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RPA International Pty Ltd v. Compact Intl Inc.

August 11, 2010

RPA INTERNATIONAL PTY LTD, DOING BUSINESS AS NUFURN PTY LTD; NUFURN INC; DENNIS MICHAEL KRAWCHUK, PLAINTIFFS,
v.
COMPACT INTL INC; LEE JOHNSON, AN INDIVIDUAL; PRE SALES INC; ERIC SEGAL, AN INDIVIDUAL; BZ GLOBAL SDN BHD; BZ GLOBAL HK LIMITED; CHEE CHOON CHEAH, AN INDIVIDUAL; KOK CHEONG SOO, AN INDIVIDUAL, DEFENDANTS.
CHEE CHOON CHEAH, AN INDIVIDUAL; KOK CHEONG SOO, AN INDIVIDUAL; COMPACT INTL INC; LEE JOHNSON, AN INDIVIDUAL; PRE SALES INC; ERIC SEGAL, AN INDIVIDUAL; BZ GLOBAL SDN BHD; BZ GLOBAL HK LIMITED, COUNTER CLAIMANT,
v.
RPA INTERNATIONAL PTY LTD, DOING BUSINESS AS NUFURN PTY LTD; NUFURN INC; DENNIS MICHAEL KRAWCHUK, COUNTER DEFENDANTS.



The opinion of the court was delivered by: Hayes, Judge

ORDER

The matter before the Court is Plaintiffs' Motion Seeking Entry of Money Judgments and a Permanent Injunction or Alternatively Partial Judgment Pursuant to Rule 54(b) Including a Permanent Injunction. (Doc. # 172).

BACKGROUND

On May 26, 2006, Plaintiffs initiated this action by filing the Complaint. (Doc. # 1). The Complaint alleges Plaintiff Dennis Michael Krawchuck owns Plaintiff RPA International Pty Ltd. and Plaintiff Nufurn, Inc. (collectively "Plaintiffs"). The Complaint alleges that Krawchuck is the owner of U.S. Patent No. 6, 969, 113 ("the 113 patent"), entitled "Folding Chair with Metal Inserts," which was issued to Krawchuck on November 29, 2005. Id. at ¶ 4. The Complaint alleges that the 113 patent concerns a resin folding chair invented by Krawchuck known as the "Gladiator chair." Id. The Complaint alleges Defendant Kok Cheong Soo is a director of Defendant BZ Global Sdn. Bhd, and Defendant BZ Global (H.K.) Limited (the "BZ Defendants"). Id. The Complaint alleges that Soo and the BZ Defendants infringed the 113 patent "by knowingly and purposefully importing, using, offering to sell, and/or selling infringing chairs within the United States" and by inducing others to do the same. Id. at ¶ 51-52. The Complaint alleges that Plaintiffs have been harmed by this infringement and that they will continue to be harmed unless the Court enters an injunction which bars Soo and the BZ Defendants from further infringement. Id. at ¶ 53. The Complaint also seeks damages to compensate Plaintiff for lost profits, as well as treble damages pursuant to 35 U.S.C. § 284, and attorneys' fees and costs. Id.

On May 25, 2007, Defendants PRE Sales, Inc. and Segal were dismissed from the action. (Doc. # 72). On May 31, 2007, Defendant Soo filed an Answer, Affirmative Defenses, and Counterclaim. (Doc. # 74). The Answer alleges that Plaintiffs RPA and Nufurn lack standing to sue, that the patent is invalid, that the patent is being misused, that Plaintiffs are barred from recovery by unclean hands, that Soo is authorized to use the patent, that Defendants have not infringed, that Plaintiffs have not lost profits, and that the patent is unenforceable. Id.

The Counterclaim alleges that Soo was an inventor of the patent, and that he reached an agreement with RPA to receive five percent of the sales price of the newly designed chairs, and ten percent if he was the source of the sale. Id. at ¶ 23. The Counterclaim alleges that Soo assisted RPA in seeking patent protection for the Gladiator chair with the understanding that he would be listed as an inventor. Id. at ¶ 24. The Counterclaim alleges that Soo is "the actual inventor and designer" of the Gladiator chair. Id. The Counterclaim alleges that Krawchuck listed himself as the sole inventor of the Gladiator chair, even though he was not, in fact, the inventor. Id. The Counterclaim alleges that RPA failed to make payments to Soo pursuant to the parties' agreement. Id.

The Counterclaim alleges the following claims for relief: (1) correction of inventorship, which seeks a declaration that Soo and/or Defendant Chee Choon Cheah are the inventors of the 113 patent pursuant to 35 U.S.C. § 256; (2) declaration and transfer of ownership, which seeks a declaration that Soo and/or Cheah are the owners of the 113 patent; (3) declaration that the 113 patent is invalid pursuant to 35 U.S.C. § 101, et seq., on grounds that the omission of Soo and Cheah as inventors was done with deceptive intent; (4) declaration of unenforceability, on grounds that Krawchuck deceived the Patent and Trademark Office by omitting to reference Soo and Cheah's roles as inventors; (5) infringement of the 113 patent on grounds that RPA and Krawchuck have unlawfully offered for sale, sold, manufactured and used the 113 patent; (6) breach of contract on grounds that RPA failed to pay Soo five percent of the price of tables and chairs purchased by RPA and an additional ten percent of the price of sales if Soo was the source of the sales pursuant to the parties' agreement; (7) unjust enrichment on grounds that Soo and/or Cheah conferred a substantial benefit on Krawchuck by creating the Gladiator chair, and that it is unjust for Plaintiffs to retain this benefit without conferring any benefit upon Soo or Cheah; (8) quantum meruit/misappropriation of ideas/ breach of implied contract on grounds that Plaintiffs misappropriated the ideas of Soo and Cheah, and profited therefrom; (9) federal unfair competition on grounds that Plaintiffs made misrepresentations with respect to the 113 patent which violate the Lanham Act, 15 U.S.C. section 1125; (10) unfair competition/ false advertising in violation of sections 17200 and 17500 of the California Business and Professions Code; and (11) interference with contract and actual and/or prospective economic advantage on grounds that Plaintiffs/Counterclaim Defendants are aware of their business and economic and contractual relationships with Defendants/Counterclaim Plaintiffs, and "have charged one or more of the Counterclaim Plaintiffs and their customers with infringing the Mr. Krawchuck patent, knowing that such patent is invalid, unenforceable, non-infringed, and in fact rightfully owned by Soo and/or Mr. Cheah as the true inventor." Id., ¶¶ 98-99.

On October 19, 2007, an order of default was entered as to Defendants Compact Intl Inc., BZ Global Sdn Bhd, and BZ Global HK Limited. (Doc. # 99). On January 31, 2008, an order of default was entered as to Defendants Johnson and Cheah. (Doc. # 110). On January 31, 2008, the Court held that default judgment against Defendants Compact Intl Inc., BZ Global Sdn Bhd, BZ Global HK Limited, Johnson and Cheah was not proper "at this stage of the proceedings because there are claims proceeding against Defendant Kok Cheong Soo." Id. at 6.

On July 28, 2008, Soo, the only remaining and active Defendant in this case, filed a motion for summary judgment. (Doc. # 112). The motion for summary judgment stated in full:

Defendant's Answer, Affirmative Defenses and Counterclaims were filed on September 13, 2006 and subsequently on May 31, 2007 the Amended Answer, Affirmative Defenses and Counterclaims were filed.

Defendant has been hurt by this action of Plaintiffs and respectfully moves this Court for summary judgment on all Counterclaims against Plaintiffs.

Id. at 1-2. On November 3, 2008, the Court issued an order denying Soo's motion for summary judgment. (Doc. # 118). The Court found that, other than the vague assertion that "Defendant has been hurt," the motion for summary judgment did not identify any basis in fact or in law, undisputed or otherwise, which would justify granting summary judgment. Id. at 2. The Court concluded that Soo has failed to satisfy his initial burden of establishing the absence of a genuine issue of material fact as required by Rule 56 of the Federal Rules of Civil Procedure. Id.

On April 27, 2009, Plaintiffs filed their Renewed Motion for Summary Judgment, pursuant to Rule 56(a) of the Federal Rules of Civil Procedure. (Doc. # 143). On July 14, 2009, the Court granted Plaintiffs' Motion Renewed Motion for Summary Judgment. (Doc. # 149). The Court held that Soo had willfully infringed on Plaintiffs' patent, and granted summary judgment in favor of Plaintiffs and against Soo on that claim. Id. at 11-12. The Court granted summary judgment in favor of Plaintiffs and against Soo on his counterclaims for his first through fifth claims for correction of inventorship, declaration and transfer of ownership, declaration of invalidity, declaration of unenforceability, and infringement. Id. at 12. The Court held that "Soo does not dispute that these claims rely on Soo's assertion that he is an inventor of [the Gladiator chair,] yet Soo has failed to submit any evidence that Soo is" in fact the inventor. Id. The Court also granted summary judgment in favor of Plaintiffs and against Soo on the ninth claim for unfair competition under federal law. Id. As to that claim, the Court held that there was no genuine issue of material fact as to whether Plaintiffs had misrepresented their rights under the 113 patent. Id. at 13. The Court declined to exercise supplemental jurisdiction over Soo's state law counterclaims because it had already dismissed his federal claims. Id. On July 16, 2009 a judgment was entered on the claims that were adjudicated by the Court's order. (Doc. # 150).

On July 30, 2009, Plaintiffs filed their Motion to Revise the Court's Summary Judgment Order and to Enter a Permanent Injunction. (Doc. # 151). Pursuant to the Local Rules of Civil Procedure, Soo's opposition was due on August 24, 2009. On October 23, 2009, Soo filed an Ex Parte Motion for Extension of Time to File a Response. (Doc. # 154). Soo stated that he is proceeding pro se and only learned of the pending Motion to Revise the Court's Summary Judgment Order and to Enter a Permanent Injunction on October 17, 2009, because he did not receive the Notice of Electronic Filing. Id. at 2. Soo sought an extension until December 14, 2009 to file his opposition. Id. at 3. The Court granted Soo's motion and ordered Plaintiffs to file any reply to Soo's opposition by December 21, 2009. (Doc. # 156). Soo filed a response and more than 500 pages of exhibits on December 14, 2009. (Docs. # 156-163). Plaintiffs filed a reply on December 21, 2009. (Doc. # 165).

After reviewing Soo's filings, the Court concluded that one of Soo's filings, a Proposed Motion for Relief from Summary Judgment Order (Doc. # 163) should be construed as a Motion for Reconsideration of the Court's order granting summary judgment in favor of Plaintiffs and against Soo. On January 25, 2010, the Court ordered Plaintiffs to file a response on or before Tuesday, February 9, 2010 and gave Soo until February 23, 2010 to file any reply. (Doc. # 169).

On March 10, 2010, the Court issued an order denying Soo's Motion for Reconsideration and granting in part and denying in part Plaintiffs' Motion to Revise the Court's Summary Judgment Order and to Enter a Permanent Injunction. (Doc. # 170). The Court vacated the judgment which was entered on July 16, 2009. Id. at 11. Because the prior judgment was entered in error prior to the termination of the proceedings, the Court held that a permanent injunction was not appropriate at that stage in the proceedings. Id. The Court ordered the parties to file any further motions within 60 days of the date of the order. Id. at 12.

On April 27, 2010, Plaintiffs filed their Motion Seeking Entry of Money Judgments and a Permanent Injunction or Alternatively Partial Judgment Pursuant to Rule 54(b) Including a Permanent Injunction. (Doc. # 172). The submission date for the motion was June 7, 2010. Id. at 1. Pursuant to the Local Rules of Civil Procedure, any opposition was due on May 24, 2010. To date, no opposition has been filed. Plaintiffs had initially requested oral argument, but withdrew their request on May 28, 2010 due to the lack of opposition. (Doc. # 173).

ANALYSIS

Plaintiffs seek damages against the defaulted Defendants, treble damages against Soo and Soo's companies, attorneys' fees from Soo and Soo's companies, costs, and a permanent injunction against all Defendants . (Doc. # 171-1 at 7).

I. Default Judgment and Damages As to Defaulted Defendants

Plaintiffs contend that default judgment and damages are appropriate as to the defaulted Defendants, Compact Intl Inc., BZ Global Sdn Bhd, BZ Global HK Limited, Johnson and Cheah, because Plaintiffs will be "without other recourse for recovery" if default judgment is not granted. Id. at 16. Plaintiffs contend that the amount of money requested is reasonable in light of the defaulted Defendants' repeated and willful commercial infringement of Plaintiffs' patent. Id. at 17. Plaintiffs contend that damages for "lost profit on known infringing sales" are calculable without an evidentiary hearing. Id. Plaintiffs contend it is clear from the record that the defaulted Defendants did not default due to excusable neglect because all of the Defendants entered appearances and were warned by the magistrate judge and this Court that failure to comply with discovery orders would result in default. Id. at 22. Plaintiffs contend that the defaulted Defendants' willful default has made it impossible to resolve the case on the merits and that Plaintiffs should therefore receive default judgment and damages. Id. Plaintiffs contend that damages of $51,205 are proper because Plaintiffs can establish the number of infringing chairs the defaulted Defendants imported as well as the amount of lost profit per chair. Id. at 24. Plaintiffs contend Compact Intl, Johnson, and Cheah imported 2,660 infringing shares. Id. at 25. Plaintiffs contend they lost $19.25 in profit for each infringing chair. Id.

"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." TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (quotation omitted). "Plaintiff is required to prove all damages sought in the complaint. In addition, '[a] judgment by default shall not be different in kind [or] exceed in amount that prayed for in the [complaint].' In determining damages, a court can rely on the declarations submitted by the plaintiff or order a full evidentiary hearing. . . . If proximate cause is properly alleged in the complaint, it is admitted upon default. Injury is established and plaintiff need prove only that the ...


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