Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_12-cv-00450/USCOURTS-cand-4_12-cv-00450-24/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 17:504 Copyright Infringement

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

PQ LABS, INC., et al.,

Plaintiffs,

v.

YANG QI, et al.,

Defendants.

Case No. 12-cv-00450-CW (DMR)

REPORT AND RECOMMENDATION 

RE PLAINTIFFS' MOTION FOR 

ASSIGNMENT ORDER

Re: Dkt. No. 215

Plaintiffs PQ Labs, Inc. and Shanghai PinQi Digital Technology Co., Ltd. move for an 

assignment order pursuant to California Code of Civil Procedure section 708.510, seeking to 

collect on a final judgment against Defendants Yang Qi, Jinpeng Li, and Zaagtech, Inc. [Docket 

No. 215.] The Honorable Claudia Wilken referred the matter to the undersigned for a report and 

recommendation. The court has determined that this matter is appropriate for determination 

without a hearing pursuant to Civil Local Rule 7-1(b). For the following reasons, the court issues 

this report and recommendation, with a recommendation that the motion be GRANTED.

I. Background

Plaintiff PQ Labs, Inc. (“PQ”) is a California corporation that designs, develops, 

manufactures, and sells hardware and software “in the form of multi-touch screen overlays, which 

turn regular monitors into touch-screen monitors.” Shanghai PinQi Digital Technology Co., Ltd. 

(“PinQi”) is a Chinese corporation that is a wholly-owned subsidiary of PQ. [Docket No. 191 

(Sept. 30, 2014 Findings of Fact and Conclusions of Law) 1-2.] Plaintiffs brought this action 

against Defendants Yang Qi, Jinpeng Li, and Zaagtech, Inc. (“Zaagtech”)1in 2012 for 

 

1

Plaintiffs also named Haipeng Li as a defendant. The court dismissed Plaintiffs’ claims against 

Haipeng Li for failure to prosecute. [Docket Nos. 192 (Judgment); 195 (Order Granting Motion 

Case 4:12-cv-00450-CW Document 225 Filed 03/18/15 Page 1 of 6
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United States District Court

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misappropriation of trade secrets, copyright infringement, trademark infringement, breach of 

contract, and various other business-related torts. Zaagtech is a Chinese corporation that sells 

multi-touch technology products and competes directly with PQ and PinQi. Yang Qi performed 

work for PQ through a human resources consulting firm and founded Zaagtech the same month he 

left PQ. Jinpeng Li worked for Plaintiffs and later worked for Zaagtech. (Findings of Fact and 

Conclusions of law 2-4.)

Judge Wilken conducted a bench trial, and on September 30, 2014, issued Findings of Fact 

and Conclusions of Law. The court found, among other things, that Defendants willfully and 

maliciously misappropriated Plaintiffs’ trade secrets. (Findings of Fact and Conclusions of Law 

8.) The court subsequently entered a judgment in favor of Plaintiffs and against Defendants for 

the total sum of $636,350, with all three Defendants jointly and severally liable for $215,450 in 

actual damages, and Defendants Yang Qi and Jinpeng Li jointly and severally liable for $430,900 

in exemplary damages. [Docket No. 192 (Judgment).] On January 16, 2015, the court granted 

Plaintiffs’ motion for attorneys’ fees in the amount of $1,110,254.06. [Docket No. 213.] The court 

entered a permanent injunction enjoining Defendants from any further misappropriation of 

Plaintiffs’ trade secrets, using Plaintiffs’ trademarks without permission, and conducting 

advertising suggesting the existence of a business relationship between Plaintiffs and Defendants. 

[Docket No. 193 (Injunction).]

According to Plaintiffs, the only known assets of Defendants in California are payments 

owed to Zaagtech by third party IDS Pulse, LLC (“IDS Pulse”), a former distributor of Zaagtech 

products. IDS Pulse has represented that it currently owes $14,479.00 to Zaagtech for products it 

purchased, but claims that the amount owed may be reduced based on its expectation that some 

customers will return Zaagtech product to IDS Pulse. (Lee Decl., Feb. 4, 2015, ¶¶ 7, 8, Exs. E, G.) 

Plaintiffs now move for an order directing Defendants to assign to Plaintiffs the rights to payment 

due or to become due from IDS Pulse. They also ask that the court order Defendants “to account 

monthly to the [Plaintiffs] for all funds [Defendants] receive in connection with the obligations 

 

for Attorneys’ Fees) 1 n.1.] As used in this report and recommendation, the term “Defendants”

refers to Yang Qi, Jinpeng Li, and Zaagtech.

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that are the subject of this assignment and any other sums owed to [D]efendants by any other third 

parties, until [P]laintiffs’ judgment is satisfied.” Defendants do not oppose the motion. [Docket 

No. 220 (Statement of Non-Opposition).] Third party IDS Pulse filed a response, asking the court 

to modify Plaintiffs’ proposed assignment order. [Docket No. 221 (Response).]

II. Legal Standard

The execution of final judgments is governed by Federal Rule of Civil Procedure 69, 

which provides that with respect to a money judgment, the court “must accord with the procedure 

of the state where the court is located,” except that “a federal statute governs to the extent it 

applies.” Fed. R. Civ. P. 69(a)(1). In California, a judgment creditor may obtain an assignment 

order against a judgment debtor pursuant to California Code of Civil Procedure section 

708.510(a), which provides that “the court may order the judgment debtor to assign to the 

judgment creditor . . . all or part of a right to payment due or to become due, whether or not the 

right is conditioned on future developments,” such as wages due that are not subject to 

withholding under an earnings withholding order, rents, commissions, royalties, payments due 

from a patent or copyright, or insurance policy loan value. The 1982 legislative committee 

comments on this provision state that section 708.510 “provides an optional procedure for 

reaching assignable forms of property that are subject to levy, such as accounts receivable, general 

intangibles, judgments, and instruments . . . . [t]his remedy may be used alone or in conjunction 

with other remedies provided in this title for reaching rights to payment, such as execution, orders 

in examination proceedings, creditors’ suits, and receivership.”

III. Discussion

Plaintiffs move for an order directing Defendants2:

to assign to plaintiffs/judgment creditors PQ Labs, Inc. and 

Shanghai PinQi Digital Technology Co., Ltd. the rights to payment 

due or to become due to the defendant/judgment debtors from 

obligor IDS Pulse, LLC and to account monthly to the 

plaintiffs/judgment creditors for all funds the defendants/judgment 

debtors receive in connection with the obligations that are the 

 

2

Plaintiffs’ proposed order names Haipeng Li as a Defendant subject to the assignment order. As 

noted above, the court dismissed all claims against Haipeng Li following the bench trial; judgment 

was entered against Yang Qi, Jinpeng Li, and Zaagtech only.

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subject of this assignment and any other sums owed to defendants 

by any other third parties, until the plaintiffs’ judgment is satisfied.

[Docket No. 215-1 (Proposed Assignment Order).] The $14,479.00 owed by IDS Pulse to 

Zaagtech is a “right to payment due” that is assignable to Plaintiffs pursuant to section 708.510(a). 

As noted, Defendants do not oppose the motion. However, IDS Pulse filed a response to 

Plaintiffs’ motion. While IDS does not dispute Plaintiffs’ right to assignment of the amounts it

owes to Zaagtech, it seeks a modification of the proposed assignment order. IDS Pulse asserts that 

it sells electronic components, and that Zaagtech was one of its component suppliers. IDS Pulse 

claims that it ceased distributing Zaagtech products in December 2014, when it learned of the 

court’s judgment and injunction, and placed a hold on the transfer of monies “that were known or 

reasonably believed to belong to or to be owed to Zaagtech.” (Response 1; Gordon Decl., March 

9, 2015, ¶¶ 2-4.) It further explains that although it is presently holding $14,479.00 owed to 

Zaagtech, this amount may be reduced if IDS Pulse customers return Zaagtech products to IDS 

Pulse pursuant to the one-year warranty issued in connection with those products. According to 

Rick Gordon, IDS Pulse’s executive vice president of sales, 

Based on my experience selling electronic touchscreens and related 

computer components manufactured by Zaagtech and other 

manufacturers, I anticipate that some Zaagtech units may be 

returned in the future if they prove to be defective. Such defects, 

and the resulting buyer returns, often occur in a small percentage of 

the units sold of any product and are not unexpected.

(Gordon Decl. ¶ 5.) In the event of a return, IDS Pulse typically replaces a defective unit with a 

new unit of the same model and receives a credit for the defective unit from the manufacturer; 

however, as IDS Pulse is no longer a Zaagtech distributor, IDS Pulse claims that this procedure is 

no longer possible. (Gordon Decl. ¶ 7.) Instead, IDS Pulse will offer a credit to any customers 

returning Zaagtech products, but will itself receive no credit or reimbursement from Zaagtech for 

any defective units returned to IDS Pulse, thus suffering a loss. For example, IDS Pulse claims 

that in early February, a customer asked to return two defective Zaagtech units. Although it has 

not yet received the defective units, IDS Pulse contends that it will be out of pocket in the total 

amount of $620.00 for the two units once they are received and the customer credited. (Gordon 

Decl. ¶¶ 8, 9.) 

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The Zaagtech products sold by IDS Pulse included a one-year warranty pursuant to which 

the product could be returned. According to IDS Pulse, it will accept no returns of Zaagtech 

product after November 30, 2015, one year after its final delivery of Zaagtech product to a 

customer. (Gordon Decl. ¶ 6.) Therefore, IDS Pulse asks that any assignment order take into 

account the impact of customer returns on the amount payable by IDS Pulse to Zaagtech, and that 

IDS Pulse only be required to pay to Plaintiffs the amount it owes Zaagtech – $14,479.00 – less 

costs incurred for units returned by customers during the applicable warranty period. IDS Pulse 

represents that it will be able to provide an accounting of returns and customer credits by 

December 7, 2015, and asks that it be permitted to hold the amount presently owed to Zaagtech in 

escrow in an interest-bearing account until December 7, 2015, at which time it will provide 

Plaintiffs with an accounting for customer returns of Zaagtech product and pay Plaintiffs only the 

$14,479.00 presently owed to Zaagtech less the total amount of the costs identified in the 

accounting for customer returns. (Response 3; Gordon Decl. ¶¶ 10-12.)

IDS Pulse has not shown that the returns it anticipates have anything to do with the amount 

it currently owes Zaagtech. In other words, IDS Pulse would only be entitled to a credit against 

the amount currently owed, $14,479, for the return of defective products that arise from the 

purchases which are included in this amount. IDS Pulse has not made any showing that this is the 

case. Moreover, it is not clear that IDS Pulse will be unable to obtain payment from Zaagtech for 

future credits for customer returns. IDS Pulse’s position that it will suffer a loss is purely 

speculative; as Plaintiffs note, IDS Pulse will have the same rights as any other Zaagtech creditor. 

Accordingly, the court finds that IDS Pulse has failed to show that Plaintiffs’ proposed assignment 

order should be modified or that payment by IDS Pulse to Plaintiffs should be delayed.

IV. Conclusion

For the foregoing reasons, the court recommends that Plaintiffs’ motion for an assignment 

order as to Defendants Yang Qi, Jinpeng Li, and Zaagtech be GRANTED. The court further 

recommends that the court enter the following order:

The court orders that Defendants/judgment debtors Yang Qi, 

Jinpeng Li, and Zaagtech, Inc. assign to Plaintiffs/judgment 

creditors PQ Labs, Inc. and Shanghai PinQi Digital Technology Co., 

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Ltd. the rights to payment due or to become due to 

Defendants/judgment debtors from obligor IDS Pulse, LLC and that 

Defendants/ judgment debtors account monthly to 

Plaintiffs/judgment creditors for all funds Defendants/judgment 

debtors receive in connection with the obligations that are the 

subject of this assignment and any other sums owed to Defendants 

by any other third parties, until Plaintiffs’ judgment is satisfied.

Any party may file objections to this report and recommendation with the District Judge 

within 14 days after being served with a copy. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(a); 

N.D. Cal. Civ. L.R. 72-2. 

IT IS SO ORDERED.

Dated: March 18, 2015

______________________________________

DONNA M. RYU

United States Magistrate Judge

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORN

I

A

IT IS SO ORDERED

Judge Donna M. Ryu

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