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D. GILL SPERLEIN (172887) THE LAW OFFICE OF D. GILL SPERLEIN 584 Castro Street, Suite 879 San Francisco, California 94114 Telephone: (415) 404-6615 Fax: (415) 404-6616 gill@sperleinlaw.com Attorney for Plaintiff IO GROUP, INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION IO GROUP, INC. d/b/a TITAN MEDIA, a California corporation, Plaintiff, vs. MARIUSZ PRALAT, CAROL B. PEAL, YUNSHU KANG, CHUN RONG ZHENG, ZHI NENG WU, RUBEN MORENO, HAO XU, CHIAFEN LIN, SANG YEOL KIM, and MALGORZATA FRACZYK, individuals, Defendants, ) ) ) ) ) ) ) ) ) ) ) ) ) )

CASE NO.: C-10-3647 (WHA) APPLICATION FOR DEFAULT JUDGMENT AGAINST MARIUSZ PRALAT and MALGORZATA FRACZYK BY COURT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF APPLICATION FOR DEFAULT JUDGMENT BY COURT Date: October 6, 2011 Time: 8:00 a.m. Ctrm: 9, 19th Fl

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TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on October 6, 2011 at 8:00 a.m. or as soon thereafter as this matter may be heard by the above-entitled court, located at 450 Golden Gate Avenue, San

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Francisco, California, 94102, Plaintiff Io Group, Inc. will present its Application for a Default Judgment against Defendants MARIUSZ PRALAT and MALGORZATA FRACZYK. The Court previously entered the default of said defendants.
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TABLE OF CONTENTS

TABLE OF AUTHORITIES ................................................................................................... iv

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APPLICATION FOR DEFAULT JUDGMENT BY COURT ................................................. 1 MEMORANDUM OF POINTS AND AUTHORITIES .......................................................... 1 PROCEDURAL HISTORY ...................................................................................................... 1 SUMMARY .............................................................................................................................. 2 ARGUMENT ............................................................................................................................ 3 I. DAMAGES FOR COPYRIGHT INFRINGEMENT ............................................................ 3 a. Plaintiffs Copyrighted Works are Valuable. ................................................................. 3 b. Defendants Infringing Acts Harmed and Continue to Harm the Value of Plaintiffs Copyright Registered Works. ........................................................................................ 4 c. The Facts and Law Support A Maximum Statutory Award. ......................................... 6 III. A DAMAGES HEARING IS NOT REQUIRED BY LAW ............................................. 10 CONCLUSION ....................................................................................................................... 10

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TABLE OF AUTHORITIES CASES

A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, (9th Cir. 2001) ................................. 5
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Columbia Pictures Indus. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186 (9th Cir. 2001) . ......................................................................................................................................................... 6 Danning v. Lavine, 572 F2d 1386 (9th Cir. 1978) ........................................................................... 2

Elektra Entm't Group, Inc. v. Bryant, 2004 U.S. Dist. LEXIS 26700 (C.D. Cal. Feb. 13, 2004) .................................................................................................................................... 5
F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 97 L. Ed. 276, 73 S.Ct. 222 (1952) ......................................................................................................................... 9 Hickory Grove Music v. Andrews, 749 F. Supp. 1001 (D.Mont. 1990) .......................................... 9 International Korwin Corp. v. Kowalczyk, 665 F. Supp. 652 (D.N.Ill. 1987) ................................ 9

Jackson v. Sturkie, 255 F. Supp. 2d 1096 (N.D. Cal. 2003). ............................................... 8

James v. Frame, 6 F.3d 307 (5th Cir. 1993) .................................................................................. 10

Los Angeles News Serv. v. Reuters Television Int'l, Ltd., 149 F.3d 987, 996 (9th Cir. 1998) ..................................................................................................................... 8 Microsoft Corp. v. Marturano, 2009 U.S. Dist. LEXIS 44450 (E.D. Cal. May 27, 2009) . 6
Perfect 10, Inc. v. Talisman Communs., Inc., 2000 U.S. Dist. LEXIS 4564 (C. D. Cal. Mar. 27, 2000)........................................................................................................................................ 2, 5, 7 Playboy v. Webbworld, 968 F. Supp. 1171 (E.D. Tex. 1997) ......................................................... 7 Van Halen Music v. Foos, 728 F. Supp. 1495 (D. Mont. 1989) ..................................................... 9 Warner Bros. Entm't, Inc. v. Caridi, 346 F. Supp. 2d 1068 (C.D. Cal. 2004) ................................ 6

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STATUTES 17 U.S.C. 504 .................................................................................................................. 2 17 U.S.C. 504(b) .............................................................................................................. 3 17 U.S.C. 504(c) ........................................................................................................ 3, 10 FRPC 55(b)(2) .................................................................................................................. 10

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APPLICATION FOR DEFAULT JUDGMENT BY COURT By this Application, the attached Memorandum of Points and Authorities, the accompanying declaration of Keith Ruoff and the pleadings in this action, Plaintiff presents proof of the following matters: 1. 2. Defendants failed to file responsive pleadings as instructed by the Court. The Court Clerk entered default against Defendants MARIUSZ PRALAT

and MALGORZATA FRACZYK on July 20, 2011. (Docket No. 55). 3. Plaintiff is informed and believes and based thereon alleges that

Defendants are not infants and are not incompetent persons or in military service or otherwise exempted under Soldiers and Sailors Civil Relief Act of 1940. 4. Plaintiff is entitled to judgment against Defendants on account of the

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claims pleaded in the Complaint. 5. ($30,000.00). Plaintiff seeks damages in the amount of thirty thousand dollars

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MEMORANDUM OF POINTS AND AUTHORITIES Plaintiff Io Group, Inc. relies on the following points and authorities in support of its Application for Default Judgment by the Court. PROCEDURAL HISTORY Plaintiff filed its original Complaint for copyright infringement against 244 Does on August 19, 2010. Plaintiff immediately requested early discovery to identify the

Defendants. (Docket No. 5.) Plaintiff later amended the Complaint to name ten individual
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Defendants including MARIUSZ PRALAT and MALGORZATA FRACZYK. (Docket No. 41.) Plaintiff served PRALAT and FRACZYK but they failed to file responses and at Plaintiffs request the Clerk entered default against them. (Docket No. 55). Plaintiff hereby applies for entry of default judgment against MARIUSZ PRALAT and MALGORZATA FRACZYK. SUMMARY Facts pleaded in the complaint are admitted by default. Danning v. Lavine, 572 F2d 1386,1388 (9th Cir. 1978). With liability established by default, the only remaining task before the Court is fashioning the appropriate remedy. The Court may award statutory damages from $750.00 to $30,000.00 per work as it considers just, increased to $150,000.00 in cases of willful infringement. 17 U.S.C. 504. If the defendant knew or should have known [the works] belonged to someone else at the time that [he] posted them on [his] website [the defendants] infringement [] was willful. Perfect 10, Inc. v. Talisman Communs., Inc., 2000 U.S. Dist. LEXIS 4564 at 5. (C. D. Cal. Mar. 27, 2000).

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The infringement in this case involved making unauthorized reproductions of Plaintiffs copyright registered movie, Breakers, and then distributing those copies to others using peer-to-peer technologies. The copy of the movie so distributed by these

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Defendants clearly identified the name of the movie as Breakers and the producer of the movie as Titan Media. (FAC, Docket No. 41 at 13.) Plaintiffs knew that this movie did not belong to them and they had no reason to believe that Plaintiff had authorized them to

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make and distribute the copies.

Defendants did not mistakenly believe this movie

belonged to them or that Plaintiff had authorized them to reproduce and distribute it. Thus, Defendants infringement was willful. Although Defendants acts were clearly willful, Plaintiff seeks only the maximum statutory damage award permissible when willfulness is not established.
ARGUMENT I. DAMAGES FOR COPYRIGHT INFRINGEMENT

In an action for copyright infringement, the copyright owner is entitled to recover the actual damages suffered as a result of the infringement and the infringers profits attributable to the infringement. 17 U.S.C. 504(b). Alternatively, if the works were

registered with the U.S. Copyright Office prior to the commencement of the infringing activity, the copyright holder may elect statutory damages in the amount of $750.00 to $30,000.00 per work. 17 U.S.C. 504(c). Plaintiff registered the work at issue in this matter prior to the commencement of the infringing activity. (Ruoff Decl. at 4, Ex. A.) The value of Plaintiffs content and the damage caused by Defendants unauthorized use warrant a maximum award. a. Plaintiffs Copyrighted Works are Valuable. Plaintiff is a well-established company with a long reputation for producing videos with exceptional production values. It has won numerous awards for its high quality work, beginning with an award for Best Gay Video in its first year in existence (1995). Since

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then Plaintiff has won awards nearly every year including awards for Best Art Direction,
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Best Videography, Best Packaging, Best DVD Extras, Best Cinematography and Best Editing. Plaintiff is recognized throughout the industry as one of the highest quality producers of gay erotica. (FAC, Docket No. 41 at 21.) The movie Breakers is of obvious high production values and is easily discernable as a professional work. In fact, the work was one of the first erotic movies produced in the Blu-Ray format. Plaintiff created Breakers employing professional performers, directors, cinematographers, lighting technicians, set designers and editors. Plaintiff created

Breakers using state-of-the art professional-grade cameras, lighting, and editing equipment. (Id. at 22.) Plaintiff is a well-run, socially responsible company that produces high-quality product under a premium brand. The experience, hard work and financial commitment behind Plaintiffs productions, result in a product that is markedly superior to the content of its competitors. (Ruoff Decl. at 3.) Plaintiff sets licensing fees for its works higher than many inferior competitors who often flood the market with low-quality, inexpensive, and readily available content.

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Plaintiff works hard to protect its image as a premium brand in order to maintain the value of its products. (Id. at 5.) b. Defendants Infringing Acts Harmed and Continue to Harm the Value of Plaintiffs Copyright Registered Works. Plaintiffs ability to sell DVDs and memberships to its website is directly dependent upon its ability to control the distribution of its works. Simply put Plaintiff cannot sell

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its movies when those same movies are otherwise available for free on the Internet. (Id. at 6). Defendants caused Plaintiff harm by reproducing and distributing Plaintiffs works with no digital protection systems, thereby making it possible for the unending and continual distribution of Breakers, by and through peer-to-peer networks. (Id. at 10.) In Perfect 10, plaintiff magazine publisher sued a website for publishing its photographs on the Internet. Evaluating damages the Court wrote, While it would be difficult to quantify Perfect 10's damages resulting from the infringement, it is clear that Perfect 10 has been severely damaged. The photographs have been distributed worldwide, in a form that is easy to download and easy to copy. A virtually unlimited number of copies can be made of the copyrighted photographs, as a result of [defendants] infringement. Perfect 10, Inc. v. Talisman Communs., Inc., 2000 U.S. Dist. LEXIS 4564 at 11. (C. D. Cal. Mar. 27, 2000). The Court went on to award the maximum statutory award for willful infringement ($100,000 per work at the time) for each infringed photograph. When digital works are distributed via the internet, as in this case, every downloader who receives one of the copyrighted works from Defendant[s] is in turn capable of also transmitting perfect copies of the works. Accordingly, the process is potentially exponential rather than linear, threatening virtually unstoppable infringement of

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the copyright. Elektra Entm't Group, Inc. v. Bryant, 2004 U.S. Dist. LEXIS 26700 (C.D. Cal. Feb. 13, 2004), Citing, A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013-1014 (9th Cir. 2001).

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c. The Facts and Law Support A Maximum Statutory Award.

Plaintiff is unaware of any published decisions addressing the value of erotic motion pictures. However, a number of published decisions address the value of box office motion pictures and television programs, and other decisions address the value of erotic photographs. A maximum statutory award is consistent with the damages awarded by Courts in cases involving similar circumstances.1 On a motion for default judgment, a district court awarded a maximum statutory award of $150,000 each for infringements of The Last Samurai and Mystic River, when a member of the Academy of Motion Picture Arts and Sciences who had been provided with

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a screener copy of the movies allowed the movies to be duplicated and distributed via the Internet. Warner Bros. Entm't, Inc. v. Caridi, 346 F. Supp. 2d 1068 (C.D. Cal. 2004). In Columbia Pictures Indus. V. Krypton Broad. of Birmingham, Inc., the Ninth

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Circuit affirmed an award of approximately $72,000 per willful infringement of several half-hour television shows. Columbia Pictures Indus. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186 (9th Cir. 2001)(cert denied, 534 U.S. 1127 (2002). The retail cost of movies produced and sold by Io Group, Inc. are generally much higher then the retail cost of box office movies. Plaintiffs regular price for a single copy of Breakers on Blu-ray is $69.95 (though they currently offer it for a sale price of $49.95).

1. Other Courts have considered damage awards in factually similar cases to judge the appropriateness of a statutory damage award. See, Microsoft Corp. v. Marturano, 2009 U.S. Dist. LEXIS 44450 (E.D. Cal. May 27, 2009).
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(Ruoff Decl. at 7; Ex. B.) Retail cost of box office movies decline sharply after release to the DVD market as evidenced by the fact that Amazon.com currently sells this years Best Picture Oscar winner The Kings Speech for $13.49. (Id. at 8 and Ex. C). In contrast, the retail price of one of Plaintiffs movies stays relatively consistent over time. For example, Io Groups movie River Patrol was the first movie Plaintiff ever produced (1998) and Plaintiff still sells the DVD from its website for $59.95. (Id. at 7 and Ex. B.) Similarly, the cost of a thirty day membership to plaintiffs website costs $29.95 where a monthly subscription to Netflix costs $7.99. Id. at 9; Exs. D and E. The popularity and economic value of adult content cannot be denied. Erotic content is consistently more expensive then Hollywood box office films. Prior federal court decisions have recognized the high economic value of erotic photographs. A federal court awarded $5,000 per erotic photograph (Playboy v.

Webbworld, 968 F. Supp. 1171, 1176 (E.D. Tex. 1997)) and where infringement was found to be willful a court awarded $100,000 (the maximum award at the time) per adult photograph. Perfect 10, Inc. v. Talisman Communs., Inc., 2000 U.S. Dist. LEXIS 4564 at

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11. (C. D. Cal. Mar. 27, 2000). It is nearly impossible to determine the scope of the damage caused by Defendants acts. By making Breakers available through peer-to-peer networks, Defendants made it

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possible for others to further distribute the works.

Often infringers on peer-to-peer

networks make works available to others even when they have no interest in the work because peer-to-peer networks reward peers who have many movies available for upload

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by providing those peers with faster download speeds. This ensures that even peers with no interest will forward the movie on to others, making in it inevitable that anyone on a peer-to-peer network who is interested in viewing Breakers, will be able to do so without purchasing a copy from Plaintiff. Statutory damages serve both compensatory and punitive purposes, and thus may be appropriate "whether or not there is adequate evidence of the actual damages suffered by plaintiff or of the profits reaped by defendant" in order to effectuate the statutory policy of discouraging infringement. Los Angeles News Serv. v. Reuters Television Int'l, Ltd., 149 F.3d 987, 996 (9th Cir. 1998). Additionally, [s]tatutory damages are particularly

appropriate in a case . . . in which defendant has failed to mount any defense or to participate in discovery, thereby increasing the difficulty of ascertaining plaintiff's actual damages. Jackson v. Sturkie, 255 F. Supp. 2d 1096, 1101 (N.D. Cal. 2003). Statutory damages may also compensate Plaintiff for damages that may be very real but even more impossible to calculate. For example, making adult content available for free may ingrain in the consumer psyche a belief that erotic material should be freely

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available on the Internet, thereby decreasing the price at which Plaintiff might otherwise sell its products in the market place now and in the future. Also, viewing Plaintiffs content on a network with poor resolution and other quality issues may decrease

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consumers perception that Plaintiff creates and sells a premium brand. The statutory rule, formulated after long experience, not merely compels restitution of profit and reparation for injury but also is designed to discourage wrongful

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conduct. F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 233, 97 L. Ed. 276, 73 S.Ct. 222 (1952). It is appropriate that the Court use opportunities such as this to send a message of deterrence to would be infringers that, it costs less to obey the copyright laws than to disobey them. International Korwin Corp. v. Kowalczyk, 665 F. Supp. 652, 659 (D.N.Ill. 1987), affirmed 855 F. 2d 375 (D.N.Ill. 1987). The District Court in Korwin held that, [t]o determine the amount of statutory damages the court should primarily focus upon two factors: the willfulness of the defendants conduct, and the deterrent value of the sanction imposed, pointing out that courts have repeatedly emphasized that defendants must not be able to sneer in the face of copyright owners and copyright laws. Id. See also, Hickory Grove Music v. Andrews, 749 F. Supp. 1001, 1003 (D. Mont. 1990); Van Halen Music v.

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Foos, 728 F. Supp. 1495 (D. Mont. 1989). The use of peer-to-peer networks to reproduce and distribute copyright protected content must been seen as sneering in the face of copyright owners and copyright laws. On-line piracy is one of the greatest threats Plaintiffs business presently faces. (Ruoff Decl. at 11.) When determining damages for Defendants acts, the Court should consider the extent of piracy and infringement taking place on the Internet, particularly in the arena of adult entertainment. Lawfully produced adult works created within the

confines and protections of the First Amendment are legally entitled to the same copyright protection as any other creative work.

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Accordingly, Plaintiff requests that the Court exercise the discretion granted to it under 17 U.S.C. 504(c)(1) and award thirty thousand ($30,000.00) for the infringement of Breakers.
II. A DAMAGES HEARING IS NOT REQUIRED BY LAW

An evidentiary hearing is not always required to establish damages prior to entering a default judgment. James v. Frame, 6 F3d 307, 311 (5th Cir. 1993). Federal Rule 55(b)(2) states that, [i]f, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other

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matter, the court may conduct such hearings or order such references as it deems necessary and proper. FRCP 55(b)(2) (Emphasis added). If the Court believes it would benefit form oral argument, Plaintiff stands ready to appear. Otherwise, if Defendant fails to file an

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opposition to this motion, Plaintiff submits the matter on the record before the Court. See also, Local Rule 7-1(b).
CONCLUSION

Based on the above points and authorities, Plaintiff prays that the Court enter judgment in the amount of $30,000 jointly and severally against Defendants MARIUSZ PRALAT and MALGORZATA FRACZYK. Dated: August 25, 2011 Respectfully Submitted, /s/ Gill Sperlein ______________________________ GILL SPERLEIN THE LAW OFFICE OF D. GILL SPERLEIN Attorney for Plaintiff Io, Group, Inc.
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