LAUREL BEELER, Magistrate Judge.
Goes International is a Swedish company that created, copyrighted, and distributed a bubble-shooting video game called Bubble Bust!
Goes sued Dodur and its shareholders/game developers for one count of copyright infringement, claiming that they copied Bubble Bust! and marketed infringing games called Puzzle Bubble Free! and Puzzle Bubble Sea.
Dodur moved to dismiss the complaint for lack of personal jurisdiction.
The court granted the motion in part, dismissing the individual defendants but finding personal jurisdiction against Dodur based on its distribution of games in the U.S., resulting in revenues generated from U.S. players, including from ads targeted to that U.S. audience.
Goes moved to compel discovery about Dodur's revenues from distributing the challenged software outside of the United States.
On February 10, 2016, Dodur's counsel moved to withdraw, citing Dodur's nonpayment of fees; the court granted the unopposed motion and directed counsel to continue to serve Dodur.
In December 2016, Goes moved to compel Dodur to name a Rule 30(b)(6) deponent, appear at a Rule 30(b)(6) deposition, and produce documents.
The court set a further hearing for March 9, 2017 and ordered Dodur to show cause why it had not named new counsel or produced the court-ordered discovery.
Goes then moved for strike Dodur's answer and for terminating sanctions.
Goes moved for default judgment and served Dodur.
The following is a summary of the complaint's allegations about Dodur's alleged copying of Goes' copyrighted game Bubble Bust!.
Goes created and published its original video game Bubble Bust! around January 5, 2011.
Dodur allegedly accessed (and copied) Bubble Bust! via the Apple App Store and, by January 2012, uploaded an infringing game called Puzzle Bubble Free! to the Apple App Store and "various other websites."
The complaint specifies how Dodur copied coding that was not accessible to players.
Dodur's games were free downloads.
Dodur distributed its games through the Apple App store to consumers in the United States and elsewhere.
In its complaint, Goes alleged on information and belief that users downloaded Dodur's challenged games at least 15 million times before Apple removed them and that Dodur "distributed at least 150,000 copies of Puzzle Bubble Free! and 3,000 copies of Puzzle Bubble Sea to users in the United States via the Apple App Store."
Goes extrapolates from this to reach its total of at least 150,000 U.S. downloads:
Dodur game developer and shareholder Wang Li Ming declared that from June 19, 2012 to May 15, 2015, users in the United States downloaded 49,477 copies of Puzzle Bubble Free!, and from March 6, 2013 to May 15, 2015, users in the United States downloaded 2,256 copies of Puzzle Bubble Sea.
Dodur's revenues from the games are from advertising and in-game (or in-app) purchases.
In its complaint, Goes alleged Dodur's revenues on "information and belief."
In its declaration in support of its motion to dismiss, Dodur responded that Goes had no support for its figures, U.S. revenue was less than $2,200, and U.S. downloads were 0.39% of worldwide downloads.
For advertising revenue from Google Admob for Puzzle Bubble Free! and Puzzle Bubble Sea, Dodur tracks only worldwide revenues (and not U.S. revenues).
Advertising revenue from Apple iAd for Puzzle Bubble Free! and Puzzle Bubble Sea occurred from January 8, 2012 (the date Puzzle Bubble Free! was published) through November 23, 2013 (the date Apple removed the challenged games from the Apple App store).
At the motion-to-dismiss phase, Goes objected to Dodur's discrepancies in calculations and reliability.
In his declaration in support of Goes' motion for default judgment, Goes' CEO reiterated this analysis and adds that "Apple has now informed us that there were over 2.8 million downloads of Puzzle Bubble Free! from January through May 2012. This would increase the revenue estimate by 2,800,000 users x $.08 ad revenue per user, which equals $224 additional dollars. Thus, the revised estimate of total revenue is $1,264,000."
Because Goes did not register Bubble Bust! within three months of publication, there are no statutory fees or damages under 17 U.S.C. § 412(2).
Before entering default judgment, a court must determine whether it has subject-matter jurisdiction over the action and personal jurisdiction over the defendant. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). And a court must ensure the adequacy of service on the defendant. See Timbuktu Educ. v. Alkaraween Islamic Bookstore, No. C 06-03025 JSW, 2007 WL 1544790, at *2 (N.D. Cal. May 25, 2007). First, the court has subject-matter jurisdiction because Goes' copyright infringement claims invoke federal-question jurisdiction. See 28 U.S.C. § 1331. Second, the court has personal jurisdiction over Dodur for the reasons discussed in the court's earlier order (incorporated by this reference) denying Dodur's motion to dismiss.
Under Federal Rule of Civil Procedure 55(b)(2), a plaintiff may apply to the district court for — and the court may grant — a default judgment against a defendant who has failed to plead or otherwise defend an action. See Draper v. Coombs, 792 F.2d 915, 925 (9th Cir. 1986). After entry of default, well-pleaded allegations in the complaint regarding liability and entry of default are taken as true, except as to damages. See Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002); TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). The court need not make detailed findings of fact. Combs, 285 F.3d at 906. Default judgment cannot differ in kind from or exceed the amount demanded in the pleadings. Fed. R. Civ. P. 54(c).
"A defendant's default does not automatically entitle the plaintiff to a court-ordered judgment," Pepsico, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1174 (C.D. Cal. 2002); that decision lies within the court's discretion, Draper, 792 F.2d at 924-25. Default judgments generally are disfavored because "[c]ases should be decided upon their merits whenever reasonably possible." Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986). In deciding whether to enter a default judgment, the court considers: "(1) the possibility of prejudice to the plaintiff; (2) the merits of [the] plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits." Id. at 1471-72.
The first Eitel factor considers whether the plaintiff would suffer prejudice if default judgment is not entered, and whether such potential prejudice to the plaintiff weighs in favor of granting a default judgment. Eitel, 782 F.2d at 1471; Craigslist, Inc. v. Naturemarket, Inc., 694 F.Supp.2d 1039, 1054 (N.D. Cal. 2010). This factor weighs in favor of default judgment. Dodur defended the lawsuit initially but then refused to produce discovery, substitute counsel, or defend the case, despite the court's issuance of orders to show cause, warnings about terminating sanctions, and imposition of intermediate sanctions for the discovery violations. Goes has no recourse against Dodur except for default judgment.
The second and third Eitel factors consider the merits of the claim and the sufficiency of the complaint. Eitel, 782 F.2d at 1471. "The Ninth Circuit has suggested that [these factors] . . . require that plaintiffs' allegations `state a claim on which the [plaintiff] may recover.'" Kloepping v. Fireman's Fund, No. C 94-2684 TEH, 1996 WL 75314, at *2 (N.D. Cal. Feb. 13, 1996) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)).
Goes asserts one claim against Dodur for copyright infringement in violation of 17 U.S.C. §§ 501, 106 et seq. The elements of copyright infringement are "(1) ownership of a valid copyright; and (2) [] the defendant violated the copyright owner's exclusive rights under the Copyright Act." Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004) (citing, inter alia, 17 U.S.C. § 501(a)). Rights under the Copyright Act include the right to reproduce the copyrighted work, to prepare derivative works based upon the copyrighted work, to distribute copies of the work and to display the copyrighted work publicly. 17 U.S.C. § 106.
Taking Goes' allegations as true on Dodur's default, Goes states a claim for copyright infringement. Goes owns copyrights to Bubble Bust!.
The fourth Eitel factor addresses the amount of money at stake in the litigation. Eitel, 782 F.2d at 1471. When the money is substantial or unreasonable, default judgment is discouraged. See id. at 1472 (three-million dollar judgment, considered in light of parties' dispute as to material facts, supported decision not to enter default judgment); Tragni v. S. Elec. Inc., No. 09-32 JF (RS), 2009 WL 3052635, at *5 (N.D. Cal. Sept. 22, 2009); Bd. of Trustees v. RBS Washington Blvd, LLC, No. C 09-00660 WHA, 2010 WL 145097, at *3 (N.D. Cal. Jan. 8, 2010). When the sum of money at stake is tailored to the specific misconduct of the defendant, default judgment may be appropriate. See Bd. of Trs. of the Sheet Metal Workers Health Care Plan of N. Cal. v. Superhall Mech., Inc., No. C-10-2212 EMC, 2011 WL 2600898, at *2-*3 (N.D. Cal. June 20, 2011) (the amount of unpaid contributions, liquidated damages, and attorney's fees were appropriate as they were supported by adequate evidence provided by the plaintiffs).
Section 504(b) of the Copyright Act provides that a "copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages." 17 U.S.C. § 504(b). Goes seeks $1,264,000 in damages based on its estimate of the advertising revenues that Dodur received from the infringing games.
The court addresses damages in section 3 and finds that damages in the form of Dodur's profits from U.S. downloads is tailored to Dodur's misconduct.
The fifth and sixth Eitel factors consider the potential of factual disputes and whether a defendant's failure to respond was likely due to excusable neglect. Eitel, 782 F.2d at 1471-72. In Eitel, there was a factual dispute and excusable neglect. Id. at 1472. The Eitel defendant disputed material facts in the (untimely) answer and counterclaim. Id. But the defendant's response was late because the parties had previously agreed to "what appeared to be a final settlement agreement," and "[the defendant] reasonably believed that the litigation was at an end[.]" Id. Because his reliance was reasonable, and he promptly responded when the agreement dissolved, the court found excusable neglect for the defendant's untimely response. Id.
The procedural history in the Statement shows that there is no excusable neglect here. Dodur has not defended the case.
The seventh Eitel factor requires considering the strong policy favoring decisions on the merits. Eitel, 782 F.2d at 1472; see also Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985). Although default judgment is disfavored, "[t]he very fact that F.R.C.P. 55(b) exists shows that this preference, standing alone, is not dispositive." Kloepping, 1996 WL 75314 at *3. "While the Federal Rules do favor decisions on the merits, they also frequently permit termination of cases before the court reaches the merits[,] . . . [as] when a party fails to defend against an action[.]" Id.
Dodur has not defended the lawsuit since the court ruled against it on the discovery dispute regarding the scope of damages. Litigation on the merits is not possible.
In sum, the Eitel factors weigh in favor of granting default judgment. In the next section, the court considers the scope of relief.
The Copyright Act provides that a "copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages." 17 U.S.C. § 504(b). Goes seeks $1,264,000 in damages based on its estimate of the advertising revenues that Dodur received from the infringing games.
In assessing the Eitel factors, all factual allegations in the complaint are taken as true, except allegations regarding damages. TeleVideo Sys., 826 F.2d at 917-18. "To recover damages after securing a default judgment, a plaintiff must prove the relief it seeks through testimony or written affidavit." Bd. of Trs. of the Laborers Health & Welfare Trust Fund for N. Cal. v. A & B Bldg. Maint. Co. Inc., No. C 13-00731 WHA, 2013 WL 5693728, at *4 (N.D. Cal. Oct. 17, 2013); Cannon v. City of Petaluma, No. C 11-0651 PJH, 2011 WL 3267714, at *2 (N.D. Cal. July 29, 2011) ("In order to `prove up' damages, a plaintiff is generally required to provide admissible evidence (including witness testimony) supporting damage calculations."); see also Bd. of Trs. of Bay Area Roofers Health & Welfare Trust Fund v. Westech Roofing, 42 F.Supp.3d 1220, 1232 n.13 (N.D. Cal. 2014) ("It is Plaintiffs' burden on default judgment to establish the amount of their damages.").
In addition, under Federal Rule of Civil Procedure 54(c), "[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 purpose of this rule is to ensure that a defendant is put on notice of the damages being sought against him so that he may make a calculated decision as to whether or not it is in his best interest to answer. See In re Ferrell, 539 F.3d 1186, 1192-93 (9th Cir. 2008); Bd. of Trs. of the Sheet Metal Workers Local 104 Health Care Plan v. Total Air Balance Co., Inc., No. 08-2038 S.C. 2009 WL 1704677, at *4 (N.D. Cal. June 17, 2009).
Goes seeks damages in the form of Dodur's revenues for the worldwide distribution of its challenged games Puzzle Bubble Free! and Puzzle Bubble Sea. There are two issues: entitlement to damages and proof of damages.
The first issue is whether Goes may recover damages for worldwide downloads of the challenged games or instead may recover damages only for games downloaded in the U.S.
Before Dodur's default, the parties did not dispute that Goes is entitled to damages for games downloaded by U.S. players; the court recognized previously and holds now that Goes is entitled to those damages.
The issue then is recovery of revenues attributable to downloads in countries other than the U.S. The parties did not dispute — and the Statement summarizes — that Dodur's employees were in China, uploaded the games to the Apple App store from China, and never visited the United States; it also was undisputed that the downloads in the U.S. were a small percent of worldwide distribution, and U.S. revenues were modest.
But Goes contends that when Dodur uploaded its infringing games to the Apple App Store, it necessarily put the games on Apple's servers, which all were located in the United States (and mostly in California) during the relevant time period.
No case has addressed whether uploading infringing games from abroad to a third-party host's U.S.-based servers creates copyright liability for subsequent downloads by users outside the U.S. when the uploaders and downloaders have no knowledge of the server locations. Citing L.A. News Serv. v. Reuters Tel. Intern. Ltd., 149 F.3d 987, 990-92 (9th Cir. 1998), Goes argues that if the infringing act occurs in the United States, then the infringer is liable for extraterritorial damages.
In Reuters, the plaintiff Los Angeles News Service produced two videos of the 1992 riots that followed the Rodney King verdict, copyrighted them, licensed them to NBC (which used them on the Today show), and otherwise retained ownership and the right to license them. 149 F.3d at 990. When NBC broadcast the show, it transmitted the show via fiber link to Visnews in New York, which transmitted a copy to subscribers in Europe and Africa. Id. It also transmitted copies of the videos to the New York office of the European Broadcasting Union ("EBU"), which in turn made a videotape copy and transmitted it via satellite to Reuters' London branch, which "provided copies to its subscribers." Id. The Ninth Circuit held a predicate act of direct infringement took place in the United States when Visnews and EBU copied the videos. Id. at 991-92. Reuters thus was liable for its international transmissions, "which were made possible by the infringing acts of copying in New York." Id. at 992.
Reuters is an easier case: making a copy of a videotape in the United States and then transmitting it abroad for distribution is different than a Chinese developer's upload to the third-party Apple servers and subsequent downloads by foreign consumers. It does not intuitively flow from Reuters that a third-party company's decision about where it hosts data drives copyright liability for an infringing party that operates wholly outside of the United States and distributes copies to non-U.S. consumers. Companies like Apple and Google make decisions about storing data often in aid of overall network optimization and can move data automatically. See In the Matter of the Search of Content That is Stored at Premises Controlled by Google, No. 16-mc-80263-LB, 2017 WL 1487625, at *1 (N.D. Cal. Apr. 25, 2017), aff'd, 2017 WL 3478809 (N.D. Cal. Aug. 14, 2017). Where a company stores its "1's and 0's" is not necessarily like the domestic physical copying of a videotape that allowed Reuters' foreign subsequent distribution. See id. at *4 (quotation omitted). Put another way, Dodur's use of third-party servers is not the volitional conduct that Reuters and other courts find to be a predicate act of direct infringement in the U.S.
As this court has held, the Copyright Act fairly captures foreign uploads targeted to and downloaded by U.S. consumers.
But on this record and argument, the court cannot conclude that a completed act of copyright infringement occurred from an alleged pass-through on a third-party's domestic servers. Dodur has not been to the U.S., and it allegedly downloaded Goes' games (to copy them) and uploaded its infringing games in China via the China-specific platform for Apple's App Store.
The court thus concludes that Goes has not established damages flowing from Dodur's extraterritorial exploitation of an infringing act that occurred in the United States. Reuters, 149 F.3d at 992.
The court previously found personal jurisdiction based on Dodur's U.S. forum activities, based not on Dodur's use of Apple's server but instead on its acts aimed at U.S. consumers.
In DEX, the Ninth Circuit considered personal jurisdiction over a Netherlands company-defendant called DSC that sent print requests from "outside the forum," meaning outside the United States, and ultimately printed the documents in the Netherlands by using the plaintiff DEX's California-hosted software to accomplish the printing. Id. at *1-*2. In DEX, "the record establishe[d] the following: (1) DEX's Camarillo, California server had to be engaged and used for the software to software at issue to function, and DSC had knowledge of this fact; (2) DSC sent print requests to DEX's California server causing the software to engage and create output data that was sent via the VPN to DSC's printers in Venlo, Netherlands; [and] (3) after the expiration of the license agreement, DSC continued to access DEX's California server to activate and use the software on the California server—allegedly committing an instance of intentional copyright infringement occurring on California servers. Id. at *2. The use of the server was not a "fortuitous occurrence." Id. at * 2 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980) (single automobile passing through the forum)). "Rather, the software was located on California servers pursuant to an agreement reached between the parties. DSC and DEX actively set up the California-based VPN to facilitate printing following technical difficulties with a primary VPN based in Europe." Id. at *2. The parties agreed to route the data through DEX's server in California. Id.
The DEX parties' agreement — which contemplated the defendant's direct availing of DEX's California servers to facilitate printing in Netherlands — is different than using the Apple App store (even if Apple's servers are located in California) and supports the court's conclusion that damages are limited to domestic acts of copyright infringement.
First, DSC contracted to use DEX's services and knew the California server would be used to supplement the primary Europe-based VPN. It makes sense that it would be liable for its continued infringing use of the California-hosted software after its license with DEX expired.
Second, DEX addressed DSC's purposeful direction of activities at the forum. Id. at *1. The Ninth Circuit understandably found that "DSC's allegedly infringing conduct was expressly aimed at and occurred in California—causing harm DSC knew DEX would suffer in California." Id. More succinctly, DSC's conduct was aimed at California and caused harm to DEX in California. By contrast, in finding personal jurisdiction over Dodur, the court did not rely on Dodur's (perhaps fortuitous and unaware) use of non-party Apple's California's servers.
Goes is entitled to damages only from U.S. downloads. But even if it had established damages flowing from an extraterritorial exploitation of an infringing act that occurred in the U.S., see Reuters, 149 F.3d at 992, it has not submitted admissible evidence supporting its damages calculations.
First, Goes seeks Dodur's profits as damages. Goes concedes that extraterritorial damages are limited to Dodur's profits.
Second, there can be a need to extrapolate when that need is a result of the defendant's failure to participate in the litigation. Id. But here, Goes relies on its CEO's experience working on applications that generate ad revenue and his review of general industry data. That speculation — even with the CEO's playing the infringing games and seeing displayed ads
Third, as discussed in the Statement, Dodur's counsel provided revenue amounts that differed from Goes' speculative $1,264,000 in damages: worldwide revenue of $41,430.08 for Admob and revenue of $14,562.69 for iAd from the Americas.
Fourth, Goes calculated U.S. revenue from Google Admob as at least $8,320. The court could use revenue as proxy for profits, especially when revenue is low, Dodur could deduct its expenses from worldwide revenue, and Dodur itself used approximations to reach its own estimate of $2,200.
The court accepts that the CEO's knowledge of the industry, playing the games, and watching the ad rate provides some justification for revenues but concludes that Goes' overall damages estimates are too speculative. The court credits the concrete revenue data that Dodur's capable prior counsel provided: $41,430.08 in worldwide revenues from Google Admob, $14,837.38 ($14,562.29 plus $275.09) in "Americas" revenues from Apple iAd, and $241.50 for U.S. in-app purchases in 2012 and 2013.
The court previously awarded Goes $7,245 in discovery sanctions and will include that amount in the judgment.
Goes asks the court to order the following permanent injunction: "The Court orders that Dodur is permanently enjoined from: (a) distributing any computer application or program that violates the copyrights of GOES in whole or in part through an American company, through American-based services, or through American servers, or (b) earning any revenue from infringing acts of GOES' copyrights through, in whole or in part, an American company or source."
The Copyright Act authorizes the court to grant injunctive relief "as it may deem reasonable to prevent or restrain infringement of a copyright." 17 U.S.C. § 502(a). An injunction does not automatically follow a determination of infringement. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392 (2006). Instead, an injunction should issue to protect property rights against injuries otherwise irremediable. Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982).
In fashioning an injunction, the court must consider (1) whether the plaintiff has suffered irreparable injury, (2) whether the plaintiff can be adequately compensated by a remedy at law such as monetary damages, (3) whether the balance of hardships between the plaintiff and defendant favors the plaintiff, and (4) whether the permanent injunction serves the public. eBay, 547 U.S. at 391. Dodur previously agreed to a stipulated judgment to address Goes' concern. The court finds an injunction is appropriate. See Sega Enters. Ltd. v. MAPHIA, 948 F.Supp. 923, 940 (N.D. Cal. 1996) ("Generally, a showing of copyright infringement liability and the threat of future violations is sufficient to warrant a permanent injunction.").
The court's injunction will be as follows:
Dodur is permanently enjoined from distributing any games, computer applications, or programs that infringe the copyrights for Goes' games, computer applications, or programs (including Puzzle Bubble Free! and Puzzle Bubble Sea).
The court grants Goes' motion for default judgment, enters judgment in the amount of $35,241.50 in infringer profits and $7,245 for discovery sanctions, and enjoins Dodur from further infringing Goes' copyrights.
Goes must serve Dodur with a copy of this order.
