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A.O. Smith Corp. v. USA Smith Industry Dev. Inc.

United States District Court, D. Colorado

May 22, 2017

A.O. SMITH CORPORATION, a Delaware corporation, Plaintiff,
v.
USA SMITH INDUSTRY DEV. INC., a Colorado corporation, Defendant.

          ORDER GRANTING DEFAULT JUDGMENT MOTION IN PART

          William J. Martinez United States District Judge.

         Before the Court is Plaintiff's Motion for Default Judgment. (ECF No. 11.) For the reasons explained below, this motion is granted in part and denied in part.

         I. LEGAL STANDARD

         Default must enter against a party who fails to appear or otherwise defend a lawsuit. Fed.R.Civ.P. 55(a). Pursuant to Rule 55(b)(1), default judgment must be entered by the Clerk of Court if the claim is for “a sum certain”; in all other cases, “the party must apply to the court for a default judgment.” Fed.R.Civ.P. 55(b)(2). “[D]efault judgment must normally be viewed as available only when the adversary process has been halted because of an essentially unresponsive party. In that instance, the diligent party must be protected lest he be faced with interminable delay and continued uncertainty as to his rights. The default judgment remedy serves as such a protection.” In re Rains, 946 F.2d 731, 732-33 (10th Cir. 1991) (internal quotation marks and citation omitted).

         However, “a party is not entitled to a default judgment as of right; rather the entry of a default judgment is entrusted to the ‘sound judicial discretion' of the court.” Greenwich Ins. Co. v. Daniel Law Firm, 2008 WL 793606, at *2 (D. Colo. Mar. 22, 2008) (internal quotation marks omitted). Before granting a motion for default judgment, the Court must take several steps. First, the Court must ensure that it has personal jurisdiction over the defaulting defendant and subject matter jurisdiction over the action. See Williams v. Life Sav. & Loan, 802 F.2d 1200, 1202-03 (10th Cir. 1986). Next, the Court should consider whether the well-pleaded allegations of fact-which are admitted by the defendant upon default-support a judgment on the claims against the defaulting defendant. See Fed. Fruit & Produce Co. v. Red Tomato, Inc., 2009 WL 765872, at *3 (D. Colo. Mar. 20, 2009) (“Even after entry of default, however, it remains for the court to consider whether the unchallenged facts constitute a legitimate basis for the entry of a judgment.”). “In determining whether a claim for relief has been established, the well-pleaded facts of the complaint are deemed true.” Id. (citing Dundee Cement Co. v. Howard Pipe & Concrete Prods., Inc., 722 F.2d 1319, 1323 (7th Cir. 1983)).

         II. BACKGROUND

         Given Defendant's failure to appear and answer, the Court finds the following to be undisputed.

         Plaintiff is a Delaware corporation headquartered in Wisconsin. (ECF No. 1 ¶ 1.) Plaintiff manufactures and sells hot water heaters worldwide. (Id. ¶ 3.) Plaintiff owns several United States trademark registrations based on its name, as associated with water heaters, electrical boilers, and heating boilers. (Id. ¶ 5.) “In China, Plaintiff owns more than 100 trademark registrations that incorporate ‘Smith' in either English or Chinese, and began using the A. O. Smith mark in China in the 1990s.” (Id. ¶ 4.)

         Defendant's principal office is in China, and is a competitor in the hot water heater market there. (Id. ¶¶ 9, 31, 44.) Defendant, however, is a registered Colorado corporation, ostensibly with a registered agent, “Aixia Zhang, ” in Durango. (Id. ¶¶ 7, 10.) The address listed for Zhang is a single-family home, and the occupants of that home have never heard of Zhang or Defendant. (ECF No. 11-2 ¶¶ 4-5.) Defendant does not actually maintain a registered agent in Colorado. (ECF No. 1 ¶ 15.) It does not manufacture any products in the United States, and has no true headquarters here. (Id. ¶ 33.)

         Defendant was, in fact, incorporated in Colorado for the purpose of deceiving Chinese consumers into believing that Defendant's products are associated with or approved by Plaintiff. Defendant carries out this deception in two principal ways. First, it uses its Durango address on promotional materials, thus creating the impression that it is a bona fide United States company. (Id. ¶¶ 13, 32.) Second, its Chinese mark is “NOSMSE.” (Id. ¶ 30.) “[T]he ‘SMSE' portion of the ‘NOSMSE' infringing mark is identical to the Chinese characters for ‘Smith' that A. O. Smith uses [in its own Chinese mark].” (Id.) Moreover, “A. O. SMITH and NOSMSE sound similar when pronounced by native Chinese speakers.” (ECF No. 15-2 ¶ 8.) The two marks, side by side, appear as follows:

         (IMAGE OMITTED)

         “Defendant is not associated with, in any meaningful way, any individuals with the surname ‘Smith.'” (Id. ¶ 35.) Defendant's tactics have misled Chinese consumers to believe that Defendant is affiliated with Plaintiff, thus diverting hot water heater sales away from Plaintiff. (Id. ¶¶ 37-38.)

         III. ANALYSIS

         Plaintiff pleads causes of action for trademark infringement, trademark dilution, and unfair competition under the Lanham Act; and for common-law unfair competition, unjust enrichment, and tortious interference with prospective economic advantage. (Id. at 8-12.) Concerning its Lanham Act trademark infringement claim, Plaintiff seeks damages and an injunction. As for the remainder of the claims, Plaintiff seeks only an ...


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