Opinion
1:14-cv-03174 (DAB) (SDA)
12-20-2018
Cengage Learning, Inc., et al., Plaintiffs, v. Jamal Yousuf, et al., Defendants.
REPORT AND RECOMMENDATION STEWART D. AARON, UNITED STATES MAGISTRATE JUDGE. TO THE HONORABLE DEBORAH A. BATTS, UNITED STATES DISTRICT JUDGE:
INTRODUCTION
On September 11, 2018, Honorable Deborah A. Batts issued a Memorandum and Order (1) finding that Defendant Prameet Bhargava ("Bhargava") had infringed on the duly registered copyrights and trademarks of Plaintiffs Cengage Learning, Inc., Pearson Education, Inc., and John Wiley & Sons, Inc. (collectively, "Plaintiffs"); and (2) referring to me to determine at inquest the amount of statutory damages to be awarded. (9/11/18 Mem. & Order, ECF No. 177, at 1, 6, 16 & 24.) Plaintiffs submitted Proposed Findings of Fact in support of damages on October 12, 2018, seeking a total damages award of $330,000.00. (Proposed Findings of Fact & Concls. Of Law, ECF No. 179, at 16.) Bhargava failed to respond to Plaintiffs' submission. I held a telephonic hearing on December 20, 2018, at which Bhargava failed to appear.
The hearing initially had been scheduled for December 5, 2018 as an in-person hearing, but was adjourned due to December 5, 2018 having been declared a National Day of Mourning. (See 12/3/18 Order, ECF No. 181.)
For the reasons set forth below, I recommend that Plaintiffs be awarded statutory damages in the amount of $330,000.00.
BACKGROUND
I. Factual Background
The following facts are drawn from the District Court's prior decision granting summary judgment to Plaintiffs:
Plaintiffs are well-known publishers of educational textbooks and materials. Plaintiffs currently sell their works in retail and online bookstores for rental or purchase. Plaintiffs own or are the exclusive licensee of thousands of copyrights, including the textbooks Family Therapy by Nichols, Financial Accounting by Scott, Fundamentals of Chemical Engineering by Matsoukas, Fundamentals of Complex Analysis by Saff, Introduction to Behavioral Research Methods by Leary, Management of Organizational Behavior by Hersey, Performance Management by Aquinis, Policy Studies by Fowler, Research Methods by Graziano, Modern Algebra: An Introduction by Durbin, and Radiation Detection and Management by Knoll. Plaintiffs duly registered their copyrights with the United States Copyright Office.
Additionally, Plaintiffs own or are the exclusive licensee of numerous trademarks, including "PEARSON," "ALLYN & BACON," BENJAMIN CUMMINGS," MERRILL," "PRENTICE HALL," "WILEY," and "JW." Plaintiffs have duly registered their marks on the Princip[al] Register of the United States Patent and Trademark Office.
Plaintiffs assert they invest heavily in textbook publishing and incur substantial costs in author royalties and other costs of content creation, including copyediting and proofreading. Plaintiffs also assert that the revenue from their sales of textbooks represents a substantial amount of Plaintiffs' annual revenues and is "important to Plaintiffs' financial health."
Defendant Prameet Bhargava advertises and sells textbooks to consumers in New York and around the country through the online market places Amazon.com and eBay.com. Defendant owns or used to own the Amazon storefronts "Denver Hot Shot Books" and "GotBestThings," through which he sold textbooks. From at least August 2013 through May 2014, numerous textbooks bearing the same name as Plaintiffs' authentic works appeared on Defendant's storefronts for sale.
During that same time period, Plaintiffs purchased eleven different titles from Defendant's Amazon storefronts [i.e., the titles discussed above]. Upon receiving the titles, Plaintiffs examined the books and determined that they were counterfeit copies of their own authentic, copyrighted works. Plaintiffs affirmed
the counterfeit books they received were "inferior" to their own authentic works, with "lower quality paper stock, blurred images, or poor-quality binding." Plaintiffs also provided online reviews of Defendant's textbooks from customers who complained of the low quality and possible counterfeit nature of Defendant's books. Moreover, Plaintiffs noted that the "counterfeit books bear replications of a subset of [our] Marks that are indistinguishable from the real thing." Plaintiffs never authorized Defendant to reproduce, use or distribute any product containing any of its trademarks or copyrights.(9/11/18 Mem. & Order at 2-5 (citations and footnotes omitted).)
Defendant admits that he sold textbooks to consumers in the United States through his online market places on Amazon.com and eBay.com. Defendant also admits that he is indeed the owner of the Amazon online storefronts "Denver Hot Shot Books" and "GotBestThings," from which Plaintiffs purchased counterfeit textbooks. Defendant denies knowledge, however, that the books he sold through his online marketplaces were counterfeit. Among other things, Defendant also claims that he was unaware of the quality of the books he sold.
II. Additional Facts Relevant To Damages
The additional facts below, which are relevant to damages, are derived the unrebutted, proposed findings of fact submitted by Plaintiffs (Proposed Findings of Fact ¶¶ 22-32) that the Court finds are supported by the record evidence:
In the course of their investigations, Plaintiffs purchased the eleven titles referenced above from one of Bhargava's online storefronts and determined that they were all counterfeit copies of Plaintiffs' authentic works bearing Plaintiffs' marks. (Essig Decl., ECF No. 135, ¶¶ 18-20.) Plaintiffs have not authorized Bhargava to reproduce or distribute their copyrighted textbooks, nor use their trademarks. (Id. ¶ 8.) The counterfeit textbooks Bhargava sold to Plaintiffs are inferior to the authentic works. They sometimes have lower quality paper stock, blurred images or poor-quality binding. (Id. ¶ 24.) All of Bhargava's sales that Plaintiffs have been able to identify were at prices substantially below market price. (See id. ¶ 24.)
Bhargava knew or reasonably should have known that the textbooks he was selling were counterfeit. His online storefront on Amazon.com received multiple reviews complaining that the textbooks Bhargava sold had quality issues and/or were counterfeit. (See Mustico Decl., ECF No. 180, ¶ 9 & Ex. 2.) Although Bhargava did not reply to these reviews, he did reply to several positive reviews about the Online Storefront's delivery speed. (Mustico Decl. ¶ 9.)
Bhargava refused to cooperate in this litigation. Throughout the litigation, Plaintiffs served him with multiple discovery requests, but Bhargava did not respond to any of the requests. (Chen Decl., ECF No. 171, ¶ 2.)
In its September 11, 2018 Memorandum and Order, Judge Batts already has found that Bhargava infringed on Plaintiffs' duly registered copyrights, and enjoined him from persisting in that conduct. (9/11/18 Mem. & Order at 24-25.) The only question remaining for the Court is the amount of damages to be awarded in favor of Plaintiffs against Bhargava.
DISCUSSION
I. Legal Standards
The Second Circuit set forth the procedural rules applicable to the entry of a default judgment in City of New York v. Mickalis Pawn Shop, LLC:
Federal Rule of Civil Procedure 55 is the basic procedure to be followed when there is a default in the course of litigation." Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004). Rule 55 provides a "two-step process" for the entry of judgment against a party who fails to defend: first, the entry of a default, and second, the entry of a default judgment. New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005). The first step, entry of a default, formalizes a judicial recognition that a defendant has, through its failure to defend the action, admitted liability to the plaintiff. . . . The second step, entry of a default judgment, converts the defendant's admission of liability into a final judgment that terminates the litigation and awards the plaintiff any relief to which the court decides it is entitled, to the extent permitted by Rule 54(c).645 F.3d 114, 128 (2d Cir. 2011).
Where default has been entered against a defendant, courts are to accept as true all of the well-pleaded facts alleged in the complaint, except those concerning the amount of damages. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). Where, as in this case, a plaintiff's well-pleaded facts are sufficient to state a claim on which relief can be granted, the only remaining issue in an inquest is whether plaintiff has provided adequate support for its requested relief. See Gucci Am., Inc. v. Tyrrell-Miller, 678 F. Supp. 2d 117, 119 (S.D.N.Y. 2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)).
"[A] plaintiff seeking to recover damages against a defaulting defendant must prove its claim [through] the submission of evidence. . . ." Malletier v. Carducci Leather Fashions, Inc., 648 F. Supp. 2d. 501, 503 (S.D.N.Y. 2009). A court may determine the amount, if any, a plaintiff is entitled to recover without holding a hearing as long as (1) the court determines the proper rule for calculating damages, and (2) the evidence submitted by the plaintiff establishes "with reasonable certainty" the basis for the damages. Id. (citing Credit Lyonnais Sec. (USA), Inc., 183 F.3d at 155, and Transatlantic Marine Claims Agency Inc., 109 F.3d at 111).
Under the Copyright Act, an infringer of a copyright is liable for either (a) the copyright owner's actual damages and any additional profits of the infringer, or (b) statutory damages. 17 U.S.C. § 504(a); Brown v. Party Poopers, Inc., No. 00-CV-4799 (JSM) (DFE), 2001 WL 1380536, at *4 (S.D.N.Y. July 9, 2001). The courts favor awarding statutory damages in the absence of concrete data and numbers concerning the actual damages, particularly in default cases. Cengage Learning, Inc. v. Bhargava, No. 14-CV-3174 (DAB) (RLE), 2017 U.S. Dist. LEXIS 135381, *10 (S.D.N.Y. Aug. 22, 2017) (citation omitted). A copyright owner who elects statutory damages may recover for each infringement the "sum of not less than $750 or more than $30,000 as the court considers just." 17 U.S.C. § 504(c)(1). Within these boundaries, the Court has "wide discretion . . . in setting the amount of statutory damages." Fitzgerald Pub. Co. v. Baylor Pub. Co., 807 F.2d 1110, 1116 (2d Cir. 1986) (collecting cases).
If the infringement is willful, the Court may increase an award of statutory damages to a maximum of $150,000 per infringement. 17 U.S.C. § 504(c)(2). However, Plaintiffs are not seeking such an award here.
In determining how to exercise this discretion, courts consider factors such as (1) "the expenses saved and the profits reaped;" (2) "the revenues lost by the plaintiff;" (3) "the value of the copyright;" (4) "the deterrent effect on others besides the defendant;" (5) "whether the defendant's conduct was innocent or willful;" (6) "whether a defendant has cooperated in providing particular records from which to assess the value of the infringing material produced;" and (7) "the potential for discouraging the defendant." Union of Orthodox Jewish Congregations of Am. v. Royal Food Distributors Liab. Co., 665 F. Supp. 2d 434, 436 (S.D.N.Y. 2009) (quoting Fitzgerald Pub. Co., 807 F.2d at 1117). While statutory damages may be (and often are) awarded when actual damages are impossible to calculate, they should ideally "bear some relation to actual damages suffered." Van Der Zee v. Greenidge, No. 03-CV-8659 (RLE), 2006 WL 44020, at *2 (S.D.N.Y. Jan. 6, 2006) (citation omitted); see also Warner Bros. v. Dae Rim Trading, Inc., 677 F. Supp. 740, 769 (S.D.N.Y. 1988) ("While a plaintiff is allowed to opt for statutory damages in lieu of actual damages, this option is not intended to provide the plaintiff with a windfall recovery.").
In the present case, Plaintiffs seek statutory damages of $30,000 per title, for each of the eleven titles at issue, for a total of $330,000.
II. Application
As stated above, the Court has discretion to order statutory damages of no less than $750 and no more than $30,000. 17 U.S.C. § 504(c)(1). Under the relevant factors, the Court recommends that Plaintiffs be awarded $30,000 for each title:
1) Expenses saved and profits reaped. Plaintiffs were prevented from determining Bhargava's actual profits since he failed to comply with his discovery obligations. Nevertheless, records obtained using third-party subpoenas support the conclusion that Bhargava reaped substantial profits from his infringing business. These records reflect that Bhargava sold hundreds of copies of Plaintiffs' titles and earned well over $259,000 in just the ten months for which Plaintiffs have records. (See Chen Decl. ¶ 4 & Ex. 1; Mustico Decl. ¶¶ 4, 7.) Meanwhile, Plaintiffs have submitted sworn testimony that they invested heavily in textbook publishing and incurred substantial expenses in author royalties and other costs of content creation, including copyediting and proofreading. (Stitt Decl., ECF No. 156, ¶ 10; Suarez Decl., ECF No. 173, ¶ 9.) Bhargava was able to save himself from these expenses by infringing on Plaintiffs' copyrights.
2) Revenues lost by Plaintiffs. Again, since Bhargava refused to cooperate in the discovery process, Plaintiffs are unable to calculate Plaintiffs' actual lost revenues as a result of Bhargava's infringement. According to Plaintiffs' sworn testimony, legitimate sales and rentals of Plaintiffs' copyrighted textbooks represented a substantial portion of their annual revenues, and are critical to Plaintiffs' financial health. (Stitt Decl. ¶ 9.) Furthermore, Bhargava's sale of counterfeit textbooks at below-market value undercut the legitimate textbook market and caused Plaintiffs to lose critical sales and revenue. (See id. ¶ 10; see also Suarez Decl. ¶ 10.)
3) Value of the copyrights. The record reflects that Plaintiffs' copyrights are quite valuable. Plaintiffs are among the leading publishers in the world. (Stitt Decl. ¶¶ 3-5.) As stated above, Plaintiffs invest heavily in book publishing, and each year they incur substantial expenses for author royalties and other costs of content creation, including copyediting and proofreading. (Id. ¶¶ 9-10.) Further, Plaintiffs make substantial investments in promoting their textbooks under copyrights, as well as in their goodwill and reputations. (See id. ¶ 11; see also Suarez Decl. ¶ 11.)
4) Deterrent effect. Awarding the maximum statutory amount for non-willful infringement will deter others from engaging in conduct like that engaged in by Bhargava.
5) Bhargava's Willfulness. Judge Batts found a genuine issue of material fact existed that precluded summary judgment on the issue of willfulness. (9/11/18 Mem. & Order at 15.) However, there is evidence in the record to support Plaintiffs' claims regarding Bhargava's willfulness, which the Court has considered in making its recommendation.
Indeed, Bhargava's "willingness to default indicates willfulness." Hounddog Prods., L.L.C. v. Empire Film Grp., Inc., 826 F. Supp. 2d 619, 632 (S.D.N.Y. 2011).
6) Lack of cooperation. This is a very significant factor in the Court's recommendation to award the maximum statutory amount for no-willful infringement. Bhargava has refused to cooperate in this litigation, ignoring Plaintiffs' discovery requests. As a result of his conduct, Bhargava has been able to hide the full extent of his infringement and the resulting damage it has caused.
7) Potential for discouraging defendant. Awarding the maximum statutory amount for non-willful infringement will discourage Bhargava himself from engaging in further infringing activities.
Taking into account all the relevant factors, as well as the unique circumstances of this case, the Court finds that the amount requested by Plaintiffs—i.e., $30,000 per title—is reasonable and an appropriate amount to be awarded against Bhargava for his copyright infringement.
In reaching its recommendation, the Court is mindful of the fact that, despite the record evidence of willfulness, Plaintiffs are not seeking damages in the higher range permitted by statute. (See n.2, supra.)
CONCLUSION
For the foregoing reasons, I recommend that Plaintiffs be awarded statutory damages under the Copyright Act for a total of $330,000.
The Clerk of Court is directed to mail a copy of this Report And Recommendation to pro se Defendant Prameet Bhargava, 3348 East Sequoia Drive, Phoenix, AZ 85050. DATED: December 20, 2018
New York, New York
/s/ _________
STEWART D. AARON
United States Magistrate Judge
* * *
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed. R. Civ. P. 6(a), (d) (adding three additional days when service is made under Fed. R. Civ. P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen days after being served with a copy. Fed. R. Civ. P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Batts.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).