United States District Court, D. Nevada
SEIKO EPSON CORP. et al., Plaintiffs,
INKSYSTEM LLC et al., Defendants.
C. JONES UNITED STATES DISTRICT JUDGE.
case arises out of alleged counterfeiting and other
unauthorized use of trademarks in relation to computer
printer ink cartridges.
FACTS AND PROCEDURAL HISTORY
Seiko Epson Corp. ("Seiko") is a Japanese
corporation that owns eight registered trademarks at issue in
the present case, U.S. Trademark Nos. 1, 134, 004
("EPSON"); 2, 144, 386 ("EPSON"); 2, 949,
374 ("EPSON"); 3, 092, 025 ("EPSON"); 3,
520, 274 ("EPSON"); 3, 448, 351 ("EPSON EXCEED
YOUR VISION"); 3, 875, 333 ("Better Products for a
Better Future"); and 2, 644, 235 ("DURABRITE")
(collectively, "the Marks"). Plaintiff Epson
America, Inc. is a California corporation and Seiko's
sole licensee for ink cartridges using the Marks. Defendants
are Nevada and California residents and business entities.
allege that Defendants import, modify, repackage, advertise,
distribute, and/or sell at least three types of infringing
cartridge: (1) counterfeit ink cartridges manufactured abroad
bearing one or more of the Marks; (2) genuine Epson
cartridges sold abroad with printers that are not intended
for resale; and (3) genuine Epson cartridges sold abroad that
are expired or nearly expired. As to the latter two
categories of cartridge, Defendants remove them from their
original packaging, reprogram or otherwise modify them to
work in American printers (they otherwise would not), and
repackage them with counterfeit Epson labels. In the process,
Defendants degrade the quality and lifespan of the ink,
remove instructions for use with the cartridges and other
important consumer information such as the expiration date,
and add their own false advanced expiration dates.
Defendants' activities infringe the Marks, deceive
consumers, and damage Plaintiffs' goodwill.
sued Defendants in this Court for trademark counterfeiting
and infringement under 15 U.S.C. § 1114 et seq.
and unfair competition and false advertising under §
1125 et seq. The Court granted a temporary
restraining order ("TRO") and after a hearing
granted a preliminary injunction ("the Sales
Injunction"), enjoining certain offending activity and
ordering the seizure and impoundment of the accused goods.
Discovery has been problematic. Plaintiffs asked the
Magistrate Judge to issue a report and recommendation for
terminating sanctions against certain Defendants for their
continued intransigence. InkSystem, LLC and Lucky Print, LLC
(collectively, "Debtors") filed for Chapter 11
bankruptcy protection. Plaintiffs asked, for another TRO
seizing Defendants' assets (minus the assets of Debtors).
The Court granted the motion and later granted a preliminary
injunction ("the Asset Freeze") when Defendants
failed to appear at the hearing. In the meantime, the
Magistrate Judge recommended that the sanction of default be
entered against Defendants Art LLC, AF LLC, Inkredible LLC,
Andriy Kravchuk, Artem Koshkalda, Igor Bielov, and Vitalii
Maliuk. The Court adopted that recommendation. The Clerk had
previously entered the defaults of Defendants Veles LLC,
Alado LLC, Karine LLC, Karine Vardanian, Vladimir
Slobodianiuk, Kristina Antonova, and Roman Taryanik for
failure to answer or defend. The Clerk has entered notice of
its intent to dismiss without prejudice as against Defendants
KBF LLC and Vitalii Galukh under Rule 4(m) unless Plaintiffs
file proof of service or show good cause by September 29,
2017, and Plaintiffs have asked the Clerk to enter default
against Debtors now that the automatic stay has been lifted.
summary, the defaults of all Defendants have been entered
except those two Defendants subject to dismissal for failure
to serve them and those two Defendants previously protected
by the automatic stay. Several motions relating to the Asset
Freeze are pending before the Court.
Bielov, Koshkalda, Kravchuk, and Maliuk have asked the Court
to vacate the Asset Freeze (ECF No. 159) or to release the
funds for use in hiring attorneys and continuing their
businesses. Movants' only potentially legitimate
grievance is that they've been having trouble convincing
tellers at their banks to disburse to them the $3000 per
month per Defendant permitted for the individual
Defendants' living expenses. But Movants argue that the
hardship is on the employees of the LLC Defendants, because
the LLCs can't pay them. In other words, Movants
don't seem to claim that any individual Defendant has
been unable to withdraw $3000 per month from his or her
personal bank account, but only that the LLC Defendants'
accounts have been so restricted.
Plaintiffs respond that several accounts already known to
them had been closed before the TRO was served on the
relevant banks, leading them to think the accounts were
cleared out and that more assets are being hidden. For
example, Koshkalda has closed the sale of one or more
properties despite the Asset Freeze (and has continued to
list others for sale), Movants in fact appear to admit one or
more sales despite the TRO in the present motion (and
others), explaining that they refused to stop sales despite
the Asset Freeze in order to protect third-party buyers (or
to protect themselves from lawsuits by third-party buyers)
and noting, e.g., "The reason some properties were sold
was because that was the legitimate real estate investment
process. Once the properties reached a certain profit margin
they were to be sold." In other words, Movants make no
apologies for their violations of the Asset Freeze but simply
explain their reasons, Nor do Movants explain their failure
to appear for the Asset Freeze hearing. In their responses,
Plaintiffs have amply documented Defendants' consistent
intransigence in discovery and contempt of the court's
orders by Defendants, as well as the flight risk they pose
should the assets be unfrozen. The Court will not lift or
modify the Asset Freeze at this time.
Plaintiffs have asked the Court to order Defendants Koshkolda
and Westbrook to show cause why they should not be held in
contempt due to their sale of one or more properties in
violation of the Asset Freeze. The Court will order these
Defendants to appear and show cause, It will not order the
remedies Plaintiffs have suggested in their motion unless and
until the Court finds Defendants in contempt.
Koshkalda has asked the Court to return certain ink
cartridges that were seized that he alleges were not within
the scope of the Sales Injunction, i.e., cartridges sold
"as is" without any modifications or unauthorized
labeling. Plaintiffs respond that the seizure was within the
scope of the Sales Injunction and was in fact later confirmed
by the Court as proper, The Court will hear this motion at
the show-cause hearing.
HEREBY ORDERED that the Motions to Vacate Preliminary
Injunction (ECF Nos. 154, 173), the Motion to Stay
Proceedings for Defendants to Obtain Counsel (ECF No. 158),
and the Motions ...