The opinion of the court was delivered by: Hon. John F. Walter United States District Judge
FINAL JUDGMENT AND PERMANENT INJUNCTION AGAINST DEFENDANTS EZCOM, INC. D/B/A TRICOM COMMUNICATIONS AND MICHAEL LI WU; DAMAGES AWARDED AGAINST DEFENDANT EZCOM, INC. D/B/A TRICOM COMMUNICATIONS
Judge: Hon. John F. Walter Courtroom: 16 Complaint Filed: January 9, 2012 Trial Date: January 29, 2013
Sprint Nextel Corporation, Boost Worldwide, Inc., and Virgin Mobile USA, L.P. ("Sprint Nextel"), brought the above-captioned lawsuit against Defendants EZCOM, Inc. d/b/a Tricom Communications and Michael Li Wu ("Defendants"), alleging that Defendants are engaged in an unlawful enterprise involving the acquisition, sale, and alteration of large quantities of Sprint Nextel, Boost Mobile, and Virgin Mobile wireless telephones designed for use on Sprint affiliated wireless service (collectively, "Sprint Nextel Handsets" or "Handsets") and activation materials, including but not limited to SIM cards, that causes substantial and irreparable harm to Sprint Nextel (the "Bulk Handset Trafficking and Activation Scheme"). Defendants perpetrate the Bulk Handset Trafficking and Activation Scheme by acquiring bulk quantities of Sprint Nextel Handsets, which often include Sprint Nextel SIM cards, from retail stores, such as Best Buy, Wal-Mart or Target. Defendants solicit others to purchase Sprint Nextel Handsets and SIM cards in bulk for their benefit. Defendants acquire the Sprint Nextel Handsets with the actual or constructive knowledge and intent that the Handsets will not be activated for use on the Sprint Nextel wireless network, but that the Handsets will be computer-hacked. The purpose of this hacking, known as "unlocking," is to erase, remove, and/or disable proprietary software installed in the Handset, which enables the use of the Sprint Nextel Handsets exclusively on Sprint Nextel's wireless system. The unlocked Handsets are then trafficked and resold overseas at a premium under the Sprint Nextel trademarks for unauthorized use outside of Plaintiff's wireless system, and the SIM cards that come with the handsets are illicitly sold and/or fraudulently activated to misappropriate airtime.
Sprint Nextel Handsets are sold subject to terms and conditions ("Terms and Conditions") which conspicuously restrict and limit the sale and use of the Sprint Nextel Handsets. These Terms and Conditions are set forth in printed inserts that are included in the packaging with every Sprint Nextel Handset and are also available to the public on the Sprint Nextel websites. The Terms and Conditions are also referenced in printed warnings that are placed on the outside of the retail packaging of the Handsets. The Terms and Conditions and language on the packaging constitute a valid and binding contract.
Pursuant to the Terms and Conditions and the language on the packaging, purchasers of Sprint Nextel Handsets agree, among other things, not to resell Sprint Nextel products or services (including the Handsets), and not to use the Handsets for any purpose that could damage or adversely affect Sprint Nextel.
As a result of the Defendants' involvement in the Bulk Handset Trafficking and Activation Scheme, Sprint Nextel has asserted claims against Defendants for breach of contract, federal trademark infringement and false advertising under 15 U.S.C. § 1125(a)(1)(A) and (B), contributory trademark infringement, tortious interference with business relationships and prospective advantage, civil conspiracy, unjust enrichment, conspiracy to induce breach of contract, false advertising in violation of California Business & Professions Code § 17500 et seq., unfair competition in violation of California Business & Professions Code § 17200 et seq., harm to Sprint Nextel's goodwill and business reputation, and violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq. Based on the respective positions advocated by the parties, and having reviewed the Complaint and file and being otherwise duly and fully advised in the premises, it is hereby
ORDERED, ADJUDGED and DECREED that:
1. This Court has jurisdiction over all the parties and all of the claims set forth in Sprint Nextel's Complaint.
2. The Court finds that Sprint Nextel has the right to use and enforce said rights in the standard character marks Sprint, Boost Mobile, payLo, Assurance, and Virgin Mobile, and the stylized Sprint and Boost Mobile Marks (collectively, the "Sprint Nextel Marks"), as depicted below:
Sprint Nextel uses the Sprint Nextel Marks on and in connection with its telecommunications products and services. The Sprint Nextel Marks are valid, distinctive, protectable, famous, have acquired secondary meaning, and are associated exclusively with Sprint Nextel and Boost Mobile.
3. The Court finds that the Terms and Conditions and the language in and on the packaging constitute a valid and binding contract enforceable against Defendants. The Court finds that (a) facilitating others to use Sprint Nextel Handsets in conjunction with service providers other than Sprint Nextel; (b) selling Sprint Nextel Handsets, and (c) tampering with or altering Sprint Nextel Handsets, SIM cards or the Handsets' software; and/or entering unauthorized activation codes in the Handsets for purposes of unlocking the Handsets or facilitating others in such acts, constitute independent breaches of contract for which Sprint Nextel is entitled to relief.
4. The Court finds that the conduct set forth in the Complaint constitutes violations of 15 U.S.C. § 1125(a)(1)(A) and (B) (federal trademark infringement and false advertising). The Court further finds that the conduct constitutes contributory trademark infringement, tortious interference with business relationships and prospective advantage, civil conspiracy, unjust enrichment, conspiracy to induce breach of contract, false advertising in violation of California Business & Professions Code § 17500 et seq., unfair competition in violation of California Business & Professions Code § 17200 et seq., harm to Sprint Nextel's goodwill and business reputation, and violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq., and has caused substantial and irreparable harm to Sprint Nextel, and will continue to cause substantial and irreparable harm to Sprint Nextel unless enjoined.
5. Sprint Nextel has suffered damages, including loss of goodwill and damage to its reputation, as a result of Defendants' conduct. On review and consideration of all relevant factors, Sprint Nextel is entitled to damages and injunctive relief on the claims as set forth in the Complaint.
6. Final judgment is hereby entered only against Defendant EZCOM, Inc. d/b/a Tricom Communications and in favor of the Plaintiff Sprint Nextel, on all of the claims set forth in Sprint Nextel's Complaint in the principal amount of Five Million Dollars and Zero Cents ($5,000,000.00 (U.S.)), which ...