COPYRIGHT WATCHDOG [U.S. District Court – Western District of Texas (Austin) – CIVIL CASE #: 1:17-cv-00018-SS]

Introduction

Some of my software audit clients (BSA and Autodesk) ask me: “Does Autodesk ever file lawsuits for copyright infringement?”  The straight answer is yes, they have.  This blog discusses one such case where a lawsuit was filed in federal court in Texas.  In this case the parties were:

, § a Delaware corporation, AUTODESK INC., a Delaware corporation, and CNC SOFTWARE, INC v. SKH SYSTEMS, INC., a Texas § corporation, and CHORNG “JACK” § HWANG, individually and d/b/a § JACK'S LAPTOPS.  Autodesk, Adobe and CNC (Plaintiffs) are represented by the law firm of Klemchuk, LLP out of Dallas Texas.  The case involved copyright and trademark infringement.

Sample Allegations in the complaint

Plaintiffs Adobe Systems Incorporated (“Adobe”), Autodesk, Inc. (“Autodesk”), and CNC Software, Inc. (“CNC”), (collectively, “Plaintiffs”) file this Original Complaint against Defendants SKH Systems, Inc. (“SKH Systems”), and Chorng Hwang (“Hwang”), individually and d/b/a Jack's Laptops, (collectively, “Defendants”) for trademark infringement and counterfeiting in violation of 15 U.S.C. § 1114, unfair competition in violation of 15 U.S.C. § 1125(a)(1)(A), and copyright infringement in violation of 17 U.S.C. §501, et seq.  Plaintiffs bring this action as a result of Defendants' willful, repeated and ongoing unauthorized reproduction and use of certain of Plaintiffs' software products.

ADOBE SOFTWARE PRODUCT AT ISSUE

Adobe develops, advertises, markets, distributes, and licenses a number of computer software programs. Adobe's software programs are recorded on distributable media, such as DVDs, or are made available for download through various authorized distribution channels. Adobe's software products include multimedia, creativity, Internet application, document services, and other programs. The Adobe CS6 software, along with all component parts and reference materials, is hereinafter collectively referred to as the “Adobe Products.”

AUTODESK SOFTWARE PRODUCT AT ISSUE

Autodesk develops, advertises, markets, distributes, and licenses a number of computer software programs. Autodesk's software programs are recorded on distributable media, such as DVDs, or are made available for download through various authorized distribution channels. Autodesk's software products include computer-aided design programs and other programs, including the AutoCAD® 2012 software (“AutoCAD”). The AutoCAD 2012 software Case along with all component parts and reference materials, are hereinafter collectively referred to as the “Autodesk Products.”

CNC SOFTWARE PRODUCT AT ISSUE

CNC develops, advertises, markets, distributes, and licenses a number of computer software programs. CNC's software programs are recorded on distributable media, such as DVDs, or are made available for download through various authorized distribution channels. CNC's software products include tools for CAD/CAM manufacturing markets, including Mastercam versions X5 and X9. These products, along with their reference materials, are hereinafter collectively referred to as the “CNC Products.”

The Business and Infringing Activities of Defendants (allegations – all persons are presumed innocent)

According to public records, Defendant Chorng “Jack” Hwang is the Director and President of SKH Systems, Inc., a domestic for-profit corporation registered in Texas as computer and software stores. Upon information and belief, Defendants sell refurbished laptops, USB drives, and hard drives with preloaded software, including Plaintiffs' software, under the business name “Jack's Laptops.”

Upon information and belief, Defendants are active in the Austin area and use Craigslist, a Facebook store page, and University of Texas posts (amongst other means) to market their business.

Upon information and belief, Hwang has a technical background as a programmer and technology consultant and offers technical support services for customers of Jack's Laptops. To consummate sales, Hwang meets customers at public locations, such as local coffee shops. Upon information and belief, Hwang is in the business of distributing, advertising, publicly displaying, offering for sale, and/or selling software programs bearing logos and source-identifying indicia and design elements that are unauthorized imitations of one or more of the Adobe Marks, Autodesk Mark and CNC Marks.

Plaintiffs are informed and believe that Chorng “Jack” Hwang provided, installed and activated unauthorized and unlawful copies of Plaintiffs' software, including MasterCamX5, AutoCAD 2012, and CS6, for customers within this Court's jurisdiction.

Plaintiffs are further informed and believe that Hwang engaged in the conduct described above with full knowledge and understanding of its unlawful nature, and therefore engaged in such acts willfully and intentionally.

For example, and without limitation, upon and information and belief Hwang, in connection with his unlawful distribution and sale of Plaintiffs' software to customers within this Court's jurisdiction, acknowledged to such customers that the software he was installing and activating “[was] not licensed,” and that if people wanted to purchase licensed software, they would have to do so directly from the company for “full price.” Defendants have no license, authority, or other permission from Plaintiffs to use any of the Adobe, Autodesk or CNC Marks in connection with the advertising, promotion, distribution, public display, sale, and/or offer for sale of the counterfeit software programs at issue. Indeed, upon information and belief, Defendants use counterfeit serial numbers to activate Plaintiffs' products they then sell to customers within this Court's jurisdiction.

CLICK HERE FOR BLOG ON LEGAL ISSUES WITH SELLING REFURBISHED SOFTWARE.

Causes of Action

In addition to a claim for “unfair competition” the Complaint also set forth the following theories of recovery:

A. TRADEMARK INFRINGEMENT – Defendants, without authorization from Plaintiffs, have used and are continuing to use in commerce counterfeit product key codes/serial numbers that are substantially indistinguishable from legitimate product key codes/serial numbers used to lawfully activate Plaintiffs' software products. Defendants' activities constitute infringement of Plaintiffs' federally registered trademarks and service marks with the registration numbers listed above.

Defendants' acts constitute trademark infringement and counterfeiting of the Adobe, Autodesk and CNC Marks in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114. As established by the registration of the marks, the marks are protectable and enforceable against Defendants, Plaintiffs are the owners of the respective marks, and Plaintiffs are the senior users of their respective marks. Moreover, Defendants' actions have caused a likelihood of confusion and damage to Plaintiffs.

In particular, through infringement of the Adobe, Autodesk and CNC Marks, Defendants are harming Plaintiffs and diverting sales that would otherwise go to Plaintiffs. Defendants' infringement of the Adobe, Autodesk and CNC Marks is likely to cause confusion and mistake as to the source of Defendants' goods.

Under Section 35 of the Lanham Act, 15 U.S.C. § 1117(a)

and

(b), Plaintiffs are entitled to recover from Defendants:

(i) Defendants' profits,

(ii) the damages sustained by Plaintiffs,

and

(iii) the costs of this action. Due to the knowing, intentional, and purposeful nature of Defendants' conduct, Plaintiffs seek treble the amount of their actual damages. Due to the exceptional nature of this case, Plaintiffs also seek their reasonable attorney's fees. Alternatively, Plaintiffs are entitled to statutory damages under 15 U.S.C. §1117(c).

B. COPYRIGHT INFRINGEMENT

According to the Complaint:

“Plaintiffs are the sole owners of their respective Adobe Products, Autodesk Products, and CNC Products, and of the corresponding copyrights and Certificates of Registration with the registration numbers listed above. Defendants have infringed Plaintiffs copyrights by reproducing or distributing Plaintiffs' software in the United States without approval or authorization from Plaintiffs.  At a minimum, Defendants acted with willful blindness to, or in reckless disregard of, Plaintiffs' registered copyrights.

As a result of Defendants' wrongful conduct, Plaintiffs are entitled to recover their actual damages and Defendants' profits attributable to the infringement. Alternatively, Plaintiffs are entitled to statutory damages under 17 U.S.C. §504(c).

BONUS MATERIALS:  CLICK HERE FOR OUR VIDEO THAT DISCUSSES DAMAGES FOR COPYRIGHT INFRINGEMENT.

The award of statutory damages should be enhanced in accordance with 17 U.S.C. §504(c)(2). Plaintiffs are further entitled to injunctive relief and an order compelling the impounding of all infringing materials. Plaintiffs have no adequate remedy at law for Defendants' wrongful conduct because, among other things:

(a) Plaintiffs' copyrights are unique and valuable property that have no readily determinable market value;

(b) Defendants' infringement harms Plaintiffs such that Plaintiffs could not be made whole by any monetary award;

(c) Defendants' wrongful conduct, and the resulting harm to Plaintiffs, is continuing.”

C. CIRCUMVENTION OF ACCESS CONTROL (DMCA)

17 U.S.C. §1201(a) provides that:

“no person shall circumvent a technological measure that effectively controls access to a work protected under this title.” 17 U.S.C. §1201(a)

(1). To “circumvent a technological measure” means to descramble, decrypt, or otherwise “avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner.”

The Adobe Products, Autodesk Products, and CNC Products contain Access Control Technology used to prevent access to the Adobe Products, Autodesk Products and CNC Products by those who do not have legal access. Upon information and belief, and without Plaintiffs' authorization, Defendants willfully, intentionally, and maliciously circumvented the Access Control Technology in violation of 17 U.S.C. §1201(a).

Defendants' willful, intentional and malicious circumvention of the Access Control Technology has caused and will continue to cause Plaintiffs to suffer substantial injuries, loss, and damage to their respective proprietary and exclusive rights in the Adobe Products, Autodesk Products and CNC Products, the Adobe Marks, Autodesk Mark, and CNC Marks, and the Adobe Copyrights, Autodesk Copyrights, and CNC Copyrights; and has caused and will continue to cause Plaintiffs to lose profits in amounts not yet ascertained.

As a result of Defendants' wrongful conduct, Plaintiffs are entitled to recover their actual damages and Defendants' additional profits. Alternatively, Plaintiffs are entitled to statutory damages under 17 U.S.C. §1203(c)(3).  Plaintiffs are further entitled to injunctive relief as Defendants' circumvention of the Access Control Technology, and the threat of continuing circumvention, have caused and will continue to cause Plaintiffs to suffer repeated and irreparable injury.

It would be difficult to ascertain the amount of money damages that would afford Plaintiffs adequate relief at law for Defendants' continuing acts and omissions complained of herein, and a multiplicity of judicial proceedings would be required. Plaintiffs' remedy at law is not adequate to compensate them for the injuries already inflicted and further threatened by Defendants. Therefore, Plaintiffs respectfully request as prayed for below that Defendants be restrained and enjoined as authorized by the Copyright Act, and any device or product in Defendants' possession, custody or control that enabled or was involved in the circumvention be impounded pursuant to 17 U.S.C. §1203(b).

BONUS MATERIALS:  CLICK HERE TO READ OUR BLOG ON ILLEGAL CIRCUMVENTION OF ACCESS CONTROLLED TECHNOLOGY

D.  INJUNCTION ALSO SOUGHT

These actions entitle Plaintiffs to a preliminary injunction and, upon hearing, permanent injunction enjoining Defendants, their officers, agents, servants, employees, and attorneys, and all those persons in active concert or in participation with Defendants, from:

(i) copying or making any other infringing use or infringing distribution of Plaintiffs' software and other intellectual property including but not limited to the software identified by the Trademark, Service Mark, and Copyright Registration Numbers listed above;

(ii) assembling, producing, distributing, offering for distribution, activating, circulating, selling, offering for sale, advertising, importing, promoting, or displaying any of Plaintiffs' software or other intellectual property bearing any simulation, reproduction, counterfeit, copy, or colorable imitation of any of Plaintiffs' registered trademarks, service marks, or copyrights, including but not limited to the Trademark, Service Mark, and Copyright Registration Numbers listed above;

(iii) using any simulation, reproduction, counterfeit, copy or colorable imitation of Plaintiffs' registered trademarks, service marks, or copyrights, including but not limited to the Trademark, Service Mark, and Copyright Registration Numbers listed above, in connection with the assembly, production, distribution, offering for distribution, activation, circulation, sale, offering for sale, import, advertisement, promotion or display of any software, component, and/or other item not authorized or licensed by Plaintiffs.

(iv) circumventing any technological measure that effectively controls access to any of Plaintiffs' copyrighted software products;

(v) destroying or otherwise disposing of, or altering, any copies of software or other products, materials, technologies, services, devices, components, documents, or electronically stored data or files that relate or pertain in any way to the: (a) copying, reproduction, distribution or use of any of Plaintiffs' copyrighted software products; (b) circumvention of any technological measure that effectively controls access to any of Plaintiffs' copyrighted software products; or (c) infringement of any of Plaintiffs' copyrights;

(vi) engaging in any other activity constituting an infringement of any of Plaintiffs' trademarks, service marks, and/or copyrights, or of Plaintiffs' rights in, or right to use or to exploit, these trademarks, service marks, and/or copyrights;

and

(vii) assisting, aiding, or abetting any other person or business entity in engaging in or performing any of the activities listed above.

The complaint talked about the global problem of software piracy

Another interesting thing in the complaint is how Plaintiff's go to great lengths to educate the judge on the issue of global software piracy.  Here is some sample language:

“The Global Problem of Software Piracy 35. Software developers lose billions of dollars in annual revenue from software piracy, namely, the unauthorized and unlawful copying, downloading, and distributing of copyrighted and trademarked software and related components. In 2015, the commercial value of unlicensed software in the United States was in excess of $9 billion. See Business Software Alliance, Seizing Opportunity Through License Compliance:

BSA Global Software Survey 2016, http://globalstudy.bsa.org/2016/index.html. One prominent form of obtaining unlicensed software is “hard-disk loading,” which is the unauthorized copying and installation of infringing software on devices. Those devices are then sold in competition with, and often for lower prices than, devices pre-installed with legally licensed copies of software.

Software developers like Plaintiffs are not the only victims. Plaintiffs' customers are also victims, for they are often deceived by distributors of unlicensed software; these distributors go to great lengths to make the software appear genuine. When this occurs, customers may unwittingly expose themselves to security risks associated with the use of unlicensed software. See Federal Bureau of Investigation, Consumer Alert: Pirated Software May Contain Malware, Aug. 1, 2013, at http://www.fbi.gov/news/stories/2013/august/pirated-software-may-contain-malware/ (noting the relatively greater risk that such software is infected with malicious software, or “malware,” which can be used to record keystrokes and thus capture sensitive information such as user names, passwords, and Social Security numbers); IDC, Unlicensed Software and Cybersecurity Threats, January 2015; The Link between Pirated Software and Cybersecurity Breaches, March 2014, at http://www.news.microsoft.com/download/presskts/dcu/docs/idc/031814.pdf (concluding that, on average, a user of an unlicensed software package has a one-in-three chance of encountering malware).

In 2015, 49% of Chief Information Officers identified security threats from malware as a major threat posed by unlicensed software. See Business Software Alliance, Seizing Opportunity Through License Compliance: BSA Global Software Survey 2016, http://globalstudy.bsa.org/2016/index.html; see also Fighting Cybercrime with Actionable Insights, at Page 10 http://www.slideshare.net/IBMBDA/infographic-fighting-cybercrime-with-actionable-insights (reporting organizations experience some form of malware attack every seven minutes).

The Defendant filed an answer in the action and it appears as of this writing the case is pending.

Contact an Autodesk software infringement defense law firm

Our firm has helped many companies who are facing software audits (ex. with the software alliance or SIIA or software compliance group), cease and desist letters, and we can help if you have been sued by a large software company such as Microsoft, CNC, Adobe, or Siemens for examples.  We have extensive federal court experience and we understand the types of law firm you are up against, many large prominent intellectual property firms such as Klemchuk or Donohue Fitzgerald or others.  Call us to discuss your case at (877) 276-5084.  For many non-litigation cases we are able to structure a flat rate fee. There is no call to potential clients for the initial discussion.