2012 FC, 2012 FC 1219

Date: 20121018 Docket: T-2055-11 Citation: 2012 FC 1219 Toronto , Ontario , October 18, 2012 PRESENT: The Honourable Mr. Justice Campbell BETWEEN: ADOBE SYSTEMS INCORPORATED, MICROSOFT CORPORATION, AND ROSETTA STONE LTD. Plaintiffs and DALE THOMPSON DBA APPLETREE SOLUTIONS Defendant REASONS FOR JUDGMENT AND JUDGMENT [ 1 ] In the present action launched under the Copyright Act , RSC 1985, c C-42 (the Act ) the Plaintiffs claim that the Defendant infringed their copyright in a number of works through the unauthorized reproduction and sale of counterfeit copies of the Plaintiffs’ computer software products and the reproduction of cover art used on their software program packaging. I.

Summary Judgment [ 2 ] The Plaintiffs argue that

summary judgment is appropriate for the following reasons: the evidence of the Defendant’s infringing conduct is overwhelming; the Defendant’s Statement of Defence has no substantive merit; and, apart from filing the Statement of Defence, the Defendant has not participated in the action, including not appearing for the hearing of the

summary judgment motion although duly served with notice. I agree with this argument. [ 3 ] On the uncontested evidence of copyright infringement on the record of the

summary judgment motion, I find the following facts: the Plaintiffs are all well-known US companies and developers of popular software programs who own copyrights in various software programs, and license these rights to a wide range of licensees; the Defendant, a resident of Toronto, Ontario, engaged in unauthorized reproduction of the Plaintiffs’ software programs and cover art and offered the counterfeit reproductions for sale on the internet under the name Appletree Solutions through the popular Kijiji and Craigslist websites since at least the spring of 2011; and the Defendant directly assisted purchasers of the pirated software by supplying detailed instructions and product keys for activating the counterfeit software programs.

In my opinion, with respect to criteria for granting

summary judgment pursuant to Rule 215 of the Federal Courts Rules, I find that in the present case there is no genuine issue for trial with respect to the claim or defence.

II. Deterrent Relief [4] The Plaintiffs argue that the Defendant’s conduct warrants deterrent relief by way of an injunction, and orders for maximumstatutory damages, punitive damages, prejudgment interest, post-judgment interest, and solicitor client costs.

I also agree with thisargument because I find that the Defendant’s infringing conduct, and his response to being held accountable for this conduct, isparticularly egregious and requires a clear deterrent message to the Defendant, and anyone else of like mind. [5] The Defendant has failed to acknowledge any wrongdoing, rather his reaction to the current proceedings has been to blamethe Plaintiffs.

In my opinion, the following statements made by the Defendant in the Statement of Defence discloses a misguided attitudeof entitlement with respect to his infringing conduct: the Plaintiffs erred by not issuing a cease and desist letter before commencing theinfringement action; the Plaintiffs are participants to a “network effect” which the Defendant describes as an economic practice by whichthe Plaintiffs establish market dominance and maximize their profits, while also allowing and tolerating copyright infringement andpiracy; and copyright infringement and piracy actually lead to financial gains for the Plaintiffs, which is why they fail to installprotective measures in their software.

It appears that the Defendant’s knowledge and attitude towards theft of intellectual property wasgained in the course of working for a business law firm in downtown Toronto. In my opinion, the evidence of the Defendant’s strongintention to infringe requires the application of the law to deliver strong deterrent measures. A. Declaratory and Injunctive Relief [6] I find that the Plaintiffs are entitled to declarations regarding the subsistence of copyright in the identified software programsand cover art, the ownership of the copyright and the infringement of the copyright by the Defendant.

An injunction is appropriate toissue to protect these rights from continuing infringement by the Defendant. B. Statutory Damages [7] Pursuant to s. 38.1 (1) of the Act statutory damages may be awarded “in a sum of not less than $500 or more than $20,000 asthe court considers just”, with the proviso that, pursuant to s. 38.1 (3), even the minimum amount can be lowered on the basis ofproportionality of damages to the infringing activity, “as the court considers just”.

Pursuant to s. 38.1(5), the following factors are to betaken into consideration in awarding statutory damages: the good faith or bad faith of the defendant; the conduct of the parties before andduring the proceedings; and the need to deter other infringements of the copyright in question. [8] Given what I consider to be a bad faith attitude on the part of the Defendant, his conduct as recounted above, the need fordeterrent relief as I have expressed, and given that no argument has been advanced by the Defendant on any these question, I find noreason not to award maximum statutory damages in the amount of $340,000, being $20,000 per work infringed for each of the threePlaintiffs.

C. Punitive Damages [9] The Plaintiffs seek punitive damages in the amount of $15,000 per Plaintiff for a total of $45,000.

Section 38.1(7) of the Actprovides that an award of statutory damages does not preclude the Plaintiffs from punitive and exemplary damages. The leading case onpunitive damages remains the Supreme Court of Canada’s decision in Whiten v Pilot Insurance Co., 2002 SCC 18, [2002] 1 SCR 595(SCC). The Court in Whiten ruled that punitive damages are appropriate when a party’s conduct has been malicious, oppressive and high-handed, offends the court’s sense of decency, and represents a marked departure from ordinary standards of decent behaviour (Whiten vPilot Insurance Co., supra at para 36).

Furthermore, punitive damages are to be awarded only when all other penalties have been takeninto account and are deemed inadequate to accomplish the objectives of retribution, deterrence and denunciation (Whiten v PilotInsurance Co., supra at para 123). [10] Judges have not shied away from awarding punitive damages in cases that present similar circumstances to those in thecurrent action.

In fact, in recent years punitive damages against individual defendants for copyright infringement have ranged from$50,000 to $200,000 (Microsoft Corp. v PC Village Co., 2009 FC 401 (FC); Louis Vuitton Malletier S.A. v Yang, 2007 FC 1179 (FC),Louis Vuitton Malletier S.A. v 486353 B.C. Ltd. 2008 BCSC 799 , [2008] BCSC 799, [2008] BCWLD 5075 (BC SC [InChambers])].

It is worth nothing that in Louis Vuitton Malletier S.A. v Yang, supra Justice Snider awarded $100,000 in punitive indamages on top of the maximum statutory damages award. [11] It appears that if a defendant’s conduct can be characterized as “outrageous”, “highly unreasonable” or showing a callousdisregard for the rights of the plaintiff, punitive damages will be warranted (Louis Vuitton Malletier S.A. v Singga Enterprises (Canada)Inc., 2011 FC 776 (FC) at para 168). When assessing whether conduct can be characterized in such terms, the following factors arehelpful to consider: (

i) the scale and duration of the infringing activities; (ii) cooperation of the infringing party during court proceedingsand willingness to admit wrongdoing; (iii) whether the infringing party’s actions were knowing, planned and deliberate; (iv) whether theinfringing party attempted to conceal and cover up wrongdoings; (

v) whether the infringing party continues to infringe the copyright in

question; and (vi) whether the conduct of the infringing party in the course of the proceedings has resulted in the additional costs to thePlaintiffs (Louis Vuitton Malletier S.A. v Singga Enterprises (Canada) Inc., supra at para 170-176). [12] While there is no evidence of recidivist activity on the part of the Defendant, nevertheless, I am of the opinion that he is onthe negative side of each of the other factors.

Considering the quantum of punitive damage in the comparable cases, I find that theDefendant’s conduct and attitude as described in paragraphs 4 to 6 of these reasons certainly qualify for an award of punitive damages. Ifind that the amount sought by the Plaintiffs is most reasonable. D. Pre-judgment and Post-judgment Interest [13] Pursuant to s.128 (1) and s.129 (1) of the Act, I find that the Plaintiffs are entitled to both pre-judgment and post-judgmentinterest in accordance of the laws of Ontario being the locus of the pirating.

The prescribed rate of pre-judgment interest is 1.3%, and theprescribed rate of post-judgment interest pursuant to s.127(2) of the Ontario Courts of Justice Act, as published by the Deputy AttorneyGeneral for orders issued in the fourth quarter of 2012, is 3.0% (see:http://www.attorneygeneral.jus.gov.on.ca/english/courts/interestrates.asp). E. Costs [14] Finally, the Plaintiffs request an award of costs on a solicitor client basis within the Court’s discretionary powers set out inRule 400(1) of the Federal Court Rules.

Such costs are appropriate where a party has acted in a reprehensible, scandalous or outrageousmanner (Louis Vuitton Malletier S.A. v Yang, supra; Young v Young, (SCC), [1993] 4 SCR 3 (SCC) at para 66; Rice v.New Brunswick, 2002 SCC 13 , [2002] 1 SCR 405 (SCC) at para 86). In my opinion, this is such a case. In the course of oralargument in the hearing of the present action, Counsel for the Plaintiffs advised that the Plaintiffs have suffered costs of at least $60,000to prosecute this action against the Defendant.

In my opinion there is no reason why the Plaintiffs should bear any of these costs giventhe Defendant’s conduct as detailed in these reasons. As a result I grant the Plaintiffs’ request. JUDGMENT ACCORDINGLY, THIS COURT’S JUDGMENT is that: It is declared that: 1. Copyright subsists in the computer software programs and cover art identified in the evidence filed in support of thePlaintiffs’ motion, namely: a. Adobe Acrobat X; b. Microsoft Word for Mac 2011; Microsoft Excel for Mac 2011; Microsoft PowerPoint for Mac 2011; and Microsoft Outlookfor Mac 2011 (hereinafter, collectively “Microsoft software”); c.

Rosetta Stone Japanese Level 1, 2, and 3; d. nine unique works of cover art used with Adobe InDesign CS; Adobe Creative Suite 4 Master Collection; Adobe CreativeSuite 5 Master Collection; Adobe Acrobat X; Adobe After Effects CS5; Adobe InCopy CS5; Adobe Lightroom 2; Adobe Lightroom 3;and Adobe Font Folio 11 (hereinafter, collectively “Adobe cover art”); and e. two unique works of cover art used with Rosetta Stone Arabic Levels 1-3; Rosetta Stone Chinese Mandarin Levels 1-3;Rosetta Stone English (American) Levels 1-5; Rosetta Stone French Levels 1-3; Rosetta Stone German Levels 1-3; Rosetta Stone GreekLevels 1-3; Rosetta Stone Hebrew Levels 1 & 2; Rosetta Stone Hindi Levels 1-3; Rosetta Stone Italian Levels 1-3; Rosetta StoneJapanese Levels 1-3; Rosetta Stone Korean Levels 1-3; Rosetta Stone Persian Levels 1-3; Rosetta Stone Portuguese Levels 1-3; RosettaStone Russian Levels 1-3; Rosetta Stone Spanish (Spain) Levels 1-3; and Rosetta Stone Spanish (Latin America) Levels 1-5 (hereinafter,collectively “Rosetta Stone cover art”); 2. the Plaintiff Adobe Systems Incorporated is the owner of copyright in the Adobe Acrobat X software and the Adobe coverart, the Plaintiff Microsoft Corporation is the owner of copyright in the Microsoft software, and the Plaintiff Rosetta Stone Ltd. is theowner of copyright in the Rosetta Stone Japanese Level 1, 2, 3 software and the Rosetta Stone cover art; and 3. the Defendant has infringed the Plaintiffs’ copyright in the Adobe Acrobat X software, the Adobe cover art, the Microsoftsoftware, the Rosetta Stone Japanese Level 1, 2, 3 software, and the Rosetta Stone cover art, and has authorized, induced and procuredinfringement of the Plaintiffs’ copyright in the identified computer software programs by his customers.

It is FURTHER ADJUDGED that: 1. Permanent injunctions hereby issue to restrain the Defendant from: a. infringing copyright in the software programs, cover art or any other works in which the Plaintiffs own copyright, and from authorizing or inducing and procuring others to do so including, without limitation, from directly or indirectly: (

i) reproducing or communicating to the public by telecommunication all or a substantial part of the computer software programs listed in Appendix A to the Statement of Claim, and Adobe or Rosetta Stone cover art identified in the evidence; (ii) authorizing, directing, assisting, inducing and procuring others to infringe copyright in any of the computer software programs listed in Appendix A to the Statement of Claim; b. selling, distributing, exposing for sale, offering for sale or importing any infringing copies of any of the computer software programs listed in Appendix A to the Statement of Claim, or any other works in which the Plaintiffs own copyright; and c. infringing copyright in works the Plaintiffs own copyright in, including any such works which come into existence after the commencement of these proceedings. 2.

The Defendant is directed to forthwith pay to the Plaintiffs: a. statutory damages in the maximum amount prescribed by

section 38.1 of the Copyright Act in respect of the infringement of copyright in the software programs and cover art, namely: (i) $80,000 to the Plaintiff Microsoft Corporation; (ii) $200,000 to the Plaintiff Adobe Systems Incorporated; and (iii) $60,000 to the Plaintiff Rosetta Stone Ltd. b. punitive damages in the amount of $15,000 to each of the Plaintiffs; c. pre-judgment interest in the prescribed amount of 1.3% on the award of statutory damages calculated from April 8, 2011; d. post-judgment interest in the prescribed amount of 3.0% on the award of statutory damages calculated from the date of judgment; e. costs in the amount of $60,000. “Douglas R.

Campbell” Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-2055-11 STYLE OF CAUSE: ADOBE SYSTEMS INCORPORATED, MICROSOFT CORPORATION, AND ROSETTA STONE LTD. V DALE THOMPSON DBA APPLETREE SOLUTIONS

PLACE OF HEARING: Toronto, Ontario DATE OF HEARING: October 11, 2012 REASONS FOR JUDGMENT AND JUDGMENT BY: CAMPBELL J. DATED: October 18, 2012 APPEARANCES : Brian P. Isaac Vik Tenekjian FOR THE PLAINTIFFS No appearance FOR THE DEFENDANT (on his own behalf) SOLICITORS OF RECORD : Smart & Biggar Barristers & Solicitors Toronto, Ontario FOR THE PLAINTIFFS N/A FOR THE DEFENDANT (on his own behalf)