United States District Court, M.D. Pennsylvania
October 12, 2005.
MICROSOFT CORPORATION, Plaintiff,
MASTER COMPUTER, INC., a Pennsylvania corporation, and SUNG KAO a/k/a RICK KAO, an individual, Defendants.
The opinion of the court was delivered by: MALCOLM MUIR, Senior District Judge
THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:
On November 29, 2004, Plaintiff Microsoft Corporation, Inc.
(hereinafter "Microsoft"), initiated this action by filing a
complaint containing six counts. The Defendants are an individual
named Sung Kao, who is also known as Rick Kao, (hereinafter
"Kao") and the company he owns and operates in State College,
Pennsylvania, known as Master Computer, Inc. (hereinafter "Master
Computer"). All of the claims in Microsoft's complaint relate to
Kao's allegedly unauthorized distribution of counterfeit
Microsoft computer software. The computer software at issue is
subject to a copyright and trademarks owned by Microsoft.
On September 1, 2005, Microsoft filed a motion for summary
judgment accompanied by a statement of undisputed material facts, a supporting brief, and exhibits. On September 16, 2005, Kao
filed an opposing memorandum, exhibits, and a response to
Microsoft's statement of material facts. The time allowed for
Microsoft to file a reply brief expired on October 3, 2005, and
to this date no such brief was filed. Microsoft's motion for
summary judgment is ripe for disposition.
Summary judgment is appropriate only when there is no genuine
issue of material fact which is unresolved and the moving party
is entitled to a judgment as a matter of law. Fed.R.Civ.P.
56(c). Summary judgment should not be granted when there is a
disagreement about the facts or the proper inferences which a
fact finder could draw from them. Peterson v. Lehigh Valley Dist.
Council, 676 F.2d 81, 84 (3d Cir. 1982).
Initially, the moving party has a burden of demonstrating the
absence of a genuine issue of material fact. Celotex Corporation
v. Catrett, 477 U.S. 317, 323 (1986). This may be met by the
moving party pointing out to the court that there is an absence
of evidence to support an essential element as to which the
non-moving party will bear the burden of proof at trial. Id. at
"When a motion for summary judgment is made and supported as
provided in . . . [Rule 56], an adverse party may not rest upon
mere allegations or denials of the adverse party's
pleading. . . ." Fed.R.Civ.P. 56(e). Rule 56 provides that, where such a motion is
made and properly supported, the adverse party must show by
affidavits, pleadings, depositions, answers to interrogatories,
and admissions on file that there is a genuine issue for trial.
Fed.R.Civ.P. 56(e). The United States Supreme Court has
commented that this requirement is tantamount to the non-moving
party making a sufficient showing as to the essential elements of
their case that a reasonable jury could find in its favor.
Celotex Corporation v. Catrett, 477 U.S. 317, 322-23 (1986).
When addressing a motion for such a judgment, our inquiry
focuses on "whether the evidence presents a sufficient
disagreement to require submission to the jury or whether it is
so one-sided that one party must prevail as a matter of law."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)
As summarized by the Advisory Committee On Civil Rules, "[t]he
very mission of the summary judgment procedure is to pierce the
pleadings and to assess the proof in order to see whether there
is a genuine need for trial." Fed.R.Civ.P. 56 advisory
committee note to 1963 Amendment.
The evidentiary materials submitted to us confirm that the
following facts are undisputed. Microsoft develops, advertises, distributes and licenses
computer software programs. Microsoft software is distributed in
all fifty states of the United States of America and throughout
Microsoft's copyright to its "Windows 2000 Professional"
software was registered with the United States Copyright Office
in compliance with the Copyright Revision Act of 1976
(17 U.S.C. § 101, et seq.) and Copyright Office regulations. The copyright
was assigned registration number TX 5-036-267. Microsoft has
been, and still is, the sole owner of all rights, title and
interest in the copyright and Certificate of Registration for its
"Windows 2000 Professional" software.
Microsoft is the owner of valid, federally-registered
trademarks or service marks, or both, in and to the following: 1)
Trademark and Service Mark Registration No. 1,200,236
("Microsoft") for computer programs and computer programming
services; 2) Trademark Registration No. 1,256,083 ("Microsoft")
for computer hardware and software manuals, newsletters, and
computer documentation; 3) Trademark Registration No. 1,872,264
("Windows") for computer programs and manuals sold as a unit; 4)
Trademark Registration No. 1,815,350 (Colored Windows Flag Logo)
for computers, computer peripherals, and computer programs and
manuals sold as a unit; and 5) Trademark Registration No. 1,816,354 (Windows Flag Logo) for computers, computer
peripherals, and computer programs and manuals sold as a unit. At
all relevant times Microsoft has been the sole owner of all
rights, title, and interest in, and to, those trademarks, service
marks, and registrations. Although there are five different
trademark registrations at issue here, because the first and
second both relate to the term "Microsoft," there are actually
only four registered marks relevant to this case.
Master Computer is a Pennsylvania corporation in the business
of building new computer systems, some of which are sold with
Microsoft software installed onto the hard disk drives. Kao
started Master Computer in 1987 and he receives his salary from
the business. He is the company's primary officer, sole owner,
and sole shareholder.
As the sole owner and operator of the business, Kao has the
right and ability to supervise the employees of Master Computer,
and he is the only person with the authority to hire and fire
employees. Koa is responsible for Master Computer's overall
operation and he oversees the day-to-day operation of the
Koa selects Master Computer's vendors and is responsible for
acquiring purported Microsoft software and hardware from master
Computer's suppliers. Kao personally assembles the computer systems distributed by Master Computer, including affixing
Certificate of Authenticity labels onto the computers and
installing software onto those computers.
In October of 2003, an investigator contacted Master Computer
and placed an order with an individual who identified himself as
"Rick" for a computer system with Microsoft Windows 2000
Professional (hereinafter "Windows 2000 Pro") software installed.
The Defendants distributed to the investigator a computer system
with an infringing copy of Windows 2000 Pro software installed on
the hard disk drive. The computer was distributed with a Windows
2000 Pro Certificate of Authenticity label affixed to the system.
The label was subsequently identified as one that had been
Microsoft packages and distributes its software programs with
associated user manuals, Certificates of Authenticity, end user
license agreements, and other documentation. To help ensure that
computer system dealers, such as Master Computers, are
distributing authorized copies of Microsoft software on their
computers, Microsoft requires that any installed copy of a
software program be distributed with a corresponding authorized
Microsoft CD-ROM containing the program, and a Certificate of
Authenticity or a Certificate of Authenticity label. This
practice helps prevent would-be infringers from taking one CD-ROM of Microsoft software, which was licensed for use only on a
single computer, and copying it onto numerous systems which they
then sell to customers.
The computer system sold to the investigator was not
distributed with the requisite legitimate Microsoft Windows 2000
Pro CD-ROM or end user license agreement. The Defendants are not
authorized to copy and distribute Microsoft software programs on
computer systems without also obtaining and distributing the
software components, which include the appropriate CD-ROM's.
In two letters dated February 27, 2004, Microsoft notified the
Defendants that they had infringed Microsoft's copyright and
trademarks by distributing a computer with an infringing copy of
Windows 2000 Pro software installed and a stolen Windows 2000 Pro
Certificate of Authenticity label. The reference line in each
letter requested the Defendants to "Cease and Desist" certain
practices. In the letters Microsoft informed the Defendants of
the proper manner to distribute Microsoft software and of the
dangers associated with distributing Certificate of Authenticity
labels. The Defendants received the two letters dated February
In October of 2004, the Defendants distributed to an
investigator counterfeit Windows 2000 Pro Certificate of Authenticity labels. An individual who identified himself as Rick
took the order from the investigator.
The legitimate function of a Certificate of Authenticity label
is to help a customer verify whether he or she has obtained
genuine Microsoft software, similar to the way that an appraisal
certificate is used to authenticate a diamond. There is no
legitimate reason to distribute a Certificate of Authenticity
label separate from the software program which it was intended to
Microsoft has direct relationships with several large
distributors to distribute Microsoft software to system builders
and software resellers. Microsoft maintains a list of these
authorized distributors on its internet home page. Through that
page, an Anti-Piracy telephone hotline, and a variety of mass
mailings, Microsoft directs system builders and resellers to the
authorized dealers as assured sources of genuine Microsoft
Although the Defendants learned "a long time ago" that
Microsoft had authorized distributors of Microsoft software, the
Defendants chose to deal primarily in purported Microsoft
software components of unknown origin which they acquired from
other sources. The Defendants acquired stand alone Certificate of
Authenticity labels and Microsoft software from vendors which they knew were not authorized distributors of Microsoft software.
The Defendants selected their vendors based on who offered the
best price. The Defendants acquired stand alone Certificate of
Authenticity labels, rather than complete, legitimate packages of
Microsoft software, to maximize their profits.
The Defendants admit that they installed unauthorized copies of
Microsoft software programs onto computer systems using a single
installation CD-ROM, affixed to those systems suspect
separately-acquired Certificate of Authenticity labels, and then
distributed the systems to their customers without the
accompanying CD-ROM. The Defendants admit that they continued
their infringing business practices "a couple of months" after
reading Microsoft's cease and desist letters in order to make
Based on those facts, Microsoft argues that it is entitled to
summary judgment on the claims in its complaint. Before
considering the merits of Microsoft's arguments, we briefly
recount the claims set forth and relief sought in the complaint.
The following claims have been asserted in Microsoft's complaint:
1) Copyright infringement; 2) Trademark infringement; 3) False
designation of origin, false description, and false
representation of Microsoft packaging; and 4) unfair competition
based on Pennsylvania common law. Microsoft seeks a judgment providing for injunctive relief; an accounting of and trust to
hold the Defendants' illegal profits; money damages; and
Microsoft's costs and reasonable attorneys' fees incurred by it
in prosecuting this action. In the documents filed by Microsoft
in support of its summary judgment motion, Microsoft specifically
requests damages in the amount of $430,000.00.
Turning now to the merits of Microsoft's summary judgment
motion, we first consider whether Microsoft is entitled to
summary judgment with respect to the Defendants' liability on any
or all of its causes of action.
Courts have consistently held that in order to prevail on a
claim of copyright infringement, "a plaintiff must establish: (1)
ownership of a valid copyright; and (2) unauthorized copying of
original elements of the plaintiff's work." Kay Berry, Inc. v.
Taylor Gifts, Inc., 421 F.3d 199, 203 (3d Cir. 2005) (quoting Dun
& Bradstreet Software Servs., Inc. v. Grace Consulting, Inc.,
307 F.3d 197, 206 (3d Cir. 2002)).
With respect to the first element, the Court of Appeals for the
Third Circuit has ruled that "[c]ertificates of registration
issued by the U.S. Copyright Office constitute prima facie
evidence of the validity and ownership of the material. Ford
Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277, 291 (3d
Cir. 1991) (citing Andrien v. Southern Ocean County Chamber of Commerce, 927 F.2d 132, 134 (3d Cir. 1991); Williams Electronics,
Inc. v. Artic International, Inc., 685 F.2d 870, 873 (3d Cir.
1982)). By submitting all of the pertinent certificates of
registration, Microsoft has fulfilled that element.*fn1
The undisputed material facts set forth above confirm that
Microsoft has also proven the second element. Kao unlawfully
obtained and resold unauthorized copies of Microsoft's "Windows
2000 Professional" software, which were at all relevant times
subject to Microsoft's copyright. Those actions render the
Defendants liable to Microsoft on its copyright claim as a matter
The next claim to consider is the trademark infringement cause
of action relating to Microsoft's four trademarks. In order to
prove such a claim, Microsoft is required to prove the following:
(1) it owns the marks at issue; (2) the marks are valid and
legally protectable; and (3) the Defendants' use of the marks to
identify goods or services is likely to create confusion.
Checkpoint Systems, Inc. v. Check Point Software Technologies,
Inc., 269 F.3d 270, 279 (3d Cir. 2001) (citing Commerce Nat'l Ins. Servs., Inc. v. Commerce Ins. Agency, Inc.,
214 F.3d 432, 437-38 (3d Cir. 2000)).
None of the material facts relating to Microsoft's Lanham Act
claim are in dispute. Microsoft registered each of the
trademarks, the computer components and software distributed by
the Defendants contained those marks, and the marks distributed
by the Defendants were likely to create confusion because they
were in fact identical to Microsoft's protected marks.
Those same facts establish Microsoft's entitlement to recover
on the false designation claim in count three and the state-law
unfair competition claim in count four. See Major League Baseball
Promotion Corp. v. Colour-Tex, Inc., 729 F. Supp. 1035, 1039
(D.N.J. 1990) (observing that plaintiff must prove same elements
to establish either federal or common law trademark infringement
and that identical facts would support common law unfair
competition claim and false designation of origin claim under
federal law); J & J Snack Foods Corp. v. Nestle USA, Inc.,
149 F. Supp.2d 136, 157 (D.N.J. 2001) (same); Pa. State Univ. v. Univ.
Orthopedics, Inc., 706 A. 2d 863, 870 (Pa.Super. 1998).
The Defendants' only argument with respect to their liability
on any of Microsoft's claims is that their conduct was not
willful. As a matter of law, a plaintiff is not required to prove
willfulness to prevail on a copyright or trademark infringement claim. See 17 U.S.C. § 501(a);
15 U.S.C. § 1117(c); Microsoft v. Grey Computer, 910 F. Supp. 1077, 1083,
1086 (D.Md. 1995).
Consequently, Microsoft is entitled to summary judgement on the
issue of the Defendants' liability on all of Microsoft's claims.
We will enter judgment in favor of Microsoft with respect to the
That conclusion requires us to consider the relief to which
Microsoft is entitled. We need not discuss the merit of
Microsoft's request for permanent injunctive relief because the
Defendants have already voluntarily provided that
relief.*fn2 It is clear that Microsoft is entitled to such
relief and we will grant its request therefor. We will proceed to
consider Microsoft's entitlement to damages.
The federal statutes upon which Microsoft's claims are based
allow a successful plaintiff to choose the method by which the
damages will be determined. A plaintiff may elect to recover
actual damages, or opt for an award of specified statutory
damages. 15 U.S.C. § 1117(c); 17 U.S.C. § 504(c)91). The
Copyright Act provides for statutory damages of up to $30,000.00 for each copyright infringed, and as much as $150,000.00 for each
willful infringement. 17 U.S.C. § 504(c). The corresponding
figures in the Lanham Act allow for an award of $100,000.00 for
each trademark infringed, enhanced up to $1,000,000.00 for each
willful infringement. 15 U.S.C. § 1117(c).
As noted above, Microsoft has requested an award of $430,000.00
in damages. Microsoft bases that figure upon a $100,000.00 award
for each of its four trademarks infringed, and $30,000.00 for the
single copyright at issue. Those figures are the maximum amounts
set forth in the governing statutes for non-willful violations.
The Defendants contend that no award of damages should be made
without conducting a hearing.
The United States Supreme Court has held that "the Seventh
Amendment provides a right to a jury trial, which includes a
right to a jury determination of the amount of statutory damages"
available pursuant to the Copyright Act. Feltner v. Columbia
Pictures Television, Inc., 523 U.S. 340, 342, 118 S. Ct. 1279,
1282 (1998). The court reached the same conclusion with respect
to statutory damages awarded for the infringement of a trademark.
Dairy Queen v. Wood, 369 U.S. 469, 477-79, 82 S.Ct. 894,
8 L.Ed.2d 44 (1962) (trademark); see also Alcan Intern. Ltd. v.
S.A. Day Mfg. Co., Inc., 179 F.R.D. 398 (W.D.N.Y. 1998). By order dated January 31, 2005, we placed this case on our
December, 2005, Trial List. The matter will remain on that list
with the trial being limited to the amount of damages to be
NOW, THEREFORE, IT IS HEREBY ORDERED THAT:
1. Microsoft's motion (Document 16) for summary
judgment is granted in part and denied in part as
provided in paragraphs 2 through 4 of this order.
2. The Clerk of Court shall enter judgment in favor
of Microsoft and against Master Computer, Inc., and
Sung Kao, a/k/a Rick Kao, on all of Microsoft's
3. Defendants Master Computer, Inc., and Sung Kao
(a/k/a Rick Kao), their agents, servants, employees,
representatives, successors and assigns, and all
persons or entities acting in concert or in
participation with them, shall be and hereby are
permanently enjoined and restrained from: a)
imitating, copying, or making any other infringing
use or infringing distribution of software programs,
components, end user license agreements or items
protected by Microsoft's registered trademarks and
service mark including but not limited to the
following Trademark or Service Mark Registration
Numbers: (1) 1,256,083 ("Microsoft");
(2) 1,200,236 ("Microsoft");
(3) 1,872,264 ("Windows");
(4) 1,815,350 (Colored Windows Flag); and
(5) 1,816,354 (Windows Flag Logo);
or of the software programs, components, end user
license agreements, items or things protected by the
following Certificate of Copyright Registration No.:
TX 5-036-267 (Microsoft Windows 2000 Professional);
b) manufacturing, assembling, producing,
distributing, offering for distribution, circulating,
selling, offering for sale, advertising, importing,
promoting, or displaying any software program,
component, end user license agreement, item or thing
bearing any simulation, reproduction, counterfeit,
copy, or colorable imitation of any of Microsoft's
registered trademarks or service mark including but
not limited to the Trademark and Service Mark
Registration numbers listed in paragraph a) above;
c) using any simulation, reproduction, counterfeit,
copy, or colorable imitation of Microsoft's
registered trademarks or service mark, including but
not limited to the Trademark and Service Mark
Registration numbers listed in paragraph a) above, in connection with the
manufacture, distribution, offering for distribution,
sale, offering for sale, advertisement, promotion, or
display of any software, component, end user license
agreement, item or thing not authorized or licensed
d) using any false designation of origin or false
description which can or is likely to lead the trade,
the public, or individuals erroneously to believe
that any software, component, end user license
agreement, item, or thing has been manufactured,
produced, distributed, offered for distribution,
advertised, promoted, displayed, licensed, sponsored,
approved by or for Microsoft, when such is not true;
e) using the names, logos, or other variations
thereof, of any Microsoft copyright or
trademark-protected software program in any of
Defendants' trade or corporate names;
f) engaging in any other activity constituting an
infringement of any of Microsoft's trademarks,
service marks, or copyrights, or of Microsoft's
rights in, or right to use or to exploit these
trademarks, service mark, or copyrights; or constituting any dilution of
Microsoft's name, reputation, or goodwill; and
g) assisting, aiding, or abetting any other person or
business entity in engaging in or performing any of
the activities referred to in paragraphs a) through
4. This matter remains on the December, 2005, Trial
List, for a jury to determine the amount of statutory
damages to which Microsoft is entitled.
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