Data Axle, Inc. v. CFM Data Network, LLC

Background

Data Axle alleged that CFM Data Network, LLC, doing business as DataSourceOne.com (DSO), copied and used Data Axle’s copyrighted business databases. Data Axle sued DSO, Andrew Nolting, Douglas Ferrara, and John and Jane Does, asserting claims under the Copyright Act, the Computer Fraud and Abuse Act, and state law.

DSO did not timely respond to the lawsuit. On April 12, 2024, the court entered a default judgment against DSO for $450,000, plus $94,058 in attorney fees and costs. The judgment also permanently prohibited DSO and certain associated persons from wrongfully using, marketing, licensing, purchasing, or profiting from Data Axle’s copyrighted databases. It required DSO to provide an accounting of relevant records within 30 days, and to impound, produce, and then destroy copies of Data Axle’s databases in its possession or control.

DSO was administratively terminated by the Minnesota Secretary of State on February 27, 2024, for failing to file an annual renewal. Data Axle later learned that DSO’s website redirected to datasource360.com and that the websites had similar appearances and offered databases with some of the same names. Data Axle alleged that DSO and Nolting violated the earlier judgment by failing to pay, failing to provide the accounting, failing to impound, produce, and destroy the databases, and continuing to use Data Axle’s copyrighted data through datasource360.com.

Nolting admitted that he was involved with datasource360.com but denied that it used or sold Data Axle’s copyrighted databases. He testified that datasource360.com licensed data from third-party vendors, added data from open sources and other vendors, and did not include Data Axle’s copyrighted information. Data Axle’s attorney testified that Data Axle had not analyzed the content of datasource360.com’s databases to determine whether they contained Data Axle’s information.

Civil-contempt findings

Civil contempt is a court process used to coerce compliance with a court order or compensate for violations. The court explained that Data Axle had to prove, by clear and convincing evidence, that the person accused of contempt knew about the order and violated it. If Data Axle met that burden, the burden shifted to the accused party to show an inability to comply.

The court found that both DSO and Nolting had notice of the April 12, 2024 order. It also found that Nolting was DSO’s sole owner, shareholder, officer, and person in control of DSO. Based on those circumstances, the court held both DSO and Nolting in contempt for DSO’s failure to:

- Pay the money judgment; - Provide the required accounting; and - Impound, produce, and destroy Data Axle’s copyrighted information as required by the order.

The court rejected the request to hold Nolting in contempt for continuing to use Data Axle’s copyrighted material through datasource360.com. Although the similarities between the websites and the similar database names could suggest a connection, they did not establish that datasource360.com’s databases contained the same content as DSO’s databases or Data Axle’s copyrighted material. The court denied this portion of the motion without prejudice, stating that Data Axle could renew it with additional evidence.

Sanctions and disposition

The court declined to impose contempt sanctions on DSO because DSO had been administratively terminated and a financial sanction against it was unlikely to coerce compliance. The court also declined Data Axle’s requests to imprison Nolting or refer him to the United States Attorney for criminal-contempt proceedings. It concluded that the circumstances did not rise to the level of the extraordinary conduct supporting a criminal referral in the case Data Axle cited.

Instead, the court ordered Nolting to pay a civil-contempt fine of $1,000 per day to the Clerk of Court. The fine begins 30 days after the date of the order and continues until one of three required conditions is satisfied: DSO pays the judgment or reaches a mutually agreed payment arrangement with Data Axle; DSO or its representative provides the required accounting; and DSO or its representative impounds, produces, and destroys Data Axle’s copyrighted databases as required by the earlier order.

The court required the parties to file a joint status report within 30 days addressing compliance. If DSO and Nolting claimed that DSO could not comply, Nolting had to explain in detail why compliance was impossible, show that the inability was not self-induced, and show that DSO had made all reasonable good-faith efforts to comply.

Judge Laura M. Provinzino ordered that Data Axle’s motion for sanctions was GRANTED IN PART AND DENIED IN PART. The order held DSO and Nolting in civil contempt, denied the request concerning alleged continued use of Data Axle’s data through datasource360.com without prejudice, declined imprisonment and criminal referral, and imposed the conditional $1,000-per-day fine on Nolting.