Opinion
3:21-cv-01584-SB
11-15-2022
COOPER ZIETZ ENGINEERS, INC., dba AKANA, an Oregon corporation, Plaintiff, v. THE AKANA GROUP, INC., a Texas corporation, Defendant.
FINDINGS AND RECOMMENDATION
HON. STACIE F. BECKERMAN UNITED STATES MAGISTRATE JUDGE
Cooper Zietz Engineers, Inc., which does business as “Akana” (“Plaintiff”), filed this action against The Akana Group, Inc. (“Defendant”), alleging claims under the Lanham Act for trademark infringement and unfair competition, see 15 U.S.C. §§ 1114, 1125, and a claim for common law trademark infringement. After Defendant failed to appear or otherwise defend, the clerk entered default against Defendant. Plaintiff now moves for a default judgment. See FED. R. CIV. P. 55(B).
Plaintiff's second claim is styled as a claim for unfair competition and false designation of origin under § 1125(a). (Compl. at 5, ECF No. 1.) Plaintiff's motions for entry of default and default judgment refer to this claim as an unfair competition claim. (See Pl.'s Req. Entry Default at 1-3, ECF No. 9; Pl.'s Mot. Default J. (“Pl.'s Mot.”) at 1-7, ECF No. 13.) The Court does the same here. See generally Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 29 (2003) (explaining that § 1125(a) “appl[ies] only to certain unfair trade practices,” such as “false designation of origin,” but “does not have boundless application as a remedy for unfair trade practices”) (simplified); 5 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 27:7 (5th ed. 2022) (same); see also Inhale, Inc. v. Inhale, LLC, No. 6:19-cv-01780-AA, 2020 WL 6121942, at *4 (D. Or. Oct. 16, 2020) (observing that the “essential elements” for trademark infringement, false designation of origin, and unfair competition “are identical”).
The Court has original jurisdiction over Plaintiff's federal claims pursuant to 28 U.S.C. §§ 1331 and 1338 and supplemental jurisdiction over Plaintiff's state law claim pursuant to 28 U.S.C. § 1367. For the reasons explained below, the Court recommends that the district judge grant Plaintiff's motion.
Plaintiff submitted a proposed judgment, which included findings of fact and conclusions of law, for the undersigned to consider. (ECF No. 13-3 at 1-5.) Defendant's consent, however, is a prerequisite to the undersigned's jurisdiction to enter judgment. See Austin v. Lyft,Inc., No. 21-09345, 2022 WL 243245, at *2 (N.D. Cal. Jan. 24, 2022) (noting that “consent of all named plaintiffs and defendants in the complaint, including unserved defendants, is ‘a prerequisite to a magistrate judge's jurisdiction to enter dispositive decisions,” and courts in this circuit have “recognize[d] a motion for default judgment as a dispositive motion”) (simplified); United States v. Browning, 398 Fed.Appx. 908, 908-09 (4th Cir. 2010) (remanding for corrective action and explaining that absent full consent, the magistrate judge lacked the authority to enter a final dispositive order on a motion for default judgment).
The facts below are drawn from the well-pleaded allegations in the complaint, which the Court accepts as true. See TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (“The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.”) (citation omitted). Plaintiff also submitted declarations in support of its motion for default judgment (ECF Nos. 131, 13-2). The Court cites these declarations to the extent they mirror, as opposed to supplement, the allegations in Plaintiff's complaint. See generally Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978) (explaining that “facts which are not established by the pleadings of the prevailing party, or claims which are not well-pleaded, are not binding and cannot support [a default] judgment”); Love v. Mustafa, No. 20-cv-02071, 2021 WL 7286006, at *1 (N.D. Cal. Feb. 4, 2021) (explaining that a plaintiff “cannot use [its] motion for default judgment to supplement [its] complaint” (citing Danning, 572 F.2d at 1388)), report and recommendation adopted, 2021 WL 7287626, at *1 (N.D. Cal. Feb. 8, 2021).
Plaintiff is an Oregon corporation in “the business of engineering, design, health and safety, and construction management services for both private and government contracts.” (Compl. ¶¶ 4, 11, 14; Decl. Timothy Oliver Supp. Mot. Entry Default J. (“Oliver Decl.”) ¶ 2, ECF No. 13-1.) Plaintiff, which has offices in Oregon, Washington, Illinois, and Nevada and performed services across the United States, conducts business under the registered and assumed name “Akana” and has a federally registered trademark for “AKANA.” (Compl. ¶¶ 4, 10-11, 1415; Oliver Decl. ¶¶ 2-3.)
Plaintiff “began using the trademark AKANA in commerce as an assumed business name on October 1, 2014.” (Compl. ¶ 10; Oliver Decl. ¶ 3.) Plaintiff applied to the United States Patent and Trademark Office (“PTO”) to register the mark AKANA on October 31, 2014, and received a federal trademark for AKANA on September 15, 2015. (Compl. ¶ 11; id. Ex. A at 1-2; Oliver Decl. ¶ 3.)
Defendant, a Texas corporation, is also in the “business of providing construction equipment and construction services for both private and government contracts.” (Compl. ¶¶ 5-6, 16; Oliver Decl. ¶ 4; Decl. Scott Schnuck Supp. Pl.'s Mot. Entry Default J. (“Schnuck Decl.”) ¶ 2, ECF No. 13-2.) Defendant uses the tradename “The Akana Group” in connection with its business and services, which has resulted in “instances of actual confusion” between Plaintiff's and Defendant's business. (Compl. ¶¶ 1, 18.) In fact, the federal government once “inadvertently awarded” a contract to Defendant when Plaintiff was the “intended recipient.” (Id. ¶ 18; Oliver Decl. ¶ 5.)
Although Plaintiff sent a cease and desist letter to Defendant on February 19, 2020, Defendant failed to cease its use of AKANA. (Compl. ¶¶ 1, 17, 19.) Plaintiff reiterated its demand that Defendant stop all uses of AKANA in a January 15, 2021 letter, but Defendant failed to do so and “continue[s] to use ‘AKANA' in association with its business.” (Id. ¶¶ 19-20; Oliver Decl. ¶ 8.)
Based on the foregoing events, Plaintiff filed the present action against Defendant on October 29, 2021, alleging claims under the Lanham Act for trademark infringement and unfair competition, and a claim for common law trademark infringement. (Id. at 4-7.) After Defendant failed to appear or otherwise defend, the clerk entered default against Defendant on May 19, 2022. (ECF No. 12.) Plaintiff's motion for default judgment followed on August 26, 2022. (ECF No. 13.)
Plaintiff served Defendant's registered agent with a copy of the summons and complaint on December 21, 2021. (ECF No. 9-1 at 1-2.) The Court therefore concludes that service was adequate. See Deckers Outdoor Corp. v. Pac. Harbors, LLC, No. 19-01587-YY, 2020 WL 5269437, at *1-2 (D. Or. Aug. 10, 2020) (explaining that service on a corporate defendant's registered agent was adequate), findings and recommendation adopted, 2020 WL 5260379, at *1 (D. Or. Sept. 3, 2020). The Court also concludes that it has personal jurisdiction over Defendant, which received infringement-related cease and desist letters from an Oregon company but continued its infringement. See Int'l Aero Prods., LLC v. Aero Advanced Paint Tech., Inc., 325 F.Supp.3d 1078, 1086 (C.D. Cal. Aug. 2018) (“The Ninth Circuit has . . . found that specific jurisdiction exists when a plaintiff files suit in its home state against an out-of-state defendant and alleges that defendant intentionally infringed its intellectual property rights knowing the plaintiff was located in the forum state.”) (simplified).
DISCUSSION
I. STANDARD OF REVIEW
“The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.” Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (citing Pope v. United States, 323 U.S. 1, 12 (1944)). “However, a defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law.” DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (simplified).
Unlike its complaint, Plaintiff's motion for default judgment does not include a request for damages. (Compare Compl. at 6-7, with Pl.'s Mot. Default J. Attach. 3 at 4-5, ECF No. 133.) As a result, the Court does not address the issue of damages. See ECBlend, LLC v. Mad Alchemist Elixirs & Potions, LLC, No. 1:17-cv-01273-MC, 2017 WL 5999886, at *1 (D. Or. Dec. 1, 2017) (“In its Motion for Default Judgment, ECBlend seeks a permanent injunction and its costs, but drops its request for damages. The Court will not, therefore, examine the issue of damages.”).
Although “default judgments are ordinarily disfavored[, and] [c]ases should be decided upon their merits whenever reasonably possible,” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 (9th Cir. 2016) (quoting Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986)), a court has the discretion to enter a default judgment. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (citations omitted). A court's decision should be guided by these seven factors (the “Eitel” factors):
(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.NewGen, 840 F.3d at 616 (quoting Eitel, 782 F.2d at 1471-72).
II. ANALYSIS
The Court accepts as true the well-pleaded factual allegations in Plaintiff's complaint because the clerk has entered Defendant's default. Accepting those allegations as true, the Court concludes that the Eitel factors, on balance, support granting Plaintiff's motion for default judgment.
A. Possibility of Prejudice to Plaintiff
The first factor “considers whether a plaintiff would suffer prejudice if default judgment is not entered, and any potential prejudice to the plaintiff favors granting a default judgment.” Progressive Universal Ins. Co. v. Johnson, No. 21-cv-00263-JR, 2021 WL 4163987, at *2 (D. Or. Aug. 13, 2021) (simplified), findings and recommendation adopted, 2021 WL 4165370, at *1 (D. Or. Sept. 11, 2011). The first factor favors granting Plaintiff's motion because Defendant has failed to appear or participate in this action and thus Plaintiff has no other means to prevent Defendant from causing it further harm. See ECBlend, 2017 WL 5999886, at *1-2 (addressing an out-of-state defendant's post-cease and desist letter use of an Oregon's company's trademark, and explaining that the first factor favored the plaintiff, who would “generally be prejudiced if a court decline[d] to grant default judgment where, as here, it lack[ed] other recourse to recover damages for its injury or means to prevent [the defendant] from causing it further harm”).
B. Merits of Plaintiff's Claims and Sufficiency of Plaintiff's Complaint
Plaintiff alleges claims under the Lanham Act for trademark infringement and unfair competition, see 15 U.S.C. §§ 1114, 1125, and a claim for common law trademark infringement. To such establish such claims, a plaintiff must demonstrate that “(1) [it has] a protectible ownership interest in the mark; and (2) [there is] a likelihood of consumer confusion in the defendant's use of its allegedly infringing mark.” Lodestar Anstalt v. Bacardi & Co. Ltd., 31 F.4th 1228, 1244-45 (9th Cir. 2022) (simplified) (explaining that when an “unfair competition claim is based on alleged infringement of a registered mark, the legal analysis under the two sections is essentially identical”); Edge Wireless, LLC v. U.S. Cellular Corp., No. 03-cv-01362-AA, 2004 WL 1661992, at *8 (D. Or. July 23, 2004) (citing the same two elements under Oregon law).
As to the first element of its trademark and unfair competition claims, the relevant factors favor default judgment because Plaintiff has shown that it has a protectible ownership interest in the “Akana” mark and attached the PTO registration to the complaint. (See Compl. ¶¶ 10-12; id. Ex. A at 1-2; Oliver Decl. ¶ 3); see Inhale, 2020 WL 6121942, at *5 (noting that “registration . . . with the [PTO] constitutes prima facie evidence of the validity of the registered mark, ownership of the mark and of the registrant's exclusive right to use the registered mark”) (simplified).
As to the second element, “[t]o determine whether a likelihood of consumer confusion exists, [the Ninth Circuit] relies on the eight-factor Sleekcraft test[.]” JL Beverage Co., LLC v. Jim Beam Brands Co., 828 F.3d 1098, 1106 (9th Cir. 2016) (citing AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979), abrogated in part on other grounds by Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792, 810 n.19 (9th Cir. 2003)). The eight Sleekcraft factors are:
(1) the strength of the mark; (2) proximity or relatedness of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchaser; (7) the defendant's intent in selecting the mark; and (8) the likelihood of expansion of the product lines.Id. (quoting Sleekcraft, 599 F.2d at 348-49).
Based on the limited record before the Court, the eight Sleekcraft factors appear to support the conclusion that Plaintiff's trademark and unfair competition claims are meritorious and sufficiently pled. Plaintiff is in “the business of engineering, design, health and safety, and construction management services for both private and government contracts.” (Compl. ¶¶ 4, 11, 14; Oliver Decl. ¶ 2.) Defendant is also in the “business of providing construction equipment and construction services for both private and government contracts.” (Compl. ¶¶ 5-6, 16; Oliver Decl. ¶ 4; Schnuck Decl. ¶ 2.) Further, Defendant uses the “Akana” mark in connection with advertising, promoting, and selling services in competition with Plaintiff and without its consent. (Compl. ¶¶ 10-35.) Additionally, Defendant's conduct has resulted in, among other things, the federal government improperly awarding a contract to Defendant when Plaintiff was the intended recipient. (Compl. ¶¶ 18, 30; Oliver Decl. ¶ 5.)
For these reasons, the second and third Eitel factors favor default judgment. See ECBlend, 2017 WL 5999886, at *3 (“Upon review [of the Sleekcraft factors], the Complaint appears both sufficiently pled and meritorious and so the Court concludes that these factors favor default judgment.”).
C. Sum of Money at Stake
As discussed above, Plaintiff does not seek an award of damages in its default judgment motion. Accordingly, this factor favors entry of default judgment. See Id. (reaching the same conclusion).
D. Possibility of a Dispute as to Material Facts
Given Defendant's failure to appear or defend against Plaintiff's suit or cease its use of Plaintiff's trademark after Plaintiff sent Defendant cease and desist letters, the fifth Eitel factor favors entry of default judgment. See Id. (“The possibility of a dispute as to material facts is remote because [the defendant] has not defended itself herein and there is no indication that it intends to do so. The Court therefore concludes that this factor favors entry of default judgment.”).
E. Excusable Neglect and Policy Favoring Decisions on the Merits
The sixth and seventh factors also favor granting Plaintiff's motion for default judgment. The sixth factor considers whether Defendant's default was due to excusable neglect, and here the record demonstrates that Defendant's registered agent accepted service of Plaintiff's summons and complaint on Defendant's behalf. (ECF Nos. 9-1 & 9-2 at 1-2.) It is therefore unlikely that Defendant's default resulted from excusable neglect. See Progressive, 2021 WL 4163987, at *3 (“[D]efendant was served with the summons and complaint on April 30, 2021. Thus, it is clear defendant is aware of the suit, and it is unlikely the failure to respond resulted from excusable neglect.”) (simplified). As to the seventh factor, “default judgments are disfavored because ‘[c]ases should be decided on their merits whenever reasonably possible[,]' . . . [but] the policy . . . favoring decisions on the merits does not weigh against default judgment because [Plaintiff's] failure to appear makes a decision on the merits impractical.” Id. (quoting Eitel, 782 F.2d at 1472). Accordingly, the sixth and seventh factors favor entry of default judgment here.
In sum, the Court concludes that the Eitel factors, on balance, support granting Plaintiffs motion for default judgment.
III. INJUNCTIVE RELIEF
Plaintiff seeks injunctive relief under 15 U.S.C. § 1116(a). (See Compl. at 6; Pl.'s Mot. at 4-5.)
Section § 1116 provides that a court may “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 PTO] or to prevent a violation under [the Lanham Act].” 15 U.S.C. § 1116(a). “Granting a permanent injunction is ‘an act of equitable discretion' and courts should apply ‘traditional equitable principles' in their analysis.” ClarkEquip. Co. v. Walls, No. 21-cv-05886, 2022 WL 4594238, at *4 (W.D. Wash. July 29, 2022) (quoting eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006)). A party seeking a permanent injunction must demonstrate:
(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.Id. (citing MercExchange, 547 U.S. at 391).
The Court finds that Plaintiff satisfies the first two factors because it has demonstrated infringement, and it has no other legal remedy available to stop Defendant from using the Akana mark. See Id. (“Once infringement is shown, irreparable injury is generally presumed in a trademark case. Thus, the Court presumes irreparable injury and does not find evidence rebutting such a presumption.... Plaintiff has no other legal remedy to stop Defendants from using the Bobcat marks.... Defendants' failure to appear suggests that their infringing behavior may continue.”) (simplified).
The third and fourth factors also favor granting injunctive relief because (1) absent an injunction, Defendant could continue using the Akana mark, and (2) minimizing consumer confusion and protecting the rights of a trademark holder like Plaintiff serve the public interest. See Id. (same). Accordingly, the relevant factors support granting permanent injunctive relief.
CONCLUSION
For the reasons stated, the Court recommends that the district judge GRANT Plaintiff's motion for default judgment (ECF No. 13), as follows:
1. Pursuant to 15 U.S.C. § 1116, IT IS ORDERED that Defendant and its agents, employees, successors, and assigns are PERMANENTLY ENJOINED from using any mark, word, or name similar to Plaintiff's “Akana” mark in connection with Defendant's goods or services.
2. Pursuant to 15 U.S.C. § 1116, IT IS FURTHER ORDERED that within thirty (30) days after entry of this injunction, Defendant is required to file with the Court and serve on Plaintiff a report in writing, and under oath, setting forth in detail the manner in which Defendant has complied with this injunction.
3. Pursuant 15 U.S.C. § 1117(a), IT IS FURTHER ORDERED that Plaintiff is entitled to an award of its attorney's fees and costs incurred in an
amount to be determined by the Court upon review of Plaintiff's supplemental submission.
See ECBlend, 2017 WL 5999886, at *4 (same).
See Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696, 699-702 (9th Cir. 2008) (noting that that upon entry of default, “all factual allegations in the complaint [were] deemed true, including the allegation of [defendant]'s willful infringement of [plaintiff]'s trademarks,” the “default sufficiently establishe[d] [the plaintiff]'s entitlement to attorneys' fees under the Lanham Act,” and a Ninth Circuit “decision upheld an award of attorneys' fees under the Lanham Act solely because, ‘by entry of default judgment, the district court determined, as alleged in [the plaintiff's] complaint, that [the defendant's] acts were committed knowingly, maliciously, and oppressively, and with an intent to . . . injure [the plaintiff]'” (quoting Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1023 (9th Cir. 2002))) (emphasis added); see also Compl. ¶¶ 10-25, reflecting that Plaintiff alleges, and the Court accepts as true, that Defendant continues to use Plaintiff's mark despite receiving cease and desist letters and the past instances of confusion, and thus Defendant's “acts are willful, intentional, and deliberate”; but cf. Kaloud, Inc. v. Shisha Land Wholesale, Inc., 741 Fed.Appx. 393, 396-97 (9th Cir. 2018) (“The district court did not abuse its discretion in denying Kaloud's motion for attorney's fees on the ground that Kaloud was not the prevailing party. Under § 1117(a), a plaintiff seeking actual damages for trademark infringement is entitled to reasonable attorney's fees only in exceptional cases. Kaloud did not receive any damages in this case, and a permanent injunction does not qualify as actual damages. Accordingly, Kaloud was not entitled to relief under § 1117(a).”) (simplified).
SCHEDULING ORDER
The Court will refer its Findings and Recommendation to a district judge. Objections, if any, are due within fourteen (14) days. If no objections are filed, the Findings and Recommendation will go under advisement on that date. If objections are filed, a response is due within fourteen (14) days. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement.