Professional Documents
Culture Documents
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
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No. 2:15-cv-1461
COMPLAINT FOR DAMAGES
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Electronic Recycling, LLC (GER), Danny L. Kirkpatrick, Gary L. Kirkpatrick, and John
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I.
1.
INTRODUCTION
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infringement (the Claims). The Claims arise from the theft of over 70,000 Microsoft Office
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2010 software product activation key cards (the product key cards) belonging to Microsoft
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while the product key cards were entrusted to Defendants and in their custody and control.
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Defendants failure to secure and protect Microsofts product keys cards resulted in the theft,
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illegal distribution, and subsequent activation of tens of thousands of copies of pirated and
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certified destruction, recycling, and/or reuse of Microsoft property, including returned, current,
and/or obsolete Microsoft software and associated materials. Under the contract, Microsoft
delivered large volumes of property to GER, including the product key cards, which Microsoft
no longer wished to sell for a variety of reasons. The product key cards contain Office 2010
product activation keys that can be used to activate Office 2010 software. Pursuant to its
contract and related statements of work with Microsoft, GER was required to destroy the
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product key cards and to implement and maintain security policies and procedures to secure
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them until the destruction was accomplished. GER failed to comply with these contractual
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obligations. GER and its principals also failed to exercise reasonable care in the performance
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of their services and in supervising the employees entrusted with handling the product key
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cards. As a direct and proximate of Defendants breaches and failures, the product key cards
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were taken from Defendants possession and subsequently sold in the black market, enabling
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rampant piracy, theft, and unauthorized use of Microsoft software. In addition to their liability
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for breach of contract and negligence, GER and its principals are liable for copyright
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II.
3.
PARTIES
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4.
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recycling and disposal services for electronics and associated materials. GER processes,
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recycles, and disposes of electronics, such as computer hardware, software, and other computer
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related material. GER contracted with Microsoft to destroy and dispose of Microsoft products,
including Microsoft software and related material such as product key cards.
5.
Danny L. Kirkpatrick and Gary L. Kirkpatrick are the owners of GER and are
each executive officers of the company. As such, Danny and Gary Kirkpatrick have the right
and ability to supervise GERs employees, and hold dominant influence over GER and its
policies, including GERs policies concerning the security and protection of Microsofts
products and material. Danny and Gary Kirkpatrick are therefore subject to liability for the
wrongful conduct set forth below, either directly or under principles of secondary liability.
On information and belief, John Does 1 10 include (1) one or more GER employees and/or
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agents that stole and illegally distributed the Microsoft Office product key cards valued at
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millions of dollars; (2) one or more downstream distributors of the stolen product key cards;
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and/or (3) other individuals and/or entities involved in the theft and/or distribution of the
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III.
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infringement claim pursuant to 17 U.S.C. 501 and 28 U.S.C. 1331 and 1338(a). The Court
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has supplemental subject matter jurisdiction over Microsofts state law claims pursuant to 28
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U.S.C. 1367(a). The Court also has subject matter jurisdiction over this matter pursuant to 28
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U.S.C. 1332(a) because this action is between citizens of different states and the matter in
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7.
The Court has personal jurisdiction over GER because, under GERs contract
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with Microsoft, GER expressly consented to the jurisdiction of Washington courts and waived
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all defenses of lack of personal jurisdiction. The Court has personal jurisdiction over GERs
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principals, Danny and Gary Kirkpatrick, because they expressly aimed their conduct at
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Washington in that they (1) had actual or constructive knowledge of Microsofts intellectual
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Washington); (2) acted, at a minimum, with willful blindness to, or in reckless disregard of,
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Microsofts rights; and (3) knew of or should have known that their conduct would harm
Microsoft in Washington. See Wash. Shoe Co. v. A-Z Sporting Goods, Inc., 704 F.3d 668 (9th
Cir. 2012).
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Venue is proper in this Court because GER, under its contract with Microsoft,
consented to venue in the federal courts sitting in King County, and agreed Washington law
would govern this dispute. Venue is also proper in this Court pursuant to 28 U.S.C. 1400(a)
because Defendants are subject to personal jurisdiction in the Western District of Washington.
See Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124 (9th Cir. 2010).
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Division is proper because the claims arose in this Division where (a) Microsoft resides, (b) the
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injuries giving rise to the suit occurred, and (c) Defendants directed their unlawful conduct.
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IV.
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10.
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piracy, which is the unauthorized and unlawful copying, downloading, and distribution of
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copyrighted and trademarked software and related components. Software developers, like
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Microsoft, are not the only victims of software piracy. Customers are also victims, as they are
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often deceived by distributors of pirated software who go to great lengths to make the software
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and combat theft of its intellectual property. Relevant here, and among other measures,
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Microsoft requires vendors like GER that dispose of Microsoft software and related
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components to implement and maintain security procedures at their facilities and to comply
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12.
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software products for business, home, and educational use, including a suite of productivity
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software of called Microsoft Office 2010 (Office 2010). Office 2010 is available in a number
of versions; each includes certain combinations of products, programs and features. Versions
include Office Professional 2010, Office Home and Business 2010 and Office Home and
Student 2010. Microsoft holds a valid copyright in Office Professional Plus 2010, the most
Plus 2010 encompasses all other versions of Office 2010. Microsoft duly and properly
registered its copyright in Office Professional Plus 2010 with the United States Copyright
Office. A true and correct copy of the Registration Certificate for Microsoft Office
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13.
On July 6, 2009, Microsoft and GER entered into a Materials Handling and
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effective through July 5, 2019 (jointly, the Contract). See Ex. B (Agreement), Ex. C (SOW),
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Under the Contract, GER agreed to dispose of returned, current, and/or obsolete
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provide certified destruction and recycling, reuse and or recovery of plastic and metallic
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Recognizing the threat of software piracy, GER agreed to render all intellectual
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property associated with the Microsoft Material unusable for its originally intended use,
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promised not to resell any Microsoft intellectual property, and further promised not to even
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send Microsoft Material to a landfill for disposal. Ex. C at 1.A, 1.D, 1N.
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Microsoft products, and agreed to securely store Microsoft products and prevent the slippage
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of Microsoft Materials back into the retail sales channel. Ex. C at 1N. GER also agreed that
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it would protect all Microsoft Materials against loss or injury while the Microsoft Materials
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are under its control and/or its possession, and specifically promised to implement and
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maintain security procedures and measures reasonably sufficient to prevent the theft or
disclosure of Microsoft Materials to any unauthorized persons. Ex. B at 4.6(a). GER further
agreed to comply with Microsofts Supply Chain Security Compliance Policies and Procedures,
id. 2.5(b).
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GER assumed responsibility in the Contract for any loss of Microsoft Materials
while the materials are under the control or possession of GER or its agents. Ex. B at 4.7;
see id. at 4.1 (Vendor holds Microsoft Materials solely for Microsofts benefit as bailee.).
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The Contract requires GER to fully compensate Microsoft for the loss or
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misappropriates, loses, damages or fails to return Microsoft Materials or any other Microsoft
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property or Intellectual Property, Vendor will fully compensate Microsoft (at estimated retail
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The prevailing party in an action to enforce any right or remedy under the
Contract is entitled to recover attorneys fees, costs and other expenses. Id. at 13.2.
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regularly delivered Microsoft Material to GER, and entrusted GER with the secure handling,
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Department contacted Microsoft to advise it of an ongoing police investigation into the theft of
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Microsoft Office product key cards from GER and subsequent illegal distribution of those cards
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Microsoft is informed and believes that the investigation has identified a number
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of individuals who have stolen and distributed over 70,000 Microsoft Office product key cards.
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Microsoft is informed and believes that one or more GER employees were
involved in the theft and illegal sale of Microsoft Office product key cards while the product
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Microsoft is further informed and believes that the John Does, including, but not
limited to, the defendants named in the Indictment, sold the product key cards to enable the
activation and use of pirated and unauthorized copies of Microsoft Office software.
V.
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GER entered into a valid, binding, and enforceable Contract with Microsoft for
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GER has materially breached its Contract with Microsoft by, among other
things: (1) failing to secure and protect Microsoft Material from theft or loss; (2) failing to
provide the certified disposal of all Microsoft material; ((3) failing to implement and maintain
adequate security measures; and (4) failing to comply with the Microsoft Supply Chain and
Security Compliance Policies and Procedures.
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CAUSES OF ACTION
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The Contract imposed upon each party an implied covenant of good faith and
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fair dealing in its performance. GER had a duty to perform its obligations under the Contract in
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a manner faithful to its purpose so that Microsoft could obtain the full benefit of performance.
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30.
The purpose and intent of the Contract was for GER to securely handle and
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dispose of Microsoft products, including software and associated intellectual property. GER
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specifically acknowledged the potential impact of the theft or loss of Microsoft property and
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owed a good faith duty to take measures to secure and protect all Microsoft Materials.
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GER breached its duty of good faith by failing to implement and maintain
adequate security over the Microsoft property with which it was entrusted, thereby frustrating
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Defendants owe a duty to their clients to use reasonable care in the handling and
safekeeping of the property with which they are entrusted. Specifically, Defendants owed a
duty to Microsoft to implement and maintain security procedures and measures reasonably
designed to prevent the theft/loss of Microsoft property, including product key cards, while
such property was and is under the custody and control of Defendant.
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maintain appropriate security procedures and measures to prevent the theft/loss of over 70,000
product key cards.
Microsoft has suffered at millions of dollars in actual damages from the rampant piracy
proximately caused by the theft/loss of the product key cards and the foreseeable unauthorized
use of such product key cards to activate unlicensed and pirated software. Microsofts damages
are continuing due to additional activations of pirated and unlicensed software with the product
keys.
Fourth Claim: Negligent Supervision
(Against Defendants GER, Danny Kirkpatrick and Gary Kirkpatrick)
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and subordinates, and prevent them from stealing Microsofts property while entrusted to
Defendants possession or control.
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subordinates acted outside the scope of their employment in stealing and reselling thousands of
Microsoft product keys.
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subordinates presented a risk of stealing Microsoft product or otherwise harming Microsoft and
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Defendants had the ability to control their employees and subordinates and the
controlling and supervising one or more of their employees and subordinates from stealing over
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41.
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42.
Microsoft is the sole owner of Microsoft Office 2010 and the corresponding
copyright and Certificate of Registration with the registration number listed above.
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Microsoft is informed and believes that one or more John Doe Defendants
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and/or subsequently distributing over 70,000 Microsoft Office product key cards that were used
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44.
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secure and protect the Microsoft product key cards enabled, facilitated, and contributed to the
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GER, Danny Kirkpatrick and Gary Kirkpatrick acted with willful blindness to, or in reckless
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Defendant GER is liable for the infringing acts of its employee(s) under the
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doctrine of respondeat superior. The Kirkpatrick Defendants are likewise liable for the
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infringement attributable to GER or its employees and/or agents because the Kirkpatricks, as
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GERs co-owners and executive officers, hold dominant influence over the company and
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responsibility over the inadequate security that ultimately enabled the infringement.
Accordingly, Defendants GER, Danny Kirkpatrick and Gary Kirkpatrick are, at minimum,
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actual damages from the infringement. Alternatively, Microsoft is entitled to statutory damages
under 17 U.S.C. 504(c). The Court should enhance the award of statutory damages in
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VI.
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A.
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B.
Require Defendants to pay all general, special, actual, and statutory damages
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that Microsoft sustained, or will sustain, as a result of Defendants unlawful acts, and that such
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C.
Order Defendants to pay to Microsoft the costs and reasonable attorneys fees
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incurred in prosecuting this action as a prevailing party under the Contract, and as provided for
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D.
Grant Microsoft such other, further and additional relief as the Court deems just
and equitable.
DATED this 11th day of September 2015.
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By s/Bonnie MacNaughton
Bonnie MacNaughton, WSBA #36110
John A. Goldmark, WSBA #40980
Angela Galloway, WSBA #45330
1201 Third Avenue, Suite 2200
Seattle, WA 98101-3045
Telephone: 206-622-3150
Fax: 206-757-7700
E-mail: bonniemacnaughton@dwt.com
johngoldmark@dwt.com
angelagalloway@dwt.com
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