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SATA GmbH & Co. KG v. USA Italco International Ltd.

United States District Court, D. Nevada

September 20, 2019

SATA GmbH & Co. KG, a German corporation, Plaintiff,
v.
USA ITALCO INTERNATIONAL LIMITED, a New York Company; Zhejiang Auarita Pneumatic Tools L.L.C. d.b.a. Auarita, a foreign entity Defendants.

          DICKINSON WRIGHT PLLC, Steven A. Caloiaro, Attorney for Plaintiff SATA GmbH & Co. KG

          ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT, PERMANENT INJUNCTION, AND ATTORNEY FEES

         Plaintiff SATA GmbH & Co. KG (“SATA”) moves for default judgment, permanent injunction, and attorney's fees against Defendants USA ITALCO INTERNATIONAL LIMITED, a New York Company (“ITALCO”); and Zhejiang Auarita Pneumatic Tools L.L.C. d.b.a. Auarita, (“AUARITA”) a foreign entity, (collectively “Defendants”) in this action for trademark counterfeiting, trademark infringement, unfair competition, and patent infringement. (ECF No. 21) Having weighed the factors outlined by the Ninth Circuit in Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986), the Court grants SATA's motion for default judgment, awards statutory damages, issues a permanent injunction, and awards attorney's fees.

         FINDINGS OF FACT

         SATA is a century-old German Corporation that manufactures paint spray guns and related equipment worldwide. (ECF No. 21 at 3.) SATA's United States-directed business produces over $15 million annually with more than 100, 000 paint spray guns and reservoirs sold. (Id. at 4.) SATA owns ten (10) trademark registrations that it claims Defendants infringed: (1) a design mark for a green band of color extended around the circumference of a paint spray gun air cap ring (Registration No. 2, 770, 801); (2) a design mark for a band of any color extended around the circumference of a paint spray gun air cap ring (Registration No. 2, 793, 583); (3) a design mark for a band of red color extending around the circumference of a paint reservoir for a paint spray gun (Registration No. 3, 072, 417); (4) a design mark for a band of blue color extending around the circumference of a paint reservoir for a paint spray gun (Registration No. 2, 774, 593); (5) a design mark for a green grip base plate (Registration No. 3, 153, 260); (6) “1000” (Registration No. 4, 920, 510); (7) “2000” (Registration No. 4, 920, 511); (8) “3000” (Registration No. 4, 920, 512); (9) “4000” (Registration No. 4, 666, 773); and (10) “5000” (Registration No. 4, 731, 525) (collectively “SATA Marks”) (Id. at 4-5.) SATA uses the SATA Marks to advertise and promote its products throughout the United States and the world. (Id. at 4.)

         SATA also has eight (8) design patents that it claims Defendants infringed: (1) an ornamental design for a spray gun head ring (Patent No. U.S. D459, 432); and (2) an ornamental design for a paint spray gun head ring (Patent No. U.S. D459, 433); (3) an ornamental design for a spray gun head ring (Patent No. U.S. D770, 593); (4) an ornamental design for a spray gun (Patent No. U.S. D548, 816); (5) an ornamental design for a paint spray gun rear portion (Patent No. U.S. D758, 537); (6) an ornamental design for a spray gun (Patent No. U.S. D644, 716); (7) an ornamental design for an identification tag (Patent No. U.S. D655, 347); and (8) an ornamental design for a paint spray gun (Patent No. U.S. D552, 715) (collectively “SATA Patents”) (Id. at 5-6.)

         In or around July of 2017, SATA discovered that an influx of counterfeit SATA guns were being distributed on the west coast branded under the name ITALCO (“Counterfeit Paint Spray Guns”). (Id. at 6). Upon investigation, SATA uncovered two distributors, one based in Phoenix, Arizona, and one based in Sacramento, California. (Id.) These distributors were distributing, advertising, offering for sale, and selling several ITALCO paint spray gun models. Id. On Friday, June 30, 2017, SATA's investigator purchased an ITALCO 5000 for $350. Id. The ITALCO model infringes on approximately seven (7) SATA Marks and SATA Patents. Id. On August 25, 2017, SATA's investigator was able to purchase an ITALCO H-4000 Sprayer and ITALCO H-5000 sprayer for a combined amount of $756. Id. Those two models infringe a number of SATA's intellectual property.

         On October 31, 2017, SATA representatives attended the SEMA trade show in Las Vegas, Nevada, and became aware of Defendants' presence because several vendors and consumers were talking about a knock-off SATA gun that was half the cost that had recently become available. (Id. at 7.) SATA then became aware that a local Las Vegas auto paint company was selling Defendants' Counterfeit Paint Spray Guns. (Id.) On Tuesday, November 1, 2017, SATA representatives visited the auto paint company's store and, when they inquired about the availability of the Counterfeit Paint Spray Guns, they were informed that the store had recently sold two pallets, but they could receive a new shipment by request within two weeks. (Id.) The store employees referred to the Counterfeit Paint Spray Guns as “knock off SATAs.” (Id.). The store also provided a representative sample of an ITALCO H-5000. (Id.) On December 21, 2017, SATA filed an action against the store for the Counterfeit Paint Spray Guns. See No. 2:17-cv-03101. The case against the store was subsequently settled.

         During the litigation, SATA learned that Defendants were actively soliciting customers in the United States. (ECF No. 1, Exs. D, E.) An individual named Betty, who listed herself as a “Sales Manager, ” sent several versions of the paint spray guns on behalf of the parent company AUARITA. (Id.) The Las Vegas auto paint company later purchased Counterfeit Paint Spray Guns directly from AUARITA, and received the shipment in Las Vegas, Nevada. (Id.)

         SATA also discovered that Defendants operate websites containing advertisements for the Counterfeit Spray Guns. (ECF No. 21 at 7.) The websites also include the Counterfeit Paint Spray Guns. (Id.) SATA then filed this suit, asserting trademark counterfeiting, trademark infringement, unfair competition, and patent infringement. (ECF No. 1.)

         On August 28, 2018, ITALCO was served with a copy of the Complaint by personal service. (ECF No. 11.) ITALCO failed to answer or otherwise respond to SATA's Complaint. See generally, Docket. Accordingly, on September 25, 2018, SATA filed a request for entry of default. (ECF No. 13.) The Clerk of the Court entered Default against ITALCO on September 26, 2018. (ECF No. 14.)

         On September 17, 2018, this Court entered its notice regarding Intention to Dismiss Pursuant to Rule 4(m) of the Federal Rules of Civil Procedure. (ECF No. 10.) In response, SATA filed a Motion for Leave to Obtain Service of Process through Alternative Means or, in the Alternative, Motion to Extend Time for Service. (ECF No. 12) In its Motion, SATA moved this Court under Fed.R.Civ.P. 4 to allow SATA to serve the Complaint and Summons on AUARITA via electronic mail. A hearing on SATA's motion was held on October 23, 2018. On October 24, 2018, this Court entered its order granting SATA's motion and allowing SATA to serve AUARITA via email “because: email service is not prohibited by international agreement with China; service under the [Hague Convention] would be expensive and result in an unnecessary delay under these circumstances; service by email is reasonably calculated to apprise Auarita of the action and afford Auarita an opportunity to present its objections, especially given that SATA has been in communication with Auarita via email and they are already aware of the lawsuit.” (ECF No. 16.)

         On October 26, 2018, AUARITA was served with a copy of the Complaint via email. (ECF No. 18.) AUARITA failed to answer or otherwise respond to SATA's Complaint. See generally, Docket. SATA thereafter filed a request for entry of default on November 29, 2018. (ECF No. 19.) The Clerk of the Court entered Default against AUARITA on November 30, 2018. (ECF No. 20.)

         CONCLUSIONS OF LAW

         A. Default Judgment Standard

         Federal Rule of Civil Procedure 55(b)(2) permits a plaintiff to obtain a default judgment after the clerk enters default based on a defendant's failure to defend. After entry of default, the complaint's factual allegations are taken as true except those relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam); Fed.R.Civ.P. 8(b)(6) (“An allegation-other than one relating to the amount of damages-is admitted if a responsive pleading is required and the allegation is not denied.”). “[N]ecessary facts not contained in the pleadings, and claims [that] are legally insufficient, are not established by default.” Cripps v. Life Ins. Co., 980 F.2d 1261, 1267 (9th Cir. 1992). The court may require a plaintiff to provide additional proof of facts or damages in order to ensure that the requested relief is appropriate. See Fed. R. Civ. P. 55(b)(2). Whether to grant a motion for default judgment lies within the district court's discretion, Eitel, 782 F.2d at 1471, which is guided by the seven factors outlined by the Ninth Circuit in Eitel v. McCool:

(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.

Id. at 1471-72.

         B. Analyzing the Eitel Factors

         1. Possibility of ...


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