This court reviews de novo those portions of the proposed findings of fact to which objection has been made. 28 U.S.C. § 636(b)(1). See McDonnell Douglas Corp. v. Commodore Business Machines, 656 F.2d 1309, 1313 (9th Cir.1981), cert. denied, 455 U.S. 920 (1982). In making a de novo determination, the court considers the record which has been developed before the magistrate. The court is not bound to adopt the magistrate's findings but rather the judge will, “in sound judicial discretion,” make his own determination on the record. United States v. Raddatz, 447 U.S. 667, 675–76 (1980).

As to any portion of the proposed findings of fact to which no objection has been made, the court assumes its correctness and decides the motions on the applicable law. See Orand v. United States, 602 F.2d 207, 208 (9th Cir.1979). The magistrate's conclusions of law are reviewed de novo. See Britt v. Simi Valley Unified School District, 708 F.2d 452, 454 (9th Cir.1983).

The court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate. 28 U.S.C. § 636(b)(1). The authority and responsibility to make an informed and final determination is vested in the district court judge. Mathews v. Weber, 423 U.S. 261, 271 (1976).

Defendant make various objections to the proposed findings of fact. None of the findings of fact to which objection has been made, however, bear dispositively on the spoliation issue which is at the heart of this matter.

Defendant first objects to the magistrate's finding that defendant had completed his program by April, 1989. I note first that defendant Sullivan stated in his April 1989 application to the copyright office that the work was completed. Sullivan Depo., Exh. 6, item 3. In his deposition, however, Sullivan testifies that his program was not completed at the time he attempted to copyright it. Sullivan Depo. at 305:21–24. Defendant made his first sale of the program in August of the same year, and thus the program must have necessarily been completed by that time. Whether the program was completed in April or in August of 1989, however, has no bearing on the issue of the appropriate discovery sanction.

*2 Defendant next objects to the magistrate's finding that defendant destroyed a hard copy of the source code after he had been served with a request for production in the state court action. Cabinetware served Sullivan with a request for production on September 28, 1989. Defendant admitted he destroyed a hard copy of his source code “maybe” in October of 1989. Sullivan Depo. at 207:19. Because defendant did not appear or testify in the evidentiary hearing, his credibility could not be assessed by the magistrate. In light of contradictory statements in Sullivan's deposition as to when the destruction took place, see Sullivan Depo. at 207:9–10, 217:14–15, it does not appear the magistrate's finding is incorrect. More pertinent to the spoliation issue, however, is Sullivan's destruction of the electronic files in 1990, which remains uncontested.

Defendant also objects to the magistrate's finding that Sullivan knew that Cabinetware wanted to review all versions of his source code. Sullivan admits to carefully reviewing the production request, which required him to produce his source code and all documents which refer or relate to development of the software. Under these circumstances, defendant knew or should have known that this request would encompass all versions of the source code.

Defendant further objects to the finding that Sullivan rented a safe deposit box to store his electronic code. This objection is completely unfounded, as Sullivan admitted to obtaining a “safe deposit box to store my source code in.” Sullivan Depo. at 208:11–12.

Defendant's objection to the finding that a compiler is hardware is sustained. While the magistrate was incorrect in characterizing a compiler as hardware, that finding of fact is of no significance to the matter of sanctions.

Defendant's final objection is to the finding that the fifty pages deposited with the Copyright Office do not contain the “guts of the source code operations.” Sullivan's own expert admits the deposited fifty pages do not refer to the program's main purpose. RT II at 63:4–12, 63:13–64:8. Accordingly, after de novo review of the record, I find that defendant's objections, except insofar as they relate to the characterization of a compiler, cannot be sustained.

Moreover, it appears that even in the absence of the findings to which objections have been made, the magistrate's uncontested findings fully support the conclusion that a discovery sanction is appropriate in the instant matter because of defendant's spoliation of evidence essential to plaintiff's case. The magistrate found that computer programs can be easily modified to disguise the copying of source codes and that a comparison of Sullivan's initial source code with Cabinetware's source code is of critical importance in this case. Though fully aware of the request for production of the source codes and of their significance in copyright infringement actions, defendant purposefully destroyed the initial source codes in order to avoid having that code made available for comparison in this litigation. Sullivan's explanation that he destroyed the evidence by writing over the floppy disks because he needed more disks and did not want to bother to go out and buy additional disks simply cannot be credited. Finally, I note, in continuing his intransigent behavior, defendant's production of the current code has been incomplete and with the files corrupted so as to be nonusable by plaintiff's experts. Under these circumstances, I find that a discovery sanction must be imposed in this action. I turn, therefore, to the question of the appropriate sanction in a case of such egregious conduct.

*3 Sanctions are authorized pursuant to Rule 37 for failure to comply with discovery orders. See Fed.R.Civ.P. 37(b)(2). The court also has the inherent authority to impose an appropriate sanction in order to protect the integrity of the judicial process. Halaco Engineering v. Costle, 843 F.2d 376 (9th Cir.1988). Where a dismissal or entry of default judgment is contemplated as a sanction pursuant to the court's inherent authority, several factors must be considered: (1) whether willfulness, bad faith, or fault can be attributed to the offending party, (2) whether certain extraordinary circumstances exist, (3) whether lesser sanctions would be efficacious, (4) the relationship or nexus between the misconduct and the matters in controversy in the case. Halaco Engineering, 843 F.2d at 380. As an optional consideration, where appropriate, the prejudice to the party victim of the misconduct can factor into the court's determination of whether default judgment is an appropriate sanction. Id.

The magistrate found Sullivan willfully destroyed evidence of great significance to the instant case. During oral arguments on the appropriate sanction, defendant represented to the court that he was never on notice that Sullivan's motivation or state of mind would be an issue during the evidentiary hearing held by the Magistrate on the sanctions matter. Defendant therefore requested another opportunity to present different or additional evidence on this matter. After reviewing the record, defendant's representations notwithstanding, I find that adequate and full notice was given that defendant's intent in destroying the evidence was at issue in the sanctions matter.

I note first that the briefing on the motion for sanctions put defendant on notice that his willfulness was in issue. In the first page of Plaintiff's Memorandum in Support of Sanctions, it is alleged that Sullivan willfully destroyed evidence. Plaintiff's memorandum at page six describes “Sullivan's intent.” On page 18, plaintiff states that “[t]he court should impose these sanctions because of Sullivan's willful destruction of evidence.” In opposing the motion for sanctions, defendant resisted the characterization of the destruction as deliberate. See Opposition at 8:4; 10:7–11.

Second, in the order referring this matter to the magistrate, I noted that plaintiff's motion raised dispositive matters because a dismissal sanction was sought due to “defendant's spoiliation [sic] of the evidence.” Order, filed April 19, 1991, at 3:4–5. Even if plaintiff's briefing was insufficient to put defendant on notice that intent was at issue, certainly the court's characterization of this motion as a spoliation matter should have raised alarm that defendant's mental state was of concern to the court.

Finally, the magistrate noted that an evidentiary hearing was ordered “because there appeared to be serious factual disputes concerning the motive behind the destruction of evidence.” Findings and Recommendations at 3:9–12. I conclude, therefore, that defendant was given fair notice that his willfulness or state of mind was of central concern in the sanctions matter. Defendant, having failed to avail himself of the opportunity to testify at the lengthy evidentiary hearing conducted by the magistrate, must now abide by his tactical decision. The court declines defendant's further offer of proof on the matter of his intent in destroying the evidence.

*4 The magistrate has recommended that a rebuttable presumption of copying be established, reasoning that this will put the plaintiff in the same position as if the evidence had not been destroyed. A prima facie case of copyright infringement requires plaintiff prove ownership of the copyright and copying of an expression protected by the copyright. Johnson Controls v. Phoenix Control Systems, 886 F.2d 1173, 1175 (9th Cir.1989). Copying is usually proved by proof of defendant's access to the copyrighted material and substantial similarity between the copyrighted material and the allegedly infringing material. Krofft Television v. McDonald's Corp., 562 F.2d 1157, 1162 (9th Cir.1977). By destroying the original source code versions, defendant in the instant case has precluded plaintiff from proving substantial similarity. Under Ninth Circuit law, once the plaintiff offers proof that defendant had access and the two works are substantially similar, a presumption of copying by defendant arises. Granite Music Corp. v. United Artists Corp., 532 F.2d 718, 721 (9th Cir.1976). The magistrate's recommended sanction mirrors this presumption and overcomes the difficulties with plaintiff's proof that have been caused by defendant's destruction of the evidence.

This sanction, however, would serve no deterrent or punitive function. Ordinarily, the rebuttable presumption of copying need not be overcome with clear and convincing evidence. Granite Music Corp., 532 F.2d at 723–24; Perry Studio, Inc. v. Wernick, 597 F.2d 1308, 1310 (9th Cir.1979). As an alternative sanction that would be moderately punitive, the court has considered imposing a requirement on defendant that he rebut the presumption with clear and convincing evidence.

Although these alternative sanctions are reasonably tailored to put the plaintiff in the position he would have been in but for defendant's transgression, I conclude that they are inadequate to protect the integrity of the court's process. Defendant's conduct in the instant action, cast in its most charitable light, is an affront to the integrity of the judicial system. Knowing full well the significance of the initial source codes to plaintiff's suit for copyright infringement, defendant willfully destroyed essential evidence after being served with a request for production. Although I have served many years on the federal bench, this court has never before been confronted with such a flagrant example of contempt for the judicial system. Faced with a similar case of spoliation, a brother court found the circumstances sufficiently extraordinary to warrant default judgment. See Computer Associates Intern. v. American Fundware, 133 F.R.D. 166 (D.Colo.1990).

In that opinion, Judge Carrigan reflects this court's concern with imposing a sanction that would be sufficiently severe so as to deter future like-minded litigants.

In this post Iran-gate era of widely publicized evidence destruction by document shredding, it is well to remind litigants that such conduct will not be tolerated in judicial proceedings. Destruction of evidence cannot be countenanced in a justice system whose goal is to find the truth through honest and orderly production of evidence under established discovery rules. I hold that nothing less than default judgment on the issue of liability will suffice to both punish this defendant and deter others similarly tempted.

*5 Computer Assoc., 133 F.R.D. at 170. Because defendant's conduct strikes at the heart of the judicial process, I too, conclude that no sanction less than default judgment will be sufficient to serve both the necessary deterrent and punitive functions.

Plaintiff has moved to preliminarily enjoin defendant during the pendency of this action from infringing plaintiff's copyright and from publishing, selling, marketing, transferring, copying or otherwise disposing of any copies of defendant's computer software program. To prevail on this motion, plaintiff must demonstrate either a likelihood of success on the merits and the possibility of irreparable injury, or that serious questions going to the merits are raised and the balance of hardships tips sharply in the moving party's favor. Apple Computer Inc. v. Formula Int'l, Inc., 725 F.2d 521, 525 (9th Cir.1984). In a copyright infringement action, plaintiff need only demonstrate a reasonable likelihood of success on the merits because such a showing raises a presumption of irreparable harm. Johnson Controls v. Phoenix Control Systems, 886 F.2d 1173 (9th Cir.1989)

Because this court shall order default judgment on the issue of liability be entered against defendant as a sanction for spoliation, plaintiff has demonstrated more than a likelihood of success on the merits; it is a certainty. Accordingly, a presumption of irreparable harm arises. Defendant contends that plaintiff is not irreparably harmed because his product is sold to low-end users who could not afford plaintiff's product. Competitive harm, however, is not the only kind of irreparable harm recognized in copyright infringement actions. Plaintiff can be irreparably harmed in its reputation for high quality products, see Dallas Cowboy Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200 (2nd Cir.1979), as well as in the loss of control of distribution of its works. See Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539 (1985).

Plaintiff need only demonstrate a possibility of irreparable injury. Even if defendant's contention was correct, that defendant's customers could not and would not have bought plaintiff's product because of its high cost, that argument addresses only competitive harm. Defendant has failed to rebut the presumption of irreparable harm that rises in the instant action. Plaintiff's motion for preliminary injunction is therefore GRANTED.

In accordance with the above, IT IS HEREBY ORDERED:

(1) Default judgment on the issue of liability is hereby entered against defendant.

(2) Defendant James W. Sullivan and his agents, servants, employees, attorneys, and all persons in active concert or participation with him are enjoined during the pendency of this action from infringing plaintiff's copyright in any manner and from publishing, selling, marketing, transferring, copying, or otherwise disposing or attempting to dispose of any copies of defendant's computer software program entitled “Kitchen Simulator.”

*6 IT IS SO ORDERED.