United States District Court, N.D. California
ORDER GRANTING MOTION FOR PRELIMINARY INJUNCTION, Re:
ECF No. 139.
TIGAR United States District Judge.
seek a preliminary injunction enjoining Plaintiff Virtue
Global Holdings Limited and Plaintiff's licensees from
using the physical MOVA Assets; securing the MOVA Assets in a
neutral location; ceasing all use of the MOVA Assets patented
technology, trademarks and copyrighted material, and
derivative works thereof; and prohibiting Shenzhenshi
Haitiecheng Science and Technology Co., Ltd. and Virtue
Global Holdings Limited from any further transfer of the MOVA
Assets to any other party. ECF No. 139.
Court will grant Defendants' motion for a preliminary
case is about the ownership of MOVA, a technology to
"capture the facial performance of an actor" for
use in movies, computer graphics, and other video
applications, and its related intellectual property
(collectively the "MOVA Assets"). See ECF
No. 93 ¶ 9. Greg LaSalle and Stephen Perlman, former
business collaborators and friends, are the principal actors
in this dispute.
the background of this case has been recited in the
Court's prior orders and need not be repeated here.
See ECF No. 52 (Order on Defendants' Motion for
Summary Judgment); ECF No. 103 (Order on Discovery Letter
Brief). The Court, however, provides the following background
for the purposes of resolving this motion.
Haitiecheng Science and Technology Co., Ltd.
("SHST") filed its Complaint in February 2015,
seeking declaratory relief that it was the owner of the MOVA
Assets. See ECF No. 1.
December 16, 2015, at the parties' Case Management
Conference, the Court granted Defendants' request to
amend their pleadings and to file counterclaims. See
ECF No. 60. On February 25, 2016, Defendants answered the
Complaint and filed Amended Counterclaims against SHST. ECF
No. 76. Defendants brought the following counterclaims:
declaratory relief, intentional interference with contract,
intentional interference with prospective business advantage,
negligent interference with prospective economic relations,
conversion, trespass to chattels, misappropriation of trade
secrets, infringement of four patents, trademark
infringement, contributory trademark infringement, unfair
competition and false designation of origin, violation of
anti-cybersquatting, direct copyright infringement, secondary
copyright infringement, unjust enrichment, and unfair
competition. See generally id. On March 4, 2016, the
Court stayed SHST's obligation to respond to
Defendants' Amended Counterclaims until the resolution of
the parties' declaratory relief claims. ECF No. 86.
March 18, 2016, the parties' filed a stipulation and
proposed order to substitute SHST. ECF No. 92. Counsel for
SHST represented that SHST transferred all of its interest in
the MOVA Assets to Virtue Global Holdings Limited
("VGH"). Id. The parties agreed to the
substitution of VGH as the Plaintiff in the case but also
agreed that SHST would remain in the case as a Counterclaim
Defendant and that all counterclaims asserted by Defendants
against SHST would continue as pleaded against both SHST and
VGH. Id. The Court granted the stipulation. ECF No.
March 18, 2016, Defendants filed their Answer and Amended
Counterclaims. ECF No. 95. Defendants added an additional
counterclaim under the California Uniform Fraudulent Transfer
See id. ¶¶ 424-433. Defendants allege that
SHST transferred the MOVA Assets to VGH "with the actual
intent to hinder, delay or defraud Defendants in this
case." Id. ¶ 425.
Transfer of the MOVA Assets from SHST to VGH
document transferring the MOVA Assets from SHST to VGH was
Dated:e day after the Court granted Defendants' request
to amend their answer and to file counterclaims. See
ECF No. 139, Seraphine Decl., Ex. 1. While SHST alleges to
have paid $100, 000 to acquire the MOVA Assets from MO2 LLC
in February 2013, VGH paid $25, 000 for the MOVA assets, with
an additional $25, 000 due upon a decision by the Court in
SHST's favor. ECF No. 139 at 10; see Ex. 1 at 4
(Bates No. SHST0002177). The agreement transfers the MOVA Assets
to VGH but leaves all the liabilities with SHST. Id.
explains the purpose of the transfer as follows: VGH's
parent, Digital Domain Holdings Limited ("DDHL"),
"recognized that a company which it did not wholly own
held title to the MOVA Assets and determined that - for
reasons unrelated to this litigation - a wholly-owned entity
should hold title." ECF No. 151 at 7; ECF No. 152,
Chopra Decl. ¶ 7. DDHL accordingly took the steps to
transfer title from SHST to VGH, a "holding company in
the DDHL family." Chopra Decl. ¶ 7. VGH obtained
title subject to the licenses which SHST previously granted.
Id. VGH does not have physical possession of the
MOVA Assets and has not used them. Id. ¶ 8.
SHST and VGH's Discovery Conduct
assert that SHST has not participated in good faith in
discovery, which is the subject of a motion for default
judgment Defendants filed against SHST now before Magistrate
Judge Sallie Kim. See ECF No. 132; ECF No. 143.
joint discovery letter brief submitted to Magistrate Judge
Kim, counsel for SHST stated that SHST "appears to have
gone dormant." ECF No. 132 at 5. Counsel disclosed:
VGH purchased the MOVA Assets from SHST in December 2015, and
substituted into this case as Plaintiff. (Dkt. 96). Following
the sale of the MOVA Assets, SHST appears to have gone
dormant. Only in March 2016 - after SHST apparently went
dormant - did Defendants' new counsel begin demanding
verifications for SHST's discovery responses from the
previous summer. Despite diligent efforts, SHST's counsel
has not received any response to any of its multiple attempts
to communicate with SHST, including to obtain the requested
verifications. From SHST's silence, it appears that SHST
no longer has any active business, no officers, no active
board members, no employees, and no one else who can provide
the verifications which Defendants began demanding in March
2016. Accordingly, the undersigned counsel will be taking
necessary steps to initiate the process of withdrawing as
counsel of record for SHST in this litigation.
Id. Counsel for SHST state they intend to "take
the necessary steps to initiate the process of withdrawing as
counsel of record for SHST in this litigation."
Defendants propounded interrogatories on VGH requesting VGH
to identify "all directors, shareholders, and/or
employees of SHST and/or VGH" with knowledge about the
acquisition of MOVA Assets by SHST from MO2 LLC and by VGH
from SHST. See ECF No. 139, Seraphine Decl., Ex. 7.
VGH responded that "there are no current directors,
shareholders, and/or employees of VGH with knowledge of the
acquisition of the MOVA Assets" from either MO2 LLC or
SHST, id., notwithstanding that VGH purports to own
Present Use of the MOVA Assets
present, Digital Domain 3.0, Inc. ("DD3"), a
licensee of the MOVA Assets, possesses the physical MOVA
Assets, and DD3 and LaSalle are using the Assets. ECF No. 151
at 8; ECF No. 44-2; LaSalle Decl. ¶ 52. DD3 is
wholly-owned by Digital Domain-Reliance LLC
("DDR"), and 70% of DDR is owned by
DDHL. DDHL owns 100% of VGH. ECF No. 144-3 Boyd
Decl., Ex. B at 7 and 15.
LaSalle purportedly began secret negotiations to sell the
MOVA Assets, he began with DD3. ECF No. 121 ¶¶
113-116. Ultimately, LaSalle sold the MOVA Assets to SHST,
although DD3's General Counsel and Vice President of
Business Affairs, Joseph Gabriel, negotiated the sale of the
MOVA Assets - on behalf of SHST. ECF No. 44-19, Gabriel Decl.
¶ 8. DD3 then entered into an exclusive license
regarding the MOVA Assets and took possession of the physical
MOVA Assets. Id. Gabriel's declaration is silent
regarding the details of this transaction and how he could
represent a party that is nominally adverse to his own
client. Id. These circumstances give rise to
substantial doubt whether DD3 is a wholly separate entity
from either VGH or SHST.
used the MOVA Assets to provide visual effects for a number
of movies, including for the character "Colossus"
in the film "Deadpool." ECF No. 139 at 11.
Defendants have not provided a license to any party for the
MOVA Assets with which DD3 has used the MOVA Assets.
Motion for Preliminary Injunction
6, 2016, Defendants filed the instant motion for preliminary
injunction regarding the MOVA Assets. ECF No. 139. Defendants
filed the motion for preliminary injunction four days after
SHST's counsel informed the Court that SHST "appears
to have gone dormant." Defendants propose the injunction
take the following form:
1. This preliminary injunction applies to the MOVA Assets,
which are defined as the MOVA physical property and MOVA
patents, trademarks and copyrighted material and derivative
works identified in the Amended Counterclaims (D.I. 100) in
2. This preliminary injunction includes the MOVA Assets in
the possession of VGH and SHST, or in the possession of any
of SHST's or VGH's licensees and their respective
sub-licensees (including but not limited to DD3);
3. SHST, VGH and anyone in concert therewith on whom notice
of this Order is served (including Mova Asset licensee DD3
and all of its Mova Asset licensees, and including the
producers and distributors of motion pictures, video games or
any other material in which any portion of the Mova Assets is
used, even if such use is pursuant to a purported license
issued by Plaintiff, its licensees and/or their respective
sublicensees) shall cease all use of the physical MOVA Assets
(and secure those assets in a neutral location), cease all
use of all MOVA Assets trademarks, cease practicing all MOVA
Assets patented inventions, and cease use or distribution of
all MOVA Assets copyrighted material and all derivative works
4. SHST and VGH are hereby enjoined from making any purported
transfer of the MOVA Assets to any other party;
5. This preliminary injunction shall remain in place until
further Order by the Court.
ECF No. 139-15 (Proposed Order).
20, 2016, VGH filed an opposition to the motion. ECF No. 151.
On May 27, 2016, Defendants filed a reply. ECF No. 159. The
Court heard oral argument on June 16, 2016.