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Punitive Damages Warranted Where Infringing Activity Persists Despite Warning
Microsoft Corporation v. 1276916 Ontario Ltd. 2009 FC 849 (Mandamin, J.)
September 17, 2009
John C. Cotter and Tara James for the Plaintiff, Microsoft Corporation
No one for the Defendant, 1276916 Ontario Ltd.
This was a case where the Court granted Microsoft’s default judgment motion against Smart Buy, a computer retailer, as well as against its sole shareholder and director for copyright infringement relating to the sale and distribution of unlicensed copies of Microsoft computer programs installed in the computer systems sold by Smart Buy.
Microsoft maintains a database of reports relating to software piracy. Members of the public can report instances of suspected piracy to Microsoft. Prior to the commencement of the lawsuit against Smart Buy, Microsoft received ten piracy reports regarding Smart Buy. The reports described a range of activities, including installing unlicensed copies of Microsoft software onto new computers and either not providing the customer with CD-ROM(s) or providing burned CD-Rs of the Microsoft software installed.
Microsoft had warned Smart Buy to cease and desist from selling PCs pre-loaded with infringing copies of Microsoft software. Despite these warnings, Smart Buy continued its infringing activities and even continued to do so after the commencement of the lawsuit.
Throughout the course of the lawsuit, Smart Buy had frequently missed court imposed deadlines and mislead Microsoft about whether it was still in business. In February 2009, Smart Buy’s Statement of Defence was struck for failure to comply with court orders. Microsoft subsequently applied for default judgment seeking statutory damages, punitive damages and a permanent injunction.
Justice Mandamin held that Microsoft had met the test under Rule 210 of the Federal Court Rules for default Judgment.
In assessing damages, Mandamin, J. stated that the amount of statutory damages must reflect not only the Defendants’ bad faith but their disregard for the Plaintiff’s rights. He awarded $80,000 in statutory damages given Smart Buy’s ongoing infringement of Microsoft’s copyrights despite having received notice of its infringing activities coupled with the fact that the infringing conduct was not an isolated incident.
In addition, Mandamin, J. awarded $50,000 in punitive damages based on his finding that Smart Buy had acted in bad faith by asking customers to sign a document indicating that any “illegal” software installed on the computer was the responsibility of the customer when it was Smart Buy’s agents that installed the software in question. A permanent injunction was also granted in relation to the relevant computer programs. Finally, Justice Mandamin found the owner personally liable on the basis that he directed or participated in the activities, knowingly or with indifference.
By: Taryn Burnett, Gowling Lafleur Henderson LLP
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