Microsoft Corp. v. Big Boy Distribution LLC

589 F.Supp.2d 1308

MICROSOFT CORPORATION, plaintiff, v. BIG BOY DISTRIBUTION LLC, a Florida limited liability company; Steven Blackburn; Educational Solutions and Technological Development Inc., d/b/a Educational Solutions and Edsol, a Jordanian company, and Mahmoud Shadid, defendants.

Case No. 07-80296-CIV.

United States District Court, S.D. Florida.

December 3, 2008.

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Richard C. Hutchison, Gustavo Alfonso Bravo, Holland & Knight, LLP, Fort

Lauderdale, FL, Jeremy E. Roller, John H. Jamnback, Scott T. Wilsdon, Yarmuth Wilsdon Calfo, Seattle, WA, for Petitioners.

Timothy Powers O'Neill, James Daniel Ryan, Ryan and Ryan Attorneys, P.A., North Palm Beach, FL, John T. Mitchell, Interaction Law, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON LIABILITY [DE # 55], GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ON BIG BOY DEFENDANTS' COUNTERCLAIMS [DE # 57] & DENYING BIG BOY'S CROSS MOTION FOR SUMMARY JUDGMENT [DE# 59]

DANIEL T.K. HURLEY, District Judge.

This is an action for damages and injunctive relief arising out of the defendants' alleged infringement of plaintiff's copyrights in its software. Plaintiff Microsoft Corporation ("Microsoft") alleges that defendants Big Boy Distribution LLC and Steven Blackburn (cumulatively "Big Boy") unlawfully imported into the United States copyrighted Microsoft Student Media software that was manufactured abroad and intended for schools and other qualified educational users abroad, and then distributed that software in the United States without approval or authorization from Microsoft.

The case is currently before the court on the following motions:

(1) Microsoft's motion for partial summary judgment on Big Boys' liability for copyright infringement and unauthorized importation of copyrighted works [DE # 55];

(2) Microsoft's motion for summary judgment on Big Boys' counterclaims [DE# 57];

(3) Big Boys' motion for partial summary judgment on first sale defense [DE# 59].

I. Factual & Procedural Background

Microsoft Corporation is engaged in the manufacture and distribution of computer software programs, including Student Media software which is distributed at a discount to qualified educational users in order to provide students in the United States, in developing countries and worldwide low cost access to the latest software technology and information in furtherance of their educational development.

Microsoft distributes Student Media through three academic licensing programs—Campus Agreement, School Agreement and Academic Select. In the United States, an institution enrolled in one of these academic licensing programs may order Microsoft Student Media software only through Authorized Education Resellers ("AERs"), which are specially trained to distribute the product to qualified educational users. The academic institutions, students and qualified educational end users are prohibited from reselling Student Media software because the programs though which it is distributed are designed to provide low cost software to qualified students and not to the general public.

Microsoft also imposes geographical restrictions on the distribution of Student Media through international licensing and distribution programs. For example, Student Media licensed and distributed for use in Europe, the Middle East or Africa is not licensed for use in North America.

Big Boy buys and sells computer software on the open market. Microsoft alleges that at a time prior to October, 2006, Big Boy improperly acquired thousands of units of Student Media software intended for distribution abroad and then sold it to non-educational end users in the United States. In support of this charge, Microsoft adduces uncontradicted evidence that Big Boy directly imported into the United States approximately 10,000 units of Microsoft Student Media software from Mahmoud Shadid of Anman, Jordan, on behalf of a third party, eDirect Software ("eDirect"), a Canadian company, and eDirect's principal, Jesse Willms. In addition, Big Boy indirectly imported thousands of units of Microsoft Student Media software through purchase from eDirect, and then redistributed about 9,000 units of that software to resellers and online retailers who are not qualified educational users. Defendant Steven Blackburn admits that he personally participated in the importation and distribution of this Microsoft Student Media software, which was clearly labeled "not for retail distribution" and "not for resale."

Through work order numbers marked on this product which was impounded during prior litigation between Microsoft and eDirect, Microsoft determined that the software imported by Big Boy under this arrangement was manufactured and assembled in Ireland, and was not licensed for distribution or use in the United States.¹ Further, it determined and now establishes that the Microsoft software product which Big Boy admitted to importing and distributing through this arrangement was initially distributed to EdSol or Farah Trading and Contracting Co. in Jordan pursuant to an agreement between Microsoft Ireland Operations Limited, a Microsoft Corporation affiliate, and the Kingdom of Jordan, specifically the Jordanian Ministry of Education. Dr. Khaled Toukan, the Minister of Education and Higher Education for the Kingdom of Jordan, entered into the Jordanian Ministry of Education Agreement on behalf of the Kingdom of Jordan.

Pursuant to the Jordanian Ministry of Education Agreement ("MOE Agreement"), the Jordanian Ministry of Education and its qualified educational users are authorized to use certain Microsoft Student Media software. Further, under the MOE Agreement, the Jordanian Ministry of Education was authorized to acquire Microsoft Student Media software only for its faculty, staff and students, and was not authorized to transfer its license to others except under limited circumstances and only with Microsoft's written consent.

Under the Jordanian Ministry of Education Subscription Enrollment, which is part of the MOE Agreement, Educational Solution and Technological Development Inc. d/b/a Educational Solutions d/b/a EdSol ("EdSol") was authorized to distribute Student Media software to Jordanian Ministry of Education qualified educational users. EdSol was a reseller entitled to sell the Student Media software to students under the Jordanian Ministry of Education Agreement. It was not authorized to distribute Microsoft Student Media software to users other than qualified educational users under the MOE Agreement. And, like other licensees of Microsoft Student Media software licensed for exclusive use and distribution abroad, EdSol was not authorized to import to the United States Microsoft software licensed for distribution outside the United States.

On April 2, 2007, Microsoft filed this lawsuit charging Big Boy with copyright infringement in violation of 17 U.S.C. § 501 et seq. (Count 1) and infringing importation of copyrighted works in violation of 17 U.S.C. § 602(a) (Count 2).

Microsoft now seeks partial summary judgment establishing Big Boys' liability on these claims. Big Boy, in turn, cross moves for summary judgment on liability contending that both infringement claims are barred under the first sale doctrine, codified at 17 U.S.C. § 109(a).

II. Standard of Review

Summary judgment is proper "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." Fed. R.Civ.P. 56(c). The purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The moving party has the burden of identifying those portions of the pleadings, depositions and other evidence on file which it believes demonstrates the absence of a genuine issue of material fact. If it satisfies this test, the burden then shifts to the non-moving party to make a sufficient showing on all essential elements of his claim with respect to which it bears the burden of proof at trial. Id. at 322-23, 106 S.Ct. 2548.

To avoid summary judgment, the nonmoving party must bring forth material facts, i.e. "facts that might affect the outcome of the suit under the governing law," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), and "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

In resolving a motion for summary judgment, the court must draw all reasonable inferences in favor of the non-moving party, including questions of credibility and of the weight to be accorded particular evidence. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 111 S.Ct. 2419, 2434-35, 115 L.Ed.2d 447 (1991). Viewing the evidence in this light, the court must then decide if a rational or reasonable jury might return a verdict in favor of the nonmoving party based on that evidence. Where the record as a whole could not lead a rational trier of fact to find in favor of the non-moving party, there is no "genuine issue for trial" and summary judgment is appropriately entered against the non-movant. Matsushita, 475 U.S. at 587, 106 S.Ct. 1348.

III. Discussion

Under § 106(3) of the Copyright Act, a copyright owner "has the exclusive rights ... to distribute copies ... of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending." 17 U.S.C. § 106(3).

A cause of action for infringement of this right is established under section 501(a) of the Act,² which provides:

Anyone who violates any of the exclusive rights of...