Spectrum Products LLC v. Gao ( 2023 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Spectrum Products LLC, No. CV-21-01407-PHX-DLR 10 Plaintiff, ORDER 11 v. 12 Jie Gao, et al., 13 Defendants. 14 15 16 Plaintiff Spectrum Products LLC accuses Defendants of patent infringement. (Doc. 17 31.) After they failed to appear, the Clerk of the Court entered default against Defendants. 18 (Docs. 27, 37, 38.) Plaintiff now moves for entry of default judgment. (Doc. 40.) 19 The Court’s “decision whether to enter a default judgment is a discretionary one.” 20 Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Although the Court should consider 21 and weigh relevant factors as part of the decision-making process, it “is not required to 22 make detailed findings of fact.” Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th 23 Cir. 2002). The following factors may be considered in deciding whether default judgment 24 is appropriate: (1) the possibility of prejudice to the plaintiff, (2) the merits of the claims, 25 (3) the sufficiency of the complaint, (4) the amount of money at stake, (5) the possibility 26 of factual disputes, (6) whether default is due to excusable neglect, and (7) the policy 27 favoring decisions on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 28 1986). In considering the merits and sufficiency of the complaint, the Court accepts as true 1 the complaint’s well-pled factual allegations. See Geddes v. United Fin. Grp., 559 F.2d 2 557, 560 (9th Cir. 1977). 3 The Court has considered the Eitel factors and finds they favor default judgment on 4 liability. If default judgment is not granted, Plaintiff “will likely be without other recourse 5 for recovery.” PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 6 2002). Plaintiff’s complaint states a plausible claim of patent infringement against 7 Defendants. Given the sufficiency of the complaint and Defendants’ default, “no genuine 8 dispute of material facts would preclude granting [Plaintiff’s] motion.” Id. There is no 9 evidence that Defendants’ default was the result of excusable neglect. The amount of 10 money at stake, though substantial, appears proportionate to the alleged infringement. And 11 although cases “should be decided on their merits whenever reasonably possible” Eitel, 12 782 F.2d at 1472, the existence of Federal Rule of Civil Procedure 55(b) “indicates that 13 this preference, standing alone, is not dispositive.” PepsiCo, 238 F. Supp. 2d at 1177 14 (citation omitted). Indeed, it is difficult to reach the merits when the opposing party is 15 absent. Accordingly, the Court will enter default judgment in favor of Plaintiff and against 16 Defendants on liability. 17 The Court also will grant Plaintiff relief in the form of a permanent injunction 18 against further infringement by Defendants. The Court has found for Plaintiff on the merits 19 by default. The record suggests that absent an injunction, Defendants will continue to 20 infringe on Plaintiff’s patent; indeed, a cease-and-desist letter did not deter Defendants 21 from further infringement. And the balance of equities and public interest favor an 22 injunction that protects Plaintiff’s patent rights from unlawful infringement. 23 The Court further finds—given the apparent infringement by Defendants, their 24 refusal to voluntarily cease infringement after being sent a cease and desist letter, and their 25 failure to participate in this litigation—that this is an exceptional case pursuant to 35 U.S.C. 26 § 285 justifying an award of attorney fees and costs, though the Court will defer awarding 27 a specific amount until after it resolves the damages issues because further briefing on 28 damages will result in additional attorney fees. 1 On the issue of damages, the Court needs more information. Plaintiff seeks its lost 2 profits and disgorgement of Defendants’ profits. Plaintiff has quantified the latter but 3 claims it will need to supplement the record after entry of default judgment to quantify the 4 former. Absent from the motion, however, is an explanation for why Plaintiff is entitled to 5 both. Generally, disgorgement of a defendant’s profits and plaintiff’s own lost profits based 6 on the same sales constitutes an impermissible double-recovery under the Patent Act. See 7 Focus Products Grp. International, LLC v. Kartri Sales Co., Inc., 15 Civ. 10154 (PAE), 8 2022 WL 17851810, at *66 (S.D.N.Y. Dec. 22, 2022). And because disgorgement is an 9 equitable remedy, a plaintiff generally can’t elect disgorgement over actual damages just 10 because disgorgement is the greater of the two. Id. It seems, then, that the default remedy 11 for Defendants’ infringement is an award of Plaintiff’s lost profits, which is a calculation 12 Plaintiff claims it needs additional time to make. 13 Plaintiff also asks that the Court order Amazon.com, Inc. to transfer Defendants’ 14 Amazon.com account to Plaintiff. But Amazon.com is not a party to this litigation, and the 15 Court generally lacks authority to enjoin non-parties, unless those non-parties are officers, 16 agents, servants, employees, attorneys, or other persons in active concert or participation 17 with the named defendants. See Fed. R. Civ. P. 65(d)(2). Plaintiff’s motion makes no 18 argument and cites no authority for the proposition that Amazon.com is an agent of 19 Defendants or is operating in active concert with Defendants in their infringement. 20 For these reasons, the Court will reserve judgment on these remaining damages 21 issues pending further briefing and evidence from Plaintiff, but the Court otherwise grants 22 the motion for default judgment. 23 IT IS ORDERED that Plaintiff’s motion for default judgment (Doc. 40) is 24 GRANTED as follows: 25 1. The Court finds in favor of Plaintiff and against Defendants on the issue of 26 liability. Defendants have infringed the D925721 Patent. 27 2. Defendants, their officers, agents, servants, employees, attorneys, and other 28 persons in active participation with them are permanently enjoined during the 1 life of the D925721 Patent from any and all acts of infringement of the D925721 2 Patent, including making, having made, using, selling, offering for sale, or 3 importing into the United States the invention claimed in the D925721 Patent. 4 3. Within 14 days of the date of this order, Plaintiff shall file a supplemental brief 5 addressing the outstanding damages issues identified in this order. In addition, 6 Plaintiff shall notify the Court in writing whether it believes an evidentiary 7 hearing will be required to determine its damages. 8 4. Plaintiff may supplement its attorney fees and costs request after the Court rules 9 on the outstanding damages issues. 10 Dated this 27th day of March, 2023. 11 12 13 {Z, 14 _- {UO 15 Usted States Dictric Judge 16 17 18 19 20 21 22 23 24 25 26 27 28 -4-