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Yelp Inc. v. Catron

United States District Court, N.D. California

October 1, 2014

YELP INC., Plaintiff,
v.
TIMOTHY CATRON, Defendant

Order Filed: September 8, 2014

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For Yelp Inc., a Delaware corporation, Plaintiff: Nitoj Paul Singh, LEAD ATTORNEY, Dhillon and Smith LLP, San Francisco, CA; San Francisco, CA, Yelp! Inc., San Francisco, CA; Harmeet K. Dhillon, Dhillon Law Group Inc., San Francisco, CA.

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ORDER ADOPTING REPORT AND RECOMMENDATION TO GRANT IN PART AND DENY IN PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT

Re: Dkt. Nos. 17, 30

WILLIAM H. ORRICK, United States District Judge.

This order concerns Magistrate Judge Kandis A. Westmore's September 8, 2014 report and recommendation, in which she recommends tat this Court grant default judgment in favor of plaintiff Yelp, Inc. (" Yelp" ) but reduce the award of statutory damages from $2,000,000 to $45,000. Dkt. No. 30. Yelp filed objections to the damages recommendation on September 25, 2014, three days after the fourteen day deadline set by Federal Rule of Civil Procedure 72. Dkt. No. 32. I have considered

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Yelp's objections despite their tardy arrival.

Under 28 U.S.C. § 636(b)(1), the district court must " make a de novo determination of those portions of the [magistrate judge's] report or...recommendations to which objection is made" and may then " accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." Id. Having considered the report and recommendation, Yelp's papers (including its objections), the record in this case, and the relevant legal authority, I agree with Judge Westmore's determination that Yelp's request for $2,000,000 in damages is excessive because it lacks a " plausible relationship" to Yelp's actual damages. See Adobe Sys., Inc. v. Tilley, No. 09-01085-PJH, 2010 WL 309249, at *5 (N.D. Cal. Jan. 19, 2010); Microsoft Corp. v. Ricketts, No. 06-06712-WHA, 2007 WL 1520965, at *4 (N.D. Cal. May 24, 2007). Yelp reduces its request to $300,000 in damages in the objections filed on September 25, 2014. But Yelp offers no persuasive argument why a permanent injunction and award of $45,000 in damages will not have a sufficient deterrent effect, especially given that Yelp has provided evidence of only one sale of infringing services by Catron from which he earned at most $2,495. See Dkt. No. 30 at 22. While the plaintiff in a trademark infringement case is entitled to damages that will serve as a deterrent, it is not entitled to a windfall. Adobe Sys., 2010 WL 309249, at *5.

Judge Westmore's report and recommendation is correct, well-reasoned, and thorough, and it is adopted in whole. Accordingly, IT IS HEREBY ORDERED:

(1) Yelp's motion for default judgment is GRANTED IN PART AND DENIED IN PART.
(2) Yelp's request for injunctive relief is GRANTED. Timothy Catron and his agents, employees, affiliates, distributors, successors, assigns, and any other person acting in concert or in participation with him is now and forever enjoined from: (a) registering, using, trafficking in, or benefiting from internet domain names that incorporate the " Yelp Marks," [1] or that incorporate words, numbers, or symbols that, collectively or in isolation, are confusingly similar to the " Yelp Marks; " (b) using the " Yelp Marks" or any confusingly similar marks in advertisements or otherwise in commerce in any manner likely to confuse consumers as to the association, affiliation, endorsement, or sponsorship of Yelp; and (c) engaging in any infringing acts involving the " Yelp Marks."
(3) Yelp's request for statutory damages under 15 U.S.C. § 1117(c) is DENIED IN PART. Yelp is awarded $45,000 in statutory damages.
(4) Yelp's request for attorney's fees and costs pursuant to 15 U.S.C. § 1117(a) is DENIED.
(5) The Clerk is directed to enter judgment and close the file. This order disposes of Docket Nos. 17 and 30.

IT IS SO ORDERED.

ORDER REASSIGNING CASE TO DISTRICT JUDGE; AND REPORT AND RECOMMENDATION TO GRANT IN PART AND DENY IN PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT

KANDIS A. WESTMORE, United States Magistrate Judge.

Plaintiff Yelp Inc. moves for default judgment against Defendant Timothy Catron

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for trademark infringement under 15 U.S.C. § 1114, unfair competition under 15 U.S.C. § 1125(a), dilution of a famous mark under 15 U.S.C. § 1125(c), cybersquatting under 15 U.S.C. § 1125(d), unfair competition under California Business and Professions Code § 17200, false advertising under California Business and Professions Code § 17500, breach of contract, and intentional interference with contractual relations. (Pl.'s Mot. for Default J. " Pl.'s Mot.," Dkt. No. 17.) The clerk entered Plaintiff's motion for default on April 3, 2014. (Dkt. No. 18.) Yelp seeks injunctive relief, statutory damages pursuant to 15 U.S.C. § 1117(c), and an award of attorneys' fees and costs.

On August 21, 2014, the Court held a hearing on Plaintiff's motion for default judgment, where Defendant did not appear.

Since Defendant, by the very virtue of being in default, has not consented to the undersigned, the Court reassigns this action to a district judge and recommends that Plaintiff's motion be GRANTED IN PART AND DENIED IN PART.

I. BACKGROUND AND PROCEDURAL HISTORY

Plaintiff Yelp owns and operates popular websites (collectively, the " Yelp Site" ), which feature information about local businesses nationwide and around the world, including ratings, reviews, and photos. (Pl.'s Mot. at 2; Compl., Dkt. No. 1 ¶ 2.) Yelp owns seven service marks (collectively " Yelp Marks" ), which have U.S. Patent and Trademark Office Registration Nos. 3,660,122; 3,660,119; 3,181,664; 3,938,129; 3,660,123; 3,660,120; and 3,316,616. (Compl. ¶ ¶ 32-34.) These represent three distinguishable marks. Id.

Access to, and use of, the Yelp Site is governed by Yelp's Terms of Service, which Yelp asserts is displayed prominently on the Yelp Site. (Compl. ¶ 8.) In order to contribute reviews to the Yelp Site, an individual must create a user account, which requires affirmative acceptance of the terms of service. ( Id.) Yelp's terms of service prohibit paid reviews on the Yelp Site. (Compl. ¶ 3.)

In January 2013, Yelp learned that AdBlaze was offering to sell Yelp reviews to the public. (Compl. ¶ ¶ 15, 23, Exs. A, 6.) On January 29, 2013, Yelp conducted a WhoIs search that revealed that AdBlase was registered to Timothy Catron using an email address timcatron@gmail.com. Timothy Catron is, or at all relevant times has been, the registrant, owner, and content provider of the websites adblaze.com and BuyYelpReview.com. (Compl. ¶ 10.) Defendant created an individual Yelp user account on November 11, 2012 and a business account for AdBlaze on November 12, 2012 which he used to offer gift certificates and discounts related to AdBlaze's services. (Compl. ¶ ¶ 20-21.) Both accounts were registered with the same timcatron@gmail.com email address. Id. In creating the accounts, Defendant repeatedly agreed to the Yelp's terms of service. Id.

On January 30, 2013, Yelp sent a letter to Catron demanding that he cease from his violation of the Yelp terms of service through selling Yelp reviews, cease using Yelp's registered trademarks, and provide Yelp information about the reviews he had posted. (Compl. ¶ 16.) In response, Defendant refused to provide any of the information Yelp sought, but responded on February 5, 2013 that " [a]ny mention of Yelp has been removed from Adblaze.com." ( Id.; Compl., Ex. 3.) On March 24, 2013, Catron promoted a different website BuyYelpReview.com on Twitter. (Compl. ¶ 18.) This new website charged $24.95 per Yelp review. (Compl. ¶ 19.)

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In early 2013, Yelp allegedly purchased false reviews from Defendant through BuyYelpReview.com for a fictitious business Yelp created. (Compl. ¶ 24.) Yelp received and approved the content of the fake reviews through email correspondence, and the reviews eventually appeared on the fictitious business's Yelp listing. Id.

Yelp filed the instant suit on June 20, 2013 alleging trademark infringement under 15 U.S.C. § 1114, unfair competition under 15 U.S.C. § 1125(a), dilution of a famous mark under 15 U.S.C. § 1125(c), cybersquatting under 15 U.S.C. § 1125(d), unfair competition under California Business and Professions Code § 17200, false advertising under California Business and Professions Code § 17500, breach of contract, and intentional interference with contractual relations.

Defendant Catron was served with the summons and complaint on July 3, 2013. (Dkt. No. 8.) Defendant did not answer or otherwise respond to the complaint. On April 1, 2014, Yelp filed a motion for entry of default. (Dkt. No. 15.) The Clerk entered the default against Catron on April 3, 2014. (Dkt. No. 18.) On April 2, 2014, Yelp filed a motion for default judgment seeking injunctive relief, statutory damages under 15 U.S.C. § 1117(c), and attorneys' fees and costs. (Pl.'s Mot. at 13-16.) On June 13, 2014, Yelp filed supplemental briefing in support of its request for attorneys' fees and costs. (Dkt. Nos. 26 & 27.)

II. DEFAULT JUDGMENT

A. Legal Standard

Federal Rule of Civil Procedure 55(b)(2) permits a court to enter a final judgment in a case following a defendant's default. Shanghai Automation Instrument Co. v. Kuei, 194 F.Supp.2d 995, 999 (N.D. Cal. 2001). Whether to enter a judgment lies within the court's discretion. Id. at 999 (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)).

Before assessing the merits of a default judgment, a court must confirm that it has subject matter jurisdiction over the case and personal jurisdiction over the parties, as well as ensure the adequacy of service on the defendant. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). If the court finds these elements satisfied, it turns to the following factors (" the Eitel factors" ) to determine whether it should grant a default judgment:

(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 decision on the merits.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986) (citation omitted). In this analysis, " the well-pleaded allegations of the complaint relating to a defendant's liability are taken as true." Pepsico, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1175 (C.D. Cal. 2002) (citing Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987)). Nevertheless, default does not compensate for essential facts not within the pleadings and those legally insufficient to prove a claim. Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). The Court, however, has the discretion to consider competent evidence and other papers submitted with a motion for default judgment to determine damages. Shanghai Automation Instrument Co., Ltd. v. Kuei, 194 F.Supp.2d 995, 1000, 1010 (N.D. Cal. 2001) (citing TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987)).

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B. Subject Matter Jurisdiction

This Court has subject matter jurisdiction over this matter because Yelp raises claims under federal law, specifically trademark infringement under 15 U.S.C. § 1114, unfair competition under 15 U.S.C. § 1125(a), dilution of a famous mark under 15 U.S.C. § 1125(c), cybersquatting under 15 U.S.C. § 1125(d). 28 U.S.C. § § 1331, 1338.

This Court has supplemental jurisdiction over the pendent state law claims, specifically unfair competition under California Business and Professions Code § 17200, false advertising under California Business and Professions Code § 17500, breach of contract, and intentional interference with contractual relations, pursuant to 28 U.S.C. § 1367(a), because these claims ...


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