CNC Software, LLC v. Global Engineering Limited Liability Company

Background

CNC Software, LLC sued Global Engineering Limited Liability Company and Edwin Escobar, identified as Global’s president. CNC asserted claims under the Copyright Act, the Digital Millennium Copyright Act’s anti-circumvention provisions, and contract law. CNC alleged that the defendants used pirated versions of its Mastercam software.

CNC alleged that its software was protected by at least thirteen copyrights and that its piracy-detection software identified at least 4,000 uses of pirated Mastercam on at least eleven computers between February 16, 2018, and April 22, 2022. CNC contacted the defendants about the alleged piracy, but the defendants did not resolve the matter and continued using the software.

CNC served Global and Escobar. Neither defendant answered or otherwise appeared. The clerk entered default against Escobar on October 3, 2022, and against Global on November 29, 2022. CNC then moved for default judgment. Magistrate Judge Thomas Hixson recommended granting the motion, and the case was reassigned to Judge Edward M. Chen.

Court’s analysis

The court first determined that it had jurisdiction. Copyright claims gave the court subject-matter jurisdiction. The court also found personal jurisdiction over Global because its headquarters were in California and over Escobar because he was domiciled in California. The court found that both defendants had been properly served and that the procedural requirements for default judgment were satisfied.

Applying the seven factors used to decide whether to enter default judgment, the court concluded that each factor favored CNC. The defendants’ failure to participate left CNC without another way to obtain relief, the complaint adequately stated copyright claims, the requested damages were tied to the alleged conduct, factual disputes were unlikely because the defendants had not contested the allegations, and nothing suggested that the default resulted from excusable neglect. The preference for decisions on the merits also favored default judgment because the defendants’ refusal to participate made such a decision impossible.

For the copyright claim, the court found that CNC adequately showed ownership of valid copyrights and copying of original parts of the software. The court treated the complaint’s factual allegations, except those concerning damages, as true because of the defendants’ default. It also concluded that Escobar could be personally liable because the complaint alleged that he knew about and directed Global’s unauthorized use of Mastercam. The court found the alleged infringement willful because the defendants continued using the software after CNC informed them that the use was illegal and because bypassing the software’s security system required deliberate steps.

Relief awarded

The court awarded CNC $870,000 in actual damages. CNC calculated that amount using a stated annual cost of $87,000 per software seat for ten computers. The court also issued a permanent injunction, finding that continued infringement could cause irreparable harm, money damages were inadequate to prevent future infringement, the balance of hardships favored CNC, and the injunction served the public interest.

The defendants must delete all infringing software from their computers within 30 days after entry of judgment. They must also file a written report under oath with the clerk and serve CNC with details explaining how they complied with the injunction.

The court awarded $19,671.20 in attorney’s fees. This was CNC’s requested $19,743.50 reduced by $72.30 for clerical work that could not properly be billed at attorney or paralegal rates. The court awarded $400 in costs rather than the $635.21 requested, allowing the filing fee but rejecting the requested service-of-process and mailing costs. The court also awarded post-judgment interest at the rate required by 28 U.S.C. § 1961(a).

Disposition

Judge Edward M. Chen adopted the magistrate judge’s report and recommendation in part and granted CNC’s motion for default judgment. The order awarded the damages, permanent injunction, software-deletion order, attorney’s fees, costs, and interest described above. The opinion’s analysis focuses on the copyright claims and does not separately analyze the Digital Millennium Copyright Act or contract claims.