Opinion
CV 15-07694 RSWL (PJWx)
05-17-2016
KCI NEWPORT, INC., a California corporation; and KASSIR IMPORT-EXPORT CO., INC., a California corporation, Plaintiffs, v. SMOKE TOKES, LLC, a California limited liability company; SMOKE WORLD, INC., a California corporation; CC INTERNATIONAL TRADING, INC., a California corporation; MIGUEL RUIZ, an individual and doing business as EAST SIDE SMOKE SHOP; WESTSIDE TRADING LLC, a California limited liability company; and DOES 1 through 50, Defendants.
ORDER Re: APPLICATION FOR DEFAULT JUDGMENT BY COURT AS TO SMOKE WORLD, INC., MIGUEL RUIZ, DBA EAST SIDE SMOKE SHOP, CC INTERNATIONAL TRADING, INC, AND WESTSIDE TRADING LLC [50].
Currently before the Court is Plaintiff KCI Newport, Inc.'s ("KCI") and Kassir Import-Export Co., Inc.'s ("Kassir") (collectively "Plaintiffs") Application for Default Judgment [50]. In their Application, Plaintiffs seek damages, injunctive relief, and attorneys' fees. The present application arises from a trademark infringement action against Defendants. For the reasons set forth below, the Court GRANTS Plaintiffs' Application [50].
I. BACKGROUND
A. Factual Background
Plaintiffs are California corporations with their principal places of business in Commerce, California. First Amended Complaint ("FAC") ¶ 1, ECF No. 13. Kassir is a wholesaler and distributor of general merchandise including smoking supplies, operating its business since 1995. Id. at ¶ 12.
Defendants CC International Trading, Inc. ("CC International Trading"), Smoke Tokes, LLC ("Smoke Tokes"), and Smoke World, Inc. ("Smoke World") are California corporations with their principal places of business in Los Angeles, California. Id. at ¶¶ 2-4. Defendant Miguel Ruiz is an individual residing in, and doing business as East Side Smoke Shop in Los Angeles, California. Id. at ¶ 5. Defendant Westside Trading LLC ("Westside Trading") is a California limited liability company with its principle place of business in Los Angeles, California. Id. at ¶ 6.
Kassir has a registered trademark with the United States Patent and Trademark Office ("USPTO") for a mark featuring the words "NEWPORT ZERO" (Registration No. 4,492,372), including graphic elements such as a distinctive red flame and blue rectangle, along with other distinctive graphic elements of its packaging such as "a design consisting of a tube with flints spaced aroudn the top in different levels (the "Mark"). Id. at ¶¶ 14-16; see FAC Ex. C. The Mark covers "cans containing butane gas." Id.
KCI was formed on March 6, 2013. Id. at 17. Kassir has, since its conception, distributed butane lighter gas under the Mark, as well as under the unregistered word mark "NEWPORT ZERO" (the "Trade Name").
In their FAC, Plaintiffs allege that Defendants have been importing and/or distributing glass pipes designed for smoking marijuana and marijuana derived combustibles that bear graphics closely similar to their Mark, except that the word "Newport" in the graphic is replaced with the word "Newpipe" ("Infringing Pipes"). Id. at ¶ 18. Plaintiffs believe that the Infringing Pipes are being imported from China by Defendant CC International Trading Inc., and are being sold in stores and marketed, advertised and/or sold online by the remaining Defendants listed in this action. Id. at ¶ 19. Plaintiffs allege that consumers within this judicial district have in fact purchased Defendants' Infringing Pipes. Id. Plaintiffs have not consented to Defendants' use of the Mark or the Trade Name on the Infringing Pipes. Id. at ¶ 22. // // B. Procedural Background
On September 30, 2015, Plaintiffs filed their Complaint [1] for injunctive and monetary relief against Defendants, alleging violations of the Lanham Act, as well as common law unfair competition and unfair competition pursuant to the California Business and Professions Code. On October 14, 2015, Plaintiffs' Complaint was served on Defendants [9, 10, 11, 12]. On October 22, 2015, Plaintiffs filed their First Amended Complaint ("FAC") [13]. On November 6, 2015, the FAC was served on Defendants [16, 17, 18, 19, 20].
On November 10, 2015, Plaintiffs requested that the clerk of court enter default against Defendants CC International Trading, Miguel Ruiz, and Smoke World [23]. On November 12, 2015, the clerk entered default against Smoke World, Miguel Ruiz, and CC International Trading [24]. On November 20, 2015, Plaintiff requested that the clerk of court enter default against Westside Trading [25]. On November 23, 2015, the clerk entered default against Westside Trading [26].
On November 25, 2015, Plaintiffs and Smoke Tokes entered into a stipulation to allow Plaintiffs to amend their First Amended Complaint, correcting some minor issues that Smoke Tokes raised in a conference of counsel [27]. On December 2, 2015, Plaintiffs filed their Second Amended Complaint ("SAC") [29]. On December 17, 2015, Plaintiffs requested that the clerk of court enter default against Defendant Smoke Tokes [30]. On December 17, 2015, Plaintiffs filed a motion withdrawing their request that the clerk enter default against Smoke Tokes [31]. On December 21, 2015, Smoke Tokes filed their Answer to Plaintiffs' SAC [32].
On December 21, 2015, Smoke Tokes filed a Counterclaim against Counter-Defendants and Third Party Defendants KCI, Kassir, and Keen Private Label Limited ("Keen") [33]. On December 23, 2015, this Court ordered Smoke Tokes' Counterclaim and Third-Party Complaint [33] to be stricken for failure to comply with the Court's Local Rules, General Orders, and/or Case Management Order [37]. On December 23, 2015, Smoke Tokes again filed a Counterclaim against Plaintiffs/Counter-Defendants KCI and Kassir . [39]. On December 23, 2015, Smoke Tokes also filed a Third Party Complaint against Third-Party Defendant Keen [40]. On January 11, 2016, Plaintiffs/Counter-Defendants filed an Answer to Smoke Tokes' Counterclaim [44]. On January 11, 2016, Defendant/Counterclaimant Smoke Tokes filed a Stipulation to Clarify its Counterclaim [45].
On February 19, 2016, Plaintiffs filed a Motion for Default Judgment against Defendants [50]. On April 7, 2015, Plaintiffs filed a Stipulation to Dismiss all claims against Smoke Tokes, and all counter-claims against counter-Defendants KCI and Kassir. [57]. On April 8, 2016, this Court granted Plaintiffs' Stipulation [58], dismissing all claims against Smoke Tokes, and all counterclaims by Smoke Tokes against Plaintiffs. On May 6, 2016, this Court granted the parties' stipulation to dismiss all claims against Defendant Miguel Ruiz, doing business as Eastside Smoke Shop [60].
Plaintiffs now bring the instant Motion for Default Judgment [50] against the remaining Defendants in this action, Smoke World, Westside Trading, and CC International Trading.
II. DISCUSSION
A. Legal Standard
Default judgment is within the discretion of the district court. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980); see Fed. R. Civ. P. 55. A party applying to the Court for default judgment must satisfy both procedural and substantive requirements.
Procedurally, the requirements set forth in Federal Rules of Civil Procedure Rules 55 and 56, and Local Rule 55-1 must be met. See Vogel v. Rite Aid Corp., 992 F. Supp. 2d 998, 1006 (C.D. Cal 2014). Local Rule 55-1 provides: "When an application is made to the Court for a default judgment, the application shall be accompanied by a declaration in compliance with Fed. R. Civ. P. 55(b)(1) and/or (2) and include the following: (a) When and against what party the default was entered; (b) The identification of the pleading to which default was entered; (c) Whether the defaulting party is an infant or incompetent person, and if so, whether that person is represented by a general guardian, committee, conservator or other representative; (d) That the Service Members Civil Relief Act, 50 U.S.C. § 521, does not apply; and (e) That notice has been served on the defaulting party, if required by Federal Rule of Civil Procedure 55(b)(2)." L.R. 55-1.
Substantively, the Ninth Circuit has directed that courts consider the following factors, referred to as the Eitel factors in deciding whether to enter default judgment: "(1) the possibility of prejudice to plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning the material facts, (6) whether defendant's default was the product of excusable neglect, and (7) the strong public policy favoring decisions on the merits." See Vogel, 992 F. Supp. 2d at 1005; see also Eitel v. McCool, 782 F.2d 1470, 1471071 (9th Cir. 1986). Additionally, "[w]hen entry of judgment is sought against a party who has failed to plead or otherwise defend , a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties." In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999).
In analyzing these factors, the Court may base its judgment entirely upon the affidavits submitted by the parties. Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir. 1981). If the Court determines that the defendant is in default, "'the factual allegations of the complaint, other than those relating to damages, are taken as true.'" Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-918 (9th Cir. 1987) (quoting Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977)). Additionally, "[w]hen entry of judgment is sought against a party who has failed to plead or otherwise defend, a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties." In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). B. Analysis
1. Application for Default Judgment
Plaintiffs seeks entry of default judgment against Defendants Smoke World, CC International Trading, and Westside Trading for failure to respond or otherwise defend themselves in this matter. See generally Appl., ECF No. 50. For the reasons set forth below, the Court GRANTS Plaintiffs' Application, and in doing so, GRANTS Plaintiffs' request for damages, in part, injunctive relief, and attorneys' fees.
a. Jurisdiction and Service of Process are Proper
In considering whether to enter default judgment against a party for failing to plead or otherwise defend itself in an action, a district court must first determine whether it has jurisdiction over the subject matter and the parties to the case. In re Tuli, 173 F.3d 707, 712 (9th Cir. 1999).
Generally, a defect in personal jurisdiction is a defense that must be asserted or waived by a party. Id. (citing Fed. R. Civ. P. 12(h)(1)). However, when a court is considering whether to enter default judgment, the court may dismiss the action sua sponte for lack of personal jurisdiction, for a "judgment entered without personal jurisdiction over the parties is void." Id. This Court should find that service of process was proper, and the Court has jurisdiction over the parties and the subject matter in this action.
i. Personal jurisdiction
Due process requires that a defendant have "certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotations marks omitted). Depending on the nature and scope of the defendant's contacts with the forum, jurisdiction may be general or specific to a cause of action. Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). When a defendant's contacts with the forum state are "substantial" or "continuous and systematic," general jurisdiction may be exercised over that defendant for any cause of action, even if it is unrelated to the defendant's activities with the forum state. Schwarzeneggar v. Fred Martin Motor Co., 374 F.3d 797, 801-02 (9th Cir. 2004); Data Disc, Inc. v. Sys. Tech. Assocs., 557 F.2d 1280, 1287 (9th Cir. 1977). "A court may exercise specific jurisdiction where the suit 'arises out of' or is related to the defendant's contacts with the forum and the defendant 'purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1169 (9th Cir. 2006) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)).
Defendants CC International Trading and Smoke World are California corporations with their principal places of business in Los Angeles, California. FAC ¶¶ 2, 4. Defendant Westside Trading is a California limited liability company with its principal place of business in Los Angeles, California. Id. at ¶ 3. This Court thus finds it has general personal jurisdiction over Defendants, as Defendants' contacts with the forum state are sufficient to approximate physical presence. FAC ¶ 11; See Bancroft & Master, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1986 (9thCir. 2000). Alternatively, this Court finds it has specific personal jurisdiction over Defendants, as the present suit arises out of Defendants' contacts with the forum state, specifically, the sale of the Infringing Pipes in this judicial district. Burger King Corp., 471 U.S. at 475.
ii. Subject matter jurisdiction
This Court finds it has subject matter jurisdiction over the matter, as Plaintiffs' claims for trademark infringement under 15 U.S.C. § 1114 and false designation of origin under 15 U.S.C. § 1125(a) arise under the Lanham Act. This Court has pendent jurisdiction over Plaintiffs' common law and California unfair competition claims. Furthermore, under 28 U.S.C. § 1338(a), this Court "shall have original jurisdiction of any civil action arising under any Act of Congress relating to ... trademarks." 28 U.S.C. § 1338(a). This Court thus has original jurisdiction over this matter as the Court has jurisdiction over "any civil action asserting a claim of unfair competition when joined with a substantial and related claim under the . . . trademark laws." 28 U.S.C. § 1338(b).
iii. Service of Process
This Court finds Plaintiffs have proffered the requisite Proofs of Service [16, 17, 18, 19, 20] showing the Defendants against whom default judgment is sought were properly served with the Summons and Complaint. Plaintiffs note that although Defendants have not appeared in this action, Plaintiffs have served each of them with this Application pursuant to Local Rule 55-2. Declaration of Robert F. Helfing ("Helfing Decl.") ¶ 10, ECF No. 51. Nonetheless, as Defendants have not appeared in this action, Plaintiffs are not required to serve the present Application on Defendants. See Fed. R. Civ. P. 55(b)(2) ("If the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application at least 7 days before the hearing."). This Court finds service of process is complete and proper.
b. Plaintiffs have Satisfied the Procedural Requirements for Default Judgment
This Court finds Plaintiffs have met all of the procedural requirements for entry of default judgment. Plaintiffs' Application includes the identity of the parties that default was entered against, and when default was entered against them. Helfing Decl. ¶¶ 2, 6, 7; Appl. 3:23-5:13. Furthermore, Plaintiff's application identifies the pleading to which default was entered, the First Amended Complaint. As Defendants are business entities, Defendants are hence neither minors, nor incompetents, nor on military service or otherwise exempt under the Servicemembers Civil Relief Act. Helfing Decl. ¶ 8. Additionally, default judgment is entered against Defendants because Plaintiffs have sufficiently satisfied the substantive requirements for entry of default judgment.
After filing their FAC, Plaintiffs subsequently filed a Second Amended Complaint on December 2, 2015, pursuant to a stipulation with now dismissed Defendant Smoke Tokes [27, 28]. Plaintiffs note that they did not serve the SAC on the Defendants against whom default had already been entered and against whom this Application for Default Judgment is sought. Plaintiffs note that the present Application refers only to the allegations contained in the First Amended Complaint that was the governing and operative pleading at the time that default was entered against Defendants. Finally, Plaintiffs note that Smoke Tokes has responded to the SAC, and Plaintiffs do not seek default judgment against Smoke Tokes. Helfing Decl. p. 2, fn 1. --------
c. Plaintiffs have Satisfied the Substantive Requirements for Default Judgment
i. Risk of prejudice to Plaintiffs.
The first Eitel factor "considers whether plaintiff will suffer prejudice if default judgment is not entered." Tate v. Molina, 2015 U.S. Dist. LEXIS 3607 (C.D. Cal. Jan. 9, 2015).
This Court finds Plaintiffs would be prejudiced if default judgment was not entered. As Defendants have failed to respond to the FAC, and have not otherwise appeared or participated in these proceedings, Plaintiffs would have no other means of recovery if the Court declined to enter default judgment. See Phillip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 499 (C.D. Cal. 2003) (prejudice found where Plaintiffs could not otherwise recover damages). Further, Plaintiffs would likely continue to suffer future harm, specifically lost sales and diminished goodwill, if Defendants were not prevented through injunctive measures from further misuse of the Infringing Pipes. This Court finds the first Eitel factor weighs in favor of entry of default judgment.
ii. The merits of Plaintiffs' substantive claims and sufficiency of the Complaint.
The second and third Eitel factors consider the merits of Plaintiffs' substantive claims and the sufficiency of the complaint. "Under an [Eitel] analysis, [these factors] are often analyzed together." Tate, 2015 U.S. Dist. LEXIS 3607 at *5 (quoting Dr. JKL Ltd. v. HPC IT Educ. Ctr., 749 F.Supp.2d 1038, 1048 (N.D. Cal. 2010)). "These two factors require a plaintiff to 'state a claim on which the [plaintiff] may recover." Id. (quoting Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)). The second and third Eitel factors favor default judgment because Plaintiffs have adequately pled their four claims. See PepsiCo. Inc. v. California Security Cans, 238 F.Supp.2d 1172, 1175 (C.D. Cal. 2002) (these factors "require that a plaintiff state a claim on which the [plaintiff] may recover")(internal citations omitted).
1. Plaintiffs have asserted a meritorious claim for Federal Trademark Infringement.
Plaintiffs' first claim against Defendants alleges infringement of a registered trademark, in violation of 15 U.S.C. § 1114. "To prove a claim of trademark infringement, a plaintiff must show: (1) that it has a valid, protectable trademark, and (2) that defendant's use of the mark is likely to cause confusion." Kythera Biopharmaceuticals, Inc. v. Lithera, Inc., 998 F.Supp.2d 890, 898 (C.D. Cal. Feb. 20, 2014) (citing Applied Info. Scis. Corp. v. eBay, Inc., 511 F.3d 966, 969 (9th Cir. 2007)). Whether the use is likely to cause confusion turns on "whether a reasonably prudent consumer in the marketplace is likely to be confused as to the origin of the goods" bearing the mark. Id. at 901.
A. Protectability
The first element is comprised of two sub-parts: the mark's protectability and Plaintiffs' ownership of the mark. So. Ca. Darts Ass'n v. Zaffina, 762 F.3d. 921, 929 (9th Cir. 2014). Whether a mark is protectable depends on its degree of "distinctiveness." Id. There are five traditional categories of distinctiveness: (1) generic, (2) descriptive, (3) suggestive, (4) arbitrary, or (5) fanciful. Id. (citing Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992). Descriptive marks, such as Plaintiffs' Mark here, become protectable if they acquire a "secondary meaning," by becoming distinctive "as used on or in connection with the applicant's goods in commerce." Id.; 15 U.S.C. § 1052(f). Whether a secondary meaning exists requires the consideration of several factors: (1) whether consumers associate the product with the trademark owner, (2) the extent of advertisement by the trademark owner, (3) the length of time of use by the trademark owner, and (4) the owner's exclusive use of the trademark. Japan Telecom v. Japan Telecom, 287 F.3d 866, 873 (9th Cir. 2002).
Here, this Court finds Plaintiffs' Mark is valid and protectable as Plaintiffs have sufficiently alleged ownership of a valid mark. See FAC ¶ 16, Ex. C. In accordance with 15 U.S.C. § 1057(b), the registration provided is prima facie evidence of the ownership and validity of the Mark. Further, since March 2013, Plaintiff KCI, under license from Plaintiff Kassir, has "expended substantial time, money and resources marketing, advertising and promoting the butane lighter gas that it sells" under the Mark. FAC ¶ 17. Plaintiffs have not consented to Defendants' use of the Mark, or its correlating Trade Name, on Defendants' Infringing Pipes. Id. at ¶ 22. Based on the analysis of the factors above, this Court finds that Plaintiff's Mark has a secondary meaning and is thus protectable.
B. Likelihood of Confusion
In regards to the second element, Plaintiffs must show that Defendants' infringing use would likely cause consumer confusion. So. Ca. Darts Ass'n, 762 F.3d at 929. Generally, courts apply a "likelihood of confusion" test that asks whether the defendant's use of the plaintiff's trademark is "likely to cause confusion or to cause mistake, or to deceive as to the affiliation, connection, or association" of the two products. Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792, 806-07 (9th Cir. 2003).
The factors assessed in determining a "likelihood of confusion" ("Sleekcraft factors") are: (1) the strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degrees of care likely to be exercised by the purchaser; (7) defendant's intent in selecting the mark; and (8) likelihood of expansion of the product lines. AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979), abrogated in part on other grounds by Mattel Inc. v. Walking Mountain Prods., 353 F.3d 792, 810 n. 19 (9th Cir. 2003). While courts analyze each of the eight factors, "[t]he test is a fluid one and the plaintiff need not satisfy every factor, provided that strong showings are made with respect to some of them." Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 631 (9th Cir. 2005). The importance of any one factor will vary case by case, and a court may reach a conclusion of confusion by only considering a subset of the factors. Brookfield Commc'ns, Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1054 (9th Cir. 1999).
Here, the Court finds Plaintiffs have made a strong showing with respect to five of the eight Sleekcraft factors, and thus Plaintiffs have established a "likelihood of confusion" supporting a meritorious claim for trademark infringement. Regarding the first factor, Plaintiffs show their Mark is strong. Plaintiffs have continually used the Mark since its USPTO registration in March of 2013, and have neither abandoned it nor shown intention to abandon it. FAC ¶ 16. Plaintiffs have advertised and promoted their products under their Mark, developing a reputation in the smoking industry since 2013. Id. at ¶¶ 17, 28.
Regarding the second factor, the Court finds Plaintiffs have shown proximity of the goods at issue here. Plaintiffs are both California corporations. Id. at ¶ 1. Kassir is a wholesaler and distributor of merchandise including smoking supplies. Id. at ¶ 12. KCI has distributed butane lighter gas under the Mark and Trade Name since its formation in March, 2013. Id. at ¶ 17. Defendants are also distributors in the California smoking supplies industry. Id. at ¶ 19. Defendants sell smoking products in stores, as well as market, advertise, and/or sell these products online. Id.
Regarding the third factor, the Court finds that although the marks are not identical, they are deceptively similar. Defendants have been importing and/or distributing glass pipes designed for smoking marijuana that bear graphics very similar to the Mark, the only minor difference being that the word "Newport" is replaced with the word "Newpipe." Compare Declaration of Michael Mottesheard ("Mottesheard Decl.") Exs. B, C with FAC Ex. A. Defendants' Infringing Pipes display the same design as Plaintiffs' Mark: an identical red flame arising out of a blue vertical rectangle with white font. See id. Defendants' Infringing Pipes also contain the "design consisting of a tube with flints spaced around the top in different levels." Id. Plaintiffs' Mark states in white font: "Newport, Extra Purified Butane Lighter Gas," while Defendants' Pipes state, in similar white font: "Newpipe, Extra Purified Butane Gas." Id.
Regarding the fourth and seventh Sleekcraft factors, Plaintiffs allege that actual confusion has occurred and it was Defendants' intention to create such confusion. Plaintiffs allege "that consumers within this judicial district have in fact purchased Defendants' Infringing Pipes," and that "Defendants are importing and distributing the Infringing Pipes with knowledge of Plaintiffs' trademarks." FAC ¶¶ 20, 21. Plaintiffs allege Defendants "make such use with the intention to capitalize upon the goodwill established by Plaintiffs in those designations of origin." Id.
This Court finds Plaintiffs have made a strong showing of five of the eight Sleekcraft factors, and accordingly have asserted a meritorious claim for federal trademark infringement.
2. Plaintiffs have asserted meritorious claims for False Designation of Origin, Common Law Unfair Competition, and Unfair Competition under California Business & Professions Code § 17200.
The elements to establish the claims of false designation of origin, unfair competition, and trademark infringement are "identical." New West Corp. v. NYM Co., 595 F.2d 1194, 1201 (9th Cir. 1979). "[T]he courts have uniformly held that common law and statutory trademark infringement are merely specific aspects of unfair competition," and thus the claims may appropriately be analyzed together. Kythera, 998 F.Supp.2d at 897 (citing Hokto Kinoko Co. v. Concord Farms, Inc., 810 F.Supp.2d 1013, 1031 (C.D. Cal. 2011)); see also Grey v. Campbell Soup Co., 650 F.Supp. 1166, 1173 (C.D. Cal. 1986) ("The tests for infringement of a federally registered mark under § 32(1), 15 U.S.C. § 1114(1), infringement of a common law trademark, unfair competition under § 43(a), 15 U.S.C. § 1125(a), and common law unfair competition involving trademarks are the same.") Furthermore, the Ninth Circuit "has consistently held that state common law claims of unfair competition . . . are 'substantially congruent' to claims made under the Lanham Act." Cleary v. News Corp., 30 F.3d 1255, 1262-63 (9th Cir.1994) (citing Academy of Motion Picture Arts & Scis. v. Creative House Promotions, Inc., 944 F.2d 1446, 1457 (9th Cir. 1991)).
Thus, as this Court finds Plaintiffs have asserted a meritorious claim for federal trademark infringement, this Court similarly finds Plaintiffs are likely to succeed on the merits of their false designation of origin claim under the Lanham Act (second claim for relief), their common law unfair competition claim (third claim for relief), and their California unfair competition claim (fourth claim for relief).
As such, the Court finds Plaintiffs have plausibly pled each claim for relief, and thus the second and third Eitel factors favor default judgment.
iii. The sum of money at stake in the action.
"Under the fourth Eitel factor, 'the court must consider the amount of money at stake in relation to the seriousness of Defendant's conduct.'" Tate, 2015 U.S. Dist. LEXIS 3607 at *10 (quoting PepsiCo, 238 F.Supp.2d at 1176.
Plaintiffs request that the Court award $100,000.00 in damages, "whether as an exercise of the Court's discretion under the Lanham Act or as an award of exemplary damages," which Plaintiffs allege equates to $25,000.00 against each Defendant individually Appl. 13:11-14. Plaintiffs' also seek a permanent injunction against Defendants, prohibiting Defendants from any further unauthorized use of the infringing marks. Id. at 3:19-21; FAC ¶ 5.
Section 1117(c) gives trademark owners the right to seek statutory damages in lieu of actual damages, ranging from $1,000.00 to $200,000.00 per trademark. 15 U.S.C. § 1117(c). If trademark infringement is willful, trademark owners can recover statutory damages of as much as $2,000,000.00 for each trademark infringed. Id. "An allegation of willful trademark infringement is deemed true when the defendant defaults." Sennheiser Electric Corp. v. Eichler, No. 12-cv-10809-MMM-PLAx, 2013 WL 3811775, at * 5 (C.D. Cal. July 19, 2013); see Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 500 (C.D. Cal. 2003) (noting that defendants' failure to answer an allegation of willful importation of counterfeit cigarettes constitutes an admission of the allegations in the complaint); see also Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 124 (S.D.N.Y. 2003) ("By virtue of the default, the [defendants'] infringement is deemed willful . . .").
Plaintiffs allege Defendants' infringement was "knowing, deliberate, willful, [and] fraudulent." FAC ¶ 29. The statutory damages that Plaintiffs seek are thus within the allowable range set by Congress. Since the district court has "wide discretion in determining the amount of statutory damages to be awarded," the amount of money requested does not weigh against the entry of default judgment. See L.A. News. Serv. v. Reuters Television Int'l, Ltd., 149 F.3d 987, 996 (9th Cir. 1998).
Further, injunctive relief is an appropriate remedy in a trademark infringement action, and thus this too weighs in favor of granting Plaintiffs' application for default judgment. Sennheiser Electric Corp., 2013 WL 3811775, at *5; see also PepsiCo, 238 F.Supp.2d at 1176 (finding that plaintiff's prayer for injunctive relief to protect against continued infringement weighed in favor of entering a default judgment).
Finally, Plaintiffs seek $22,940.00 in attorneys' fees pursuant to 15 U.S.C. § 1117(a) and Local Rule 55-3. Section 1117(a) authorizes a plaintiff to recover attorneys' fees in exceptional cases. See Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400, 1409 (9th Cir. 1993) ("[G]enerally a trademark case is exceptional for purposes of an award of attorneys' fees when the infringement is malicious, fraudulent, deliberate or willful."). The Court finds that all of these amounts are appropriate, and thus this factor favors the entry of default judgment against Defendants.
iv. The possibility of a dispute concerning the material facts.
This Court finds that it is not clear there would be any genuine dispute of material fact in the present case, as Defendants have not answered Plaintiffs' FAC or otherwise participated in this litigation. "Upon entry of default, the well-pleaded allegations in the complaint are taken as true, except those relating to damages." Tate, 2015 U.S. Dist. LEXIS 3607 at *12 (citing TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-918 (9th Cir. 1987)). "In addition, '[t]he district court is not required to make detailed findings of fact.'" Id. (citing Fair Housing of Marin v. Combs, 285 F.3d 899, 908 (9th Cir. 2002)). In Tate, the district court found: "Since defendant never answered or otherwise appeared in this action, it is unclear whether there would be any genuine dispute of material facts." Id. As in Tate, this Court finds no impediment to entry of default judgment against Defendants.
v. Whether Defendants' default was the product of excusable neglect.
"Excusable neglect is an equitable concept that takes account of factors such as 'prejudice . . ., the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.'" Tate, 2015 U.S. Dist. LEXIS 3607 at *12 (quoting Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380, 395 (1993)). As Defendants have not responded to Plaintiffs' FAC or the present Application, or otherwise appeared in this action, there is no evidence before this Court that Defendants' default is the product of excusable neglect. Furthermore, Defendant Smoke World contacted Plaintiffs' counsel after having received the Complaint, at which time Plaintiffs' counsel informed Smoke World that they would need to respond to the Complaint. Helfing Decl. ¶ 4. Smoke World nonetheless has not responded to the FAC or otherwise appeared in this action.
Such failure to respond and/or appear favors entry of default judgment against Defendants. See U.S. v. Waterbabies, LLC, 2010 WL 289075 at *2 (N.D. Cal. Jan. 15, 2010) (finding no "excusable neglect" where the defaulting party had been served and was aware of the lawsuit, but failed to respond in any manner); ACS Recovery Services, Inc. v. Kaplan, 2010 WL 144816 at *7 (N.D. Cal. Jan. 11, 2010) (finding no excusable neglect where defendant was properly served with the summons and complaint and had the opportunity to oppose the request for entry of default and failed to do so). There is no indication that Defendants' default resulted from "excusable neglect." Furthermore, as to Smoke World, it appears that entry of default resulted from willful disobedience. This Court thus finds the sixth Eitel factor favors entry of default judgment. // //
vi. The strong public policy favoring decisions on the merits.
Although there is a strong policy underlying the Federal Rules of Civil Procedure, which favors decisions on the merits "whenever reasonably possible," Tate, 2015 U.S. Dist. LEXIS 3607 at *13 (quoting Eitel, 782 F.2d at 1427), "'this preference, standing alone, is not dispositive.'" Id. (quoting Kloepping v. Fireman's Fund, 1996 U.S. Dist. LEXIS 1786 (N.D. Cal. 1996)). In deciding to grant default judgment, the Tate court noted: "Defendant's failure to answer the Complaint makes a decision on the merits impractical, if not impossible." Id. (citing PepsiCo, 238 F.Supp.2d at 1177). "Under Fed. R. Civ. P. 55(b), termination of a case before hearing the merits is allowed whenever a defendant fails to defend an action." Id.
In the present case, Defendants have similarly made it impractical to decide the matter on the merits. In fact, no adjudication of the substantive claims can occur because Defendants have not appeared in the action. Because all Eitel factors weigh in favor of default judgment, this Court GRANTS Plaintiff's Application [50], and accordingly permanently enjoins Defendants from further infringing Plaintiff's trademark. // //
4. Plaintiffs' Recovery
a. Statutory Damages
In determining the appropriate amount of statutory damages to award, a court should "consider the defendant's profits, as well as saved expenses, the plaintiff's lost revenues, and the defendant's state of mind." Rolex Watch U.S.A., Inc. v. Zeotec Diamonds, Inc., No. 02-cv-01089-GAF-VBKx, 2003 WL 23705746, at *4 (C.D. Cal. Mar.7, 2003) (quoting Louis Vuitton Malletier and Oakley, Inc. v. Veit, 211 F.Supp.2d 567, 584 (E.D.Pa. 2002)). The resulting statutory damages award should be "low enough to bear some rational relationship to the amount of damages incurred . . . but substantial enough to deter similarly situated businesses from engaging in similar conduct in the future." Id. at *5.
"A court has wide discretion to determine the amount of statutory damages between the statutory maxima and minima." Microsoft Corp. v. Coppola, No. 06-cv-06701-WHA, 2007 WL 1520964, at *4 (N.D. Cal. May 24, 2007) (citing Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984)). However, "[a] court is less likely to award significant statutory damages, especially maximum damages, if plaintiff fails to substantiate or delineate the basis for the relief sought." Sennheiser, 2013 WL 3811775 at *7; See Coach, Inc. v. Am. Fashion Gift, No. 12-cv-07 647-MWF-RZx, 2013 WL 950938, at *2 (C.D. Cal. Mar. 12, 2013) (awarding plaintiffs $10,000, instead of a requested $100,000, in statutory damages based on "the paucity of supporting evidence" where "it [was] not clear whether Defendants sold one or one million infringing purses").
Here, Plaintiffs' seek statutory damages in the amount of $25,000.00 against each Defendant individually, for a total of $100,000.00. Appl. 13:1-14. Plaintiffs' present Application, however, is seeking default judgment against three remaining defendants, specifically Smoke World, CC International Trading, and Westside Trading, as Miguel Ruiz d/b/a East Side Smoke Shop has since been dismissed from the action [59]. Therefore, this Court finds an award of $75,000.00 is appropriate. This Court notes that Plaintiffs provided sparse evidence as to Defendants' profits from the infringement. However, this Court finds, as Plaintiffs note, that Defendants' failure to appear or participate in this action has made it difficult, if not impossible, for Plaintiffs to determine the scope, breadth and volume of Defendants' distribution and sales of the Infringing Pipes. Accordingly, Defendants have little evidence to support a focused calculation of damages.
However, Plaintiffs do proffer evidence of the valuation of the Infringing Pipes in the Smoke World and Westside Trading stores. See Mottesheard Decl. Exs. B, C. The Infringing Pipes were sold in these stores for $292.00 and $267.50, respectively. Id. Plaintiffs provide no further evidence with respect to Defendants' confirmed sales or other quantification of importing activity or sales onsite. However, given Plaintiffs' allegation of willfulness and the need for deterrence, the Court awards $75,000.00 in statutory damages, $25,000.00 against each Defendant for its respective role in the importing, sale, and/or promotion of the Infringing Pipes.
b. Injunctive Relief
Under the Lanham Act, the Court has the power to grant injunctions according to the rules of equity, and on such terms as the court deems reasonable, to prevent the violation of a mark holder's rights. Truong Giang Corp v. Twinstar Teac Corp., No. 06-cv-03594-JSW, 2007 WL 1545173, at *19 (N.D. Cal. May 29, 2007); see also 15 U.S.C. § 1116(a). A plaintiff is not entitled to an injunction as a matter of course, but where a mark holder demonstrates ongoing infringement of its marks, an injunction is appropriate. Truong, 2007 WL 1545173 at *19. "Injunctive relief is the remedy of choice for trademark infringement and unfair competition cases, since there is no adequate remedy at law for the injury caused by a defendant's continuing infringement." Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1180 (9th Cir. 1988). Here, as Plaintiffs have sufficiently pled willful trademark infringement, the Court exercises its discretion to GRANT Plaintiffs' request for entry of a permanent injunction, so as to prevent Defendants from further unauthorized use of the Mark.
c. Attorneys' Fees
Plaintiffs request attorneys' fees in the amount of $22,940.00, pursuant to 15 U.S.C. § 1117(a) and Local Rule 55-3. Appl. 14:24-26. Upon review of the Helfing Declaration, the Court GRANTS this request. Given the Court's award of $75,000.00 in statutory damages, and pursuant to Rule 55-3, the Court awards Plaintiffs' attorneys' fees as requested.
III. CONCLUSION
This Court GRANTS Plaintiffs' Application for Default Judgment [50]. Additionally, this Court GRANTS Plaintiff's request for entry of a permanent injunction against Defendants. This Court hereby awards Plaintiffs $75,000.00 in statutory damages against Defendants, $25,000.00 to be owed by each Defendant. The Court awards $22,940.00 in attorneys' fees to Plaintiffs, to be paid in equal parts by each Defendant. Plaintiffs are awarded a sum total of $97,940.00. DATED: May 17, 2016
s/ RONALD S.W. LEW
Honorable Ronald S.W. Lew
Senior U.S. District Judge