Opinion ID: 790804
Heading Depth: 2
Heading Rank: 3

Heading: Monetary and Injunctive Relief

Text: 21 Island also challenges the remedies awarded to Microsoft by the district court upon its entry of summary judgment. Although we affirm the summary judgment, we agree with Island that, on the record before us and at this stage of the proceedings, the remedies given to Microsoft must be vacated and the case remanded for future proceedings in this regard. 22 Once an act of infringement under the Copyright Act has been proven, a plaintiff may, in lieu of an award of actual damages and profits, request that statutory damages under 17 U.S.C. § 504(c) be awarded. If a plaintiff so elects, the district court will grant anywhere between $750 and $30,000 for each copyright infringed. See 17 U.S.C. § 504(c)(1). If the defendant's infringement was willful, however, the district court may also, in its discretion, enhance the statutory damages award to as much as $150,000 per infringed work. 17 U.S.C. § 504(c)(2). 23 To prove willfulness under the Copyright Act, the plaintiff must show (1) that the defendant was actually aware of the infringing activity, or (2) that the defendant's actions were the result of reckless disregard for, or willful blindness to, the copyright holder's rights. See In re Aimster Copyright Litigation, 334 F.3d 643, 650 (7th Cir.2003); Lipton v. Nature Co., 71 F.3d 464, 472 (2d Cir.1995); N.A.S. Import Corp. v. Chenson Enters., Inc., 968 F.2d 250, 252 (2d Cir.1992); see also Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 112 (2d Cir.2001) (Willfulness in this context means that the defendant recklessly disregarded the possibility that its conduct represented infringement.) (citation and internal quotation marks omitted). 24 The evidence relevant to willfulness in the summary judgment record consisted of Brunner's affidavit and deposition testimony. In both, Brunner repeatedly denied that he had actual knowledge of any infringing activities, and Microsoft does not contend that conclusive evidence of actual knowledge can be found in Brunner's affidavit or deposition. Microsoft asserts, however, that Brunner's testimony readily established sufficient reckless disregard and willful blindness to compel a finding of willfulness. In support of this claim, it points primarily to three of Brunner's statements. 25 First, Brunner expressed his frustration with CCST's price fluctuations (between $100 and $265 over a six-month period) for various software products. In Brunner's words, he at times squirmed when dealing with CCST, which he did not consider a regular distributor because, in part, its prices jump all over the place. There is no consistency. This, Microsoft claims, establishes that Brunner was suspicious of the authenticity of CCST products. 26 Second, Microsoft points to Brunner's account of a prior incident in which an anonymous customer called Island to complain about counterfeit merchandise. Upon receiving the telephone call, Brunner invited the customer to come to Island's retail location and return the merchandise for a refund; when no customer ever materialized to authenticate the claim of counterfeit merchandise, Brunner let the matter drop. Microsoft argues that this casual response to claims of counterfeiting constituted clear willful blindness, and that a reasonable merchant would have taken additional steps to investigate the authenticity of his products. 27 Finally, Brunner testified that Island did not take extensive measures to prevent the receipt and sale of high-quality counterfeit merchandise. Rather, Island's employees, including Brunner, would conduct a relatively quick visual inspection of goods. And on some occasions (including the sale of the offending products to Gouzien), the employees would not even examine products upon receiving them from distributors. 28 Microsoft asserts that, taken together, this evidence constitutes conclusive proof that, as a matter of law, Brunner acted with reckless disregard for, and willful blindness to, Microsoft's rights. We do not disagree with Microsoft that some of Brunner's statements suggest that Island failed to take reasonable steps to prevent the distribution of counterfeit software. But at this stage of the proceedings, where we must draw all inferences in favor of the non-moving party, we cannot say that, as a matter of law, Island is entitled to summary judgment on the question of willfulness. 29 A jury could, without doubt, conclude that Brunner's statements reveal willful blindness, or establish a pattern of conduct so unreasonable as to constitute reckless disregard. Still, it is not beyond peradventure that a reasonable jury would conclude otherwise. And that is enough to make summary judgment on the issue of willfulness inappropriate. See Owens v. New York City Hous. Auth., 934 F.2d 405, 410 (2d Cir.1991) (Only if no reasonable trier of fact could find in favor of the non-moving party should summary judgment be granted.). 30 Brunner's lamentation over CCST's sales practices, for example, might be read as indicating only that Brunner was frustrated with disruptions in his supply chain. Similarly, Brunner's lack of investigatory follow-up when faced with complaints of counterfeit products might be explained on the grounds that a reasonable merchant might not credit the claims of an anonymous customer unwilling to return the merchandise for examination. Further, while Island certainly did not take any special steps to prevent its receipt and sale of inauthentic software products, a jury could infer that additional inspections were, for any number of reasons, not mandated. For example, perhaps only an individual with specialized training (like Bankhead, Microsoft's own expert) could discern the difference between authentic products and high-quality counterfeits of the sort at issue in this case. And the hiring of such experts could be found by a jury to be beyond what could reasonably be expected of small companies. We conclude that, viewed in the manner most favorable to Island, the evidence does not show, at this stage of the proceedings, that Microsoft is entitled to judgment as a matter of law as to willfulness. See Fed. R.Civ.P. 56(c). 31 Having given possible explanations which would not constitute willfulness on Island's part, we reiterate that the evidence of willfulness, in the instant case, is strong. And our prior decisions clearly recognize that, even in the absence of evidence establishing the infringer's actual knowledge of infringement, a plaintiff can still prove willfulness by proferring circumstantial evidence that gives rise to an inference of willful conduct. See, e.g., Knitwaves, Inc. v. Lollytogs Ltd., 71 F.3d 996, 1010 (2d Cir.1995) (noting that [k]nowledge of infringement may be constructive rather than actual; that is, `it need not be proven directly but may be inferred from the defendant's conduct') ( quoting N.A.S. Import Corp. v. Chenson Enters., Inc., 968 F.2d 250, 252 (2d Cir. 1992)). Nevertheless, at the summary judgment stage, although an inference of constructive knowledge or reckless conduct seems the better of the possible inferences that can be drawn, we must still draw all inferences in favor of the non-moving party. See, e.g., Lipton, 71 F.3d 464, 472-73 (2d Cir.1995) (reversing district court's award of summary judgment on the question of willful infringement, and its attendant award of monetary relief, because the evidence viewed in the light most favorable to the non-moving party did not support an inference of willfulness). Thus, even in a case like the one before us, where the non-moving party does not traverse the evidence suggesting constructive knowledge of infringement, but only disputes the inferences to be drawn from that evidence, our standard of review requires that we decide in favor of the non-moving party. 32 Microsoft contends, however, that assuming arguendo that the court entered summary judgment on willfulness prematurely, its damage award should still stand. We agree with Microsoft that the district court's damage award is consistent with the Copyright Act's damage provisions, quite apart from willfulness. The court awarded Microsoft $30,000 per work infringed, and this amount is authorized by the statutory scheme even without a finding of willfulness. See 17 U.S.C. § 504(c)(1). 33 But within the statutory framework, a district judge has wide discretion in setting the statutory damage award anywhere between $750 and $30,000 for each work infringed. See, e.g., Fitzgerald Pub. Co., Inc. v. Baylor Pub. Co., Inc., 807 F.2d 1110, 1116-17 (2d Cir.1986) (discussing the wide discretion the Copyright Act affords the trial court in setting the amount of statutory damages). And the district court specifically stated that its willfulness finding was one of the factors motivating its discretionary decision to set damages at the $30,000 end of the range. 3 Since, in setting statutory damages, the district court relied, at least in part, on an erroneous conclusion that willfulness had been established as a matter of law, we believe it prudent to vacate its damage award and remand for further proceedings. 34 Similarly, the district court's assessment of costs and attorney's fees, as well as its entry of a permanent injunction, also relied in part on the court's finding of willfulness. We therefore vacate the entirety of the remedial portion of the district court's summary judgment order, including statutory damages, costs, fees, and injunctive relief. 35 In vacating this portion of the district court's judgment, we emphasize, however, that the court's reliance on a finding of willfulness was unnecessary to the relief it awarded. Under the Copyright Act, there is no need for an infringer to act willfully for it to be sanctioned as the court sanctioned Island. And so it may well be that the identical remedies that we are currently vacating are reimposed upon Island following remand. But since we cannot be certain that the district court's remedial decision would have been the same absent its conclusion that Island and Brunner acted with reckless disregard for, or willful blindness to, Microsoft's rights, we vacate the injunction and the award of costs and fees. 4