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MICROSOFT CORP. v. CMOS TECHS.

October 24, 1994

MICROSOFT CORPORATION, Plaintiff,
v.
CMOS TECHNOLOGIES, INC.; CMOS SYSTEMS, INC.; SUSHANT PATNAIK; SUBRAT PATNAIK a/k/a BRAD PATNAIK; SATISH PATEL; DEEPAK BAJAJ; DUNN'S PRINTING CO., INC.; MARC DUNN; G.D. SYSTEMS AMERICA, INC.; GOLDEN DRAGON SYSTEMS, LTD.; and DORIS ING, Defendants.



The opinion of the court was delivered by: ALFRED M. WOLIN

 WOLIN, District Judge

 This is a trademark and copyright infringement action. Plaintiff Microsoft Corporation alleges that defendants G.D. Systems America, Inc.; Golden Dragon Systems, Ltd. Canada; and Doris Ing (hereinafter "the defendants") have engaged in the distribution, offer for sale and sale of counterfeit copies of computer software programs protected by Microsoft's registered trademarks and copyrights. Before the Court is motion of plaintiff for summary judgment. Plaintiff also seeks a permanent injunction to restrain defendants from distributing, offering for sale or selling counterfeit computer software products with plaintiff's marks. *fn1" For the reasons expressed below, the Court will grant plaintiff's motion for summary judgment and permanently enjoin defendants. In addition, the Court will award plaintiff profits earned by the defendants from the sale of the counterfeit software, treble profits, attorneys' fees and costs.

 I. FACTUAL BACKGROUND

 A. Microsoft Corporation

 Plaintiff Microsoft Corporation ("Microsoft") is a corporation engaged in the manufacture, distribution and sale of computer software programs for personal computers. MS-DOS is a computer operating system developed and marketed by Microsoft, which is currently used on seventy million personal computers worldwide. (Amended Complaint, P 17). Windows is a graphical interface computer software program developed and marketed by Microsoft, which is currently licensed for use on more than ten million personal computers worldwide. (Amended Complaint, P 18). Windows is a software program which uses graphic images, or icons, to replace typed commands. (Microsoft's MS-DOS computer programs and Windows computer programs will be referred to hereinafter as "Microsoft's products".)

 Microsoft has registered its copyright in its Windows and MS-DOS products with the United States Copyright Office (Amended Complaint, Exh. 1-3). Such copyrights confer on Microsoft the exclusive rights and privileges to market and distribute computer software products under the Windows brand name.

 Microsoft is the owner of the federally registered trademarks "MICROSOFT" and "MS-DOS" used to identify the source of the Windows and MS-DOS products. Microsoft has registered its trademarks in the United States Patent and Trademark Office. (Amended Complaint, Exh. 4-7). As the exclusive owner of the trademarks, Microsoft has the right to enforce and sue others for infringements of its trademarks.

 B. Defendants

 The defendants G.D. Systems America, Inc. and Golden Dragon Systems Ltd., Canada are in the business of distributing and selling personal computers and computer products. (Declaration of Henry Wong, filed September 14, 1994, P 4, hereinafter "Wong Decl. P "; Deposition Transcript of Doris Ing at page 13, hereinafter "Ing Dep. Tr. at P. "). Defendant Doris Ing is the field manager of G.D. Systems America Inc. and Henry Wong is the owner. Id. Henry Wong is also the owner of Golden Dragon Systems Ltd., Canada. Id. G.D. Systems owns a retail outlet for the sale of computers in Plainfield, New Jersey. Id. Defendants have never been licensed to sell Microsoft products.

 Defendants purchased computer software products from CMOS Technologies Inc. ("CMOS"), another defendant in this action. CMOS was licensed to adapt and sell Microsoft's Windows software in conjunction with CMOS' computer systems. (Amended Complaint, P 21). The license agreement between CMOS and Microsoft specifically prohibited the sale of "standalone" Windows software products. (See, License Agreement, Exh. 1 to the Declaration of Timothy Beard, filed May 25, 1993). On December 22, 1992, Microsoft terminated the license agreement with CMOS. (Beard Decl. Exh. 2). *fn2"

 C. Purchase and Sale of Counterfeit Software

 Despite the restrictions in the CMOS licensing agreement, defendants purchased "standalone" Windows software products from CMOS. (Ing Dep. Tr. at P. 19; Wong Decl., P 3). Defendants in turn sold the counterfeit software to the public. (Declaration of Robert Holmes, dated May 21, 1993). *fn3" Defendants sold the counterfeit software even after they received a "Counterfeit Microsoft Products Watch List" (hereinafter "Watch List") on April 6, 1993, alerting them to the possibility that the Microsoft products they were buying from CMOS "should be considered suspect as counterfeit." (Declaration of Beth Frechman, filed September 14, 1994, P 8, Wong Decl., P 8-9). *fn4"

 Robert Holmes is a private investigator who testified that on May 18, 1993, he entered the G.D. Systems store in South Plainfield, New Jersey and purchased standalone software marked "Microsoft Windows 3.1". (Holmes Decl., P 5). Mr. Holmes also stated that a woman named Doris "told me that they are only suppose to sell the software at wholesale, but sold it to me anyway for $ 35.00 cash. Doris told me that she could not give me a receipt for the purchase, since she wasn't suppose to be selling it to me."

 From September 1992 to May 1993, defendants distributed and sold 29,898 units of counterfeit software. (Frenchman Decl., P 6-7). It is the sale of these "standalone" Windows software products that form the factual predicate for this action.

 D. Procedural History

 Microsoft commenced this action on May 25, 1993, against defendants alleging copyright infringement, trademark infringement, unfair competition and dilution. Microsoft sought, among other things, ex parte seizure relief and a temporary restraining order. This Court granted plaintiff's seizure order and on May 27, 1992, federal marshals seized approximately 75 pieces of counterfeit software from G.D. Systems Inc.'s place of business in South Plainfield, New Jersey. On June 16, 1994, plaintiff filed its First Amended Complaint, which included Golden Dragon Systems Ltd., Canada.

 On June 17, 1993, the Court entered a preliminary injunction restraining defendants from manufacturing and distributing unauthorized, pirated and counterfeit Microsoft products.

 II. DISCUSSION

 A. Summary Judgment Standard

 Summary judgment shall be granted 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 a judgment as a matter of law." Fed. R. Civ. P. 56(c); see Hersh v. Allen Products Co. Inc., 789 F.2d 230, 232 (3d Cir. 1986). In making this determination, a court must draw all reasonable inferences in favor of the non-movant. Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n.2 (3d Cir. 1983), cert. dismissed, 465 U.S. 1091 (1984). Whether a fact is "material" is determined by the substantive law defining the claims. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); United States v. 225 Cartons, 871 F.2d 409, 419 (3d Cir. 1989).

 "At the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249. Summary judgment must be granted if no reasonable trier of fact could find for the nonmoving party. Id.

 If the moving party has carried its burden of establishing the absence of a genuine issue of material fact, the burden shifts to the non-moving party to "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). When the non-moving party's evidence in opposition to a properly-supported motion for summary judgment is merely "colorable" or "not significantly probative," the Court may grant summary judgment. Anderson, 477 U.S. at 249-50. See also Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 876 n. 6 (2d Cir. 1986) (summary judgment appropriate in trademark infringement case).

 In opposing summary judgment, a non-movant may not "rest upon mere allegations, general denials, or . . . vague statements." Quiroga v. Hasbro, Inc., 934 F.2d 497, 500 (3d Cir.), cert. denied, 502 U.S. 940, 116 L. Ed. 2d 327, 112 S. Ct. 376 (1991); Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990) ("unsupported allegations in [a non-movant's] memorandum and pleadings are insufficient to repel summary judgment"); see Fed. R. Civ. P. 56(e). The summary judgment procedure enables a party "who believes there is no genuine issue as to a specific fact essential to the other side's case to demand at least one sworn averment of that [specific] fact before the lengthy process of litigation continues." Lujan v. National Wildlife Federation, 497 U.S. 871, 888-89, 111 L. Ed. 2d 695, 110 S. Ct. 3177 (1990).

 An affidavit filed in opposition to a properly-supported motion for summary judgment "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). A non-movant "is not to replace conclusory allegations of the complaint or answer with conclusory allegations of an affidavit." Lujan, 497 U.S. at 888. The Court is not to presume the existence of specific facts from general averments. Id. Such an affidavit must: (1) "show affirmatively that the affiant is competent to testify to the matters stated therein"; (2) be based on "personal knowledge"; and (3) establish facts that "would be admissible at trial". Fed. R. Civ. P. 56(e); see Hlinka v. Bethlehem Steel Corp., 863 F.2d 279, 282 (3d Cir. 1988). In sum, an affidavit offered in opposition to a motion for summary judgment must establish a proper evidentiary foundation for the facts stated within it. Williams v. Borough of West Chester, Pa., 891 F.2d 458, 471 (3d Cir. 1989) (Garth, J., concurring). Affidavits that fail to satisfy these requirements "may not be considered" on a motion for summary judgment. Hlinka, 863 F.2d at 282-83. Moreover, "when, without a satisfactory explanation, a nonmovant's affidavit contradicts earlier deposition testimony, the district court may disregard the affidavit in determining whether a genuine issue of material fact exists." Hackman v. Valley Fair, 932 F.2d 239, 241 (3d Cir. 1991); see also Martin v. Merrell Dow Pharmaceuticals, Inc., 851 F.2d 703 (3d Cir. 1988).

 B. Undisputed Facts Warrant Summary Judgment

 In this case, the defendants have failed to point to any material issue of fact that would warrant a trial on the issues of infringement or damages. In fact, defendants only opposition to the motion for summary judgment is the eight-page affidavit of Mr. Wong. Mr. Wong in his affidavit does not assert that this case in inappropriate for disposition by summary judgment.

 The affidavit of Mr. Wong fails to raise a material issue of fact for trial for several reasons. First, that affidavit contains nothing more than "conclusory allegations" Lujan, 497 U.S. at 888. The Court is not to presume the existence of specific facts from general averments. Id. As such, the Wong affidavit does not create any material issues of fact for trial. Hlinka, 863 F.2d at 282-83.

 Moreover, many of the allegations in the Wong affidavit were contradicted by Mr. Wong's deposition testimony. For example, Mr. Wong's statements in his affidavit in which he describes the meaning of certain invoices from CMOS (Wong Decl. P 6, 13, 14, and 15) are in contradiction to his deposition testimony in which he said he had no understanding of the CMOS invoices. (Wong Dep. Tr. at 43). "When, without a satisfactory explanation, a nonmovant's affidavit contradicts earlier deposition testimony, the district court may disregard the affidavit in determining whether a genuine issue of material fact ...


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