The opinion of the court was delivered by: Honorable Manuel Real United States District Judge
ORDER GRANTING PRELIMNARY INJUNCTION
Date Action Filed: June 15, 2012 Trial Date: None Set
On June 15, 2012, Plaintiff Innersvingen AS ("Plaintiff") filed a Complaint against Defendant Sports Hoop, Inc. ("Sports Hoop"), Kun Yuan Lin aka Kwan Lin ("Lin"), Linbos Corporation ("Linbos") and Boslin Co. Limited ("Boslin") (collectively, "Defendants").
In its Complaint, Plaintiff alleged that each Defendant, individually and in concert with the other Defendants has: (1) with full knowledge of its terms, breached or intentionally interfered with the November 11, 2011 Exclusive License Agreement ("Exclusive License") between Plaintiff and Sports Hoop, which granted Plaintiff the Exclusive License to promote, sell, and distribute Sports Hoop's weighted hula hoops throughout Europe; (2) used a shell company (Boslin) to promote, sell, and distribute Sports Hoop's weighted hula hoops throughout Europe in violation of the Exclusive License; and (3) unlawfully sold Defendants' products in Plaintiff's exclusive territory under Plaintiff's registered Powerhoop® trademark, packaging and trade dress.
Plaintiff has asserted claims for interference with contract, interference with prospective economic advantage, breach of contract, breach of implied covenant of good faith and fair dealing, declaratory relief, injunctive relief, and restitution for violation of Section 17200 of the California Business and Professions Code.
On June 19, 2012, pursuant to Federal Rules of Civil Procedure Rule 65 and Civil Rules 65-1 and 7-19, Plaintiff moved ex parte on its claims against Defendants for a Temporary Restraining Order ("TRO") and an Order to Show Cause Why a Preliminary Injunction Should Not Issue.
On June 22, 2012, this Court issued a Temporary Restraining Order to prevent immediate and irreparable injury to Plaintiff and set the Order to Show Cause ("OSC") regarding the preliminary injunction, and to preserve the status quo. Defendants were ordered to show cause, why the preliminary injunction should not issue on June 29, 2012. The parties subsequently stipulated to maintain the TRO and postpone the hearing on the OSC until July 13, 2012.
On July 13, 2012, after consideration of the briefs and evidence filed in support of and in opposition to the OSC and Plaintiff's ex parte application, the arguments of counsel, and upon good cause shown, the Court hereby enters this Preliminary Injunction against Defendants, as follows:
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In the Ninth Circuit, a plaintiff is entitled to a preliminary injunction if it demonstrates: (1) a likelihood of success on the merits, (2) a likelihood of irreparable harm that would result if an injunction were not issued, (3) the balance of equities tips in favor of the plaintiff, and (4) an injunction is in the public interest. Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008); Storman's, Inc. v. Select, Inc., 586 F.3d 1109 (9th Cir. 2009).
Plaintiff is entitled to preliminary relief to stop Defendants' trademark infringement and breach of Plaintiff's exclusive license. First, Plaintiff has established a likelihood of success on the substantive merits of its action. Plaintiff entered into an agreement with Defendant Sports Hoop, Inc. to promote, sell, and distribute Sports Hoop's weighted hula hoops throughout Europe. That agreement included an exclusive license to Plaintiff. Plaintiff has submitted declarations of its employees and others which demonstrate that Defendants are selling their products directly to consumers in Europe and are using other importers and wholesalers as agents to do so as well and have continued to do so despite this Court's prior Order. Moreover, Defendants submit in their Opposition that they are now selling their own hoops in Europe in an effort to mitigated damages caused by an alleged breach by Plaintiff. Defendants' actions are in direction breach of the exclusive license agreement granted to Plaintiff.
Plaintiff has also submitted evidence demonstrating that it faces irreparable harm if preliminary relief is not issued. Injunctive relief is generally not available if an adequate legal remedy exists. In cases involving a breach of contract, damages are presumed to be sufficient and no equitable remedy will be provided. However, Plaintiff's action is not merely a breach of contract case. In the Ninth Circuit, "[e]vidence of threatened loss of prospective customers or goodwill certainly supports a finding of the possibility of irreparable harm." Stuhlbarg Int'l Sales Co., Inc. v. John D. Brush & Co., 240 F.3d 832, 841 (9th Cir. 2001). Here, Plaintiff has submitted evidence establishing that Defendants' actions are causing the loss of customers and goodwill that Plaintiff had spent significant time, money, and effort in cultivating. Defendants are violating the exclusive license by unlawfully selling substandard products under Plaintiff's "Powerhoop" trademark, and have continued to do so in direct violation of the Court's TRO. This action has angered customers who believe they are being overcharged for Plaintiff's authentic products. In addition, "irreparable injury may be presumed" in cases of trademark infringement. Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1066 (9th Cir. 1999).
Further, the balance of equities favors Plaintiff. Defendant Sports Hoop, Inc. granted an exclusive license to Plaintiff to market the Powerhoop in Europe. However, Defendants are selling similar but substandard products in violation of the exclusive license agreement. By contrast, Plaintiff's significant efforts to cultivate a customer base and goodwill may be permanently damaged if Defendants' actions are not enjoined, which will likely harm Plaintiff's long-term prospects in the European market. Enjoining Defendants' sales in Europe will do nothing more than provide them with the benefit of their bargain.
Finally, preliminary injunctive relief is in the public interest. The public has a significant interest in preventing fraud and public confusion surrounding the sale of substandard products which are held out as authentic ones. See Boston Telecommunications Group, Inc. v. Wood, 588 F.3d 1201, 1207 (9th Cir. 2009). Defendants are California citizens and corporations. Some of those corporations appear to be alter egos established simply for the purpose of circumventing the exclusive license agreement entered with Plaintiff. Defendants' actions are causing confusion ...