Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00278/USCOURTS-caed-1_05-cv-00278-0/pdf.json

Parties Involved:
Mortgage Tree Funding, Inc.
Defendant
Mortgagetree Lending, Inc.
Plaintiff

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

MORTGAGETREE LENDING, INC., )

)

Plaintiff, )

v. )

)

MORTGAGE TREE FUNDING, INC., )

et al., )

)

Defendants. )

)

 )

1: 05-CV-00278-OWW-SMS

FINDINGS AND RECOMMENDATION

REGARDING PLAINTIFF’S MOTION FOR

DEFAULT JUDGMENT AND PLAINTIFF’S

MOTION FOR COSTS AND ATTORNEY’S

FEES (DOCS. 6-9)

Plaintiff is proceeding with a civil action. The matter has

been referred to the Magistrate Judge pursuant to 28 U.S.C. §

636(b) and Local Rule 72-302(c)(19).

Pending before the Court is Plaintiff’s motion for default

judgment in which Plaintiff seeks damages, injunctive relief,

costs, and attorney’s fees.

I. Background

On February 24, 2005, Plaintiff filed a complaint stating

claims for 1) infringement of federally registered trademarks in

violation of the Trademark Act of 1946, as amended, specifically

15 U.S.C. § 1114; 2) false designation of origin and unfair

competition in violation of 15 U.S.C. § 1125(a); 3) trademark

infringement in violation of California common law; and 4) unfair

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competition and injury to business reputation, trade name and

trademark in violation of California common law (Cal. Bus. &

Prof. Code § 17200). The Clerk entered default as to Defendant

Mortgage Tree Funding, Inc. (MTF), on June 6, 2005. Plaintiff

filed the instant motions for entry of default judgment and for

costs and attorney’s fees on July 8, 11, and 18, 2005;

supplemental briefing was filed on September 6, 2005, pursuant to

the Court’s order of August 9, 2005. Plaintiff’s initially filed

motion papers included the declaration of Robyn T. Callahan, and

Plaintiff’s supplemental brief contained an additional

declaration of Callahan.

Plaintiff’s motion for default judgment came on regularly

for hearing on October 7, 2005, at 9:30 a.m. in Courtroom 4

before the Honorable Sandra M. Snyder, United States Magistrate

Judge. Robyn T. Callahan appeared on behalf of Plaintiff; thre

was no appearance on behalf of Defendant. After argument,

Plaintiff was given leave to file supplemental briefing and

materials. On October 19, 2005, Plaintiff filed verbatim copies

of the supplemental brief and declaration previously filed on

September 6, 2005. The matter is now submitted to the Court.

II. Requirements for Entitlement to Default Judgment

A court has the discretion to enter a default judgment

against one who is not an infant, incompetent, or member of the

armed services where the claim is for an amount that is not

certain on the face of the claim and where 1) the defendant has

been served with the claim; 2) the defendant’s default has been

entered for failure to appear; 3) if the defendant has appeared

in the action, the defendant has been served with written notice

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of the application for judgment at least three days before the

hearing on the application; and 4) the court has undertaken any

necessary and proper investigation or hearing in order to enter

judgment or carry it into effect. Fed. R. Civ. P. 55(b); Alan

Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392 (9th

Cir. 1988). Factors that may be considered by courts in

exercising discretion as to the entry or setting aside of a

default judgment include the nature and extent of the delay,

Draper v. Coombs, 792 F.2d 915, 924-925 (9th Cir. 1986); the

possibility of prejudice to the plaintiff, Eitel v. McCool, 782

F.2d 1470, 1471-72 (9th Cir.1986); the merits of plaintiff's

substantive claim, id.; the sufficiency of the allegations in the

complaint to support judgment, Alan Neuman Productions, Inc., 862

F.2d at 1392; the amount in controversy, Eitel v. McCool, 782

F.2d at 1471-1472; the possibility of a dispute concerning

material facts, id.; whether the default was due to excusable

neglect, id.; and the strong policy underlying the Federal Rules

of Civil Procedure that favors decisions on the merits, id.

 A default judgment generally bars the defaulting party from

disputing the facts alleged in the complaint, but the defaulting

party may argue that the facts as alleged do not state a claim.

Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392.

Thus, well pleaded factual allegations, except as to damages, are

taken as true; however, necessary facts not contained in the

pleadings, and claims which are legally insufficient, are not

established by default. Cripps v. Life Ins. Co. of North America,

980 F.2d 1261, 1267 (9th Cir. 1992); TeleVideo Systems, Inc. v.

Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987).

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A. Service

A California corporation is effectively served by personal

service upon an authorized agent for service of process. Fed. R.

Civ. P. 4(h), and (e)(1); Cal. Civ. Proc. Code §§ 415, 415.10,

416.10. A signed return or proof of service has been held to

constitute prima facie evidence of valid service which can be

overcome only by strong and convincing evidence. O’Brien v. R. J.

O’Brien & Assocs., Inc., 998 F.2d 1394, 1398 (7th Cir. 1993). 

Here, the declaration of service attached to the initial

declaration of Callahan as Exhibit B establishes that Andrew

Strachan, an adult, not a party to the case, and a registered

California process server, served the summons and complaint and

other associated documents on Defendant Mortgage Tree Funding,

Inc. by serving its authorized agent at is business address on

April 28, 2005, at 9:25 a.m. Thus, valid service on that date on

Defendant has been established.

The Court notes that the docket does not reflect that

Defendant ever responded to the complaint.

B. Notice

A defaulting party is entitled to written notice of the

application for default judgment unless the party has not

appeared in the action. Fed. R. Civ. P. 55(b)(2). An appearance

for the purpose of Rule 55 need not be a formal one and may

consist even of informal contacts made by the defaulting party

where the defaulting party demonstrates a clear purpose to defend

the suit. In re Roxford Foods v. Ford, 12 F.3d 875, 879-81 (9th

Cir. 1993). 

Here, Plaintiff’s counsel declared that Defendant never

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responded to a letter sent before the filing of the complaint, or

to the complaint; and Defendant has not filed a responsive

pleading or otherwise appeared in the above-referenced action.

(Decl. at 3.) There is no indication in the file that the

Defendant was ever given notice of the default or the application

for default judgment. However, Plaintiff has demonstrated that

the defaulting party has not appeared in the action and that

notice is therefore not required.

C. Liability

Because claims that are legally insufficient are not

established by a party’s default, a court in considering an

application for default judgment must determine whether the

claims upon which a plaintiff seeks a default judgment are

legally sufficient. It is the party’s burden to demonstrate to

the Court that under the pertinent law, the Plaintiff’s claims,

as alleged, are legally sufficient.

1. Trademark Infringement, 15 U.S.C. §1114(1)(a)

Preliminarily, this Court has jurisdiction over this action

pursuant to 15 U.S.C. § 1121(a), which confers district court

jurisdiction over all actions arising under the chapter

regardless of amount in controversy, diversity of citizenship of

the parties, or lack thereof.

As to the claim regarding infringement of a federally

registered trademark, § 1114(a) provides that a person is liable

in a civil action by a registrant of a registered mark for

various remedies if the person, without the consent of the

registrant, uses in commerce any reproduction, counterfeit, copy,

or colorable imitation of a registered mark in connection with

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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. It

has been held that in order to prevail on such a claim, the

Plaintiff must establish a protected interest in the thing

infringed as well as a likelihood of consumer confusion;

registration is prima facie evidence of a protected interest, and

establishing that a substantial segment of consumers and

potential consumers have mentally associated the mark and a

single source of the product is also sufficient. Levi Strauss &

Co. v. Blue Bell, Inc., 778 F.2d 1352, 1354-55 (9th Cir. 1985).

Plaintiff has alleged that as a result of Plaintiff’s exclusive

and continuous use of the “Tree Brand” in United States commerce,

consumers recognize and associate the services sold under the

mark as originating from a single source. (Complt. at 3.) 

The complaint alleges that Plaintiff has used a tree design

for almost five years and owns the tree logo design pursuant to

U.S. Registration No. 2645750; Plaintiff also has a pending

application for the Tree Brand. The precise allegations of the

complaint are as follows:

MortgageTree Lending has used and has been affiliated

with a tree design mark for almost five years. It is

the owner of U.S. Registration No. 2645750 for its Tree 

design logo and also owns a pending U.S. Application for

MORTGAGE TREE (collectively known as the “Tree Brand.”)

(Complt. at 2.) The remainder of the operative allegations of the

complaint concern the “Tree Brand,” which includes the registered

logo. Therefore, the registered mark appears to be included in

each of the allegations concerning the “Tree Brand.” It is

alleged that the conglomerate “Tree Brand” has been used by

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Defendant for its mortgage brokerage business operation,

MortgageTree Funding, and thus in connection with advertising

services, without Plaintiff’s authorization or consent; and that

the use is likely to cause confusion of deception among the

public. (Id. at 2-3.) It thus appears that Plaintiff sufficiently

alleged a violation of § 1114(1)(a).

3. Violation of § 1125(a)

As to Plaintiff’s claim of false designation of origin and

unfair competition, 15 U.S.C. § 1125(a) provides:

(a) Civil action

(1) Any person who, on or in connection with any goods

or services, or any container for goods, uses in

commerce any word, term, name, symbol, or device, or

any combination thereof, or any false designation of

origin, false or misleading description of fact, or

false or misleading representation of fact, which--

(A) is likely to cause confusion, or to cause

mistake, or to deceive as to the affiliation,

connection, or association of such person with another

person, or as to the origin, sponsorship, or approval

of his or her goods, services, or commercial activities

by another person, or

(B) in commercial advertising or promotion,

misrepresents the nature, characteristics, qualities,

or geographic origin of his or her or another person's

goods, services, or commercial activities,

shall be liable in a civil action by any person who

believes that he or she is or is likely to be damaged

by such act.

Plaintiff alleged that Defendant’s use in commerce of the

“Tree Brand,” which had come to be associated in consumers’ minds

with a single source of origin, was a false designation of origin

and unfair competition in violation of the statute. Plaintiff

also alleged that the activities caused and will continue to

cause great injury to Plaintiff. Plaintiff’s allegations satisfy

the requirement of the statute. Plaintiff’s second claim has been

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adequately pleaded.

4. Common Law Trademark Infringement

In its initial application, Plaintiff asserted that its

claims were well-pleaded, including the allegation that Defendant

intentionally and willfully violated common law trademark

infringement. In the supplemental brief filed by Plaintiff,

Plaintiff did not provide any authority regarding the legal

sufficiency of its claim for judgment on the third cause of

action in the complaint, namely, “Common Law Trademark

Infringement,” which contained an incorporation by reference of

the previous allegations of the complaint, and allegations that

such activities constituted “trademark infringement under the

common law of the State of California.” (Complt. at 5.)

At the hearing on the motion, Plaintiff withdrew its claim

for common law trademark infringement. 

4. Unfair Competition-Pendant State Claim

Plaintiff alleged in the fourth cause of action that the

previously described conduct constituted unfair competition under

the common law of the state of California. Plaintiff cited to

authority to the effect that common law claims of unfair

competition and actions pursuant to Cal. Bus. & Prof. Code §

17200 (defining unfair competition as including unlawful, unfair,

or fraudulent business acts or practices) are “substantially

congruent” to claims made under the Lanham Act. Cleary v. News

Corp., 30 F.3d 1255, 1262-63 (9th Cir. 1994). The Court further

notes that it is established in California that if goods or

services are known to the public by a name, design, or physical

appearance, any imitation which has the effect of deceiving

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buyers regarding the origin of the goods or services may be

actionable as unfair competition. See 11 Witkin, Summary of

California Law (9th Ed. 1990) at § 86. It appears that Plaintiff

has adequately alleged a claim pursuant to Cal. Bus. & Prof. Code

§ 17200.

D. Other Factors

It does not appear that Defendant is an infant, incompetent,

or member of the armed services. Defendant’s delay has been longstanding, and it does not appear that there is any showing of

excuse on the part of Defendant. This is tempered by the fact

that Defendant was not given notice of the default or the

application for default judgment. Nevertheless, no specific, real

possibility of a dispute concerning material facts appears. Under

the circumstances, it does not appear that judgment should be

deferred in favor of a decision on the merits. The Court finds

that entry of default judgment is appropriate.

III. Relief

A. Facts

Plaintiff has alleged upon information and belief that

Defendant’s infringing activities were willful, intentional, and

undertaken unfairly and unjustly to benefit from the efforts of

Plaintiff in promoting and selling services under the “Tree

Brand.” (Complt. at 3.) Plaintiff also alleged that the

Defendant’s activities have caused and continue to cause damage

to Plaintiff, and that Defendant had actual knowledge of

Plaintiff’s use of the “Tree Brand.” Counsel Robyn T. Callahan

declares under penalty of perjury that Plaintiff was founded in

1986, is a nationally recognized mortgage banker, owns specific

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registrations for its Tree design logo and a pending application

for MORTGAGE TREE; and has used the tree design mark for almost

five years. (Decl. at 3.) Callahan declares upon information and

belief that Defendant operates a mortgage brokerage named

Mortgage Tree Funding; Defendant has operated as a mortgage

broker only since well after Plaintiff began using the “Tree

Brand,” and Defendant’s activities were undertaken by Defendant

without the authorization or consent of Plaintiff. (Decl. at 3.)

Counsel details two letters, sent on October 12, 2004, December

16, 2004, informing Defendant of Plaintiff’s registered trademark

logo and pending application that had been approved for

registration, strongly requesting Defendant to desist from using

identical terms and highly similar marks, and informing Defendant

of the legal bases for damages, injunctions, and attorneys fees

that could result from its conduct. The letter sent in October is

accompanied by proof of receipt. (Id., Ex. C.) The other letter

is not; counsel declares only that Plaintiff wrote to Defendant

through its outside counsel, and that a correct copy of the

letter is attached; Defendant did not respond. (Decl. at 3.)

Although there is no reference to it in the declarations,

Plaintiff’s supplemental brief refers to Defendant’s continuing

its infringing actions as evidenced “by its active website at

http://mtreefunding.com.” (Supp. Brief at 8.) Plaintiff does not

bother to point to any specific part or aspect of this website,

let alone submit papers copies of any specific part as it existed

at any specific time. Further, Plaintiff does not provide any

material by way of declaration regarding matters of

authentication, such as a statement by someone with personal

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knowledge of who maintains the website, who authored the

documents, or the accuracy of the contents. There is no

background regarding the time period during which this site has

existed. 

Fed. R. Evid. 901 provides:

(a) The requirement of authentication or

identification as a condition precedent to

admissibility is satisfied by evidence sufficient to support a

finding that the matter in question is what is proponent claims.

Unauthenticated evidence is not relevant. Authentication

constitutes “a special aspect of relevancy.” Fed. R. Evid. 901(a)

advisory committee's note. Evidence cannot have a tendency to

make the existence of a disputed fact more or less likely if the

evidence is not that which its proponent claims. United States v.

Branch, 970 F.2d 1368, 1370 (4th Cir. 1992). Authentication

requirements are satisfied by evidence sufficient to support a

finding that the matter in question is what its proponent claims,

Fed. R. Evid. 901(a). It is sufficient if there is enough support

in the record to warrant a reasonable person in determining that

the evidence is what it purports to be; thereafter, the question

of weight to be given to the evidence is left to the finder of

fact. United States v. Holmquist, 36 F.3d 154, 167 (1st Cir.

1994). Circumstantial evidence is sufficient to authenticate

evidence. United States v. Englebrecht, 917 F.2d 376, 378 (8th

Cir. 1990).

Information on internet sites presents special problems of

authentication. A proponent should be able to show that the

information was posted by the organization/s to which it is

attributed. See Wady v. Provident Life and Accident Insurance Co.

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of America, 216 F.Supp.2d 1060, 1064-65 (C.D.Cal. 2002); but see

Moose Creek, Inc. v. Abercrombie & Fitch Co., 331 F.Supp.2d 1214,

1224-5 (C.D.Cal. 2004). It has been recognized that anyone with

sufficient hacking ability can put anything on the internet; no

web-site is monitored for accuracy, and nothing contained therein

is subject to independent verification absent underlying

documentation. Wady v. Provident Life and Accident Insurance Co.

of America, 216 F.Supp.2d at 1064-65.

Here, there is no statement by a person with personal

knowledge of who maintained the site, who authored the documents,

or the accuracy of any of the contents at any specific time. It

is unclear what person or entity posted the information. There is

no showing that the internet site is secure from hackers or even

secure within the allegedly posting organization. The only

immediately apparent connections of the site to this action are

the name of the posting entity (which mirrors that of the

Defendant) and addresses within the organization that correspond

to some extent with addresses of letters that counsel asserts

were written to Defendant. Given the nature of the evidence, and

considering the failure of Plaintiff to provide the Court with

paper copies of specific parts of the site taken at a specific

time and to provide any attempt at authentication, the Court

concludes that neither the site, nor any specific version or

aspect of the website, has been authenticated.

B. Damages

Plaintiff seeks the Court to award it “Defendant’s profits

from rendering mortgage brokerage services marketed, sold or

offered using the ‘Tree Brand’, together with such increased sum

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in addition thereto as the Court shall find just in view of the

willful nature of Defendant’s infringing and tortious acts.”

(Decl. at 4.) Plaintiff further seeks the Court to award

Plaintiff “its damages arising out of Defendant’s infringing

acts, in an amount which is three times the amount found as

actual damages.” (Id.; Application at 5-6.) Reference to the

complaint reveals that with respect to damages, Plaintiff sought

an award of Plaintiff’s damages “arising out of Defendant’s

infringing acts, in an amount which is three times the amount

found as actual damages,” as well as an order that Defendant

account to MortgageTree Lending for, and that

MortgageTree Lending be awarded Defendant’s profits

from rendering mortgage brokerage services marketed,

sold or offered using the “Tree Brand”, together with

such increased sum in addition thereto as the Court shall

find just in view of the willful nature of Defendant’s 

infringing and tortious acts.

(Complt. at 6-7.)

There is no proof of the amount of profits set forth in the

materials submitted to the Court. However, the complaint’s

reference to an additional sum for wilful conduct is reasonably

interpreted as a request for statutory damages for wilful

conduct. Indeed, in the supplemental brief submitted in support

of default judgment, Plaintiff reveals that what it actually

seeks is statutory damages pursuant to 15 U.S.C. § 1117(c)(1),

which 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

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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 goods or services

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

considers just.

Reference to § 1116(d)(1)(B) shows that a counterfeit mark

is defined as follows:

As used in this subsection the term "counterfeit

mark" means--

(i) a counterfeit of a mark that is registered on

the principal register in the United States Patent and

Trademark Office for such goods or services sold,

offered for sale, or distributed and that is in use,

whether or not the person against whom relief is sought

knew such mark was so registered; or

(ii) a spurious designation that is identical

with, or substantially indistinguishable from, a

designation as to which the remedies of this chapter

are made available by reason of section 220506 of Title

36;

but such term does not include any mark or designation

used on or in connection with goods or services of

which the manufacture or producer was, at the time of

the manufacture or production in question authorized to

use the mark or designation for the type of goods or

services so manufactured or produced, by the holder of

the right to use such mark or designation.

Given that the complaint, in describing the conduct of the

Defendant that gave rise to liability, contains allegations that

Defendant made unauthorized use, in selling and promoting

services, of a registered tree logo and a brand for which

registration is pending notwithstanding Defendant’s actual

knowledge of Plaintiff’s use of the brand, it is concluded that

it has been established that the case involves the use of a

counterfeit mark in connection with the offering or distribution

of services.

As to wilfulness, wilfulness has been interpreted to involve

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a deliberate duplication of a mark in a way calculated to obtain

benefit from the plaintiff’s goodwill, or with deliberate intent

to deceive. Rolex Watch U.S.A., Inc. v. Meece, 158 F.3d 816, 823

(5th Cir. 1998) (quoting Lindy Pen Co. v. Bic Pen Corp., 982 F.2d

1400, 1405 (9th Cir. 1993)); SecuraComm Consulting Inc. v.

Securacom Inc., 166 F.3d 182, 187 (3d Cir. 1999). The allegations

of the complaint establish that Defendant had actual knowledge of

Plaintiff’s use of the tree brand, and that Plaintiff wrote

Defendant in October and December 2004, requesting it to cease

and desist its use of the brand; Defendant did not respond.

Wilfulness may be inferred from continuing use after having been

presented with a cease and desist demand. Discovery

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

1291-92 (C.D.Cal.2001); Louis Vuitton Malletier and Oakley, Inc.

v. Veit, 211 F.Supp.2d 567, 583 (E.D.Pa 2002).

As to the amount of damages for wilful use of the

counterfeit mark, courts have analogized to the body of case law

interpreting a similar provision in the Copyright Act. Phillip

Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 501

(C.D.Cal. 2003). This involves consideration not only of

compensation for the injured plaintiff, but also deterrence of

future infringement. Id. This is consistent with established

understanding in the Ninth Circuit of the policies underlying

trademark protection, namely, to protect consumers from being

misled as to the enterprise from which the goods or services

emanate or with which they are associated, to prevent impairment

of the value of the enterprise that owns the trademark, and to

achieve these ends in a manner consistent with the objectives of

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free competition. See Intel Corp. v. Terabyte International,

Inc., 6 F.3d 614, 618 (9th Cir. 1993.) Copyright factors include

the defendant’s profits and saved expenses, the plaintiff’s lost

revenues, and the defendant’s state of mind. Louis Vuitton

Malletier and Oakley, Inc. v. Weit, 211 F.Supp.2d 567, 584

(E.D.Pa 2002). 

Here, profits, expenses, and lost revenues are matters only

of speculation. The precise scope of Defendant’s business is not

clear. All that the allegations of the complaint indicate is that

the Defendant used a counterfeit mark in the same type of

business beginning well after five years ago, when Plaintiff

started using it and amassing substantial goodwill in a business

that has grown to over fifty branches; Defendant did so wilfully,

intentionally, and with a purpose unjustly to benefit from the

efforts of Plaintiff in promoting and selling services. Specific

evidence of wilfulness includes the failure to respond to

requests to cease and desist in late 2004, and a failure to

respond to the complaint. The complaint does not allege

specifically when Defendant obtained knowledge of the

registration of the mark, but it may reasonably be inferred that

it occurred by the time of the delivery of the letter in late

2004. At least by that time, Plaintiff had notified Defendant

that its mark was registered. See § 1111 (providing that no

damages shall be recovered against an infringer of a registered

mark unless the defendant had actual notice of the registration).

Plaintiff did not serve Defendant with notice of the default or

notice of the application to enter default judgment. 

Under the circumstances, the Court concludes that because

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there is some evidence that the use of the confusing mark was

wilful, even in the absence of evidence of the extent of

Plaintiff’s loss or the Defendant’s profits, it is appropriate to

award damages for the purpose of deterrence. Because of the scope

of Plaintiff’s operation as alleged in the complaint, a

significant interest in deterrence is presented. There is no

detailed evidence regarding the nature or quality of the

respective services offered by Plaintiff and Defendant;

nevertheless, because of the likelihood of confusion established

by Defendant’s default, the circumstances necessarily demonstrate

an interest in the protection of the public. It further appears

that only one counterfeit mark per type of goods or services sold

has been demonstrated.

Plaintiff seeks $50,000 under § 1117(c)(1) and $200,000

under § 1117(c)(2). This is not a case in which the defendant has

been shown to have engaged in selling counterfeit goods, using

the internet over a long period of time to infringe multiple

trademarks, importing millions of infringing products, or

unjustly gaining huge amounts of profits. It may thus be

distinguished from the cases cited by Plaintiff, such as Louis

Vuitton ($l,500,000 for eight marks, use of multiple domain names

on the internet, and egregious conduct of extensive sales of many

types of goods for a long period of time); Petmed Express, Inc.

v. Medpets.Com, Inc., 336 F.Supp.2d 1213, 1221 (S.D.Fla 2004)

($400,000 for each infringing mark used on the internet plus

$50,000 for each infringing domain name, based on wilfulness and

the presumptively high scope of internet sales); and Playboy

Enter., Inc. v. AsiaFocus Int’l, Inc., 1998 WL 724000 (E.D.Va

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1998) ($1,000,000 for wilful infringement of two counterfeit

domain names, and $500,000 for each category of merchandise,

where there was extensive use of multiple sites for sale of

Playboy merchandise as well as viewing of photographic images,

use of registered trademarks within the named sites and in e-mail

addresses, and active encouragement of other web sites to

distribute the infringing material); see also Philip Morris USA

Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 501-02 (C.D.

2003) (award of $2,000,000 for wilful infringement of two famous

Marlboro trademarks by sale of 8,000,000 imported counterfeit

cigarettes of inferior quality with a street value of millions of

dollars). Given that the only probative evidence available to the

Court in the present case demonstrates wilful conduct of

relatively short duration and of uncertain extent or effect, the

Court finds appropriate an award of $50,000.00 in damages

pursuant to 15 U.S.C. § 1117(c)(1).

C. Injunctive Relief

Title 15 § 1116(a) provides:

The 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, to prevent the violation of any right of

the registrant of a mark registered in the Patent and

Trademark Office or to prevent a violation under

subsection (a), (c), or (d) of section 1125 of this

title. Any such injunction may include a provision

directing the defendant to file with the court and

serve on the plaintiff within thirty days after the

service on the defendant of such injunction, or such

extended period as the court may direct, a report in

writing under oath setting forth in detail the manner

and form in which the defendant has complied with the

injunction. Any such injunction granted upon hearing,

after notice to the defendant, by any district court of

the United States, may be served on the parties against

whom such injunction is granted anywhere in the United

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States where they may be found, and shall be operative

and may be enforced by proceedings to punish for

contempt, or otherwise, by the court by which such

injunction was granted, or by any other United States

district court in whose jurisdiction the defendant may

be found.

It is appropriate to award injunctive relief in connection

with a default judgment pursuant to the Lanham Act. Philip Morris

USA Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 502

(C.D.Cal. 2003) (finding permanent injunctive relief appropriate

because the claims otherwise warranted an injunction, the

defendant had chosen to ignore the lawsuit, and failure to grant

the injunction would needlessly expose the plaintiff to the risk

of continuing irreparable harm); Pepsico, Inc. v. California

Security Cans, 238 F.Supp.2d 1172, 1177-78 (C.D. 2002) (granting

an injunction barring use of a trademark on counterfeit products

where it was consistent with the relief requested in the

complaint, and it was not absolutely clear that the wrongful

behavior had ceased and would not begin again).

An injunction is an equitable remedy appropriate where there

is irreparable injury and inadequacy of legal remedies; the Court

will balance the competing claims and consider the potential

injury and convenience to each party of granting or withholding

the injunctive relief, as well as consider the public interest.

Weinberger v. Romero-Barcelo, 456 U.S. 305, 312-13 (1982).

The Lanham Act gives courts the "power to grant injunctions,

according to the principles of equity and upon such terms as the

court may deem reasonable, to prevent the violation" of a

registrant's rights. 15 U.S.C. § 1116(a). A plaintiff is not

automatically entitled to an injunction simply because it proved

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its affirmative claims; the grant of injunctive relief is not a

ministerial act flowing as a matter of course. Pyrodyne Corp. v.

Pyrotronics Corp., 847 F.2d 1398, 1402 (9th Cir. 1988). However,

the owner of a registered mark is generally entitled to

injunctive relief because there is no adequate remedy at law for

the injury caused by a defendant's continuing infringement. See

Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1180-81

(9th Cir. 1988); see Lone Star Steakhouse & Saloon v. Alpha of

Va., Inc., 43 F.3d 922, 939 (4th Cir. 1995). Demonstrating a

likelihood of confusion is generally sufficient in trademark

infringement or unfair competition cases to permit a presumption

that the plaintiff will suffer irreparable harm. Vision Sports,

Inc. v. Melville Corp., 888 F.2d 609, 612 n. 3 (9th Cir. 1989).

Denying injunctive relief would force Plaintiff to endure

continuing infringement and to bring successive suits for money

damages. Further, there is a strong interest in protecting

consumers. In cases where the infringing use is for a similar

service, broad injunctions are especially appropriate. Century 21

Real Estate Corp. v. Sandlin, 846 F.2d at 1180-81.

Plaintiff alleged in the complaint that Defendant’s unlawful

acts have had and will continue to have an effect in this

judicial district; the trademark has amassed substantial goodwill

inuring to the benefit of Plaintiff; Defendant’s unlawful and

infringing activities have caused and continue to cause damage to

Plaintiff (Cmplt. at 2-3); Defendant’s use of the brand has

caused and will continue to cause great and irreparable injury to

Plaintiff, and unless such acts are restrained by the Court, they

will be continued, and Plaintiff will continue to suffer great

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and irreparable injury; and Plaintiff has no adequate remedy at

law. (Complt at 4-5.)

Here, the Court finds that Plaintiff has established that it

is the owner of a registered trade mark with respect to its tree

design logo (U.S. Registration No. 2645750) and the owner of a

pending U.S. application for MORTGAGE TREE (collectively known as

the “Tree Brand”). Defendant engaged in trademark infringement of

this brand and continues to do so in its unauthorized use of the

Tree Brand in connection with mortgage brokerage services.

Defendant’s infringement was wilful. The Court finds that

Plaintiff is entitled to permanent injunctive relief against

future infringement of its mark by Defendant because Plaintiff

has established a likelihood of confusion if Defendant continues

to use Plaintiff’s mark, has established substantial good will

based on the association of the mark with Plaintiff’s operations,

has shown that irreparable harm will result absent such relief,

and finally has shown that a permanent injunction will serve the

public interest. Further, the Court finds that with respect to

the relative hardships imposed by an injunction, the balance tips

in favor of issuance. Plaintiff is only seeking to enjoin illegal

activity. The injunction will not adversely affect any of

Defendant’s legitimate business operations, nor will it suffer

any cognizable hardship as a result of its issuance. Conversely,

Plaintiff will suffer harm in the form of disfavor from clients

if Defendant’s activities continue. The Court further finds that

injunctive relief would serve the public interest because the

pertinent law protects not only the private interests of the

trademark owner, but also the public's interest in not being

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confused by the infringing products. The Court finds that the

injunction would deter future infringement. 

Further, § 1116(a) provides that any injunction may include

a provision directing the defendant to file with the Court and

serve on the plaintiff within thirty days after the service on

the defendant of such injunction, or such extended period as the

court may direct, a report in writing under oath setting forth in

detail the manner and form in which the defendant has complied

with the injunction.

Accordingly, if the Court were authorized to enforce an

injunction, the Court would recommend that it be ordered that

Defendant Mortgage Tree Funding, Inc., and its

officers, directors, agents, servants, employees, attorneys and

those persons in active concert or participation or otherwise in

privity with it, be permanently enjoined and restrained

(1) from using in any manner, in connection with the

advertising, promotion, marketing, sale, offer for sale or

rendering of mortgage brokerage services, MortgageTree Lending's

"Tree Brand"; and

(2) from using in any manner, in connection with the

advertising, promotion, marketing, sale, offer, or rendering of

mortgage brokerage services, any false designations of origin, or

false representations, or otherwise commit any acts of trademark

infringement, unfair competition or deceptive or unlawful

trade practices, which may cause the trade or public to

mistakenly believe that Defendants' services are related to,

affiliated, associated or connected with, or sponsored or

approved by Plaintiff, or from doing any other act which may, or

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is intended, designed or calculated to, injure MortgageTree

Lending's business reputation or dilute, tarnish or disparage the

"Tree Brand"; and

(3) that it be ordered that Defendant file with the Court

and serve upon MortgageTree Lending within 30 days after service

upon Defendant of this Court's injunction issued in this action,

a written report, signed under oath, setting forth in detail the

manner in which Defendant has complied with such injunction.

However, the Court notes that because Defendant has not been

given notice of this hearing, it appears that any injunction

emanating from the Court cannot come within the provision of §

1116(a), which permits enforcement by contempt “or otherwise”,

but which appears to limit such enforcement to injunctions

granted “upon hearing, after notice to the defendant, by any

district court of the United States....” At hearing Plaintiff

asserted that because Plaintiff gave Defendant notice of the

possibility of injunctive relief in a letter before the

commencement of suit, Defendant had notice within the meaning of

§ 1116(a); however, Plaintiff has not submitted any authority to

that effect, and the Court is aware of no authority to the effect

that the notice contemplated by § 1116(a) is anything other than

notice that particular injunctive relief will be sought at a

hearing following the notice of such hearing. See In re Lorillard

Tobacco Co., 370 F.3d 982, 986 (9th Cir. 2004) (noting that an ex

part seizure order under § 1116 is not the same as an injunction

under § 1116, which requires notice and hearing in order to be

enforceable by contempt). Because of the lack of notice to the

Defendant of the terms of the injunction sought and of the

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hearing thereon, it would appear that any injunction granted

would not be capable of enforcement. The Court will not order an

injunction when it is a futility. In re Estate of Ferdinand

Marcos Human Rights Litigation, 94 F.3d 539, 545 (9th Cir. 1996).

Plaintiff has not established that any injunction issued in this

proceeding, of which no notice was given, is capable of

enforcement by the Court. Accordingly, the Court concludes that

Plaintiff has not established entitlement to injunctive relief.

D. Attorney’s Fees

Plaintiff seeks $8,310.63 in attorney’s fees pursuant to

Fed. R. Civ. P. 55(d) and Local Rule 54-293 for work done on the

case from November 2004 through June 2005 in connection with

preparation of the initial application and motion for attorney’s

fees. Plaintiff also seeks an additional $4,125.00 for fifteen

hours of additional work at a rate of $275.00 per hour,

consisting of eight hours of reviewing and researching case law

and statutory authority for the supplemental brief, and seven

further hours for travel to and from Fresno and for appearance at

the hearing of the motion. The total claimed is thus $12,435.63.

Plaintiff initially requested fees pursuant to Fed. R. Civ.

P. 55(d) (which says nothing regarding an award of costs or fees)

and Local Rule 54-293. No substantive basis for an award of fees

was referred to in the application. Subsequently Plaintiff

identified 15 U.S.C. § 1117(a) as the source of the Court’s

statutory authority to award fees and costs. Section 1117(a)

concerns violations of any right of a registrant of a mark or a

violation under § 1125(a) that has been established in a civil

action. It states in pertinent part, “The court in exceptional

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cases may award reasonable attorney fees to the prevailing

party.” Exceptional cases includes cases in which trademark

infringement is malicious, fraudulent, deliberate, or wilful.

Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400, 1409 (9th Cir.

1993); Philip Morris USA Inc. v. Castworld Products, Inc., 219

F.R.D. 494, 502 (C.D.Cal.2003). To determine a reasonable

attorney fee award under § 1117(a), courts employ the lodestar

method. See, Earthquake Sound Corp. v. Bumper Industries, 352

F.3d 1210, 1219 (9th Cir. 2003).

Case law construing what a reasonable fee is applies

uniformly to all federal fee-shifting statutes. City of

Burlington v. Dague, 505 U.S. 557, 561 (1992). “The most useful

starting point for determining the amount of a reasonable fee is

the number of hours reasonably expended on the litigation

multiplied by a reasonable hourly rate.” Hensley v. Eckerhart,

461 U.S. 424, 433 (1983). This figure, the “lodestar,” is

presumed to be the reasonable fee contemplated by the statute.

City of Riverside v. Rivera, 477 U.S. 560, 568 (1986). Factors to

consider in the initial lodestar calculation are the novelty and

complexity of the issues, the special skill and experience of

counsel, the quality of the representation, the results obtained,

and the superior performance of counsel. Blum v. Stenson, 465

U.S. 886, 898-900 (1984). Local Rule 54-293 also sets forth the

procedure to be followed, the matters to be shown by an

applicant, and the criteria to be followed in making awards.

Here, Plaintiff does not request fees for a specified number

of hours. Reference to the billing statements attached to

counsel’s declaration (Ex. E) reveals that 24.80 hours of

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attorney time was the total number of hours claimed by various

counsel for services including research and investigation

regarding Defendant’s corporate status, correspondence with the

client and with Defendant, reviewing the file, drafting and

filing the complaint and related documents, and research

regarding service, preparation of request for entry of default,

and the application for default judgment. The Court notes that

some of the services, including telephone conferences with the

Court regarding payment of filing fees and issuance of subpoenae,

confirming the filing of the complaint, and checking with the

Court regarding the status of the order on entry of default,

consisting of approximately an hour and one-half, are clerical or

paralegal in nature and are not worthy of compensation at a rate

for attorney time. See, Missouri v. Jenkins, 491 U.S. 274, 285-89

(1989). The Court finds that twenty-three hours of attorney time

for the attorney tasks described hereinabove are reasonable.

As to the supplemental brief, the Court requested briefing

on the legal sufficiency of the claims pleaded and authority

regarding entitlement to the relief requested. In response,

Plaintiff filed authority regarding the Court’s discretion to

enter default. The Court did not solicit the submission of legal

points and authorities on these general matters. As to the

matters regarding which briefing was directed, and specifically

the legal sufficiency of the multiple claims that Plaintiff had

pleaded, Plaintiff cited only one case, and that was cited only

in reference to an assertion that California claims of unfair

competition were substantially congruent to claims made under the

Lanham Act. There was no citation of authority regarding, or

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setting forth of, the elements of the California claims or the

terms of the California statutes. There was no specific reference

to the common law trademark infringement law at all. With respect

to the federal claims pled, Plaintiff merely cited to the

statutes in question, parroting the statutory language. With

respect to the law regarding the remedies Plaintiff sought,

Plaintiff cited no cases regarding entitlement to or scope of

injunctive relief, but rather merely cited to the federal

statute. Plaintiff did not brief the question of enforcement of

an injunction issued without notice to the defendant. Seven cases

were cited on various subpoints concerning statutory damages,

most of which were from outside this circuit. No discernible,

rational argument was set forth with respect to how the Court

should determine damages in the instant case aside from

Plaintiff’s belief as to what was appropriate, which in turn was

based on evidence which Plaintiff did not even attempt adequately

to identify or authenticate (evidence that would have been

associated with the internet site address briefly referred to in

the supplemental brief, but not in any evidentiary document). 

The Court notes that it has already included in the sum of

reasonable hours 9.10 hours for previous work on the default,

including obtaining of injunctive relief, research regarding

entry of default and default judgment by the Court, and

preparation of papers to obtain default and default judgment--all

separate and apart from any preparation of the motion for

attorney’s fees. The Court finds that a claim of eight additional

hours for the work represented by the supplemental brief and

declaration is patently excessive and unreasonable. At most four

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hours more hours should be granted, and this is generous. Thus,

eleven additional hours for the supplemental brief, declaration,

and estimated travel time and time for appearance at the hearing

is reasonable. 

The Court finds that a reasonable number of hours for all

the tasks billed is 34 total hours. 

As to the reasonable hourly rate, a district court should be

guided by the rate prevailing in the community for similar work

performed by attorneys of comparable skill, experience, and

reputation. Blum v. Stenson, 465 U.S. 886, 895 n. 11 (1984).

Either current or historical rates prevailing rates may be used;

use of current rates or an appropriate adjustment for delay in

payment may be reasonable. Missouri v. Jenkins, 491 U.S. 274,

283-84 (1989).

Here, Plaintiff does not total the various hours performed

by each attorney in the case; Plaintiff only submits a billing

sheet that is chronologically organized. Counsel in the case, who

practice in a law firm in San Francisco, have varying levels of

experience and various hourly rates: $500 per hour (Bailey-Wells,

managing partner, fifteen years’ experience), $425 (Cohen,

partner, twelve years’ experience), $425 (Wheble, partner,

fifteen years’ experience), and $275 (Callahan, associate, three

years’ experience). The Court will not pick through the

chronological billing sheet unaided by counsel; however, it

appears that slightly over half of the hours were completed by

the associate, and less than half by more experienced counsel. It

appears that an average of $360 per hour is a reasonable

prevailing rate in the community for the services rendered in

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this case in light of the nature of the case, the skill and

experience of counsel, and the ability reflected in the quality

of the work.

Accordingly, the Court finds that counsel should be awarded

$12,240.00 in attorney’s fees. 

E. Costs

Plaintiff seeks $1,212.70 in costs, consisting of various

items, and cites no authority other than the statute in support

of this request.

Title 15 U.S.C. § 1117(a) provides that when a violation of

any right of a registrant of a mark or a violation under §

1125(a) has been established in a civil action, the plaintiff

shall be entitled, subject to sections 1111 (requiring display of

a registration symbol, or actual notice of registration, in order

to recover damages) and 1114 (limitations on relief in situations

involving printers or advertisers), and subject to the principles

of equity, to recover the costs of the action. The term “costs of

the action,” which appears in numerous federal statutes, has been

interpreted to authorize the costs recoverable under §§ 1920,

1821, and other such provisions. Agredano v. Mutual of Omaha

Companies, 75 F.3d 541, 544 (9th Cir. 1996) (where the term was

unadorned by any modifier such as “reasonable” or necessary”).

However, it has been held that the Lanham Act authorizes awards

of investigative costs as an adjunct to a reasonable attorney’s

fee (a term used both in § 1117(b) and § 1117(a)). Levi Strauss &

Co. v. Shilon, 121 F.3d 1309, 1314 (9th Cir. 1997). Further,

recovery of expenses for things such as travel, telephone,

mailing, duplication, and the cost of computerized legal research

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services has been permitted as reasonable expenses incidental to

an award of attorney’s fees. Ford Motor Co. v. Kuan Tong

Industrial Co., Ltd., 697 F.Supp. 1108, 1110-11 (N.D.Cal. 1987).

Plaintiff’s billing sheet reveals costs of filing fees, and

expenses of telephone calls, investigation, postage, copying,

data base and legal research fees, and courier fees. Under feeshifting statutes, out-of-pocket expenses appropriate to the

specific litigation and normally billed to a paying client will

be reimbursed even though they may not be taxed as costs. Harris

v. Marhoefer, 24 F.3d 16, 19-20 (9th Cir. 1994). However, the

Court disallows a claim for $149.18 in word processing fees

because it is not clear what such expenses represent or that they

are anything other than normal overhead expense associated with

doing business and customarily absorbed as the cost of

maintaining an office.

Accordingly, the Court recommends an allowance of 

$1,063.52 in costs and expenses. 

RECOMMENDATION

Accordingly, it IS RECOMMENDED THAT

1) Plaintiff’s application for default judgment BE GRANTED

in part on Plaintiff’s first, second, and fourth causes of

action; and

2) The Clerk BE DIRECTED TO ENTER DEFAULT JUDGMENT for

Plaintiff MortgageTree Lending, Inc., and against Defendant

Mortgage Tree Funding, Inc., as follows:

a) Pursuant to 15 U.S.C. § 1117(c)(1), statutory

damages in the amount of $50,000.00; and

b) Pursuant to 15 U.S.C. § 1117(a), attorney’s fees in

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the amount of $12,240.00; and

c) Pursuant to 15 U.S.C. § 1117(a), $1,063.52 in costs

and expenses.

This report and recommendation is submitted to the United

States District Court Judge assigned to the case, pursuant to the

provisions of 28 U.S.C. § 636 (b)(1)(B) and Rule 72-304 of the

Local Rules of Practice for the United States District Court,

Eastern District of California. Within thirty (30) days after

being served with a copy, any party may file written objections

with the Court and serve a copy on all parties. Such a document

should be captioned “Objections to Magistrate Judge’s Findings

and Recommendations.” Replies to the objections shall be served

and filed within ten (10) court days (plus three days if served

by mail) after service of the objections. The Court will then

review the Magistrate Judge’s ruling pursuant to 28 U.S.C. § 636

(b)(1)(C). 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).

IT IS SO ORDERED.

Dated: November 21, 2005 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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