and presumably still is selling, decoders that have been modified so as to render their addressability feature inoperative. There is only one purpose to be achieved by such modification: to enable the user to receive and unscramble a STV signal without notifying and having to make payments to the signal provider.
Moreover, the defendant is selling these decoders with the knowledge and intent that his customers do not contact local STV signal providers to arrange for payment of the programming service. The defendant has acknowledged that he knows his customers are not paying for the programming they receive and, as found above, specifically advised one such client not to contact the signal provider, commenting that: "You don't want to pay monthly. . . . That's why you spent $225 for the box." Section 605 prohibits any person from assisting in the unauthorized interception of STV signals. See Chartwell Communications Group v. Westbrook, 637 F.2d at 466 ("It is clear that by selling decoders or decoder schematics the [defendants] are assisting third parties in receiving communications to which they are not entitled.").
The Court also notes, without deciding, however, that the defendant's conduct appears to constitute a number of common law torts, including theft-of-service and conversion, and appears also to run afoul of several federal criminal statutes, including the prohibition against mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C. § 2511.
The only remaining issue is the type of relief which should be granted in this case. Plaintiffs have requested that the Court enter a permanent injunction and an award of both compensatory and punitive damages. The Court turns first to the availability of injunctive relief.
It is well settled that the federal district courts are vested with "broad discretionary power" in the shaping of equitable remedies. Lemon v. Kurtzman, 411 U.S. 192, 200, 36 L. Ed. 2d 151, 93 S. Ct. 1463 (1973) (plurality). The traditional basis for injunctive relief is a showing of irreparable harm and the inadequacy of legal remedies. E.g., Reed Enterprises v. Corcoran, 122 U.S. App. D.C. 387, 354 F.2d 519, 522 (D.C. Cir. 1965).
This Court also will consider the public interest in the entry of an injunction. Ashland Oil, Inc. v. Federal Trade Commission, 409 F. Supp. 297, 307 (D.D.C. 1976). See generally 11 C. Wright & A. Miller, Federal Practice and Procedure § 2942 (1973). It is clear that the plaintiffs have met the standard for injunctive relief and that a permanent injunction prohibiting the defendant from manufacturing or selling the modified decoders must be entered.
As an initial matter, the defendant's conduct has caused and is continuing to cause plaintiffs irreparable harm. Each purchaser of defendant's pirate decoders is lost to plaintiffs as a potential subscriber to their STV service. Because subscriber fees are virtually plaintiffs' only source of revenue to support their STV business, the irretrievable loss of subscribers constitutes irreparable damage entitling plaintiffs to injunctive relief. See Chartwell Communications Group v. Westbrook, 637 F.2d at 467.
In addition, another irreparable injury is being inflicted because plaintiffs' ability to retain existing subscribers, to enlist new subscribers, to acquire suitable programming, and to remain in the STV business depends directly on their reputation as the sole source of the STV programming that plaintiffs provide. Plaintiffs' STV business will not survive if plaintiffs lose their credibility as the exclusive source of their programming.
Moreover, plaintiffs have no adequate remedy at law because money damages cannot make them whole. The federal courts have recognized in other video piracy cases that this injury is not adequately compensated by money damages.
In Home Box Office, Inc. v. Pay TV of Greater New York, Inc., 467 F. Supp. 525, 530 (E.D.N.Y. 1979), for example, the court found that:
Plaintiff plausibly claims that its present lack of control over the locations and customers being served by defendant and defendant's representation of the pirated service as its own are damaging plaintiff's name and jeopardizing its expansion plans. A judgment for damages is hardly adequate to compensate for these.
The public interest also strongly supports the entry of a permanent injunction. The FCC has been authorized by Congress to regulate the airwaves so as to promote the public interest. See e.g., National Subscription Television v. S & H TV, 644 F.2d at 826. In furtherance of this mandate, the Commission has authorized and licensed STV service. See 47 C.F.R. §§ 73.641-73.644.
The FCC's efforts to authorize, license, regulate and promote STV services so as to serve the public interest would be thwarted if STV programmers are not protected from unlawful activities such as those engaged in by defendant. In fairness to plaintiff, their paying subscribers, and all others who seek to earn their own living and pay their own way in this society, the requested permanent injunction should issue.
This Court is obligated to shape an injunction which will provide protection for the plaintiffs both now and in the future. Thus, the permanent injunction entered in this case will provide not only that the defendant be permanently enjoined from selling or otherwise distributing unauthorized, non-addressable decoders. In addition, the terms of the injunction will order the defendant to turn over his customer lists to the plaintiffs so that they may contact the purchasers and make arrangements for payment. Finally, in order to ensure that the defendant does not continue the unlawful sale of the modification decoders, he will be ordered to turn over the decoders in his possession, wherever located, to the United States Marshal's office having jurisdiction over the district in which they are located, for ultimate destruction.
With respect to the issue of damages, at trial plaintiffs established that they were entitled to $ 59,944.50 in compensatory damages. In the special circumstances of this case, however, more than the entry of an award of compensatory damages is necessary to vindicate both the private and public interests raised in this litigation. The plaintiffs have requested, and the Court concludes that the defendant's conduct warrants, the imposition of a punitive damages award.
In this jurisdiction punitive damages are awarded, in addition to compensatory damages, both to punish the wrongdoer and to deter him (and others) from similar misconduct in the future. City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 266-67, 69 L. Ed. 2d 616, 101 S. Ct. 2748 (1981). Punitive damages are justified when the defendant acts with "gross fraud, wantonness, maliciousness, or willful disregard" for the rights of others. Rainbolt v. Johnson, 215 U.S. App. D.C. 381, 669 F.2d 767, 769 (D.C. Cir. 1981). Accord Knippen v. Ford Motor Co., 178 U.S. App. D.C. 227, 546 F.2d 993, 1002 (D.C. Cir. 1976). Moreover, the trier of fact may infer the requisite mental state from the defendant's conduct. See Hobson v. Wilson, 556 F. Supp. 1157, 1193 (D.D.C. 1982). The award of punitive damages, of course, rests within the sound discretion of the trial court sitting in a non-jury case. Mariner Water Renaturalizer v. Aqua Purification Systems, Inc., 214 U.S. App. D.C. 248, 665 F.2d 1066, 1071 (D.C. Cir. 1981).
In this case, the Court finds that the defendant's continuing course of misconduct unmistakably manifests his wanton, willful and total disregard for the rights of others. The testimony introduced at the trial shows that the defendant has not only violated the law by selling the modified decoders but has deliberately ignored the express terms of this Court's preliminary injunction, and also has attempted to avoid detection by mailing the unlawful modified decoders from another site and by refusing to accept C.O.D. orders from the Washington, D.C., area.
A substantial award of punitive damages is consistent with the purposes of that remedy. It will serve both to punish the defendant and to deter similar conduct in the future. See Davis v. Schuchat, 166 U.S. App. D.C. 351, 510 F.2d 731, 738 (D.C. Cir. 1975) (civil law has long recognized that in certain situations deterrence can be better achieved by punitive damages award than through criminal sanctions). Accordingly, the Court will enter an order awarding plaintiffs $ 50,000 in punitive damages.
As noted above, the defendant has contumaciously ignored, disregarded, or intentionally disobeyed the directives of this Court, including the temporary restraining order and the preliminary injunction. In the future, the Court will consider with the utmost severity any failure by the defendant to comply with each provision of the Court's permanent injunction which is issued contemporaneously herewith.
Upon consideration of plaintiffs' application for a permanent injunction, compensatory and punitive damages, the memorandum in support thereof, and the evidence and the argument of counsel presented thereon at trial on January 27, 1985, at which the defendant did not appear in person, or by counsel, and for the reasons set forth in the Court's Findings of Fact and Conclusions of Law issued this date, pursuant to Fed. R. Civ. P. 52, it hereby is
ORDERED, that plaintiffs' application for a permanent injunction is granted. It hereby further is
ORDERED, that the defendant A. Bart Kaufmann, A. B. Kaufmann Associates, New Video, and any and all other persons acting in consort or participation, aiding and abetting, or conspiring with him hereby are permanently enjoined from:
(1) Manufacturing, assembling, purchasing, using, installing, advertising, promoting, selling, renting, consigning, leasing, gifting, distributing, conveying, or transferring; or attempting to manufacture, assemble, purchase, use, install, advertise, promote, sell, rent, consign, lease, gift, distribute, convey or transfer, components, plans, or devices
This cause having come on for trial upon consideration of plaintiffs' motion for damages upon entry of default and Findings of Fact and Conclusions of Law having been rendered on April 24, 1985, it is this 24th day of April, 1985,
ORDERED AND ADJUDGED, that plaintiffs shall be awarded compensatory damages in the amount of $ 59,944.50. It is hereby further
ORDERED AND ADJUDGED, that pursuant to Fed. R. Civ. P. 37 plaintiffs shall be awarded damages as a sanction against the defendant in the amount of $ 880.00. It is hereby further
ORDERED AND ADJUDGED, that plaintiffs shall be awarded punitive damages in the amount of $ 50,000.00. It is hereby further
AND ADJUDGED, that JUDGMENT be entered in the total amount of $ 110,824.50 in favor of the plaintiffs against the defendant, and the case is dismissed.