bernina vs. riddick/imageline: 081810-17-1

8/8/2019 Bernina vs. Riddick/Imageline: 081810-17-1

1/62


2/62

Exhibit

A

Case 1:10-cv-04917 Document 17-1 Filed 08/18/10 Page 2 of 62


3/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

1

IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

BERNINA OF AMERICA, INC.,

Plaintiff,

-vs-

IMAGELINE, INC., ISLANDVIEWTECHNOLOGIES, LLC,ISLANDVIEW DESIGNS, LLC, andGEORGE P. RIDDICK, III,

Defendants.

))))))))))))

Case No. 10 C 4917

Chicago, IllinoisAugust 9, 20109:15 a.m.

TRANSCRIPT OF PROCEEDINGSBEFORE THE HONORABLE MILTON I. SHADUR

APPEARANCES:

For the Plaintiff: WINSTON & STRAWN, LLPBY: MR. NORMAN K. BECK

MR. MARC H. TRACHTENBERGMR. KEVIN P. McCORMICK

35 West Wacker DriveChicago, Illinois 60601-9703

(312) 558-5600

For DefendantRiddick:

(via telephoneconference call)

MR. GEORGE P. RIDDICK, III, pro se

Court Reporter:

CHARLES R. ZANDI, CSR, RPR, FCRROfficial Court Reporter

United States District Court219 South Dearborn Street, Room 1728

Chicago, Illinois 60604Telephone: (312) 435-5387

email: [email protected]



4/62


5/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

3

action and there are two corporate defendants, two limited

liability companies, as a non-lawyer, you can't appear for the

corporations. Under the regular practice in all litigation,

only lawyers can appear for entities other than individuals.

An individual can appear for himself or herself, but that's

the extent of it.

MR. RIDDICK: I'm aware of that, your Honor.

THE COURT: Okay. Now, the -- as it happens, it's

not a good day to be considering a motion for a temporary

restraining order simply because I have a preset hearing on

just such a motion that's going to start at 9:30. However, I

read over Bernina's presentation, and I have had a chance to

look, Mr. Riddick, as counsel have not, at your submission.

And the question that I have for you is that you

claim ownership of a whole group of items as to which you're

claiming and have claimed that Bernina is an infringer, and

indeed, the people who are Bernina's various authorized

dealers are also infringers.

I'd like you -- their complaint has said that the

only things that you have asserted copyright interests in, at

least as far as properly recognized interests, are some

collections of items that do not, under law, give you

proprietary interest in the various items that make up the

collection.

So, you tell me, if you would, just in your own



6/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

4

words -- I recognize you're a non-lawyer, but you tell me what

is the basis of the ownership that you're talking about --

MR. RIDDICK: Okay. I'd be happy to do that.

THE COURT: -- of the various designs.

MR. RIDDICK: I'll be happy to do that, your Honor.

As I said in the summary, we've been doing this for 25 years.

THE COURT: You're going to have to speak up better

than that.

MR. RIDDICK: I'm sorry. As I said in the summary,

we have been doing this for 25 years, and we have never had

anyone contest the ownership legally of any one of our images.

I personally participated in the design and production of

every image, and every image --

THE COURT: Wait, wait, wait. Try me again. Listen

to my question instead of answering one that you want to

answer.

My question is: What gives you an entitlement to

some kind of proprietary interest in the individual designs,

when, as I understand it, checking with the -- with the

government office reflects that your efforts at protection

have been for collective matters that include a large number

of designs, which does not give you, of itself, a proprietary

interest in any of those individual designs?

Do you understand the question?

MR. RIDDICK: Yes, sir.



7/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

5

THE COURT: All right. Tell me.

MR. RIDDICK: Okay. Let me answer it in -- directly,

if I can. Number one, the copyright in the individual

designs, at the moment we do them and affix them in tangible

form, so we need to make sure we understand the distinction

between copyright and proprietary ownership and registration

procedures. The plaintiff apparently does not understand that

law, but I've tried to clarify it for you with the document I

sent this morning.

We own every single individual image, number one. We

owned it when we produced it. Number two, we submitted it in

registration to the copyright office as individual images.

Several of those registrations were also compilations, but not

all of them.

This issue has been brought to the attention of

circuits throughout the country. We've unfortunately been

involved in 25 or 30 different federal lawsuits. There has

never been a question of ownership of a single one of our --

THE COURT: Well, there's a question now, so don't

tell me there's never been a question.

MR. RIDDICK: There's never previously --

THE COURT: They have provided information that says

that they have had searches made and that the only searches --

the only items that came up in the searches are these

compilations; and if that's so, that does not entitle you to



8/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

6

claim ownership in the -- in the items within the

compilations, but just the compilations. That's how copyright

law works.

MR. RIDDICK: But that's just not what the -- the way

that the law works for --

THE COURT: Is that true? So, now you're -- now

you're representing yourself and you're telling me how

copyright law works; is that the idea?

MR. RIDDICK: If you would look at the ruling in the

Fourth Circuit on appeal in 2002, you will --

THE COURT: I'll tell you what you better do, because

as I say, I can't -- I can't deal with it this morning. But

what you're going to do right now is to stop any amount of

communication that goes out to any of these people that makes

the claim until we have an opportunity to sort the thing out.

And what I expect that you're going to -- you do have a

lawyer, I trust, do you not?

MR. RIDDICK: I personally at this point do not have

one. The companies are in negotiations with --

THE COURT: But the companies are looking for

counsel?

MR. RIDDICK: Yes.

THE COURT: And how soon do you expect you're going

to do that --

MR. RIDDICK: Probably within the next --



9/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

7

THE COURT: -- because I expect to have a

professional response, not this amateur response.

MR. RIDDICK: Probably within -- well, I don't really

appreciate that, because I do know what I'm --

THE COURT: I'm sorry. I can't hear you.

MR. RIDDICK: I said I don't really appreciate that,

because I do know what I'm talking about, having worked on

this for 25 years. However, I know --

THE COURT: You know, I'm glad you've been at this

25 years. I guess I had a misspent youth, because I've been

30 years at the bench here just last month; and I appreciate

your education, but I've got to tell you, it doesn't -- it

doesn't seem to work the way you seem to think it does. So,

you'd better have something professional in the way of a

response.

MR. RIDDICK: I will, your Honor. There is a

distinction between the underlying work and a compilation that

are not owned by the claimant and --

THE COURT: Let me -- listen to me again. Okay?

You're going to be doing nothing along the lines that you have

been engaged in up to now for a very limited period of time to

allow you to provide some input in written form, professional

input is what I want to emphasize once more, that deals with

this question that has been posed by the Bernina complaint.

And I'm going to give you -- because I don't want to



10/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

8

knock you out of your business communications, so I'm going to

give you a short period of time because I don't want to have

you restrained inappropriately for any period of time.

The short answer, then, is that -- is there any

reason that you cannot get something in hand here by a week

from today?

MR. RIDDICK: Well, the only answer I could tell you

is that I -- my preferred attorney --

THE COURT: I'm sorry. You know what, you're --

THE CLERK: You're going to have to speak up. We're

having a difficult time hearing you.

MR. RIDDICK: Okay. I'm sorry. The only answer that

I can give you is that I tried to contact our preferred

attorney for one of the companies this weekend and was told

that he is on vacation for the next two weeks.

THE COURT: So, two weeks, you -- that's the -- are

you dealing with a one-lawyer lawfirm, or what?

MR. RIDDICK: In this particular case, it's a

three-lawyer lawfirm, but only one has been briefed on this

subject matter.

THE COURT: Well, I'll tell you what you're then

dealing with. A week ought to be plenty of time. And if the

particular lawyer that you're talking about is out of pocket

for two weeks, then what's going to happen is that if I don't

get something within a week from now, I'm going to have to



11/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

9

consider the entry of a temporary restraining order that puts

things in sort of the deep freeze for a limited period of

time, which is all that temporary restraining orders do.

So, I'm going to provide that anything that gets

filed is to be -- is to be here by let's make it Tuesday, the

10th, rather than -- I'm sorry, I've got the wrong date,

instead of -- instead of the 16th, by Tuesday, the 17th, and

then I'm going to set the matter for either Wednesday, the

18th, or Thursday, the 19th, at 9:15.

So, let me find out from counsel here what -- which

of those days might be preferable. And then I'll find out

from you, Mr. Riddick, what -- which of those two days you

might like or not like.

MR. RIDDICK: Okay.

MR. BECK: Your Honor, I have a conflict for the

18th, but the 19th would be fine.

THE COURT: All right. Mr. Riddick, can you make the

19th, you and counsel make the 19th, that's Thursday, at 9:15?

MR. RIDDICK: Yes, we can, your Honor. And how long

of a hearing will that likely be?

THE COURT: How long what?

MR. RIDDICK: How long of time would you have

docketed for that hearing?

THE COURT: You mean how long would the proceeding on

that day likely take?



12/62


13/62

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

11

THE CLERK: I did. And you want that filed on the

docket?

THE COURT: Yeah, sure.

THE CLERK: Okay.

(Which were all the proceedings heard.)

CERTIFICATE

I certify that the foregoing is a correct transcript from

the record of proceedings in the above-entitled matter.

/s/Charles R. Zandi August 9, 2010

Charles R. Zandi DateOfficial Court Reporter



14/62

Exhibit

B



15/62



16/62



17/62



18/62



19/62



20/62



21/62



22/62



23/62



24/62

Exhibit

C



25/62



26/62



27/62


28/62

H u : i u L 4 : . 2 p G e c r e P . R L d d c k , 1 1 1( G 0 4 I 2 8 - 1 8 6p . 8

L NT H E U N I T E D S T A T E S D I S T R I C T C O U RF O R T H E E A S T E R N D I S T R I C T O F V I R G I N

-R I C H M O N DD I V I S I O N

X O O M , I N C . ,3 0 0 M o n t g o m e r y S t r e e t , T h i r d F l o o rS a n F r a n c i s c o , C a l i f o r n i a 9 4 1 0 4

P l a i n t i f f , C L R . N oV .M A C M I L L A ND I G I T A L P U B L I S H I N G U S A ,a d i v i s i o n o f P R E N T I C E - h A L L , I N C . ,

P l a i n t i f f ( J o i n e d ) ,

A Z T E C H N E W M E D I A I N T E R N A T I O N A L C O R P . ,


M E D I A G A P I - 1 1 C S I N T E R N A T I O N A L , I N C . ,


v . C i v i l A c t i o n N o . 3 :

I M A G E L r N E , I N C . ,

D e f e n d a n t ,

G E O R G E P . R I D D I C K , I r4 .

D e f e n d a n t 1

C O M P L I A N C E S E R V I C E S , I N C . ,

D e f c n d a n t ,

W A Y N E K N Y S T R O M ,

D e f e n d a n t ,

a n d

S P R I N T S O F T W A R E f l Y L T D ,

D e f e n d a n t .

3 0 1 . .

Hug 3_ _ L#:J2p George P. R_ddxck, [II (804|228-1S8S p.8

LX[THE UNLTED STATES DISTRICT COURT

FOR THE EASTERN DISTRICF OF VIRGINIA

XOOM, INC.,300 I_tontgomery S=-.et, Tldrd FloorSan Francisco, California 94 [04

RICHMOND DIVISION

Plaintiff',

MACMILLAN DIG/TAt, PUBLISHING USA,

a divisionofPRENTICE-HALL, INC.,

Plaintiff J'oine.d),

AZTECH NEW MEDIA INTERNATIONAL CORP.,

Plaintlff(Jolned),

MEDIA GRAPHICS IJq'I'ERNATIONAL,INC.,

PlaintiffJ'oincd),

GEORGE P. RIDDICK, Ill,

, I L E nl

Defendant,

Defendant,

Def=ndant,

Defendant,

Defendant.

COMPLIANCE SERVICES, INC.,

WAYNE K. NYSTROM,

and

SPRINT SOFTWARE Irl'Y LTD,

Civil Action No. i_,: _ _ _'_'5 k{ _..

-k

-30--



29/62

R u g 3 0 8 8 C 3 4 : 2 2 pG e o r - g e P . R d d c k , I I I( 8 0 4 1 2 2 8 1 8 8 8p . S

C O i 4 P L A I N TF O R I N J U N C T I Y E R E L I E F ,D E C L A R A T O R Y R E L I E F A N D D A M A G

P l a i n t i f f X O O M , I n c . ( " X O O M " ) f i l e s t h i s c o m p l a i n t a

( " I m a g e l i n & ) , G e o r g e P . R i d d i c k , I I I ( " R i d d i c k " ) , C o m p l i

S c r v i c e " ) , W a y r i c K . N y s t r o m ( " N y s t r o r n " ) a n d S p r i n t S o

C o l l e t i v c l y , I r n a g e l i n c , R i d d i c k , C o m p l i a n c e S e r v i c e s a n d

" I r n a g e l i r i e D e f e n d a n t s . " X O O M a l s o j o i n s a s p l a i n t i f f s , p

R u l e s o f C i v i l P r o c e d u r e , i M a c m i l i a n D i g i t a l P u b l i s h i n g U

( " M a c m i l l a n " ) , A z t e c h N e w M e d i a i n t e r n a t i o n a l C o r p . ( " A

I n t e r n a t i o n a l , I n c . ( " M e d i a G r a p h i c s " ) o n t h e g r o u n d s t h a t

i f s u c h p l a i n t i f f s a r e n o t j o i n e d , a n d ( i i ) s u c h p l a i n t i f f s c l a i

m a t t e r o f t h i s a c t i o n a n d t h e i r a b s e n c e w i l l l e a v e X O O M , a

s u b s t a n t i a l r i s k o f i n c u r r i n g m u l t i p l e o r o t h e r w i s e i n c o n s i s

X O O M j o i n s M a c m i l l a n , A z t e c h a n d M e d i a G r a p h i c s a s d e

r e a l i g n t h e m a s p l a i n t i f f s i n i t s d i s c r e t i o n p u r s u a n t , t o R u l e

P r o c c d u r c .' A

S U M M A R Y ' O FT H E A C T I O N

1 . I n J u n e 1 9 9 7 , X O O M , a d i s t r i b u t o r o f c l i p a r t ( ,e l e c t r o n i c a l l y - f o m i a t t c d

g r a p h i c i m a g e s ) a c q u i r e d l i c e n s e r i g h t s t o c e r t a i n c l i p a r t f

L i c e n s e A g r e e m e n t , e f f e c t i v e J u n e 4 , 1 9 9 7 , b e t w e e n X O O M

A g r e e m e n t " ) g r a n t e d X O O M p a i d - u p , w o r l d - w i d e l i c e n s e

r i g h t s i n c l u d e d t h e r i g h t t o d i s t r i b u t e a n d s u b - l i c e n s e t h e c l

d i s t r i b u t i o n , a n d t o i n c o r p o r a t e t h e i m a g e s i n X O O M ' s s e r

2

3 1

Aug 30 S8 04:22p George P. Riddick, I!I (8041228-168S p.S

COMPLAIMT FOR Ii_JUNCTIVE RELIEF,

DECLARATORY RELIEF, AND DAMAGES

Plainti ffXOOM, inc. ("XOOM") files thEs complaint against defendants lmageline, ind.

("Imageiine"), George P. Riddick, Ill ("Riddick"), Compliance Services, Inc. ("ComplEance

Services"), Wayne K. Nystrom ("Nystrom") and Sprint Software Pty Ltd ("Sprint").

Collectively, Imageline, Riddick, Compliance Services and Nystrom will be ret'crrcd to as the

"Lmageline Defendants." XOOM also joins as plaintiffs, pursuant to Rule i9(a) of the Federal

Rules of Civil Procedure, Macmillan Digital Publishing USA, a division of Prentice-Hall, inc.'

("Macmillan"), Aztech New Media International Corp. ("A.ztech") and Media Graphics

International, inc. ("Media Graphics") on the grounds that (i) complete reliefcamlot be accorded

if such plaintiffs are not joined, and (ii) such plaintifi_ claim an interest relating to the subject

matter of this action and their absence will leave XOOM, and perhapso_cr parties, subjcct to a

substantial risk ofincurrlng multiple or otherwise inconsistent obligations. In the alternative, .

XOOM joins Macmillan, Azteeh and Media Graphics as defendants and requests that the Court

realign them as plaintiffs in its discretion pursuant to Rule 19 of the Federal P,.ul_ of Civil

Procedure..,,t

SUMMARY'OF THE ACTION

1. In June 1997, XOOM, a distributor of clip art (i.._e. electronically-formatted

graphic images) acquired license rights to certain clip art from Sprint. An Electronic Content

License Agreement, effective June 4, 1997, between XOOM and Sprint (the "Sprint License

Agreement") granted XOM paid-up, world-wide license rights to 4,500 clip art images. These

rights included the right to distribute and sub-license the clip art to other entities For further

distribution, and to incorporate thc images in XOOM's services and products. The Sprint



30/62


31/62

r u e c r e - . c , ( 8 O 4 J 2 2 8 - 1 S 8 p . 1

c o n d u c ta l s o h a s p r e v e n t e d X O O Mf r o me x e r c i s i n g i t s l i c e n s e r i g h t s u n d e r t h

A g r e e m e n t t h a t d o n o t r e l a t e t o c l i p a r t a l l e g e d l y o w n e d b

a c t i o n s h a v e b e e n i t s s t a n d a r d o p e r a t i n g p r o c e d u r e i n t h e c

a s s e r t e d a g a i n s t o t h e r c l i p a r t p u b l i s h e r s , i n c l u d i n g l i c e n s

p u b l i s h e r s s u e d b y I r n a g e l i n e i n t h i s v e x y C o u r t .

5 . A c c o r d i n g l y ,X O O M b r i n g s t h i s a c t i o n a g a i n s c t h e I m a g

o b t a i n a n i n j u n c t i o n d i r e c t i n g t h e I m a g e l i n e D e f e n d a n t s t o

w h i c h I r n a g e l i n e o w n s a v a l i d , e n f o r c e a b l e c o p y r i g h t , ( b )

a l l e g e d l y h a s b e e n i n f l i n g e d b y X O O M o r i t s l i c e n s e e s ( i n

G r a p h i c s ) , a n d ( c ) e a c h a l l e g e d o c c u r r e n c e w h e n X O O M

( i n c l u d i n g M a c m i l l a n , A z t e c h a n d M e d i a G r a p h i c s ) a n d s u

i n f r i n g e d c o p y r i g h t s i n c l i p a r t c l a i m e d t o b e o w n e d b y I m

l i n a g e l i n e ' s a l l e g e d c o p y r i g h t s i n c e r t a i n c l i p a r t a x e i n v a l i

C o p y r i g h t A c t , 1 7 U . S . C . 1 0 1 . ;( i i i )r e d r e s s v i o l a t i o n s a n d r e c o v e r d a mo f t h e I m a g e l i n e D e f e n d a n t s ' m i s u s e o f I m a g e l i n & s c o p y r io b t a i n a d e c l a r a t i o n e s t a b l i s h i n g t h e a m o u n t o f d a m a g e su n d e rt h e C o p y r i g h t A c t o w

b y X O O M t o I m a g e l i r i e , f o r w h i c h S p r i n t h a s a g r e e d t o i n

d e c l a r a t i o n e s t a b l i s h i n g t h e a m o u n t o f d a m a g e s , i f a n y , u n

M a c m i l l a n , A z t e c h a n d M e d i a G r a p h i c s t o I m a g e l i n e f o r w

t h e m ( a n d f o r w h i c h S p r i n t h a s a g r e d t o i n d e m n i t y X O O M

I m a g e l i n e D e f e n d a n t s ' i n t e n t i o n a l i n t e r f e r e n c e w i t h X O O M

s u b - d i s t r i b u t o r s ; a n d ( v i i ) r e c o v e r d a m a g e s f o r t h e I r n a g e l i

i n t e n t T i o n a l l y i n t e r f e r e w i t h X O O M ' s c o n t r a c t s w i t h S p r i n t

4 - -

3 3 . -

conductalsohaspreventedXOOMfromexercisingts I{censcightsundertheSprintLicense

Agreementhatdonot relateo _clipartallegedlyownedby Imagcline. In fact,Imageline's

actionshavebe=nts standard perating procedure in the copyright infi"ingement claims it has

asserted against other clip art publishers, including licensee:; ofiXOOM and other clip art

publishers sued by Imagel,.'ne in tiffs very Court.

5. Accordingly, XOOM brings this action agains_ the Imageline Defendants to (i)

obtain an injunction directing the lraagetine Defendants to identify (a) each clip art image in

which l.mageline owns a valid, enforceable copyright, Co) each such clip art image which

allegedly has been infringed by XOOM or its licensees (including Macmillan, Aztech a.ad Medi_t

Graphics), and (c) each alleged occurrence when XOOM, its licensees and sub-distributors

(including Macmillan, .Aztech and Media Graphics) and such sub-distributors' licensees have

i.n_nged copy'Hghta in clip art claimed to be owned by Imageline; (ii) obtain a declaration that

Imageline's _.lleged copyrights i_ certain clip art are invalid and unenforceable under the

Copyright Act, t7 U.S.C. I01 e_!tse.q.q.;(iii) retires violations and recover damages arising out

of the Imageline Defendants' misuse ofl.mageline's copyrights under the Copyright Act; (iv)

obtain a declazatiort establish.hag the anlount of damages, ff any, under the Copyright Act owed

by XOOM to Imageline, for which Sprint has agreed to indemnify XOOM; (v) obtain a

declaration establishing the amount of damages, if any, under the Copyrig, ht Act owed by

Macmillan, Aztech and Media Graphics to Imageline for which XOOM has agreed to indemnify

them (and for which Sprint haz agr.e'_ to indemnify XOOM); (vi) recover damag_ for the

Imagel,ine Defendants' intentional interference with XOOM's contracts with Sprir]t and XOOM's

sub-distributors; and (vii) recover damages for the Imageline Defendants' conspiracy to

intenfionaIlyinterfere with XOOM's contracts with Sprint and. XOOM's sub-distributors.



32/62

3 0 S 3 L . 4 : 2 3 pG e c r e P . R t d d L c k , 1 1 1t 8 O 4 i 2 2 8 - 1 8 8p . 1

6 . X O O M a l s o b r i n g s t h i s a c t i o n a g a i n s t S p r i n t ,X O O M ' ss u p p l i e r . a s a d e f e n d

f o r a l l e g e d c o p y r i g h t i n f r i n g e m e n t o f l m a g e l i n e ' s c o p y r i g h

t h e v a l i d i t y o f I n i n g e l i n c ' s a l l e g a t i o n t h a t I m a g e l i n e n e v e r

a n d . ( i i ) r e c o v e r d a m a g e s a n d o b t a i n i n d e m n i f i c a t i o n f r o m

m a y b e f o u n d t o o w e t o I m a g e l i n e a n d X O O M ' s s u b - d i s t r

7 . F i n a l l y , X O O M b r i n g s t h i s a c t i o n t o j o i n i t s s u b - d

a n d M e d i a G r a p h i c s a s p l a i n t i f f s ( o r , i n t h e a l t e r n a t i v e 1

t h a t t h e C o u r t , i n i t s d i s c r e t i o n , r e a l i g n , t h e m a s p l a i n t i f f s )

a c t i o n t h e a m o u n t o f d a m a g e s o w e d b y e a c h s u b - d i s t r i b u t o

X O O M i s l i a b l e u n d e r i t s i n d e m n i c a t i o n o b l i g a t i o n s t o s u

m a yr c c o v c r d a m a g e s a n d o b t a i n i n d e m n i f i c a t i o n f r o m S p r i n

J U R I S D I C T I O N A 1 ' D V E N U E

8 . T h i s a c t i o n a r i s e s u n d e ' r t h e C o p y r i g h t A c t , 1 7 U . S1 0 L c t s e q . 1 u n d e r t

D e c l a r a t o r y J u d g m e n t A c t , 2 8 U . S . C . 2 2 0 1- 0 2 , a n d u n d e r C a l i f o r n i a l a w .

9 . T h i s C o u r t h a s j u r i s d i c t i o n o v e r t h e s u b j e c t m a t t e r

U . S . C . 1 3 3 1a n d 1 3 3 8 ( a ) a n d ( b ) , a s w e l l a s 2 8 U . S . C .1 3 3 2 a n d 1 3 6 7 .

1 0 . V e n u e i s p r o p e r i n t h i s C o u r t p u r s u a n t t o 2 8 U . S1 3 9 1a n d 1 4 0 0 .

P A R T I E S

A . X O O M . m c .

1 1 . P l a i n t i f f X O O M , I n c . ( X O O M " ) i s a c o r p o r a t i o n

e x i s t i n g u n d e r t h e l a w s o f t h e S t a t e o f D e l a w a r e , h a v i n g i

F r a n c i s c o , C a l i f o r n i a .

S

3 4 - .

Rue 30 $8 G4:23p Gecrce P. R_ddtck, tII (8041228-1SS8 p. iR

6. XOOM also bringsthis action againstSprint,XOOM's supplier,s a defendant

foralleged copyright infi'ing_m.ent flrnagelin's opyrights, [o(i)deten'ninen thissingleaction

thevalidityflmageline's allegation hatIrnagclineever granted distributiort ights to Sprint,

and.(ii)recoverdamages and obtainindemnificationrom Sprintforany damages thatXOOM

may be found toowe toImagelineand XOOM's sub-distributors.

7. Finally, XOOM brings this action to join its sub-distributors---.'_,iacmillan, Aztech

and Medda Graphlcswas plaJnt2R's (or, in the akemative, rejoin them as defendants and request

that the Court, in its discretlon, r_allgrt them as plaintiffs) solely to determine is this eonsoEdzted

action the amount of damag_ owed by each sub-distributor, if any, to [raagelhle (for which

XOOM is liable under its indemnification ob[igatiors to such sub-distributors) so that XOOM _

may recover damages and obtain indemnification from Sprint.

JURISDICTION .M'_-D VENUE

8. This action arises under the Copyright Act, 17 U.S.C. _ 101 et seq., under the

Declaratory Judgraem Act, 28 U.S..C. 2201 - 02, and under California law.

9. This Court has jurisdiction over the subject matter of this action pursuant to 28,A

U.S.C. 1331 and 1338(a) and Co), as well/s 28 U.S.C, 1332 and 1367.

10. Venue is pt'vper in this Court pursuant to 28 U.S.C. 1391 and 1400.

PARTIES

A. X'OOM, l'ne_

1 t. PlaintiffXOOM, Inc. ("XOOM") is a corporation organized anti '

existing under the laws of the State of Delaware, having its principal place ofbusiness in San

Francisco, Califomia.



33/62

, r c I C C L C p c , . O 4 I 2 2 - 1 B Sp . 1

1 2 . F o u n d e d i n S e p t e m b e r 1 9 9 6 , X O O M o w n s , m a n a

a W o r l d W i d e W e b ( " W e b ' ) s i t e l o c a t e d a t " w w w . x o o x n .

c o m m u n i t y - b a s e d d i r e c t s e l l i n g c h a n n e l o n t h e I n t e r n e t . T

X O O M p r o v i d e s a v a r i e t y o f f r e e m e m b e r s e r v i c e s , i n c l u d

h o s t i n g , e - m a i l , c h a t r o o m s , o n l i n e c l i p a r t a n d o n l i n e g r e

m e m b e r s t h e o p p o r t u n i t y t o j o i n t o p i c a l c o m m u n i t i e s w h e

i n f o r m a t i o n . U p o n r e g i s t r a t i o n , m e m b e r s a g r e e t o r e c e i v e

s e r v i c e sv i a e - m a i l . T h e s e o f f e r i n g s a r e c o n t i n u o u s l y u p d a t e d

c o m p u t e r a c c e s s o r i e s a n d p e r i p h e r a l s , c o n s u m e r c l c c f t c n i c

a n d e v e n c r e d i t c a r d s e r v i c e s , S i n c e l a u n c h i n g i t s W e b s i t

a p p r o x i m a i c l y 2 . 9 m i l l i o n m e m b e r s .

B . X O O M ' s S u b - D i s t r i b u t o r s : M a c m i l l a n , A z t e c h a n d

1 3 . P l a i n t i f f M a c m i l l a n i s a d i v i s i o n o f P r e n t i c e - H a l l 3

e x i s t i n g u n d e r t h e l a w s o f D e l a w a r e , w i t h i t s p r i n c i p a l p l a

Y o r k . M a c m i l l a n i s i n t h e b u s i n e s s o f s o f t w a r e a n d b o o k p

a n d o t h e r w i s e c o n d u c t s b u s i n e s s t h r o u g h o u t t h e U n i t e d S t a

1 4 . P l a i n t i f f A z t c c h N e w M e d i a t n t e r r i a t i o n a l C o r p . ( "

o r g a n i z e d a n d e x i s t i n g u n d e r t h e l a w s o f C a n a d a , w i t h i t s p

M i l l s , O n t a r i o , C a n a d a . A z t c c h i s i n t h e b u s i n e s s o f s o f t w

a n d o t h e r w i s e c o n d u c t s b u s i n e s s i n V i r g i n i a ,

1 5 . P l a i n t i f fM e d i a O r a p h i c s I n t e r n a t i o n a l ( " M e d i a G r a p h i

e x i s t i n g u n d e r t h e l a w s o f C o l o r a d o , w i t h i t s p r i n c i p a l p l a c

6

3 5

12.

a World Wide Web ("Web") site located at "www.xoom.com". XOOM is now a leading

_mmunity-bazed direct selling c.harmel on the Internet. To attract members to its Web site,

XOOM provides a variety of free member services, including Web site ere_.tion and Web site

hosting, e-ma/I, chat rooms, online clip ,art and online greeting cards. XOOM also offers its

members the oppommJty to join topical communities where they can exchange ideas and

information. Upon registration, members agree to receive periodic offers of products and

services via e-maiL These offerings are continuously updated mad include computer sort',rare,

computer accessories mad peripherals, consumer electronics, music CDs, clip art on CD-ROM,

and even credit card service_. Since launching its Web site in June 1997, XOOM has enrolled

approximately 2.9 million members.

B. XOOM.'LSub-Distributors: Mazmillan, Az'tech and Media Glmphics

13. PlaintiffMacmillan is a division of Prentice-Hall_ Inc., which is organ/zed and

existing under the laws of Delaware, with its l_rincipal place o fbusiness in New York, New

York. Macmillan is in the business of software and book pubffshing. Maemilian sells products

and otherwise conducts business throughout the United States,'-includifig Virginia.

14. Plaintiff Aztech New Media International Corp. ("Aztech") is a company

organized and existing under the Iaws of Canada, with its principal place of business in Don

Mills, Ontario, Canada..Aztech is in the business of software publishing. Aztech sells products

and otherwise conducts business in Virginia.

[5. PlaintiffMedia Graphics International ("Media Graphics") is orgahize.d and

existing under the laws of Colorado, with its principal place ofb u_ine_ in Arvada, Colorado.

l

Founded in September 1996, XOOM owns, manages and operates on the Interact



34/62

r . . , t 8 0 4 1 2 2 5 I E B Sp . 1

M e d i aG r a p h i c s i s i n t h e b u s i n e s s o f s o f t w a r e p u b l i s h i n g . M e

o t h e r w i s ec o n d u c t sb u s i n e s s i n V i r g i n i a ,

C . J m a c I j n e , I n c . a n d G e o r g e P . R i d d i c k 1 1 1

1 . 6 . D e f e n d a n t I r n a g e l i n e , I n c . ( " I m a g e l i n e " ) i s a c o r p o

u n d e r t h e l a w s o f t h e C o m m o n w e a l t h o f V i r g i n i a , w i t h i t s

V i r g i n i a . I m a g e l i n e m a r k e t s a n d d i s t r i b u t e s c l i p a r t .

1 7 . D e f e n d a n t G e o r g e P . R i d d i c k , 1 1 1 ( u R i d d i c k t I ) i s t

I r n a g e l i n e . H e a l s o i s t h e s o l e o f i c e r a n d s o l e d i r e c t o r o f I m

D . C o v n n t i p n c eS e r v i c e s .t n c . a n d W a y n e K . N v t r p m

1 8 . U p o n i n f o r m a t i o n a n d b e l i e f , d e f e n d a n t C o m p l i a n c

S e r v i c e s " ) i s a c o r p o r a t i o n o r g a n i z e d u n d e r t h e l a w s o f t h e

p r i n c i p a l p l a c e o f b u . s i n e s s i n R i c h m o n d , V i r g i n i a . B a s e d o

S e r v i c c s p r o v i d e s , a m o n g o t h e r s e r v i c e s , c o p y r i g h t e n f o r c

c o r p o r a t i o n C o u m i i s s i o n , h o w e v e r , d o e s n o t h a v e a r e c o r d

V i r g i n i a c o r p o r a t i o n a c t i v e a n d i n g o o d s t a i d i n g , o r a s a f o

d o b u s i n e s s i n V i r g i n i a .

1 9 ; D e f e n d a n t W a y n e l ( N y s t r o m ( N y s t r o m " ) i s t h e P

S e r v i c e s a n d a V i r g i n i a r e s i d e n t .

E . S p r i n t S o f t w a r e P t v L t d

2 0 . D e f e n d a n t S p r i n t S o f t w a r e P t y L t d ( " S p r i n t " ) i s a c

u n d e r t h e l a w s o f A u s t r a l i a , w i t h i t s p r i n c i p a l p l a c e o f b u s i

S p r i n t i s i n t h e b u s i n e s s o f s o f t w a r e p u b l i s h i n g .

8 6

MediaGraphics s in the business ot'sogware publishing, lvfedia Graphics sells products and

otherwise conducts business in Virginia.

C. /ma_.eline, ln_. and George P. Ridd_ck TIT

16. Dcfcadmt Imagcline,Inc. C'Imageline") isa corporation organizedmd existing

under _e laws of_e Commouwealth of Vffglnia_with its pdncipa[ placeof'businessnAshland,

Vh'ginia. Imagelinc markets and distributes clip art.

17. Defendant George P. Riddick, Ill ("Riddick") is the founder and President of

irnageline. He also is the sole officer and sole dffector ot'Imageline and is a Virginia resident.

D. Cornnl'i;_Diqe Services. inc. _4Id W_iv_e K. Nvstr0rfi

18. Upoa information and belief, d_fendant Compliance Services, Inc. ("Compliance

Services") is a corporation o:ganizcd under the laws of the Coramoawcaltk of Virgida, with its

principal place of business hi Richmond, Virginia. BasM on information and belief, Compliance

Services provide.% among other _ervices, copyright et_orcum_nt aervices. The Virginia S[ate

Corporation Commission, however, does not have a record of a"Compliuncc Scrvlces, Inc." as a

Virginia corporation active and in good stafiding, or as a foreign corporation presently licensed to

do business irl Virginia. -_.

19, Defendant V/ayne K. Nystrom ("Nystrom'9 is the President of Compliance

Services and a Virginia resident,

E. S_fint 8oftw_e "Ply l_td

20. D_fcndant Sprint SoRwam Ply Lid ("Sprint") is a company organized and existing

under the laws of Australia, with its prindpat place of business in Richmond, Vicloriih Australia.

Sprint is in the business ofsoRware publishing.



35/62

e o r e . c , - p . 1

F A C TS

A . X O O M ' s D i s t r i b u t i o n o f C l i p a r t

2 1 . S i n c e i t s i n c e p t i o n i n 1 9 9 6 , X O O M h a s a c q u i r e d t h

u s e o f o v e r 2 5 0 , 0 0 0 s o f t w a r e" c l i p s , "c o n s i s t i n g c f c l i p a r t i m a g e s , g r a p h i c s ,

a n i m a t i o n s , s o u n d s , m u s i c a n d v i d e o s . T h c s c , c t i p s h a v e b e

a n d t e n c o m p a n i e s t h a t h a v e c r e a t e d o r a c q u i r e d d i s t r i b u t i o

2 2 . C l i p a r t c o n s i s t s o f e l e c t r o n i c a l l y - f o r m a t t e d a p h i c

d i s t r i b u t e d , f o r e x a m p l e , o n o p t i c a l m e d i a ( s u c h a s C D - R O

( s u c h a s a W e b s i t e ) . T h e d i s f r i b u t o r o f a c l i p a r t c o l l e c t i o n

r e p r o d u c e t h e c l i p a r t i n m a s s i v e q u a n t i t i e s , I nt y p i c a le n d - u s e r l i c e n s e a g r e e m e n t s t

( i . i r t l i k e t h e p u r c h a s e r o f a b o o k ) i s l i c e n s e d t o r e p r o d u c e a n

e x c e p t t h a t t h e e n d - u s e r i s p r o h i b i t e d f r o m s u b l i c e n s i n g t o

c l i p a r t .

2 3 . C o m m e n c i n g i n J u l y 1 9 9 7 , X O O M d i s t r i b u t c d a t wp r o d u c tk n o w n a s

W E B C L I P E M P I R E 5 0 , 0 0 0 , w h i c h c o n t a i n e d a p p r o x i m a t

c l i p a r t i m a g e s . S u b s e q u c n t l y , a s X O O M o b t a i n e d d i s t r i b u

X O O M h a s e x p a n d e d i t s c o l l e c t i o n a n d d i s t r i b u t e d W E B CE M P I R E7 5 , 0 0 0 , W E B C L I P

E M P I R E 1 5 0 , 0 0 0 a r i d W E B C L I P E M P I R E 2 5 0 , 0 0 0 .

2 4 . X O O M d i s t r i b u t e d i t s W E B C L I P E M P I R E p r o d u c

t h r o u g h X O O M s W e b s i t e , a n d i n d i r e c t l y t h r o u g h t h i r d p a r

p a c k a g e d W E B C L I P E M P I R E p r o d u c t s t o e n d - u s e r s .

2 5 . I na d d i t i o n , X O O M s u b l i c e n s e d p o r t i o n s o f i t s c o l l e

p a r t y s u b - d i s t r i b u t o r s . E a c h s u b - d i s t r i b u t o r w o u l d s e l e c t c e

8

3 T

FACTS

A. XOOM'_ D.istrib_)i0n ofCli_ aa

21. Since its inception in 1996, XOOM has acqui.'red the rights to use arid license the

use of over 250,000 software "clips," consisting of clip art images, graphics, photos, web objects,

animation, sounds, music and videos. These.clips have been a.cquired rom over forty artists

and ten compo.nies that have created or acquired distribution rights for thee clips.

22. Clip art consists of electronically-formatted graptdcal images that can be

distributed, for example, on optical media (such as CD-ROMs, or _CDs") or via online services

(such as a Web site). The distributor of a clip art collection is permitted and expected to

w

reproduce the clip art in massive quantities. In typical end-user license agreements the end-user

(unlike the purchaser of a book) is lice_ed to reproduce and use the clip art in any fashion,

except that the end-user is prohibited fi'om sublicensing to distributors the fight to reproduce the

clip art.

23. Commencing in July 1997, XOOM distributed a two-disc CD product known as

WEB CLIP EMPIRE 50,000, which cont_inc.d approximately 50,000 software clips, including.,,It

clip art images. Subsequently, as XOOM obtaineddistribution ri_ts for odier sollwm-e clips,

XOOM has expanded its collection and distributed WEB CLIP EMPIRE 7.5,000, WEB CLIP

EMPIRE 150,000 and WEB CLiP EMPIRE 250,000.

24. XOOM distributed its WEB CLIP EMPIRE products directly to end-users

through XOOM's Web site, ant indirectly through third patti .es that in turn marketed the pre-

packaged WEB CLIP EM_HR.E products to end-users.

25. In addition, XOOM sublicet_sed portions of its coliection of software clips to third

party sub-distributors. Each sub-distributor would select certain soft'ware clips from a collection

-37-



36/62

u u e . c c c . 0 4 1 2 2 8 - L 5 E 5 p . 1

m a d ea v a i l a b l e b y X O O M a n d t h e n w o u l d i n c o r p o r a t e X O O M

f r o m m u l t i p l e s o u r c e s a n d r e p a c k a g e t h e s o f t w a r e c l i p s u n

X O O M ' s s u b - d i s t r i b u t o r s w e r e M a c m i l l a n , A z t e c h a n d M e

2 6 . E f f e c t i v e A u g u s t 2 5 , 1 9 9 7 , X O O M g r a n t e d M a c m

1 6 , 0 0 0 c l i p a r t i m a g e s f r o m X O O M ' s c o l l e c t i o n , o f c l i p a r t 1

s o u n d c l i p s , v i d e o c l i p s , a n i m a t i o n s a n d w e b o b j e c t s ( t h e "

M a c m i l l a n u s e d t h e i m a g e s l i c e n s e d f r o m X O O M i n a c o l i

l n o w n a s " M o l y C o w ! 2 5 0 , 0 0 0 G r a p h i c s . " U n d e r t h e M a c

a g r e e d t o " i n d e m n i t y a n d h o l d h a r r u l u s s . . .( M a c m i l l a n ]o r i t s l i c e n s e e s a g a i n s t a l l c l

d e m a n d s , s u i t s , a c t i o n s , j u d g m e n t s , l o s s e s , c o s t s , d a m a g e s ,

r e a s o n a b l e e x p e n s e s t h a t . . . [ M a c m i l l a n ) o r i t s l i c e n s e e s m

b r e a c h o f X O O M ' s w a r r a n t y t h a t t h e c l i p a r t a n d o t h e r s o f t w

c o p y r i g h t o f a n y t h i r d p a r t y .-

2 7 . X O O M a l s o g r a n t e d A z t e c h , b y a g r e e m e n t d a t e d J

s u b d i s t r i b u t e 5 0 , 0 0 0 c l i p a r t i m a g e s f r o m X O O M ' s c o ' i l e c t

o t h e r w i s e r e p a c k a g e d s o m e o f t h e s e i m a g e s l i c c n s e d f r o m

A z t e c h u n d e r t h e t i t l e " 7 5 , 0 0 0Q u a l i t yC l i p a r t a n d I m a g e s . " T h e J u n e 3 0 , 1 9

A z t e c h r e q u i r e d X Q O M " t o i n d e m n i f y a n d h o l d h a r m l e s s .. . ( A z t e c h 3f r o m a n y l i a b i l i t y f o

d a m a g e s o r c o s t s , o r a n y c l a i m s m a d e i n c i r c u m s t a n c e s w[ X O O M ]i s i n b r e a c h " o f i t s

w a r r a n t y t h a t t h e c l i p a r t i m a g e s d i d n o t " i n f r i n g e u p o n a n y

2 3 . B y a g r e e m e n t d a t e d D e e m n b e r 5 , 1 9 9 7 , X O O M l i c

r i g h t t o s u b - d i s t r i b u t e 3 4 , 0 0 0 s o f t w a r e c l i p s , i n c l u d i n g c l i

G r a p h i c s s e l e c t e d s o w a r e c l i p s f r o m K O O M ' s c o l l e c t i o n a

9

3 8 -

made availabley XOOM and thenwould incorporate OOM's clips with otherclipsbtained

from multipleourcesndrepackage he soRwarclipsnderanew brandname. Among

XOOM's sub-distributors ereMacmillan,AztechandMedi_.Graphics.

26_ Effective ugust25,1997,XOOM grantedMacmillanthe right todistribute

16,000 clip artimagesfromXOOM's collect[oa clip art,long withcertain hotos,usic and

It

sound clips, ideoclips,nimationsndweb objectstheMacmillanLtccnseAgreement").

Macmillanusedtheimagc.slcenscdromXOO/vl in a collection fCDs publishedy Macmillan

known as"HolyCowl 250,000CrraphJ.cs." nder _c MacmillanLicensc'Agrcemcnt, OOM

agreedto"indemnifyndholdharmless...Macmillan]r itslicenseesgainstllclaims,

demands,suits,ctions, udgments, osses,osts,amages,reasonable ttorney's eesand

reasonablexpenses that...[Macmillan]r its licenseesay sustainr incurby reason"ofany

breachof'XOOM'swarrantythat the clipartandothersoRware clips didnotinfringepon arty

copyrightfanythirdarty.

27. XOOM also granted Aztech, by agreement dated 3uric 0, 1997, the fight to

subdistribute 50,000 clip art images from XOOM's collection. Azteoh incorporated and

otherwiseepackagcdome ofthese images licensedromXODM in aproductpublishedy

Aztech under the title "75,000 Quality Clipart and Images." The .l'une 30, 1997 agreement with

A._,echequiredOOM "to indemnify nd hold harmless... [Aztech] from arty liability or

damages or costs, or any claims made in circumstances where... [XOOM] is in breach" of its

warranty that the clip art images did not "ir_f.nge upon any' proprietary Hghts of any third party."

28. By agreement dated December 5, 1997, XOOM licensed to Media'Graphi.es the

right to sub-distribute 34,000 soRwarc clips, including dip art, from XOOM's collection. Media

Graphics selected software clips from XOONPs collection and incorporated them in a product



37/62


38/62

. . . _ . _ _

( E m p h a s i sa d d e d . )

3 3 . A f t e r e x e c u t i n g t h e S p r i n t L i c c a e A g r e e m e n t , X O

c l i p a r t i n t o X O O M ' s c o l l e c t i o n o f c l i p a r t , a n d d i s t r i b u t e d

b y X O O M 7 t h e X O O M W e b s i t e a n d d i s t r i b u t i o n a g r e e m e

i n c l u d i n g M a c m i l l a n , A z t e c h a n d M e d i a G r a p h i c s . S o m e C

C L I P E M P I R E s e r i e s i n c l u d e d c l i p a r t l i c e n s e d b y X C O M

3 4 . A t t h e L i m e o f t h e a c t i o n s d e s c r i b e d i n t h e p r e c e d i n

g o o d f a i t h o n i t s l i c e n s e w i t h S p r i n t f o r i t s r i g h t s t o d o s o .

a w a r e a n d h a d n o r e a s o n t o b e l i e v e t h a t i t s a c t s c o n s t i t u t e d

C . I m a g e l i n e ' s W r o n g f u l C o n d u c t

1 . J n i a g c l i n c ' s W i t h h o l d i n g o f l n r o r m a t i o n

3 5 . I n J a n u a r y 1 9 9 8 , W a y n e K . N y s t r o m , p r e s i d e n t o f

a g e n t n f l m a g e l i n e , c o n t a c t e d X O O M , a l l e g i n g t h a t c l i p a r t

I m a g c l i n c ' s c o p y r i g h t s . T h i s w a s t h e f i r s t t i m e t h a t X O O M

a l l e g e d i n f r i n g e m e n t . B a s e d o n a s a m p l i n g o f i m a g e s p r o v

N y s t r d m n , X O O M w a s a b l e t o t r a c e t h e a l l e g e d l y i n f r i n g i n g

3 6 . . S i n c e t h a t t i m e , X O O M r e p e a t e d l y h a s r e q u e s t e d t h

i d e n t i f y , L o . t h e f u l l e x t e n t o f t h e i r I m o w l e d g e , ( i ) t h e c l i p a

X O O M i n w h i c h I m a g e l i n e o w n s a c o p y r i g h t , a n d ( i i ) e a c h

p r o d u c t s a n d W e b s i t e s p r o d u c e d b y X O O M a n d i t s b u s i n e

i n f r i n g e m e n t .

' I

4 0

_mphasisadded.)

33. After executing tile Sprint Lice== Agreement, XOOM incorporated the Sprint

clip art into XOOM's collection of clip art, and distributed the Sprint clip art via CDs published

by XOOM, the XOOM Web site and distribution agreements with third parr/clip art publisher_

including bfacmi!Ian, A.ztcch and Mcdia Graphics. Some CDs published as part of the WEB

CLIP FAfPIP,.E scrles included clip art licensed by XOOM fzon:t Sprint

34. At the time of the actions described in the preceding paragraph, XOObl relied in

good fa/th on its license with Sprint for its rights to do so. Also, at that time, XOOM was not

aware and had no reason to beIisve that its a_ts constituted an infringement of copyl"ight.

C. Ima_etlne's Wrongful Conduct

1. hnagelinc's Withholdln_ ot'hformatior_

3:5. In J'anuary 1998, Wayne IC Nystrom, president of Compliance Services and the

agent vf I.magellnc, oagcted XOOM, aRegingRat clipartdistributedy XO0_[ h:,d infringed

Imagelinc'scopyrights.This was the fir-q ime that XOOM became aware of any claimof'such

alleged infringement. Based on asamplingof images provided 6y Compliance Servicesand

Nystzom, XOOM was ableto tracetheallegedlynfringing lip_art mages to Sprint.

36.. Sincethat time, XOOIYl repeatedlyas requested thattheImagelinDefendants

identify, .o.the ull extent of thek"nowledge,(i)the clip artimages allegedlyinfringed by

XOOM inwhich Imagelineowns a copyright, nd (ii) ach occurrence in thevarioussoRware

productsand Web sitesproduced by XOOM and itsbusincsspartners of such alleged

in.fzingcment.

It

-40-



39/62

. . % . 1 ' . 7 a 4 4 t 0 U 7 I C C 01 . 0 C 0

3 7 . T h e I r n a g e l i n e D e f e n d a n t s h a v e r e f u s e d t o s u p p l y

X O O M , c h o o s i n g i n s t c a d t o r e p c a t c d l y d r o p h i n t s o f c o n t i

( " t h o u s a n d s o f i n f r i n g e m e n t s , ' ' h u n d r e d s o f i n f r i n g e m e n t s

3 & T h e L m a g e l i n e D e f e n d a n t s a l s o h a v e a c c u s e d o t h

i n f r i n g i n g I m a g e l i n e ' s c o p y r i g h t s t o c l i p a r t . I n s o d o i n g , t

e n g a g e d i n a p a . t t c r n o f r e f u s i n g t o p r o v i d e t o t h e s e t a r g e t c

I m a g e l i n e D c f e n d a i i l c ' l c n o w k d g e , t h e i d e n t i t y o f t h e a l l e g

3 9 . F o r e x a m p l e , b a s e d o n i n f o r m a t i o n a n d b e l i e f , I m a

i n f o r m a t i o n i n a s s e r t i n g c o p y r i g h t i n f r i n g e m e n t c l a i m s a g a

S o f t w a r e , I n c . , M i n d s c a p c , t u e . , a n d M c d i a S y n e r g y , I n c . ,

b e l o w , X O O M ' s o w n s u b - d i a i b u t o r s - - - M a c m i l l a n , A z t c c h

s u b j e c t e d t o t h e s a m e p a t t e r n o f r e f u s a l t o i d e n t i f y f u l l y t h e

4 0 . T h e I m n a g c l i n e D e f e n d a n t s h a v e e a g a g c d i n t h i s c o

c o m p a n i e s t o l i c e n s e c l i p a r t c o l l e c t i o n s t h a t t h e y d o n o t w a

o f a l l e g e d i n f r i n g e m e n t , a t p r i c e s g r o s s l y i n e x c e s s o f m a r k

e f f e c t , t h e I m a g e l i n e D e f e n d a n t s a r e a t t e m p t i n g t o " m i l k "

i n n o c e n t i n f r i n g e r s i n t o b e c o m i n g u n w i l l i n g " p a r t n e r s . "

4 1 . I n a d d i t i o n , b a s e d u p o n i n f o r m a t i o n a n d b e l i e f , I m

e n g a g e d i n a p a t t e r n o f d e l i b e r a t e l y w i t h h o l d i n g t h e f u l l e x

c o p y r i g h t i n f r i n g e m e n t w h e n f i l i n g c o p y r i g h t i n f r i n g e m e n t

m o r e a l l e g e d i n f r i n g e m e n t s a t s e n s i t i V e t i m e s l a t e r i n l i t i g a-

4 2 . B y w i t h h o l d i n g f r o m X O O Mt h ef u l l e x t e n t o f t h e i r k n o w l e d g e o f

c o p y r i g h t i n f r i n g e m e n t , t h e l r n a g e l i n e D e f e n d a n t s h a v e p r e

1 2

4 1

37. The Imageline Defendants have refused to supply such complete information to

XOOM, choosing instead to repeatedly drop hints of continuing unidentified infringements

("thousands of infringements," "hundreds of infringements," "under a hundred infringements").

38. The I.mageline Defendants also have accused other software companies of

infi--inging I.magetine's copyrights to clip art. In so doing, the ImageIIne Defendants have

engaged in a pattern of refusing to provide to these target companies, to the full extent of the

Imageline DefendanU' knowledge, the identity or:the alleged copyright infringemen:s.

39. For example, based on information and belief, I.mageline deliberately has with_held

information in asserting copyright infiingement claims against International Microcomputer

Software, Inc., Mindscape, Inc., and Media Synergy, Inc., before this Court. As discussed

below, XOOM'z own sub-distributors---Macmillan, Aztech and Media Graphics--have been

subjected to the same pattern of refusal to identify fully tb.e aUeged infringements.

40. The Imageline Defendants have engaged in this conduct in order to coerce target

companies to license clip art collections that they do not want and. that extend beyond the scope

of alleged infringement, at priccs grossly in excess of market rates for clip art hcensing. In

effect, the Imageline Defendants are attempting to "milk" the s_uation and coerce alleged

innocent infringers into becoming unwilling "partners."

4-1. In addition, based upon information and belief, Imageline and Riddick have

engaged in a pattern of deliberately witI_olding the full extent of tlaeir knowledge of alIeged

copyright inJ.i-i..ugement when tiling copyrigt:tt infringement lawsuits, for the purpose of revealing

more alleged inNngements at sensitive times later in litigation.

42. By withl'lolding from XOOM the full extent of their knowledge ef alleged

copyright infringement, the Imageline Defendants have prevented XOOM and its sub-

12

-41-



40/62

. . . . , - . . , - e p .

d i s t r i b u t o r s f r o m c o m p l e t e l y c e a s i n g t h e u s e , l i c e n s i n g a n d

o w n e d b y l i n a g c l i n c .

4 3 . B y w i t h h o l d i n g f r o m X O O M t h e i d e n t i t y o f t h e a l lI r n a g c l i n c I D e f e a d a n t s a l s o h a v e p r e v e n t e d X O O M f r o m b e

d i s t r i b u t i o n o f t h e c l i p a r t l i c e n s e d b y X O O M f r o m S p r i n t

c o p y r i g h t i n f r i n g e m e n t , a n d ( i i ) X O O M ' s o n g o i n g b u s i n e s s

i n c l u d i n g M a c m i l l a n , A z t e c h a n d M e d i a G r a p h i c s .

4 4 . B y w i t h h o l d i n g f r o m X O O M t h e i d e n t i t y o f t h e a l l

t h e e x t e n t o f i t s p r o l i f e r a t i o n , t h e I m a g e l i n e d e f e n d a n t s h a v

d i s r e g a r d o f t h e r i g h t s o f X O O M a n d i t s l i c e n s e e s a n d s u b -

2 . T h e J m a n e f l n e ] l e f e n d a n t s ' U n l a w f i l D e m a n d s

4 5 . I nJ a n u a r y 1 9 9 8 , W a y n e K . N y s t r o m , t h e p r e s i d e n t o

a c t i n g i n c o n c e r t w i t h I m a g e l i n e , w r o t e t o M a c m i l l a n , X O O

a l l e g i n g t h a t M a c m i l l a n ' s " H o l y C o w ! 2 5 0 , 0 0 0 " p r o d u c t c o

I m a g e l i n e o w n e d a c o p y r i g h t a n d a c c u s i n g M a c m i l l a n o f c

4 6 . T h e I n i a g e l i n e D e f e n d a n t s i d e n t i f i e d s o m e o f t h d a !

i m a g e s . M a c m i l l a n t r a c e d t h e s e i m a g e s t o X O O M , w h o , i n

I r n a g e l i n e D e f e n d a n t s , h o w e v e r , r e f u s e d t o i d e n t i f y t o M a c

i x i . f r i n g e m e n t a s s e r t e d b y I x n a g e l i n e , d e s p i t e M a c m i l l a n ' s a n

4 7 . C o n t e m p o r a n e o u s l y , t h e I m a g e l i n e D e f e n d a n t s d e m

i n t o a c l i p a r t d i s t r i b u t i o n a g r e e m e n t w i t h I m a g e l i n e a n d l i c

n i r n b e r f o r w h i c h I m a g e l i n e c l a i m e d c o p y r i g h t n f r h i g e m e x

I m a g e l i n e D e f e n d a n t s d e m a n d e d t h a t M a c m i l l a n p a y I m a g e

1 3

4 2

distributorsrom completely ceasingtheuse, licensing nd distributionf the clipartaUegedly

owned by Imagcline.

43. By withholdingfrom X OOM theidentityf the allegedlyinfringing lipart, the

/.magcline efendantsalsohave preventedXOOM from benefitingfrom (l)theuse,licensingnd

distribution of the clip art licensed by XOOM from Sprint in which Imagdine has no claim of

copyright infringement, and (ii) XOOM's ongoing business relationship with its sub-distributors,

including Macmillan, A.ztech and Media Graphics.

44. By withholding from XOOM the identity of the allegedly in_nging clip art and

the extento fitsproliferation, heImagelinedefendants have actedmaliciouslyand inconscious

disregardof therightsofXOOM and itslicenseesnd sub-distributors."

2. The Ima._eline Defendants' UnlawfttlDemands Made to Macmilla_

45. In January 1998, Wayne K. Nystrom, the president of Compliance Services,

acting in concert with Imagcline, wrote to Macmillan, XOOM's l_censee and sub-distributor,

alleging that Maemillan's "Holy Cow[ 250,000" product conta{ned cllp art iraagcs in which

hnageline owned a copyright and accusing Macmillan of copyright infringement.

46. The Imagelinc Defendants identified some ofthc_a!legcdly infringing clip art

images. Macmillan traced these images to XOOM, who, in turn, traced-them to Sprint. The

I.mageline Defendants, however, refused to identify to Macmillan the full extent of the copyright

irtfzingement asserted by Im_geline, despite Macmillan's and XOObi's repeated requests.

47. Contemporaneously, the Irnagellnc Defendants demanded that Macmillan enter

into a clip art distribution agreement with Imageline and license far more clip art _mages than the

number for which fi'nageline claimed copyright inf_ngement. For thes_ license rights, the

Imageline Defendants demanded that Macmillan pay Imagcline an amount substantially greater



41/62

e c r e - . c ,8 a 4 J 2 2 a - 1 8 6 p . 2

t h a nt h e n e g l i g i b l e m a r k e t v a l u e o f t h e r i g h t t o d i s t r i b u t e t h e c

g r e a t e r t h a n t h e r a t h e r i n s i g n i f i c a n t p r o f i t o f M a c m i l l a n a t t

s u b s t a n t i a l l y g r e a t e r t h a n a n y a c t u a l d a m a g e s ( i n c l u d i n g l o

t h e a l l e g e d c o p y r i g h t i n f r i n g e m e n t . S i m p l y p u t , I m a g e l i n e

t o e x t o r t i o n .

4 2 . I n r e s p o n s e , M a c m i l l a n w a s f o r c e d t o c r e a t e a n c w

2 5 0 , 0 0 0 " t h a t d i d n o t c o n t a i n a n y o f t h e c l i p a r t t h a t w a s l i c

s u b l i c e n s e d t o M a c m i l l a n . A c c o r d i n g l y , M a c m i l l a n h a d t o

d i s t r i b u t e d b y S p r i n t i n w h i c h I m a g e l i n e c a n n o t c l a i m c o p y

4 9 . B y t h e t e r m s o f t h e M a c m i l l a n L i c e n s e A g r e e m e n t

M a c m i l l a n f o r a n y c o p y r i g h t i n f r i n g e m e n t l i a b i l i t y a r i s i n g

t o M a c m i l l a n .

3 . T h l m a g 1 i n e D c f e n d a n t L U n l a w f u l D e m a n d s

5 0 . O no r a b o u t J u n e 2 6 , 1 9 9 8 , G e o r g e P . R i d d i c k , I I I , tc a l l e d A z t e c h , a n o t h e r X O O M I i c e n e e a n d s u b - d i s t r i b u t o r ,

p r o d u c t s c o n t a i n e d c l i p a r t i m a g e s t h a t i n f r i n g e d I m a g e t i n e

R i d d i c k r e f u s e d t o i d e n t i l y a l l t h e a l l e g e d i n . & i n g e m e n t s d e

5 1 . B a s e d o n t h e i m a g e s R i d d i c k d i d i d e n t i f y , A . z t e c h t

X O O M , w h i c h t r a c e d t h e m t o S p r i n t . r n J u l y 1 9 9 8 , X O O M

I m a g e l i n e i d e n t i f y " e a c h a n d e v e r y i m a g e t h a t t h e A z t e c h p

c o p y r i g h t r e g i s t r a t i o n s r e l a t e d t o e a c h i m a g e . " F o l l o w i n g i t

i o r e d t h e r e q u e s t , p r e f e r r i n g i n s t e a d t o k e e p b o t h X O O M a

1 4

4 3

thanthenegligiblemarketvalue of the right to distribute the contested clip art, substantially

greater than the rather in._ignifieant profit of Macmillan attributable to such clip art, and

substantially greater than any actual damages (including lost profits) of Imageline attributable to

the alleged copyright infringement. Simply put, Imagelinc's demands have practically amotinted

to extordort.

48. In response, Macmillan was forced to create a new release of"Holy Cow!

250,000" that did not contain any of the clip art that was licensed by Sprint to XOOM and

subIicertsed to Macmillan. Accordingly, Macmillan had to strip from its product clip art

distributed by Sprint in which I.magelime cannot claim copyright infi'ingement.

49. By the terms of the Macmillan License Agreement, XOOM must indemnify

Macmillan for any copyright b.Edngement liability arising from the clip an, licensed by XOOM

to Macmillan.

3. The Imazeline Defendants-' Unlawful Demands Made to Aztech

50. On or about .rune 26, 1998, George F. Riddiek, IH, the president c flmageline,

called Aztech, another XOOM Iicen_ee mad sub-distdbutor,.atleging that certain of Aztech's

products contained clip art images that infringed Imagetine's copyright. As'with Macmillan,

Riddick refused to identify all the atlegcd infringements despite Aztech's repeated requests.

5 i. Based on the images Riddick did identify, Az'tech traced the clip art images to

XOOM, which traced them to Sprint. In July 1998, XOOM wrote ImageHne and requested that

Imageline identify "each and every image that the Aztech product(s) allegedly infringed" and "all

copyright registrations related to each image." Following its standard practice, I.r_ageIine

ignored the request, preferring instead to keep both XOOM and Aztech in the dark and thereby



42/62

u 4 : p G e c r e e P . R t d e L c i l lt 8 a 4 1 2 2 9 - 1 S 2 S p . 2

p r e v e n t e i t h e r p a r t y f r o m t a k i n g i m m e d i a t e c o r r e c t i v e a c t i o

i m a g e s .

4 . i m a g e l i n e ' s U n l a w f u l A c t f o n s R e g a r d i n g M e d i a

5 2 . A s r e c e n t l y a s e a r l y A u g u s t 1 9 9 8 , R i d d i c k c o n t a c t e

a n d s u b - d i s t r i b u t o r , M e d i a G r a p h i c s , a l l e g i n g t h a t c e r t a i n c

p r o d u c t s i n f r i n g e d I r n a g e l i n e ' s c o p y r i g h t s . R i d d i c k i d e n t i f i

t h c s o u r c e a n d p r o v i d e d a f e w e x a m p l e s o f t h e a l l e g e d i n f r i

5 3 . D e s p i t e M e d i a G r a p h i c s ' r e q u e s t , I m a g e l i n e h a s f a i

l i s t o f a l l e g e d l y i n f r i n g i n g c l i p a r t s o t h a t M e d i a G r a p h i c s a

D . X O Q M s A c t i o n s R e g a r d i n g S p r i n t

5 4 . I m m e d i a t e l y u p o n h e a r i n g t h a t c e r t a i n o f t h e S p r i n t

I m a g e l i n e ' s c o p y r i g h t s , X O O M c o n t a c t e d S p r i n t a n d r e q u e s

r i g h t t o l i c e n s e t h e c o n t e s t e d i m a g e s . X O O M a l s o i n v o k e d

S p r i n t L i c e n s e A g r e e m e n t .

5 5 . T o d a t e , S p r i n t h a s n o t p r o v i d e d a n y w r i t t e n e v i d e n

t h e i m a g e s i d e n t I f i e d b y I m a g e l i n e .-E . T h e r i w & i d i t v o f I n , a c z c l i n e ' s C l a i m o f V a l i d C o p y r

I . I m a g e l i n c ' s C o p y r i t h t R e a i s t r a t i n n a

5 & B a s e d o n i n f o r m a t i o n a n d b e l i e f , i n c l u d i n g e x a m i n a

C o p y r i g h t O f f i c e , I t r i a g e l i n e h a s b e e n g r a n t e d t h e f o l l o w i n g

C o p y r i g h t O f f i c e f o r w o r k s c o n t a i n i n g c l i p a r t :

a T h e w o r k t i t l e d " r m a g e l i n e D e s i g n G a l l e r y , " R e

e f f e c t i v e M a r c h 1 8 , 1 9 9 7 , a u t h o r e d b y " I n - i a g d l i n ; I n c o

1 5

- 4 4 . . -

prevent either party from taking immediate corrective action to strip away all allegedly inliinging

images.

4.

52.

and sub-distributor, Media Graphics, alleging that certain clip art images in Media Graphics'

products in.fringed Inlageline's copyrights. Riddick identified XOObi (and presumably Sprint) as

thc source and provided, a few examples of the alleged infringement.

53. Despite Media Graphics' request, Imageliae has failed to pro_de a comprehensive

list o faUegedly infringing clip art so that Media Graphics and XOOM could co=oct the problem.

D. XOOM's Actions l_egardin_Sorlnt

54. Immediately upon hearing that certain of the Sprint clip art images might infringe

Imageline's copyrights, XOOb,t contacted Sprint and requested that Sprint provide evidence of its

right to license the contested images. XOOM nl-qo invoked its indemnification rights under the

Sprint License Agreement.

55. To date, Sprint has not provided any written evidence o fits rights to redistribute

the images identified by Imageline. -_

E. Tile rnv_liditv oflrnageline's Claim of Valid Copyrights

I. Tmageline's Copyright Registrations

56. Based on information and belief, including examination of tI'terecords of the

Copyright Oft'ice, Irnageline has been granted the foIlowing copyright t'egistrations by the

Copyright Oflice for works containing clip art:

a. The work titled "Imageline Design Gallery," Reg. No. VA 841-528,

effective March 18, t997, authored by "lmagcline, Incorporated," containing 2730

lmageline's Unlawful Actions Regarding Media Graphics

As recently a._'early August 1998, Riddick contacted vet another XOOb[ licensee



43/62


44/62

3 0 U 4 : 2 6 p n e o r c eP . R i d d i c k , U Ic 8 a 4 J 2 2 8 - 1 e e p . 2

5 2 . U p o n i n f o r m a t i o n a n d b e l i e f , p r i o r t o t h e d a t e o f t

s u c h r e g i s t r a t i o n s , I m a g 1 i r i e m a r k e t e d p r o d u c t s c o n t a i n i n

r e g i s t e r e d w o r k s b u t f a i l e d t o i d e n t i . j a l l s u c h p r i o r p r o d u c

a p p L i c a t i o n s . T h e o r r t h s i o & o f t h i s i n . f o n n a t i o n a l s o c o n s

t h e C o p y r i g h t O f f i c e a n d r e n d e r s t h e c o p y r i g h t s i n v a l i d .

3 . I r n a e l i n e ' s F a i l u r e t o R e g i s t e r U n d c r l v i n c r C o

5 9 . B a s e d o n t h e s t a t e m e n t s m a d e i n I m a g e l i n e ' s c o p y

( 1 ) i m a g e i n e D e s i g n G a l I e ( R e g . N o . V A 8 4 1 - 5 2 8 ) i s a d

G a l I c i y ; ( i i ) I m a g e l i n e M a s t e r G a l l e r y ( C o p y r i g h t R e g i s t r a

w o r k o f F i c t u r e P a k S u p e r B u n d l c ; a n d ( i i i ) P i c t u r e p a k S u p

7 4 6 - 7 7 3 )i s a d e r i v a t i v e w o r k o f F i c t u r e P a k I P i c t u r e P a k 2 , P i c

I a n d O f f i c e C l i p s . E a c h o f t h e f o r e g o i n g w o r k s i s a l s o a d

I m a g e l i n c f a i l e d t o d i s c l o s e i n i t s c o p y r i g h t r e g i s t r a t i o n a p

6 0 . I m a g e t i n e h a s n o t r e g i s t e r e d w i t h t h e C o p y r i g h t O f

1 , P i c t u r e P a k 2 , P i c t u r e P a k 3 , P i c t u r e E ' u k V a l u e P a k 1 , O f f

f a i l e d t o d i s c l o s e l i ti t sc o p y r i g h t r e g i s t r a t i o n a p p l i c a t i o n s A c t h r d i n g

r e c o v e r a r t y s t a t u t o r y o r o t h e r d a m a g e s f o r a U e g e d c o p y r i g

c o n t a i n e d i n P i c t u r e P a k 1 , P i c t t i r e P a k 2 , P i c t u r e P a k 3 , P i c t

o t h e r w o r k s t h a t J m a g e l i n e f b i l c d t o d i s c l o s e i n i t s c o p y r i g h

4 . F a i l u r e o f V a r i o u s i m a g e s t o O t i a 1 i f ' a s O r i R i n

6 1 . S o m e o f t h e d i n a t i m a g e s f o r w h i c h i m a g e l i n e c l a

n o t q u a l i f i a s o r i g i n a l w o r k s o f a u t h o i h . i p " u n d e r 1 7 U . S .1 0 2f o r t h e f o l l o w i n g r e a s o

a m o n g o t h e r s : .

1 7

- 4 6 ' -

Rug 20 _ U4:26p George P. Rxddick, III (8041228-168S p.24

Upon information and belief, pdor to the date of the applications that matured into8.

such registrations, Imageline marketed products confab'ring a portion ofthz clip art in the

registered works but failed to identi_ all such.prior products oo the cop) right registration

app_cations. The omisdon'of thi Lrd'ormafion also constitutes raisrepresentation and fraud on

the Copyright Office and renders the copyrights invalid.

3. Image]inn's Failure to Register Under|_n E (_opv_.'p.,hts

59. Based on the statements made in Imagel_ne's copyright reg[s_ation applications:

(i) Imageline Design Galle_ (Reg. No. VA 841-528) is a derivative work oflmagetine Master

Gallon-y; (ii) Iraageline Master Gallery (Copyright Regls_"afion No. VA 751-565) is a derivative

work of PictarePak SuperBundle; and (iii) PictarePak SuperBundlc (Copy'cilaht Reg. I%. VA

746-773) is a derivative work of FicturePak I, PicturePak 2, PicturePak 3, PicturePa.k ValuePak

I and Office Clips. Each of the foregoing works is also a derivative work or'other products that

ImageIine failed to disclose in its copyright registration applications.

60. Imagdlne has not registered with the Copyright Of.rice a copyright for._icturcPak

I, Pictur_Pak 2, PictureP._k 3, PicturePak ValuePak I, Office Clips or other works that Imageline

failed to disclose in its copyriglit registration applications. Ac_. rdingly, Imageliae cannot

recover any statutory or other damages for aUcged copyright infringement of clip art images

contained in P_.cturePak 1, PictttrePak 2, FicturePak 3, PicturePak ValuePak 1, Office Clips or

other works that/mageline thiled to disclose in its copyright regist'ratintt applications.

4. "FaHur_ 0t:Varj0us Images to Oualifv as_Original W0rka ot'Authorshlp

61. Some of the clip art images for which Imageline el.aims copyright ownership do

not qualify as "original works of authomldp" under 17 U.S.C. I02 for the following reasons,

among others:



45/62

- j u g U U 4 : f / p e c r e . c , - p . 2

a . s o m e c l i p a r t i m a g e s w e r e c o p i e d f r o m a r t t h a

b . s o m e c l i p a r t i m a g e s w e r e c o p i e d f r o m a r t t h a

o f o t h e r s ;

c . s o m e c l i p a r t i m a g e s c o p i e d o r i n f r i n g e d t h i r d

m a r k s ; a n d

d . s o m e c l i p a r t i m a g e s d o n o t e m b o d y s u f f i c i e n t

" o r i g i n u w o r ko fa u t h o r s h i p " u n d e r 1 7 U . S . C . 1 0 2 .

6 2 . B y s e e k i n g t o r e g i s t e r i m a g e s t h a t a r c c l e a r l y n o t "

u . n d e r 1 7 U . S . C . 1 0 2 ,I m a g e l i n e h a s m i s l e d t h e C o p y r i g h t O f f i c e , o

t h i s C o u r t ,t h e r e b yr e n d e r i n g u s c o p y r i g h t s a n d c o p y r i g h t r e g i s a t i o

C O U N TI( I n j u n c t i v e R e l i e f : F u l l D i s c l o s u r e o f A l l e g e d C o p y

6 3 . X O O M r e a l l e g c s a n d i n c o x p o r a t e s b y r e f e r e n c e t h e

p a r a g r a p h s 1 - 6 2 a b o v e .6 4 . X O O M r e q u e s t s t h a t t h i s C o u r t e n t e r a p r e l i m i n a r y

r e q u i r i n g t h a t I m a g e l i n c , C o m p l i a n c e S e r v i c e s , R i d d i c k a nN y s t r o md i s c l o s e :

a . e a c h c l i p a r t i m a g e f o r w h i c h I m a g e l i n e a s s e r t s

b . t o t h e f u l l e x t e n t o f t h e i r k n o w l e d g e , o f t h e f o r

i m a g e s a l l e g c d l y h a v e b e e n i n f r i n g e d u n d e r t h e C o p y r i

X O O M ' s l i c e n s e e s ( i n c l u d i n g M a c m i l l a n , A z t e c h a n d M

c . t o t h e f u l l e x t e n t

s e r v i c e o f X O O M o r a n y o f X O O M ' s l i c e n s e e s ( i n c l u d

G r a p h i c s ) o f s u c h c l i p a r t f o r w h i c h I m a g e l i n e a s s e r t s c

4 1

a

b.

of or.ben;

C,

marks; and

d.

some clip art images were copied from art that was in the public domain;

some clip_art images were copied fi'om art that is the copyrighted property

some clip art images copied or infringed third, party trademarks or service

some clip art image_ do not embody sufficient originality to constitute an

"original work of authorship" under 17 U.S.C. 102.

62. By seeking to register image_ that are clearly not "original work[s] of authorship"

under 17 U.S.C. I02, I.magellne has re%led the Copyright Office, other clip art distributors and

this Court, thereby rendering its copyrights and copyright registrations invalid.

COUNT I(Injunctive Relief: Full Disclosure of Alleged Copyright Infi':mgements)

63. XOOM realleges and incorporat_ by reference the-allegations set forth in

paragraphs 1-62 above.

64. XOOM requests that this Court enter a preliminary and permanent injunction

requiring that I.mageKne, Compliance Services, Rid dick and "_ystrom disclose:

a. each clip art image for which Iraageline asserts copyright ownership;

b. to the full extent or" their knowledge, of the foregoing clip art, which

images allegedly have been infringed under the Copyright Act by XOOM or any of

XOOM's licensees (including Macnfillan, Aztech and Media Graphics); and

c. to the fall extent of their knowledge, each occurrence in eat_h product or

servce of XOOM or any of XOOM's licensees (including Macmillan, Az'tech and Media

Graphics) of such clip art for which Imageline asserts copyright ownership.



46/62

- : p e c r e. c c ,I L L t E 0 4 1 2 2 8 L S S Sp .

C O U N T 1 1( D e c l a r a t o r y J u d g m e n t , I n j u n c t i v e R e l i e f a n d D a m a g

6 5 . X O O M r e a l l e g e s a n d i n c o r p o r a t e s b y r e f e r e n c e t h

p a r a a p h s 1 - 6 4 a b o v e .

6 6 . I f t h e C o u r t d e t e r m i n e s t h a t I m a g e l i n e o w n s v a l i d

i m a g e s , X O O M r e q u e s t s t h a tt h eC o u r t i s s u e a d e c l a r a t o r y j u d g m e n t t h a t t

t h r o u g hC o m p l i a n c eS e r v k e s ,R i d d i c k a n dN y s t r o m ) h a s m i s u s e d t h e s ec o p y r i g h t sa n d t h a t t h e

c o p y r i g h t s a r e i n v a l i d .

6 7 . X O O M a l s o s e e k s a d e c l a r a t o i y j u d g m e n t t h a t I m a

a n y c o p y r i g h t i n f r i n g e m e n t d a m a g e s f o r c l i p a r t i m a g e s f r

d i s t r i b u t o r s ,o r t h e e n d - u s e r s o f s u c h c l i p a r t d u e t o s u c h m i s u s e .

6 8 . B e c a u s e o f I t n a g e l i n e ' s c o p y r i g h t m i s u s e , X O O M

e n t e r a p e r m a n e n t i n j u n c t i o n r e s t r a i n i n g I m a g e l i n e ( a n d i t s

a g e n t s , a n d a l l p e r s o n s t o g e t h e r w i t h I m a g e l i r i e ) f r o m a s s e

c o p y r i g h t t o a n y c l i p a r t i m a g e s e n c o m p a s s e d b y i t s c o p y r

6 9 . A s a p r o x i m a t e r e s u l t o f I m n a g e l l r t & s c o p y r i g h t n i s

a n d p o t e n t i a l c l i p a r t l i c e n s i n g r e v e n u e a n d t h e r e s u l t i n g p

a r i d p o t e n t i a l c l i p a r t l i c e n s e e s . n d s u b - d i s t r i b u t o r s . X O O M

e x t e n t o f t h i s d a m a g ; b u t i t b e l i e v e s t h a t t h e d a m a g e f a r e

C O U N T I I I( D e c l a r a t o r y J u d g m e n t R e g a r d i n g I n v a l i d i t y o f I n i a g e l i

7 0 . X O O M r e a l l e g e s a n d i n c o r p o r a t e s b y r e f e r e n c e t h e

p a r a g r a p h s 1 - 6 9 a b o v e .

1 9

4 8

COUNT I!

(D_laratory 3ud_nent, Injunctive Relief and Damages for Copyright Misus=)

65. XOOM reaIIege_ md incoi'porates by reference the allegations set l'or_h in

pamg_aph_ 1-64 above.

66. If the Court detem'dnes that ImageI_e owns valid copyrights to any clip m

images, XOOM requests that the Court issue a de_lamto_jud'graent dmt [mageline (d{rectly and

through Compliance Services,iddickand Nystrom) has misused these copyrightsand that the

copyrights arcinvalld.

67. XOOM aim seeks._declaratoryjud_'ncnthatImagelincisnot entitled orecover

any copyright infringementamages for clip artimages from XOOM, itslicensees,tssub-

distributors, r the end.usersof such clipartduc tosuch misusc.

68. Because oflmagclinc's copyright misuse,XOOM further equsststhattheCourt

enter apcrmancnt injunctionestrainingmagclinc(and itsofficers,irectors,mployees and

agents,and allpersons together with Imageline)from ass_n'dngo anyone that itowns a valid

copyright to any clip art images encompassed by its copyright registrations.

69. As a proximate result ofImagetin's copyright*misuse, OOM has lostcurrent

and potentialclip artLiccming revenue and the resultingrofit,s well as the goodwillofpresent

and potential cllp art licensees d sub-distributors. OOM does not yet know the full monetary

extent ofthls damage, but itbelievesthatthedamage farexceeds $75,000.

(Declaratory Judgment Regarding Invalidity of Imageline's Copyright Registrations)

70. XOOM rcallegcs and incorporates by reference the allegations set forth in

paragraphs 1-69 above.



47/62


48/62

. u u 4 : p e c r e e p . R , d d L c k ,( 8 Q 4 1 2 2 8 L 6 8 S .

7 8 . T h e I n i a g e i n e D e f e n d a n t s i n t e n t i o n a U y h a v e f o r c e

s u b - d i s t r i b u t o r s , M a c m i l l a n , A z t e c h a n d M e d i a G r a p h i c s )

l i c e n s i n g o f t h e c l i p a r t t h a t X O O M l i c e n s e d f r o m S p r n t b y

a l l e g e d c o p y r i g h t e d p r o p e r t y .

7 9 . T h u s , I m a g e l i n e D e f e n d a n t s ' r e f u s a l h a s i n t e r f e r e d

c o n t r a c t u a l r e l a t i o n s h i p b e t w e e n X O O M a n d S p r i n t a n d b e t

i n c l u d i n g M a c m i 1 l a n A z t e c h a n d M e d i a G r a p h i c s .

8 0 . T h e I r n a g c l i n e D e f e n d a n t s ' a c t i o n s h a v e p r o x i m a t e l

a . r e s u l t , X O O M h a s b e e n d a m a g e d , s i n c e i t c a n n o l o n g e r o

a r t l a w f u l l y l i c e n s e d f r o m S p r i n t a n d n o t s u b j e c t t o a n y c l a i

I m a g e l i n e . X O O M d o e s n o t y e t k n o w t h e f u l l m o n e t a r y e x

t h a t t h e d a m a g e f a r e x c e e d s 7 5 , O 0 O .

C O t . T N T V

( C o n s p i r a c y t o I n t e n t i o n a l l y I n t e r f e r e w i t h X OC o n t r a c t s w i t h S p r i n t a n d X O O M ' s S u b - d i s t r i b

E l . X O O M r e a l l c g c s a n d i n c o r p o r a t e s b y r e f e r e n c e t h e

p a r a g r a p h s 1 - 8 0 a b o v e .

8 2 . E a c h o f t h e I r n a g e l i r i e D e f e n d a n t s h a s c o n s p i r e d w i

i d e n t i f y f u l l y I m a g e l i n e ' s a l l e g e d c o p y r i g h t e d p r o p e r t y t o X

8 3 . A sr e s u l t o f t h i s c o n s p i r a c y , X O O M w a s f o r c e d t o d

d i s t r i b u t i o n a n d l i c e n s i n g o f t h e c l i p a r t t h a t i t l i c e n s e d f r o m

8 4 . T h u s , a s a r e s u l t o f t h i s c o n s p i r a c y , t h e c o n t r a c t u a l

a n d S p r i n t a n d b e t w e e n X O O M a n d i t s s u b - d i s t r i b u t o r s h a v

2 1

5 0

Hue _U uu u4:d_p Georee P. Rtdd_ck, III t8041228-1S8S p.28

78. The Imageline Defendants intentionally have forced XOOM (as well as XOOM's

sub-distributors, Macmillan, Aztech and Media Graphics) to discontinue the use, distribution and

licensing of the clip art that XOOM llcermed from Sprint by refusing to identify fully Irnageline's

alleged copyrighted property.

79. Thus, Imageline Defendants' refusal has interfered with. and disrupted the

contractual rclatio_hip between XOOM and Sprint and betwe_rt XOOM and its sub-distributors,

including Macmillan, Aztech and Media Graphics.

80. The Imagelinc Defendants' actions have proximately caused injury to XOOM. As

a result, XOOM has been damaged, since it can rio lon

bernina vs. riddick/imageline: 081810-17-1

Documents