MEMORANDUM OPINION AND ORDER
On Nоvember 19,1997, the Court conducted a non-jury trial of this case. After consideration of the admissible evidence presented therein, along with the arguments of counsel, the Court renders this decision.
Plaintiff Playboy Enterprises, Inc., has prevailed in its claim for direct and indirect copyright infringement against Defendants Webbworld, Inc., Bentley Ives, and Benjamin Brian Ellis, who owned or operated an Internet website that offered sexually-oriented photographs and images to subscribers for a monthly fee. The Court finds that those Defendants impermissibly reproduced, distributed, and displayed images substantially identical to ones appearing in Plaintiff’s copyrighted publications. With regard to five of the copyrights, the infringement was willful. In addition to statutory damages of $310,000 awarded at summary judgment, the Court awards $129,000 in statutory damages, plus attorney’s fees. A permanent injunction will issue. On all remaining claims, the Court finds for Defendants.
I. PROCEDURAL HISTORY
On December 2, 1996, Plaintiff Playboy Enterprises, Inc. (“PEI”), filed this action for copyright infringement, trademark infringement, and unfair competition. After a hearing on December 9, 1996, the . Court granted a temporary restraining order, and on January 6, 1997, thе Court entered an agreed preliminary injunction. Both orders forbad Defendants, owners and operators of an adult-oriented Internet website, from directly or indirectly infringing PEI’s copyright and trademark registrations.
On June 27, 1997, Judge Dale E. Saffels, a visiting judge to whom the ease was referred, granted summary judgment against Defendant Webbworld, Inc., for direct copyright infringement of sixty-two PEI images.
See Playboy Enterprises, Inc. v. Webbworld, Inc.,
In the present opinion, the Court disturbs neither the conclusion nor the reasoning of Judge Saffels’s summary judgment. The issues remaining for decision after non-jury trial are PEI’s claims for the following: (1) copyright infringement of twenty-nine PEI registrations — the sixteen on which Judge Saffels reserved opinion, plus thirteen not included in PEI’s motion for summary judgment; (2) vicarious liability of Defendants Ellis and Ives for the remaining twenty-nine alleged infringements, and of Defendant Gur-kin for all of the alleged infringements; (3) willfulness; (4) trademark infringement and unfair competition under the Lanham Act; (5) Texas common-law unfair competition; (6) dilution of PEI’s trademarks; and (7) contempt against Ellis for alleged violation of the preliminary injunction. PEI requests *549 statutory, actual, and punitive damages, a permanent injunction, and attorney’s fees.
II. FACTUAL BACKGROUND
Since approximately 1953, Playboy Enterprises, Inc. (“PEI”), has published the monthly Playboy magazine and other publications. It is undisputed here that PEI owns valid trademark or service mark registrations for the famous “Rabbit Head” design, for the name “Playboy,” for the name “Playboy’s Playmate Review,” and for. the name “Playmate.” It is also undisputed that PEI holds valid copyrights for the images in its magazine issues and other publications.
Defendant Webbworld, Inc. (‘Webb-world”), is a Texas corporation that operated “Netpics,” an adult-oriented site on the Internet’s World Wide Web, from about May 1996 until February 1997. Webbworld ceased operating at that time upon seizure of their equipment in a raid by the Fort Worth police on charges of child pornography. Pretrial Order, Stips. ¶5. The gravamen of PEI’s Complaint here is that the Defendants infringed certain copyrighted nude and semi-nude female images (“the images”), some of which bore PEI trademarks. Webbworld made those images available on the Netpics site to Internet users for a monthly subscription fee.
Webbworld had three principals, individual Defendants Bentley Ives (“Ives”), James Gurkin (“Gurkin”), and Benjamin Brian Ellis (“Ellis”). Ellis had the original idea for the Netpics site and wrote the software that allowed it to function. Gurkin and Ives contributed the start-up capital. Ives was, until the final month of the company’s existence, sole shareholder and president of Webb-world. Gurkin worked as Webbworld’s customer service representative. The net profits of the business were distributed 50% to Ellis, and 25% each to Gurkin and Ives.
The equipment for Webbworld’s Netpics website consisted of fifteen personal computers, a modem, and three telephone lines, all of which were located in an office building in Dallas, Texas. One of the computers functioned as a news server; one handled accounting and administrative data; and the remaining twelve were used as web servers. The web servers were where the Netpics site “existed” on the World Wide Web. They were used to store, reproduce, display, and distribute adult images to Webbworld subscribers.
Webbworld obtained the images that it sold from selected adult-oriented Internet “newsgroups.” A newsgroup is an Internet forum for the exchange of ideas by people of similar interests. Newsgroups exist on the Usenet, which like the World Wide Web is an aspect of the Internet. A newsgroup typically specializes in a certain subject area, such ■ as sports, for example, or Cajun cooking. A substantial number of newsgroups are devoted to sexually explicit material. Newsgroups feature discrete collections of information called “articles.” Newsgroup participants may “post” (upload) articles, which consist of text and/or images. Images may be posted by using hardware called a scanner to convert, for example, a photograph to a digital file, which may then be uploaded onto the newsgroup in the same way that text is transferred. Once online and within a newsgroup, a participant may post an article, may view one of many articles on the computer screen, and may download an article to his or her computer for later retrieval or printing. None' of the Defendants here themselves posted any of the PEI images at issue to any of the newsgroups.
Webbworld obtained its images from selected newsgroups according to the following general method. Defendant Ellis selected the particular adult-oriented newsgroups to be downloaded. Periodically, Webbworld received a “news feed,” which consisted of digital files from the selected adult newsgroups. The information was downloaded onto the news server computer. The feed consisted of both text and images, representing all of the new material that had been posted onto the newsgroup since the last feed.
The heart of thе Webbworld operation was “ScanNews,” software that Ellis had developed. ScanNews took the news feed, discarded most of the text, and retained the sexually-oriented images. A small amount of identifying text was sometimes retained. After the news feed was edited, the news ser *550 ver would announce to the twelve web servers, via the ScanNews software, that its images were ready to be transferred. Each of the web servers would contact the news server computer and copy into memory the new adult images stored there. The news server then discarded that data to make room for the next news feed.
Besides discarding text, the ScanNews software altered the news feed in a second way. It created two “thumbnail” copies, one large and one small, for each of the adult images downloaded from the Usenet. The thumbnail images enabled Webbworld to display many images on a single screen. Moreover, the thumbnails could be downloaded more quickly than, full-sized images. The thumbnails were not part of the news feed; they were created by the ScanNews software to facilitatе Webbworld’s sale of the images they represented.
After being loaded onto the web servers, the thumbnail and full-sized adult images were available to any Internet user willing to pay Webbworld a subscription fee of $11.95 per month. The subscription process could be completed online in about 30 seconds with a major credit card. Before gaining access to the Webbworld Netpics site on the World Wide Web, a potential user would first have had to gain access to the Internet via his or her Internet service provider (“ISP”), sometimes called an access provider (“LAP”). Then, the person would employ browser software to access various sites on the World Wide Web. Webbworld’s Internet address was “http://www.netpics.com.” That address would be typed into a user’s browser software for immediate access to Webbworld’s site.
Upon entering Netpics, a subscriber was given the choice whether to view images in large or small thumbnail format. After making that choice, the user could view a full-sized image by clicking on the corresponding thumbnail. Webbworld provided instructions to its subscribers about viewing images and about downloading them into the memories of their own computers for later retrieval.
Every day, Webbworld obtained between 5,000 and 10,000 new images. An approximately equal number were deleted to make room for the new arrivals. On average, an image was stored on Webbworld’s computers and thus made available to subscribers for about six days before being deleted. Webb-world normally stored and displayed about 40,000 to 70,000 images at any given time.
During the time Webbworld was in operation, many hundreds of copyrighted PEI images appeared on the website. Some of those images appeared in close association with one or more of PEI’s trademarks. PEI never authorized Webbworld to reproduce, display, or distribute any of those images or marks.
III. DIRECT COPYRIGHT INFRINGEMENT
Based on the facts related above, PEI alleges that Defendant Webbworld is directly liable for copyright infringement. For the reasons that follow, the Court agrees.
To prevail on a claim for direct copyright infringement, PEI must prove (1) ownership of the asserted copyrights, and (2) “copying” by Webbworld.
See Lakedreams v. Taylor,
In this ease, PEI has submitted to the Court twenty-nine copyright certificates of registration. See Plf s Trial Exhibit (“Exh.”) 5. The parties have stipulated that the registrations are valid and enforceable. Supp. Stip. & Exh. A (filed November 18, 1997). Accordingly, the sole element of infringement remaining for PEI to prove is whether Webbworld “copied” the registered images.
“Copying” is a judicial shorthand for the infringement of any of a copyright
*551
owner’s exclusive rights.
Worlds of Wonder, Inc. v. Veritel Learning Systems, Inc.,
In this case, Webbworld cannot claim to have lacked access to PEI’s famous publications. The uncontroverted testimony at trial is that PEI’s periodicals are widely distributed throughout the United States.
Even if proof of access were lacking, however, the Court would still find “copying” to exist. The electronic images downloaded from Webbworld’s computers and offered as evidence at trial are not merely “strikingly similar” to PEI’s photographs, but are virtually identical. See Exh. 5 (consisting of twenty-nine tabs with the relevant copyright registration, a photocopy of the copyrighted images, and copies of identical images downloaded from the Netpies site). Furthermore, a few of Netpies’ electronic copies self-pro-elaim their origin by bearing a PEI title or emblem.
Having established that the accused electronic files are copies of PEI’s photographs, PEI must establish that Webbworld has violated one or more of the five exclusive rights granted to a copyright holder.
See Playboy Enterprises, Inc. v. Starware Pub. Corp.,
(1) Reproduce the copyrighted work;
(2) Distribute copies of the copyrighted work to the public by sale or other transfer of ownership; and/or
(3) Display the copyrighted work publicly.
17 U.S.C. § 106. Using, or authorizing the use of, a copyrighted work in any one of these three ways, without permission of the copyright owner, constitutes actionable copyright infringement.
Starware Publishing Corp.,
First, Webbworld “reproduced” unauthorized copies of copyrighted PEI images. On each of the twelve Webbworld web server computers and for each of the images at issue, Webbworld created two thumbnail copies and also reproduced a full-sized image downloaded from the' newsgroup.
See MAI Systems Corp. v. Peak Computer, Inc.,
Second, Webbworld “distributed” PEI’s copyrighted works by allowing its users to download and print copies of electronic image files. Those files, stored on the web servers, contained virtually exact reproductions of copyrighted PEI images. Thus, Webbworld violated PEI’s exclusive right to distribute its copyrighted works.
See Central Point Software, Inc.,
Finally, Webbworld violated PEI’s exclusive right to “display” its copyrighted works. To display a work means “to show a copy of it, either directly or by means of a film, slide, television image, or any other *552 device or process.” 17 U.S.C. § 101. Webb-world allowed its paying subscribers to view PEI’s copyrighted works on their computer monitors while online. Such action constitutes a display, as the Frena court explains:
The concept of display is broad. It covers “the projection of an imáge on a screen or other surface by any method, the transmission of an image by electronic or other means, and the showing of an image on a cathode ray tube, or similar viewing apparatus connected with any sort of information storage and retrieval system.” H.R.Rep. No. 1476, 94th Cong., 2d Sess. 64 (Sept. 3,1976), reprinted in 1976 U.S.Code Cong. & Admin.News 5659, 5677. The display right precludes unauthorized transmission of the display from one place to another, for example,- by a computer system. See H.R.Rep. No. 1476, 94th Cong., 2d Sess. 80 (Sept. 3, 1976), reprinted in 1976 U.S.Code Cong. & Admin.News 5659, 5694.
Defendant Ives testified that no image existed until the Netpics subscriber downloaded it. That assertion is disingenuous. The image existed in digital form on Webbworld’s servers, which made it available for decoding as an image file by the subscriber’s browser software. The subscriber could view the images merely by visiting the Webbworld site. The evidence unequivocally shows that Webbworld electronically reproduced, distributed, and displayed PEI’s protected images.
Webbworld’s primary defense to the claim of copyright infringement is that, as a provider of .access to Usenet images, it served as a mere conduit between its subscribers and adult-oriented newsgroups.
See Religious Technology Center v. Netcom OnLine Communication Services, Inc.,
Webbworld’s argument was rejected at summary judgment and is similarly unavailing after the additional evidence presented at trial.
See Webbworld,
Also unlike the Defendant in
RTC,
Webb-world did not function as a passive conduit of unaltered information. Instead, Webbworld functioned primarily as a store, a commercial destination within the Internet. Just as a merchant might re-package and sell merchandise from a wholesaler, so did Webb-world re-package (by deleting text and creating thumbnails) and sell images it obtained from the various newsgroups. In contrast to the defendants in
RTC,
Webbworld took “affirmative steps to cause the copies to be made.”
RTC,
Webbworld contends that it had no control over the information its software retrieved from the Usenet and no control over the images posted therein.
See RTC,
For those reasons, the Court rejects Webbworld’s defenses and holds it directly hable for infringing PEI’s twenty-nine copyright registrations at issue in trial of this ease.
IV. WILLFULNESS
PEI claims that Webbworld’s infringement was willful. A defendant acts willfully if he knows his actions constitute an infringement; the actions need not have been malicious.
Broadcast Music, Inc. v. Xanthas, Inc.,
At trial, PEI offered evidence of certain images downloaded from the Webbworld site that infringed five of its copyright registrations. See Exhs. 5, 6. These images appeared on Netpics and were, downloaded by PEI after Webbworld was on .notice, by way of a temporary restraining order issued by this Court, that its site contained infringing material. Many of the images are instantly recognizable as belonging to PEI because of the trademark phrases or emblems printed on them. Furthermore, the images originated from a newsgroup called “alt.binaries.erotica.centerfolds.” The title of that particular newsgroup, though not a PEI trademark, is sufficiently closely associated with PEI magazines to have put Webbworld on notice that the newsgroup potentially contained PEI images. Webbworld continued to carry that newsgroup until the business closed in February 1997.
Defendant Ives, president of Webbworld, testified at trial that anyone would have known that most óf the images at issue belonged to PEI. Ives further testified that he knew that the “centerfolds” newsgroup contained infringing images and that he did not take any steps to prevent its use.
Defendants Ives and Ellis also testified, however, that the infringements were innocent. They maintained that identification and elimination of all PEI images was impossible and therefore that no infringement might be termed “willful.”
The Court disagrees. Elimination by manual monitoring would have been difficult and expensive, but not impossible, particularly for images as obviously infringing as the ones at issue here. The evidence shows that Webb-world implemented substantial effort to combat the infringement. Notwithstanding its “compliance program,” Webbworld chose to continue to copy from a newsgroup that essentially advertised by its “centerfolds” name that it carried PEI images. After it was on notice of infringement, Webbworld chose to stay in business without implementing a system that would reliably delete even such obvious transgressions. Such an action constitutes willful infringement.
See Broadcast Music, Inc.,
V. VICARIOUS INFRINGEMENT
PEI claims that each of the individual Defendants should be held vicariously liable for Webbworld’s infringement. Participants in copyright infringement are jointly and severally liable as tortfeasors.
Swallow Turn v. Wilson,
On summary judgment in this ease, Judge Saffels held Defendants Ellis and Ives vicariously liable for the sixty-two direct infringements decided at that time.
See Webb-world,
Defendant Ives, until late January 1997, owned 100% of the outstanding Webb-world shares of stock and was Webbworld’s president and director. He handled most of the legal and financial aspects of the business. Ives testified at trial that he had no involvement in the day-to-day operations of the business. He kept his full-time position with the United States Postal Service and devoted only about 20 hours per week to Webbworld. He viewed the Netpics site only a “couple of times” per week, typically when a change was made or a question raised. His testimony, corroborated by Defendant Gur-kin, was that operational decisions were made only by consensus and that Ives did not—and did not believe he had the authority to—give orders to Ellis regarding operation of the business. Ives testified that he could “make suggestions” but could not control Ellis.
The reluctance of Ives to exercise his authority is not determinative of the issue. Courts that have examined the issue of vicarious liability have focused not on actual exercise of control but rather on the “right and ability” to exercise control.
E.g., Softel, Inc. v. Dragon Medical and Scientific Comms., Inc.,
It is undisputed that Ives received a significant and direct financial reward of 25% of Webbworld net profits for his efforts. Accordingly, Ives, along with Ellis, is vicariously liable for each of the remaining infringements at issue in this case.
The analysis with regard to Defendant Gurkin reaches a different result. Gur-kin, who formerly worked for the United States Postal service and owned a security agency, contributed start-up capital to Webb-world. He derived' significant financial benefit from - the business in the form of 25% of the net income. With regard to establishing the requisite supervisory authority over the infringing activity, however, PEI has not met its burden as to Gurkin.
Gurkin worked as Webbworld’s customer service representative, spending approximately 3-5 hours per day fielding and responding to subscribers’ e-mail. Although the parties have stipulated that Gurkin, along with Ellis and Ives, “hаd the right, authority and ability to control the operations of the Netpics website,” the Court finds that Gur-kin did not have authority or supervision over the actual infringing activities. He was not a Webbworld shareholder until the very end of the company’s existence. Gurkin testified that he had no access to the ScanNews software. Moreover, PEI did not connect him to any decision-making ability regarding which newsgroups the site used as sources of material. Accordingly, the Court finds that Gurkin should not be held vicariously liable for any of the infringements.
*555 VI. TRADEMARK INFRINGEMENT
PEI is the undisputed owner of valid federal trademark and service mark registrations, including PLAYBOY®, PLAYMATE®, the RABBIT HEAD DESIGN®, and PLAYBOY’S PLAYMATE REVIEW®. 1 In this case, PEI claims that Webbworld has infringed those trademarks. The Court disagrees.
Under section 1114(1) of Title 15, United States Code, any person who uses in commerce an imitation of a registered mark, without the registrant’s consent and in a way that is likely to cause confusion, is hable for trademark infringement. Likelihood of confusion is, therefore, the touchstone of trademark infringement.
Soc. of Financial Examiners v. Nat’l Ass’n of Certified Fraud Examiners, Inc.,
In the Fifth Circuit, likelihood of confusion is determined by analysis of the following “seven digits”:
(a) the type of trademark at issue (i.e., the “strength” or distinctiveness of the mark);
(b) similarity of the trademark and the accused term or design;
(c) similarity of the products or services;
(d) identity of retail outlets and purchasers;
(e) identity of advertising media used;
(f) the defendant’s intent; and
(g) actual confusion.
Id. at 228 n. 10.
A court must “evaluate the weight to be accorded the individual factors” and then make its ultimate decision thereon.
AmBrit, Inc. v. Kraft, Inc.,
In the pre-trial order, the parties here have stipulated that the Playboy marks are “famous.” Several courts, too, have recognized that PEI’s marks are both strong and valuable.
E.g., Playboy Enterprises, Inc. v. Chuckleberry Pub., Inc.,
Nevertheless, the Court finds no significant likelihood of confusion to be present in this cаse. PEI presents no evidence of actual confusion by Webbworld subscribers or others.
See Moore Business Forms, Inc. v. Ryu,
Ironically, PEI established at trial that its “purchasers” are not the same as Webb-world’s. PEI witness Gene Snyder testified he found primarily hard-core pornography on Webbworld’s site. Robert Perkins, executive vice-president of PEI in charge of marketing, testified at trial that the vast majority of PEI customers are decidedly nоt consumers of pornography. Accordingly, the fourth digit weighs against confusion.
Finally, the Court agrees that the Webb-world home page is unequivocal in its purpose and affiliation, or lack thereof:
“Cyberporn on the Internet!?”
It’s really out there, hundreds of MegaBytes of uncensorable new pictures from around the world every day! It’s buried in so-called USENET news “articles.” But it’s very time consuming and requires lots of technical knowledge to find, download, decode, and view pictures from USENET news articles ... Now you don’t have to put up with it anymore. Netpics has done all of the work for you; we’ve found the newsgroups, we comb them for pictures, and we present them to you right here, on the Web (or via FTP). All you have to do is sit back and click!
Exh. 7 (boldface and emphasis in. original). The origin of Webbworld is clear; its lack of sponsorship by PEI is equally apparent. The weight of the credible evidence shows that Defendant’s intent was neither to infringe PEI’s trademarks nor to generate confusion. The presence of PEI’s marks was, moreover, incidental and even irrelevant to the product that Webbworld offered and its subscribers bought.
Cf. Universal Money Centers, Inc. v. American Tel. & Tel. Co.,
It is true that some of the other “seven digits” are present here. Both PEI and Webbworld are in the business of entertainment publishing, and both publish and adver-. tise on the World Wide Web. The marks found on Netpics are identical to PEI’s.
See Exxon Corp. v. Texas Motor Exchange of Houston, Inc.,
In a similar Internet ease involving PEI’s trademarks, a Florida district court found trademark infringement to exist.
See Frena,
Such is not the case here. Although Webbworld used the corresponding newsgroup name to identify the source of its files, the evidence shows that in only a very few of the 170-180 Usenet sources was a PEI trademark involved. Although other filenames may have referred to PEI publications,
e.g.,
“covers” or “centerfolds,” the registered
*557
marks are not present. Here, unlike in
Fre-na,
there is no evidence that Defendants intended to usurp PEI’s goodwill.
See id.
at 1561. PEI presented no evidence that Webbworld attempted to generate confusion by superimposing its own name on the PEI images, as did the
Frena
defendant.
See id.
at 1559. Furthermore, as explained previously, the evidence does not support any suggestion of affiliation or sponsorship of the site by PEI.
Cf. id.
at 1561 (“It is well established that ‘falsely suggesting affiliation with the trademark owner in a manner likely to cause confusion as to source of sponsorship constitutеs infringement.’ ”) (quoting
Burger King v. Mason,
PEI has not proved by a preponderance of the evidence that Webbworld infringed its trademarks phrases and image. Because there is no direct trademark infringement, PEI’s claim of vicarious infringement by the individual Defendants fails as well.
VII. UNFAIR COMPETITION
A Lanham Act
PEI brings a claim for “unfair competition” under Section 43(a) of the Lanham Act.
See 15
U.S.C. § 1125(a).
3
As with trademark infringement, “likelihood of confusion” is the key test for determining whether such a false designation has occurred.
Louisiana World Exposition, Inc. v. Logue,
B. Texas Common Law
PEI brings a similar claim for unfair competition under Texas common law. Unfair competition relates to “causes of action arising out of business conduct which is contrary to honest practice in industrial or commercial matters.”
American Heritage Life Ins. Co. v. Heritage Life Ins. Co.,
Under the same evidence discussed above, PEI has not shown unfair competition under Texas law. Neither the testimony nor the exhibits indicate that PEI sponsored, endorsed, or approved the images available on the website.
See Jud Plumbing Shop on Wheels v. Jud Plumbing & Heating, Inc.,
*558
Unfair competition under Texas law also includes misappropriation of a business opportunity.
United States Sporting Prods., Inc. v. Johnny Stewart Game Calls, Inc.,
In this case, the evidence tends to establish the first element of PEI’s claim. With regard to the second element, however, the Court is not persuaded by the evidence at trial that Webbworld obtained any “special advantage” over PEI in business competition.
On the third element, PEI’s claim fails conclusively. The testimony of Robert Perkins, PEI’s executive vice-president for marketing, is that PEI did not see any drop in sales during the time period in which Webb-world operated. No evidence of relative stock price was offered. No probative evidence of diminution of value of PEI’s copyrights was introduced. In short, the Court finds no evidence of actual “commercial damage” to PEI resulting from Webbworld’s activities.
For those reasons, PEI has not met its burden to prove a state-law claim for unfair competition.
VIII. DILUTION
Under section 1125(c) of Title 15, United States Code, PEI brings a separate cause of action1 for “dilution” of its trademarks.
4
The owner of a famous mark may obtain relief under an anti-dilution statute if there is a likelihood of dilution due to (1) “blurring,” a diminution in the uniqueness and individuality of the mark; or (2) “tar-nishment,” an injury resulting from another’s use of the mark in a manner that tarnishes or appropriates the goodwill and reputation associated with the plaintiffs mark.
See Exxon Corp. v. Oxxford Clothes, Inc.,
In this case, no probative evidence was presented at trial on the issue of “blurring.” Instead, the evidence goes primarily to “tarnishment.” PEI employee Gene Snyder testified that PEI images appeared on Netpics in close proximity to what he regards to be hardcore pornography—images with “explicit sexual content.” 5 Perkins testified that display of PEI images in such an environment serves to diminish the prestige of the marks. PEI’s brand image is one of romance аnd joie de vivre, he testified; PEI’s “core promise” to its consumers is that PEI images represent “tasteful nudity” in photography of the highest quality. Perkins opined that if the public were to perceive that PEI had gone into the pornography business, the effect on sales would be disastrous. ■
On cross-examination, however, Perkins admitted that PEI has a wide channel of *559 distribution that includes adult bookstores. Perkins also admitted that PEI cannot control where and how its publications or centerfolds are displayed by merchants and the public. Furthermore, as the Court has already found, the PEI marks and images had only a de minimis presence on the Netpics site. For these reasons and others previously stated, the Court finds no dilution to have occurred here.
IX. CONTEMPT
Finally, PEI moves for contempt of court against Defendant Ellis for alleged violation of the preliminary injunction in effect in this case. A party commits contempt when he violates a definite and specific order of the court requiring him to perform or to refrain from particular conduct and when he acts with knowledge of the court’s order.
Travelhost, Inc. v. Blandford,
In a civfl contempt proceeding, the movant bears the burden of establishing the elements of contempt by clear and convincing evidence.
Petroleos Mexicanos v. Crawford Enterprises, Inc.,
In this case, Defendant Ellis was restrained by order of January 6, 1997, from “directly or indirectly reproducing, distributing or displaying any computer file or image that is substantially similar to any copyrighted PEI image or photograph.” PEI claims that Ellis has violated that proscription by his business rеlationship with a California company named Yehudi International Network Group, Inc. (“Yehudi”).
It is undisputed that in about April 1997, three months after the preliminary injunction was entered, Ellis agreed to sell the Scan News software to Yehudi for $15,000. Before that, a. licensing agreement was contemplated between Ellis and Yehudi, pursuant to which Ellis would receive 50% of Yehudi’s profits. Furthermore, Ellis received some $20,000 for “consulting services” he performed for Yehudi during that time: Since then, PEI has filed an infringement lawsuit against Yehudi along lines similar to this one. In the California lawsuit, PEI claims that Yehudi began operating the Netpics site after Webbworld’s demise — under the same name, with the same ScanNews software, and on the same infringing basis. On September 10, 1997, PEI obtained a preliminary injunction against Yehudi based on the alleged Netpics infringements. PEI now claims that Ellis assisted Yehudi'in its operations and is thus in violation of the preliminary injunction entered in this case.
At trial, Ellis testified that he did not assist Yehudi in any infringing activities. According to Ellis, his consulting work entailed loading the software, making sure the servers and e-mail were operating cprrectly, and setting up and backing up the system. He testified that the ScanNews software need not be used to access and copy images from adult newsgroups; rather, the subject matter might be anything from flowers to sound or video clips, depending on how the software is used. Ives indirectly confirmed the possibility of Ellis’s innocent participation in that regard by referring to Scan-News as “percussive” software that would require a certain amount of consulting for proper operation regardless how it was used. See Ives Depo.
In his trial testimony, Ellis denied knowledge of Yehudi’s activities and denied consulting with a view to reviving the “Netpics” site. Furthermore, he denied involvement with Yehudi’s choice of newsgroups. Ellis disavowed any knowledge of the preliminary injunction in place in the California lawsuit. *560 He testified that he ceased consulting for Yehudi and sold them the software outright because Yehudi was not paying him 50% of its net profits as it had agreed to do in return for the SeanNews license. Although Ellis testified that he agreed to license the software to Yehudi under the terms above, the written agreement PEI admitted into evidence was unexecuted. Ellis testified that no signed аgreement exists. Ellis Depo.
Based on this evidence, the Court believes it is more likely than not that Ellis violated the preliminary injunction in effect in this ease. The standard for contempt, however, is more stringent.
See Travelhost,
X. RELIEF GRANTED
Pursuant to the claims on which PEI has prevailed, PEI asks for relief of statutory damages, a permanent injunction, and attorney’s fees. For the. reasons that follow, each request is granted.
A. Statutory Damages for Copyright Infringement
PEI has elected to pursue statutory damages for its established claim of copyright infringement. A copyright owner whose copyright has been infringed may, at any time before judgment, elect to recover either actual damages or statutory damages. 17' U.S.C. § 504;
see Central Point Software,
Within the range defined by the statutory maximum and minimum, the court has virtually unfettered discretion in setting the damage award.
F.W. Woolworth Co. v. Contemporary Arts,
In this case, the evidence shows that in its 9-month existence, Webbworld generated approximately $670,000 after some but not all expenses, and before taxes. According to further testimony from Defendant Ives, Webbworld’s net income was between $400,000 and $450,000 for the relevant period. The testimony is not clear to what extent, if at all, appropriating PEI images rather than generating original images served to decrease Webbworld’s operating expenses.
*561 The weight of the evidence establishes that even after becoming aware of obvious infringements, Webbworld continued to operate overall at approximately the same pace, and with an increasing clientele, while declining to develop software or an effective manual monitoring plan to eliminate copying of PEI images. A simple reduction in the number of newsgroups covered would have fаcilitated lawful operation. Under those circumstances, continuing to operate virtually unrestrained showed, at best, reckless disregard of PEI’s legal rights.
As a somewhat mitigating factor, the Court finds that Webbworld and its principals attempted to put a “compliance plan” in place after entry of the TRO to reduce the risk of infringement. Some steps were taken to accomplish that goal. Furthermore, the Court finds that the twenty-nine infringements at issue at trial are substantially less identifiable as PEI images than the ones submitted at summary judgment. Specifically, the images do not appear for the most part in proximity to a title, phrase or emblem connecting them to PEI. Accordingly, the Court regards these infringements as more difficult to detect and therefore as somewhat more likely to be “innocent” than the ones at issue in summary judgment.
PEI appears to find great negative significance in that Defendants made a relatively large amount of money for a relatively small investment of capital and time. On the contrary, the Court finds no reason to deter capitalism in the technological оr any other arena.
Copyright infringement, however, must not be allowed to serve as the cornerstone of a profitable business. Under all of the circumstances of this case, the Court awards to PEI $1,000 for each of the 29 copyrights at issue at trial. For the 5 infringements found to be willful, the Court awards an additional $20,-000 per infringement. Along with the $310,-000 awarded at summary judgment, the total amount of statutory damages awarded in this case is $439,000.
B. Permanent Injunction
In addition to damages, PEI asks the Court to enter a permanent injunction. Under the Copyright Act, a court may grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain mfringement of a copyright. 17 U.S.C. § 502(a). Permanent injunctive relief is “never lightly given.”
Posada v. Lamb County, Tex.,
In this case, PEI has prevailed in its сase for copyright infringement. The burden that would be imposed on Defendants— merely to refrain from further infringement — -is light in comparison to the threatened injury to PEI should such infringement occur. Furthermore, the Court finds that the public interest, to the extent it is involved at all in this private business matter, is affirmatively served by requiring continuing, strict adherence to intellectual property law in the relatively uncharted arena of Internet commerce.
It remains to be decided only whether PEI has an adequate remedy at law in this case. To prevail on this issue, PEI must show a significant threat of cognizable injury and that money damages would not fully repair the threatened harm.
Humana, Inc. v. Avram A. Jacobson, M.D., P.A,
In analyzing the evidence in this case, the Court revisits Robert Perkins’s testimony
*562
that PEI’s reputation would be damaged by-continued display of PEI images in close conjunction with “hard-core pornography.” Although the Court did not find the past harm to have risen to the level of tarnishment required for dilution of trademark under all the circumstances, the evidence is at least probative on the issue of potential harm for which legal remedy is inadequate.
See Valley v. Rapides Parish Sch. Bd.,
On the other hand, a finding of willful infringement has. been made in this case. Defendants have not shrunk from, continuing their activities even when put on notice of infringement.
See Dream Dealers Music v. Parker,
Under all of these circumstances, PEI has made a sufficient showing of the potential for irreparable harm and the substantial likelihood of further infringement.
See Marvin Music Co. v. BHC Ltd. Partnership,
C. Attorney’s Fees
PEI asks the Court to award its reasonable attorney’s fees. Under the Copyright Act, a court may in its discretion award attorney’s fees to the prevailing party in a suit for copyright infringement, 17 U.S.C. § 505;
see Fogerty v. Fantasy, Inc.,
PEI has prevailed on its causes of action for copyright infringement against Webbworld and for vicarious copyright infringement against Defendants Ellis and Ives. Under the circumstances of this case, an award of reasonable and necessary attorney’s fees is appropriate.
XI. CONCLUSION
For the reasons set out above, the Court rules as follows. ' Plaintiff has proved its claim for infringement of twenty-nine copyrights .in addition to the sixty-two infringements found on summary judgment. Of those infringements, five were willful. The Court awards statutory damages of $129,000, in addition to the $310,000 awarded at summary judgment. Individual Defendants Ellis and Ives are vicariously hable for all infringements and are therefore jointly and seyerally hable for the damages awarded.
PEI did not meet its burden of proof at trial for the following claims against Defendants: trademark infringement, indirect trademark infringement, unfair competition, and dilution. PEI did not prove by a preponderance of the evidence that Defendant Gurkin should be held hable for vicarious copyright infringement. On the issue of con *563 tempt against Defendant Ellis, PEI similarly did not meet its burden of proof.
PEI’s request for a permanent injunction prohibiting future copyright infringement is GRANTED.
PEI’s request for reasonable attorney’s fees is GRANTED. Counsel for the parties are DIRECTED to confer in an attempt to reach agreement on the amount of such fees. Should agreement be reached, counsel are directed to file the appropriate papers with the Court on or before noon, December 22, 1997. If agreement cannot be reached, PEI is DIRECTED to file its attorney’s fees affidavit and brief, applying the factors approved by this Circuit, by the same date. Defendants may file written opposition, if any, on or before noon, December 29, 1997.
PEI is DIRECTED to prepare a Final Judgment, which shall include a permanent injunction, consistent with this Memorandum Opinion and Order. PEI is further DIRECTED to confer with Defendants as to form, of the proposed judgment and to file it with the Court on or before noon, December 22,1997.
SO ORDERED.
Notes
. At issue are Registration Numbers 643,926 (trademark RABBIT HEAD DESIGN for monthly magazines); 1,971,523 (service mark RABBIT HEAD DESIGN for on-line magazines in the entertainment field); 600,018 (trademark PLAYBOY for monthly magazines); 1,691,469 (trademark PLAYBOY’S PLAYMATE REVIEW for magazines); 1,733,661 (service mark PLAYBOY’S for entertainment services); and 721,987 (trademark PLAYMATE for calendars).
. The number of images submitted at summary judgment bearing PEI trademarks or service marks is higher than those in evidence at trial. ' Still, the overall effect in light оf the huge number of images on the Netpics site is insignificant.
. 15 U.S.C. § 1125(a) provides:
Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,
shall be liable in a civil action by any person who' believes that he or she is or is likely to be damaged by such act.
. Section 1125c of-Title 15, United States Code, provides: “The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person’s commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this subsection.”
. PEI also contends that its images were displayed in close proximity to child pornography, for which the individual Defendants were allegedly arrested in February 1997. PEI presents no evidence, however, of child pornography appearing on the Netpics site, which is the sole alleged source of infringement in this case. Webbworld computers were used for other pursuits associated with adult images that were not affiliated with the Netpics site. See Ellis Depo. Because the child pornography charges might just as easily have stemmed from one of the other pursuits, PEI has not proved that any child pornography appeared on the Netpics site in conjunction with PEI images.