Supreme Court Copyright Case

DONGXIAO YUE, Applicant,

v.

STORAGE TECHNOLOGY CORPORATION; SUN MICROSYSTEMS INC.; MICHAEL MELNICK; JULIE DECECCO; MICHAEL P. ABRAMOVITZ; LISA K. RADY; JONATHAN SCHWARTZ,

Respondents.


(Ninth Circuit Appeal Nos. 08-15927 and 08-17034)

(District Case No. 5:07-CV-05850-JW (N.D. Cal))

To the Honorable John G. Roberts, Chief Justice of the Supreme Court of the United States;:

NOW COMES the Plaintiff-Applicant, Dongxiao Yue, a citizen of the People’s Republic of China, the author of the PowerRPC software,
pursuant to United States Supreme Court Rule 23 hereby applies for a Stay of the Order of the Northern District of California in the Yue-Sun case below that requires him to pay copyright defendants $219,949.90 attorneys’ fees under Section 505 of the U.S. Copyright Act.

Defendants made unlimited copies of Plaintiff’s PowerRPC software. They concealed the software piracy and misled Plaintiff for years. The District Court dismissed Plaintiff’s lawsuit and subsequently ordered Plaintiff to pay $219,949.90 of attorneys’ fees to Defendants under 17 U.S.C. §505.

Plaintiff’s motion for stay of the enforcement of the fee award was denied at the District Court on November 19, 2008 and denied by the Ninth Circuit on December 5, 2008. Defendants have applied for Writ of Execution/Possession of Personal Property to levy Plaintiff’s assets, primarily his family home.

The Magistrate’s award of attorneys’ fees is contrary to the American Rule established by this Court in 1898, and improperly rewards Defendants’ attorneys for violating the District Court’s Local Rules. The District Court’s refusal to review that Award is contrary to the requirement of F. R. Civ. Proc. Rule 72(b)(3) that it do so. Plaintiff’s right to due process has been denied at key junctures. All of the foregoing errors serve to thwart Congress’s intent in enacting the Copyright Law.

Facts on Defendants’ Software Piracy

Since 1994, Plaintiff Dongxiao Yue has been developing the PowerRPC software. In July 1996, when the software was near completion, Yue founded the company Netbula, LLC to market PowerRPC. Yue always owned the copyright of the pre-Netbula PowerRPC code, with U.S. Copyright Registration No. TXu 1-576-987 (the “`987 Copyright”). See Exhibit to Stay, Page A.1. Yue owned other PowerRPC copyrights via a written assignment.

In 2000, defendant StorageTek bought licenses for distributing 1000 copies of the PowerRPC runtime software. Soon afterward, StorageTek informed Yue that it had stopped distributing PowerRPC. Unknown to Yue, StorageTek incorporated PowerRPC into a product called LibAttach, and vastly exceeded the 1000-copy limit. Defendants committed the software theft knowingly. On March 2, 2004, Lisa K. Rady, the program manager of the LibAttach software, wrote in an internal email:

As you can see, we have exceeded the 1,000 distributions that we had right to with Netbula…. I think it is obvious that engineering has not and did not monitor the distributions on this product.

See A.4. In another email dated March 15, 2004, Thomas J. Murray, Director of Engineering at StorageTek, wrote:

We either need to increase the Netbula license or put a stop-ship on the LibAttach product, because we have shipped LibAttach copies up to the limit of the current Netbula license (Netbula is embedded in our LibAttach product.)

See A.5. On June 28, 2005, responding to an internal report on Sun’s PowerRPC usage, Michael Melnick wrote (A.6):

The number that Holly has provided and thought it may be low causes quite a problem for you… You will need to order additional
distribution rights or we will be in breach of the agreement.

Despite its managers’ full knowledge of the unauthorized copying of the PowerRPC software, Sun went on to grant its customers the right to make unlimited copies of PowerRPC, while concealing the piracy from Plaintiff. An internal Sun project management document admitted that the PowerRPC software “has been copied, uncontrolled, for several years.” A.7. As a result, Sun caused unlimited distribution of PowerRPC by third parties. The First Amended Complaint gave detailed evidence, such as the email exchanges among the individual defendants

[...]

ARGUMENT

A. Plaintiff is Likely to Succeed on the Merits of Appeal.

1. Awarding fees to software pirates would serve injustice and damage U.S. copyright law.

As shown by the emails by Rady, Melnick and Murray, Sun and StorageTek knowingly distributed PowerRPC without buying licenses. A.4-7. Defendants concealed the piracy from Plaintiff and misled Plaintiff for years. These facts were not mentioned in various court orders, but they are in the Complaint and other court record and are undeniable. Awarding fees to Defendants is awarding software piracy.

Under the American rule, parties “bear their own attorney’s fees unless Congress provides otherwise.” Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994). The attorneys’ fees were awarded under Section 505 of the Copyright Act. A.21-30. That award was in contrary to Copyright Act and the decisions interpreting the scope of its attorney fee provisions.

As a matter of policy, rewarding Sun for pirating software weakens the Copyright Law, by encouraging other powerful businesses to follow Sun’s example and violate the Copyrights of less powerful inventors contributing to the development of arts and technology.

2. Dismissal based on virtual representation ran counter to Supreme Court decision in the case of Taylor v. Sturgell

The District Court dismissed Plaintiff’s claims under the doctrine of virtual representation, which had been disapproved in Taylor v. Sturgell, 128 S. Ct. 2161 (June 12, 2008). The Magistrate Judge, in her recommendation, stated the two grounds for finding privity: (1) “Plaintiff was an assignee;” and (2) “Plaintiff was virtually represented in Netbula’s case as a result of his intertwined relationship with Netbula.” A.25:12-15.

Both grounds for finding privity were erroneous, because “due process considerations make adequacy of representation a prerequisite to privity.” Kourtis v. Cameron, 419 F.3d 989, 996 (9th Cir. 2005).

The `987 Copyright (YUE PWRPC) was created before the existence of Netbula. There was no assignment as regard to the `987 Copyright. Yue always owned this copyright. The `847 and `697 copyrights were assigned to Yue, but they were never part of the Netbula’s action. “The only copyright at issue” in Netbula’s action was the `063 Copyright. A.10, 16.

Although the `063 Copyright asserted in Netbula’s action was a derivative work of the YUE PWRPC (`987) Copyright, elements drawn from a pre-existing work remain the property of the owner of the pre-existing work and “[i]t is irrelevant whether the pre-existing work is inseparably intertwined with the derivative work.” Stewart v. Abend, 495 U.S. 207, 223 (1990). None of the `987, `847 and `697 copyrights were represented in Netbula-Sun, therefore there was no privity between Netbula and Yue on the `987, `847 and `697 copyrights alleged in Yue-Sun. Under Ninth Circuit law, Netbula did not even have standing to sue on Yue’s copyrights such as the YUE PWRPC.

The District Court first excluded “Non-Party” Yue from Netbula-Sun by vacating Yue’s motion to intervene and join Netbula’s action; then it dismissed Yue’s action on the ground that Yue should have joined Netbula’s action. No matter what Yue tried to do, he could not have his day in court to protect his rights.

3. Defendants are not prevailing parties for fee award purposes under the Copyright Act because the District Court made no ruling on the merits of the copyright claims

The dismissal order made no mentioning of any of the infringement facts. It did not analyze the ten infringement claims in the complaint. A.44. Because the District Court did not decide the merits of the copyright claims, Defendants are not prevailing parties under the Copyright Act. As the First Circuit held in Torres-Negrón v. J & N Records, 504 F.3d 151, 164 (1st Cir. 2007):

We have made no ruling on [plainitff’s] claims of infringement. Therefore, [defendant] has not prevailed on the merits of the copyright infringement allegations and is not entitled to a fee award under the statute.

Without a ruling on the merits of the copyright claims, it would also be impossible to apply the factors identified in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (such as frivolousness and objective unreasonableness). The Magistrate Judge, in analyzing the “objective
unreasonableness” Fogerty factor for awarding fees under the Copyright Act, stated:

While Yue attacks Abramovitz’s credibility, he does not offer any factual basis for naming the particular two high level officers in this action, revealing that the allegations against them are speculative.

A.26, 57. However, the District Judge never made any factual findings. Yue provided sufficient facts in the Complaint to alleged vicarious and contributory liability of the two Sun officers, including the allegation that they played the delaying game with Plaintiff while allowing the infringement to continue at Sun and its customers. Moreover, as long as Plaintiff gave defendants a fair notice of the claim and the ground upon which it rests, “[s]pecific facts are not necessary.” Erickson v. Pardus, 127 S. Ct. 2197, 2200 (2007).

4. The fee award was not properly determined because the District Court did not perform de novo review of magistrate judge’s report andrecommendation

The District Court’s “ORDER … DENYING MOTION FOR DE NOVO REVIEW” gave the following reason for declining de novo review:

Since the Court has wide discretion to consider and reconsider a magistrate’s recommendation, the Court finds that Judge Laporte’s award of attorney fees and costs are reasonable and ADOPTS Judge Laporte’s Report and Recommendation.

A.63. But, Federal Rule of Civil Procedure 72(b) (3) says that “[t]he district judge must determine de novo any part of the magistrate judge’s disposition that has been properly objected to.” The Sixth Circuit has held that:

the district court is obliged to make clear and adequate findings of fact, expressly addressing Plaintiff’s specific timely objections. Otherwise, the reasonableness of the award of attorney’s fees will be virtually unreviewable.

Massey v. City Of Ferndale, 7 F.3d 506, 510 (6th Cir. 1993). Plaintiff raised twenty-nine (29) objections on law and fact that were dispositive of the fee award, but the district court did not mention any of them in its order denying motion for de novo review. Since the district court did not even mention Plaintiff’s specific objections, the fee award was not properly decided.

5. Yue was Denied Due Process from the Beginning to the End

The U.S. Constitution prohibits deprivation of property without due process of law. Three of the rudimentary elements that have been identified as basic to one’s receipt of due process of the law are:
(1) the opportunity to be heard “at a meaningful time and in a meaningful manner”; (2) timely and adequate notice; and (3) a tribunal whose conclusion will be based “solely on the legal rules and evidence adduced at the hearing [and who is] of course . . . impartial.” Goldberg v. Kelly, 397 U.S. 254, 267-71 (1970). Measured against this standard, the denial of Yue’s due process was total.

1) October 31, 2007, in an ex parte proceeding, Judge Jenkins vacated Non-party Yue’s pro se motion to intervene and join Netbula-Sun;

2) November 20, 2007, Judge Jenkins issued a spontaneous “cease and desist” order prohibiting Yue from filing papers;

3) December 14, 2007, Judge Jenkins granted Sun’s oral motion to delay answering the Yue-Sun complaint while forbidding pro se Plaintiff Yue to speak (The Yue-Sun case wasn’t even assigned to Judge Jenkins at the time);

4) March 4, 2008, Judge Jenkins dismissed Yue-Sun with prejudice by concluding that Yue was virtually represented in Netbula-Sun, no decision was made on the merits of the copyright claims;

5) March 18, 2008, Defendants filed their fee motion without conferring with Plaintiff;

6) Plaintiff had no opportunity to challenge Defendants’ subsequently filed declarations seeking $129,000.00 additional fees;

7) The Magistrate Judge’s report and recommendation did not even list the reasonable hourly rates and reasonable hours spent by the
attorneys;

8) Plaintiff’s motion for de novo determination of the fee award was ignored completely. The district court’s order adopting the Magistrate Judge’s recommendation did not even mention Plaintiff’s motion for de novo determination of the fee award.

As shown above, Plaintiff was denied due process at key junctures of the case. His motion to join Netbula’s action was never heard, it was taken off calendar in an ex parte proceeding; he was not given any chance to argue against that “cease and desist” order; he did not have any prior notice of Defendants’ request to enlarge time in answering the Yue-Sun complaint and was denied the right to speak against it; he did not have the day in court to litigate the merits of his copyright claims; he did not have the opportunity to contest the fee demands; the District Court refused to conduct de novo review of the Magistrate Judge’s report and recommendation, and completely ignored the twenty-nine (29) specific objections raised in his motion for de novo determination (Docket 146 at the District Court).

Local Rule 54-6(b) of the Northern District of California says counsel “must” meet-and-confer before filing a motion for attorneys’ fees. Defendants did not make any effort to meet-and-confer. They admitted it was an “oversight on counsel’s part.” The district court excused Defendants’ non-compliance then awarded them over $10,000.00 allegedly spent on defending their violation of the local rule of the District Court.

B. Plaintiff Would be Irreparably Injured Absent a Stay

As Plaintiff declared at the District Court and the Ninth Circuit, the only way for Plaintiff to come up with the $219,949.90 is to sell his family home. The consequence for Plaintiff’s family to lose their home would be harsh in this cold winter. The trauma inflicted on Plaintiff’s children would be irreparable. Plaintiff attempted to negotiate with Defendants to no avail — they would not accept installment payments. They have applied for Writ of Execution to possess Plaintiff’s personal property. A.66.

Sun has authorized numerous third parties to make unlimited copying of Plaintiff’s software. Plaintiff suffers irreparable harm from Defendants’ copyright infringement. Defendants are using the fee award to acquire Plaintiff’s copyrights and other assets, leading to deprivation of Plaintiff’s real and intellectual property.

C. A Stay Will Not Substantially Injure the Other Parties

Sun Microsystems has pirated vast number of copies of PowerRPC and profited immensely from the piracy. There is no prejudice to Defendants if the $219,949.90 fee award is stayed pending appeal.

D. The Public Interest in Copyright Protection Favors a Stay

This PowerRPC infringement case has been widely reported in China and the U.S. Sun’s conduct was typical software piracy. Decisions in this case will have profound impact on copyright protection in China and U.S. Software pirates, big and small, domestic and foreign, can readily borrow the legal arguments Sun used in this case and related cases. Absent a stay, Plaintiff will not be able to maintain his appeal; the erroneous copyright decisions below will stand as the law of the United States and negatively impact the rights of U.S. copyright holders.

CONCLUSION

For the reasons stated above, Plaintiff respectfully requests that the United States Supreme Court grant a stay pending appeal of the order requiring Plaintiff to pay $219,949.90 to copyright defendants.

Respectfully submitted,

DATED: December 8, 2008

_______________________

Dongxiao Yue
Plaintiff-Applicant
In Pro Se

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~~~Date~~~ ~~~~~~~Proceedings and Orders~~~~~~~~~~~~~~~~~~~~~
Dec 10 2008 Application (08A515) for a stay pending appeal, submitted to Justice Kennedy.
Dec 11 2008 Application (08A515) denied by Justice Kennedy.
Dec 12 2008 Application (08A515) refiled and submitted to The Chief Justice.
Dec 17 2008 DISTRIBUTED for Conference of January 9, 2009.
Dec 17 2008 Application (08A515) referred to the Court.
Jan 7 2009 Letter from applicant with copy of the writ of execution issued by the United States District Court on December 15, 2008, received.


~~Name~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~Address~~~~~~~~~~~~~~~~~~ ~~Phone~~~
Attorneys for Petitioner:
Dongxiao Yue 2777 Alvarado St., Suite C (510) 396-0012
San Leandro, CA 94577
Party name: Dongxiao Yue
Attorneys for Respondents:
Laurence F. Pulgram Fenwick & West LLP (415) 875-2300
555 California St., Suite 1200