The opinion of the court was delivered by: Carolyn K. Delaney United States Magistrate Judge
FINDINGS AND RECOMMENDATIONS
Presently pending before the court is plaintiff's motion for default judgment.*fn1
(Dkt. No. 12.) The motion was previously submitted on the record without oral argument. Upon review of the papers in support of the motion, and good cause appearing therefor, THE COURT FINDS AS FOLLOWS: BACKGROUND*fn2
Plaintiff Premier Pool Management Corp. ("PPMC"), through its licensee Premier Pool & Spa, Inc. ("PPS") has offered swimming pool and spa construction services under the mark PREMIER POOLS & SPAS (the "PPMC Mark") since December 12, 1989 and in interstate commerce since at least 2001. (See Complaint, Dkt. No. 1 ["Compl."] ¶ 8.) PPMC itself offers a full range of marketing services, including website management, creation of printed marketing materials, search engine optimization ("SEO") pay per click online ad management, and licensing of the PPMC Mark to pool construction companies throughout the United States. (Compl. ¶ 8.) According to PPMC, internet advertising is a major component of its advertising services to its licensees -- PPMC, through vendors, seeks to ensure that its licensees' websites appear prominently in internet search results for pool construction companies. (Compl. ¶ 9.)
Around June 2006, PPS applied to register the PPMC Mark with the United States Patent and Trademark Office ("USPTO"), but was refused registration based on an alleged conflict with a prior registration for the mark PREMIER POOLS CONSTRUCTION, INC. (the "PPCI Mark") owned by Premier Pools Construction, Inc. ("PPCI"), a Florida pool construction company. (Compl. ¶ 10.) Negotiations with PPCI to obtain PPCI's consent for registration of the PPMC Mark proved unsuccessful, and PPS abandoned its trademark application around May 2007, but continued to offer pool and spa construction services under the PPMC Mark. (Compl. ¶ 11.)
On December 27, 2007, PPCI filed a new application to register the PPCI Mark with USPTO and on June 12, 2008, the USPTO cancelled the prior registration of the PPCI Mark for failure to renew the registration. (Compl. ¶ 12.) On February 27, 2009, the USPTO issued a new registration for the PPCI Mark -- U.S. Trademark Reg. No. 3,574,382. (Compl. ¶ 12.)
Around August 2011, PPMC began searching for a new vendor to assist with its SEO services. (Compl. ¶ 14.) Thereafter, in late August/early September 2011, PPMC entered into an agreement with a company named SmartPro for SEO services. (Compl. ¶ 14.) SmartPro is owned, operated, and managed by two brothers, defendants Franklin Dean Lusk and Jason Lusk. (Compl. ¶¶ 5-6, 13.)
Around this same time, on August 4, 2011, PPCI's president, Kevin Boissy, contacted PPMC's president, Paul Porter, to inquire whether PPMC was still interested in acquiring the PPCI Mark registration. (Compl. ¶ 15.) Mr. Boissy indicated that PPCI wanted to sell the registration, because Boissy was interested in winding down the business, PPCI only built a couple of pools a year, and it only built pools in central Florida. (Compl. ¶ 15.) After Boissy suggested a sale price of $5,000, Porter accepted the offer and sent Boissy a draft agreement for the assignment around September 4, 2011 as agreed. (Compl. ¶ 15.) However, later that month, PPCI's attorney notified Porter that another party had made a higher offer for the PPCI Mark registration and invited Porter to increase PPMC's $5,000 offer. (Compl. ¶ 16.) Porter refused, stating that he believed that he had already purchased it based on his acceptance of Boissy's earlier offer. (Compl. ¶ 16.) He also stated additional money was not warranted because of Boissy's statement to him that PPCI only built pools in Florida, which Porter understood made the PPCI Mark registration invalid based on PPCI's failure to use the PPCI Mark in interstate commerce. (Compl. ¶ 16.)
Subsequently, on October 18, 2011, defendant Dean Lusk requested to meet with PPMC's Retail Division President, Rob Carter. (Compl. ¶ 17.) Carter met with defendant Dean Lusk and his "partner," Hamilton Leonard, on October 20, 2011. (Compl. ¶ 17.) At the meeting, defendant Dean Lusk explained to Carter that, in the course of SmartPro's work for PPMC, he discovered that the only national trademark registration related to the words "Premier Pools" was owned by PPCI. (Compl. ¶¶ 18-20.) Upon speaking with PPCI, defendant Dean Lusk had also learned of Porter's past efforts to purchase the PPCI Mark registration. (Compl. ¶ 20.) Further research revealed that there were approximately 30 companies doing business in the United States that were using some form of the phrase "Premier Pools" in their business listings. (Compl. ¶ 21.) Defendant Dean Lusk discussed the situation with his brother, defendant Jason Lusk, who confirmed that they could "turn the lights out" on PPMC's efforts to market and advertise on the web, as well as force the discontinuation of any website use if SmartPro obtained the PPCI Mark registration. (Compl. ¶ 21.)
Defendant Dean Lusk told Carter that although he did not have the funding to purchase the registration on his own, he and Leonard decided that there was "an opportunity to profit by securing the PPCI Mark registration by forcing anyone and everyone who was using "Premier Pools" in their business listing to pay to use the trademark." (Compl. ¶ 22.) Leonard then informed Carter that he had in fact purchased the PPCI Mark registration for $140,000 and listed defendant Dean Lusk as the assignee. (Compl. ¶ 23.) Leonard stated that "with one letter to Google, Microsoft, Yahoo, and all web hosting companies, they could negatively impact PPMC's and all of its licensees [sic] ability to do business by convincing search engines and hosting companies to stop PPMC from any form of internet marketing and they could get all of PPMC's websites shut down immediately." (Compl. ¶ 24.)
When Carter asked what they wanted to allow PPMC and its licensees to continue to use their names, Leonard replied: "I want to get my investment of $140,000.00 out of it and one of several options that will allow me and Dean to have passive income on an indefinite basis." (Compl. ¶ 23.) Leonard then proposed three options to Carter:
Option "A" - SmartPro uses the trademark to approach all existing PPMC licensees and demand that if they wanted to continue using the Premier Pools name, each licensee would have to begin paying an annual royalty of $6,000.00 to $10,000.00.
Option "B" - SmartPro allows all current licensees to use the name, assigns the PPCI Registration to PPMC, and in turn they would police the use of the name in the United States and go after all of the other 30 non Premier Pools licensees and force them to become a PPMC licensee, pay SmartPro a royalty of $6,000.00-$10,000.00 per month indefinitely, or cease doing business under the Premier Pools name.
Option "C" - PPMC "pays an astronomical sum to purchase the trademark from Dean and Hamilton." (Compl. ¶ 25.) Defendant Dean Lusk and Leonard further indicated that if PPMC did not participate in their offer, they would contact PPMC's current licensees, as well as all other entities doing business with Premier Pools in their name, to become trademark licensees of theirs. (Compl. ¶ 27.) Carter conveyed the above information and offer to Porter, and on October 21, 2011, Carter informed defendant Dean Lusk that PPMC would not accept the offer. (Compl. ¶ 28.)
Thereafter, on October 24, 2011, PPMC received an e-mail from one of its web hosting vendors, Rackspace, informing PPMC that it had received a complaint from defendant Dean Lusk regarding PPMC's use of the PPMC Mark on a website hosted by Rackspace. (Compl. ¶ 29.) The complaint alleged that defendant Dean Lusk was the owner of the PPCI Mark registration, that PPMC did not have permission to use the term "Premier" in connection with its licensee's pool construction services, and that Rackspace should immediately cease and desist any hosting services provided to PPMC. (Compl. ¶ 29.) On October, 26, 2011, PPMC's counsel responded stating that defendant Dean Lusk did not have any legitimate trademark rights in connection with the PPCI Mark registration and that his complaint was an attempt to harass PPMC and its licensees. (Compl. ¶ 30.) Nevertheless, when Rackspace indicated that it would disable access to the site if the allegedly infringing mark was not removed, PPMC was compelled to enter into a new agreement with another company to provide hosting services to PPMC's licensees' websites, resulting in additional expenses. (Compl. ¶¶ 31-32, 51.)
Additionally, on October 27, 2011, PPMC discovered that SmartPro had placed an internet advertisement on YouTube for pool construction services in connection with the mark PREMIER POOLS AND SPAS, i.e. the PPMC Mark, in some markets in which PPMC licensees currently offer their services. (Compl. ¶ 33.) According to PPMC, this advertisement demonstrates that SmartPro is acting on defendant Dean Lusk's stated intent to offer licenses for use of the PPMC Mark to competitors of PPMC's licensees. (Compl. ¶ 33.)
On November 2, 2011, plaintiff PPMC filed the instant action against defendants Franklin Dean Lusk and Jason Lusk d/b/a SmartProSEO, containing causes of action for: (1) federal unfair competition under 15 U.S.C. § 1125(a); (2) cancellation of trademark registration under 15 U.S.C. § 1119; (3) intentional interference with contractual relations; and (4) unfair business practices under Cal. Bus. & Prof. Code § 17200 et seq. (Dkt. No. 1.)*fn3 A declaration of service filed with the court demonstrates that defendant Dean Lusk was properly served with process on January 12, 2012 by substituted service pursuant to Fed. R. Civ. P. 4(e)(1) and Cal. Civ. Proc. Code § 415.20(b), under which service was effective on the 10th day after the January 12, 2012 mailing, i.e. on January 22, 2012. (Dkt. No. 6.) PPMC's counsel also sent a copy of the complaint to the attorney defendant Dean Lusk had previously retained to handle the assignment of the PPCI Mark. (Dkt. No. 12-3, ¶ 5, Ex. B.) The attorney replied stating that, although he had handled the assignment, he was not representing defendant Dean Lusk in any other matter, but would forward the complaint to the last known e-mail address he had for defendant Dean Lusk. (Dkt. No. 12-3, ¶ 5, Ex. C.)
When defendant Dean Lusk failed to respond to the complaint within the required time, PPMC filed a request for entry of default on February 17, 2012. (Dkt. No. 9.) That same day, PPMC also dismissed its claims against defendant Jason Lusk without prejudice pursuant to Fed. R. Civ. P. 41(a). (Dkt. No. 8.) On February 21, 2012, the clerk entered defendant Dean Lusk's default. (Dkt. No. 10.) Subsequently, on March 14, 2012, PPMC filed the instant motion for default judgment against defendant Dean Lusk. (Dkt. No. 12.) The motion seeks a default judgment awarding injunctive relief, costs, and attorneys' fees. No response to the motion has been filed.
Pursuant to Fed. R. Civ. P. 55, default may be entered against a party against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend against the action. See Fed. R. Civ. P. 55(a). However, "[a] defendant's default does not automatically entitle the plaintiff to a court-ordered judgment." PepsiCo, Inc. v. Cal. Sec. Cans., 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)); see Fed. R. Civ. P. 55(b) (governing the entry of default judgments). Instead, the decision to grant or deny an application for default judgment lies within the district court's sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court may consider the following factors:
(1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily disfavored. Id. at 1472.
As a general rule, once default is entered, well-pleaded factual allegations in the operative complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); see also Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). Although well-pleaded allegations in the complaint are admitted by a defendant's failure to respond, "necessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)); accord DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) ("[A] defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law" (citation and quotation marks omitted); Abney v. Alameida, 334 F. ...