Adobe Systems Incorporated v. NA Tech Direct, Inc.

Background

Adobe sued NA Tech Direct Inc., Avenue Industrial Supply Company Limited, SYX Distribution Inc., and SYX Services Inc. for copyright and trademark infringement. The defendants were former licensees and resellers of Adobe software. Adobe alleged that they exceeded their license restrictions by selling software to resellers, buying from unauthorized distributors, improperly selling educational versions, and distributing volume-licensed software outside the permitted organization.

Adobe moved for summary judgment on direct copyright infringement, contributory copyright infringement, and contributory trademark infringement. The defendants opposed Adobe’s motion and cross-moved for summary judgment on the knowledge element of contributory infringement. They also sought summary judgment based on the statute of limitations, delay, and collateral estoppel, and challenged Adobe’s trademark dilution and unfair competition claims.

Direct copyright infringement

The court held that Adobe provided sufficient evidence of direct copyright infringement only for specific sales linked to a particular defendant. It granted Adobe summary judgment for one sale to SunPumps, Inc. and five sales to J&B Medical Supply Co. Those sales occurred after September 2014 and therefore were not subject to the statute-of-limitations analysis discussed in the opinion.

The court denied Adobe summary judgment on the remaining direct copyright claims because Adobe had not provided sufficiently definite evidence linking each alleged unauthorized sale to a specific defendant and copyrighted work. The court rejected the defendants’ arguments that waiver, acquiescence, or equitable estoppel barred the claims. Adobe’s failure to sue earlier was not an affirmative act abandoning its rights, and the evidence showed that the defendants had been warned about unauthorized sales rather than reasonably relying on Adobe’s inaction.

Contributory infringement

The court denied Adobe’s motion for summary judgment on contributory copyright infringement. Adobe had not shown that Software Tech’s alleged direct infringement occurred in the United States, which was required for the copyright claim. The court also denied the defendants’ cross-motion on the knowledge element because evidence about communications, investigations, and sales activity created a genuine dispute over whether the defendants knew about Software Tech’s unauthorized conduct.

The court likewise denied both sides’ motions for summary judgment on contributory trademark infringement. Adobe had not provided evidence establishing Software Tech’s direct trademark infringement or showing that the alleged mislabeling had effects in the United States. At the same time, the defendants had not established that they lacked knowledge of Software Tech’s conduct.

Defenses

The court denied the defendants’ motion for summary judgment based on the statute of limitations. Under the copyright discovery rule, a claim accrues when the plaintiff discovers or reasonably should have discovered the alleged infringement. The court found a factual dispute about whether Adobe reasonably should have investigated the defendants’ involvement earlier. It also noted that separate acts of infringement can have separate limitation periods.

The court denied the defendants’ motion based on latches, an equitable defense based on unreasonable delay that prejudices the opposing party. It found that the facts presented by Adobe created a strong presumption against applying that defense.

The court also denied the defendants’ collateral-estoppel motion. Although the defendants could raise the defense at the summary-judgment stage, the court found that the issues in the earlier Software Tech litigation were not identical to the issues in this case. The earlier proceeding involved fewer copyrights and trademarks, a shorter period, and a damages award that included sanctions.

Trademark dilution and unfair competition

The court denied the defendants’ motion for summary judgment on trademark dilution and unfair competition. Adobe claimed that selling educational versions of its software to ordinary customers could tarnish Adobe’s trademarks by associating them with products having fewer features. The court held that a reasonable jury could find dilution even though the products were Adobe’s own products and consumer confusion was not required for a dilution claim.

Disposition

The court granted in part and denied in part Adobe’s motion for summary judgment. It granted Adobe summary judgment only as to Tiger Direct’s sales to SunPumps, Inc. and J&B Medical Supply Co. It denied the parties’ motions on all remaining grounds and terminated Docket Numbers 86, 88, 89, and 95.