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concluding that because plaintiff had asserted laches defense, defendant was on notice that timeliness of action would be at issue
Summary of this case from Chrimar Systems Inc. v. Cisco Systems Inc.Opinion
No. C-03-2785 MMC.
August 17, 2004
Before the Court are cross-motions for partial summary judgment, both of which were filed July 9, 2004 and noticed for hearing August 6, 2004. Defendants Unicom Sales, Inc. ("Unicom") and George Saghafian ("Saghafian") have filed opposition to plaintiff Novell, Inc.'s ("Novell") motion, to which Novell has replied. Novell has filed opposition to defendants' motion, to which defendants have replied. The Court, having reviewed the papers filed in support of and in opposition to the motions, finds the matters appropriate for decision without oral argument, and hereby VACATES the August 6, 2004 hearing on the motions. For the reasons set forth below, each motion is GRANTED in part and DENIED in part.
The Court notes that the parties' spelling of Saghafian's name is inconsistent, even within defendants' own memoranda.
BACKGROUND
In this action for trademark and copyright infringement, Novell alleges that Unicom unlawfully marketed and distributed copies of Novell's NetWare software. Novell asserts causes of action against defendants for (1) copyright infringement in violation of 17 U.S.C. § 106(3): (2) contributory copyright infringement in violation of 17 U.S.C. § 106(1); (3) trademark infringement in violation of section 32(1)(a) of the Lanham Act, 15 U.S.C. § 1114(1)(a); (4) unfair competition in violation of § 43(a)(1)(A) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A); (5) false advertising in violation of § 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B); (6) trademark dilution, in violation of § 43(c) of the Lanham Act, 15 U.S.C. § 1125(c); (7) unfair competition in violation of § 17200 of the California Business and Professions Code; (8) common law unfair competition; (9) trademark and trade name infringement and dilution in violation of § 14330 of the California Business and Professions Code and common law; and (10) unjust enrichment.It is undisputed that defendants distributed NetWare software and used the Novell name in advertising. Defendants argue, however, that all of Novell's claims are barred by the doctrine of laches, the statute of limitations, and the first sale doctrine, and that Novell's trademark claims are also barred by the doctrine of nominative fair use. The following factual background is undisputed.
Novell has valid United States certificates of copyright registration for the versions of software known as NetWare 3.2, NetWare 4.11, IntranetWare, NetWare 4.2, NetWare 5.0, NetWare 5.1, NetWare for Small Business 5.1, and NetWare 6.0. (See Stipulation of Facts ("Facts") ¶ 8.) Novell also owns valid, incontestable United States trademark registrations for its "NOVELL" and "NETWARE" trademarks. (See id. ¶ 9.)
Novell has several programs under which it distributes copies of its NetWare software ("Software") directly to end users, one of which is its School License Agreement Program ("SLA Program"), by which an end user educational institution enters into a School License Agreement for Primary and Secondary Education ("School License Agreement") directly with Novell. (See id. ¶ 10.) James Joy ("Joy"), an employee of the Frederick County Public Schools ("FCPS") signed a School License Agreement with Novell on behalf of FCPS, and subsequently misappropriated from FCPS some of the Software copies that Novell distributed to FCPS pursuant to the School License Agreement. (See id. ¶ 12, 15.) Joy then distributed the Software to Unicom. (See id. ¶ 15.) Joy has never been a Novell authorized distributor or authorized reseller and knew that it was wrong for him to take the Software from FCPS and distribute it elsewhere. (See id. ¶¶ 15-16.)
Another one of Novell's end-user Software licensing programs is the Direct Education Order program ("DEO program"), by which Qualified Educational Institutions order NetWare products directly from Novell. (See id. ¶ 20.)
In addition to its SLA and DEO programs, Novell distributes its NetWare products to end users through Novell authorized distributors, including Ingram Micro and Tech Data, and authorized resellers. (See id. ¶ 26.) Most of the entities that supplied Novell Software directly to Unicom were not Novell-authorized; the only Novell-authorized entities from which Unicom directly obtained any Software were Ingram Micro and Tech Data, and those units of Software are not at issue in this case. (See id. ¶ 27.) Unicom became a Novell authorized reseller on March 19, 2003; between March 9, 1999, the date of Unicom's incorporation, and March 19, 2003, Unicom did not enter into any agreements with Novell. (See id. ¶¶ 2, 28.)
Prior to March 19, 2003, Unicom advertised Novell products in Processor magazine, and in facsimile flyers sent to customers. (See id. ¶ 30.) Prior to March 19, 2003, Unicom also distributed to various end user and reseller customers quantities of the Software including the Software copies that Joy misappropriated from FCPS and sent to Unicom, as well as additional Software copies that Novell had originally distributed under the DEO program and that Unicom had subsequently obtained from various third parties. (See id. ¶ 31.)
For example, on May 3, 2000, Unicom distributed to Computer Parts Peripherals in Eden Prairie, Minnesota ("CPP") a copy of NetWare 5.0 100-user additive Software that Novell had originally distributed under the DEO program. (See id. ¶ 35.) On November 15, 2000, Unicom distributed to CPP a copy of the Software that Joy had misappropriated from FCPS and distributed to Unicom. (See id. ¶ 36.)
Ronald J. Girard ("Girard"), CPP's owner, first learned that Unicom sold Novell software when he saw Unicom's advertisement in Processor magazine. (See id. ¶ 37.) Based solely on Unicom's advertisement of Novell products, Girard believed that Unicom was authorized by Novell to advertise and distribute Novell products. (See id. ¶ 38.) Girard believed that CPP was purchasing legitimate licenses for Novell Software from Unicom. (See id. ¶ 40.)
As of the dates of the CPP transactions, no one had informed Unicom that any of the Software Unicom was distributing had been misappropriated or had originally been distributed by Novell under its DEO program. (See id. ¶ 41.) On May 9, 2001, Novell contacted Saghafian by telephone and informed him that he had distributed a NetWare license that was an academic license meant only for a specific school, and asked him to identify Unicom's supplier for that product. (See id. ¶ 43.) Later that day, Saghafian informed Novell that he had acquired the product from Joy and that Unicom would remove all references to Novell products from Unicom's advertisements. (See id. ¶ 44.) Novell then informed Saghafian that Unicom must be an authorized partner of Novell in order to legally distribute Novell products, and that after becoming a Novell authorized partner, Unicom would only be allowed to acquire Novell products "from authorized distributors Ingram Micro and Tech Data." (See id. ¶ 45.)
Between May 10, 2001 and March 19, 2003, Unicom continued to advertise Novell products in Processor magazine, and continued to distribute additional copies of the Software that Joy had misappropriated from FCPS and distributed to Unicom. (See id. ¶¶ 46, 47.)
LEGAL STANDARD
Rule 56(c) of the Federal Rule of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Fed.R.Civ.P. 56(c). Material facts are those that may affect the outcome of the case.See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is "genuine" if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. See id. The Court may not weigh the evidence. See id. at 255. Rather, the nonmoving party's evidence must be believed and "all justifiable inferences must be drawn in [the nonmovant's] favor." See United Steelworkers of Am. v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir. 1989) (en banc) (citing Liberty Lobby, 477 U.S. at 255).
The moving party bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the pleadings, depositions, interrogatory answers, admissions and affidavits, if any, that it believes demonstrate the absence of a genuine issue of material fact.See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the nonmoving party will bear the burden of proof at trial, the moving party's burden is discharged when it shows the court that there is an absence of evidence to support the nonmoving party's case. See id. at 325.
Where the moving party "bears the burden of proof at trial, he must come forward with evidence which would entitle him to a directed verdict if the evidence went uncontroverted at trial."See Houghton v. South, 965 F.2d 1532, 1536 (9th Cir. 1992) (citations omitted); see also Fontenot v. Upjohn, 780 F.2d 1190, 1194 (5th Cir. 1986) (holding when plaintiff moves for summary judgment on an issue upon which he bears the burden of proof, "he must establish beyond peradventure all of the essential elements of the claim . . . to warrant judgment in his favor") (emphasis in original).
A party opposing a properly supported motion for summary judgment "may not rest upon the mere allegations or denials of [that] party's pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial." See Fed.R.Civ.P. 56(e); see also Liberty Lobby, 477 U.S. at 250. The opposing party need not show that the issue will be resolved conclusively in its favor. See Liberty Lobby, 477 U.S. at 248-49. All that is necessary is submission of sufficient evidence to create a material factual dispute, thereby requiring a jury or judge to resolve the parties' differing versions of the truth at trial.See id.
DISCUSSION
I. DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENTA. Statute of Limitations
The statute of limitations for copyright and federal trademark claims is three years. See 17 U.S.C. § 507(b); Karl Storz Endoscopy-America, Inc. v. Surgical Technologies, Inc., 285 F.3d 848, 857 (9th Cir. 2002). The statute of limitations begins running with respect to such claims upon the plaintiff's actual or constructive knowledge of the wrong. See id.; see also Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994) (holding that claim for copyright infringement "accrues when one has knowledge of a violation or is chargeable with such knowledge"). The instant action was filed on June 13, 2003.
Novell argues that defendants waived their right to assert the statute of limitations as a defense by failing to assert it in their initial answer in this litigation. This argument was also raised in opposition to defendants' motion for leave to file an amended answer. The Court has rejected the argument for the reasons set forth in the Court's order granting that motion.
1. Copyright
Defendants argue that any copyright claims that accrued before June 13, 2000 are time-barred. It is undisputed that Novell made a "test purchase" of a Novell IntranetWare/NetWare 4.11 product from Unicom on June 26, 1998 and discovered that it was an Original Equipment Manufacturer ("OEM") version of the Software. (See Facts ¶ 49.) To the extent Novell is asserting a copyright claim based on this transaction, the claim is time-barred.
Defendants have not presented any evidence that Novell learned of any other alleged copyright infringement prior to June 13, 2000. Novell may bring a claim for copyright infringement "for all acts that accrued within the three years preceding the filing of the suit." See Roley, 19 F.3d at 481. As noted, for example, Novell first learned about defendants' distribution of SLA and DEO software after June 13, 2000. (See Kirk Supp. Decl. ¶¶ 9, 11.) Accordingly, although any copyright claims that accrued prior to June 13, 2000 are time-barred, defendants have not demonstrated that all of Novell's copyright claims are time-barred.
Steve Kirk ("Kirk"), Novell's principal investigator in this action, attests that he learned in May 2001 that Unicom had distributed a copy of the SLA software that Novell had distributed to FCPS, and that he was not aware at that time that Unicom also had distributed software that had been acquired from Novell under the DEO program. (See Opp. Ex. A. (Kirk Supp. Decl.) ¶¶ 9, 11.) Kirk first learned that Novell had distributed the DEO software in 2003, shortly before filing the instant lawsuit. (See id. ¶ 16.)
2. Trademark
Defendants argue that all of Novell's federal trademark claims are time-barred because Novell first learned that defendants were using Novell's trademarks in advertisements in 1998, more than three years before Novell filed the instant complaint. It is undisputed that Novell became aware in 1998 that Unicom was advertising Novell products using Novell's trademarks. (See Facts ¶¶ 48, 50.) The Ninth Circuit has held, however, that trademark "`infringement is a continuing wrong, and the statute of limitations is no bar except as to damages beyond the statutory period.'" Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 837 (9th Cir. 2002) (quoting 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 31.33 (4th ed. 2001)). Consequently, although Novell's claims for damages based on trademark infringement of which Novell was aware prior to June 13, 2000 are time-barred, the statute of limitations does not preclude Novell from asserting a claim for trademark infringement with respect to claims accruing or violations continuing after that date. It is undisputed, for example, that defendants continued to advertise Novell products for sale, after Saghafian had promised Novell that Unicom would stop doing so, between May 10, 2001 and March 19, 2003.
B. Laches
Defendants also argue that Novell's claims are barred by the doctrine of laches. "`Laches is an equitable time limitation on a party's right to bring suit,' resting on the maxim that `one who seeks the help of a court of equity must not sleep on his rights.'" Jarrow, 304 F.3d at 835 (quoting Boone v. Mech. Specialties Co., 609 F.2d 956, 958 (9th Cir. 1979) and Piper Aircraft Corp. v. Wag-Aero, Inc., 741 F.2d 925, 939 (7th Cir. 1984) (Posner, J., concurring)). "It is well established that laches is a valid defense to Lanham Act claims[.]" Id. Laches is also a defense to claims for copyright infringement. See Danjaq LLC v. Sony Corp., 263 F.3d 942, 950-51 (9th Cir. 2001).
"While laches and the statute of limitations are distinct defenses, a laches determination is made with reference to the limitations period for the analogous action at law." Jarrow, 304 F.3d at 835. In particular, "[i]f the plaintiff filed suit within the analogous limitations period, the strong presumption is that laches is inapplicable," see id. at 835, while "if suit is filed outside of the analogous limitations period, courts have often presumed that laches is applicable." See id. at 836. "[T]he presumption of laches is triggered if any part of the claimed wrongful conduct occurred outside the limitations period." Id. at 837. The presumption is that a plaintiff "is barred if he fails to file suit promptly when the defendant commences the wrongful conduct." See id. at 838. Thus, "[f]or purposes of laches, the limitations period may expire even though part of the defendant's conduct occurred within the limitations period." See id. at 838. Consequently if laches applies, all of Novell's copyright and federal trademark claims would be barred.
The defendant asserting laches as a defense must show that the plaintiff's delay in filing suit was unreasonable, and that the defendant would suffer prejudice caused by the delay if the suit were to continue. See id. The length of the delay in filing suit is measured from the time the plaintiff knew or should have known about its potential cause of action. See id. In determining the reasonableness of the delay, the Court considers whether the plaintiff has proffered a legitimate excuse for the delay in filing suit, and considers the delay in light of the time allotted by the analogous limitations period. See id. "Courts have recognized two chief forms of prejudice in the laches context — evidentiary and expectations-based." Danjaq, 263 F.3d at 955. "Evidentiary prejudice includes such things as lost, stale, or degraded evidence, or witnesses whose memories have faded or who have died." Id. A defendant may demonstrate expectations-based prejudice "by showing that it took actions or suffered consequences that it would not have, had the plaintiff brought suit promptly." See id.
As noted, it is undisputed that Novell first learned in 1998 that defendants were selling Novell's OEM software and advertising Novell's products using Novell's trademarks, approximately five years before the instant suit was filed. (See Facts ¶¶ 48-50.) As the statute of limitations for both trademark and copyright claims is three years, Novell delayed approximately two years beyond the limitations period before bringing suit. Accordingly, there is a presumption that laches applies. See Jarrow, 304 F.3d at 836.
As previously noted, it is undisputed that Novell did not learn of Unicom's unauthorized sales of SLA software until May 2001, less than three years before filing the instant lawsuit, and did not learn of Unicom's unauthorized sales of DEO software until 2003, shortly before filing suit. (See Opp. Ex. A (Kirk Supp. Decl.) ¶¶ 9, 16.) The Court need not determine whether the various types of unauthorized sales at issue should be considered separately or jointly for purposes of applying the doctrine of laches in light of its decision, as set forth below, that Novell did not delay unreasonably in bringing suit.
Kirk attests that Novell
did not contact Unicom Sales or take any other action against it because Novell's right to prohibit the secondary marketing and distribution of its OEM software — the version Unicom Sales had distributed — was up in the air at that time. Novell's right to prohibit the marketing and distribution of its OEM Software was being vigorously challenged by the defendants in three lawsuits Novell had already filed. Novell wanted to clarify its rights concerning its OEM Software before taking any further action against others [sic] parties who were doing business in OEM Software.
(See Opp. to Def's. Motion for Partial Summary Judgment Ex. A (Kirk Supp. Decl.) ¶ 5.) Kirk also attests that Novell was using its resources "to pursue the largest known distributors, which were some of the defendants in the lawsuits that were already pending." (See id. ¶ 6.) Kirk attests that on May 4, 2000, the United States District Court for the Southern District of Texas concluded that Novell could not prohibit the secondary marketing and distribution of its OEM software, although that ruling was later vacated as part of a settlement of the lawsuit. (See id. ¶ 8.) Kirk further attests that when he learned, in 2001, that Unicom had distributed copies of the SLA software that Novell had distributed to FCPS, "Novell did not file a lawsuit against Unicom and Saghafian at that time partly because they had cooperated with Novell to an extent by disclosing the source (Jim Joy) of the SLA Software, but mostly because Saghafian had told [Kirk] that Unicom did not keep any inventory of Novell products and that Unicom had acquired only 4-5 products from Joy in the preceding year and had returned two of them, and because Saghafian assured [Kirk] that Unicom would remove all references to Novell's products from its advertisements and would `no longer buy/sell advertise any Novell products outside of [Novell's] authorized distribution channels.'" (See id. ¶ 10.) Kirk attests that he "did not believe that the costs of pursuing litigation against Saghafian and Unicom would be justified and that Novell's resources would be better spent on other investigations." (See id. ¶ 12.)
Although Novell has not submitted a copy of that opinion, Novell appears to be referring to Novell, Inc. v. CPU Distributing, Inc., 2000 U.S. Dist. LEXIS 9975 (S.D. Tex. May 4, 2000), wherein the court concluded that Novell's claims for copyright infringement based on resale of its OEM products were barred by the first sale doctrine. See id. at *18-19. The decision has no impact on this Court's analysis of the first sale doctrine, however, as the agreements at issue in that case are different from the agreements at issue in the instant case.
The Ninth Circuit has held that in determining reasonableness of the plaintiff's delay in filing suit, for purposes of laches, "[d]elay has been held permissible, among other reasons, when it is . . . `used to evaluate and prepare a complicated claim,' and when its purpose is `to determine whether the scope of proposed infringement will justify the cost of litigation[.]'" See Danjaq, 263 F.3d at 954 (quoting Lotus Dev. Corp. v. Borland Int'l, Inc., 831 F. Supp. 202, 219 (D. Mass. 1993)). Here, it is undisputed that the legal issue of Novell's entitlement to bring suit for secondary distribution of its OEM software was unresolved at the time Novell learned that Unicom had engaged in such distribution, and that Novell was litigating the issue in other lawsuits. See (See Opp. to Def's. Motion for Partial Summary Judgment Ex. A (Kirk Supp. Decl.) ¶ 5.) It is also undisputed that, as of May 2001, Novell was aware only of only a few unauthorized sales of its software by Unicom. (See id. ¶¶ 3, 9, 11.) Under these circumstances, it was reasonable for Novell to wait to file suit until the legal issues had been resolved through its other lawsuits, and to defer bringing a lawsuit against Unicom until it learned that the infringement was of a scope sufficient to justify the cost of the litigation.
Kirk attests that he learned, in late February 2003, that Unicom had distributed another copy of the SLA software, despite Saghafian's promise in May 2001 to cease such distributions. (See id. ¶ 13.) Kirk immediately sought to examine Unicom's records, and engaged in settlement negotiations with Unicom and Saghafian. (See id. ¶¶ 13-14.) When those settlement discussions proved unsuccessful, Novell filed suit on June 13, 2003. (See id. ¶ 14.) The Court finds that Novell's delay in filing suit was not unreasonable, for purposes of determining whether laches should apply. See Danjaq, 263 F.3d at 954. As laches applies only if defendants demonstrate both unreasonable delay and prejudice, see Jarrow, 304 F.3d at 838, and defendants have not demonstrated that Novell delayed unreasonably in bringing suit against defendants, the Court denies defendant's motion for summary judgment on the issue of laches.
There is no conflict between the Court's ruling here that Novell's delay in filing suit was reasonable and the Court's ruling, in its order granting defendants' motion to amend their answer, that Novell had not shown that its failure to file suit, in reliance on Saghafian's statements, was reasonable for purposes of applying the doctrine of equitable estoppel. In rejecting Novell's claim that defendants were equitably estopped from asserting the statute of limitations, the Court's focus was on whether defendants had concealed from Novell the scope of their alleged infringement. See, e.g., Santa Maria v. Pacific Bell, 202 F.3d 1170, 1173 (9th Cir. 2000). By contrast, in determining whether the doctrine of laches applies, the Court's focus is on whether Novell's delay in filing suit was justified by, for example, its continuing investigation into the scope of defendants' alleged infringement. See, e.g., Danjaq, 263 F.3d at 954.
In light of this finding, the Court does not reach defendants' argument as to prejudice.
C. The First Sale Doctrine
Defendants argue that all of Novell's copyright and federal trademark claims are barred, pursuant to the first sale doctrine, because all of the software at issue in this case was sold by the defendants after having been previously sold by Novell to others. Novell argues in response that the first sale doctrine has no application in the instant case because all of the software at issue was licensed, not sold.
Under the first sale doctrine, "the owner of a particular copy . . . lawfully made . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy." See 17 U.S.C. § 109(a). "[U]nder the first sale doctrine, . . . a sale of a `lawfully made' copy terminates the copyright holder's authority to interfere with subsequent sales or distribution of that particular copy." See Parfums Givenchy, Inc. v. Drug Emporium, Inc., 38 F.3d 477, 480 (9th Cir. 1994). Thus, "where a copyright owner parts with title to a particular copy of his copyrighted work, he divests himself of his exclusive right to vend that particular copy . . . [and] the exclusive right to vend the transferred copy rests with the vendee, who is not restricted by statute from further transfers of that copy." See Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341, 1344 (9th Cir. 1988) (quoting United States v. Wise, 550 F.2d 1180, 1187 (9th Cir. 1977)). "The whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution."Quality King Distributors, Inc. v. L'Anza Research International, Inc., 523 U.S. 135, 152 (1998).
The first sale doctrine also applies to trademark cases; the Ninth Circuit has held that "the right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product." See Sebastian International, Inc. v. Longs Drug Stores Corp., 53 F.3d 1073 (9th Cir. 1995). "Resale by the first purchaser of the original article under the producer's trademark is neither trademark infringement nor unfair competition," even when the producer has not authorized the reseller to sell the producer's products. Id. The first sale doctrine applies even when resale under the producer's trademark creates a likelihood of consumer confusion; "[t]he `first sale' rule is not rendered inapplicable merely because consumers erroneously believe the reseller is affiliated with or authorized by the producer." See id. at 1075-76.
Nevertheless, "conduct by the reseller other than merely stocking and reselling genuine trademarked products may be sufficient to support a cause of action for infringement." Id. at 1076. As the Ninth Circuit has noted, for example, in Bandag, Inc. v. Al Bolser's Tire Stores, 750 F.2d 903 (Fed. Cir. 1984), "the reseller used the producer's trademark in a telephone directory advertisement in such a way as to suggest the reseller was one of the producer's franchisees." See Sebastian, 53 F.3d at 1076.
The first sale doctrine does not, however, "unless authorized by the copyright owner, extend to any person who has acquired possession of the copy . . . from the copyright owner, by rental, lease, loan, or otherwise, without acquiring ownership of it."See 17 U.S.C. § 109(d). Because the defendant "clearly has the particular knowledge of how possession of the particular copy was acquired," the defendant has the burden of proving the applicability of the first sale doctrine. See 17 U.S.C. § 109, Historical Note.
Novell contends that it did not sell, but instead licensed, the SLA and DEO software.
1. SLA
It is undisputed that Novell transfers copies of the SLA software pursuant to a standard form School License Agreement ("SLA"). (See Facts ¶ 11.) That form provides, in relevant part:
1.2 Authorized Users means (a) students currently enrolled in Customer, and (b) Customer's faculty and administrative personnel.
* * *
1.6 Licensed Works means, collectively, the Software, Documentation and any Upgrades and Updates licensed by Novell to Customer under the SLA.
* * *
2 Subject to the provisions of this SLA, for the term of the SLA only, and conditional upon Customer paying the applicable annual School License Fee, Novell grants and Customer accepts a non-exclusive, non-transferable license to copy and distribute the software identified on the SLA Annual Fee Worksheet, for Use by Authorized Users on Customer's Workstations. Only individuals qualifying as Authorized Users may copy and/or Use the software.
2.1 Additional Terms and Limited Warranty. The School License is subject to all other provisions of this SLA, including the license terms and restrictions set forth in the applicable End User License Agreement and Limited Warranty ("EULA") that accompanied a Licensed Work. . . .
2.2 Removal From Price List. For any product licensed by Customer under the SLA which Novell removes from the Novell Price List, Customer may not make additional copies of the product after such removal occurs unless Novell agrees in writing otherwise. Customer may only continue using such product through to the end of the Annual Period in which such removal occurs, except that Customer may use the product longer to the extent it makes a separate purchase of licenses for that product from Novell.
* * *
6.1 Annual License Fee. Customer may obtain Licensed Works by submitting to Novell a completed and signed SLA Annual Fee Worksheet with a Customer purchase order for the amount of the annual fee. The total, nonrefundable annual license fee will be payable in a lump sum net 30 days from the date of invoice.
* * *
7.1 Term. The term of this SLA will begin on the Effective Date and will remain in effect for a period of one year after the first day of the month following the Effective Date. The SLA will be automatically renewed for one year periods until either party gives written notice at least ninety (90) days prior to the end of the SLA term.
* * *
7.3.1 Transition from SLA. Upon termination or expiration of the SLA, all rights granted under the SLA will immediately terminate and Customer shall return all software media to Novell and remove all software copies made hereunder, except such copies for which licenses were or are purchased by Customer under Section 7.4 below. All licenses purchased outside the SLA will remain the property of the Customer and will survive termination or expiration of the SLA. Within thirty (30) days after termination or expiration hereof: (a) customer may submit an order for any licenses available under Section 7.4, and (b) Customer shall certify in writing that all copies of Software for which no licenses have been purchased have been removed and that all fees due have been paid.
* * *
7.4.2 Vesting Fund. After three (3) consecutive years of SLA annual fee payments and upon SLA termination or expiration, Customer may apply thirty (30) percent of the cumulative and consecutive SLA annual fees toward the purchase of licenses that will survive the SLA.
* * *
9.1 Employees and Agents. Customer agrees to use commercially reasonable efforts to inform its employees, agents, and other individuals using Licensed Works under the SLA that the Licensed Works are proprietary products of Novell, Inc., or its licensors and may only be used, copied or transferred subject to the license terms in the SLA.
(See Facts ¶ 11 and Ex. 79.) Joy signed the SLA on behalf of FCPS when he obtained the SLA software from Novell. (See id. ¶ 12. and Ex. 79.)
In determining whether a transaction is a sale or a license, the Court reviews the substance of the transaction, rather than simply relying on the plaintiff's characterization of the transaction. See United States v. Wise, 550 F.2d at 1190. InWise, the Ninth Circuit found that certain agreements for the distribution of films to movie theatres were licenses rather than sales, noting that the agreements "purported to transfer only limited rights for the exhibition or distribution of the films for a limited purpose and for a limited period of time," required the return of the films at the expiration of the contract term, and prohibited the licensee from copying or duplicating any prints thereof. See id. The court noted that "[t]he mere failure to expressly reserve title to the films does not require a finding that the films were sold, where the general tenor of the entire agreement is inconsistent with such a conclusion." See id. at 1191. The court distinguished one of the agreements, which it found to be a sale rather than a license, because it permitted the "licensee" to retain a copy of the print, at its election, with no requirement that it be returned at any future date, and provided for no retention of rights by the film company. See id. at 1191.
Here, the SLA granted FCPS a license to copy the software for use only by its students and employees. (See Facts Ex. 79 §§ 1.2, 2.) The license was for a specific term of one year, and required payment of an annual license fee. (See id. §§ 6.1, 7.1.) When the SLA expired, FCPS was required to return the software to Novell. (See id. § 7.3.1.) All of these terms are consistent with a license, rather than a sale. See Adobe Systems Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1091 (N.D. Cal. 2000) (finding restrictions on use of software indicated license, rather than sale); see also Adobe Systems, Inc. v. Stargate Software Inc., 216 F. Supp. 2d 1051, 1057 (N.D. Cal. 2002) (same).
The only exception is in § 7.4, which appears to grant FCPS the right to purchase the software once the SLA terminates, provided that FCPS had paid its annual license fee for at least three years prior to termination of the SLA. (See id. § 7.4.) The parties do not discuss § 7.4 in their memoranda. Although § 7.4 arguably contemplates a sale rather than a license of the software, because it contemplates an unrestricted transfer of the Software, the Court need not decide the issue as there is no evidence that the SLA was ever terminated or that FCPS ever sought to exercise its rights under § 7.4.
Accordingly, the Court finds that the SLA is a license, rather than a sale, and the first sale doctrine has no application to defendants' distribution of SLA software they obtained from Joy.
2. DEO
Novell distributes software under the DEO program in a different manner from its distribution of software under the SLA program. Novell distributes its software under the DEO program to Qualified Educational Institutions, who are not required to enter into a separate written license agreement, although a printed Software License is included in the box in which the software is packaged. (See Facts ¶¶ 20, 25.)
The Software License states:
Novell grants to you a non-exclusive, non-transferrable right to use Host Software and NLM Software on a single computing device (network server). Novell grants to you a non-exclusive, non-transferrable right, provided you do not receive any direct payment, to make and distribute internally within your organization unlimited copies of Client Software and to use those copies to support use of the Host Software and NLM Software. Novell reserves all rights not expressly granted to you.
Transfer of License. This License is not subject to transfer or assignment without the prior written approval of Novell.
Term. This License will become effective on the date you acquire the Software and will remain in force until terminated. You may terminate this License at any time by destroying the Documentation and the Software together with all copies and adaptations. This License shall also automatically terminate if you breach any of the terms and conditions. You agree to destroy the original and all adaptations or copies of the Software and Documentation, or to return them to Novell upon termination of this License.
"Client Software" is defined as "the software programs provided as part of the Software that operate on an intelligent, single-user device, permitting that device to access the shared resources provided by Host Software"; "Host Software" is defined as "the software programs provided as part of the Software that are designed to operate on a single computing device, providing access to the shared resources attached to that computer"; and "NLM Software" is defined as "the software programs provided as part of the Software that run on the Host Software." (See Facts Ex. 21 at NOV-123 0134.)
(See, e.g., Facts ¶ 25 and Ex. 21 at NOV-123 0134.) Participants in the DEO program could use the Software for an unlimited time, provided they complied with the terms of the Software License. (See Facts ¶ 23.) Participants in the DEO program were charged for the use of the Software based on the number of pieces of Software they ordered and the number of permitted users. (See Facts ¶ 22.)
The documentation included with the Software also contained the following "warning":
READ FIRST
WARNING! AVERTISSEMENT! WARNUNG! ATENCION! ATTENZIONE!
Before using this software, carefully read the Software License Agreement provided with this product. If the Software Agreement is missing, contact your reseller. Use of this software indicates acceptance of the Software License Agreement. If you do not want to accept the terms of this agreement, you may return the software for a refund.
(See, e.g., Facts Ex. 21 at NOV-123 0132.)
Contrary to defendants' argument, contracts contained in software boxes, which are sometimes referred to as "shrink wrap licenses," are no less enforceable than any other type of contract. See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1449 (7th Cir. 1996). The Seventh Circuit has noted that it is not unusual to receive the terms of a contract after payment, such as, for example, with respect to insurance contracts, airline tickets, concert tickets, and consumer goods in which warranty terms are not disclosed until the purchaser removes the product from the package after purchase. See id. at 1451. The cases cited by defendants in which particular shrinkwrap licenses were held not enforceable are distinguishable. The transaction at issue in Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F.2d 91 (3d Cir. 1991), involved a "battle of the forms," which the court resolved by reference to UCC 2-207. See id. at 99-100. No such battle is at issue in the instant case. In Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), the Court declined to enforce a provision in a shrinkwrap license that prohibited copying the software for purposes of reverse engineering, holding that such a provision, although permitted by Louisiana law, was preempted by the Copyright Act. See id. at 269-70. No such provision is at issue here. In Softman Productions Company, LLC v. Adobe Systems Inc., 171 F. Supp. 2d 1075 (C.D. Cal. 2001), the court found that a third party was not bound by the restrictions set forth in a shrinkwrap agreement because it had never agreed to them. See id. at 1087. Here, the issue is not whether defendants are bound by the shrinkwrap agreement, but whether the original purchaser/licensee was bound by its terms.
Accordingly, the Court will proceed to examine the terms of Novell's Software License to determine whether it describes a sale or a license. The agreement grants the right to use the software, for an unlimited period of time, but only within the customer's organization. (See, e.g., Facts ¶ 25 and Ex. 21 at NOV-123 0134.) If the customer breaches any of the terms, the license is automatically terminated, and the customer must either destroy the software or return it to Novell. (See id.) The agreement expressly states that any rights not expressly granted are reserved to Novell. (See id.) The limited rights in the software, as set forth in the Software License, describe a license in the software, rather than a sale. See Adobe Systems Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d at 1091 (finding license of software, rather than sale; pointing to restrictions on use of software in shrink-wrap license); see also Adobe Systems, Inc. v. Stargate Software Inc., 216 F. Supp. 2d at 1059-60 (same).
Although the court in Softman, 171 F. Supp. 2d at 1086, concluded that "a single payment for a perpetual transfer of possession is, in reality, a sale of personal property and therefore transfers ownership of that property, the copy of the software," it also noted that "[t]he pertinent issue is whether, as in a lease, the user may be required to return the copy to the vendor after the expiration of a particular period." See id. (citing Raymond Nimmer, The Law of Computer Technology § 1.18[1] at 1-103 (1992)). Here, although the Software License is not for a specific time period, it expressly requires return or destruction of the software if the license is terminated. (See, e.g., Facts ¶ 25 and Ex. 21 at NOV-123 0134.) As no similar provision appears to have been at issue in Softman, the Court finds Softman is distinguishable from the instant case.
Defendants argue, however, that Novell has produced documents pertaining to the DEO transactions that are titled "Sales Order Acknowledgement" and indicate that the software is to be shipped "FOB Novell." (See Bragg Decl. Exs. E and F.) Although defendants argue the use of the term "FOB" generally signifies an intent to pass title, the one case cited for that proposition actually found, given the circumstances of the transaction at issue, that the use of the term did not indicate the point at which title was transferred. See Southern Pacific Co. v. Hyman-Michaels Co. 63 Cal. App. 2d 757, 764 (1943). As there is no evidence of Novell's intent in using the term "FOB," the Court will not infer a transfer of title where Novell's Software License expressly sets forth terms that describe a license. Similarly, it is immaterial that the document is titled "Sales Order Acknowledgement" since, as previously noted, the Court must consider the substance of the transaction rather than merely rely on its title. See U.S. v. Wise, 550 F.2d at 1190.
Defendants also argue that the inclusion of a limited warranty in the Software License, (see, e.g., Facts Ex. 21 at NOV-123 0133), indicates that the transaction is a sale rather than a license. Defendants argue that if title remained with Novell, the user could always return defective software to Novell for replacement and there would be no need for a warranty. The limited warranty included in the shrinkwrap license expressly provides that if the software does not perform substantially to specification, "Novell will either remedy the nonconformity or offer to refund any license fees paid," thus expressly describing the transaction as a license. (See id.) The Court fails to see how the inclusion of a limited warranty requires that the transaction be construed as a sale rather than a license.
Defendants further argue that Novell failed to take adequate steps to protect itself from unauthorized distribution of its software and that therefore its transactions in the DEO software should be considered to be sales rather than licenses. The case defendants cite in support of this argument, Summit Technology, Inc. v. High Line Medical Instruments Co., 922 F. Supp. 299 (C.D. Cal. 1996), does not address the issue. The Court sees no reason why Novell's failure to investigate whether persons ordering its DEO software were actually Qualified Education Institutions, (see Facts ¶ 57), or its failure to take steps to enforce the requirement in its Software License that the software be destroyed or returned if the license is breached, (see id. ¶ 55), should affect the transaction's status as a license or sale.
Accordingly, the Court finds that the DEO software was licensed, not sold, and consequently, the first sale doctrine has no application to defendants' sales of the DEO software.
3. No Good Faith Purchaser Exception to the First Sale Doctrine
Defendants also argue that even if the Court finds that the SLA and DEO software was licensed rather than sold, defendants should be considered to have obtained title to the software because they purchased the software without any knowledge that Novell had not sold it. However, "even an unwitting purchaser who buys a copy in the secondary market can be held liable for infringement if the copy was not the subject of a first sale by the copyright holder." See American International Pictures, Inc. v. Foreman, 576 F.2d 661, 664 (5th Cir. 1978). "Thus unless title to the copy passes through a first sale by the copyright holder, subsequent sales do not confer good title." Id. Because defendants did not obtain title to the SLA or DEO software, the first sale doctrine does not apply to defendants' resale of that software.
D. Nominative Fair Use
Defendants argue that Novell's claims for trademark infringement are barred by the doctrine of nominative fair use. The Ninth Circuit has held that "competitors may use a rival's trademark in advertising and other channels of communication if the use is not false or misleading." See New Kids on the Block v. News America Publishing, Inc., 971 F.2d 302, 307 (9th Cir. 1992). Such uses "are best understood as involving a non-trademark use of a mark — a use to which the infringement laws simply do not apply[.]" See id. "[W]here the defendant uses a trademark to describe the plaintiff's product . . . a commercial user is entitled to a nominative fair use defense provided that [it] meets the following three requirements: First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder." Id. at 308.
Here, it is undisputed that Unicom advertised Novell products for sale in advertisements in Processor magazine and in facsimile flyers sent to customers. (See Facts ¶¶ 29-30.) Some of the advertisements simply used the word "Novell," while other advertisements depicted a Novell software package. (Compare Facts Exs. 37-39 with id. Exs. 32 and 33; see also Facts ¶ 46.)
The parties agree that "Novell is unaware of any facts indicating that Unicom distributed counterfeit Novell Software, other than the fact that Unicom's records show that it distributed more units of Software than Unicom's records indicate that Unicom acquired." (See id. ¶ 53.) There is nothing in the record from which a reasonable jury could conclude, however, that this discrepancy is due to sales of counterfeit software.
Defendants have met the first test for nominative fair use, in that Novell's software is not readily identifiable without use of the Novell name. See New Kids on the Block, 971 F.2d at 308.
Similarly, defendants have satisfied the second part of the test, as defendants have used only so much of the mark as is reasonably necessary to identify the product. See id. Novell argues that defendants went beyond nominative use because they used Novell's logo in its advertisements. The only such use shown in the evidence submitted to the Court, however, appears in two advertisements where defendants used a depiction of a Novell software package. (See Facts Exs. 32, 33.) The cases cited by Novell in which courts have suggested that use of a logo may fall outside the scope of nominative use are distinguishable as all involve situations in which the plaintiff's logo was used to sell the defendant's product or service rather than to sell the plaintiff's own product. See, e.g., New Kids on the Block, 971 F.2d at 308 (noting that newspaper polls measuring popularity of New Kids on the Block did not use group's distinctive logo); Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350, 352 (9th Cir. 1969) (noting that automobile repair shop specializing in repair of Volkswagen automobiles "did not use Volkswagen's distinctive lettering style or color scheme, nor did he display the encircled `VW' emblem"; defendant advertised repair services, not sale of Volkswagen automobiles); World Impressions, Inc. v. McDonald's Corp., 235 F. Supp. 2d 831, 842-43 (N.D. Ill. 2002) (holding nominative fair use not applicable where defendant used Disneyland logo on map of California tourist attractions);Liquid Glass Enterprises, Inc. v. DR. Inc. h.c.F. Porsche AG, 8 F. Supp. 2d 398, 402-03 (D.N.J. 1998) (holding nominative fair use not applicable where defendant used depiction of Porsche logo and automobile in advertisements for car polish). Where, as here, defendants are selling the very Novell product depicted in the advertisement, the Court finds that use of the Novell logo is not outside the scope of nominative use.
Defendants also have demonstrated the applicability of the third factor. As noted, defendants are entitled to the defense of nominative fair use only if they "do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder." See New Kids on the Block, 971 F.2d at 308. None of the Unicom advertisements submitted in evidence state that Unicom's sales of Novell products are authorized or endorsed by Novell, or that Unicom has any connection with Novell. (See Facts Exs. 32-33, 37-39.) The parties have submitted no case law holding that a defendant who uses the plaintiff's trademark in describing and offering for sale the plaintiff's own goods, without more, thereby "suggests sponsorship or endorsement by the trademark holder" of anything other than the product itself. See New Kids on the Block, 971 F.2d at 308. Indeed, as a legal matter, it cannot reasonably be assumed that the manufacturer of a product sponsors or endorses anyone who offers that product for sale. As discussed above, a person or entity can, under the first sale doctrine, lawfully sell a trademarked product without authorization of the manufacturer. See Sebastian, 53 F.3d at 1075-76. Although, as further discussed above, the Court has determined that the defense of the first sale doctrine is unavailable to defendants herein, that ruling does not affect the Court's resolution of the instant issue. The fact that one can lawfully offer for sale trademarked goods not obtained from the manufacturer or trademark holder precludes a reasonable customer from assuming that defendants, by offering Novell products for sale, were sponsored or endorsed by Novell. As defendants neither state nor imply, in their advertisements, any sponsorship or endorsement by Novell, beyond that of the product itself, the Court finds that defendants have met the third requirement in the test for nominative fair use.
Unicom's advertisements include general statements such as "At Unicom, we offer over 150,000 titles featuring all of today's popular applications" (see id. Ex. 32); "One of the leading resellers of Security and Mainstream Software, Unicom offers box products and volume licensing enabling us to accommodate all of our customers' requirements and needs" (see id. Ex. 33); and "We only sell genuine products!" (see id. Exs. 38-39).
Accordingly, the Court finds defendants have demonstrated they are entitled to the defense of nominative fair use, and their motion for summary judgment with respect to Novell's trademark claims will be granted.
II. PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
A. Copyright claims
Novell moves for summary judgment on its claim that defendants infringed its copyrights by selling Novell's SLA and DEO software. "To establish a successful copyright infringement claim, a plaintiff must show that (1) [it] owns the copyright, and (2) defendant copied protected elements of the copyrighted work." Smith v. Jackson, 84 F.3d 1213, 1218 (9th Cir. 1996). "The word `copying' is shorthand for the infringing of any of the copyright owner's five exclusive rights, described at 17 U.S.C. § 106." S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1085 n. 3 (9th Cir. 1989). One of the exclusive rights granted by copyright is the right "to distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease or lending[.]" See 17 U.S.C. § 106(3). Thus, Novell will prevail on its claim for copyright infringement if it demonstrates that it owns the copyright in the SLA and DEO software, and that defendants distributed that software without Novell's authorization. See Adobe Systems, Inc. v. One-Stop Micro, Inc., 84 F. Supp. 2d at 1092-93 (finding unauthorized distribution of copyrighted software to be copyright infringement). There is no requirement of intent; "even where the defendant believes in good faith that he is not infringing a copyright, he may be liable." See Pye v. Mitchell, 574 F.2d 476, 481 (9th Cir. 1978).
It is undisputed that Novell owns valid copyrights in the Software. (See Facts ¶¶ 8, 54.) It is also undisputed that defendants distributed the Software without Novell's authorization on several occasions within the statute of limitations. In particular, on May 3, 2000, defendants distributed to CPP a copy of NetWare 5.0, 100-user additive Software that Novell had originally distributed under the DEO Program. (See Facts ¶ 35.) On November 15, 2000, defendants distributed to CPP certain Novell software that Joy had misappropriated from FCPS. (See id. ¶ 36.) The parties agree that between May 10, 2001 and March 19, 2003, Unicom distributed additional copies of Software that Joy had misappropriated from FCPS. (See id. ¶ 47.)
The Court has already denied defendants' motion to the extent it is based on the doctrine of laches and the first sale doctrine; to the extent these defenses are also raised in opposition to plaintiff's motion, the defenses are likewise rejected. In opposition to Novell's motion, defendants raise the additional issue that there is a dispute of fact as to whether defendants were an authorized Novell reseller. The parties agree that Unicom became an authorized Novell reseller on March 19, 2003 and that Unicom did not enter into any agreements with Novell between the date of Unicom's incorporation on March 9, 1999 and March 19, 2003. See Facts ¶¶ 2, 28.) Prior to March 9, 1999, Unicom operated as "Unicom Sales," a sole proprietorship operated by Saghafian. (See id. ¶ 48.) Defendants argue that Saghafian testified at deposition that he signed a Novell reseller application in 1992 or 1993. The portion of Saghafian's testimony defendants cite consists of the following:
Q: I think you mentioned that Unicom, the proprietorship, started selling Novell products in 1992, '93 range; is that right?
A: Somewhere around there.
Q: How did that come about?
A: Well, as I observed, Novell was one of the products that Ingram and Tech Data were offering. And since I was familiar with it, I thought it would be a good product to resell along with other manufacturers.
Q: And so you went about establishing a relationship with Ingram and Tech Data?
A: Yes. Originally I established with both of them and set up an account where we could buy and sell through them.
Q: Was it specifically set up for Novell, or did you just set up an account so you could buy whatever products?
A: No, it was general.
* * *
A: Yes, we wouldn't be able to apply from Tech Data — to buy from Tech Data or Ingram if we didn't.
No party has submitted testimony or otherwise offered to identify the document to which "it" refers.
Q: Do you have a copy of it?
A: No, we don't keep records that long.
(See Bragg Opp. Decl. Ex. A (Saghafian Dep.) at 76:24-77:16, 96:1-5.) Such testimony is inadequate to demonstrate that defendants were authorized to sell the Novell products at issue in this case. At most, Saghafian's testimony demonstrates that defendants were authorized to purchase Novell products from Ingram Micro and Tech Data and to resell them. The parties agree that "[t]he only Novell-authorized entities from which Unicom directly obtained any Software were Ingram Micro and Tech Data, and those units of Software are not at issue in this case." (See Facts ¶ 27.) Saghafian's testimony that he set up a general account to purchase Novell products from Ingram Micro and Tech Data, without any testimony as to the terms of that account, does not permit an inference that defendants were an authorized Novell reseller for products not purchased from Ingram Micro or Tech Data.
Defendants also argue they were told by Tech Data that defendants were authorized Novell resellers. Saghafian testified at deposition:
I called up Tech Data, and I asked them that, "Are we authorized to sell Novell?" And they said, "Yes, you are, with the exception of some of the educational licenses and some of the softwares that you would need higher authorization."
* * *
So they said that, "Since you have been buying Novell and you have been purchasing Novell where Novell's been shipping directly to your customer, there's no way that you could not be authorized."
(See Bragg Opp. Decl. Ex. A (Saghafian Dep.) 144:12-18, 145:6-9.) Assuming Tech Data made these statements, as the Court must do on a motion for summary judgment, Tech Data, at most, assured defendants they were authorized to sell certain unspecified Novell products, but not others. There is no evidence as to what Tech Data meant by stating that defendants were not authorized to sell "some of the educational licenses and some of the softwares," for which they would "need higher authorization." (See id. at 144:12-18.) It is undisputed that the SLA and DEO software both were distributed only to educational institutions. (See Facts ¶¶ 10, 20.) Novell has submitted evidence that it "does not authorize its authorized distributors, its authorized resellers, or anyone else to acquire and re-distribute Software that Novell originally distributed under the DEO Program, to acquire and re-distribute Software that was distributed to an educational institution under a School License Agreement, or to use any of Novell's trademarks, including NOVELL and NETWARE in connection with any such distributions." (See Kirk Decl. ¶ 7.) It would be entirely speculative for a jury to conclude that defendants were authorized to sell any particular Novell product based on Tech Data's ambiguous statements to Saghafian, particularly in light of Novell's explicit evidence that it does not authorize anyone to redistribute SLA and DEO software. Accordingly, the Court finds that defendants have failed to raise a triable issue as to their authorization to sell the Novell products that form the basis of Novell's claims herein.
The Court having found no triable issue as to any of the defenses raised by defendants, Novell's motion for summary judgment on its claims that defendants infringed its copyrights by engaging in unauthorized distribution of software that Novell had distributed under the SLA and DEO programs will be granted.
As noted, Novell's copyright claims based on defendants' distribution of the SLA and DEO software are not time-barred, as Novell first learned of defendants' distribution of that software within the limitations period.
B. Trademark Claim
To prevail on its federal claim for trademark infringement, Novell must demonstrate that defendants used a trademark that is the same as, or similar to, a valid, protectable trademark owned by Novell, and used the trademark in a manner that created a likelihood of consumer confusion. See Murray v. Cable National Broadcasting Co., 86 F.3d 858, 860 (9th Cir. 1996); see also Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1046 (9th Cir. 1999).
It is undisputed that Novell owns valid, incontestible United States trademark registrations for its Novell and NetWare trademarks. (See Facts ¶ 9.) It is also undisputed that defendants used those marks in advertising their sale of Novell software products. (See id. ¶¶ 29-30 and Exs. 32-33 and 37-39.) Thus, the only issue is whether defendants' use of those marks was likely to create consumer confusion.
In most trademark cases, the Court applies an eight factor test set forth in AMF v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979) ("theSleekcraft test") to determine whether there is a likelihood of confusion. See, e.g., Brookfield, 174 F.3d at 1053-54. In cases where the defendant asserts a defense of nominative fair use, however, "the nominative fair use analysis replaces the likelihood of confusion analysis set forth in [Sleekcraft]."See Brother Records, Inc. v. Jardine, 318 F.3d 900, 908 n. 5 (9th Cir. 2003). "[T]he nominative fair use defense shifts to the defendant the burden of proving no likelihood of confusion."See id.
The Court has already granted defendants' motion to the extent it is based on the nominative fair use defense. Accordingly, Novell's motion for summary judgment on its claim for trademark infringement must be denied.
C. Saghafian's Liability
It is undisputed that Unicom was a corporation at all times during the limitations period. (See Facts ¶ 2.) It is also undisputed that Saghafian "at all times pertinent to this case was the president, sole shareholder, and only officer of defendant Unicom." (See Facts ¶ 3.) "As the president of Unicom, Saghafian oversaw Unicom's acquisition, advertisement, and distribution of Novell products, and supervised the other Unicom employees." (See id. ¶ 32.)
As Novell points out, courts have held that corporate officers, shareholders, and employees are personally liable for the corporation's copyright and trademark infringements when they are a "moving, active conscious force" behind the corporation's infringement, and that it is immaterial whether such individuals are aware that their acts will result in infringement. See, e.g., Bambu Sales, Inc. v. Sultana Crackers, Inc., 683 F. Supp. 899, 913-14 (E.D.N.Y. 1988) (trademark infringement);Playboy Enterprises, Inc. v. Starware Publishing Corp., 900 F. Supp. 438, 441-42 (S.D. Fla. 1995) (copyright infringement);Babbit Electronics, Inc. v. Dynascan Corp., 828 F. Supp. 944 (S.D. Fla. 1993), aff'd 38 F.3d 1161 (11th Cir. 1994) (holding "a corporate officer who directs, controls, ratifies, participates in, or is the moving force behind the infringing activity, is personally liable for such infringement without regard to piercing the corporate veil).
It is undisputed that Saghafian is the president, sole shareholder, and only officer of Unicom and that he oversaw Unicom's acquisition, advertisement, and distribution of Novell products, and defendants have not opposed plaintiff's motion for summary judgment on the issue of Saghafian's liability.
Accordingly, plaintiff's motion for summary judgment on the issue of Saghafian's personal liability for Unicom's copyright infringement will be granted. As defendants have demonstrated that they are entitled to the nominative fair use defense to Novell's claim for trademark infringement, Novell's motion for summary judgment on the issue of Saghafian's personal liability for trademark infringement will be denied.
D. Remedies
Novell moves for summary judgment on the remedies to which it is entitled for defendants' copyright infringement. In particular, Novell argues that summary judgment should be granted with respect to its entitlement to actual and/or statutory damages, injunctive relief, and reasonable attorney's fees and costs as a result of defendants' copyright infringement. Novell has not specified all of the allegedly infringing transactions in which defendants engaged, however, and has not attempted to calculate its damages, fees or costs. Indeed, Novell acknowledges that the amount of damages will be determined at trial. (See Motion at 15, 18.) Moreover, Novell has not submitted the language of a proposed injunction.
Accordingly, Novell's motion for summary judgment as to its entitlement to remedies will be denied, without prejudice.
CONCLUSION
For the reasons set forth above:
1. Defendants' motion for partial summary judgment is hereby GRANTED in part and DENIED in part as follows:
a. Defendants' motion for summary judgment based on the statute of limitations is GRANTED in part. Plaintiffs' claims for copyright and federal trademark infringement that accrued prior to June 13, 2000 are time-barred. Plaintiffs' claims for copyright and federal trademark infringement that accrued on or after June 13, 2000 are not time-barred. In particular, plaintiff's claims based on defendants' distribution of OEM software in 1998 are time-barred, and plaintiffs' claims based on defendants' distribution of SLA and DEO software, which Novell first learned about during the limitations period, are not time-barred.
b. Defendants' motion for summary judgment based on the defense of laches is DENIED.
c. Defendants' motion for summary judgment based on the first sale doctrine is DENIED.
d. Defendants' motion for summary judgment with respect to Novell's claim for federal trademark infringement, based on the defense of nominative fair use, is GRANTED.
2. Plaintiff's motion for partial summary judgment is GRANTED in part and DENIED in part as follows:
a. Plaintiff's motion is DENIED as to all claims for copyright infringement that accrued prior to June 13, 2000.
b. Plaintiff's motion is GRANTED as to its claims that defendants engaged in copyright infringement by distributing DEO software to CPP on May 3, 2000 and by distributing SLA software to CPP on November 15, 2000. Plaintiff's motion is also GRANTED as to its copyright claims accruing within the limitations period based on any other sales of SLA and DEO software by defendants.
c. Plaintiff's motion for summary judgment is DENIED as to its claims for federal trademark infringement.
d. Plaintiff's motion for summary judgment with respect to remedies is DENIED, without prejudice.
This order closes Docket Nos. 54 and 57.
IT IS SO ORDERED.