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Adobe Systems Incorporated v. SKH Systems, Inc.

United States District Court, W.D. Texas, Austin Division

December 27, 2017

SKH SYSTEMS, INC. and CHORNG JACK HWANG, individually and d/b/a JACK'S LAPTOPS, Defendants.



         BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and specifically Plaintiffs Adobe Systems Incorporated (Adobe), Autodesk Inc. (Autodesk), and CNC Software, Inc. (CNC) (collectively, Plaintiffs)' Motion for Summary Judgment [#29], Defendant Chorng "Jack" Hwang (Hwang)'s Response and Motion to Exclude Evidence [#32], and Plaintiffs' Reply [#33] in support. Having reviewed the documents, the governing law, and the file as a whole, the Court now enters the following opinion and orders.


         I. The Parties

          Plaintiffs produce an assortment of software products for use in a variety of technology, including computers. Compl. [#1] ¶ 11. Plaintiffs have obtained copyright registrations for each of their software products and market, distribute, and license their products under federally registered trademarks (the Marks). Id. ¶ 12; Mot. Summ. J. [#29] Ex. A (Registrations).[1]

         Plaintiffs use a product activation system to protect their software from piracy. Id. ¶ 39. This system requires customers to enter a key or serial number to activate Plaintiffs' software on their computers. Id. Alternatively, customers can contact Plaintiffs' activation servers via the internet to have the key or serial number transmitted directly to the computer. Id. Each copy of Plaintiffs' software has a unique key or serial code, and customers must purchase a license from Plaintiffs to receive the key or serial code to activate the software. Id. ¶ 41.

         Hwang is the director and president of Defendant SKH Systems, Inc., a corporation registered in Texas to sell computers and software. Compl. [#1] ¶ 42. Doing business under the name "Jack's Laptops, " Hwang sells refurbished laptops, USB drives, and hard drives preloaded with software. Id. ¶42. Hwang markets the refurbished technology using platforms such as Craigslist and Facebook. Id.

         Through the Business Software Alliance (BSA), [2] Plaintiffs learned Hwang was allegedly advertising, selling, and activating unlicensed versions of Plaintiffs' software since at least August 2014. Mot. Summ. J.[#29] at 3. Plaintiffs hired a private investigator, Paul Brick, to learn more. Mot. Summ. J. [#29] at 3-4; id. [#29-16] Ex. D (Brick Decl.).

         II. The Investigation

         During a series of recorded phone calls and meetings, Mr. Brick confirmed Hwang was selling and activating unauthorized copies of Plaintiffs' software. See generally Brick Decl. Mr. Brick first called Hwang on June 3, 2016 using the number listed on Facebook for Jack's Laptops.

         Id. ¶ 3. In the initial call, Mr. Brick indicated he was "not looking to buy just one laptop with a couple pieces of software." Brick Decl. Ex. 1 (June 3, 2016 Tr.) at 9:18-10:19.[3] Rather Mr. Brick stated he had access to a large quantity of computers and needed to "get stuff like CS 6, AutoCAD, some science programs, . . . design type stuff for these online gaming companies in Austin." Id. Hwang responded "when 1 sell stuff like that. . . you're not buying a license. You're buying an activator. . . . And that's what 1 tell people." Id. at 11:7-11. In addition, Hwang repeatedly represented he possessed, could install, and could activate unlicensed software. See generally Id. He also noted that "[a] lot of people who buy my stuff are students . . . [o]r, you know, single contractors" who cannot afford expensive software. Id. at 13:1-11. Additionally, Hwang explained "the caveat is right up front, [customers have] got to know that they're buying unlicensed software; and 1 never build programs without telling people that." Id. at 14:18-21.

         Toward the end of first conversation, Mr. Brick proposed a relationship where he would develop connections with companies seeking to buy computers loaded with software and Hwang would work in a customer service capacity. See Id. at 13:14-14:21. The two men discussed how such a relationship would function. See Id. at 15:22-23:25. Hwang indicated "1 sell a lot of laptops to small companies like that. Guys buy five laptops." Id. at 29:20-22. However, Hwang expressly warned Mr. Brick companies needed to be told they were buying unlicensed software. Id. at 30:1-4. Hwang conditioned working with Mr. Brick on companies knowingly assuming the risk of using unlicensed software. Id. at 30:6-17. In response, Mr. Brick indicated he would check with his potential clients and perhaps Hwang could start with one computer. Id. at 30:20-22.

         In subsequent conversations, Hwang quoted Mr. Brick prices for installing and activating various unlicensed software programs. Brick Decl. ¶¶ 4-5. On June 8, 2016, Hwang and Mr. Brick met at a coffee shop where Hwang sold, installed, and activated a series of unlicensed software on Mr. Brick's laptop computer for $290. Id. ¶¶ 9-10. Mr. Brick observed Hwang using a computer program to bypass the software's product activation system. Id. ¶ 12.

         During the meeting, Mr. Brick returned to the idea of continuing relationship-a partnership where Mr. Brick would furnish the laptops and customers and Hwang would install and activate unlicensed software, answer customer service questions, and keep the software running. Id. Hwang repeated that customers must be informed the software was unlicensed but agreed to move forward with such a partnership. Brick Decl. Ex. 7 (June 8, 2016 1:31 p.m. Tr.) at 83:3-19; 87:4-23.

         III. Current Suit

          Plaintiffs filed this suit on January 9, 2017, against Hwang and SKH Systems, Inc.[4](collectively, Defendants) alleging trademark infringement and counterfeiting violating 15 U.S.C. § 1114, unfair competition violating 15 U.S.C. § 1125(a), copyright infringement violating 17 U.S.C. § 501, and circumvention of copyright protections violating 17 U.S.C. § 1201(a). See Compl. [#1]. Hwang filed an answer pro se on January 26, 2017. See Answer [#10].

         Five days after Hwang answered the lawsuit, Mr. Brick sent Hwang text messages asking follow-up questions about the unlicensed software Mr. Brick purchased from Hwang on June 8, 2016. Brick Decl. ¶ 13. Mr. Brick also inquired whether Hwang could "do another machine" and Hwang responded affirmatively. Id.; Brick Decl. Ex. 8 (Text Messages).

         In April 2017, Plaintiffs and Hwang agreed to entry of a preliminary injunction prohibiting Hwang "and any person or entity acting in concert with, or at his direction" from (1) "selling or offering for sale any computers loaded with Plaintiffs' software; (2) installing or activating [Plaintiffs'] software products by using counterfeit product key codes or serial numbers, and (3) destroying or deleting any evidence relevant to Plaintiffs' claims of copyright and trademark infringement." Agreed Prelim. Inj. [#23] at 1-2.

         In response to each of Plaintiffs' discovery requests, Hwang asserted "his right under the Fifth Amendment of the U.S. Constitution not to answer this question, on the grounds that he may incriminate himself." Mot. Summ. J. [#29-17] Ex. E (Def's Discovery Resps.).

         Plaintiffs now move for summary judgment, which is ripe for review.


         I. Legal Standard-Summary Judgment

         Summary judgment shall be rendered when the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir. 2007). A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Washburn, 504 F.3d at 508. Further, a court "may not make credibility determinations or weigh the evidence" in ruling on a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.

         Once the moving party makes an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Turner v. Baylor Richardson Med. Or., 476 F.3d 337, 343 (5th Cir. 2007). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. Id. The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Adams v. Travelers Indent. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006). Rule 56 does not impose a duty on the court to "sift through the record in search of evidence" to support the nonmovant's opposition to the motion for summary judgment. Id.

         "Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Disputed fact issues that are "irrelevant and unnecessary" will not be considered by a court in ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which ...

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