IP Law Daily, N.D. Cal.: Japanese judgment debtor OK’d in $17M copyright battle between YouTube kids channels, (Feb 12, 2025)

By Jonathan Anderson

The infringing channel has failed to pay the $17 million judgment and allegedly sought to thwart enforcement of levies on their U.S. revenues.

The owner of a top-ranked YouTube channel that features animated characters designed to appeal to children can add as a judgment debtor a Japanese subsidiary of the defendant to recoup millions of dollars in awarded damages, the federal district court in San Francisco has held. In granting a motion to amend judgment, the court ruled that service had been effectuated, both prongs of the alter ego liability test were satisfied, and adding the judgment debtor as a party would not frustrate due process (Moonbug Entertainment Ltd. v. BabyBus (Fujian) Network Technology Co., Ltd., No. 3:21-cv-06536-EMC (N.D. Cal. Feb. 10, 2025)).

Background. The case arises out of a battle between two popular YouTube channels. Moonbug Entertainment operates the CoComelon channel, a top-ranked Kids YouTube channel that features animated videos of a child character named JJ and his family. BabyBus Network Technology Co. runs a competing YouTube channel with videos featuring a character named Super JoJo and his family.

On July 27, 2023, a jury found that BabyBus infringed Moonbug’s registered copyrights to CoComelon’s JJ character, family, and animal characters for 36 out of 39 works at issue. Further, the jury found BabyBus liable for copyright infringement and misrepresentation under § 512(f) of the Digital Millennium Copyright Act (DMCA).

The court denied Moonbug’s post-trial motions, entered judgment in favor of Moonbug in the amount of $17,718,114, and later issued a writ of execution in the amount of $17,908,246.35 with $2,640.72 in daily interest. BabyBus moved for a new trial and judgment, which the court denied.

Moonbug subsequently filed a motion for an assignment of assets and a restraining order, which the court denied without prejudice. The court later granted Moonbug’s emergency motion for an assignment of assets from BabyBus to Moonbug and a restraining order to restrict BabyBus from assigning the relevant assets to any other entity. Therein, the court ordered BabyBus to assign all rights to payments from several entities, including Japan BabyBus Co., Ltd. (“Japan BabyBus”).

Because BabyBus failed to pay the judgment and had allegedly sought to thwart enforcement of levies on their U.S. revenues, Moonbug filed a motion to amend the judgment to add Japan BabyBus as a judgment debtor under California Code of Civil Procedure § 187. Moonbug alleged that BabyBus was using Japan BabyBus as a shell to launder the judgment money. In opposition, BabyBus argued that it need not provide a substantive response because Moonbug did not properly serve Japan BabyBus and because Japan BabyBus has not controlled the litigation or had the opportunity to oppose the judgment.

Service. First, the court found that service was effectuated. Defendants argued that Japan BabyBus had not appeared in the action or been served properly and were not provided notice and an opportunity to respond. However, the court held that defendants offered no countervailing evidence and did not contend that Japan Babybus was not aware of the proceedings and the motion at issue.

Alter ego. Second, the court found that both prongs of the test for alter ego liability were satisfied: (1) that there be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, and (2) that, if the acts are treated as those of the corporation alone, an inequitable result will follow.

Regarding the first prong, the court said that because Japan BabyBus is a wholly owned subsidiary of BabyBus Co., the two have a complete unity of interest. Further, the court said that several alter ego factors favor a finding of a unity of interest between Japan BabyBus and BabyBus: the two entities employ the same attorney, they have identical equitable ownership, Japan BabyBus is an instrumentality or conduit for BabyBus, and the entities have failed to maintain arm’s length relationships between each other.

As for the second prong, the court said that Moonbug made a prima facie showing that failure to disregard the separate identities of Japan BabyBus and BabyBus would result in injustice. Were Japan BabyBus not be considered the alter ego of BabyBus, an inequitable result would occur because BabyBus would be allowed to continue delaying satisfaction of the judgment.

Control of the litigation. Third, the court found that adding Japan BabyBus as a party would not frustrate its due process, satisfying the second requirement under § 187. The court said that BabyBus and its wholly owned subsidiary Japan BabyBus are legally incapable of having different interests, and that BabyBus offered no evidence showing otherwise and provided no evidence to demonstrate that it and Japan BabyBus lacked a shared legal interest or strategy. Thus, the court said that Moonbug demonstrated that Japan BabyBus controlled the litigation and had the opportunity to litigate to satisfy due process concerns.

The Case is No. 3:21-cv-06536-EMC.

Judge: Chen, E.

Attorneys: John Sprangers (Horvitz & Levy LLP) for Moonbug Entertainment Ltd. Aaron H. Perahia (Quinn Emanuel Urquhart & Sullivan, LLP) for BabyBus Network Technology Co., Ltd., and Babybus (Fujian) Network Technology Co., Ltd.

Companies: Moonbug Entertainment Ltd.; BabyBus Network Technology Co., Ltd.; Babybus (Fujian) Network Technology Co., Ltd.; Japan BabyBus Co., Ltd.

Cases: Copyright TechnologyInternet CaliforniaNews