In re Mann, Bankruptcy No. 6:08-bk-11363-PC.

410 B.R. 43

In re Calvin Kwong MANN, Debtor Symantec Corporation, Plaintiff, v. Calvin Kwong Mann, Defendant.

Bankruptcy No. 6:08-bk-11363-PC.

Adversary No. 6:08-ap-01178-PC.

United States Bankruptcy Court, C.D. California, Riverside Division.

July 6, 2009.

COPYRIGHT MATERIAL OMITTED

Henry H. Gonzalez, Esq., Baute & Tidus LLP, Los Angeles, CA, for Plaintiff, Symantec Corporation.

Stella A. Havkin, Esq., Litwak & Havkin, Woodland Hills, CA, for Defendant, Calvin Kwong Mann.

MEMORANDUM DECISION

PETER H. CARROLL, Bankruptcy Judge.

Plaintiff, Symantec Corporation ("Symantec") seeks a judgment determining that the debt owed by Defendant, Calvin Kwong Mann ("Mann") to Symantec is nondischargeable under § 523(a)(6) of the Bankruptcy Code.¹ The court conducted a trial in this adversary proceeding on June 26, 2009, at which time Henry H. Gonzalez appeared for Symantec and Stella A. Havkin appeared for Mann. The court, having considered the pleadings, the evidence, and arguments of counsel, makes the following findings of fact and conclusions of law² pursuant to F.R.Civ.P. 52(a)(1), as incorporated into FRBP 7052 and applied to adversary proceedings in bankruptcy cases.

I. STATEMENT OF FACTS

Symantec designs, manufactures, publishes, and distributes software including Norton System Works, Norton Antivirus, Norton Utilities, CleanSweep, Norton Ghost, LiveUpdate, and GoBack. It owns a registered trademark for each of these products. Symantec owns registered copyrights for Norton Antivirus, Norton Utilities, NortonGhost, and CleanSweep. Symantec contracts with a third-party, DisCopy Laboratories ("DCL") to manufacture the software. DCL ensures that all products are produced to Symantec's standards. Symantec sells its software only to authorized dealers, and produces software to be included with new computers as "original equipment manufacturer" or "OEM" disks. OEM disks are sold only to vendors and not to retail customers. Symantec's software contains certain characteristics that are not present in unauthorized replications of the software. If the software does not contain these characteristics, the software is not authorized by Symantec and is counterfeit.

Mann, who has also used the name Calvin Chik, operated a fictitious business entity known as Rowcal Distribution. Mann was in charge of ordering all Symantec software for the business. Mann's suppliers were Ted Wu ("Wu") and Lily Zheng ("Zheng"), who operated Hi-Tech Computer Services and Tedly Electronics, LLC. Mann advertised, marketed, and sold Symantec software primarily on the website www.rowcal.com. Mann also advertised, marketed, and sold Symantec software on other websites, including Amazon.com, Nutdeal.com, and eBay. Mann purchased counterfeit copies of Symantec's proprietary works. Each disk obtained by Mann contained unauthorized copies of Symantec's copyrighted material. Mann admits that he was banned from selling Symantec products on eBay.

On March 24, 2005, Mann was visited by William R. Baird ("Baird"), a Symantec employee, who informed Mann that the products that he was selling were counterfeit. Mann turned over 45 CDs to Baird on March 24, 2005. Each of these disks bore one or more of Symantec's registered trademarks. Each of these disks were determined by Symantec to be counterfeit and made to look exactly like authorized products of Symantec. On March 25, 2005, Symantec sent a letter to Mann by e-mail reiterating that he was selling counterfeit Symantec products and demanding that he immediately cease and desist from further sales of counterfeit software. Despite verbal and written notice to cease and desist, Mann resumed the marketing and sale of counterfeit Symantec software on March 29, 2005. Mann continued to purchase and sell counterfeit Symantec software for approximately one year after Baird's visit on March 24, 2005. Mann did not contact Symantec to determine whether the software he was continuing to sell was authentic, notwithstanding Baird's specific request that he do so. On June 21, 2005, Symantec sent written notice to Tedley Computer, Hi-Tech Computer Services, Tedley Electronics, LLC, Wu, and Zheng informing them that they were selling counterfeit copies of Symantec software products. Symantec's written demand that they cease and desist from doing so was ignored.

On January 29, 2007, Symantec filed a Complaint against Mann, Rowcal Distribution, and other non-debtor third-parties in Case No. 07-00676-ODW (FFMx), styled Symantec Corporation v. Mann, et al., in the United States District Court, Central District of California ("District Court Action"), seeking damages for alleged 1) trademark infringement; 2) false designation of origin under the Lanham Act; 3) copyright infringement; 4) fraud; 5) trafficking in counterfeit labels, documentation and/or packaging in violation of 18 U.S.C. § 2318; 6) unfair competition; 7) common law unfair competition; 8) state law false advertising; 9) intentional interference with prospective economic advantage; and 10) negligent interference with prospective economic advantage. A default judgment was entered against the non-debtor defendants.

On February 29, 2008, Mann filed a voluntary petition under chapter 7 of the Code. Mann received a discharge on May 28, 2008, and the case was closed as a "no-asset" case on June 12, 2008.

On May 19, 2008, Symantec timely filed its complaint in this adversary proceeding seeking a determination that Mann's debt to Symantec is nondischargeable under 11 U.S.C. §§ 523(a)(2), (a)(4), and (a)(6). Mann filed an answer to Symantec's complaint on August 18, 2008. On January 13, 2009, Symantec moved for summary judgment on its cause of action under 11 U.S.C. § 523(a)(6). On February 3, 2009, Mann filed his response in opposition to the motion. Symantec filed its reply to Mann's opposition on February 12, 2009. After a hearing on March 31, 2009, the matter was taken under submission.³

On April 6, 2009, an Order Granting Plaintiff a Partial Summary Judgment on Plaintiffs Claim Under 11 U.S.C. § 523(a)(6) was entered in this adversary proceeding.⁴ In the Memorandum Decision of even date therewith, the court found that Mann had infringed Symantec's registered trademarks in violation of 15 U.S.C. § 1114(1) and was liable for false designation of origin in violation of 15 U.S.C. § 1125(a)(1). The court also found that Mann had infringed Symantec's registered copyrights in violation of 17 U.S.C. § 106(3) and trafficked in counterfeit labels in violation of 18 U.S.C. § 2318(a)(1)(B). In making its determinations, the court found that Mann's conduct was both (a) willful in that Mann acted intentionally, deliberately, and with a subjective motive to inflict injury on Symantec; and (b) malicious in that Mann's wrongful acts were done intentionally, necessarily caused injury to Symantec, and were done without just cause or excuse. The court reserved for trial the issue of damages.

At the conclusion of trial on June 26, 2009, Symantec requested an award of statutory damages. Notwithstanding the court's finding of willfulness, Symantec seeks an award of statutory damages in (1) the maximum amount permitted under 15 U.S.C. § 1117(c) attributable to non-willful trademark infringement ($100,000 for Mann's violation of each of the nine trademarks at issue);⁵ and (2) the maximum amount permitted under 17 U.S.C. § 504(c) attributable to non-willful copyright infringement ($30,000 for Mann's violation of each of the four copyrights at issue).⁶ Symantec also seeks an award of reasonable attorneys' fees of $165,639.25, plus costs of court.

II. DISCUSSION

This court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(b) and 1334(b). This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (I), and (O). Venue is appropriate in this court. 28 U.S.C. § 1409(a). To prevail under 11 U.S.C. § 523(a)(2), (a)(4), or (a)(6), the plaintiff must establish the allegations of the complaint by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). Objections to the dischargeability of a debt are to be literally and strictly construed against the objector and liberally construed in favor of the debtor. Quarre v. Saylor (In re Saylor), 108 F.3d 219, 221 (9th Cir.1997).

A. Statutory Damages

The Copyright Act provides that "an infringer of copyright is liable for either — (1) the copyright owner's actual damages and any additional profits of the infringer ... or (2) statutory damages, as provided by subsection (c)." 17 U.S.C. § 504(a). Section 504(c)(1) states, in pertinent part, that "the copyright owner may elect, at any time before final judgment, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually ... in a sum not less than $750 or more than $30,000 as the court considers just." 17 U.S.C. § 504(c)(1). If the court finds that the infringement was willful, "the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000." 17 U.S.C. § 504(c)(2).

The trial court has "wide discretion in determining the amount of statutory damages to be awarded, constrained only by the specified maxima and minima." Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir.1984). A court must be guided by "`what is just in the particular case, considering the nature of the copyright, the circumstances of the infringement and the like.'" Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir.1990) (quoting F.W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228, 232, 73 S.Ct. 222, 97 L.Ed. 276 (1952)).

Factors which a court may consider in calculating an award of statutory damages include "`the expenses saved and profits reaped by the defendants in connection with the infringements, the revenues lost by the plaintiffs...