United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT AS TO COMPANY DEFENDANTS AND REASSIGNING CASE WITH REPORT AND RECOMMENDATION THAT SUMMARY JUDGMENT BE GRANTED AS TO INDIVIDUAL DEFENDANTS
(Re: Docket No. 104)
PAUL S. GREWAL, Magistrate Judge.
Plaintiff SD-3C, LLC, moves for summary judgment or, in the alternative, default judgment against Defendants Biwin Technology Ltd., Wintek Enterprises Ltd. (the "Company Defendants"), Sun Rixin, Zhou Zhengxian, Lu Wei and Xu Linxian (the "Individual Defendants"). As the Company Defendants have not participated in the case since July 2013 and the Individual Defendants have never appeared in the case, the motion is unopposed. The court GRANTS SD-3C's motion for summary judgment as to the Company Defendants and orders that the case be reassigned with a report and recommendation that summary judgment be granted as to the Individual Defendants as well.
This is a case about a licensing agreement gone awry. In 2006, Biwin sought a license for patents and related intellectual property to manufacture and sell S.D. memory cards for use in digital cameras and related devices. The terms of the card license agreement ("CLA") required Biwin to make accurate quarterly sales reports and pay SD-3C a six percent royalty on its S.D. card sales. Over the course of the next two years, SD-3C grew skeptical about Biwin's sales reporting and-in line with the CLA-conducted an audit to review Biwin's financial records. Biwin's financial records painted an incomplete picture but were adequate to establish that Biwin had underreported and concealed its true S.D. card manufacturing and sales operations to avoid paying SD-3C the full royalty to which it was due. SD-3C terminated Biwin's license on August 22, 2009.
Just a few months later, Wintek-Biwin's alter ego-entered the scene and approached SD-3C for a CLA of its own-which was promptly granted-without informing SD-3C of its affiliation with Biwin. In fact, the relationship between Biwin and Wintek is extensive: they are owned and operated by the same four individuals-the Individual Defendants-they share personnel and addresses in China and Hong Kong and orders for S.D. cards placed with one company are routinely filled by the other.
Nearly three years after SD-3C terminated Biwin's CLA, SD-3C discovered that Biwin was still claiming to produce S.D. cards pursuant to a valid license agreement-a claim that has not yet been withdrawn to this day. And in deposition, Joseph James-Biwin America's former marking director-testified that as recently as 2012, Biwin was still manufacturing two million S.D. cards each month, representing between ten and thirty-three percent of the company's total revenues.
As a result of Biwin's ongoing breach of the CLA, SD-3C filed its initial complaint on January 25, 2013 alleging breach of contract, fraud, trademark infringement and unfair competition under both the Lanham Act and under California law. SD-3C was only able to effect service on Biwin and Wintek through the Hague Convention in September 2012, at which point the complaint had evolved into a Third Amended Complaint. Biwin and Wintek answered that complaint and defended the lawsuit through July 2013, when SD-3C sought leave and filed a Fourth Amended Complaint-adding the Individual Defendants, two additional counts of trademark counterfeiting and civil conspiracy and specific facts learned through discovery. Within two weeks of SD-3C amending its complaint, Biwin and Wintek ceased participation in the lawsuit. Their counsel sought leave to withdraw-which was granted by this court-and neither Company Defendants nor Individual Defendants answered the operative complaint. SD-3C now moves for summary judgment or, in the alternative, default judgment against all Defendants.
This court has jurisdiction under 28 U.S.C. § 1331, 28 U.S.C. § 1332 and 28 U.S.C. § 1338. SD-3C and the Company Defendants further consent to the jurisdiction of the undersigned under 28 U.S.C. § 636(c) and Fed.R.Civ.P. 72(a).
Pursuant to Fed.R.Civ.P. 56(a), summary judgment is appropriate when "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Material facts are those that may affect the outcome of the case. A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party. All evidence must be viewed in the light most favorable to the non-moving party. At this stage, a court "does not assess credibility or weigh the evidence, but simply determines whether there is a genuine factual issue for trial." Initially, the moving party bears the burden to show that no genuine issue of material fact exists. If this burden is met, the burden shifts to the non-moving party.
Pursuant to Fed.R.Civ.P. 55(b)(2), the court may enter default judgment against a defendant who has failed to plead or otherwise defend an action."The district court's decision whether to enter default judgment is a discretionary one."
As an initial matter, SD-3C asks this court to grant summary judgment, or in the alternative, default judgment. This court finds that default judgment would likely otherwise be appropriate but ultimately is not viable here. While Biwin and Wintek answered the third amended complaint,  neither the Company Defendants nor the Individual Defendants-who were added for the first time in the Fourth Amended Complaint-answered the operative complaint. In fact, Biwin and Wintek stopped paying their attorneys, leading this court to grant Defendants' lawyers leave to withdraw from the case. Ultimately, Defendants ceased participating in the litigation in or around July 2013. Although Biwin and Wintek responded to the third amended complaint, "[a]n amended complaint supersedes the original, the latter being treated thereafter as nonexistent." This case thus falls within the ambit of default judgment consideration, but SD-3C failed to follow the proper procedure to seek default judgment from this court. In the Ninth Circuit, Federal Rule of Civil Procedure 55 "requires a two-step process consisting of: (1) seeking a clerk's entry of default, and (2) filing a motion for the entry of default judgment." SD-3C has skipped straight to step two.
Notably, SD-3C's motion for summary judgment is unopposed. While "[a] district court may not grant a motion for summary judgment solely because the opposing party has failed to file an opposition, " "[t]he court may... grant an unopposed motion for summary judgment if the movant's papers are themselves sufficient to support the motion and do not on their face reveal a genuine issue of material fact." The court finds that SD-3C has sufficiently established its case to warrant granting the motion as to each of ...