Case 2:14-cv-05097-GW-AGR Document 23 Filed 12/28/15 Page 1 of 8 Page ID #:135

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
December 28, 2015

CV 14-5097-GW(AGRx)
JA Wheels, Inc. v. DB Motoring Group, Inc., et al.

GEORGE H. WU, UNITED STATES DISTRICT JUDGE

Katie Thibodeux
Court Reporter / Recorder

Patricia Gomez
Deputy Clerk

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Leontyne Fan

None Present

PROCEEDINGS: PLAINTIFFS MOTION FOR ENTRY OF DEFAULT JUDGMENT [201

Case called. The Courts tentative ruling is circulated and attached hereto. Counsel request time to
address the Courts tentative. Plaintiffs supplemental brief is due by January 15, 2016. The Court
continues the motion for entry of default judgment to January 25, 2016 at 8:30 a.m.

01
Initials of Preparer PG
CV-90 (06/04

CIVIL MINUTES - GENERAL

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JA Wheels, Inc v.DB Motoring jjoup Inc., Case No. CV-14-05097GW (AGRx)
Tentative Ruling on Motion for Default Judgment against Defendant DB Motoring Group

Plaintiff JAT Wheels, Inc. ("Plaintiff) filed suit against Defendant DB Motoring
Group, Inc. ("Defendant") on July 1, 2014, asserting four claims for relief: 1) patent
infringement pursuant to 35 U.S .C. 271; 2) federal copyright infringement, pursuant to
17 U.S.C. 106; 3) unfair competition under Californias common law; and 4) unfair
business practices, pursuant to California Business and Professions Code 17200.
Plaintiffs Complaint arises out of the allegation that Defendant is manufacturing and
selling automobile parts on the Internet that are infringing Plaintiffs design patent.

See

Complaint IT 13-20.
On July 29, 2014, Plaintiff served Defendant with the Summons and Complaint,
by executing service upon Evelyn Velasquez, the authorized person to accept service.

See Dkt. 11; Fed. R. Civ. P. 4(h)(1)(B). Defendant has not appeared in the action, and on
April 23, 2015, the Clerk entered default against Defendant.

See Dkt. 15. Because of

Defendants non-appearance and default, Plaintiff now seeks a default judgment,

including an award of damages, costs, attorneys fees and a permanent injunction.
Local Rule 55-1
Under Local Rule 55-1, a party requesting default judgment must make a showing
as to the following: (1) when and against what party the default was entered; (2) identification of the pleading to which default was entered; (3) whether the defaulting party is
an infant or incompetent person; (4) that Defendant is not in military service such that the
Servicemembers Civil Relief Act does not apply; and (5) that notice has been served on
the defaulting party, if required by Fed. R. Civ. P. 55(b)(2). See C.D. Cal. L.R. 55-1; see

also Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D. Cal.
2003). Plaintiff has supplied the information Local Rule 55-1 requires. See Wang Decl.
(Dkt. 20-1)

11 5-9. Though no service of this motion was necessary under Fed. R. Civ. P.

55(b)(2) because Defendant has not appeared, Plaintiff served Defendant with it by mail.
Dkt. 20 at 2.
Plaintiff has also complied with Local Rule 58-11, which requires that it submit a
proposed default judgment in compliance with Fed. R. Civ. P. 58. See Dkt. 20-3.

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The Merits of a Default Judgment

On entry of a default, well-pleaded allegations in the complaint regarding liability

are generally deemed true. See Geddes v. United Fin. Corp., 559 F.2d 557, 560 (9th Cir.
1977); see also Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir.
1988) (holding that "facts which are not established by the pleadings of the prevailing
party, or claims which are not well-pleaded, are not binding and cannot support the
[default] judgment"). The court need not make detailed findings of fact in the event of
default. See Adriana Intl Corp.. v. Thoeren, 913 F.2d 1406, 1414 (9th Cir. 1990).
This Court has discretion to refuse to enter a default judgment in an appropriate
case. See Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986); Aldabe v. Aldabe,
616 F.2d 1089, 1092 (9th Cir. 1980). The Court may consider a variety of factors in the
exercise of such discretion, including:
(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiffs
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
material facts, (6) whether the default was due to excusable neglect, and
(7) the strong policy underlying the Federal Rules of Civil Procedure
favoring decisions on the merits.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

Factor One: Possibility of Prejudice to Plaintiff
As the Defendant has not appeared in this action, Plaintiff will suffer prejudice if
default is not entered as the case cannot otherwise proceed, Thus, absent the entry of
judgment, Plaintiff would be left without a remedy against Defendant. See, e.g., Philip

Morris USA, 219 F.R.D. at 499 ("Plaintiff would suffer prejudice if the default judgment
is not entered because Plaintiff will be without other recourse for recovery."). Therefore,
the first Eitel factor favors granting the motion.
Factors Two and Three: Substantive Merits and Sufficiency of Complaint
Although well-pleaded allegations are taken as true, "claims which are legally
insufficient, are not established by default."

Cripps v. Life Insurance Co. of North

America, 980 F.2d 1261, 1267 (9th Cir. 1992). Whether a plaintiff has properly stated a
claim is related to the second and third Eilel factors. See PepsiCo, Inc. v. Cal. Sec. Cans,
238 F. Supp. 2d 1172, 1175 (C.D. Cal. 2002).

PA

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Patent Infringement
To establish a claim for direct patent infringement under 35 U.S.C. 271, a
plaintiff must show that the defendant "without authority makes, uses, offers to sell, or
sells any patented invention, within the United States or imports into the United States
any patented invention during the term of the patent therefor . . . ." 35 U.S.C. 271(a).
Here, the complaint alleges that Defendant has been and is infringing U.S. Design Patent
Application No. 29,492,155 (the "Design Patent") by importing or selling the Traklite
Holeshot wheel. Because factual allegations are taken as true, Plaintiff is entitled to
default judgment on this claim.
"[T]o establish willful infringement, a patentee must show by clear and
convincing evidence that the infringer acted despite an objectively high likelihood that its
actions constituted infringement of a valid patent." In re Seagate Tech., LLC, 497 F.3d
1360, 1371 (Fed. cir. 2007). This is an objective inquiry that does not implicate the state
of mind of the accused infringer.

Id. After establishing this threshold element, "the

patentee must also demonstrate that this objectively-defined risk (determined by the
record developed in the infringement proceeding) was either known or so obvious that it
should have been known to the accused infringer." Id. Here, the Complaint alleges that
Defendant was made aware of its infringing conduct through direct or indirect
communications with Plaintiff and/or as a result of its participation in- the aftermarket
automobile parts industry. Thus, the Complaint alleges that the sale of the Traklite
Holeshot wheel has been made with knowledge of Defendants infringement of the
Design Patent; These facts, taken as true, are sufficient to state a claim for willful
infringement.

Copyright Infringemet
In order to institute a lawsuit for copyright infringement, a plaintiff must initially
either pre-register or register with the U.S. Copyright Office as mandated in 17 U.S.C.
411(a). See Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 157 (2010) (the registration
requirement is a precondition to filing a copyright infringement claim). Although the
Complaint alleges that Plaintiff is the exclusive holder of all rights, title and interest in its
photographs, it does not allege any facts regarding copyright registration. See Complaint
128. Accordingly, Plaintiff has not pleaded a sufficient claim of copyright infringement.

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Unfair Competition/ Cal. Bus. & Prof Code 17200

To prevail on its unfair competition claim under Cal. Bus. & Prof. Code
17200, et seq., Plaintiff must prove that Defendant engaged in "unlawful, unfair or
fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Cal. Bus. & Prof. Code 17200. Plaintiff alleges that Defendant has distributed
and sold infringing products utilizing the Design Patent, thereby creating a false designation of origin of Plaintiffs brand of goods and unfairly competing with Plaintiffs
business.

See Complaint 37. But Plaintiffs allegations of unfair competition are

preempted by federal patent law because they are predicated upon claims that Defendants products infringe Plaintiffs Design Patent. Bonito Boats, Inc. v. Thunder Craft

Boats, Inc., 489 U.S. 141, 167-168, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989). Because
Plaintiff has not alleged any additional tortious conduct that is separate from the patent
law cause of action, preemption applies arid, hence, its unfair competition claim cannot

proceed. Summit Mach. Tool Mfg. Corp. v. Victor CNC Sys., Inc.,

7 F.3d 1434, 1439-40

(9th Cir.1993).
Accordingly, the second and third Eitel factors favor granting the motion only
with respect to the patent infringement claim.
Factor Four: Sum of MonMat Stake in the Action
By its motion for default judgment, Plaintiff seeks damages in the amount of
$100,000. Given the substantial amount of money at stake, this factor could weigh
against the entry of default judgment. As discussed below, however, the Court declines
to issue a judgment in the amount requested without supplemental briefing. Consequently, the fourth Eitel factor does not weigh against Plaintiff.
Factor Five: Possibilitv of Dispute Concerning Material Facts
Plaintiff has provided the court with well-pleaded allegations. The Court may
assume the truth of well-pleaded facts in the complaint (except as to damages) following
the clerks entry of default and, thus, there is no likelihood that any genuine issue of

material fact exists. See, e.g., Elektra Entm t Group Inc. v. Crawford, 226 F.R.D. 388,
393 (C.D.Cal.2005) ("Because all allegations in a well-pleaded complaint are taken as
true after the court clerk enters default judgment, there is no likelihood that any genuine
issue of material fact exists."). As such, the fifth factor favors a default judgment.

ri

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Factor Six: Excusable Neglect

There is no evidence that Defendants failure to respond was due to excusable
neglect. Notice of the summons, Complaint, and Motion were properly served and filed
with the Court. Dkt. 11, 20. Therefore, the sixth Eitel factor favors granting the motion.
Factor Seven: Public Policy
The final Eifel factor takes into account the strong policy preference of deciding
claims on their merits. This factor generally disfavors the entry of default judgment.
"However, the mere existence of Fed. R. Civ. P.
standing alone, is not dispositive."

55(b) indicates that this preference,

PepsiCo, 238 F. Supp. 2d at 1177. In this case,

Defendants failure to respond precluded a decision on the merits with respect to its
liability. The seventh Eifel factor weighs slightly against granting the Motion.
Conclusion
Consideration of the Eifel factors favors granting the motion. Entry of default
judgment is therefore appropriate.
Relief Requested
A plaintiffs demand for relief must be specific, pursuant to Fed. R. Civ. P.
8(a)(3). Here, Plaintiff seeks a permanent injunction barring further actions of
infringement of the Design Patent, monetary damages, and attorneys fees and costs. The
relief sought by the motion is consistent with the relief requested in the Complaint.
Injunctive Relief
The Patent Act permits courts to "grant injunctions in accordance with the
principles of equity to prevent the violation of any right secured by patent, on such terms
est the court
as the court deems reasonable." 35 U.S.C. 283. The Copyright Act also vests
with the power to grant injunctive relief. See 17 U.S.C. 502(a). In fact, at least for a
time, injunctive relief in copyright cases was commonly issued as part of a default
judgment. See, e.g., Sony Music Entrn t Inc. v. Elias, No. CV 03-6387DT (RCx), 2004
LEXIS 30385, at *11.44 (C.D. Cal. Jan. 20, 2004); see also MAISys., 991 F.2d at 520
("[A] permanent injunction will be granted when liability has been established and there
is a threat of continuing violations."). Under 502(a), the court may grant injunctive
relief "on such terms as it may deem reasonable to prevent or restrain infringement of a
copyright." Peifect 10, Inc. v. Google, Inc., 653 F.3d 976, 980 (9th Cir. 2011). Here, as

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noted above, only Plaintiffs patent claim would provide a basis for injunctive relief.
Under eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), a plaintiff seeking
a permanent injunction must satisfy a four-part test: 1) that it has suffered irreparable
injury; 2) that there is no adequate remedy at law; 3) that considering the balance of
hardships between the plaintiff and defendant, a remedy in equity is warranted; and 4)
that the public interest would not be disserved by a permanent injunction. See id. at 39193.
A permanent injunction is appropriate here based upon Defendants violation of
Plaintiffs patent. "The general rule of law is that upon default the factual allegations of
the complaint, except those relating to the amount of damages, will be taken as true."
Tele Video Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (quoting Geddes
v. United Financial Group, 559 F.2d 557, 560 (9th Cir.1977)). Because Defendant has
failed to answer the Complaint, Plaintiffs allegation of infringement must be taken as
true for the purpose of this motion.
If an injunction were not granted, Plaintiff would suffer irreparable injury from
the ongoing acts of infringement. Furthermore, given the difficulty of determining exact
damages, monetary compensation may be inadequate. Defendant has been unresponsive
to this litigation, further indicating that Plaintiff may have no other way aside from a
permanent injunction to stop Defendants infringement.
The balance of hardships favors Plaintiff because without an injunction, Plaintiff ,
will lose profits, while an injunction will only proscribe Defendants infringing activities.
Finally, an injunction is in the public interest because it will uphold societys interest in
protecting intellectual property.

Blackberry Ltd. v. lypo Products LLC,

2014 WL

1318689, at *13 (N.D. Cal. Mar. 28, 2014) ("[T]he public interest in protecting valid
patents outweighs any purported benefit to consumers that [infringing products]
provides.").
Monetary Damages
Pursuant to Fed. R. Civ. P. 55(b)(2)(B), following the entry of default judgment, a
court may conduct a hearing to determine the amount of damages at issue. Here, at this
point, the only basis for monetary damages would stem from Defendants infringement of
Plaintiffs patent. Plaintiff has not requested statutory damages for its copyright claim

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and, as noted above, could it now get such damages under that claim. Nevertheless, with
respect to the claim for patent infringement, a separate hearing is needed to assess
monetary damages sustained due to the infringing acts.
Attorneys Fees and Costs
Pursuant to 35 U.S.C. 285, "[t]he court in exceptional [patent] cases may award
reasonable attorney fees to the prevailing party." An exceptional case "is simply one that
stands out from others with respect to the substantive strength of a partys litigating
position (considering both the governing law and the facts of the case) or the
unreasonable manner in which the case was litigated."

Octane Fitness, LLC v. ICON

Health & Fitness, Inc, 134 S.Ct. 1749, 1756 (2014). "District courts may determine
whether a case is exceptional in the case-by-case exercise of their discretion,
considering the totality of the circumstances." Id.
Plaintiff further alleges that Defendants infringement was willful and thereby
seeks enhanced damages under 35 U.S.C. 284. However, Plaintiff submits no evidence
of its damages, and the Court declines to speculate. In addition, based on the limited
record, the Court does not find Defendants default in this case to rise to the level of the
type of misconduct that justifies an award of attorneys fees. See Telequip Corp. v. The

Change Exch., No. 5:01CV-1748, 2007 WL 655734, at

*2 (N.D.N.Y.2007) (entering

default judgment and holding that the case was not exceptional, noting that "neither
willful infringement nor defaults are unusual in patent infringement cases.").
Conclusion

The Court would grant Plaintiffs motion for default judgment and request for
permanent injunction as to its patent cause of action, but defer. determination of the
monetary damages, attorneys fees and costs until such issues are further briefed and
presented at a future hearing.