Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-01337/USCOURTS-caed-2_05-cv-01337-1/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:44 Trademark Infringement

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

PHILIP MORRIS USA, INC., NO. CIV.S-05-1337 WBS DAD

Plaintiff,

v. FINDINGS AND RECOMMENDATIONS

ELOISE S. ESCANDON, individually

and doing business as LA

CALIFORNIA, et al.,

Defendants.

_______________________________/

This matter came before the court on November 4, 2005, for

hearing on plaintiff’s motion for entry of default judgment against

defendants Eloise S. Escandon, individually and doing business as La

California, and Manuel P. Escandon, individually and doing business

as La California. Anna S. McLean appeared on behalf of plaintiff. 

There was no appearance on behalf of defendants. Having considered

all written materials submitted with respect to the motion, and after

hearing oral argument, for the reasons set forth below the

undersigned recommends that plaintiff’s motion be granted.

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PROCEDURAL BACKGROUND

Plaintiff Phillip Morris USA, Inc. initiated this action

for damages and injunctive relief by filing its complaint on May 2,

2005. The complaint alleges trademark infringement in violation of

the Lanham Act and unfair competition in violation of California

state law. Despite being served with process, defendants Eloise S.

Escandon and Manuel P. Escandon failed to appear. The Clerk of the

Court has entered default against each of the defendants pursuant to

plaintiff’s request. On September 22, 2005, plaintiff filed the

instant motion, noticing it to be heard before the undersigned, as

provided by Local Rule 72-302(c)(19). Despite being served with all

moving papers, defendants have not responded to the motion.

LEGAL STANDARD

Federal Rule of Civil Procedure 55(b)(2) governs

applications to the court for entry of default judgment. Upon entry

of default, the complaint’s factual allegations regarding liability

are taken as true, while allegations regarding the amount of damages

must be proven. Dundee Cement Co. v. Howard Pipe & Concrete

Products, 722 F.2d 1319, 1323 (7th Cir. 1983)(citing Geddes v. United

Fin. Group, 559 F.2d 557 (9th Cir. 1977)); see also TeleVideo Sys.,

Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987). It is

improper for the court to consider liability issues without first

providing notice to plaintiff that the merits will be addressed. 

Black v. Lane, 22 F.3d 1395, 1398 (7th Cir. 1994). Where damages are

liquidated (i.e., capable of ascertainment from definite figures

contained in the documentary evidence or in detailed affidavits),

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 Specifically, the complaint states claims for trademark

infringement under 15 U.S.C. § 1114(1); false designation of origin

under 15 U.S.C. § 1125(a); and unfair competition in violation of

California common law.

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judgment by default may be entered without a damages hearing. See

Dundee, 722 F.2d at 1323. Unliquidated and punitive damages,

however, require “proving up” at an evidentiary hearing or through

other means. Dundee, 722 F.2d at 1323-24; see also James v. Frame, 

6 F.3d 307, 310 (5th Cir. 1993).

Granting or denying default judgment is within the court’s

sound discretion, see Draper v. Coombs, 792 F.2d 915, 924-25 (9th

Cir. 1986) (citations omitted), and the court is free to consider a

variety of factors in exercising that discretion, see Eitel v.

McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The court may

consider such factors as:

(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 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, 782 F.2d at 1471-72 (citing 6 Moore’s Federal Practice, ¶ 55-

05[2], at 55-24 to 55-26). 

ANALYSIS

The complaint in this action alleges two claims for

trademark infringement under the Lanham Act and a claim for unfair 

competition under California law.1 In sum, the detailed allegations

of the complaint allege that defendants have sold, offered for sale

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2 As confirmed on the record during the hearing, because

plaintiff’s motion implicates one retailer, La California, plaintiff

seeks only a single award of $10,000 plus reasonable attorney fees

for which the two named defendants will be jointly and severally

liable.

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or otherwise contributed to the sale of counterfeit Marlboro and

Marlboro Lights cigarettes. Plaintiff is in the business of

manufacturing and selling tobacco products, including the famous

Marlboro brand of cigarettes. Plaintiff’s complaint names only the

two defendants against whom default judgment is now sought. 

Consistent with the prayer in that complaint, and as permitted by the

Lanham Act, plaintiff’s motion seeks an award of $10,000 against the

retailer implicated by the instant motion as well as permanent

injunctive relief. Plaintiff also seeks recovery of reasonable

attorney fees.2

Weighing the factors outlined in Eitel v. McCool, 782 F.2d

at 1471-72, the undersigned has determined that default judgment

against defendants is appropriate. Defendants have made no showing

that their failure to respond to the complaint was due to excusable

neglect. The complaint is sufficient, and the amount of money at

stake is relatively small, particularly because plaintiff seeks only

statutory damages, not the recovery of lost profits or actual

damages. There is no reason to doubt the merits of plaintiff’s

substantive claim, nor is there any apparent possibility of a dispute

concerning the material facts underlying the action. As these

factors weigh in plaintiff’s favor, the undersigned, while 

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recognizing the public policy favoring decisions on the merits, will

recommend that default judgment be granted.

After determining that entry of default judgment is

warranted, this court must next determine the terms of the judgment. 

As indicated above, plaintiff seeks an award of $10,000 against

defendants. Such an award is permitted by the Lanham Act, which

provides for the election of statutory damages in a counterfeiting

case in an amount “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[.]” 15 U.S.C.

1117(c)(1). The plain language of 15 U.S.C. 1117(c) “affords

plaintiffs the right to pursue statutory damages without proving

actual damages; however, the statute does not provide guidelines for

courts to use in determining an appropriate award.” Louis Vuitton

Malletier and Oakley, Inc. v. Veit, 211 F. Supp. 2d 567, 583 (E.D.

Pa. 2002). See also Tiffany (NJ) Inc. v. Luban, 282 F. Supp. 2d 123,

124-25 (S.D. N.Y. 2003)(“The statute ‘does not provide guidelines for

courts to use in determining an appropriate award’ and is only

limited by what ‘the court considers just.’”)(citations omitted). As

plaintiff accurately points out, some courts have found guidance in

this regard in the case law of an analogous provision of the

Copyright Act, 17 U.S.C. § 504(c). See Tiffany, 282 F. Supp. 2d at

125; Louis Vuitton, 211 F. Supp. 2d at 583; Sara Lee Corp. v. Bags of

N.Y., Inc., 36 F. Supp. 2d 161, 166 (S.D. N.Y. 1999). Under the

Copyright Act, courts consider factors such as:

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(1) “the expenses saved and the profits reaped;”

(2) “the revenues lost by the plaintiff;” (3)

“the value of the copyright;” (4) “the deterrent

effect on others besides the defendant;” (5)

“whether the defendant's conduct was innocent or

willful;” (6) “whether a defendant has cooperated

in providing particular records from which to

assess the value of the infringing material

produced;” and (7) “the potential for

discouraging the defendant.”

Tiffany, 282 F. Supp. 2d at 125 (citing Fitzgerald Pub. Co., Inc. v.

Baylor Pub. Co., 807 F. 2d 1110, 1117 (2d Cir. 1986)). See also

Microsoft Corp. v. PC Exp., 183 F. Supp. 2d 448, 454 (D. P.R.

2001)(listing same factors).

Looking to the relevant factors, no evidence submitted in

connection with the instant motion addresses the expenses saved and

profits reaped by defendants or the revenues lost by plaintiff. 

However, the undersigned recognizes that plaintiff is still

discovering the extent of the counterfeiting and that such

calculations would be difficult in any event in light of the nature

of this action. As one court has recognized, “[t]he statutory

damages provision was added in 1995 because ‘counterfeiters' records

are frequently nonexistent, inadequate, or deceptively kept ...,

making proving actual damages in these cases extremely difficult if

not impossible.’” Tiffany, 282 F. Supp. 2d at 124 (citations

omitted). 

With respect to the other factors, the undersigned finds

that an award of $10,000 will likely serve to deter each defendant as

well as others. While the court has discretion to award up to

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 As plaintiff explains, and as alleged in the complaint, each

of the two types of Marlboro cigarettes at issue in this case – Reds

and Lights – contains two Philip Morris USA registered trademarks,

one being the “MARLBORO mark” and the other being the “MARLBORO Roof

Design” mark. (Compl. ¶ 4.) Thus, for each pack of cigarettes

bought from defendants, the court could award $200,000 (i.e.,

$100,000 for each of the two marks on each pack). 

4 An award of $10,000 is also reasonable in light of the amount

of damages awarded in other similar counterfeit cases. See Louis

Vuitton, 211 F. Supp. 2d at 583-84 (collecting cases). 

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$100,000 per counterfeit mark per type of goods or services sold,3

the record suggests that the defendants against whom default judgment

is now sought, as well as the other defendants in related actions on

file in this district, are independent small business owners and/or

operators. An award of $10,000 is at least commensurate with the

value of plaintiff’s famous marks and also in line with defendants

“blatant attempt to profit from Philip Morris USA’s substantial

investment in its Marlboro marks.” (Compl. ¶ 5.) As outlined in

plaintiff’s motion, defendants have failed to cooperate with

plaintiff in its efforts to litigate this matter, including attempts

at settlement. For these reasons, the undersigned finds the

requested award of $10,000 is just.4

Plaintiff also is entitled to the requested permanent

injunctive relief. Title 15 U.S.C. § 1116(a) provides, in relevant

part, that “[t]he several courts vested with jurisdiction of civil

actions arising under this chapter shall have power to grant

injunctions, according to the principles of equity and upon such

terms as the court may deem reasonable ....” In recommending entry

of default judgment in similar actions initiated by this plaintiff,

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the undersigned previously has endorsed similar requests for

injunctive relief. The district judge assigned to this case also has

approved similar requests. Accordingly, the undersigned will

recommend that defendants be (1) prohibited from purchasing, selling,

offering for sale, or otherwise using in commerce any counterfeit

Marlboro or Marlboro Lights brand cigarettes and (2) prohibited from

assisting, aiding or abetting any other person or entity in

purchasing, selling, offering for sale, or otherwise using in

commerce any counterfeit Marlboro or Marlboro Lights brand

cigarettes. See Levi Strauss & Co. v. Shilon, 121 F.3d 1309, 1314

(9th Cir. 1997)(affirming permanent injunction against using “any

counterfeit, copy, or colorable imitations of the trademarks of

Plaintiff Levi Strauss & Co. that is likely to cause confusion”);

PepsiCo, Inc. v. California Security Cans, 238 F. Supp. 2d 1172,

1177-78 (C.D. Cal. 2002) (granting motion for default judgment and

request for a permanent injunction enjoining defendant from using

trademarks on counterfeit products).

Finally, plaintiff seeks to recover reasonable attorney

fees incurred as a result of litigating this action against

defendants. Counsel for plaintiff has submitted declarations

detailing the $4,942.50 sought for attorney fees. The undersigned

finds the rates customary and hours expended reasonable for

litigating an action of this nature. See Intel Corp. v. Terabyte

Int'l, Inc., 6 F.3d 614, 623 (9th Cir. 1993).

An award of attorney fees is warranted in this case. The

Lanham Act authorizes the court to award attorney fees to the

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prevailing party in “exceptional cases.” 15 U.S.C. § 1117(a). 

“While the term ‘exceptional’ is not defined in the statute,

generally a trademark case is exceptional for purposes of an award of

attorneys' fees when the infringement is malicious, fraudulent,

deliberate or willful.” Lindy Pen Co., Inc. v. Bic Pen Corp., 982

F.2d 1400, 1409 (9th Cir. 1993). In the default judgment context,

courts have found a case “exceptional” where, as here, the defendant

disregards judicial proceedings and does not appear. See Discovery

Communications, Inc. v. Animal Planet, Inc., 172 F. Supp. 2d 1282,

1292 (C.D. Cal. 2001); Taylor Made Golf Co., Inc. v. Carsten Sports,

Ltd., 175 F.R.D. 658, 663 (S.D. Cal. 1997). Accordingly, the

undersigned will recommended that plaintiff be awarded the requested

attorney fees of $4,942.50.

CONCLUSION

Accordingly, the court HEREBY RECOMMENDS that:

1. Plaintiff’s motion for entry of default judgment be

granted; and

2. The district judge assigned to this case sign the

proposed Default Judgment and Permanent Injunction filed on September

22, 2005 (see Pl.’s Mot. for Default J., Ex. 12).

These findings and recommendations are submitted to the

United States District Judge assigned to the case pursuant to the

provisions of 28 U.S.C. § 636(b)(l). Within ten days after being

served with these findings and recommendations, any party may file

written objections with the court and serve a copy on all parties. 

Such a document should be captioned “Objections to Findings and

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Recommendations.” Any reply to the objections shall be served and

filed within five days after service of the objections. The parties

are advised that failure to file objections within the specified time

may waive the right to appeal the District Court's order. Martinez

v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

DATED: November 4, 2005.

DAD:th

Ddad1/orders.civil/philipmorris1337.default

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