Bernina vs. Riddick/Imageline - 080510d

8/8/2019 Bernina vs. Riddick/Imageline - 080510d

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

BERNINA OF AMERICA, INC., )

)Plaintiff, ) Case Number: 1:10-cv-4917)

v. )

) Judge Milton I. ShadurIMAGELINE, INC., ISLANDVIEW )

TECHNOLOGIES LLC, ISLANDVIEW )

DESIGNS LLC, and GEORGE ) Magistrate Judge Martin C. AshmanP. RIDDICK, III, )

)

Defendants. )

INDEX OF EXHIBITS

12/29/08 Email From G. Riddick to J. Woods........................................................................ Ex. A

1/5/09 Email from G. Riddick to P. Newton .......................................................................... Ex. B

1/2/09 Letter from B. Fergemann to G. Riddick ..................................................................... Ex. C

2/13/09 Email from G. Riddick to B. Fergemann ................................................................... Ex. D

6/3/10 Email from G. Riddick to M. Favre .............................................................................. Ex. E

6/28/10 Letter from B. Fergemann to G. Riddick .................................................................... Ex. F

6/17/10 Email from G. Riddick to L. Stevens ........................................................................ Ex. G

6/17/10 Email from G. Riddick to All Bernina Dealers ......................................................... Ex. H

6/25/10 Email from G. Riddick to All Bernina Dealers ........................................................... Ex. I

6/25/10 Email Chain from Imageline to All Bernina Dealers ..................................................Ex. J

6/30/10 Letter from G. Riddick to All Bernina Dealers ......................................................... Ex. K

7/9/10 Email from G. Riddick to L. Stevens ........................................................................... Ex. L

7/2/10 Email from C. Racine to Bernina ................................................................................Ex. M

7/14/10 Letter from G. Riddick to B. Fergemann ................................................................... Ex. N

Case 1:10-cv-04917 Document 8-1 Filed 08/05/10 Page 1 of 143


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Registration Extract from the United States Copyright Office Database ............................... Ex. O

5/31/96 Letter from the U.S. Copyright Office to Imageline .................................................. Ex. P

Declaration of Kevin P. McCormick ...................................................................................... Ex. Q

Declaration of Marc H. Trachtenberg ..................................................................................... Ex. R



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Exhibit

A



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From: George Riddick [mailto:[email protected]]Sent: Monday, December 29, 2008 3:32 PMTo: 'Jackie Woods'Cc: '[email protected]'

Subject: RE: URGENT - Copyright Infringement NotificationsJackie,

Here are handful of the Imageline images we have discovered thus far. The listing is by no meanscomplete. Every time our investigators take a deeper look, they find more. I have never seen anythingquite like this before. And I have been doing this longer than anyone I know ... by far!

While I intend to be as professional and cooperative as humanly possible, I also do intend for Imagelineto be paid for the damages we have sustained thus far, which as I am sure you know are quite substantialwhether the calculation is based on actual damages, statutory damages, Section 1202 damages, orotherwise.

FYI, the formula we have successfully developed and enhanced over the years is as follows.

1. End user infringement unknowing. Three times our normal end user licensing fees, which averageroughly $25 per image download. Our industry (digital photograph and designs) averages 3-10 timesretail price as its settlement yardstick. Many courts have also gone along with the rationale behind thiscalculation.

2. Retail store level infringement. $750.00 per design.

3. Distributor or Internet download supplier. - $7,500.00 per design (this would relate to 100 end users,which is VERY low based on the research we have conducted and data we have accumulated over thepast 2 and years of intense studies and investigations.

4. If someone claims our proprietary designs are in the Public Domain or are owned by someone other

than Imageline, and a settlement cannot be reached, we go for the maximum amount allowable underlaw, which is unlimited for actual damages, up to $150,000 per independent work for statutory damagesand up to $25,000 per image altered for Section 1202 violations.

Since all of our images are registered with the U.S, Copyright Office, we generally are also awarded alllegal fees, expenses, and court costs as well.

It pays to settle these disputes, as you well know. Fortunately for Imageline, we are now working with fourbrand new (to us, not to the graphics industry) contingency law firms. We will be filing six differentlawsuits against folks who chose not to settle in January and February. The attorneys are chomping atthe bit to get involved in these embroidery industry issues. Thus far, I have told them I was going to try tohandle them myself. We have to pay these lawyers anywhere form 35-50%, you know. Contingency firmsare the only way to go in cases like this, however, in my humble opinion. We have paid out millions andmillions of dollars of hourly legal fees throughout the years. We know.

The problem with all of this, as you know, is that the toothpaste can never be put back into the tuberegardless of what we do going forward. The damage to Imageline is the same in the marketplaceregardless of how innocent or intentional an incident of copyright infringement may have been from theget-go.

As you can see, I think the best way to get handle this infringement epidemic is through an industry-widehigh level emergency meeting. I have called for such a meeting in Dallas for mid-January. That should beconvenient for your and other executives from Great Notions, OESD and Bernina.



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Can you be of any help pulling this together before the middle of January? We will bring several keypeople with us to Dallas if that would help.

George



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Exhibit

B



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From: George Riddick [mailto:[email protected]]Sent: Monday, January 05, 2009 10:26 AMTo: [email protected]: Fergemann, Brian D.; 'Jackie Woods'; [email protected]; [email protected]

Subject: URGENT - Please respond today - Ongoing copyright infringement activity

PERSONAL AND CONFIDENTIAL

Dear Mr. Newton,

As you can see from the attached e-mail sent out by Imageline over theweekend, we were surprised in Bernina's decision to turn this mattercompletely over to outside counsel while the ongoing infringement activityinvolving your company, your suppliers, your distributors and re-sellers,and most important, your customers, was/is still accelerating at such a

rapid pace.

Our researchers and investigators have now discovered well over 120independent infringements (double what we had found in our lastcorrespondence and still only halfway through our detailed "finger-printing"process) involving copyright-registered works belonging exclusively toImageline, Inc. entrenched in every aspect of your distribution channels,worldwide. We have already invested hundreds and hundreds of man-hours inthis process.

There is no way on earth that this degree of obvious infringement activitycould be interpreted as anything other than flagrant and willful. What hashappened to the quality control standards of your organization?

Imageline is not some artist working out of their garage. Your people andexecutives either knew, or certainly should have known, that your design,duplication, and production activities were infringing. Imageline inventedthe entire category of electronic graphic arts content (digitalillustrations, designs, and animations) for the PC marketplace all the wayback to the mid-1980s and have been an industry leader ever since.

We would be happy to keep Mr. Fergemann in the loop, but will notcommunicate with him only. In fact, we want to include the CEOs of bothBernina USA and Bernina International (after all, this is a major globalproblem, as I am sure you know by now) in all further communications aswell. Please forward us the correct contact information for the Berninasenior executives today. Thank you.

At one time, it appears that your organization led the fight against digitalpiracy in the embroidery industry. When did that course of action change,



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Mr. Newton? It appears that perhaps you changed directions after the Berninaacquisitions a few years back. That frightens me.

Imageline, as a company, and I, personally, have fought Internet and CD/DVDbased piracy for the past 18 years consistently. We have made a huge

difference in the markets and industries we have focused on. BUT our realwork has just begun. Your industry is totally out of control in this regardand NO ONE, regardless of how smart or hard-working they are, can competeagainst their own goods and services that are practically given away forfree in the market ... and especially in an Internet-connected globalmarket. As a matter of fact, I think I read a quote where you essentiallysaid this exact same thing to the press a few years back. Am I right?

You should know this, Mr. Newton. I am very disappointed that Jackie Woodsand you chose to take a legal course on the resolution of this massiveBernina problem rather than meet with me and other copyright and embroidery

industry senior executives and officials as I requested several weeks agoonce we realized the enormity of this problem.

My invitation is still open for you and your senior Bernina representativesto fly into Richmond (or Dallas) and take a look at what we have uncoveredin the past two months. You will be blown away. The infringing material anddocumentation we have accumulated thus far is now stacked almost eight (8)inches high. Involving the outside lawyers in a discovery-like process willonly allow the market infringement activity to increase exponentially. Weare not wiling to participate in this kind of willful activity. We care toomuch about innocent end users to support that kind of plan.

In fact, we are always firm in this conviction. We will not willinglysupport ANY plan that is likely to increase copyright infringement in themarketplace.

Please get back with me today and let me know your decision, from the top ofthe Bernina organization, as to whether you are interested in trying toresolve this mess in a peaceful manner ASAP or are intent on turning it overto outside litigation counsel and proceeding from there. We have certainmajor copyright industry events talking place in the next few months andreally do not want to play games with you or anyone else in yourorganization at this critical time.

We take this kind of thing very seriously, Mr. Newton. We are not yetconvinced that you, Ms. Woods, and your other business executives still do.

Please advise.

George P. Riddick, III



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Chairman/CEOImageline, Inc.P.O. Box 6275Ashland, Virginia 23005

(804) 525-6941 - voice(804) 525-6943 - fax



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Exhibit

C



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Exhibit

D



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From: George Riddick [mailto:[email protected]]Sent: Friday, February 13, 2009 11:56 AMTo: Fergemann, Brian D.Cc: 'Jackie Woods'; [email protected]

Subject: Revised Bernina Proposal - immediate response requiredCONFIDENTIAL FOR THE PURPOSE OF SETTLEMENT DISCUSSIONS UNDER F.R.E. 408 ONLY

Dear Mr. Fergemann:

We have just concluded a detailed review of our embroidery industry cases with our ExecutiveCommittee. We have amicably resolved six (6) infringement disputes over the past few weeks and havequite a few still outstanding. Needless to say, one of the largest of those still outstanding and unresolved,and continuing to infringe I might add, is with your clients, Bernina, Great Notions, and OESD.

I have been instructed to contact you today and make your clients a revised settlement proposal, more inline with the terms and conditions of the other agreements we have reached in recent weeks. I must addthat I disagreed with that decision, but am going along with the majority as advised.

As you know, we made Mr. Perich a very well-reasoned settlement offer to resolve all disputes andrelease all of your clients, their officers and directors, as well as their business partners and end usercustomers, for $15,000.00 per independent infringing design/product found to be unlawfully included inthe distribution channels of your various clients. When these cases are taken to court we have instructedour attorneys to file for between $15,000.00 and $150,000.000 for each infringement, as well as seek fullrecovery of all attorneys fees and costs, and applicable DMCA Section 1202 penalties, to full extent of thelaw, ,which in this case would be $25,000.00 per altered and falsely represented design.

Did you even advise your clients regarding Section 1202 claims, Mr.Fergemann? You never oncementioned anything about them in your numerous letters and e-mail responses to me. Several of our IPattorneys are quickly gaining national recognition for their expertise in this very important area of the law.Your clients should know these rules and laws like the back of their hands, just like we now do here atImageline.

Nee Proposal. $7,500.00 per design, payable as follows:

A. Four equal quarterly cash payments beginning on the date of settlement and release andconcluding one calendar year from that date; or,

B. 1/3 cash payment on the settlement date, and 2/3 of the total settlement compensation paid overtime, or in the exchange of design products, software, and/or equipment, as well as possibleongoing contracted digitizing services as required (applied as a credit towards the outstandingbalance until paid in full).

As you no doubt can tell, we intend to enter this embroidery design market with a significant presence asearly as possible this year. The above offers are made, and conditioned upon, your clients and Imageline

having a cooperative business relationship moving forward, with the joint objective of protecting our enduser customers and reducing digital piracy in the embroidery markets around the world.

Please track down the Bernina executives and get back to me by the end of the business day today if atall possible. As I am sure you know by now, time is of the essence in the resolution of this extremelyserious matter.

Thank you.



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George

George P. Riddick, IIIChairman/CEOImageline, Inc.



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Exhibit

E



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From: George Riddick [mailto:[email protected]]Sent: Thursday, June 03, 2010 9:27 AMTo: 'mfavre'Cc: 'George Riddick'

Subject: Business opportunity

Good morning, Martin

Do you plan to directly respond to the last two e-mails I sent you ornot?

It makes no sense to those of us here at Imageline and IslandviewDesigns tosend stacks and stacks of materials to an outside litigator whoobviouslydoes not have a clue what we are talking about. Besides, this sameoutsidecounsel assured us in writing that all of this was taken care ofeighteen(18) months ago . and we have already found over fifty (50+) previouslyidentified infringing Imageline illustrations and designs still beingactively displayed, distributed, and bundled by Bernina and itsworldwidedistribution channels and partners.

To refresh your mine as to the severity of our claims (*all of which wewerewilling to resolve with a business arrangement had you not abruptlycancelled our meeting in Chicago last month), we have documentedevidencethat:

1. At least fifty (50) of our individually copyright-registereddesigns are still being actively displayed and distributed by you inmass,and these illustrations were all presented to you in January 2009, whenwe



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were assured by both Mr. Fergemann and Mr. Perich that they were removedfrom ALL channels of distribution. This willful infringement activitysubjects your company to statutory damage claims of at least$7,500,000.00under United States copyright law. Willful infringement can also have

criminal implications in cases such as this.

2. Roughly one hundred and fifty (150) additional infringingImagelineimages have been identified, as well. Often these designs have a pieceoftape over or beside them in your store locations and/or online, but youhavenever been granted rights to display them in any manner, whatsoever, and

thefact that you did not entirely remove them from your independent dealernetwork is unconscionable. Even leaving willfulness out of the equationfora moment, these additional discoveries result in additional statutorydamageclaims of up to $2,250,000.00 under firmly established U.S. Law.

3. Each Imageline proprietary image we have found to be infringingthrough the Bernina worldwide networks has been altered and modified soasto remove the Copyright Management Information (CMI) Imageline embedswithineach of our original copyright-registered designs, and replaced withidentifying materials that falsely claim Bernina, or one of your whollyowned subsidiaries, owns the copyrights to the imageline images. This isinclear violation of Section 1202 of the DMCA and subjects Bernina tootherstatutory claims (over and above the infringement claims referencedabove)of an additional $5,000,000.00.

4. Each of the Bernina-related or affiliated retail dealers andonlinedistributors continues to display and distribute Imageline proprietary



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images (and pay royalties back to you at Bernina) as well. Theseindependentinfringement claims (even assuming they were not willful) would resultinclaims of roughly $150,000.00 against each independent retail outlet for

anadditional potential liability of roughly $135,000.000.00 worldwide.

5. Since all Imageline clipart illustrations and designs areindependently registered with the U.S. Copyright Office, we would alsobeentitled to recover all legal fees and other costs associated with theabovereferenced claims.

As I am sure you know by now, Imageline filed federal lawsuits againsteighteen (18) similar companies over the past eighteen (18) months. WehaveNEVER filed a false claim and we have NEVER lost a copyrightinfringementcase in the past twenty years. We are also very active in the ObamaAdminstration's new aggressive anti-piracy efforts in Washington.

We only file legitimate claims. But once a claim is filed, and we areconvinced the infringers would rather fight than settle, we do notofferthe same settlement/business resolution possibilities as we routinelytry tooffer if a company is willing to work with us in good faith and in anhonestand forthright manner from the offset. We have not found this to be thecasewith Bernina and particularly not when Mr. Fergemann is involved. In ourview, litigators have a built in conflict of interest in situations suchasthis, as their law firm makes tens times the amount of money (at least)whenthey can encourage their clients to try to defend an obviously weak caseincourt.



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Martin, we had such a fair and reasonable business-related resolutionready

to present to you "live" in Chicago. There was far more risk to me andImageline than to you and Bernina to attend that meeting and review thefulldisclosure of all of the facts. Why you abruptly cancelled the meeting,andthen refused to communicate with me at all, is not clear to any of us(or Iam sure to your dealer network, as well) at all. Please explain.

I look forward to hearing from you directly before the end of the weekbefore we decide what next move is in the best interest of our customersanddealers.

Sincerely,

George


Chairman/CEO

Imageline, Inc.

Boca Raton, Florida



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Exhibit

F



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Exhibit

G



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From:George RiddickTo:'Lisa'Cc:[email protected] ; [email protected] ; [email protected] ;[email protected]: Thursday, June 17, 2010 11:35 AM

Subject: TIME HAS RUN OUT ON THIS END

ISLANDVIEW TECHNOLOGIES MAY BE FORCED TO CHANGE ITS COURSE IN

THE EMBROIDERY DESIGN WORLD. OVER 220 INFRINGING

PRODUCTS/DESIGNS OWNED EXCLUSIVELY BY IMAGELINE, INC. HAVE BEEN

DISCOVERED ALREADY WITHIN THE BERNINA WORLDWIDE COPYRIGHT

INFRINGEMENT NETWORK.Hi Lisa,

I hope your procedure was successful yesterday and that you are feeling better today. Your

health is far more important than all of this business nonsense.

We have not heard a single word back from Martin Favre or anyone else from Bernina. Our

executive board is steaming mad and has directed me to proceed in a manner that will not be fun

for ANY of us. In short, we have been told to file a federal lawsuit against BerninaUSA and eachof the 600 or so Bernina dealers where the current infringing activities are still taking place. We

will also be filing suit against Bernina International and all 300 or so international Bernina

dealers. We intend to get several copyright enforcement agencies in Washington D.C. involvedin this later mission, as well.

I hope you realize how hard I have worked, personally, to avoid this outcome and how

completely unprofessional and unethical the executives of Bernina have handled this complex

situation. I have worked for hours and hours over the past two months trying to convince peopleon this end that we would be better off in a business partnership with Bernina, rather than a

nuclear war.

Martin knows that we have refused to talk to either Mike Perich (your CFO at BerninaUSA) or

Brian Fergemann (your outside litigation counsel in Chicago), since both of these gentlemen lied

to us about how these infringement issues were dealt with throughout the Bernina distribution

network (retail stores, OEM bundles, and online) last year. All of this years continuinginfringements will likely be deemed willful under current U.S. copyright laws and have both

severe civil and criminal potential repercussions to the infringers, based on what information is

confirmed during discovery.

As you know, we are currently training six (6) people up in Ashland, Virginia on your new

Bernina 830 embroidery machines and the new Bernina Designer Plus Embroidery 6/Corel DrawEssentials software package. We plan to do a similar training program down here in Hollywood,

Florida this fall.



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Lisa, I suspect other Bernina dealers will reach out to you after they become aware of thiscontroversy and get directly involved. I know we can count of you to be 100% truthful with

them. I sincerely hope that if you are contacted by other Bernina dealers, you will be honest with

them, as you have always been with me, and let them know that Bernina headquarters (seniorexecutives in both Chicago and Switzerland) soundly rejected our business resolution to this

serious dispute and essentially forced us into filing lawsuits against everyone who is involved inthe unlawful Bernina-driven distribution scheme from the top down, including Bernina end usercustomers.

You would have to agree with me at this point that Bernina is baiting us into this war. Why?

No one other than Martin apparently knows. We NEVER lose a war pertaining to the protectionof artists rights and the theft of our property, particularly at this magnitude. Unfortunately,

hundreds, if not thousands, of individuals and companies in the middle of these worldwide

Bernina distribution channels will likely end up taking the brunt of the damage.

You know how much I like you, Lisa, but you are just plain wrong in your assessment of

Martin here. His has had ample time to do the right thing for his dealers and customers. He haschosen not to. He would not have the title of President of BerninaUSA if he didnt have the

authority to try and avoid this kind of needless war. Because of his failure to respond (or even to

deliver a polite no thank you) to my numerous requests to meet and talk, our board voted

unanimously last night to head in an entirely different direction.

You (along with ALL other Bernina dealers worldwide) will be receiving an official notice from

Imageline very soon. Please call me directly (804-929-4044) if you have any questions. I am notgiving out this mobile number to the other Bernina dealers at this point in time. I do plan to visit

the Richmond Bernina store later today or tomorrow to inform them as to what is getting readyto happen. I believe they deserve that kind of professional courtesy.

Thanks again for your efforts, Lisa. I do care a great deal for you and your health, and I wish Idid not have to deliver this kind of depressing news to you while you are re-covering.

George

P.S. It has not helped matters at all that Martin has apparently been too busy handling important

matters with directors and has not even followed up with you as he promised. In our view, he is

not sincerely interested in resolving this dispute out of litigation, Lisa. We see this kind of thingeach and every day in the digital piracy world. We rank the Bernina network as one of the most

notorious and widespread digital piracy networks we have uncovered in the past twenty-five (25)

years of doing this kind of investigative work to protect the valuable copyrights of the creativecommunities in this country. Often foreign-based companies, such as Bernina, present us with

the strongest challenges.


Chairman/CEO

Islandview Technologiesand



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Imageline,Inc.

2012 Hollywood Boulevard

Hollywood, Florida 33020

(804) 368-8571 voice(804) 368-8572 - fax



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Exhibit

H



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From:George RiddickTo:[email protected]: Thursday, June 17, 2010 12:43 PMSubject: Bernina dealers - Pennsylvania

URGENT COPYRIGHT INFRINGEMENT NOTIFICATION

THIS E-MAIL NOTIFICATION IS BEING SENT TO YOU ON BEHALF OF

IMAGELINE, INC. OF HOLLYWOOD, FLORIDA BY ISLANDVIEW

TECHNOLOGIES, SISTER COMPANY OF IMAGELINE, INC., AND OWNER OF

ISLANDVIEW DESIGNS, LLC THE COMPANY NOW PRODUCING THE LARGEST

LIBRARY OF PREMIUM EMBROIDERY DESIGNS IN THE WORLD

Dear Bernina dealer:

Within the next few days, you will receive a certified notice from Imageline, Inc. of Hollywood,

Florida pertaining to serious and ongoing copyright infringement activity taking place in printedembroidery design catalogs, software CD/USB products, and online embroidery design systems(including your Embroidery Take-Out service) at your Bernina store location.

Based on the fact that your suppliers, Bernina International, BerninaUSA, and DakotaCollectibles, were given written notice of these infringements early last year and assuredImageline that all infringing activities at Bernina authorized dealers had been curtailedimmediately, your ongoing and continuing copyright infringement activities will nowlikely bedeemed as willful, and subject you to the maximum statutory damage penalties of up to$150,000.00 per independent infringement, as well as all legal costs and other DMCA Section1202 penalties that will be further explained to you in the certified package being delivered to

your store location.

Over two hundred (>200) infringing Imageline designs have been identified thus far, making thiscase one of the most flagrant, damaging, and widespread digital piracy discoveries in our twenty-five year history as the long time leader in the electronic graphic arts content (clipartillustrations, designs, templates, and animations) industry.

As of today, you are being advised to cease and desist from any further infringing activities,identify and notify all customers you have provided with stolen designs belonging exclusively toImageline, Inc., and preserve all records (print and electronic) for the pending copyrightinfringement lawsuits we are preparing to file.

Be assured, we have tried for quite some time to get the senior business executives at Berninaand Dakota Collectibles to take these digital piracy claims seriously and perhaps allow theirdealers and end user customers to escape this now necessary action. In our view, we have beencompletely ignored and lied to by these senior embroidery industry business executives.Consequently, we have been left with little choice as to how we need to proceed to protect ourhard-earned property.



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For your information, Imageline owns one of the largest archives of high quality vector-baseddigital illustrations, designs, and logos in the world, and is the pioneer of the electronic clipartindustry, starting with our joint ventures with IBM, Microsoft, Adobe, WordPerfect, Corel,Lotus, Borland, and Apple in the mid 1980s. We are actively involved with both Congress andthe U.S. Copyright Office in Washington, as well as several major copyright protection

associations (see attached SIIA Press Release), in the protection of intellectual property,worldwide, and will do everything in our power to stop digital piracy from spreading evenfurther into the embroidery design markets.

Please contact me directly (or have your attorney do so) so that you can objectively evaluate youroptions as we move forward on these massive, and willful, infringement claims. Several Berninadealers have already opted to take a firm stand against copyright infringement and intra-industryhypocrisy, and cooperate with Imageline as we pursue these serious claims. I personally believethey have been given excellent legal advice.

I hope you will cooperate with Imageline to protect your customers from the potential liabilities

they, too, now face based on ongoing infringement activities of this magnitude.

Sincerely,

George P. Riddick, IIIChairman/CEO

Islandview TechnologiesandImageline, Inc.2012 Hollywood BoulevardHollywood, Florida 33020

(804) 368-8731 voice(804) 368-8721 fax(804) 929-4044 - mobile



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Exhibit

I



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From: George Riddick [mailto:[email protected]]Sent: Friday, June 25, 2010 5:09 PMTo:[email protected]: URGENT - Ten (10) clarifications from our previous e-mail message to you of June 17, 2009

WE FULLY REALIZE THAT MANY PEOPLE DO NOT BOTHER TO READ LONG E-

MAIL MESSAGES THESE DAYS, AND VIEW INFORMATION DELIVERED IN THIS

FASHION AS NATURALLY SUSPECT. WE STRONGLY ENCOUARGE YOU,

HOWEVER, TO MAKE AN EXCEPTION HERE, AS THE BELOW INFORMATION,

IN ITS ENTIRIETY, IS CRITICALLY IMPORTANT TO LIMITING THE ONGOING

POTENTIAL LIABILITIES YOU FACE, PERSONALLY, AS WELL AS THROUGH

YOUR EMBROIDERY STORE OPERATIONS, FOR ONGOING COPYRIGHT

INFRINGEMENT.

Dear Bernina Machine and/or Designs Dealer:

There has been a bit of confusion among the Bernina reseller network as to the Notice ofCopyright Infringement and Cease & Desist Demand you received from Imageline, Inc. lastweek. I sincerely hope this e-mail message helps to clarify some of this confusion for you:

1. Whether you are an authorized Bernina dealer or not, you are receiving this notice becausewe have reason to believe that willful copyright infringement activities are taking placewithin your embroidery store and over the Internet by your store personnel on behalf of youand your customers.

2. Under current U.S. Copyright laws (see www.copyright.gov), both you and your end usercustomers, who have displayed, copied, licensed, given away for free, stitched, or otherwisedistributed or modified any copyrighted design owned exclusively by Imageline, Inc., areliable for copyright infringement. If you have done so AFTER we gave official notice to yourBernina and/or Dakota Collectibles suppliers in January 2009, your infringement activities

may be deemed willful, and subject you to the maximum of $150,000.00 per independentinfringement.

3. Copyright Infringement is a strict liability offense under the laws of the United States ofAmerica and most countries that Bernina and Dakota Collectibles operate in are alsosignatories to the Berne Convention and other international treaties protecting registeredcopyright-protected works. See the anti-piracy FAQ section of the website for the Softwareand Information Industry Association (www.SIIA,net) in Washington, D.C. to which



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Imageline is an active member, for more information on copyright infringement definitions,enforcement, and liabilities. A Press Release issued recently by the SIIA on Imagelinesbehalf is also attached for your review.

4. Many Bernina dealers have informed us that they did not receive notice from Bernina in

January 2009, yet Bernina has claimed to us in writing they provided notice to all of theirauthorized machine and embroidery design resellers, worldwide. This vital information iscritically important to both you and us as we file lawsuits and determine the degree ofwillfulness involved in this massive worldwide copyright infringement network initiatedprimarily by Bernina, and the Bernina-owned embroidery design entities of OESD and GreatNotions.

5. We have also found infringing embroidery designs owned exclusively in 2010 embroiderydesign catalogs, laminated displays, and CDs labeled as owned by Great Notions, OSED, andDakota Collectibles at numerous Bernina stores our investigators have visited in recentmonths.

6. Since you have now been officially notified of copyright infringement, you are required tomaintain ALL records (print and electronic) and not destroy any potential evidence that couldbe involved with these pending lawsuits.

7. If you would like to try and resolve these issues amicably with Imageline, you or yourattorney should contact us at the below listed address or via e-mail immediately. Otherwise,we will assume that you prefer for us to file suit against you, personally, and yourembroidery business operation.

8. We have reached out repeatedly to the senior business executives of both Bernina and

Dakota Collectibles. We have been completely ignored. We never allow a known incident ofcopyright infringement to go unresolved and we demand that the infringers are heldaccountable in either our civil or criminal justice systems , or in some extreme cases, both.

9. Imagelines corporate headquarters has recently relocated to Hollywood, Florida (seecontact information below). We also maintain an embroidery design production operation inAshland, Virginia, called Logoworks International. Logoworks is not directly involved withthis infringement claim.

10. In our prior e-mail message of June 17, 2009, which you have already received, we showedyou documented evidence of thirty-three (33) infringing embroidery designs that our

investigators have acquired or downloaded from currently active Bernina-related storesand/or website operators. There are substantially more infringing designs, as Bernina wasgiven a list of over one hundred and sixty-six (166) such infringements in January 2009. Wehave found the claims by Bernina senior business executives and their outside legal counselin Chicago that they took our notices seriously almost eighteen (18) months ago to becompletely false and intentionally misleading. Please ask your own independent intellectualproperty attorney what that means to you and your potential liability in these pending cases.



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Copyright infringement is a VERY serious matter. Those who respond to us professionally willbe treated accordingly.

The key question for our investigators at this point it time is whether or not you were officiallynotified by Bernina or Dakota Collectibles as to the known infringing activities taking place atyour store location or on the various Bernina or Dakota Collectibles websites and resellers inJanuary 2009?

Thank you for responding to us with the critical information requested in this and our prior June17th e-mail message as soon as possible.


Chairman/CEO

Imageline, Inc.

Imageline, Inc.

2012 Hollywood Blvd., Suite D

Hollywood, Florida 33020

(804) 368-8731 voice

(804) 368-8721 - fax



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Exhibit

J



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From: [email protected]: [email protected], [email protected], [email protected],[email protected], [email protected], [email protected],[email protected], [email protected], [email protected],[email protected], [email protected]

Sent: 6/29/2010 11:03:37 A.M. Central Daylight TimeSubj: Fwd: More continuing infringements

Dear Bernina Machine and Embroidery Design Dealers,

Please check out the links in the e-mail correspondence below. These linksshow you current infringing activity involving Bernina, Dakota Collectibles,and possibly your store operations and customers, as well.

We have now sent Bernina headquarters copies of over 250 infringingembroidery designs and design packs found throughout their distributionnetworks over the past few years.

Please have your attorney, not Bernina's attorney, contact us immediately.

Thank you.

Imageline, Inc.

----- Forwarded Message -----From: "George Riddick" To: [email protected]: Monday, June 28, 2010 10:37:24 PMSubject: FW: More continuing infringement s

Debbie,Thebelowemailalsoneedstobedistributedtoallembroiderydesigndealersonouractivelist

tomorrowmorning.ThisnoticeillustratesyetanotherImagelinecopyrightregistereddesignthatiscurrentlybeinginfringed

bymanyoftheembroiderydesigndealerswearenownotifying.TheofficialBerninalawyerletterwe

receivedearliertoday(fromBrianFergemannBerninasoutsidelitigationcounselinChicago)

continuestothreatenImagelinefortellingthetruthandfalselyclaimthatwehavenotprovided

examplesoftheseongoinginfringementstotheBerninaandDakotaCollectiblesembroiderydesign

dealersandresellers.



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HealsocontinuestofalselyclaimthatImagelinedoesnotownthesedesigns.WhyMr.Fergemann,and

hisBerninacounterpart,MikePerich,continuetheseliesandcoverupexcusesisuncleartomeatthis

time.Thetruthwillprevail.Thetruthisthatwehavenowdocumentedandsentalmost250examplesofembroiderydesignsand

designpacksbeinginfringedbyBernina,GreatNotions,EmbroiderySupply,OESD,and/orDakota

Collectiblesaroundtheworldoverthepastfewyearsandmanyoftheseongoinginfringements

continueontoday,June29,2010.Pleasemakesurethatthosedealerswhoarenotdisplayingordistributingembroiderydesigns,andhave

alsonotdonesoforthepastthreeyears,areremovedfromourmailinglists.Thankyou.GeorgeFrom: George Riddick [mailto:[email protected]]Sent: Sunday, June 27, 2010 11:14 PMTo: [email protected]: [email protected]; [email protected]; [email protected]; GeorgePaine; [email protected]: More continuing infringement sDebbie,As extraordinary as it may seem, Dakota Collectibles ("Dakota") continues to willfullyinfringe copyright-registered designs owned exclusively by Imageline, as well. Dakotasenior business executives were first officially notified by Imageline all the way back inDecember 2008. After that notification, we also found Dakota providing our proprietarydesigns, which they have obviously stolen, to Zazzle, Logo Sportswear, and many otherthird party organizations.The Imageline image below was sent to over 900 embroidery design dealers/resellersrecently yet remain on the Dakota Collectibles website as of June 27, 2010. I personallyfind this ongoing willful infringement activity from a company that relies on adequatecopyright protection for their own survival as shocking.http://www.dakotacollectibles.com/warehouse/stock_detail.asp?stockcode=XM0280&view=&return=/comm/section_detail.asp?useraction=fromdetail As far as we can tell, Dakota Collectibles, like Bernina, NEVER bothered to notify theirworldwide embroidery design dealer/online reseller network, or end user customers,that they had been unlawfully licensed pirated artwork by Dakota.As you may or may not know, we also discovered addiona infringing Imageline designsin the 2010 Dakota Collectibles printed design catalogs when our investigatorsresearched and visited numerous Bernina dealers over the past few months. We are



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now including this official notice of continuing infringement by Dakota Collectibles in ourregular dealer notifications.To make things worse,Dakota Collectibles has recently announced a whole new line ofscreen print-oriented "clipart illustrations and designs", making them a direct competitor

to Imageline in our traditional markets worldwide, as well.

The senior business executives at Dakota were notified again last month with afinal attempt to try and resolve these claims before we are forced file federal lawsuitsagainst Dakota and their dealers. Once again, our requests were completely ignored.Apparently, this company could care less how we proceed against their dealer/retailernetwork, online resellers, and end user embroidery design customers. They seem to beinviting us to file suit.We will be notifying another large group of dealers we suspect are carrying these

infringing Dakota embroidery design and/or print products as well over the next fewweeks..I will work with you on the preparation of this new non-Bernina embroiderydesign dealer spreadsheet this coming week.I hope you enjoyed your reunion weekend.George



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Exhibit

K



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Bernina Infringement Network

1990-2010 Imageline, Inc. All Rights Reserved

Ongoing Bernina Willful Copyright infringement and Cover-up Plan

HAS BERNINA EVER SHOWN YOU THESE STOLEN DESIGNS? IF YOU ARE

LIKE OTHER BERNINA EMBROIDERY DESIGN DEALERS WE HAVE

SPOKEN TO OR WHO HAVE CONTACTED US, THE ANSWER IS NO.

MARTIN FAVRE, PRESIDENT OF BERNINA, HAS KNOWN ABOUT THESEWILLFUL INFRINGEMNTS SINCE JANUARY 2009. WHY WERENT YOU

NOTIFIED? PLEASE ASK YOUR OWN LAWYER THIS QUESTION.

Imageline, in good faith, attempted to present the information below to BerninaUSAsenior business executives in Chicago in May 2010. The meeting was abruptly cancelledby Bernina without explanation, forcing Imageline to protect its property by demandingthat all Bernina dealers immediately cease and desist from any further infringements ofour property AND notify all of your customers that they are using stolen property and aresubject to additional copyright infringement claims, as well.

Many of the below infringements were identified in the catalogs and online at BerninaRetail stores in April and May 2010. The majority of these infringing embroidery designswere specifically identified to Mike Perich of BerninaUSA and Berninas outside legalcounsel, Brian Fergemann in January 2009. Mr. Perich and Mr. Fergemann intentionallylied to Imageline and claimed all of the infringing designs had been removed from everyauthorized Bernina dealership worldwide.

These gentlemen also tried to claim that Imageline did not own these designs and thatthe designs were improperly registered with the U.S. Copyright Office. Both of theseclaims are blatantly false and were apparently intended to mislead Bernina dealers intothinking that their ongoing infringement activities pertaining to Imagelines proprietary

designs were somehow legal, as well.

These actions by senior Bernina USA executives and outside litigators FORCED

Imageline to notify all Bernina dealers directly in June 2010.

As indicated to Martin Faure, the president CEO of BerninaUSA, repeatedly, Imagelinehas subsequently refused to negotiate with Mr. Perich or Mr. Fergemann in the potentialresolution of this ongoing infringing activity in June 2010. Bernina has thus far refused toidentify a senior business executive who is willing to be truthful with Imageline as weattempt to get to the bottom of these unlawful activities and hold the correct peopleaccountable UNDER THE LAW. We need Bernina to tell its dealers the truth in order to

protect you as a Bernina machine or embroidery design dealer or online reseller, as wellas our customers who are currently using illegally licensed images obtained within theBernina embroidery operations worldwide.

Thank you to the authorized Bernina and embroidery design dealers who have

offered to help. You requested that we provide you examples of many of the roughly

250 infringing designs and design packs we have found throughout the Bernina



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Infringement Network in the past few years. Enclosed is yet another report showing

you screen captures and color printouts of these stolen images and designs.

Without the honesty, full disclosure, and cooperation of Bernina worldwide in thiscomplex ongoing research and documentation process, it could easily be many more

months before all of your ongoing infringing activities are identified. The below detailedimage comparison document identifies the proprietary Imageline images and designs weare evaluating to date and infringing copies of these designs as identified on the Berninaproducts and websites.

The Bernina infringed designs are shown in the left hand column of the following

comparison report, while the actual illustrations and designs as registered with the

U.S. Copyright Office by Imageline in group registrations called the Imageline

Master Gallery and the Imageline Design Gallery in 1996 and 1997 (see

www.copyrights.gov) are listed in the right hand column.

According to Mike Perich of BerninaUSA, and Bernina attorney Brian Fergemann, youwere officially notified of infringement on the vast majority of these infringing designs inJanuary 2009. ALL Bernina dealers we have talked to to date have denied that what bothMr.Perich and Mr.Fergemann told Imageline is true.

Failure to remove copyright-registered embroidery designs after receiving official noticeconstitutes willful copyright infringement under United States copyright laws andsubjects the infringing distributor/dealer to statutory damage claims of up to $150,000.00per independent infringement. Ongoing willful copyright infringement also has criminalimplications under current U.S. copyright law.

Below is a sampling of the designs owned exclusively by Imageline, Inc. that arepresently being displayed, or were formerly displayed in catalogs, bundled on CDs,USBs, and other electronic media in your stores, and also made available online by andfrom your Embroidery Take-Out (ETO) and other design distribution systems in yourretail outlet or through Bernina-sponsored website services.

If similar or identical Imageline images/designs are listed more than once below, it is

because the designs were found to be infringing in more than one Bernina-related

product or service, or a product and/or service provided by a Bernina online

reseller, Embroidery Supply, or Dakota Collectibles.

*This comparison analysis and report, as well all images, illustrations, and designscontained herein are the exclusive copyrighted property of Imageline, Inc. 1990-2010.All rights reserved. Protected under U.S. copyright laws and international copyrighttreaties.



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CONFIDENTIAL

1. Registered with The U.S. Copyright Office in the Imageline Design Gallery(VA0000841528) on March 18, 1997.

2. Registered with The U.S. Copyright Office in the Imageline Master Gallery

(VA0000751565) on May 3, 1996.

3. Registered with The U.S. Copyright Office in the Imageline Master Gallery(VA0000751565) on May 3, 1996.

________________________________________________________________________

4. Registered with The U.S. Copyright Office in LogoExpress LogoWorks(VA0000791082) on June 10, 1996.



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________________________________________________________________________

The below illustrations and designs are registered by Imageline in either the

Imageline Master Gallery group registration or the Imageline Design Gallery group

registration in 1996 and 1997. Some designs were registered in the Logoworks or

Headliners collective registrations. Deposit copies from each of these Imageline

registrations can be obtained from the U.S. Copyright Office/Library of Congress

archives in Washington D.C.

________________________________________________________________________

5. Registered with The U.S. Copyright Office in the Imageline Master Gallery groupregistration (VA0000751565) on May 3, 1996.

________________________________________________________________________

6. Registered with the U.S. Copyright Office in the Imageline Design Gallery groupregistration (VA0000841528) on March 18, 1997.

________________________________________________________________________

7. Registered with the U.S. Copyright Office in the Imageline Design Gallery groupregistration (VA0000841528) on March 18, 1997.



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16. Designs from several Imageline group registrations.

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17. Designs form several Imageline group registrations.

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Twelve (12) Imageline designs were found in this one Bernina/Great Notions designpack, alone and are also available in the Bernina/Great Notions Printables collections

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23. Registered with the U.S. Copyright Office in the Imageline Design Gallery groupregistration on March 18, 1997.

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32. Registered with The U.S. Copyright Office in the Imageline Master Gallery group

registration (VA0000751565) on May 3, 1996.



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33. Registered with the U.S. Copyright Office in the Imageline HeadLiners collection(VA0000844189) on March 12, 1997.

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64. Registered with the U.S. Copyright Office in the Imageline HeadLiners collection

(VA0000844189) on March 12, 1997.



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66. Registered with The U.S. Copyright Office in LogoExpress LogoWorks

(VA0000791082) on June 10, 1996.

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Below are additional samples of Imageline designs that have been found infringing

on the products, websites, and services associated with Bernina, Great Notions,

OESD, Embroidery Take-Out, Embroidery Supply, and/or Dakota Collectibles:

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121. Registered with the U.S. Copyright Office in the Imageline Design Gallery group

registration on March 18, 1997.

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128. Registered with the U.S. Copyright Office in the Imageline Design Gallery group

registration on March 18, 1997.



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______

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