Kirakosian v. J&L Sunset - Order Granting Default Judgment

Case 2:16-cv-06097-CAS-PLA Document 127 Filed 09/11/17 Page 1 of 17 Page ID #:874
UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES GENERAL O

Case No. 2:16-cv-06097-CAS(PLAx) Date September 11, 2017
Title ALBERT KIRAKOSIAN ET AL v. J&L SUNSET WHOLESALE &
TOBACCO ET AL.
Present: The Honorable CHRISTINA A. SNYDER

Catherine Jeang Laura Elias N/A
Deputy Clerk Court Reporter / Recorder Tape No.
Attorneys Present for Plaintiffs: Attorneys Present for Defendants:
Joanna Ardalan Not Present

Proceedings: PLAINTIFFS MOTION FOR DEFAULT JUDGMENT (Dkt. 114,
filed July 14, 2017)
I. INTRODUCTION
On August 15, 2016, plaintiff Albert Kirakosian (Kirakosian) and Kiraco, LLC,
dba Apple on Top (Kiraco) filed this action against seventeen hookah retailers,
including the instant defendant J&L D Sunset Wholesale & Tobacco. Dkt. 1. The
gravamen of plaintiffs complaint is that the defendants infringed upon Kirakosians
patent and trademark rights by selling or offering to sell counterfeit hookah products. Id.
On November 10, 2016, plaintiffs served the summons and complaint on defendant. Dkt
23. On November 30, 2016, plaintiffs submitted proof of service to the Court. Id.
Defendant has failed to file an answer or otherwise respond. On January 19, 2017, the
Clerk of Court entered default against defendant. Dkt. 58.
On March 15, 2017, plaintiffs filed a motion for leave to amend complaint to
dismiss three defendants, U.S. Global Imports, Hookah King, and Southbay Wholesale.
Dkt. 86. On April 13, 2017, the Court granted plaintiffs motion to amend the complaint.
Dkt. 92. On April 28, 2017, plaintiffs filed a first amended complaint. Dkt. 96 (FAC).
The gravamen of plaintiffs FAC is similarly that defendants infringed upon Kirakosians
patent and trademark rights by selling or offering to sell counterfeit hookah products.
On June 30, 2017, the Court issued an order to show cause, ordering plaintiffs to
show why the action should not be dismissed for lack of prosecution as to defendant J&L.
Dkt. 107. On July 14, 2017, pursuant to the Courts June 30, 2017 order, plaintiffs
responded by filing the instant motion for default judgment against defendant. Dkt. 114.
On August 1, 2017, plaintiffs filed an ex parte application to lengthen the time to hear
CV-06097 (09/17) CIVIL MINUTES - GENERAL Page 1 of 17


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plaintiffs motion for default judgment. Dkt. 112. On August 2, 2017, the Court granted
plaintiffs ex parte motion and set the default judgment hearing to September 11, 2017.
Dkt. 123.
II. BACKGROUND
Plaintiffs allege the following facts.
Kirakosian is an individual residing in Los Angeles County. FAC 1. Kiraco is a

California limited liability company that does business as Apple on Top. Id. 2.
Defendant is a California corporation with its principal place of business in Rancho
Cucamonga, California. Id. 3. Defendant imports and sells hookah and hookah
accessories throughout the United States. Id. Defendant also does business as 7SG Stars
Glass at its principal place of business in Rancho Cucamonga, California, where it sells
hookah and hookah accessories. Id. 4.
Kirakosian developed a small and sleek hookah bowl that fits nearly all hookahs
and delivers the full smoking experience. FAC 25. Kirakosian branded the hookah
accessory as Apple on Top AOT. Id. On December 19, 2012, Kirakosian registered
the hookah pipe head with the United States Patent and Trademark office and received
Patent No. D726,366 (the 366 Patent). Id. 26. The product is round like an apple,
features a single rubber green leaf attached to the metal bowl for easy handling of hot
coals, is comprised of rubber ridges, and is available in various colors. Id. Since October
2012, plaintiffs have used the trademark Apple on Top on their website. Id. 31.
On May 30, 2013, Kiraco began using the AOT Mark to sell hookah and hookah
accessories. Id. 28. Kiraco has devoted substantial time, effort, and resources to the
development and extensive promotion of the AOT Mark and the products offered under
it. Id. Due to Kiracos trademark registration and continuous use in connection with
hookah and hookah accessories, the hookah smoking public recognizes and relies upon
the AOT Mark as an indication of the high quality and unique design of plaintiffs
hookah and hookah accessories. Id. In addition, as a result of Kiracos trademark
registration and extensive use of its AOT Mark, Kiraco owns valuable goodwill
symbolized by the AOT mark. Id. 29.
On April 7, 2015, Kiraco validly registered the AOT Mark under Registration No.
4,717,006, deeming Kiraco the sole owner of all right, title, and interest in the AOT


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Mark. Id. 30. Since October 2012, plaintiffs have been using the trademark Apple On
Top on their website, and also uses it as part of the URL, www.appleontop.com. Id.
31. In connection with its trademark registration and extensive use, Kiraco owns the
AOT Trade Dress, which consists of the patented AOT product packaged in a small, clear
plastic box with a distinct red banner at the base that reads AOT . Id. 32. At the
back of the box is a red backdrop with white text that describes the AOT product and its
origins, as well as the URL for plaintiffs website. Id.
Plaintiffs allege that defendant is infringing or inducing others to infringe by

making, using, offering to sell, and/or selling products that infringe the claims of the
AOT patent. Id. 33 & Ex. E. This use of the AOT patent in commerce is without the
permission, license, or authority of plaintiffs. Id. 34. The infringing products appear
identical to AOT products in all material respects, including the word mark and
packaging, and the infringing products even include the patent pending claim on the
bottom of the product. Id. 35. Plaintiffs allege that defendants infringement of the
AOT patent is willful and deliberate, and that defendant knowingly received payments
for this unauthorized and counterfeit product. Id. 36.
Kirakosian has only one authorized manufacturer and one authorized wholesaler of
the AOT product covered under the AOT patent. Id. 41. Kirakosian has inspected the
infringing products and believes that these products, while looking identical to the AOT
products, were not manufactured or sold by Kirakosians authorized manufacturer and
wholesaler. Id. 43.
Plaintiffs allege that defendant has traded on plaintiffs AOT Mark, goodwill and
reputation in connection with AOT products and confused consumers as to the origin and
sponsorship of defendants product. Id. 47. The use of the AOT trademark in
commerce is without authorization, legal right, or consent. Id. 48. Plaintiffs allege that
unless restrained by the Court, defendant will continue to infringe on plaintiffs AOT
Mark, thus causing a multiplicity of judicial proceedings, and pecuniary compensation
will not afford plaintiffs adequate relief for the damage to their AOT Mark and public
perception. Id. 49. Plaintiffs allege that, as a proximate result of defendants activities
trading on plaintiffs advertising, sales, and consumer recognition, defendant has made
substantial sales and profits. Id. 51. As a result of these activities, plaintiffs have been
damaged and deprived of substantial sales and have been deprived of the value of the
AOT Mark as a commercial asset. Id. 52. Lastly, plaintiffs allege that defendants


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actions constitute unfair and deceptive acts or practices in the course of business, trade, or
commerce. Id. 81.
III. LEGAL STANDARDS
Pursuant to the Federal Rule of Civil Procedure 55, when a party against whom a
judgment for affirmative relief is sought has failed to plead or otherwise defend, and the
plaintiff does not seek a sum certain, the plaintiff must apply to the court for a default
judgment. Fed. R. Civ. P. 55.
As a general rule, cases should be decided on the merits as opposed to by default,

and therefore, any doubts as to the propriety of a default are usually resolved against the
party seeking a default judgment. Judge William W. Schwarzer et al., California
Practice Guide: Federal Civil Procedure Before Trial 6:11 (The Rutter Group 2015)
(citing Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Circ. 1985)).
Granting or denying a motion for default judgment is a matter within the courts
discretion. Elektra Entmt Grp. Inc. v. Crawford, 226 F.R.D. 388, 392 (C.D. Cal. 2005);
see also Sony Music Entertainment, Inc. v. Elias, 2004 WL 141959, *3 (C.D. Cal. Jan.
20, 2004).
The Ninth Circuit has directed that courts consider the following factors in
deciding whether to enter default judgment: (1) the possibility of prejudice to plaintiff;
(2) the merits of plaintiffs substantive claims; (3) the sufficiency of the complaint; (4)
the sum of money at stake in the action; (5) the possibility of a dispute concerning the
material facts; (6) whether defendants default was the product of excusable neglect; and
(7) the strong policy favoring decisions on the merits. See Eitel, 782 F.2d at 1471-72; see
also Elektra, 226 F.R.D. at 392.
IV. DISCUSSION
A. Application of the Eitel Factors
1. Possibility of Prejudice to Plaintiff
The first Eitel factor considers whether a plaintiff will suffer prejudice if a default
judgment is not entered. PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172,
1177 (C.D. Cal. 2002); see also Eitel, 782 F.2d at 1471-72. Courts have concluded that a


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plaintiff is prejudiced if the plaintiff would be without other recourse for recovery
because the defendant failed to appear or defend against the suits. Pepsi, 238 F. Supp. 2d
at 1177; see also Phillip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494,
499 (C.D. Cal. 2003).
Plaintiffs contend that despite knowledge of AOTs valid trademark, patent, and
trade dress rights, defendant willfully ignored plaintiffs rights and infringed upon them
and sold counterfeit products. Dkt. 114-1 at 4 (Memorandum). Because defendant has
not appeared in this matter, plaintiffs will be without any other recourse for recovery
unless default judgment is granted. See PepsiCo, Inc. v. California Sec. Cans, 238 F.
Supp. 2d 1172, 1177 (C.D. Cal. 2002) (stating that plaintiffs would have no other
recourse if a default judgment were not entered). At minimum, plaintiffs would be
prejudiced through loss of sales and dilution of their AOT Mark if denied a remedy
against the defendant. As a result, the first Eitel factor weights in favor of the entry of
default judgment.
2. Substantive Merits and Sufficiency of the Claims
Courts often consider the second and third Eitel factors together. See PepsiCo, 238
F. Supp. 2d at 1175; HTS, Inc. v. Boley, 954 F. Supp. 2d 927, 941(D. Ariz 2013). The
second and third Eitel factors assess the substantive merit of the movants claims and the
sufficiency of its pleadings, which require that a [movant] state a claim on which [it]
may recover. PepsiCo, 238 F. Supp. 2d at 1177 (quotation marks omitted); see also
Danning v. Lavine, 572 F.2d 1386, 1388(9th Cir. 1978) (stating that the issue is whether
the allegations in the pleading state a claim upon which plaintiff can recover).
Plaintiffs seek relief for: (1) patent infringement in violation of 35 U.S.C. 271;
(2) trademark infringement in violation of 15 U.S.C. 1114; (3) trademark counterfeiting
in violation of 15 U.S.C. 1116 and state statutory counterfeiting in violation of Cal.
Bus. & Prof. Code 14250; and (4) false designation of origin in violation of 15 U.S.C.
1125(a), common law trademark infringement, and unfair competition in violation of Cal.
Bus. & Prof. Code 17200 and 17500, et seq.
a. Patent Infringement
Plaintiffs allege that defendant has infringed on their design patents under 35
U.S.C. 271. Section 271 provides that whoever without authorities makes, uses, offers


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to sell, or sells any patented invention infringes that patent. 35 U.S.C.A. 271. In order
to establish design patent infringement, plaintiffs must prove that an ordinary observer
familiar with the patented product would be deceived into believing that the accused
product is the same as the patented design. Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.
3d 665, 681 (Fed. Cir. 2008).
Plaintiffs sufficiently allege the necessary requirements to demonstrate design

patent infringement. Plaintiffs establish that they held the enforceable patent for the AOT
product at all relevant times. FAC 26. Plaintiffs allege that defendant has infringed its
AOT patent by importing, making, using, offering to sell, or selling in the United States
products that are covered by claims of the AOT patent. Id. 40. Plaintiffs provide
images of their AOT product packaging, Ex. D, and plaintiffs also provide images of the
allegedly infringing hookah bowls that depict nearly identical copies of plaintiffs
designs. Id. 33 & Ex. E. The infringing product contains substantially the same design,
including the apple-like shape, indented portions of the bowl, the removable tray with a
particular pattern of holes, and the rubber green leaf. See Exs. D, E.
Therefore, the Court concludes that plaintiffs adequately plead their patent
infringement claims, and the first factor weighs in favor of the entry of default judgment.
b. Trademark Infringement
Plaintiffs allege trademark infringement under 15 U.S.C. 1114(1) of the Lanham

Act, which imposes liability on a person who uses a registered mark without the consent
of the registrant and where such use is likely to cause confusion or to cause mistake[.]
To prevail on a claim for trademark infringement under the Lanham Act, a plaintiff must
prove: (1) ownership of a valid trademark; (2) use of the mark without its consent; and
(3) that such use is likely to cause confusion. Credit One Corp v. Credit One Financial,
Inc., 661 F. Supp. 2d 1134, 1137 (C.D. Cal. 2009); see also Rearden LLC v. Rearden
Commerce, Inc., 683 F.3d 1190, 1202 (9th Cir. 2012). The test for likelihood of
confusion is whether a reasonably prudent consumer in the marketplace is likely to be
confused as to the origin of the good or service bearing one of the marks. Dreamwerks
Prod. Grp., Inc. v. SKG Studio, d/b/a Dreamworks SKG, 142 F.3d 1127, 1129 (9th Cir,
1998). The Ninth circuit has identified eight factors that should be considered in making
this assessment, however in cases involving counterfeit marks, it is unnecessary to
perform this step-by-step examination because counterfeit marks are inherently


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confusing. Phillip Morris USA Inc. v. Shalabi, 352 F.Supp.2d 1067, 1073 (C.D. Cal.
2004). Counterfeiting is a subset of trademark infringement under 15 U.S.C.
1114(a)(1). A counterfeit is defined in the Lanham Act as a spurious mark which is
identical with, or substantially indistinguishable from, a registered mark. 15 U.S.C.
1114(a)(1).
Under the Lanham Act, a plaintiff may recover statutory damages not less than
$1,000 or more than $200,000 per counterfeit mark per type of goods or services sold,
offered for sale, or distributed, as the court consider[s] just. 15 U.S.C. 1117(c)(1). In
addition, where a defendants conduct has been willful, the court may grant enhanced
statutory damages of not more than $2,000,000 per counterfeit mark per type of goods
or services sold, offered for sale, or distributed, as the court considers just. 15 U.S.C.
1117(c)(2). Willfulness requires a connection between the defendants awareness of its
competitors and the defendants actions at those competitors expense. Otter Products,
LLC v. Berrios, No. 13-cv-4384-RSWL-AGR, 2013 WL 5575070, *9. Several courts
have found statutory damages are appropriate in default judgment cases because the
information needed to prove actual damages is within the infringers control and is not
disclosed. Microsoft Corp. v. NOP, 594 F. Supp. 2d 1233, 1138 (E.D. Cal. April 17,
2008).
Here, plaintiffs have alleged a prima facie case of trademark infringement and
counterfeiting. See FAC 4552. Kiraco is the owner of a federally registered and valid
trademark. Id. 31. The infringing products look confusingly similar and also bear the
identical AOT Mark. Defendant is a sophisticated seller of hookah products and is aware
of the valid trademark as plaintiffs expressly denote the trademark symbol and provide a
URL for the AOT website on all of plaintiffs products. Memorandum at 9. Despite this
express trademark symbol, defendant ignored plaintiffs rights and infringed upon the
AOT products and sold counterfeits. Id. at 10. These counterfeits are likely to confuse a
reasonably prudent consumer because the counterfeits are substantially indistinguishable
from the AOT products. Id. at 1112. The infringing products appear identical to AOT
products in all material respects, including the AOT Mark and packaging, and the
infringing products even include the patent pending claim on the bottom of the product.
See FAC & Exs. D, E. Accordingly, plaintiffs allege a prima facie case for trademark
infringement and counterfeiting, and therefore may seek injunctive relief pursuant to15
U.S.C.A. 1116 and Cal. Bus. & Prof. Code 14250.


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Furthermore, there is evidence sufficient to support a finding of willful

infringement. Dkt. 114-2, Kirakosian Declaration (Kirakosian Decl.) 12. Kirakosian
visited defendants establishment on March 4, 2016 and inquired specifically about AOT
products sold by defendant. Id. On this occasion, defendants co-owner stated that he
sells hundreds of AOTs every week. Id. In addition, the failure of a party to defendant
itself against allegations of trademark counterfeiting is indicative of willful trademark
infringement. Nop, 549 F. Supp. 2d at 1238; see also Sennheiser Elec. Corp v. Eichler,
No. 12-cv-10809-MMM-PLA, 2013 WL 3811775, *5 (C.D. Cal. July 19, 2013) (An
allegation of willful trademark infringement is deemed true when the defendant
defaults.). Thus, plaintiffs sufficiently allege willful infringement because of the
statements of defendants co-owner, and because defendant has failed to defend itself in
the instant action.
Plaintiffs adequately allege that they own the AOT Mark, that defendant uses the
AOT Mark without plaintiffs consent, and that defendants infringing products are
confusingly similar to plaintiffs AOT products. Additionally, plaintiffs demonstrate that
defendants infringement is willful. As a result, the Court concludes that plaintiffs
adequately plead their trademark infringement and trademark counterfeiting claims, and
the second and third factors weigh in favor of the entry of default judgment.
c. False Designation & Unfair Competition
Plaintiffs allege violations under sections 1114 and 1125 of the Lanham Act.
Although they are distinct claims, the elements are essentially identical and the same
evidence establishes both claims. Phillip Morris USA Inc. v. Liu, 489 F. Supp. 2d 1119,
112122 (C.D. Cal. 2007). Identical to the Courts analysis of defendants trademark
violations under section 1114(1), defendant is liable for violations of section 1125 if
plaintiffs demonstrate that (1) they own a valid and protectable trademark, and that (2)
defendant used in commerce a similar mark without authorization in a manner likely to
cause consumer confusion, deception, or mistake. Id. Here, as the Court previously
discussed, plaintiffs demonstrate that they own the AOT Mark. Furthermore, defendant
sells infringing products, without authorization, that are substantially similar to the AOT
products, and are likely to cause consumer confusion, deception, or mistake. Therefore,
plaintiffs adequately allege a claim for false designation of origin in violation of section
1125 of the Lanham act.


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Californias Unfair Competition Law (UCL) prohibits unfair competitions

includ[ing] any unlawful, unfair or fraudulent business act or practice and unfair,
deceptive, untrue or misleading advertising. Cal. Bus. & Prof. Code 17200. Each
prong of the UCL is separate and distinct theory of liability. Birdsong v. Apple, Inc.,
590 F.3d 955, 959 (9th Cir. 2009). [A]n action based on [the UCL] to redress an
unlawful business practice borrows violations of other laws and treats these violations
as unlawful practices, independent actionable under section 17200 et seq. and subject
to the distinct remedies provided thereunder. Farmers Ins. Exch. V. Super. Court, 826
P.2d 730, 734 (Cal. 1992) (quotation marks omitted); Chabner v. United Omaha Life Ins.
Co., 225 F.3d 1042, 1048 (9th Cir. 2000). Plaintiffs rest their UCL claim on defendants
alleged trademark infringement. See FAC 8085. A violation of the Lanham Act may
support a claim under the UCL, because the Ninth Circuit has consistently held that state
common law violations of unfair competition and actions pursuant to Cal. Bus. & Prof.
Code section 17200 are substantially congruent to claims made under the Lanham Act.
Cleary v. News Corp., 30 F.3d 1255, 126263 (9th Cir. 1994). Accordingly, because the
Court concludes that plaintiffs have sufficiently stated a claim for trademark
infringement, plaintiffs have likewise adequately stated a claim for unfair competition in
violation of the UCL.
Thus, the Court concludes that plaintiffs adequately plead their false designation of
origin and unfair competition claims, and the second and third factors weigh in favor of
the entry of default judgment.
3. The Sum of Money at Stake in the Action
Pursuant to the fourth Eitel factor, the Court balances the amount of money at
stake in relation to the seriousness of the [defaulting partys] conduct. PepsiCo, 238 F.
Supp. 2d at 1176; see Eitel, 782 F.2d at 1471-72. This determination requires a
comparison of the recovery sought and the nature of defendants conduct to determine
whether the remedy is appropriate. United States v. Broaster Kitchen, Inc., No. 2:14-cv-
09421-MMM, 2015 WL 4545360, *6 (C.D. Cal. May 27, 2015); see also Walter v.
Statewide Concrete Barrier, Inc., No. 04-cv-02559-JSW, 006 WL 2527776, *4 (N.D. Cal.
Aug. 30, 2016) (If the sum of money at issue is reasonably proportionate to the harm
caused by the defendants actions, then default judgment is warranted.).


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Plaintiffs do not submit evidence in connection with this motion that addresses the
expenses saved and profits reaped by defendant, or in turn, the revenues lost by plaintiffs.
Here, plaintiffs allege they are deprived of substantial sales and the value of the AOT
Mark and AOT trade dress. FAC 66. Yet plaintiffs were deprived of the opportunity
to review defendants records due to defendants failure to appear or respond to
plaintiffs complaint or motion for default judgment. For that reason, statutory damages
are appropriate in default judgment cases because the information needed to prove actual
damages is within the infringers control and is not disclosed. Microsoft Corp. v. Nop,
549 F.Supp.2d 1233, 1238 (E.D. Cal. April 17, 2008).Accordingly, this factor weighs in
favor of the entry of default judgment.
Plaintiffs also seek non-monetary damages in the form of injunctive relief from the
continued use of their trademarks on defendants counterfeit products. Accordingly, non-
monetary damages favor granting default judgment. PepsiCo, 238 F. Supp. 2d at 1177.
4. Possibility of Dispute
The fifth Eitel factor considers the possibility that material facts are disputed.
PepsiCo, 238 F. Supp. 2d at 1177; see also Eitel, 782 F.2d at 147172. As explained,
plaintiffs adequately allege their claims for patent infringement, trademark infringement
and trademark counterfeiting, false designation of origin, and unfair competition.
Therefore, the Court concludes that no factual disputes exist that would preclude the
entry of default judgment on these four claims. As a result, the fifth Eitel factor weighs
in favor of the entry of default judgment on these claims.
5. Possibility of Excusable Neglect
The sixth Eitel factor considers whether defendants default may have been the
product of excusable neglect. PepsiCo, 238 F. Supp. 2d at 1177; see also Eitel, 782 F.2d
at 147172. Here, there is no indication that default was entered due to defendants
excusable neglect. Defendant was properly served with the summons and complaint, see
dkt. 23, yet has failed to show cause why a default judgment should not be entered
against it. Accordingly, this factor weighs in favor of entry of default judgment.


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6. Public Policy in Favor of Deciding the Merits
Under the seventh Eitel factor, the Court takes into account the strong policy
favoring decisions on the merits. See Eitel, 782 F.2d at 1472 (Cases should be decided
upon their merits whenever reasonably possible.). However, a partys failure to answer
or appear makes a decision on the merits impractical, if not impossible. PepsiCo, 238 F.
Supp. 2d at 1177. Since defendant failed to respond to plaintiffs complaint, this factor
does not preclude entry of default judgment.
7. Conclusion Regarding the Eitel Factors
Apart from the policy favoring decisions on the merits, all of the remaining Eitel
factors counsel in favor of default judgment, including the merits of plaintiffs claims for
patent infringement, trademark infringement and trademark counterfeiting, false
designation of origin, and unfair competition. See Federal Nat. Mortg. Assn v. George,
No. 5:14-cv-01679-VAP-SP, 2015 WL 4127958, *3 (C.D. Cal. July 7, 2015) (The
merits of the plaintiffs substantive claim and the sufficiency of the complaint are often
treated by courts as the most important Eitel factors.) (citations omitted). All of the
Eitel factors are neutral or weigh in favor of the entry of default judgment.
Consequently, it is appropriate to grant plaintiffs motion for default judgment against
defendant.
B. Relief
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. Group, 559 F.2d 557, 560 (9th Cir. 1977). Plaintiffs seek damages
under the Lanham Act, injunctive relief, plus attorneys fees and costs. Memorandum at
1720.
1. Damages for the Lanham Act Claims
Although 15 U.S.C. 1117(c) does not provide guidelines for determining an

appropriate statutory damages award, courts faced with determining statutory damages
under the Act should consider the defendants profits, as well as saved expenses, the
plaintiffs lost revenues, and the defendants state of mind. Rolex Watch U.S.A. v.
Zeotec Diamonds, Inc., No. CV 02-01089 GAF (VBKx), 2003 WL 23705746, *4 (C.D.


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Cal. Mar. 7, 2003). The resulting statutory damage award should be low enough to bear
some rational relationship to the amount of damage incurred but substantial enough to
deter similarly situated businesses from engaging in similar conduct in the future. Id. at
*5. There must be a plausible relationship between the damages sought by plaintiff
and the defendants infringing conduct. See Beachbody , LLC v. Johannes, No. 11-cv-
1148 PSG (RZx), 2011 WL 3565226, *3 (C.D. Cal. August 12, 2011) (finding that
plaintiffs request for $2,150,000 in statutory damages was unreasonable where there
were no figures confirming defendants profits).
A court has wide discretion to determine the amount of statutory damages

between the statutory maxima and minima. Microsoft Corp. v. Coppola, No. C 06
06701 WHA, 2007 WL 1520964, *4 (N.D. Cal. May 24, 2007) (citing Harris v. Emus
Records Corp., 734 F.2d 1329, 1335 (9th Cir.1984)). A court is less likely to award
significant statutory damages, especially maximum damages, if plaintiffs fail to
substantiate or delineate the basis for the relief sought. See Coach, Inc. v. Am. Fashion
Gift, No. 12-cv-07647-MWF RZX, 2013 WL 950938, *2 (C.D. Cal. Mar. 12, 2013)
(awarding plaintiffs $10,000, instead of a requested $100,000, in statutory damages based
on the paucity of supporting evidence where it [was] not clear whether Defendants
sold one or one million infringing purses); Coach Inc. v. Envy, No. 1:11cv1029 LJO
GSA, 2012 WL 78238, *4 (E.D. Cal. Jan.10, 2012) (denying plaintiffs motion for
default judgment without prejudice in part because of the breadth of the allegations in the
complaint and a lack of evidence regarding what products in particular were obtained,
the value of the items, the presence of other products in the store, or how the introduction
of these products into the market specifically [a]ffected Coachs profit. Plaintiffs
statements that they do not have information as to how many goods were sold, or the
amount of revenues lost by Plaintiffs because Defendant failed to appear in this action, is
not sufficient to support a $100,000 damage request). But see Philip Morris USA, Inc.
v. Castworld Prod., Inc., 219 F.R.D. 494, 5002 (C.D. Cal. 2003) (awarding $2,000,000
in statutory damages where a defendant willfully imported 8,000,000 counterfeit
cigarettes having a street value of millions of dollars).
Plaintiffs request $2,000,000 for infringement of the AOT Mark. This is the
ceiling of the range for damages where a defendants conduct was willful. 15 U.S.C.
1117(c)(2). To justify this award, plaintiffs note that the original AOT products were
priced at $19.00 at wholesale and $39.00 at retail. Kirakosian Decl., 11. Yet because
defendant priced the counterfeit AOT products much lower than plaintiffs wholesale


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price, at $12.00, plaintiffs were forced to sell the authentic AOT products at $15.00
wholesale. Kirakosian Decl., Ex. G. Plaintiffs have not estimated the revenue lost as a
result of defendants infringing conduct, or the profit reaped by defendant. Plaintiffs also
do not provide evidence of defendants number of confirmed sales or the true value of the
counterfeited products. However, plaintiffs do contend that defendants co-owner
represented that he sells hundreds of AOT products every week. Memorandum at 10.
Nonetheless, plaintiffs have adequately alleged that defendants conduct is willful.

A court may grant enhanced damages of up to $2,000,000 per counterfeit mark on a
finding of willful infringement. Id. The need to deter this type of willful conduct
warrants a damage award, however, the award need not be substantial to achieve this
goal. Coach, Inc. v. American Fashion Gift, CV 12-07647-MEF (RZx), 2013 WL
950938 (C.D. Cal. March 12, 2013) (noting that $10,000 in statutory damages was
sufficient where the record ma[de] clear that Coachs trademarks [were] highly valuable
and that Defendants acted willfully, and noting that any award would have a deterrent
effect on other would-be infringers and would discourage Defendants from committing
future infringement). Plaintiffs have been denied an opportunity to discover the full
extent of their actual damages and lost profits because defendant has failed to appear in
this action. Plaintiffs allege that the infringing products appear identical to AOT products
in all material respects, including the word mark and packaging. FAC 47, 5657.
Plaintiffs also argue that defendants sale of counterfeit AOT products is potentially
harmful to public health, as counterfeit AOT products are frequently made with shoddy
materials that are potentially harmful to the consuming public. Memorandum at 16.
The Court concludes that plaintiffs are entitled to $100,000 in statutory damages
for trademark infringement. The damages that [plaintiffs] seek are thus within the
allowable range set by Congress. Since the district court has wide discretion in
determining the amount of statutory damages to be awarded, the amount of money
requested does not weigh against the entry of default judgment. Sennheiser, 2013 WL
3811775, at *5 (quoting LA News Serv. v. Reuters Television Intl, Ltd., 149 F.3d 987,
996 (9th Cir. 1998)); see also Philip Morris, 219 F.R.D. at 500 (Given Defendants
infringing [conduct], the likelihood that its conduct would cause confusion or mistake or
otherwise deceive customers, and its failure to comply with the judicial process or to
participate in any way in the present litigation, the Defendant has engaged in willful use
of the counterfeit mark, which justifies the imposition of a substantial monetary award.).
Where, as here, plaintiffs seek statutory damages consistent with that to which


TOBACCO ET AL.
Plaintiff[s] [are] entitled by law ..., while the amount of money at issue is substantial, this
factor does not significantly weigh against granting default judgment. TVB Holdings
(USA), Inc. v. eNom, Inc., No. 13-cv-624-JLS-DFM, 2014 WL 3717889, at *3 (C.D.
Cal. July 23, 2014); see also Microsoft Corp. v. Nop, 549 F. Supp. 2d 1233, 1238 (E.D.
Cal. 2008) (after default, awarding statutory damages of $100,000 for each of seven
trademarks at issue and $30,000 for each of nine copyrights at issue, for a total of
$710,000). The Court thus finds that $100,000 in statutory damages is reasonably
proportionate to the willful harm that defendant has caused and will deter future
infringement.
2. Injunctive Relief
Plaintiffs seek a permanent injunction barring defendants use of its trademark and
patent. Memorandum at 18. Specifically, plaintiffs request that the court permanently
enjoin defendant from importing, purchasing, distributing, selling, offering for sale, or
otherwise using in commerce any counterfeit hookah products hearing AOT, Apple on
Top, or similar language, and assisting, aiding, or abetting any other person or entity in
importing, purchasing, distributing, selling, offering for sale, or otherwise using in
commerce any counterfeit hookah products bearing AOT, Apple on Top, or similar
language. FAC 10; Memorandum at 20.
The Lanham Act gives the Court the power to grant injunctions to prevent the
violation of any right of the registrant of a mark registered in the Patent and Trademark
office. 15 U.S.C. 1116(a). Furthermore, the Patent Act grants the Court the same
injunctive power. 35 U.S.C. 283. Injunctive relief is the remedy of choice for
trademark and unfair competition cases, since there is no adequate remedy at law for the
injury caused by a defendants continuing infringement. Century 21 Real Estate Corp.
v. Sandlin, 846 F.2d 1175, 1180 (9th Cir. 1998). A Court may grant a permanent
injunction if the plaintiff satisfies a four-factor test. eBay, Inc. v. MercExchange, LLC,
547 U.S. 388, 39293 (2006). Specifically, a plaintiff seeking a permanent injunction
must demonstrate: (1) that it has suffered irreparable injury; (2) that there is no adequate
remedy at law; (3) that, considering the balance of hardships between the plaintiff and
defendant, a remedy in equity is warranted; (4) that it is the publics interest to issue the
injunction. eBay, 547 U.S. at 391.


TOBACCO ET AL.
[W]hen a plaintiff establishes in a trademark infringement or unfair competition

action a likelihood of confusion, it is generally presumed that the plaintiff will suffer
irreparable harm if an injunction is not granted. Otter Prod., LLC v. Berrios, No. 13-cv-
4384-RSWL-AGRX, 2013 WL 5575070, *11 (C.D. Cal. Oct. 10, 2013). Furthermore,
[e]vidence of threatened loss of prospective customers or goodwill certainly supports a
finding of the possibility of irreparable harm. Stuhlbarg Intl Sales Co., Inc. v. John D.
Brush and Co., Inc., 240 F.3d 832, 841 (9th Cir. 2001). Plaintiffs pleadings show a
likelihood of confusion as to the origin of the infringing products, and thus a potential
loss of prospective customers, as well as harm to reputation and goodwill if the products
are inferior. FAC 4748. Therefore, the Court finds that plaintiffs will be irreparably
harmed by defendants continued use and infringement of plaintiffs AOT Mark.
Plaintiffs satisfy the second element concerning inadequate legal remedy.

Damage to reputation and loss of customers are intangible harms not adequately
compensable through monetary damages. Car-Freshner Corp. v. Valio, LLC, No. 2:14-
cv-01471-RFB-GWF, 2016 WL 7246073, *8 (D. Nev. Dec. 15, 2016). Plaintiffs allege
that unless enjoined, defendant will continue to infringe upon plaintiffs AOT Mark.
FAC 4748. Although, post-eBay, a court may no longer presume irreparable injury
from the bare fact of liability in a trademark or trade dress case, the injury caused by the
presence of infringing products in the marketsuch as lost profits and customers, as well
as damage to goodwill and business reputationwill often constitute irreparable injury.
Sennheiser, 2013 WL 3811775 at *10 (citations omitted). Plaintiffs adequately allege
that defendant had used and will continue to use counterfeit products. FAC 49.
Furthermore, plaintiffs contend that this use will create consumer confusion and damage
to their reputation and goodwill. FAC 4748; Memorandum at 19. See Wecosign,
Inc. v. IFT Holdings, Inc., 845 F. Supp. 2d 1072, 1084 (C.D. Cal. 2012) (if an injunction
were not granted, plaintiff would suffer irreparable injury from the ongoing damages to
its goodwill and diversion of customers to counterfeit services).
Furthermore, the balance of hardships favors plaintiffs as they will lose profits and
goodwill, while an injunction will only proscribe defendants infringing activities.
Wescosign, Inc. v. IFG Holdings, Inc., 845 F.Supp.2d. 1072, 1084 (C.D. Cal. Jan. 23,
2012). There is no indication that defendant will suffer hardship if a permanent
injunction is entered. Rather, an injunction will merely assure defendants compliance
with the Lanham Act and other laws governing trademark and patent infringement and
unfair competition. See Sennheiser, 2013 WL 3811775 *11.


TOBACCO ET AL.
Finally, an injunction is in the interest of the public because [t]he public has an
interest in avoiding confusion between two companies products. Internet Specialties
West, Inc. v. Milon-DiGiorgio Enters., Inc., 559 F.3d 985, 993 (9th Cir. 2009). Where
defendants concurrent use of plaintiffs trademark without authorization is likely to
cause confusion, the public interest is damaged by the defendants use. AT&T Corp. v.
Vision One Sec. Sys., No. 95-0565-IEG (BTM), 1995 WL 476251 *7 (S.D. Cal. July 27,
1995). Furthermore, there is a public interest in limiting counterfeited good made with
inferior products from entering the market. Counterfeit products made from inferior
materials may lead to members of the public becoming ill from smoking. Kirakosian
Decl. 13.
Therefore, the Court finds that plaintiffs have met the statutory and equitable
requirements for permanent injunctive relief as to the patent and trademark violations
asserted in the complaint. See Adobe Sys., Inc. v. Tilley, No. 09-cv-1085-PJH, 2010 WL
309249 *6 (N.D. Cal. Jan. 19, 2010) (granting a permanent injunction on a motion for
default judgment because, [i]n light of Defendants past infringement and their failure to
appear in this action, injunctive relief is warranted).
3. Attorneys Fees and Costs
Plaintiffs seek an award of reasonable attorneys fees. With respect to trademark

counterfeiting, reasonable attorneys fees and costs are mandated by statute. 17 U.S.C.
1117(b). Section 1117(a) gives the court discretion to award reasonable attorneys fees in
exceptional cases. 15 U.S.C. 1117(a). The term exceptional case is generally
accepted to mean cases in which trademark infringement is deliberate and willful. See
Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400, 1409 (9th Cir. 1993). Additionally, a
case may be deemed exceptional, and merit an award of attorneys fees under the
Lanham Act, when defendant disregards the proceedings and does not appear. See
Phillip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 502 (C.D. Cal.
Dec. 31, 2003).
Local Rule 55-3 determines attorneys fees for a default judgment pursuant to a
fixed percentage schedule. C.D. Cal. L.R. 55-3. For a judgment of over $100,000, the
schedule of attorneys fees allows $3,600 plus 4% of the amount of damages awarded
over $50,000. Id. Accordingly, because plaintiffs judgment for one trademark
infringement is $100,000, plaintiffs counsel is entitled to $5,600 in attorneys fees.


TOBACCO ET AL.
V. CONCLUSION
In accordance with the foregoing, the Court GRANTS plaintiffs motion for
default judgement with respect to plaintiffs claims for patent infringement, trademark
infringement and trademark counterfeiting, false designation of origin, unfair
competition, and injunctive relief.
It is hereby ordered that judgment be entered in favor of plaintiffs with respect to

these four claims and with respect to plaintiffs request for injunctive relief. Defendant
shall be liable to plaintiffs in the amount of $105,600, which is comprised of: (a)
$100,000 in statutory damages for trademark infringement; and (b) $5,600 in attorneys
fees. Costs shall be awarded pursuant to plaintiffs bill of costs. Plaintiffs shall submit a
Proposed Judgment in accordance with this order.
IT IS SO ORDERED.
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Case 2:16-cv-06097-CAS-PLA Document 127 Filed 09/11/17 Page 1 of 17 Page ID #:874

UNITED STATES DISTRICT COURT

CIVIL MINUTES GENERAL O

Present: The Honorable CHRISTINA A. SNYDER

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Plaintiffs allege the following facts.

Kirakosian is an individual residing in Los Angeles County. FAC 1. Kiraco is a

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Plaintiffs allege that defendant is infringing or inducing others to infringe by

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III. LEGAL STANDARDS

As a general rule, cases should be decided on the merits as opposed to by default,

A. Application of the Eitel Factors

1. Possibility of Prejudice to Plaintiff

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2. Substantive Merits and Sufficiency of the Claims

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Plaintiffs sufficiently allege the necessary requirements to demonstrate design

Plaintiffs allege trademark infringement under 15 U.S.C. 1114(1) of the Lanham

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Furthermore, there is evidence sufficient to support a finding of willful

c. False Designation & Unfair Competition

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Californias Unfair Competition Law (UCL) prohibits unfair competitions

3. The Sum of Money at Stake in the Action

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5. Possibility of Excusable Neglect

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6. Public Policy in Favor of Deciding the Merits

7. Conclusion Regarding the Eitel Factors

1. Damages for the Lanham Act Claims

Although 15 U.S.C. 1117(c) does not provide guidelines for determining an

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A court has wide discretion to determine the amount of statutory damages

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Nonetheless, plaintiffs have adequately alleged that defendants conduct is willful.

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[W]hen a plaintiff establishes in a trademark infringement or unfair competition

Plaintiffs satisfy the second element concerning inadequate legal remedy.

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3. Attorneys Fees and Costs

Plaintiffs seek an award of reasonable attorneys fees. With respect to trademark