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Volvo Car Corp. v. The Unincorporated Associations Identified In Schedule A

United States District Court, E.D. Virginia, Alexandria Division

January 17, 2019

VOLVO CAR CORPORATION, et al., Plaintiffs,
v.
THE UNINCORPORATED ASSOCIATIONS IDENTIFIED IN SCHDULE A, Defendants.

          REPORT & RECOMMENDATION

          Michael S. Nachmanoff United States Magistrate Judge.

         This matter comes before the Court on plaintiffs Volvo Car Corporation's (“Volvo Car”) and Volvo Trademark Holding AB's (“Volvo Trademark Holding”) (collectively, “plaintiffs”) Motion for Entry of Default Judgment (Dkt. No. 72). Having reviewed the record and the pleadings, the undersigned Magistrate Judge recommends entering default judgment in plaintiffs' favor for the reasons that follow.

         I. Procedural Background

         On August 7, 2018, plaintiffs filed a Complaint against the Unincorporated Associations Identified in Schedule A to the Complaint (collectively, “defendants”) alleging various claims of trademark infringement based on defendants' unauthorized use of counterfeit imitations of plaintiffs' federally-registered trademarks in connection with the sale, offering for sale, distribution, and/or advertising of infringing goods (Dkt. No. 1). Specifically, the Complaint alleges three counts against defendants, including: Trademark Infringement and Counterfeiting under Section 32 of the Lanham Act, 15 U.S.C. § 1114, for “selling, offering to sell, marketing, distributing, and advertising products using counterfeit reproductions” of plaintiffs' trademarks without plaintiffs' permission, ” Compl. (Dkt. No. 1) ¶¶ 32-38; False Designation of Origin under Section 43 of the Lanham Act, 15 U.S.C. § 1125(a), for “promoting, marketing, offering for sale, and sale” of counterfeit reproductions of plaintiffs' trademarks that created a likelihood of confusion, mistake, and deception among the general public as to the affiliation, connection, or association with plaintiffs or the origin, sponsorship, or approval of defendants' counterfeit products, id. at ¶¶ 39-43; and Trademark Dilution under Section 43 of the Lanham Act, 15 U.S.C. § 1125(c), for willfully and intentionally using plaintiffs' trademarks in connection with the advertisement, promotion, and sale of defendants' products, id. at ¶¶ 44-53.

         In the Complaint, plaintiffs seek the following relief: an order temporarily, preliminarily, and permanently enjoining and restraining defendants from engaging in their alleged unlawful conduct, id. at A; an order requiring third-parties in privity with defendants-including online marketplace platforms, web hosts, sponsored search engines or ad-word providers, credit cards, banks, merchant account providers, payment processing service providers, and internet search engines-to disable and cease providing services being used by defendants to engage in the sale of goods using plaintiffs' trademarks and displaying any advertisements used by defendants in connection with the sale of counterfeit and infringing goods using plaintiffs' trademarks, id. at B; an order requiring defendants to account for, or to pay plaintiffs, all profits realized by defendants arising from their unlawful conduct and that the amount of damages for infringing plaintiffs' trademarks be increased by a sum not exceeding three times the amount as provided under 15 U.S.C. § 1117, id. at C; in the alternative, an award of statutory damages for willful trademark counterfeiting under 15 U.S.C. § 1117(c)(2) of $2, 000, 000.00 for each and every use of plaintiffs' trademarks and $4, 000, 000.00 for those defendants that sell counterfeit goods, id. at D; and an award for reasonable attorneys' fees and costs, id. at E, among other relief the Court deems just and proper, id. at F.

         On August 8, 2019, plaintiffs filed a Motion for Order Authorizing Service of Process By Email because plaintiffs were unable to determine defendants' identities and actual physical locations due to defendants actively concealing their real identities and physical addresses (Dkt. No. 14); however, plaintiffs verified that defendants conduct foreign business via known email addresses and requested to serve defendants via those email addresses, id. The Court granted plaintiffs' motion on August 31, 2018 (Dkt. No. 26). On October 19, 2018, plaintiffs filed a Notice of Service of Defendants by Email stating that on October 17, 2018, plaintiffs emailed defendants a copy of the Verified Complaint, the individual defendant's summons, and the Court's August 31, 2018 Order to all defendants. Daniel S. Block Declr. (Dkt. No. 60) ¶¶ 4-5.[1]

         On August 9, 2018, plaintiffs filed an Ex Parte Motion for Temporary Asset Restraint and Expedited Discovery requesting the Court to issue a Temporary Restraining Order (“TRO”) freezing the assets of defendants' PayPal and AliPay accounts, restraining and enjoining the transfer of any monies held in such accounts, and to permit limited expedited discovery directed to PayPal, AliPay, and eBay to determine defendants' identity, the amount and location of the profits of defendants' counterfeiting and infringement, and the scope of defendants' activities (Dkt. No. 11). The Court granted plaintiffs' motion on August 31, 2018 (Dkt. Nos. 25).[2] On September 11, 2018, plaintiffs filed an Ex Parte Motion to Extend the Temporary Restraining Order until September 28, 2018 because AliPay had failed to freeze any of defendants' accounts, but was working diligently to effectuate the TRO (Dkt. No. 27). The Court granted the motion on September 12, 2018 (Dkt. No. 33). On September 26, 2018, plaintiffs moved for a Second Ex Parte Motion to Extend the Temporary Restraining Order until October 5, 2018 because AliPay still had not completed effectuating the TRO (Dkt. No. 37), which the Court granted on September 27, 2018 (Dkt. No. 41). On October 4, 2018, plaintiffs filed an Entry of a Preliminary Injunction seeking to freeze defendants' PayPal and Alipay accounts and to restrain and enjoin those accounts from transferring monies (Dkt. No. 42), which the Court granted that same day (Dkt. No. 49).

         On October 12, 2018, plaintiffs filed a Notice of Dismissal Under Rule 41(a)(1) seeking to dismiss the following defendants without prejudice: dkyang0753; fuwangwang105; manzhi881; shengyihonghonghuohuo17; xinlong199; xiyouji002; yypbws; gadgetsstorenet; sunnysportsfun; shinianzhien-5; fengguang2015; and nastyaangel247 (Dkt. No. 52). The Court granted the notice that same day (Dkt. No. 54). On October 26, 2018, plaintiffs filed a Notice of Agreed Stipulated Dismissal with Prejudice as to Certain Defendants because the following defendants agreed to terms and conditions representing a negotiated settlement of this action: andy.vipseller; kakeymall; surefa.yang; Tingtingonlinestore/jingcairensheng; tyskyacc; betterdeal2015; sprjiji3; xautoparts; and globaldrive (Dkt. No. 62). The Court granted plaintiffs' notice on October 29, 2018 (Dkt No. 64). On November 26, 2018, plaintiffs filed a second Notice of Dismissal Under Rule 41(a)(1) seeking to dismiss the following defendants without prejudice: Shop3109041 Store; Decoration My Car Store; and Car Accessories A Store (Dkt. No. 66). The Court granted this notice on November 27, 2018 (Dkt. No. 70).[3]

         On November 26, 2018, plaintiffs filed a Request for Clerk's Entry of Default (Dkt. No. 67), which the Clerk of Court entered on November 27, 2018 (Dkt. No. 69). On December 3, 2018, plaintiffs filed a Motion for Entry of Default Judgment (Dkt. No. 72), along with a Memorandum in Support of Plaintiffs' Motion for Entry of Default Judgment (Dkt. No. 73) and Notice of Hearing for December 14, 2018 (Dkt. No. 74), against the remaining defendants.[4] See Appendix A (listing defendants). Specifically, plaintiffs seek an order permanently enjoining defendants from making, using, selling or offering for sale unauthorized products containing plaintiffs' trademarks, Pls. Proposed Order (Dkt. No. 72-1) 1; a monetary judgment of $4, 000, 00.00[5] for infringing plaintiffs' trademarks, id.; an order requiring PayPal and Alipay to release plaintiffs' monies currently restrained in defendants' financial accounts as partial payment of the monetary judgment, id. at 1-2; and an order that until plaintiffs have recovered full payments of the monetary judgment, plaintiffs shall have an ongoing authority to serve a court order on PayPal or Alipay in the event that any new accounts controlled or operated by defendants are opened, among other instructions id. at 2. On December 14, 2018, counsel for plaintiffs appeared at the hearing on plaintiffs' Motion for Entry of Default Judgment before the undersigned and no claimant appeared on behalf of defendants (Dkt. No. 76). Accordingly, the motion is ripe for disposition.

         II. Factual Background

         Volvo Car and Volvo Trademark Holding are corporations organized under Swedish law and have principal places of business in Gothenburg, Sweden. Compl. (Dkt. No. 1) ¶¶ 5-6. Volvo Car is a world-famous automobile manufacturer that sells Volvo automobiles, genuine parts, and accessories (the “Volvo Car Products”) through a network of licensed Volvo Car dealerships throughout the United States. Id. at ¶ 8. The Volvo brand is one of the most well-recognized brands in the world. Id. at ¶ 9. For example, consumers have long associated the Volvo brand with “automobile safety” as evidenced in Consumer Reports that stated that “the Volvo brand is the ‘single, clear choice' for consumers that care about safety in automobiles, and that it ‘will be a challenge for [competing] automakers to close the gap with Volvo' to change perceptions of consumers with respect to Volvo brand and safety.” Id. Moreover, Brand Finance, a global brand valuation consultancy, recently ranked Volvo in the top 500 brands globally. Id.

         Plaintiffs are the owners of numerous federally-registered trademarks for automobiles, parts, accessories, and a long list of related services and merchandise (the “Trademarks”). Id. at ¶ 10. The Trademarks are valid, subsisting, in full force and effect, and many are incontestable pursuant to 15 U.S.C. § 1065. Id. at ¶ 11. Pursuant to an agreement with Volvo Trademark Holding, Volvo Car can “police and enforce” plaintiffs' trademarks in the United States. Id. at ¶ 7. Volvo Car incorporates these distinctive Trademarks in the design of its vehicles, vehicle parts, and vehicle accessories. Id. Plaintiffs' Trademarks “have been used exclusively and continuously by Volvo Car[] in relation to passenger cars and related goods and services for over 50 years, and have never been abandoned.” Id. Volvo Car spends millions of dollars in advertising, promoting, and developing plaintiffs' Trademarks and Volvo Car's trade dress, including their distinctive and famous VOLVO Mark, throughout the world. Id. at ¶ 15. Due to such advertising expenditures and significant sales of Volvo Car's products in the United States and internationally, plaintiffs' Trademarks have come to symbolize the brands' marketability, reputation, and goodwill. Id. at ¶¶ 11, 15.

         Defendants are individuals and business entities who, on information and belief, reside in China. Id. at ¶ 17. Defendants have gone to great lengths to conceal their identities and often use multiple fictitious names, business names, and addresses to register and operate their network of internet stores. Id. at ¶¶ 18, 27. Defendants further attempt to conceal their identity by regularly creating new websites and online marketplace accounts on various platforms as well as other unknown fictitious names and addresses. Id. at ¶ 27. Defendants operate in online marketplaces, including eBay, Alibaba, and AliExpress, by selling thousands of counterfeit goods bearing plaintiffs' Trademarks at substantially lower prices than genuine Volvo Car Products. Id. at ¶¶ 12, 17. Many of defendants' counterfeit goods were stamped with genuine Volvo Car product numbers and the online listings stated the goods were intended to fit original Volvo Car automobiles. Id. at ¶ 20. In July 2018, plaintiffs reviewed the offerings from each of defendants' internet stores on eBay and AliExpress and confirmed that defendants were in fact selling counterfeit Volvo Car Products. Id. at ¶ 20, 24.

         Defendants facilitate their sales by designing internet stores that appear to be authorized online retailers, outlet stores, or wholesalers. Id. at ¶ 25. Defendants “further perpetuate the illusion of legitimacy by purporting to offer ‘customer service' and using indicia of authenticity and security that consumers have come to associate with retailers, including the Visa®, MasterCard®, AliPay®, and/or PayPal® logos.” Id. Defendants also deceive consumers by using plaintiffs' Trademarks without authorization within the content, text, and/or meta tags of their websites to attract various search engines looking for websites relevant to consumer searches for Volvo Car Products. Id. at ¶ 26. Moreover, defendants use plaintiffs' Trademarks in product images while using strategic item titles and descriptions that will trigger their listings when consumers are searching for Volvo Car Products. Id. Accordingly, defendants, without any authorization or license from plaintiffs, have knowingly and willfully used and continue to use plaintiffs' Trademarks in connection with the advertisement, distribution, offering for sale, and sale of counterfeit Volvo Car Products into the United States and over the internet. Id. at ¶ 30. Defendants' conduct is likely to “cause and has caused confusion, mistake, and deception by and among consumers and irreparably harming [p]laintiffs.” Id. at ¶ 31.

         III. Jurisdiction, Venue, and Service of Process

         A court must have both subject matter and personal jurisdiction over a defaulting defendant before it can render a default judgment. The court has original subject matter jurisdiction under 15 U.S.C. § 1121(a) and 28 U.S.C. §§ 1331, 1338(a)-(b) because this action arises under federal law, the Lanham Act. Because defendants' contacts to Virginia are also the basis for the civil action, specific personal jurisdiction is the appropriate standard. See ALS Scan, Inc. v. Dig. Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir. 2002). In determining specific jurisdiction, courts consider “(1) the extent to which the defendant ‘purposefully avail[ed]' itself of the privilege of conducting activities in the State; (2) whether the plaintiffs' claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally ‘reasonable.'” Id. (internal citations omitted).

         Defendants satisfy each of these factors to establish specific personal jurisdiction. First, defendants purposefully availed themselves of conducting business in Virginia by seeking to do business with Virginia's residents through operating one or more commercial internet stores in which Virginia residents can purchase counterfeit products, targeting sales towards Virginia residents by operating online stores that offer shipping to the state, and accepting payment in U.S. dollars. See Compl. (Dkt. No. 1) ¶ 4. Second, this civil action arises directly from defendants' unauthorized and unlicensed sales of counterfeit products directed at Virginia. Id. at ¶¶ 23-24. Lastly, this Court's exercise of personal jurisdiction over defendants would be constitutionally reasonable. See, e.g., World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980) (determining what is constitutionally reasonably by looking at the burden on the defendant, the forum state's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, and the interstate judicial system's interest in obtaining the most effective resolution of controversies). Based on the record, there is no burden on defendants to litigate in this court given that majority of them did not even respond to the Complaint. Moreover, this court has an interest in adjudicating the dispute because courts have a “valid interest in the resolution of the grievances of its citizens and businesses….” CFA Inst. v. Inst. of Chartered Fin. Analysts of India, 551 F.3d 285, 297 (4th Cir. 2009). Because defendants have engaged in such conduct towards this judicial district, venue is also proper pursuant to 28 U.S.C. § 1391.

         Plaintiffs have properly effectuated service on defendants. On August 9, 2018 plaintiffs filed a Motion for Order Authorizing Service of Process By Email because plaintiffs verified that defendants conduct foreign business via known email addresses (Dkt. No. 14), which the Court granted on August 31, 2018 (Dkt. No. 26). On October 17, 2018, plaintiffs emailed defendants the Verified Complaint, the individual defendant's summons, and the Court's August 2018 Order in each service email. Daniel S. Block Declr. (Dkt. No. 60) ¶¶ 1-4. Plaintiffs believe that the emails were delivered to all defendants except for three, including Shop3109041 Store, Car Accessories A Store, and Decoration My Car Store, id. at ¶ 5, who were later dismissed from the action, see Dismissal (Dkt. No. 70) 1.

         IV. Standard

         Default judgment is appropriate if the well-pleaded allegations of the complaint establish that the plaintiff is entitled to relief, and the defendant has failed to plead or defend within the time frame set out in the rules. Fed.R.Civ.P. 55; see also Agri-Supply Co. v. Agrisupply.com, 457 F.Supp.2d 660, 662 (E.D. Va. 2006). By defaulting, the defendant admits the plaintiff's well-pleaded allegations of fact, which then provide the basis for judgment. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001) (quoting Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)); Partington v. Am. Int'l Specialty Lines Ins. Co., 443 F.3d 334, 341 (4th Cir. 2006). Nevertheless, “‘[a] court confronted with a motion for default judgment is required to exercise sound judicial discretion in determining whether the judgment should be entered, and the moving party is not entitled to default judgment as a matter of right.'” ReadyCap Lending, LLC v. Servicemaster Prof'l Cleaning, Inc., 2016 ...


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