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Rechanik v. Microsoft Corp.

March 17, 2009

ALEKS RECHANIK, PLAINTIFF,
v.
MICROSOFT CORPORATION, DEFENDANT.



The opinion of the court was delivered by: George M. Marovich United States District Judge

Judge George M. Marovich

MEMORANDUM OPINION AND ORDER

Plaintiff Aleks Rechanik ("Rechanik") has filed an amended complaint against defendant Microsoft Corporation ("Microsoft"). Before the Court are several motions, including defendant's motion to dismiss.

I. Background

The Court takes as true the allegations in plaintiff's amended complaint. In addition, the Court takes judicial notice of the Seventh Circuit's decision in the case of Microsoft Corp. v. Rechanik, Case No. 06-4343, 2007 WL 2859800 (7th Cir. Sept. 20, 2007).*fn1

Plaintiff's filing his amended complaint against Microsoft did not mark the first time these parties litigated against each other. Microsoft has sued plaintiff at least two times before, once in Ohio and once at the Northern District of Illinois. The Northern District of Illinois case resulted in a judgment against Rechanik, and he appealed to the Seventh Circuit. Here is what the Seventh Circuit had to say about the case:

Rechanik is in the business of selling low-priced computer software, including software produced by Microsoft. One of the ways that he is able to keep prices low is by purchasing software at the lowest possible price without asking questions about whether it is counterfeit. Microsoft first caught on to Rechanik's business practices in 1999 and sent a cease-and-desist letter to Rechanik and his Ohio corporation, Altim International Trading Co., asking that they stop distributing counterfeit products. Microsoft sued them when they failed to comply, and a district court in Ohio awarded Microsoft $980,000 in damages plus attorneys' fees and entered a permanent injunction prohibiting Rechanik and Altim from infringing Microsoft's copyrights. Microsoft Corp. v. Rechanik, No. 1:99CV0965 (N.D. Ohio Mar. 3, 2000).

Rechanik quickly regrouped in Illinois and opened another software sales business, Era Soft. Rechanik is Era Soft's sole shareholder and officer, and is one of its two employees. Microsoft sent investigators to purchase purported Microsoft software from Era Soft and soon learned that Rechanik was once again infringing its copyrights and selling counterfeit Microsoft products, so it sent Rechanik and Era Soft a cease-and-desist letter. When they continued to sell counterfeits, Microsoft brought suit . . .

We agree with the district court's determination, which we review de novo [internal citation omitted], that Microsoft was entitled to summary judgment because it presented overwhelming and unrefuted evidence that Rechanik was personally liable for infringing Microsoft's copyrights and trademarks. An individual can be jointly liable for a company's infringing conduct. See Softel, Inc. v. Dragon Med. & Scientific Commc'ns, Inc., 118 F.3d 995, 971 (2d Cir. 1997) (individual liability for a company's copyright infringement); Chanel, Inc. v. Italian Activewear of Fla., 931 F.2d 1472, 1427 (11th Cir. 1991) (same for trademark infringement).

Microsoft's evidence--including Rechanik's own tetimony and the declarations of Microsoft's investigators and the Microsoft employee who examined Era Soft's counterfeits--established that Era Soft violated Microsoft's exclusive right as the copyright holder to authrorize the manufacture and distribution of its products. See 17 U.S.C. § 106(3); Salton, Inc. v. Philips Domestic Appliances & Pers. Care B.V., 391 F.3d 871, 875 (7th Cir. 2004). And Microsoft's undisputed evidence showed that Rechanik intentionally encouraged Era Soft's infringement; thus he is personally liable as a contributor. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930, 125 S.Ct. 2764, 162 L.Ed. 781 (2005); Matthew Bender & Co. v. West Publ'g Co., 158 F.3d 693, 706 (2d Cir. 1998). Although Rechanik now argues that he did not know that the products were counterfeit, he admitted at his deposition that he purchased the products from unauthorized distributors, did not ask whether they were authentic, and did not examine them to satisfy himself that they were not counterfeit. At best, Rechanik's 'ostrich-like' business practices amount to willful blindness, which is sufficient to show he had the intent necessary to be a contributory infringer. See In re Aimster Copyright Litig., 334 F.3d 650, 655 (7th Cir. 2003).

As for Microsoft's trademark claim, the undisputed evidence leads us to the same conclusion. The logos and labeling on Era Soft's counterfeit software closely resembled Microsoft's marks, so Era Soft's products were likely to confuse consumers. See e.g., Polo Fashions, Inc. v. Craftex, Inc., 816 F.2d 145, 148 (4th Cir. 1987) ("Where one produces counterfeit goods in an apparent attempt to capitalize upon the popularity of, and demand for, another's product, there is a presumption of a likelihood of confusion."). And the same evidence that supports the conclusion that Rechanik is liable as a contributor to copyright infringement also supports the conclusion that Rechanik is liable as a contributor to Era Soft's trademark infringement. The uncontroverted evidence shows that he caused Era Soft to sell the software knowing that these products infringed on Microsoft's marks, see Inwood Labs, Inc. v. Ives Labs., Inc. 456 U.S. 844, 854, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982); David Berg & Co. v. Gatto Int'l Trading Co., 884 F.2d 306, 311 (7th Cir. 1989), or at least was willfully blind to the infringement, see Hard Rock Café Licensing Corp. v. Concession Servs., 955 F.2d 1143, 1149 (7th Cir. 1992).

Rechanik argues that summary judgment was not warranted because his counsel gave him poor advice and conspired with Microsoft's counsel, but Rechanik offers no evidence to support that allegation. In any event, we will not reverse a district court's judgment in a civil case because a litigant's counsel provided ineffective assistance. See Stanciel v. Gramley, 267 F.3d 575, 581 (7th Cir. 2001). We thus agree with the district court that Microsoft is entitled to summary judgment against Rechanik.

Microsoft Corp. v. Rechanik, Case No. 06-4343, 2007 WL 2859800 (7th Cir. Sept. 20, 2007), cert. denied, 128 S.Ct. 2429 (May 12, 2008).

On August 20, 2008, nearly a year after the Seventh Circuit issued its opinion and a few months after the Supreme Court denied plaintiff's petition for certiorari, plaintiff filed a complaint against Microsoft. After ...


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