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Seiko Epson Corp. v. Inksystem LLC

United States District Court, D. Nevada

January 16, 2018

SEIKO EPSON CORP. et al., Plaintiffs,
v.
INKSYSTEM LLC et al., Defendants.

          ORDER

          ROBERT C. JONES, UNITED STATES DISTRICT JUDGE.

         This case arises out of alleged counterfeiting and other unauthorized use of trademarks in relation to computer printer ink cartridges.

         I. FACTS AND PROCEDURAL HISTORY

         Plaintiff 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.

         Plaintiffs 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.

         Plaintiffs 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, 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 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 since entered the defaults of InkSystem LLC, KBF LLC, and Lucky Print LLC.

         The Court has denied several motions to reconsider the preliminary injunction and to release funds. When they failed to appear to show cause why they should be held in contempt for violations of the preliminary injunction, the Court issued an order of contempt as to Defendants Artem Koshkalda and Vladimair Westbrook. Bench warrants for their arrest have been issued.

         Several motions are pending before the Court. Several defendants[1] have asked the Court to lift the preliminary injunction or to increase the bond. (ECF Nos. 231, 256, 257). Koshkalda has asked the Court to issue an order directing his bank to comply with the preliminary injunction and permit him to withdraw $3, 000 per month, as permitted by the preliminary injunction. (ECF No. 236). Maliuk, on behalf of Inkredible LLC, has asked the Court permit Inkredible LLC to withdraw $3, 000 per month. (ECF No. 259). Plaintiff has moved for default judgment against Defendants.

         II. DISCUSSION

         Inkredible, LLC's motion (for a “writ of execution”) asking the Court permit Inkredible LLC to withdraw $3, 000 per month is stricken. Inkredible, LLC may only appear through licensed counsel, not through a corporate officer. See Rowland v. Cal. Men's Colony, 506 U.S. 194, 201-03 (1993). Even if the motion had been made through counsel, the preliminary injunction permitted $3, 000 monthly withdrawals only from the personal bank accounts of individual Defendants, not from the accounts of business entity Defendants.

         The Court has always been amenable to amending or supplementing the preliminary injunction to make clear that withdrawals of $3, 000 per month from personal accounts of individual Defendants is permitted, an argument again made by Koshkalda in another motion, but Koshkalda failed to appear to argue his previous motion to this effect (and to show cause why he should not be held in contempt for violating the preliminary injunction) when given the chance. The Court therefore denies his current motion, as well.

         The motions to dissolve the preliminary injunction or increase the bond are stricken as to AF LLC, Inkredible LLC, Inksystem LLC, Lucky Print LLC, and ART LLC. See Id. at 201-03. As to Koshkalda, Kravchuk, Bielov, and Maliuk, the motions are denied. On November 16, 2017, the Court of Appeals denied Defendants' petition for a writ of mandamus challenging the preliminary injunction. The Court has seen nothing indicating that dissolution of the preliminary injunction is appropriate. Nor will the Court entertain arguments to reconsider a preliminary injunction from parties who failed to appear to argue against default judgment being entered against them on the claim for a permanent injunction.

         The final motion is Plaintiff's motion for default judgment. Obtaining default judgment is a two-step process under Rule 55. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). First, the clerk must enter the party's default. Fed.R.Civ.P. 55(a). It appears that all Defendants here have had their defaults entered either for failure to defend or as a sanction. Second, the party seeking default judgment must then petition the court for a default judgment. Id. at 55(b)(2). “A grant or denial of a motion for the entry of default judgment is within the discretion of the court.” Lau Ah Yew v. Dulles, 236 F.2d 415, 416 (9th Cir. 1956). Default judgments are generally disfavored, so courts should attempt to resolve motions for default ...


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