy proceedings in 2010. See Additive Controls, 154 F.3d at 1354 ("[Defendant] contends that the district court found him in contempt based on his actions 'in active concert or participation’ with AdCon, although AdCon has been dormant for years. If that were the basis for the contempt finding, we would agree; one cannot act in concert with an inactive corporation.”).
. See WD Mem. at 9.
. See PL Mem. at 5 ("[WDE] acquired as part of their transaction the very software that violates the injunction, knowing full well that there was an outstanding software copyright claim against the products containing that software.”).
. See 414 U.S. 168, 180, 94 S.Ct. 414, 38 L.Ed.2d 388 (1973) ("We hold that a bonafide purchaser, acquiring, with knowledge that the wrong remains unremedied ... may be considered in privity with the predecessor for purposes of Rule 65(d).”) (citations omitted).
. 793 F.2d 1565, 1583 (Fed.Cir. 1986) (overruled on other grounds) (emphasis added). In Kloster Speedsteel, the district court found in favor of plaintiff for patent infringement and permanently enjoined the defendant and its "successor in interest” from infringing plaintiff’s patents. The Federal Circuit then found that, under Rule 65(d), the injunction also applied to Kloster, a non-party purchaser of the infringing assets, even though at the time of the purchase, the judgement had not been rendered.
. WD Mem. at 7.
. See id. at 2.
. See id. at 4.
. See 211 F.3d 21 (2d Cir. 2000).
. Id. at 27.
. See FCC Consent Decree, In the Matter of Westinghouse Digital Electronics, LLC ("FCC Consent Decree”), Ex. A to Declaration of Kenneth Randall in Support of Respondent Westinghouse Digital, LLC's Opposition to Plaintiffs’ Motion to Find Westinghouse Digital, LLC in Contempt.
. Id. ¶ 8.
. See WD Mem. at 4.
. WD also argues that posting the BusyBox firmware on its website cannot amount to copyright infringement because the injunction applies only to activity done "without permission” and WD is acting with the FCC’s permission. See id. at 7. This argument is una
. See id. at 5.
. See 428 F.Supp.2d 1369 (S.D.Ga. 2006).
. See id. at 1379-80.
. See id. at 1380 (noting that the purpose of copyright law is to promote the progress of science and useful arts).
. Id. at 1376 (emphasis in original). Accord id. at 1380-81 ("It would be especially egregious [to protect Gulfstream’s manual] since Gulfstream is required by federal regulations to produce the manuals anyway. Again, those federal regulations leave Gulfstream little room to make decisions regarding either format or the content of those manuals.”).
. Id. at 1376. Accord id. at 1380-81 ("[G]ranting copyright protection under these facts would not serve the purposes of copyright law .... ”).
. WD Mem. at 6 (reasoning that "those who want to use it must acquire it from Busy-Box.net or some other source”).
. See PL Mem. at 4.
. Paramedics Electromedicina Comercial, Ltda v. GE Medical Sys., 369 F.3d 645, 657 (2d Cir. 2004).
. Id. at 657-58 (quotations and citations omitted).
. Id. at 658 (quoting King v. Allied Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir. 1995)).
. Plaintiffs allege that BusyBox is an open source computer program without a profit-making mission. See Compl. ¶¶ 21-23.
. New York State Nat’l Org. for Women v. Terry, 952 F.Supp. 1033, 1043 (S.D.N.Y. 1997) (citations omitted).
. Software Freedom I, 2010 WL 2985320, at *4 (quoting Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283, 289 (2d Cir. 1999)).
. See id. (ordering WDE to turn over all infringing articles to plaintiffs pursuant to 17 U.S.C. § 503(b)).
Reference
- Full Case Name
- SOFTWARE FREEDOM CONSERVANCY, INC. and Erik Andersen v. WESTINGHOUSE DIGITAL ELECTRONICS, LLC, Phoebe Micro, Inc., Zyxel Communications Inc. and Western Digital Corporation
- Cited By
- 1 case
- Status
- Published