Otter Products, LLC v. Wang

          ORDER GRANTING PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT AND PERMANENT INJUNCTION

          Christine M. Arguello Judge

         This matter is before the Court on Plaintiffs Otter Products, LLC and TreeFrog Developments, Inc.'s Motion for Default Judgment and Permanent Injunction. (Doc. # 24.) Defendant Eddy Wang did not file a response to the Motion. For the following reasons, Plaintiffs' Motion is granted.

         I. BACKGROUND

         Plaintiffs develop, manufacture, market, and sell premium mobile device, smartphone, and tablet cases and accessories under the OTTERBOX® and LIFEPROOF® brands (“Otter Products”). Plaintiffs sell their products exclusively through their own website and their network of authorized distributors, retailers, and resellers (“Authorized Resellers”).

         Otter has registered several trademarks with the United States Patent and Trademark Office (“USPTO”), including, but not limited to: OTTERBOX® (U.S. Trademark Reg. Nos. 5, 439, 652; 5, 498, 180; 4, 602, 221; and 3, 788, 534); DEFENDER SERIES® (U.S. Trademark Reg. No. 4, 616, 874); STRADA SERIES® (U.S. Trademark Reg. No. 4, 864, 518); STATEMENT SERIES® (U.S. Trademark Reg. No. 4, 952, 893); SYMMETRY SERIES® (U.S. Trademark Reg. No. 4, 709, 178); PURSUIT SERIES® (U.S. Trademark Reg. No. 4, 280, 846); ALPHA GLASS® (U.S. Trademark Reg. No. 4, 702, 961); VENTURE® (U.S. Trademark Reg. No. 5, 449, 981); TROOPER® (U.S. Trademark Reg. No. 5, 496, 963); and ELEVATION® (U.S. Trademark Reg. No. 5, 444, 887) (the “OtterBox Trademarks”).

         TreeFrog has several trademarks with the USPTO, including, but not limited to: LIFEPROOF® (U.S. Registration Nos. 4, 519, 288; 4, 520, 890; 4, 360, 963; and 4, 057, 201); LIFEJACKET® (U.S. Registration No. 4, 354, 783); and LET'S GO!® (U.S. Registration No. 4, 285, 129) (the “LifeProof Trademarks”). The registrations for the OtterBox and LifeProof Trademarks (collectively, the “Otter Trademarks”) are valid, subsisting, and in full force and effect.

         In recent years, there has been an increase in the amount of retail sales completed through online marketplaces, such as www.amazon.com (“Amazon”). These online marketplaces allow third party sellers to sell a manufacturer's products anonymously. It has been well publicized that unauthorized third-party sellers sell diverted products through the online marketplaces, including damaged, defective, tampered-with, and/or fake products. Because these third-party sellers operate anonymously, a manufacturer has no ability to exercise its quality controls over the products or to ensure the products are safe, which presents serious risks to consumers.

         Anonymous sales by unauthorized sellers through the online marketplaces also threaten a manufacturer's ability to maintain its goodwill, reputation, and brand integrity. A consumer who receives a defective or poor-quality product from an unauthorized seller through an online marketplace is likely to become frustrated with the brand. The consumer can leave a negative review about the brand on the marketplace site, thereby impacting the purchasing decisions of other consumers. Plaintiffs have recieved multiple negative online marketplace reviews, including on Amazon, from consumers who purchased products bearing the Otter Trademarks from unauthorized sellers. The negative reviews include receiving damaged, defective, and poor-quality products.

         To protect consumers and the value and goodwill associated with OtterBox and LifeProof brands, Plaintiffs have implemented substantial quality controls that are designed to minimize the likelihood that poor quality products reach consumers. These quality controls include certain inspection, storage, handling, and other requirements, assisting with any recalls or other consumer safety information efforts, and customer service requirements. Additionally, to further combat the unauthorized sale of poor-quality products on the online marketplaces, Plaintiffs have imposed additional requirements on their Authorized Resellers that are approved to sell online and on the online marketplaces. Moreover, to allow Plaintiffs to know where their products are being sold so that they can exercise control over their products and address any quality issues that may arise, Authorized Resellers are prohibited from selling on unauthorized websites and online marketplaces and from selling to other resellers. Authorized Resellers that are approved to sell on online marketplaces may sell only under storefront names that have been specifically approved by Plaintiffs and are prohibited from selling products anonymously Plaintiffs vet their Authorized Resellers before approving them to sell online and on online marketplaces to make sure that the Authorized Reseller operates an appropriate and acceptable business that Plaintiffs wish to have representing their brands. Authorized Resellers selling online and on the online marketplaces must comply with several additional quality control requirements, including opting out of certain repackaging and commingling programs that may result in consumers receiving used, damaged, or counterfeit products; having tools in place to solicit customer feedback and respond to any negative reviews and working with Plaintiffs to address any such reviews; and maintaining an acceptable online presence and seller rating. Further, Plaintiffs monitor their Authorized Resellers to ensure their compliance with Plaintiffs' quality controls, including conducting reviews of the Authorized Resellers' websites, storefronts, and reviews and conducting test purchases and inspections.

         The quality controls Plaintiffs have imposed are legitimate and substantial and allow Plaintiffs to control the quality of products sold under their trademarks. A seller's compliance with these quality controls would be material and relevant to a consumer's purchasing decision Plaintiffs also provide a Limited Warranty (“Warranty”) for products purchased from Plaintiffs or their Authorized Resellers, covering the repair or replacement of products for defects for a period of time. The Warranty provides that a customer can receive a repair or replacement product if a product has a defect in manufacturing, materials, or workmanship during the warranty period applicable to the product. The Warranty is a material component of Otter Products. Because Plaintiffs cannot exercise their quality controls over products sold by unauthorized sellers, the Warranty is not available for products sold by unauthorized sellers who are not subject to Plaintiffs' quality controls.

         Defendant Eddy Wang (“Wang”) operates storefronts on Amazon under the names “1to3shop-store” and “E&E Global” (the “Storefronts”). Through the Storefronts, Wang has, and continues to, advertise and sell products bearing the Otter Trademarks. Wang is not an Authorized Reseller of Otter Products. The products Wang sells bearing the Otter Trademarks are: not genuine Otter Products; are materially different from genuine Otter Products because they do not come with the Warranty; and are also not genuine Otter Products because they do not abide by and interfere with Plaintiffs' quality controls.

         By selling materially different, non-genuine products bearing the Otter Trademarks, Wang is creating consumer confusion because consumers who purchase products from Wang think they are getting genuine Otter Products that come with the Warranty and abide by Plaintiffs' quality controls when, in fact, they are not.

         Wang advertises products bearing the Otter Trademarks on the Storefronts as being “New” products that come with the Warranty. His product listings also specifically state that they come with the Warranty. These representations are false because the products Wang sells do not come with the Warranty.

         Plaintiffs' agreements with their Authorized Resellers prohibit Authorized Resellers from selling products to third parties for purposes of resale. Wang knows of this prohibition, but has continued to acquire products from Plaintiffs' Authorized Resellers for the purpose of reselling them and infringing on the Otter Trademarks. Thus, Wang has acted with an improper purpose because he intended to induce Plaintiffs' Authorized Resellers to breach their agreements.

         Wang's unlawful actions have caused, and continue to cause, Plaintiffs significant harm. Wang has misled, and continues to mislead, consumers into believing they are purchasing genuine Otter Products that come with the Warranty and comply with Plaintiffs' quality controls when, in fact, they are not. As a proximate result of Wang's actions, Plaintiffs have suffered, and will continue to suffer, irreparable harm to their reputation, goodwill, and intellectual property rights. Plaintiffs have also suffered monetary harm as a result of Wang's actions, including loss of sales and damage to their existing and potential business relations.

         Wang's unlawful actions have been willful and malicious. Plaintiffs spent significant time and money trying to stop Wang's illegal sale of its products through the Storefronts. Plaintiffs sent Wang several cease and desist letters, but Wang refused to comply and continued to sell products bearing the Otter Trademarks. Further, despite being served with the Summons and Complaint in this action, Wang has chosen not to appear and continues to engage in its unlawful conduct.

         II. STANDARD OF REVIEW

         Pursuant to the Federal Rules of Civil Procedure, the court shall enter a default judgment against a party that has failed to plead or otherwise defend an action brought against it. Fed.R.Civ.P. 55(b)(2). Default judgment may be entered by the clerk of court if the claim is for “a sum certain, ” Fed.R.Civ.P. 55(b)(1), in all other cases, as here, “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).

         A default amounts to an admission of liability, and all well-pleaded allegations in the complaint pertaining to liability are deemed true. See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992) (internal citation omitted); Lyons P'ship, L.P. v. D&L Amusement & Entm't, Inc., 702 F.Supp.2d 104, 109 (E.D.N.Y. 2010). It “remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law.” Leider v. Ralfe, No. 01 Civ. ...