Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04079/USCOURTS-cand-3_05-cv-04079-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 15:1051 Trademark Infringement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SEE’S CANDIES INC., a California

Corporation

Plaintiff,

 v.

MCY MULTIDMEDIA ENGINEERS, INC., a

California Corporation

Defendant. /

No. C 05-04079 WHA

ORDER GRANTING ENTRY 

OF DEFAULT JUDGMENT AND

PERMANENT INJUNCTION

INTRODUCTION

Plaintiff See’s Candies, Inc. applies for entry of default judgment against defendant

MCY Multimedia Engineers, Inc. pursuant to Federal Rule of Civil Procedure 55, seeking

damages, permanent injunction, interest and fees. MCY has never appeared in this action. 

Review of the Eitel factors favors entry of default judgment. Accordingly, plaintiff’s

application for default judgment and permanent injunction is GRANTED, although plaintiff’s

request for damages and fees is only granted in part as explained herein.

STATEMENT

On October 12, 2005, plaintiff filed and served the summons and complaint against

MCY. The complaint stated claims for trademark infringement under the Lanham Act, breach

of contract, fraud, and false and misleading advertising under California Business and

Professions Code § 17500.

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United States District Court

For the Northern District of California

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See’s makes candy. MCY makes gift baskets. See’s has registered trademarks for both

SEE’S CANDY and for SEE’S CANDIES. According to plaintiff, MCY infringed at least two

of plaintiff’s trademarks by using them beyond the scope of a distributorship agreement entered

into by the parties. MCY allegedly represented to See’s that it was a not-for-profit entity. On

the basis of this misrepresentation, See’s authorized MCY to sell See’s products for a charitable

fundraiser and in certain gift baskets distributed to hotels. All the while, however, defendant

purportedly was a for-profit entity that sold its gift baskets to the general public via its website, 

www.fabiene.com. Defendant advertised on its website that it carried See’s products. 

Defendant also included the See’s products in its gift baskets for non-authorized purposes, even

after the products’ expiration dates.

In addition to violating trademark law, defendant alleged that MCY failed to pay

numerous invoices for shipments of See’s products. See’s shipped its candies to MCY for the

charitable fundraiser and the hotel gift baskets. MCY simply never paid. Plaintiff also claimed

that defendant’s conduct constituted fraud, although plaintiff does not seek relief for fraud on its

instant motion. Plaintiff finally alleged that defendant violated California Business and

Professions Code § 17500, which prohibits false and misleading advertising practices, by

representing on its website that its sales were authorized by See’s.

Although plaintiff served the summons and made several further attempts to alert

defendant about the pendency of this action, defendant has never responded or appeared in this

action. Accordingly, See’s filed a request for entry of default. On January 12, 2006, the Clerk

of the Court entered default against MCY. In its instant application for entry of default

judgment, plaintiff seeks statutory damages under the Lanham Act, contractual damages,

prejudgment interest on the contractual damages, post-judgment interest, injunctive relief, and

costs and attorney’s fees.

ANALYSIS

Under Federal Rule of Civil Procedure 55(b)(2), a party can apply to the court for entry

of judgment by default. “The district court’s decision whether to enter a default judgment is a

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discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The following

factors are considered:

(1) the possibility of prejudice to the 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 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). For the following reasons, these

factors favor entry of default judgment in this case.

1. MERITS OF SUBSTANTIVE CLAIMS AND SUFFICIENCY OF THE COMPLAINT.

After entry of default, well-pleaded factual allegations in the complaint are taken as true,

except as to the amount of damages. Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir.

2002). The merits of plaintiff’s substantive claims and the sufficiency of the complaint are thus

considered in tandem.

First, plaintiff seeks relief under the Lanham Act, 15 U.S.C. 1114(1), for trademark

infringement. Under that provision: 

Any person who shall, without the consent of the registrant—

(a) use in commerce any reproduction, counterfeit, copy, or

colorable imitation of a registered mark in connection with the

sale, offering for sale, distribution, or advertising of any goods or

services on or in connection with which such use is likely to cause

confusion, or to cause mistake, or to deceive; or

(b) reproduce, counterfeit, copy, or colorably imitate a registered

mark and apply such reproduction, counterfeit, copy, or colorable

imitation to labels, signs, prints, packages, wrappers, receptacles

or advertisements intended to be used in commerce upon or in

connection with the sale, offering for sale, 

distribution, or advertising of goods or services on or in

connection with which such use is likely to cause confusion, or to

cause mistake, or to deceive,

shall be liable in a civil action by the registrant for the remedies

hereinafter provided.

“The Supreme Court has made it clear that trademark infringement law prevents only

unauthorized uses of a trademark in connection with a commercial transaction in which the

trademark is being used to confuse potential consumers.” Bosley Med. Inst., Inc. v. Kremer,

403 F.3d 672, 676 (9th Cir. 2005).

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For the Northern District of California

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Here, accepting plaintiff’s allegations as true, defendant sold its gift baskets using See’s

products and See’s name. A reasonable consumer would assume that See’s authorized MCY’s

gift baskets and the products contained therein. That was not the case; the use was

unauthorized. Defendant thereby infringed plaintiff’s trademarks.

Second, plaintiff seeks to recover for breach of contract. This claim is governed by

California law. A cause of action for breach of contract is comprised of the following elements: 

(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant's

breach, and (4) the resulting damages to plaintiff. See Armstrong Petroleum Corp. v. Tri-Valley

Oil & Gas Co., 116 Cal. App. 4th 1375, 1391 n. 6 (2004).

See’s and MCY had an agreement by which See’s would provide its products to MCY

for limited purposes. See’s delivered the products. MCY failed to pay for the products. 

Clearly, See’s was damaged by this nonpayment.

Third, plaintiff claims defendant violated Section 17500 of the California Business and

Professions Code, which proscribes false and misleading advertising. That section provides:

It is unlawful for any person, firm, corporation or association, or

any employee thereof with intent directly or indirectly to dispose

of real or personal property or to perform services, professional or

otherwise, or anything of any nature whatsoever or to induce the

public to enter into any obligation relating thereto, to make or

disseminate or cause to be made or disseminated before the public

in this state, or to make or disseminate or cause to be made or

disseminated from this state before the public in any state, in any

newspaper or other publication, or any advertising device, or by

public outcry or proclamation, or in any other manner or means

whatever, including over the Internet, any statement, concerning

that real or personal property or those services, professional or

otherwise, or concerning any circumstance or matter of fact

connected with the proposed performance or disposition thereof,

which is untrue or misleading, and which is known, or which by

the exercise of reasonable care should be known, to be untrue or

misleading, or for any person, firm, or corporation to so make or

disseminate or cause to be so made or disseminated any such

statement as part of a plan or scheme with the intent not to sell

that personal property or those services, professional or otherwise,

so advertised at the price stated therein, or as so advertised.

At its essence, the statute “specifically makes unlawful advertising services by ‘untrue or

misleading’ statements.” Brockey v. Moore, 107 Cal. App. 4th 86, 98 (2003).

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Here, defendant sold its gift baskets by misleading consumers about its affiliation with

See’s. According to representations on defendant’s website, it was authorized to sell See’s

products. Accepting the allegations in plaintiff’s complaint, those representations were lies.

2. THE REMAINING EITEL FACTORS.

This order finds that the remaining Eitel factors likewise favor entry of default

judgment. To deny plaintiff’s application would leave plaintiff without a remedy. Morever,

defendant has refused to litigate this action here after being properly served with the complaint

and summons. Since MCY never filed an answer to the complaint or appeared at the hearing, it

is unclear whether there is a possibility of dispute concerning the material facts. There is no

evidence that MCY’s failure to respond was the result of excusable neglect. Although federal

policy may favor a decision on the merits, FRCP 55(b) permits entry of default judgment in

situations such as this, where the defendant has refused to litigate. On balance, the Court

concludes that the Eitel factors weigh in favor of default judgment.

3. DETERMINATION OF DAMAGES, INJUNCTIVE RELIEF, FEES AND COSTS.

Plaintiff seeks the following relief: (1) statutory damages of two million dollars for

violations of the Lanham Act, (2) contractual damages of $20,798.35, (3) prejudgment interest

on the contractual damages totaling $1,559.89, (4) post-judgment interest on the entire

judgment, (5) injunctive relief, and (6) attorney’s fees totaling $26,625.81 plus costs.

Statutory Damages under the Lanham Act: Section 1117(c) of the Lanham Act

provides:

In a case involving the use of a counterfeit mark (as defined in

section 1116(d) of this title) in connection with the sale, offering

for sale, or distribution of goods or services, the plaintiff may

elect, at any time before final judgment is rendered by the trial

court, to recover, instead of actual damages and profits under

subsection (a) of this section, an award of statutory damages for

any such use in connection with the sale, offering for sale, or

distribution of goods or services in the amount of—

(1) not less than $500 or more than $100,000 per counterfeit mark

per type of goods or services sold, offered for sale, or distributed,

as the court considers just; or

(2) if the court finds that the use of the counterfeit mark was

willful, not more than $1,000,000 per counterfeit mark per type of

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goods or services sold, offered for sale, or distributed, as the court

considers just.

As one district court noted, “[Section 1117(c)(2)] is a recent addition to the Lanham Act,

there is little case law available to assist courts in determining an appropriate award. 

Consequently, courts faced with determining statutory damages under the Act have analogized

to the body of case law interpreting a similar provision in the Copyright Act.” Philip Morris

USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 501 (C.D. Cal. 2003). “The Supreme

Court has held that deterrence of future infringement is an important factor in determining

damages under the Copyright Act, and therefore an award of statutory damages need not equal

the amount of a plaintiff’s actual damages.” Ibid. (citing F.W. Woolworth Co. v. Contemporary

Arts, Inc., 344 U.S. 228, 233 (1952)); see also Peer Int’l Corp. v. Pausa Records, Inc., 909 F.2d

1332, 1336–37 (9th Cir. 1990).

Here, plaintiff maintains that defendant MCY’s violation was egregiously wilful. 

Plaintiff thus seeks to impose the heightened statutory damages under Section 1117(c)(2) for

violation of two separate trademarks for a total of two million dollars.

Certainly, based on plaintiff’s allegations, defendant’s conduct was wilful. Defendant

lied about being a charitable organization to get a contract with See’s. Defendant then sold the

products it “bought” for purposes other than those authorized under the parties’ agreement. 

MCY even sold these products after they expired. Through it all, defendant never even paid

See’s for the products received.

Nevertheless, the ends of deterrence are satisfied by an award at the high end of Section

1117(c)(1), and without resort to Section 1117(c)(2). Although the determination of statutory

damages is an imprecise science, the case law provides useful guideposts. In Phillip Morris,

supra, the court awarded two million dollars of statutory damages under Section 1117(c)(2). 

The defendant in that case imported eight million cigarettes with a street value of millions of

dollars. A good contrast to Phillip Morris is Lorillard Tobacco Co. v. Jamelis Grocery, Inc.,

378 F. Supp. 2d 448, 457 (S.D.N.Y. 2005). In Lorillard, a suit was brought against a local

grocery for the sale of counterfeit cigarettes, of which fifty-two packs were seized. The opinion

noted “[w]hile it is likely that Lorillard could establish that defendants’ infringement was

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‘willful,’ and thus be eligible for enhanced damages, we believe that standard statutory damages

will provide sufficient redress and deterrence.” The court thus awarded $2,500 for each of five

infringed marks.

The scope of the violation here is more similar to Lorillard than Phillip Morris. Here,

defendant’s conduct apparently only involved approximately $20,000 worth of candy. Unlike

Lorillard, the product was sold over the Internet, thus expanding the reach beyond that of a

local grocery. Nevertheless, based on the facts alleged, an award of two million dollars seems

outrageous. 

This order awards plaintiff $100,000. This total includes $50,000 for the violation each

of See’s separate trademarks. This amount is still at the high end of the scale for Section

1117(c)(1) and is thus sufficient to provide for redress and deterrence. The award though does

not completely ignore the scope of the actual damages to plaintiff.

Contractual Damages: Plaintiff is entitled to the full $20,798.35 in contractual

damages. Plaintiff provided MCY with invoices totaling that amount for products plaintiff

delivered. MCY never paid those invoices.

Prejudgment Interest: Plaintiff is also entitled to $1,559.89 in prejudgment interest on

the contractual damages. This is calculated by reference to the California prejudgment interest

rate, which is ten percent per annum under California Civil Procedure Code § 3289(b).

Post-Judgment Interest: Plaintiff is also entitled to post-judgment interest pursuant to

28 U.S.C. 1961. “Under the provisions of 28 U.S.C. 1961, post-judgment interest on a district

court judgment is mandatory.” Air Separation, Inc. v. Underwriters at Lloyd’s of London, 45

F.3d 288, 290 (9th Cir. 1994).

Injunctive Relief: Plaintiff seeks a permanent injunction prohibiting MCY from its

continuing trademark infringement and false and misleading advertising. Under both

Section 1116 of the Lanham Act and Section 17500 of the California Business and Professions

Code, a plaintiff may receive injunctive relief. “Injunctive relief is the remedy of choice for

trademark and unfair competition cases, since there is no adequate remedy at law for the injury

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caused by a defendant’s continuing infringement.” Century 21 Real Estate Corp. v. Sandlin,

846 F.2d 1175, 1180 (9th Cir. 1988).

As of the time of plaintiff’s complaint, defendant continued to misrepresent its

affiliation with See’s on its website. MCY still advertised that See’s products and the See’s

name on the gift-basket website. And most importantly, defendant continued to suggest that

See’s vouched for the quality of MCY’s product. This order, therefore, permanently enjoins

defendant from using See’s trademarks in any way and from making any statements suggesting

that defendant is authorized to sell See’s products.

In order for the Court’s contempt power to apply to this injunction, however, defendant

must “receive actual notice of the order by personal service or otherwise.” Fed. R. Civ.

Proc. 65(d). Plaintiff is therefore instructed to provide proper service of this order, by personal

service to the extent possible, no later than APRIL 13, 2006. Plaintiff shall file with the Court a

copy of the proof of service.

Attorney’s Fees and Costs: Under the Lanham Act, courts “in exceptional cases may

award reasonable attorney fees to the prevailing party.” 15 U.S.C. 1117(a). “[G]enerally, a

trademark case is exceptional for purposes of an award of attorney’s fees when the infringement

is malicious, fraudulent, deliberate, or willful.” Stephen W. Boney, Inc. v. Boney Services, Inc.,

127 F.3d 821, 825–26 (9th Cir. 1997) (internal citation omitted).

As noted above, this order finds that defendant’s infringement was wilful. Plaintiff thus

is entitled to attorney’s fees.

Plaintiff’s request for attorney’s fees, however, is not adequately accounted for and, in

any event seems too high. Plaintiff’s counsel merely attests that “I reviewed my firm’s bills for

this matter. My firm’s records indicate that it has billed See’s Candies $26,625.61 for its work

prosecuting this action to date” (Anderson Decl. ¶ 17). This does not give the billing rates for

the attorneys that helped prosecute this matter, nor any identification of how much time was

spent on the various tasks yielding that figure. That total, regardless of Mr. Anderson’s billing

rate, seems high for a default-judgment proceeding. This order accordingly reduces plaintiff’s

award, granting it $5,000 in attorney’s fees.

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Plaintiff also requests costs. But plaintiff provides no indication of what costs were

incurred. Plaintiff, therefore fails to merit such an award.

CONCLUSION

For the foregoing reasons, plaintiff’s application for entry of default judgment and

permanent injunction is GRANTED. Plaintiff is hereby awarded: (i) damages of $100,000 for

violation of the Lanham Act, (ii) damages of $20,798.35 for breach of contract, (iii) $1,559.89

in prejudgment interest, (iv) post-judgment interest, (v) a permanent injunction, and (vi)

attorney’s fees of $5,000.

IT IS SO ORDERED.

Dated: April 6, 2006 WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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